Claim of Writing Off old dues cannot allow in the Absence of Evidence, old due payable is Taxable: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled that claim of writing off old dues cannot allow in the absence of evidence and old due payable are taxable.

Shri Nirav Dilipkumar Desai, the assessee is carrying out business activity as a partner in the firm related to exporting construction activities.  The assessee filed a belated return of income under Section 139(4) of the Income Tax Act declaring total income at Rs. 7,68,450/-. 

The Assessing Officer observed that the assessee has shown Rs. 11,86,798/- under the head “income from other sources” and in the schedule of other sources.  The assessee claimed expenses of Rs. 29,28,423/- and the Assessing Officer observed that the expenses claimed have no nexus with the income offered and therefore, made an addition of Rs. 29,28,423/-. On appeal, the CIT(A) has dismissed the appeal of the assessee.

The assessee contended that the loan and advances taken by the assessee from Mr Rasik Shah were related to business expenses as during the year under consideration the assessee carried out business activity for exporting construction material to the Democratic Republic of Congo (“DR Congo”) where he initiated to export the construction materials to the said country but unfortunately due to civil wars in the said country the activities had not been scaled up. 

Further submitted that the assessee has not claimed any deduction in the balance sheet and it is not a part of the trading receipt as contemplated by the CIT(A) but the benefit of Circular issued by the CBDT dated 11.04.1955 should be taken into account.

A single member Coram comprising of Ms Suchitra Kamble, Judicial Member observed that the assessee has shown in the return in respect of old dues not payable as income from other sources and was never shown the same as debts and liabilities by the assessee in the previous year.

It was viewed that merely stating that it is wrongly treated under income from other sources cannot show the genuineness of the assessee related to old dues.  The assessee has not brought on record a particular instance where the assessee has the right to approach Shri Rasik C. Patel. 

The Tribunal observed that the CIT(A) has rightly shown the old dues payable as “income from other sources”.  While dismissing the appeal of the assessee, the ITAT upheld the order of CIT(A).The appellant was represented by Shri Bharat Shah, CA and the respondent was represented by Shri Ravindra.

To Read the full text of the Order CLICK HERE

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