Indo Nabin Projects Ltd. (Formerly Indo Power Projects Ltd.) Vs DCIT (ITAT Kolkata)
The assessee stated that M/s Andrew Yule & Co. Ltd., Central Government Undertaking had closed their project division. M/s Gridco is a State Government Undertaking, Government of Orissa. The assessee further stated that despite the efforts taken by the assessee to recover this sundry debtor dues from these three parties, the assessee could not recover the same. Accordingly, the said trade debts were duly written off in the books of accounts of the assessee during the year under consideration by duly crediting the balance outstanding to the concerned parties’ account (sundry debtors’ account).
We find lot of force in the argument of the Ld. AR that these balances were reflected under the head sundry debtors in the balance sheet of the assessee and from the very fact that the same are shown under sundry debtors itself goes to prove that they had emanated out of sales of the assessee and hence, the income relatable thereon in the form of sales and services had been duly offered to tax in the earlier years in accordance with Section 36(2) of the Act.
Respectfully following the decision of the Hon’ble Supreme Court in the case of TRF Limited reported in 323 ITR 397 (SC) and in view of the fact that the assessee had duly written off this trade debts by crediting the concerned sundry debtors accounts in its books of accounts, we direct the Ld. AO to delete the disallowance made towards bad debts. In the sum of Rs. 8,86,029/- accordingly ground no. 2 raised by the assessee is allowed.
FULL TEXT OF THE ITAT JUDGMENT
1. This appeal by the assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals) -4, Kolkata [ in short the ld CITA] in Appeal No. 259/CIT(A)- 4/Circle-10/Kol/14-15 dated 19.08.2015 against the order passed by the DCIT, Circle-10, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 30.03.2013 for the Assessment Year 2010-11.
2. The only issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in restricting the disallowance made u/s 40a(ia) of the Act in respect of short deduction of tax at source in the facts and circumstances of the case.
3. The brief facts of this issue is that the assessee is engaged in business as an electrical contractor, supplier and services. The assessee filed its return of income for the assessment year 2010-11 on 12.10.2010 declaring total income of Rs. 5,31,46,950/-. During the course of assessment proceedings, the Ld. AO asked the assessee to furnish the detail of expenses with tax deducted at source. The Ld. AO observed that the following payments were made without deduction of tax at source by the assessee.
The assessee pleaded that the expenditure included in the aforesaid table also includes expenditures on which short deduction of tax at source were made by the assessee. The Ld. AO for want of details disallowed the aforesaid sum of Rs. 19,32,090/- u/s 40a(ia) of the Act. Before the Ld. CIT(A) the assessee submitted that there are certain payments for which tax has been duly deducted and remitted by the assessee to the tune of Rs. 7,45,200/-. The assessee submitted a statement showing party wise details together with its requisite TDS remittance, which was duly appreciated by the Ld. CIT(A) and relief was granted to the tune of Rs. 7,45,200/- by the Ld. CIT(A). The assessee further submitted that in respect of balance sum of Rs. 11,86,890/- the assessee had indeed deducted tax at source but the same is not in accordance with relevant provisions of Chapter XVIIB and accordingly the same would only fall under short deduction of tax at source. The assessee further pleaded that in respect of short deduction of tax at source the provisions of section 40a(ia) of the Act cannot be invoked in view of the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. S.K. Tekriwal in ITAT No. 183 of 2012 G.A. No. 2069 of 2012 dated 03.12.2012. The Ld. CIT(A) however did not heed to this contention of the assessee and sustained the disallowance to the tune of Rs. 11,86,890/- u/s 40a(ia) of the Act. Aggrieved the assessee is in appeal before us on the following ground:
1. Disallowance of Rs. 11,86,890/- on account of short deduction of TDS
On the facts and circumstances of the case and in law, the Ld. CIT(Appeals)-4, Kolkata was wrong in allowing only Rs. 7,45,200/- out of Rs. 19,32,090/-, thereby disallowing Rs. 11,86,890/- on account of short deduction of TDS without going through the veracity of the claim of the Appellant along with the documentary evidences and also not considering the relevant judgment cited in support of its claim. It is therefore, prayed that the Ld. Bench may kindly allow the entire expenditure of Rs. 19,32,090/-.
4. We have heard the rival submissions. It is not in dispute that the sum of Rs. 11,86,890/- represents amounts of expenditures for which short deduction of tax at source has been made by the assessee. It is well settled by the Hon’ble Jurisdictional High Court in the case of CIT vs. S.K. Tekriwal in ITAT No. 183 of 2012 G.A. No. 2069 of 2012 dated 03.12.2012 wherein it has been held that disallowance u/s 40a(ia) of the Act cannot be invoked in respect of short deduction of tax at source. Hence, respectfully following the said decision we hold that no disallowance u/s 40a(ia) of the Act in the sum of Rs. 11,86,890/- could be made in the facts and circumstances of the case. Accordingly, ground no. 1 raised by the assessee is allowed.
5. The next issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in upholding the disallowance of Rs. 8,86,029/- towards bad debt, in the facts and circumstances of the case.
6. The brief facts of this issue is that the Ld. AO observed that the assessee had claimed bad debt of Rs. 6.41 crores in the computation of the income. The assessee was asked to provide the details of bad debt and provide evidences that the debts had been credited in the accounts of the assessee as income in the earlier years. The Ld. AO disallowed the claim of bad debts by observing that the assessee had not provided the details of income offered in earlier years in respect of the following three parties:
