Bad debt write-off deduction and ad hoc expense disallowance deleted where books and evidence supported the assessee.

Delay of 687 days in filing the appeal was condoned on the basis of medical records showing sufficient cause for the belated filing. Deduction for bad debts under section 36(1)(vii) was allowed because the assessee had written off the amounts as irrecoverable in the books; actual proof of irrecoverability was not required after the statutory amendment. The estimated 10% disallowance of business expenses was deleted because it rested on an ad hoc percentage without comparable material or supporting evidence. The additions in dispute were therefore set aside and relief was granted on all issues.

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Issues: (i) Whether the delay of 687 days in filing the appeal could be condoned; (ii) Whether the assessee was entitled to deduction for bad debts written off under section 36(1)(vii); (iii) Whether the disallowance of business expenses at 10% could be sustained.

Issue (i): Whether the delay of 687 days in filing the appeal could be condoned.

Analysis: The delay was supported by medical records relating to the partner and his daughter, and the material placed showed sufficient cause for the belated filing.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): Whether the assessee was entitled to deduction for bad debts written off under section 36(1)(vii).

Analysis: The assessee produced ledger accounts and book entries showing that the amounts due from specified parties, as well as other bad debts, had been written off as irrecoverable in the books. The governing rule applied was that, after the statutory amendment, it is enough if the debt is written off in the accounts, and it is not necessary to prove actual irrecoverability.

Conclusion: The deduction for bad debts written off was allowed in favour of the assessee.

Issue (iii): Whether the disallowance of business expenses at 10% could be sustained.

Analysis: The disallowance was made only on an estimated percentage without comparable material or supporting data, and the reduction from 25% to 10% also rested on the same ad hoc basis.

Conclusion: The percentage-based disallowance of expenses was deleted in favour of the assessee.

Final Conclusion: The assessment-related additions in dispute were set aside, and the assessee obtained relief on all the issues decided.

Ratio Decidendi: For a deduction of bad debts, it is sufficient that the debt is written off as irrecoverable in the assessee's accounts, and an ad hoc disallowance of expenses cannot stand without a rational evidentiary basis.

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