Onus to prove that debts are irrecoverable gets satisfied, once bad debts w/off in books of accounts

Brief of the Case

ITAT Ahmedabad held In the case of M/s Indu Nissan Oxo Chemical Inds. Ltd. vs. DCIT that the Hon’ble Apex Court in the case of TRF Ltd. vs. CIT reported at (2010) 323 ITR 397(SC) has held that this position in law is well-settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. In view of this judgment, reasoning given by lower authorities cannot be sustained. Hence disallowance of Rs.23,14,032/- on account of sundry balances written off is not maintainable.

Facts of the Case

ITA No.4518/Ahd/2003

The assessee was picked up for scrutiny assessment and the assessment u/s.143 (3) was framed vide order dated 28/03/2003. While framing the assessment, the Assessing Officer made various disallowances of Rs.1,60,631/- on account of unpaid sales-tax liability, disallowance of Rs.2,39,382/- on account of difference earned on realization of foreign currency of export sales, addition of Rs.16,94,333/- on account of non-crediting of interest accrued on FDR, disallowance of Rs.70,000/- on account of wrong claim of electricity and rent expenses, disallowance of Rs.90,583/- on account of wrong debit of prior period expenses and disallowance of Rs.5,000/- by invoking the provisions of section 40A(3). The AO also made addition on account of unexplained share capital contribution of Rs.64 lacs and also made disallowance of Rs.30 lacs being the remuneration paid to the Director of the assessee-company.

Please become a Premium member. If you are already a Premium member, login here to access the full content.