Sohanraj Khimraj Kothari Vs JCIT (ITAT Bangalore)
ITAT Bangalore held that it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it enough if bad debt is written off as irrecoverable in the hooks of accounts of assessee.
Facts- The issue that arises for consideration in this appeal is as to whether the Revenue authorities were justified in disallowing the claim of the assessee for deduction of a sum of Rs.1,33,351/- on account of bad debts written off. In this regard, there is no dispute that the assessee had written off the same in question as bad debts in the books of accounts. The only reason assigned by both the Revenue authorities is that the assessee did not show as to what efforts the assessee made to recover the debts before writing off as bad debt.
Conclusion- Hon’ble Supreme Court in the case of TRF Ltd. has held that after 1.4.1989, for allowing deduction for the amount of any had debt or part thereof under section 36(1) (vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it enough if bad debt is written off as irrecoverable in the hooks of accounts of assessee.
The CBDT, on the basis of the aforesaid decision of the Hon’ble Supreme Court, issued Circular No.12/2016 dated 30.05.2016 and in para 4 of the said Circular, the CBDT has clearly laid down that deduction should be allowed if a debt is written off as irrecoverable in the books of accounts of the assessee in the relevant previous year. In the light of the aforesaid decision of the Hon’ble Supreme Court and CBDT Circular, I am of the view that the disallowance of deduction on account of bad debt written off is unsustainable and the same is directed to be allowed as deduction.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
ITA No.686/Bang/2022 is an appeal by the assessee against the order dated 08.06.2022 of NFAC, Delhi, relating to Assessment Year 2013-14. ITA no.687/Bang/2022 is also an appeal by the assessee against the order dated 08.06.2022 of NFAC, Delhi, relating to Assessment Year 2014-15.
2. ITA No.686/Bang/2022: The first issue that arises for consideration in this appeal is as to whether the Revenue authorities were justified in making the addition of Rs.1,61,960/- on account of unexplained cash credit under section 68 of the Act.
3. The assessee is an individual. He carries on the business of wholesale dealing in textiles. In the books of accounts of the assessee, the following outstanding credit balance were found:
