Case Law Details
Bajaj Auto Finance Ltd. Vs. CIT (Bombay High Court)
While mere making of provision for bad debts will not by itself (on application of amended law) entitle the party to deduction, yet it would be a matter where the assessee should be given an opportunity to establish its claim. This by producing its evidence of the manner in which it treated the provision of bad debts written off in accounts as well as in its Balance Sheet. Therefore, the dis allowance cannot be made by intimation under section 143(1)(a) of the Act, as it requires that a party be given an opportunity to establish its claim before disallowing it. It would have been a completely different matter if the Apex Court had ruled that in no case can provision for bad debts be allowed as a bad debt under section 36(1)(vii) of the Act. The allowance of the claim of provision for bad debt is entirely dependent upon how it is reflected in the Balance Sheet and its accounts. Therefore, for the above purpose it is necessary that the party to be given an opportunity to establish its claim. Therefore, in the present facts, adjustment by way of disallowing deduction by intimation under section 143(1)(a) of the Act is not proper.
FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:-
1. This Reference under Section 256(1) of the Income Tax Act, 1961 (the Act) at the instance of the applicant assessee seeks our opinion on the following question of law:
(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the Assessing Officer was justified in making an adjustment u/s 143(1)(a) relating to dis allowance of the claim for bad debts under Section 36(1)(viii) in respect of a sum of Rs. 1,69,37,818/ representing “provision for doubtful overdue installments under hire purchase finance agreements”?
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