TaxTMI 
TaxTMI 
2008 (12) TMI 305
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....IT Act, 1961 on 31st Oct., 2005. Later on, the case was selected for scrutiny and notice under s. 143(2) was issued on 18th Oct., 2006. Thereafter, the assessee participated in the assessment proceedings and assessment was concluded under s. 143(3). During the course of assessment, it was noticed that the assessee has debited an amount of Rs. 20,46,640 as bad debts in the P&L a/c. The AO asked the assessee to prove the genuineness of the claim of bad debts. The assessee furnished the names of 51 customers, which have been claimed as bad debts. It is observed by the AO that the assessee has not provided complete addresses like shop number, area where situated etc. Even in respect of 21 parties, no address has been given. However, to verify the genuineness of the claims of the assessee, summons were issued to various parties. The 51 parties to whom summons are issued, the fate of these summons is as follows: ------------------------------------------------------------------ Sl. Name and address of the parties Amount Postal remarks No. ------------------------------------------------------------------ 1. Guru Nanak Property Dealer, ne....
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....sp; 34,000 11. Shining Star Sr. Sec. School, 2,58,390 No such school in Basti Nau, Jalandhar Basti Nau 12. Simplex Projects Ltd., Jalandhar 84,568 No such case Cantt. 13. Joginder Singh, Vill. Sikandarpur, 54,060 Incomplete address Jalandhar 14. Mohan Enterprises, Jyoti Nagar, 73,820 Shop closed Jalandhar 15. Surjit Singh Dhillon, Kuki Tabh 24,800 Incomplete address Road, Mithapur, Jalandhar 16. Rajiv Sharda, MTS Nagar, Jalandhar 27,435 Not known without &nbs....
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....nbsp; 960 8. Naranjan Dass, Jalandhar 28,800 9. Rajesh Uppal, Jalandhar 8,334 10. Rana Sugar Mills, Vill. Buttar Kalan, Amritsar 1,650 11. Rajinder Kaur, Vill. Nangar 73,900 ------------------------------------------------------------------ Names of the parties confirming no dealings with the assessee: ------------------------------------------------------------------ Sr. Name and complete addresses of party Amount No. ------------------------------------------------------------------ ....
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....sp; Speedways Tyre Service, Jalandhar 7,530 6. Rakhu Cement, Nakodar Road, Jalandhar 38,520 7. Datta Traders, Adampur 36,400 8. Snowshine Marbles, Nakodar Road, Jalandhar 33,700 ------------------------------------------------------------------ These facts were informed to the assessee vide letter dt 12th Dec., 2007. In response to the AO's letter, the assessee has filed a reply on 20th Dec., 2007 and the assessee has asked for the photocopies of the reply given by 9 parties, where they stated that they had no dealings with the assessee. The AO supplied the same to the assessee. Further, the assessee has given reply vide letter dt. 16th May, 2007. The AO was not satisfied with the reply of the assessee. The AO treated the amount of....
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....e earlier returns and the Department has accepted these debtors in earlier years. Non-availability of the addresses of some of the parties does not mean that these are bogus debtors. There can be many reasons for non-availability of their present addresses. As per addresses given by the assessee, sales were made, bills were raised and the assessee made various efforts to recover debts and if the debtors are not found at the given addresses, it cannot be the fault of the assessee. They are not under the direct control of the assessee. The reason that they are not found in the given address is the best reason to write off the debts. Since they are not in the addresses, summons issued to them were returned. Some of the parties replied to the AO's letter stating that they have no dealing with the assessee in the financial year 2004-05 that itself does not mean that there was no transaction with the assessee in any year. The AO disallowed the claim of the assessee because these debts are not appearing in the parties account. The parties may not have recorded these transactions in their books of account. It is not the fault of the assessee. Because parties have not recorded in their book....
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....L a/c ending 31st March, 1-3 2006 List of sundry debtors as on 31st March, 2006 2. List of sundry debtors as on 31st March, 20065 4-13 3. Balance sheet, trading/P&L a/c ending 31st March, 16-16 2005 4. List of sundry debtors as on 31st March, 2005 17-27 5. Balance sheet, trading/P&L a/c ending 31st March, 28-30 2004 List of sundry debtors as on 31st March, 2004 6. List of sundry debtors as on 31st March, 2004 31-40 7. Balance sheet, trading/P&L a/c ending 31st March, 41-43 2003 List of sundry debtors as on 31st March, 2003 8. List of sundry debtors as on 31st March, 2003 44-51 9. Balance sheet, trading/P&L a/c ending 31st March, 52-54 &nbs....
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.... assessee. For clarity, we reproduce few customers' accounts as submitted by the assessee in Part B from serial Nos. 1 to 51 (but serial No. 38 has not been found) of the paper book. 1. KEW Industries Ltd., Focal Point 3,775 2. Guru Teg Bahadur Sugar Ltd. 832.70 3. Gum Nanak Property Dealer 9,230 4. Sondhi Agencies, Kot Kishan Chand 96,467 5. Speedways Tyre Service &n....
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....bsp; 1,66,240 17. P.K. Marble 18,000 18. Bhullar Trading Co. 5,400 19. Pandit Ravi Parkash Ji 24,932 20. Punjab Container 81,000 21. R.J.S. Bldg. & Const....
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....bsp; 4,125 33. Datta Traders, Adampur 36,400 34. Joginder Singh, Sikandarpur 54,060 35. Mohan Enterprises 73,800 36. Surjit Singh Dhillon, Jalandhar 24,800 37. Verma Sales, Dada Colony, Jalandhar 23,075 38. Niranjan Dass&n....
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....80 50. Rajinder Kaur, Vill. Nangar 73,900 --------- Total: 20,46,640 &....
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....832.70 ----------------------------------- Total 3,357.50 2,524.80 832.70 ----------------------------------- 3. Guru Nanak Property Dealer 07-12-2000 Bill No. 2611 3,400 - 3,400 29-12-2000 Bill No. 2704 1,830 - 5,230 &nbs....
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.... 14,000 - 14,000 05-09-2003 Bill No. 1070 15,000 - 29,400 ----------------------------------- Total 44,400 15,000 29,400 ----------------------------------- 6. Dada Cement 09-08-2000 Bill No. 16817 325 ....
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....; ----------------------------------- Total 20,250 - 20,250 ----------------------------------- As seen from the above accounts, the assessee though carried the bad debt to the P&L a/c at Rs. 20,46,640, no corresponding credit entry in the accounts of debtors has been made by the assessee in their respective debtors' account except in the case of Tejindra Distributors. Only in the case of Shri Tejindra Distributors, Jalandhar, corresponding written off entry was passed in this account. In other cases, the assessee has not passed corresponding entry in each debtors' account. Actually, the assessee is required to pass following entries in respect of each bad debt. ....