DCIT Vs Ispat Infrastructure India Ltd. (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, heard the appeal filed by the Deputy Commissioner of Income Tax (DCIT) against Ispat Infrastructure India Ltd. for the Assessment Year (AY) 2015-16, challenging the Commissioner of Income Tax (Appeals) [CIT(A)] order that had deleted multiple disallowances. The ITAT’s primary action was to restore three key issues back to the Jurisdictional Assessing Officer (AO) for fresh, de novo adjudication, while one ground of appeal was deemed inadvertently raised by the Revenue.
Bad Debts Claim (Ground 1)
The Revenue contested the deletion of the disallowance of bad debts amounting to ₹2,23,73,875 claimed under Section 36(1)(vii). The AO had initially disallowed the claim because the assessee failed to provide supporting evidence during assessment. The CIT(A) deleted the disallowance, relying on the settled legal position that after April 1, 1989, an assessee is not required to prove that a debt is irrecoverable; merely writing it off as irrecoverable in the books is sufficient. This principle is backed by the Supreme Court decision in TRF Ltd. vs. CIT (2010).
However, the ITAT observed that while the irrecoverability condition is relaxed, the assessee must still satisfy the technical conditions of Section 36(2) of the Act, which the CIT(A) had failed to examine. Furthermore, the AO’s remand report noted various infirmities, including the lack of details on the nature of transactions and how the debts turned bad. Consequently, the ITAT set aside the CIT(A)’s order on this issue and remanded it back to the AO, granting the assessee an opportunity to submit all necessary details to support the claim under Section 36(1)(vii) read with Section 36(2).
