2008 (4) TMI 385 - AT - Income Tax

Tribunal Orders Bad Debt Deduction for 2002-03; Highlights Tax Authorities' Duty to Correct Errors and Ensure Fairness.

Sabnis Ashok Anant. Versus Assistant Commissioner Of Income-Tax.

Sabnis Ashok Anant. Versus Assistant Commissioner Of Income-Tax. - TTJ 117, 096, [2009] 29 SOT 29 (PUNE) (URO) Issues:Rectification of mistakes under section 154 read with section 250 of the Income-tax Act, 1961 for the assessment year 2002-03 regarding deduction of bad debts.Analysis:The appeal concerns the rejection of a deduction claim for bad debts by the Assessing Officer in the assessment year 2001-02, as the bad debt was not actually written off. The CIT(A) upheld this decision, stating that the entry made was a provision for bad debts and not an actual write-off. The assessee, in the assessment year 2002-03, did not claim the bad debt again but mentioned it as written off in the previous year. The CIT(A) held that no rectifiable mistake existed under section 154 and rejected the claim, leading to the current appeal.The key legal point addressed is the interpretation of section 153(3) of the Act, which allows assessments, reassessments, or recomputations to be made at any time to give effect to findings or directions in orders under section 250. The tribunal emphasized that a finding necessary for the disposal of a case, as in the present scenario where bad debts are allowable in the year of actual write-off, falls within the ambit of section 153(3). The Assessing Officer's failure to act on the CIT(A)'s finding constitutes a mistake apparent from the record, as per the legal duty to exercise powers for the benefit of the public.The tribunal concluded that the Assessing Officer should have recomputed the taxable income for the assessment year 2002-03 by allowing the bad debt written off in the previous year, as directed by the CIT(A). Failure to do so was deemed a clear mistake apparent from the record, contrary to the Act's scheme. Upholding the assessee's grievance, the tribunal directed the Assessing Officer to give effect to the CIT(A)'s findings and allow the bad debt in the year of actual write-off, ensuring relief for the assessee and highlighting the importance of equitable and fair tax administration.In summary, the tribunal allowed the appeal, emphasizing the legal duty of public authorities to act on findings and directions in orders under section 250, rectifying the mistake apparent from the record and granting relief to the assessee by allowing the bad debt deduction in the appropriate assessment year.