TaxTMI 
TaxTMI 
2026 (7) TMI 1322
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....s. 143(2) of the Income Tax Act, 1961, was issued without adhering to the CBDT Circular F.no. 225/157/2017/ITA.II dated 23/06/2017, which is binding on the Assessing Officer. That the said notice is invalid, and the assessment framed pursuant thereto is void ab initio and ought to be quashed. 2. The Ld. Commissioner of Income Tax (Appeals)-NFAC erred in confirming the disallowance of bad debts u/s. 36(1)(vii) of the Income Tax Act 1961 amounting to Rs. 37,01,707/-, without appreciating the factual matrix of the case. That the addition made is illegal, unwarranted and ought to be deleted. 3. Without Prejudice to the above ground, the Ld. Commissioner of Income Tax (Appeals) NFAC erred in confirming the addition to the tune ....
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....ever, disallowed the claim of the assessee by stating that assessee failed to establish the irrecoverablity and thus did not complied with the requirement under section 36(2) of the Act. It was also observed by the Ld.AO that legal actions were not pursued in all cases and some debts were not beyond the stipulated period as per section 36(2)(iv) of the Act. Aggrieved by the order of the Ld.AO, the assessee filed appeal before the Ld.CIT(A). 3. The Ld.CIT(A) after considering the submissions of the assessee observed and held as under: "6.1 I have carefully considered the assessment order passed under section 143(3) read with section 144B of the Income-tax Act, 1961, the grounds of appeal raised, the written submissions filed b....
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....gly interpreted section 36(2)(iv), which in its view does not apply to the current assessment year. 6.4 The submissions of the appellant have been duly considered. It is evident from the assessment records that the appellant failed to furnish any documentary evidence to establish the nature of each debt, the year in which the corresponding income was offered, or the steps taken for recovery. In several cases, the appellant merely produced ledger copies or internal records without supporting correspondence, confirmations, or evidence of write-off as irrecoverable in the regular course of business. Further, in certain cases, part payments were received from the concerned parties, and the balances were written off without demonstratin....
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....that the debt had actually become bad would not entitle the assessee to deduction. 6.5 In view of the above facts and circumstances, and considering that the appellant has failed to discharge the onus of proving that the debts written off had actually become bad or were taken into account in computing income of the earlier years, the disallowance of Rs. 37,01,707/- made by the Assessing Officer under section 36(1)(vii) read with section 36(2) is found to be justified and is accordingly confirmed." Aggrieved by the order of the Ld.CIT(A) assessee is an appeal before this Tribunal. 4. At the outset, the Ld.AR submitted that all the grounds raised in the present appeal relate to a solitary issue, namely, the disallowance of bad ....
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....efforts, the debts were bona fide written off in the books of account. 4.4. Placing reliance on the decision of Hon'ble Supreme Court in TRF Ltd. v. CIT (supra) and the decision of Hon'ble Bombay High Court in DCIT v. Oman International Bank reported in (2006) 286 ITR 8, the Ld.AR submitted that after the amendment to section 36(1)(vii) with effect from 1/04/1989, it is no longer necessary for the assessee to establish that the debt has become irrecoverable. It was contended that once the debt is written off as irrecoverable in the books of account and the conditions of section 36(2) are fulfilled, the deduction is required to be allowed, and no further proof regarding the irrecoverability of the debt can be insisted upon. 4.3....
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.... an approach is legally unsustainable. Section 36(2)(iv) is a transitional provision applicable only to debts relating to the assessment year 1988-89 or any earlier assessment year and has no application to the year under consideration. After the amendment brought about by the Finance Act, 1987 with effect from 1 April 1989, section 36(1)(vii) merely requires that the bad debt should be written off as irrecoverable in the books of account of the assessee. It is no longer incumbent upon the assessee to establish that the debt has in fact become irrecoverable. This legal position stands authoritatively settled by Hon'ble Supreme Court in TRF Ltd. v. CIT (supra). 5.2. The Ld. CIT(A) has observed that mere book entries, even when support....