TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1192
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....l debts was made and as such the bad debts written off as claimed by the appellant is not to be allowed ?" 3. We have elaborately heard Mr. J.P. Khaitan, learned senior counsel appearing for the appellant/department and Mr. Soumen Bhattacharjee, learned standing counsel for the respondent/assessee. 4. The assessee filed the return of income for the assessment year under consideration along with tax audit report under Section 44AB of the Act appending the computation of income. In the said return, the assessee had shown a total income of Rs. 33,28,170/-. The return was processed and thereafter notice under Section 143(2) and 142(1) was issued to the assessee and the case was discussed by the Assessing Officer with the authorized representative of the assessee. The assessment was completed under Section 143(3) on 31.12.2007 determining the total income at Rs. 76,46,460/- after making disallowance of bad debts amounting to Rs. 8,97,676/- and Rs. 34,20,618/- in aggregate under different heads of income. 5. As could be seen from the material papers, the assessee had produced all documents and details with regard to the names and addresses of the debtors, the amounts referred to in t....
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....not deposited as per party's advice and reversed. This will clearly show that there has been a bad debts written off and not as a provision. However, the Assessing Officer while completing the assessment appears to have relied upon a statement of one Bijoy Krishna Majhi, who is stated to be the proprietor of Unique Agencies, who has given a statement stating there was no outstanding payable nor any cheque was issued. This statement was never put to the assessee and the assessee had no opportunity to cross-examine the said person. Therefore, the said statement should be held to be inadmissible and could not have been used by the Assessing Officer to complete the assessment. 9. Apart from that while affirming the order passed by the Assessing Officer and the CIT(A), reference has been made by the Tribunal to the decision in the case of Commissioner of Income-tax vs. Micromax Systems (P.) Ltd., (2005) 148 Taxman 486 (Madras). 10. We have carefully gone through the said decision and we find that the decision is clearly distinguishable on facts. In the said case, the Assessing Officer found that the assessee had not actually written off the bad debts as recoverable in its books of acc....
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....derstand as to `how to write off'. 12. If an assessee debits an amount of doubtful debt to the profit and loss account and credits the asset account like sundry debtor's account, it would constitute a write off of an actual debt. However, if an assessee debits provision for doubtful debt to the profit and loss account and makes a corresponding credit to the `current liabilities and provisions' on the liabilities side of the balance sheet then it would constitute a provision for doubtful debts. At this juncture, it would be of utmost importance to quote the relevant paragraphs of the decision in Southern Technologies (supra) : "6. The first question is no more res integra. Recently, a Division Bench of this court in the case of Southern Technologies Ltd. v. Joint CIT reported in [2010] 320 ITR 577, (in which one of us S. H. Kapadia J. was a party) had an occasion to deal with the first question and it has been answered, accordingly, in favour of the assessee, vide paragraph 25, which reads as under (page 604): "Prior to April 1, 1989, the law, as it then stood, took the view that even in cases in which the assessee (s) makes only a provision in its accounts for bad debts and i....
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....tual write off. According to him, the Explanation makes it very clear that there is a dichotomy between actual write off on the one hand and a pro-vision for bad and doubtful debt on the other. He submitted that a mere debit to the profit and loss account would constitute a provision for bad and doubtful debt, it would not constitute actual write off and that was the very reason why the Explanation stood inserted. According to him, prior to the Finance Act, 2001, many assessees used to take the benefit of deduction under section 36(1) (vii) of the 1961 Act by merely debiting the impugned bad debt to the profit and loss account and, therefore, Parliament stepped in by way of Explanation to say that mere reduction of pro-fits by debiting the amount to the profit and loss account per se would not constitute actual write off. To this extent, we agree with the contentions of Shri Bhattacharya. However, as stated by the Tribunal, in the present case, besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee-bank had correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from ....
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....eduction under section 36(1) (vii) of the 1961 Act, twice over. (See order of the Commissioner of Income-tax (Appeals) at pages 66, 67 and 72 of the paper book, which refers to the apprehensions of the Assessing Officer). In this context, it may be noted that there is no finding of the Assessing Officer that the assessee had unauthorisedly claimed the benefit of deduction under section 36(1) (vii), twice over. The order of the Assessing Officer is based on an apprehension that, if the assessee fails to close each and every individual account of its debtor, it may result in the assessee claiming deduction twice over. In this case, we are concerned with the interpretation of section 36(1)(vii) of the 1961 Act. We cannot decide the matter on the basis of apprehensions/desirability. It is always open to the Assessing Officer to call for details of individual debtor's account if the Assessing Officer has reasonable grounds to believe that the assessee has claimed deduction, twice over. In fact, that exercise has been undertaken in subsequent years. There is also a flipside to the argument of the Department. The assessee has instituted recovery suits in courts against its debtors. If....