TaxTMI 
TaxTMI 
2024 (2) TMI 275
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....see was selected for scrutiny under CASS and notice u/s 143(2) of the Act was issued on 24.08.2018. Thereafter, the assessee filed its Revised Return of Income on 29.03.2019 declaring total income of Rs. 1063,16,50,570/- and book profit of Rs. 1058,58,55,1041-. The Revised Return was taken for scrutiny assessment under CASS and notice u/s 143(2) of the Act was issued on 27.09.2019. Regular assessment order dated 19-12-2019 was passed by the Assessing Officer by making an addition of Rs. 36,98,570/- u/s 14A r.w.r 8D, and determining total assessed income at Rs. 1063,53,49,140/- and book profit of Rs. 1058,95,53,674/-. 3. On perusal of the above assessment order it was noticed by the Ld. PCIT that there were various discrepancies regarding the claim of deduction on account of bad debts and provision of bad and doubtful debts and the claim of deduction u/s. 80JJAA of the Act. However the Ld AO failed to verify the above claims and passed the assessment order which is erroneous and prejudicial to the interest of Revenue. Therefore a show cause notice dated 28.03.2022 was issued as to why the deduction claimed u/s. 80JJAA of the Act should not be disallowed and also as to why the first....
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....he assessee and the same has been duly written off in the books of accounts of the assessee. It is a settled position of law that once the bad debts have been duly written off in the books of accounts, amount claimed as bad debt is allowable. In this regards reliance was placed on the decision of Hon'ble Apex Court in the case of T.R.F. Ltd. Vs. CIT - (2010) 323 ITR 397 and various case laws of the Gujarat High Court. 4. The Ld PCIT considered the above reply of the assessee and having not satisfied with the same, has set aside the assessment order passed by the Ld. A.O. by observing as follows: (1) Collect the revised audit report in form 3CD as the auditor of the company has not certified the deduction u/s 80JJAA of the Act in col.33 of Form 3CD report and verify whether the revised return filed by the assessee company on 29.03.2019 is valid return as per provisions of section 139(9) of the Act or not? The AO is also directed to take cognizance of CBDT's Circular bearing No. 14(XL-35) dated 11.04.1995. (2) The allowability of bad debts amounting to Rs. 224,81,43,124/- claimed by the assessee company should be decided on the basis of CBDT Circular No. 12/2016 [F.No. 2....
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....in Form 10DA which is attached herewith vide Annexure 7. As per the provisions of section 80JJAA the deduction is available if following conditions are fulfilled. a. Who can claim the deduction- Any entity whose gross total income includes profit or gains derived from business and is subject to tax audit under section 44AB of the Act can claim the deduction under section 80JJAA of the Act. In case of taxpayers carrying on business. Section 44AB of the Act is applicable where the sales, turnover or gross receipts in business, exceed INR 10 million in the financial year. However, the deduction, is not available in case the business is formed by splitting- up/reconstruction of existing business or when the business is acquired by way of transfer or under a business reorganisation in the case of assessee the business is not formed by splitting-up or reconstruction of existing business. As explained in earlier letter dated 28.09.2019 that the amalgamation in the case of the assessee has taken place with effect from 01.04.2014 i.e. from F. Y.s 2014-15 and 2015-16 and not during the year under consideration. b. What is allowed as the deduction - An amount equal to 30% of additional ....
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....e has been duly verified by the chartered accountant while certifying in the form 10DA. f. Compliance requirement -Rule 19AB of the Income-tax Rules, 1962 requires the employer to obtain Form 10DA from a practicing accountant reporting the said deduction and other information as mentioned therein. The form is required to be obtained before filing of the income-tax return for the said year. The provisions of the Act clearly mention that no deduction shall be provided to the employer in case of non-compliance with filing of the said Form 10DA. - attached vide Annexure - 7. The working prepared by chartered accountant at time of preparing certificate is as under: Working to arrive at new employees eligible for deduction u/s 80JJAA Particulars Number of Employees As on March 31, 2016 58,807 New Joinees during financial year 2016-17 43,669 Employees left during the financial year 2016-17 36,570 As on March 31, 2017 65,906 Step 1: New Joinees who worked for 240 days and more 11290 Step 2: Out of 11,290 new joinees-employees whose salary is 25,000/-pm 10,264 Step 3: No. of employees having an effect of increase [Opening-Closing) 7,099 Step 4: To....
