2015 (6) TMI 1064 - AT - Income Tax

ITAT Mumbai upholds CIT(A) decision on bad debts written off

Income Tax Officer-10 (2) (4), Mumbai Versus M/s. Hathway Rajesh Multi Channel Pvt. Ltd.,

Income Tax Officer-10 (2) (4), Mumbai Versus M/s. Hathway Rajesh Multi Channel Pvt. Ltd., - TMI Issues: Revenue's appeal against CIT(A)'s decision on bad debts written off.Analysis:1. Claim of Bad Debts Written Off: The appeal pertains to the Revenue contesting the decision of the CIT(A) in allowing the claim of bad debts written off by the assessee. The assessee, engaged in the business of Cable Operator and ISP service provider, had debited provisions for doubtful debts in the P&L account in previous years. In the relevant assessment year, the assessee debited a certain amount as provision for doubtful debts but did not disallow it while filing the return of income. The bad debts of a specific amount were written off during the year, which the Assessing Officer disallowed as the assessee had not filed any revised return. However, the CIT(A) allowed the claim of the assessee, citing the Supreme Court decision in T.R.F. Ltd. vs. CIT 323 ITR 397, and the Bombay High Court case of CIT vs. Pruthvi Brokers & Shareholders P. Ltd. 349 ITR 336. The CIT(A) held that if bad debts are written off in the books of account, the assessee is eligible to claim a deduction under section 36(1)(vii), even if not claimed while filing the return.2. Legal Precedents and Observations: The CIT(A) based his decision on the Pruthvi Brokers case, where it was established that even if a claim was not made before the Assessing Officer, it could be presented before the appellate authorities. The Bombay High Court emphasized that the powers of the appellate authorities are not restricted and they can entertain additional claims. The High Court clarified that the decision in Goetze (India) Limited v. CIT regarding the restriction of claims through a revised return only applied to the Assessing Authority and did not limit the powers of appellate authorities. The appellate authorities have the jurisdiction to consider claims that could not have been raised before the AO, and the assessee can claim deductions before the appellate authority that were not claimed initially. The High Court highlighted that the words 'could not have been' raised should be interpreted liberally, allowing for claims not previously made to be presented during appellate proceedings.3. Decision and Dismissal of Appeal: The ITAT, Mumbai, pronounced the order on 30.06.2015, dismissing the Revenue's appeal. The Tribunal upheld the CIT(A)'s decision, stating that the Revenue failed to provide any contradictory legal precedents to challenge the Bombay High Court's proposition. As a result, the appeal was found to be without merit and was consequently dismissed.