The ITAT has directed Asian Paints to file necessary documents after the company failed to furnish supporting details for its deduction claim of sundry balances written off.
The Asian Paints has written off various old balances lying in its books of accounts. During the assessment proceedings, the assessee was asked to show as to how these expenditures were incurred in the business activity. In response thereto, the assessee submitted that during the year it has written off balances amounting to Rs.1, 81, 04,593 and debited the same to the profit and loss account. The assessee also furnished the breakup of the same in treatment given in his return of income. The AO vide assessment order noted that in the assessment year 2011-12, the assessee itself is disallowing the sundry balances written off in its books of accounts.
However, from the year under consideration, the assessee has changed its practice and started claiming the same as allowable expenditure. It was further held that the assessee could not prove that the alleged advances were made in the ordinary course of the business and such advances written off cannot be treated at par with the bad debts written off.
The bench noted that where sundry balances written off were claimed as deduction, and sundry balances written back are offered for tax in its return of income. The assessee submitted that the expenditure is normal business expenditure and allowable as deductible expenditure.
ITAT found that neither there was an examination of the aforesaid claim of the assessee nor any details were furnished. Accordingly, the two member bench of the tribunal comprising Prashanth Maharishi (Accountant member) and Sandeep Sigh Karhail (Judicial member) deemed it appropriate to restore this issue to the file of the AO for de novo adjudication. The assessee is directed to file necessary details/documents in support of its claim of deduction of sundry balances written off. As a result, revenue’s appeal was allowed.
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