Phool Singh, Judicial Member - (1.) THIS appeal of the assessee is directed against order dated 24.3.1995 recorded by the ld. CIT(A)-II, Kanpur, by which appeal of the assessee for assessment year 1991-92 stands disposed off.
(2.) The relevant facts are that the assessee firm was found to be an exporter of leather goods. For assessment year 1991-92, the assessee firm filed return on 30.10.1991 at an income of Rs. 74,260/-. During the assessment proceedings for assessment year 1992-93, the Assessing Officer noted that sale proceeds in respect of export sales worth Rs. 58,91,672/- made by the firm to M/s J. V. Finn, U.K. in the previous year relevant to assessment year 1991-92 were not brought into India in convertible foreign exchange within the period stipulated under the Clause (a) of Sub-section (2) of Section 80-HHC of Income Tax Act, 1961 (hereinafter referred to as Act). The Assessing Officer was of the view that assessee firm was entitled to deduction Under Section 80-HHC of the Act only on the turnover, foreign exchange in respect of which was brought into India within a period of 6 months from the end of the previous year. The assessee firm had claimed deduction Under Section 80-HHC of the Act on total export sales made during the previous year relevant to assessment year 1991-92 inspite of the fact that sale proceeds in respect of goods worth Rs. 58,91,672/- sold to M/s J.V. Finn, U.K. in the previous year were not brought into India in convertible foreign exchange within the stipulated time. He concluded that deduction claimed by the assessee firm Under Section 80-HHC of the Act in assessment year 1991-92 was excessive. He accordingly issued a notice Under Section 148 of the Act, as, the income chargeable to tax had escaped in assessment year 1991-92. The assessee filed return of income on 28.11.1993 showing total income of Rs. 74,260/- and deduction of Rs. 57,69,725/- was claimed Under Section 80-HHC of the Act as in the original return filed on 30.10.1991. The Assessing Officer noted that total sale in the year under consideration was Rs. 7,75,23,343/- and deduction Under Section 80-HHC was Rs. 57,69,725/-. The Assessing Officer issued a letter to State Bank of India, Kanpur on 26.11.1993 to furnish date-wise details of sales made by the assessee to various foreign buyers during the previous year relevant to assessment year 1991-92 and Assessing Officer received information from State Bank of India, Kanpur that foreign exchange in respect of export sales worth Rs. 58,91,672/- was not received till that date. It appears that assessee was called upon to show as to why the amount of Rs. 58,91,672/- be not excluded from the figure of export sales, as convertible foreign exchange was not received in the stipulated time while computing deduction Under Section 80-HHC and why that amount should not be excluded from the export sales for the purpose of computing deduction Under Section 80-HHC of the Act. It appears that assessee, after seeking several adjournments, filed a alleged revised return, in which net profit was shown at Rs. 9,36,991/- only as against net profit of Rs. 57,69,725/- shown in the original return and the return filed in response to notice Under Section 148 of the Act. The explanation given by the assessee as showing lesser amount of profit was that assessee had claimed bad debt of Rs. 48,32,734/-, the details of which had been reproduced by the assessee in its letter dated 21.2.1994 accompanied with revised return. The Assessing Officer noted that return of income filed on 21.2.1994 was not a valid return as it was filed beyond the time prescribed Under Section 139(5) of the Act. He also noted that alleged revised return was not filed voluntarily. In the original return, the assessee had claimed deduction Under Section 80-HHC at an excessive figure and when cornered from all side, the assessee has revised the return. He treated the revised return as not a valid return because it was furnished after expiry of one year from the end of assessment year and Sub-section (5) of Section 139 of the Act does not permit any assessee to revise the return filed in pursuance of notice Under Section 148. Thirdly, it was said to be not filed voluntarily and it was not a bonafide act. Further, the Assessing Officer proceeded to examine the claim of assessee's bad debt. The Assessing Officer noted that certain goods were sold to M/s J.V. Finn, U.K. during the previous year relevant to assessment year 1990-91 and the amount of sale proceeds was not received during the year under consideration. M/s J.V. Finn, U.K. went into liquidation and assessee was able to recover goods worth Rs. 11,45,390/- which he supplied to M/s Shoe International, U.K. The balance amount of Rs. 47,46,282/- along with interest of Rs. 1,26,727/- and loss on exchange rate difference of Rs. 10,00,230/- was claimed as bad debt in the assessment year 1992-93, but inspite of these facts of position, the assessee had now claimed Rs. 47,46,282/- as bad debt along with interest of Rs. 86,452/- The Assessing Officer was of the view that allowability of bad debt can only be considered in assessment year 1992-93 and assessee's subsequent action of writing off of bad debt in the account books of assessment year 1990-91 was to reflect lower net profit in assessment year 1991-92 after the department had given a notice in this year to disallow deduction Under Section 80-HHC on the turnover of Rs. 58,91,672/- because the assessee could not receive foreign exchange of that amount within the stipulated time. He also noted that assessee knew well that it would be advantageous to it if lower net profit is reflected in assessment year 1991-92 as the deduction Under Section 80-HHC was proportionate to the profit of the business. The assessee itself admitted in written reply dated 4.3.1994 that fact of amount became bad debt during previous year relevant to assessment year 1992-93. Not only this, the assessee had filed correspondence made with M/s J.V. Finn, U.K. and with Indian High Commission, London and those correspondence also revealed that assessee came to know about the fact that amount was not recoverable in the previous year relevant to assessment year 1992-93. Accordingly, the claim of bad debt in assessment year 1991-92 was found not legally correct and was rejected.
(3.) THE assessee preferred an appeal and raised so many grounds. THE first plea was that the action of the Assessing Officer in not justified in considering the revised return filed on 21.2.1994 as the valid return, as it was the valid return. THE contention was that a return filed Under Section 148 can be revised because in terms of Section 148(1) of the Act, a return is filed under that section, is to be treated as return furnished Under Section 139. This plea of the assessee could not find favour with the ld. CIT(A) who noted that mention of Section 139 in Section 148(1) is only to enable the Assessing Officer to complete the assessment by issuance of notices Under Section 142(1)/143(2) of the Act. THE view taken by the ld. CIT(A) was that the Assessing Officer was justified in holding that a return filed Under Section 148 is not capable of being revised in terms of Section 139(5). However, the ld. CIT(A) was of the view that claim of bad debt made by the assessee cannot be ignored and that can be looked into. THE ld. CIT(A) then considered the claim of the assessee for bad debt and was of the view that claim of bad debt relate of assessment year 1992-93 and not in the year under consideration. He rejected the plea of the learned counsel for the assessee that the accounting standard prescribed by the Institute of Chartered Accountants permit to reopen closed accounts for making such claim. THE ld. CIT(A) was of the view that accounting standard may be binding upon the members of the Institute, but not on the Assessing Officer, as in case this practice is allowed to be followed, then there will be no end to assessment proceedings and any assessee can come even after 5 years and can seek reopening of the assessment. He, accordingly, rejected the claim of the assessee for bad debt. THE assessee is in appeal before us.;