2014 (4) TMI 782 - AT - Income Tax

Tribunal directs verification of irrecoverable advances, emphasizes proper examination of bad debts.

The Dy. Commissioner of Income tax Versus M/s. Bisleri International Pvt. Ltd.

The Dy. Commissioner of Income tax Versus M/s. Bisleri International Pvt. Ltd. - TMI Issues:1. Disallowance of bad debts and irrecoverable advances claimed by the assessee.2. Completeness of details provided by the assessee during assessment proceedings.3. Allowability of bad debts and advances as business loss.Analysis:1. The Revenue appealed against the CIT(A)'s order deleting the addition of Rs.5,34,32,152/- as bad debts and irrecoverable advances for the assessment year 2006-07. The Revenue contended that the assessee did not provide complete details of the bad debts and advances written off, and the decision to write off the amount was not bona fide. The CIT(A) relied on the Supreme Court's decision in TRF Ltd. vs. CIT (320 ITR 397) to allow the claim of the assessee.2. The Assessing Officer (AO) found that the assessee had not furnished complete details of the bad debts and irrecoverable advances during the assessment proceedings. The AO noted that the details provided were incomplete and that the irrecoverable advances were not taken as income in earlier years. The CIT(A) deleted the addition made by the AO based on the TRF Ltd. case. The Revenue argued that the assessee made no effort to recover the debts, justifying the disallowance.3. The assessee argued that due to the closure of various branches, it was not feasible to recover outstanding receivables, leading to the decision to write off the amount. The assessee claimed that the advances were related to its business activities and should be considered as allowable business loss. The CIT(A) supported the assessee's claim, emphasizing the business nature of the advances. However, the Tribunal found discrepancies in the details provided by the assessee and directed the AO to verify and adjudicate the claim of writing off advances as irrecoverable, requiring the assessee to furnish relevant details for proper examination.In conclusion, the Tribunal partly allowed the Revenue's appeal, setting aside the issue of writing off advances as irrecoverable for further verification and directed the assessee to provide necessary details.