Bad debt write-off and client claim settlement cannot be taxed again where earlier provision and income were already accounted for.

Amounts written off as bad debts were held not to justify further addition where the assessee's reconciliation showed that part of the sum was a reversal of an earlier provision for doubtful debts already disallowed when created, so taxing it again would amount to double taxation. The client claim debit was also explained as settlement or write-off of balances whose corresponding income had already been offered to tax in earlier years, and the reconciliation was supported by ledgers, financial statements and paper-book material without any specific rebuttal. On those facts, unrecovered client dues were treated as allowable, and the additions were not warranted.

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Issues: Whether the additions on account of bad debts written off and loss on operation/client claim were sustainable, in light of the reconciliation showing reversal of an earlier disallowed provision and prior taxability of the client claim amounts.

Analysis: The assessee furnished a reconciliation showing that the amount treated as bad debts included reversal of a provision for doubtful debts created in an earlier year and already disallowed when created, so taxing it again would result in double taxation. The assessee also demonstrated that the client claim amounts had already been offered to tax in earlier years and that the debit in the year under consideration represented settlement or write-off of client balances. The reconciliation was supported by ledger accounts, financial statements and paper-book material, and no specific discrepancy was brought out to rebut it. On these facts, the governing principle that unrecovered client dues of a broker may be allowable when the corresponding income has already been assessed supported the assessee's claim.

Conclusion: The additions were not warranted and the relief granted to the assessee was sustained.

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