Ravi Yantriki Udyog Private Limited Vs ITO (ITAT Pune)
Suppressed Receipts Addition Deleted: ITAT Accepts Reversal of Income as Irrecoverable Bad Debt; 26AS Mismatch Resolved: ITAT Pune Deletes Addition as Income Was Written Off in the Books; Taxing Unpaid Bills: ITAT Upholds Right to Write Off Income Reversal Under Mercantile System; Irrecoverable Dues Deduction: ITAT Pune Deletes Addition Made Solely Based on Form 26AS Credit
Assessee, engaged in erection & commissioning of industrial plants, was subjected to scrutiny for mismatch between Form 26AS receipts & P&L income. AO noticed that ₹1.13 crore received from M/s Vanshika Sugar & Power Industries Ltd. appeared in 26AS but not in books, though TDS credit of ₹2.27 lakh was claimed. Treating it as suppressed receipts, AO added ₹1.13 crore & initiated penalty. CIT(A) confirmed the addition, holding that Assessee failed to substantiate reversal of income.
Before ITAT, Assessee submitted that invoices for ₹1.13 crore were raised but reversed on 31.03.2015 due to non-recovery, as the customer did not make payment either in that year or subsequently. The reversal was duly reflected in books, & the company followed the mercantile system. Hence, the amount represented irrecoverable dues written off, not suppression of income.
ITAT noted that Assessee had offered the income in books initially & reversed it as irrecoverable within the same year. Relying on TRF Ltd. v. CIT (323 ITR 397, SC), Xebec Communications Pvt. Ltd. (Pune ITAT), & Oman International Bank (313 ITR 128, Bom HC), Tribunal held that once a debt is written off as irrecoverable, deduction must be allowed, and there is no obligation to prove actual badness of debt.
