Appellate Tribunal upholds deletion of disallowed bad debt; assessee met legal requirements.

The Appellate Tribunal upheld the decision of the Commissioner (Appeals) to delete the disallowance of bad debt written off by the assessee. The Tribunal found that the assessee had taken adequate steps, including issuing a legal notice, and met the legal requirements post the relevant amendment. The Tribunal emphasized that it is not mandatory for the assessee to prove irrecoverability but only to show the debt has been written off. The appeal by the revenue was dismissed, citing relevant case law and the decision was pronounced on 23rd November 2021.

---

---

Issues:
Deletion of disallowance of bad debt written off.

Analysis:
The dispute in the present appeal pertains to the deletion of disallowance of Rs. 2,55,97,771/- made on account of bad debt written off. The Assessing Officer (AO) disallowed the claim of the assessee, adding it back to the income invoking the provision of section 69C of the Act, as he believed that the assessee did not make sufficient efforts to recover the outstanding dues. However, the learned Commissioner (Appeals) deleted the addition after considering the submissions of the assessee and the evidence provided. The Commissioner observed that the debt was written off in the accounts of the appellant and cited relevant case laws to support the decision. The AO's contention that the assessee did not take adequate measures to recover the debt was deemed unsustainable by the Appellate Tribunal.

The Appellate Tribunal noted that the AO did not dispute the fact that the amount was written off as bad debt, and the reasons provided by the assessee for writing off the amount were not challenged. The AO acknowledged that the assessee had issued a legal notice for recovery. The Tribunal held that the reasoning of the AO, stating that the assessee did not make sufficient efforts to recover the dues, was not supported by the evidence on record. The Tribunal highlighted that after the amendment to section 36(1)(vii) w.e.f. 01.04.1989, it is not mandatory for the assessee to prove the irrecoverability of the amount, but only to show that it has been written off as irrecoverable. Citing the precedent set by the Hon'ble Supreme Court in the case of TRF Ltd. vs. CIT [2010] 83 ITR 397, the Tribunal upheld the decision of the learned Commissioner (Appeals) and dismissed the appeal.

In conclusion, the Appellate Tribunal affirmed the decision of the learned Commissioner (Appeals) regarding the deletion of the disallowance of bad debt written off. The Tribunal emphasized that the assessee had taken necessary steps, including issuing a legal notice, and met the requirements as per the law post the amendment to section 36(1)(vii). The appeal by the revenue was dismissed, and the order was pronounced on 23rd November 2021.

---