2024 (5) TMI 435 - AT - Income Tax

Revenue's appeal dismissed as bad debts write-off allowed and excess material consumption deletion upheld

DCIT, Circle-18 (1), Delhi Versus M/s. Nidhi Builders (International) Pvt. Ltd. Delhi

ITAT Delhi dismissed revenue's appeal on two grounds. Regarding bad debts write-off disallowance, the tribunal upheld CIT(A)'s deletion of addition, ... Disallowance of claim of Bad debts Write Off - CIT deleted addition - HELD THAT:- Considering the fact that the Ld. A.O. while making the above addition, has not applied his mind and copy-pasted the portion of the order of the previous year in the year under consideration, which has been rightly deleted by the CIT(A) after examining the issues on merit as well. Thus, we find no error or infirmity of the approach of the CIT(A), accordingly the Ground No. i, ii & iii of the Revenue are dismissed. Disallowance of excess material consumed - CIT(A) deleted addition admitting additional evidence - HELD THAT:- It is the case of the assessee that its project of Kabul Lines ran into trouble with the Army authorities was substantiated by certain documents i.e. copies of invoices disclosing amount claimed and that passed finally, its receipts were TDS was made in Form 26AS details of material purchased and closing stock in Financial Year 2010-11 including its valuation in the audited books of accounts of the assessee. As per the assessee, the reason for high consumption is because of degradation of the raw materials at the work site. The assessee has also provided the evidences of complaint filed by the assessee to Police authorities against theft of materials. Considering the fact that the Ld. CIT(A) being the fact finding authority found that the contention of the assessee that the consumption of material vis-à-vis the Revenue earned appeared to be plausible, we find no reason to interfere with the finding of the Ld. CIT(A), accordingly, the Ground of the Revenue is dismissed. Issues Involved:1. Deletion of addition under section 36(1)(vii) of the Income Tax Act, 1961.2. Deletion of addition on account of bad debts written off.3. Deletion of addition by ignoring the procedure prescribed by the Supreme Court in the case of TRF Ltd. vs. CIT.4. Deletion of addition on account of excess material consumed.5. Admission of additional evidence under Rule 46A of the Income Tax Rules, 1962.Summary:Issue 1: Deletion of addition under section 36(1)(vii)The Revenue challenged the deletion of Rs. 1,41,59,848/- made by the Assessing Officer (AO) under section 36(1)(vii) of the Income Tax Act, 1961. The AO had copied the disallowance from the previous year's assessment order without examining the current year's specifics. The CIT(A) found that the disallowance was a result of a 'cut & paste job' and that the bad debts written off were supported by evidence. The Tribunal upheld the CIT(A)'s decision, finding no error or infirmity.Issue 2: Deletion of addition on account of bad debts written offThe Revenue contended that the assessee failed to prove that the bad debts were written off in the accounts. The CIT(A) allowed the bad debts written off, citing the CBDT Circular No. 12/2018 and the Supreme Court ruling in TRF Ltd. vs. CIT, which clarified that it is sufficient if the bad debt is written off in the books of accounts. The Tribunal agreed with the CIT(A) and dismissed the Revenue's grounds.Issue 3: Deletion of addition by ignoring the procedure prescribed by the Supreme Court in the case of TRF Ltd. vs. CITThe Revenue argued that the CIT(A) ignored the Supreme Court's procedure for writing off bad debts. The CIT(A) referred to the Supreme Court's decision in TRF Ltd. vs. CIT, which states that post-1.4.1989, it is not necessary for the assessee to establish that the debt has become irrecoverable. The Tribunal found no merit in the Revenue's argument and dismissed the grounds.Issue 4: Deletion of addition on account of excess material consumedThe AO had made an addition of Rs. 1,88,54,804/- due to excess material consumption, claiming the assessee did not substantiate its claim with bank statements and item-wise stock details. The CIT(A) found that the assessee had provided necessary documents, including invoices, Form 26AS, and evidence of material degradation and theft. The Tribunal upheld the CIT(A)'s findings, seeing no reason to interfere.Issue 5: Admission of additional evidence under Rule 46AThe Revenue claimed that the CIT(A) admitted additional evidence without providing an opportunity for the AO to be heard. However, the Tribunal noted that the Departmental Representative did not point out any specific additional evidence considered by the CIT(A). Consequently, the Tribunal dismissed this ground.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order on all grounds. The decision emphasized the necessity for the AO to apply due diligence and consider the specific details of the assessment year in question.