Nuevosol Energy Private Limited Vs ACIT (ITAT Hyderabad)
Once debt is written off in books assessee is not required to prove that debt has become bad or not
ITAT Hyderabad held that once the debt has been written off in the books of accounts as irrecoverable, assessee is not required to prove that the debt had become bad or not. Accordingly, deduction for bad debts written off allowed u/s 36(1)(vii) r.w.s. 36(2).
Facts- The case of the assessee was selected for scrutiny. During the course of assessment proceedings and on perusal of the books of accounts of the assessee, AO observed that the assessee has debited a sum of Rs.3,50,33,0 12/- towards bad debts receivables written off in its Profit and Loss account. AO on perusal of the details submitted by the assessee observed that the assessee could not prove the bad debts written off in its books of accounts are, in fact bad debts and irrecoverable with relevant evidences. Thus, AO observed that the assessee’s claim of bad debts is not allowable u/s 36(1)(vii) r.w.s.36(2) of the Act. Accordingly, rejected the claim of the assessee in respect of bad debts amounting to Rs.2,60,80,027/- and added back to the total income.
