Bombay H.C : the assessee had sought deduction of Rs. 1,60,83,071 under s. 36(1) (vii) of the IT Act, 1961 (‘the Act’ for short) being the amount of bad debt which is written off as irrecoverable in the accounts of the assessee

High Court Of Bombay

CIT vs. Income Tax Appellate Tribunal & Anr.

Section 254(2)

Asst. Year 1998-99

Smt. Ranjana Desai & J.P. Devadhar, JJ.

Writ Petn. No. 2892 of 2008

19th January, 2009

Counsel Appeared :

R.B. Upadhyay, for the Petitioner : None, for the Respondents

JUDGMENT

J.P. DEVADHAR, J. :

This writ petition is filed by the CIT to challenge the order passed by the Tribunal on 3rd July, 2007 whereby the Misc. Appln. No. 360 of 2007 filed by the respondent No. 2 (‘assessee’ for short) has been allowed. By the said rectification order, a sentence in para 15 of the original order passed by the Tribunal on 22nd Dec., 2006 has been substituted.

The assessment year involved herein is asst. yr. 1998-99. In the asst. yr. 1998-99, the assessee had sought deduction of Rs. 1,60,83,071 under s. 36(1) (vii) of the IT Act, 1961 (‘the Act’ for short) being the amount of bad debt which is written off as irrecoverable in the accounts of the assessee. The said sum of Rs. 1,60,83,071 included the lease rentals amounting to Rs. 92,09,480 which were taxed in the earlier years on accrual basis, but claimed to have become bad debts on account of the assessee being unable to recover the said amount.

4. By the assessment order dt. 28th Feb., 2001 the AO disallowed the entire claim of the assessee in respect of bad debts written off by the assessee.

5. On appeal filed by the assessee, the CIT(A) upheld the disallowance of Rs. 52,02,173 and allowed the claim only to the extent of Rs. 1,08,80,898. The said amount of Rs. 1,08,80,898 included the amount of lease rent taxed in the year amounting to Rs. 92,09,480 which was held to have become bad debt as irrecoverable.

6. Being aggrieved by the aforesaid order, both the assessee as well as the Revenue filed appeals before the Tribunal. By its order dt. 22nd Dec., 2006 the Tribunal restored the issue relating to the allowance of bad debt of lease rentals amounting to Rs. 92,09,480. The Tribunal while restoring the matter to the file of the AO observed in para 15 of its judgment as follows : “….The learned AO shall however be entitled to assess if any part of the alleged lease rentals is found to be in the nature of income accruing to the assessee on some other basis than lease rentals….”

7. The assessee filed a miscellaneous application seeking rectification of the order dt. 22nd Dec., 2006 inter alia, on the ground that the issue before the Tribunal was not relating to assessing the amount of Rs. 92,09,480 as income but the issue was whether the said amount of Rs. 92,09,480 which was already taxed in the earlier years was liable to be deducted on account of the said amount becoming irrecoverable and hence a bad debt. Therefore, according to the assessee, the aforesaid direction contained in para 15 of the judgment was uncalled for. The Tribunal agreed with the contention of the assessee and accordingly allowed the miscellaneous application by substituting the aforesaid sentence as follows : “….The learned AO shall verify from the records, whether lease rent of Rs. 92,09,480 has been included as income of the assessee in the earlier years and in case the same has been included, but written off during the year under consideration the assessee shall be entitled to deduction under s. 36(1)(vii) of the IT Act….” Challenging the aforesaid order, the present petition is filed. Mr. Upadhyay, learned counsel appearing on behalf of the Revenue contended that the decision of the Tribunal in allowing the miscellaneous application amounted to reviewing the original order under the garb of rectification of mistake when there was no error apparent on the face of the record. He submitted that once an order is passed, the Tribunal becomes functus officio and the Tribunal has no jurisdiction to modify its own order in the garb of rectification.

We see no merit in the aforesaid contention raised on behalf of the Revenue. As rightly held by the Tribunal, the question before the Tribunal was whether the amount of Rs. 92,09,480 which was already taxed on accrual basis in the earlier assessment years could be allowed as deduction under s. 36(1)(vii) of the Act on the ground that the said amounts had become bad and the assessee has written off the said amount in its accounts as not recoverable. Thus, the question before the Tribunal was not regarding the taxability of Rs. 92,09,480 and, therefore, there was no question of the assessing the said amount as lease rental or otherwise in asst. yr. 1998-99. It is not in dispute that the amount of Rs. 92,09,480 was not the income earned in asst. yr. 1998-99. In these circumstances, the direction contained in para 15 of the original order dt. 22nd Dec., 2006 regarding the assessment of Rs. 92,09,480 as lease rental or otherwise was ex facie erroneous and contrary to the facts on record and, therefore, the Tribunal was justified in rectifying the apparent error on the face of the record. In such case, the rectification carried out by the Tribunal cannot be said to be in the nature of review.

10. For all the aforesaid reasons, we see no merit in the petition and the same is hereby dismissed.

[Citation : 322 ITR 359]

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