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....d a question of exercise of discretion whether or not to allow an assessee to raise a claim which was not raised when the return was filed or the assessment order was made. As held by the Supreme Court there may be several factors justifying the raising of a new plea in appeal and each case must be considered on its own facts. However, such cases include those, where the ground though available when the return was filed or the assessment order was made, was not taken or raised for reasons which the appellate authorities may consider valid. In other words, the jurisdiction of the appellate authorities to consider a fresh or new ground or claim is not restricted to cases where such a ground did not exist when the return was filed and the assessment order was made. 6.4. The Ld. counsel also invited our attention to the ratio as laid down by Hon'ble jurisdictional High Court in the case of CIT-Vs- Mitesh Impex reported in (2014) 46 taxmann.com by following the judgment of Pruthvi Brokers referred above and allowed the assessee to claim deduction u/s 80IB/IC even at assessment stage or any appellate stage which was not claimed by the assessee while filing Return of Income. Relevant fa....
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....the same does not require any interference. Therefore the assessee appeal is liable to be dismissed. 8. We have given our thoughtful consideration and perused the materials available on record. In the case of the assessee company, the claim was taken while filing Revised Return of Income and further such claim was fully examined by Ld. AO during the course of assessment proceedings (see the reply filed by the assessee extracted at Para 6 of the order) after verifying all evidences and explanation produced by the assessee. No defects have been pointed out either by the Assessing Officer or the Ld. PCIT in the Revised Return of Income filed by the assessee. Further the Assessee had merely exercised its right in claiming rightful deduction while revising its Return of Income. Therefore, the direction given to the assessing officer in connection with the claim of assessee company u/s 80JJAA to verify the belated return filed by the assessee is whether valid return of income u/s 139(9) or not is totally against the law laid down by Hon'ble Jurisdictional High Court. Accordingly there is no justification in invoking Revision power u/s 263 of the Act. 8.1. Further we also find merits in....
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....hat the Ld. AO had made adequate inquiries in respect of the claim of deduction u/s. 80JJAA of the Act, while passing assessment order u/s 143(3) of the Act. The Revision of assessment proceedings on this ground is not permissible and accordingly the findings of the Ld. PCIT is hereby set aside. 9. Provision for bad debt u/s. 36(1)(viia): Now coming to second issue on which PCIT has initiated Revision proceedings u/s 263 of the Act, wherein the assessee claimed bad debts u/s. 36(1)(vii) amounting to Rs. 224,81,43,124/- and claimed provision for bad and doubtful debts u/s. 36(1)(viia) of Rs. 57,79,00,453/-. 9.1. Ld. Counsel Shri Vartik Chokshi appearing for the assessee submitted before us the reply filed before Ld. PCIT as follows: Your goodself has asked no details were called for in respect of the bad debt claimed of Rs. 2,24,81,43,124/- and claim of provision for bad debt u/s. 36(viia) of Rs. 57,79,00,453/-. Bad debt - Rs. 2,24,81,43,124/- In this regards the assessee company submits before your goodself that during the year under consideration, the assessee has written off Bad Debt amounting to Rs. 2,24,81,43,124/- which is net of bad debt recovered during the year. I....
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.... vide Annexure-6. Further, the assessee company keeps an up to date track of amounts written off. The amount of bad debt written off net of recovery is Rs. 224.81 lacs, the list of which showing with customer name along with their PAN, address, amount written off and subsequently recovered is attached herewith vide Annexure7. Without prejudice to that above, it is submitted that the bad debts written off pertains to the business of the assessee and the same has been duly written off in the books of accounts of the assessee. It is a settled position that once the bad debts have been duly written off in the books of accounts, amount claimed as bad debt is allowable. In this regards reliance is place on the decision of Hon'ble Apex Court in the case of T.R.F. Ltd. Vs. CIT - (2010) 323 ITR 397, wherein it was held as under: Whether after 1-4-1989, it is not necessary for assessee to establish that debt, in fact, has become irrecoverable; it is enough if bad debt is written off as irrecoverable in accounts of assessee - Held, yes - Whether where Assessing Officer had not examined whether, in fact, bad debt or part thereof was written off in accounts of assessee, matter was ....
