Income Tax Appeal No. 251 of 2006 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 251 of 2006 Date of decision: December 1, 2010 Commissioner of Income Tax, Ludhiana --- Appellant Versus M/s. K.D. Enterprises Ludhiana --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Rajesh Katoch, Central Government Standing Counsel for the appellant-Revenue. Mr. S.K. Mukhi, Advocate for the respondent-assessee. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the Revenue against the order dated 28.9.2005, passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No. 393/CHANDI/2004, relating to the assessment year 1997-98. The following substantial question of law has been claimed for determination of this Court: Income Tax Appeal No. 251 of 2006 2 “Whether on the facts and law, the Hon’ble Income Tax Appellate Tribunal was legally justified to hold the sundry debts of trading receipts as bad debt to allow its deduction u/s 36(1) (vii) of I.T. Act?” The facts, in brief, necessary for adjudication, as narrated in the appeal are that the assessee-firm, filed return on 31.10.1997 for the assessment year in question, declaring total income of Rs. 34,457/- and the same was processed under Section 143(1)(a) of the Act on 27.2.1998. The assessment was completed under Section 143(3) on total income of Rs. 56,460/- on 15.3.2000. The case was re-opened under Section 263 of the Act. The reassessment was completed under Section 143(3)/263 of the Act on 26.2.2003 at a total income of Rs. 15,91,890/-, including Rs. 12,52,350/- which the assessee had claimed as bad debts written off. The Commissioner of Income-tax (Appeals) {in short “the CIT(A)”}, allowed the appeal of the assessee on the issue of disallowance of Rs. 12,52,350/-, vide order dated 16.1.2004. Aggrieved by the said order, the Revenue preferred appeal before the Tribunal. The Tribunal by the order under appeal dismissed the appeal and upheld the order of the CIT(A). We have heard learned counsel for the parties and have perused the record. The point for consideration in this appeal is, “whether bad debt as claimed by the assessee was admissible under Section 36(1)(vii) of the Act”. The Tribunal on the aforesaid issue recorded its finding as under: “On perusal of record and after hearing rival contention, it is seen that undisputedly the amount has been debited in profit Income Tax Appeal No. 251 of 2006 3 and loss account by the assessee. In our considered opinion, the assessee is the best judge to decide whether the debt is really bad and not the department. In the present case, even the assessee lodged an FIR with the Police Station though no fruitful result arrived. The Assessing Officer has not doubted the condition for allowing bad debts. The only objection of the Assessing Officer is that whether it has really become bad? There is an amendment in proviso to Section 36(1)(vii) with effect from 1.4.89 which provides that is bad debt which is written off as irrecoverable in the books of accounts of the assessee is allowable as against the earlier provision the assessee was bound to establish that it has become really bad. The decision pronounced in the case of Taylor Instrument Co. India Ltd. Vs. CIT, 254 ITR 125 wherein on similar facts and circumstances, the issue was held to be allowable as bad debt supports the case of the assessee. In the case of A.W. Figgis & Co. Pvt. Ltd. Vs. CIT, 254 ITR 63 wherein criminal proceedings were filed against the debtor. The amount not recovered was held to be deductible as a bad debt clearly supports the case of the assessee. The following decisions also throw light on the issue: a. 143 ITR 166 (Gujarat) b. 74 ITR 723 (Bombay) c. 120 ITR 792 (Bombay) d. 80 TTJ 696 (Bombay) e. 152 CTR 199 (Gujarat) f. 256 ITR 772 (Gujarat) Income Tax Appeal No. 251 of 2006 4 In view of these facts, we have not found any mistake in the order of the Ld. CIT(A) on the basis of which different view may be possible. The same is upheld.” The CIT(A) had recorded a finding of fact that the amount of Rs. 12,52,350/- had become irrecoverable from M/s. Shakti Enterprises and, therefore, was bad debt. The said finding had been affirmed by the Tribunal. Learned counsel for the Revenue could not point out any fault with the aforesaid reasons recorded by the Tribunal which may warrant interference by this Court. Finding no element of illegality or perversity in the impugned order, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) December 1, 2010 JUDGE *rkmalik*