ACIT Vs Syed Habibur Rehman (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT) Delhi has dismissed an appeal by the Income Tax Department, affirming the deletion of a ₹1.50 crore disallowance claimed by Syed Habibur Rehman as bad debts for Assessment Year 2014-15. The Tribunal reiterated that after the 1989 amendment to the Income Tax Act, it is sufficient for an assessee to merely write off a debt as irrecoverable in their books of account; proving the debt has actually become irrecoverable is no longer a prerequisite.
The ruling addresses a dispute arising from commodity trading activities of the assessee through National Spot Exchange Limited (NSEL), which faced regulatory action and fraud allegations.
Case Background
Syed Habibur Rehman, an individual engaged in commodity trading, claimed a bad debt write-off of ₹1.50 crore in his profit and loss account for the financial year 2013-14 (A.Y. 2014-15). The Assessing Officer (AO) questioned this claim, noting that the total outstanding debt from NSEL was ₹5,23,29,230. The AO issued a notice under Section 133(6) of the Income Tax Act, 1961, to NSEL seeking information.
Based on NSEL’s reply, the AO concluded that the assessee had “pre-maturely written off” the amount without satisfying the conditions laid down under Section 36(2) of the Act. The AO, therefore, disallowed the ₹1.50 crore claim and added it back to the assessee’s income.
