Case Law Details
Shrawan Goenka Vs ACIT (ITAT Patna)
Brief facts relevant to the issue are that during the assessment proceedings, the Assessing Officer noted that the assessee had debited in his Profit & Loss A/c, a sum of Rs.4,94,006/- under the head bad debts. On being asked to produce the details along with supporting papers, bills, vouchers, the assessee submitted that the amount debited under the head ‘bad debts’ was raised during the same previous year. It was further submitted that in the business of dairy products many customers did not pay whenever they get rotten milk or other dairy products. However, the assessee furnished the list of four debtors, but could produce confirmation from only two debtors. The Assessing Officer however noted that the assessee’s claim of expenses in respect of aforesaid two debtors were inflated and was not substantiated by adequate supporting documents. He, therefore, disallowed the amount pertaining to two debtors amounting to Rs.2,41,607/-.
In appeal, the ld. CIT(A) confirmed the addition made by the Assessing Officer.
Before this Tribunal, the ld. counsel for the assessee has submitted that the assessee was in the business of dairy distributors and that the assessee has duly provided list of debtors, persons in whose case the debtors had actually become bad and non-recoverable. He has further submitted that the Assessing Officer without any incriminating evidence on the file made the assessment that the debt in respect of two debtors was inflated. The ld. counsel has relied upon CBDT Circular no.12/2016 dated 30.05.2016, wherein, it has been directed to the Income-Tax Authorities that the claim of any bad debt shall be admissible u/s 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of account of the assessee for that previous year and it fulfils the conditions stipulated in sub-section (2) of sub-section 36(2) of the Act.
The ld. DR could not rebut the above submission of the ld. AR, in view of this, the appeal of the assessee is allowed and the addition made by the lower authorities on this issue are ordered to be deleted.
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