Hathway Rajesh Multi Channel P.Lt, ... vs Department Of Income Tax

ITO-10(2)(4), M/s. Hathway Rajesh Multi 431, 4th Floor, Channel Pvt. Ltd., Aayakar Bhavan, 41/2-Parvati Sadan, Vs. Mumbai - 400 020 Tilak Road, Ghatkopar East, Mumbai - 77 PAN: AABCR 8471Q (Appellant) (Respondent)

Assessee by : None Revenue by : Shri Uday Baskar Jakka, Sr. D.R.

Date of Hearing : 02.06.2015 Date of Pronouncement : 30.06.2015

ORDER

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the Revenue against the order dated 06.08.2013 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2010-11. Despite service of notice, no one has come present on behalf of the assessee, hence, the matter has been heard ex-parte.

The Revenue through its grounds of appeal has contested the decision of the Ld. CIT(A) in allowing the claim of bad debts written off.

2. The facts of the case are that the assessee is engaged in the business of Cable Operator and ISP service provider. In earlier assessment year i.e. A.Y.2009-10 the assessee had debited provision for doubtful debts of Rs.36,00,000/- in P&L account. Later this provision for doubtful debts was 2 ITA No.6345/M/2013 M/s. Hathway Rajesh Multi Channel Pvt. Ltd.

disallowed by the assessee by filing return of income. In the assessment year under consideration i.e. A.Y. 2010-11 the assessee debited Rs.30,00,000/- as provision for doubtful debts in P&L account. This amount was not disallowed while filing the return of income. The assessee during the year had written off bad debts for Rs.35,68,583/-. But this amount was not debited in the P&L account as it was already debited in the previous year in the P&L account. These bad debt of Rs.35,68,583/- was written off in debtors account. The Assessing Officer (hereinafter referred to as the AO) disallowed provision of bad debts for Rs.30,00,000/- which the assessee had not disallowed while filing the return of income. Similarly the bad debt claim which the assessee claimed during assessment proceedings was rejected by A.O., as the assessee had not filed any revised return, following Goetze (India) P. Ltd. vs. CIT 284 ITR 323.

3. In appeal, the Ld. CIT(A) has allowed the claim of the assessee observing as under:

"2.3 I have considered the facts and circumstances of the case. The appellant had written off bad debts of Rs.35,68,583/- which it adjusted from provision of bad debt. This bad debt was not claimed by the appellant while filing the return, hence A.O. has not allowed this during the assessment proceedings. Consequently if the appellant claims bad debts, if it is written off in the books of account then it is eligible to claim deduction u/s.36(1)(vii). This view is supported by the Supreme Court decision in the case of T.R.F. Ltd. vs. CIT 323 ITR 397. But here the question arising is that if appellant had not claimed the deduction while filing the return, if the claims is made before the A.O, during the assessment proceedings can appellant's bad debts be allowed during appellate proceedings. This issue has come into consideration of Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders P. Ltd. 349 ITR 336 relying on a three judge bench decisions of Supreme Court in national Thermal Power Co. Ltd. vs. CIT 229 ITR 383, CIT vs. Kanpur Coal Syndicate 53 ITR 225 and Jute Corporation of India vs. CIT 187 ITR 688 and distinguishing toe judge bench decision of Supreme Court in Goetze (India)P Ltd. vs. CIT 284 ITR 323 where in it is held that "even assuming that the Assessing Of is not entitled to grant a deduction on the basis of a letter requesting an amendment to the return filed, the appellate authorities are entitled to consider the claim and to adjudicate the same. It is not necessary that the deduction be allowed only if a revised return of income would have been filed". Following the above decision, appellant is eligible for claim of bad debts u/s.36(1)(vii) as it has 3 ITA No.6345/M/2013 M/s. Hathway Rajesh Multi Channel Pvt. Ltd.

written off in the books of accounts though claim was rejected by the A.O. on the ground that appellant had not filed the revised return. Following the decision of Goetze (India)P Ltd. on examination of the details, as appellant is eligible for the claim of bad debts, appellant claim is allowed. The A.O. is directed to allow the claim of bad debts to the appellant. This ground of appeal is allowed."

4. A perusal of the above findings of the Ld. CIT(A) reveals that he has accepted the claim of the assessee following the decision of Hon'ble Bombay High Court in the case of 'Pruthvi Brokers & Shareholders Pvt. Ltd.' (supra), wherein the Hon'ble Bombay High Court, while relying upon the various decisions of the Hon'ble Supreme Court and other Hon'ble High Courts, has held that even if a claim is not made before the AO it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim is not barred. The Hon'ble Bombay High Court while relying upon the decision of the Hon'ble Supreme Court in the case of 'Jute Corporation of India Limited vs. CIT' 1991 Supp (2) SCC 744 = (1991) 187 ITR 688 has observed that the power of the Appellate Commissioner is coterminous with that of the Income Tax Officer and an appellate authority while hearing appeal against the order of the subordinate authority, has all the powers which the original authority may have in deciding the questions before it, subject to the restrictions or limitations, if any, prescribed by statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. An assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. The appellate authorities have jurisdiction to deal not merely with additional grounds which became available on account of change of circumstances or law, but with additional grounds which were available when the return was 4 ITA No.6345/M/2013 M/s. Hathway Rajesh Multi Channel Pvt. Ltd.

filed but could not have been raised at that stage or the grounds which became available on account of change of circumstances or law. The words 'could not have been' raised must be construed liberally and not strictly. It is open to the assessee to claim a deduction before the appellate authority which could not have been claimed before the AO. The Hon'ble Bombay High Court has further observed that the decision of Hon'ble Supreme Court in the case of 'Goetze (India) Limited v. CIT' (2006) 157 Taxman 1, regarding the restriction of making the claim through a revised return was limited to the powers of the Assessing Authority and the said judgment does not impinge on the power or negate the powers of the appellate authorities to entertain such claim by way of additional ground.

The Ld. DR has not cited any decision contrary to the above proposition of law laid down by the Hon'ble Bombay High Court. We therefore do not find any merit in the appeal of the Revenue and the same is accordingly dismissed.

Pronounced in Open Court on 30.06.2015 Sd/- Sd/- (G.S. Pannu) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 30 June, 2015. * Kishore

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR "C" Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.