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....ort would not satisfy such requirement - He, accordingly, disallowed claim of bad debt - Tribunal held that debt had been written off in sense that account of debtor was squared up by crediting debtor and debiting bad debt reserve account and, that, said accounting treatment did amount to actual write off of debt - Whether Tribunal was justified in its decision - Held, yes [Para 7] [In favour of assessee] In view of the above Apex court decision and the Gujarat High Court decisions, no disallowance / adjustment should be made in this respect at this stage. No different view can be taken in respect of the same and therefore it cannot be said that the order of the AO is prejudicial in nature to the revenue. The decisions of both the Courts are binding. Not following the decisions of these courts will result into contempt of Court by the lower authorities. Claim u/s. 36(viia) - Rs. 57,79,00,453/- 9.2. Ld. Counsel brought to our notice that as per clause (d) of Section 36(1) of the Act, the assessee being a non-banking financial company, an amount not exceeding 5% of the total income computed before making any deduction under this clause and Chapter VI-A of the Act. Thus, it would....
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....ighted the fact that this practise has been followed by the assessee on a consistent basis and also accepted by the Ld. AO while passing scrutiny assessment order for the earlier assessment years. This fact is also pointed out to the Ld. PCIT by the assessee in its reply to the notice issued u/s 263 of the Act. However for the sake of completeness we observe that the assessees company reverses the provision created u/s 36(1)(viia) in the immediately next year and claims actual bad debt incurred for the year under consideration only (as extracted in Para 9.2 of this order). Further, details of bad debt written off for the year under consideration of Rs 224.81 lacs, which shows list of customer name, amount written off, PAN, Address and subsequently recovered was also given before the PCIT. It was also explained that Net off bad debt written off, which means Bad debt incurred for the Assessment Year 2017-18, less the amount recovered from the customer has been written off by the assessee. Though, all such details were produced before the Ld. PCIT, he has without giving any finding on how the assessment order passed by Ld. AO is erroneous or pointing out any defect in the claim made b....
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....case where a view had been taken by Assessing Officer after making proper enquiry and, thus, Tribunal was justified in setting aside impugned revisional order Whether Special Leave Petition filed against impugned order was to be dismissed. Held, yes [Para 2] [In favour of assessee] (b) Commissioner of Income-tax Vis Arvind Jewellers [2002] 124 Taxman 615 (Gujarat) Section 263 of the Income-tax Act, 1961 Revision Of orders prejudicial to interests of revenue Assessment year 1981-82 - Whether provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by Assessing Officer and it is only when an order is erroneous that section will be attracted and incorrect assumption of facts or an incorrect application of law will satisfy requirement of order being erroneous Held, yes In pursuance of notices issued under sections 142(1) and 143(2), assessee produced relevant material and offered explanation ITO had raised all possible enquiries in view of a search conducted under section 132 After considering those materials and explanation, ITO came to a definite conclusion and made certain additions - However, Commissioner did not agree with concl....
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.... plausible, it was not open for Commissioner to take such order in revision Held, yes [Para 16] [In favour of assessee] (e) Decision of Gujarat High court in case of CIT Vs. Mehsana District Co-Operative Milk Producers Union Ltd. 263 ITR 645 whereby court has held as under: The provisions of section 263(1) of the Income-tax Act, 1961, cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, and it is only when the order is erroneous that the section will be attracted. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. When two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. The powers of the Commissioner under sub-section (1) of section 263 extend to such matters as have not been considered and decided in appeal. The revisional powers under section 263 do not extend to matters on which the appellate authority has bestowe....