Ajitsinh Takhatsinh Baraiya Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that bad debts written off as irrecoverable in books is enough and it is not necessary to demonstrate that a debt has become bad. Accordingly, addition on account of bad debts liable to be deleted.
Facts- The assessee is an individual engaged in the business of manpower supply exclusively to M/s Harsha Engineers Limited. During assessment proceedings, AO observed that the assessee claimed a sum of ₹27,92,370/- as expenditure under the head “Contribution to PF,” supposedly on account of deductions made by the service recipient (M/s. Harsha Engineers Ltd.) towards Provident Fund, ESIC, Professional Tax, canteen expenses, bus fare, and deficiency in services.
Notably, the amount of ₹27,92,370/- was initially claimed under PF and ESIC contributions, but the assessee had not actually deposited any such amounts. The claim was therefore found to be bogus. AO was of the view that it was only upon detection by the Department that the assessee shifted his position and re-characterized the same as bad debt.
AO held that the assessee’s claim was incorrect, it was not supported by facts, and the deduction of ₹27,92,370/- was thus disallowed by the Assessing Officer. Accordingly, an addition of ₹27,92,370/- was made to the total income of the assessee. CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
