Circular Guides Banks on Assessing Bad Debts for Business Income; Clarifies Role of Income Tax Officer in Decision-Making.

The circular addresses the assessment of bad and doubtful debts for banks in the context of business income. It clarifies that determining whether a debt is bad and when it became bad are factual questions to be resolved by the Income Tax Officer (ITO), subject to appeal. The decision should not be solely based on the assessee's declaration but on all relevant circumstances. The circular notes that historically, there have been no significant disputes between public banks and ITOs regarding bad debts. It also references the Income-tax Investigation Commission's report concerning the acceptance of audit certificates.

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