A Mistake would not disentitle Assessee from a Lawful Expenditure: ITAT [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has held that the assessee cannot be deprived off the expenditure which are legally eligible merely on the ground of a mistake committed during the filing of the income tax return.

During the assessment proceedings, the Assessing Officer noted that the assessee, M/s Uniworth Textiles Ltd, has written off Rs. 84,56,692/- under the head sundry balances and charged the same to the profit and loss account. The assessee contended that the claim comprised of sundry balances wriiten off as well as stocks written off however wrongly claimed under the head sundry balances written off. The AO observed from the details furnished by the assessee that the said claim of the assessee represented the garment stocks, stock of trims written off during the year beside petty balances written off on account of sundry Debtors/creditor and rejected the claim of the assessee and added the same to the income of the assessee.

On appeal, the first appellate authority granted relief to the assessee. The Revenue approached the Tribunal challenging the said order.

After hearing arguments from both sides, the Tribunal bench consists of Shri Rajpal Yadav, Vice-President & Shri Rajesh Kumar, Accountant Member found that during the year the assessee has written off the sum of Rs. 84,56,692/- on account of sundry balance written off which was charged to the account of profit and loss account.

Confirming the order of the first appellate authority, the division bench held that “We note that the substantial part of the amount represented the stock written off in respect of garment stock and stock of trims and only a small portion of the total represented sundry debtors written off. The Ld. Counsel of the assessee vehemently argued before us that this is mere claim of genuine nature made by the assessee under the wrong head which represented the business loss and should be allowed to the assessee. We note that the claim has rightly been allowed by ld CIT(A) by appreciating the facts after going through the details filed by the assessee. Having considered these facts we have no iota of doubt in our mind that even the stocks written off which are rendered unserviceable represented a business loss and has to be allowed while computing the income of the assessee though the assessee has made the claim under the head sundry balance written off. In our considered view the mistake of the assessee would not disentitle it from a lawful expenditure.”

To Read the full text of the Order CLICK HERE

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