The Pune bench of Income Tax Appellate Tribunal (ITAT) has recently deleted the addition on account of bad debts claimed in Profit and loss account.
The Assessee Navyug Cotton Company filed an appeal before the tribunal against the order of Commissioner of Income Tax (Appeals)[CIT(A)] in National Faceless Appeal Centre under Section 250 of the Income Tax Act, 1961 in relation to the assessment year 2013-14.
The issue raised before the tribunal was that the CIT(A) has confirmed the addition made by the assessing officer upon the amount debited by the assessee in its Profit and loss account as bad debts.
The Assessing Officer while making the assessment proceedings observed that the assessee could not furnish details of legal action taken for recovery of the debt.
When the matter was called for hearing before the tribunal, no representative was appeared for the assessee. Hence the bench after considering the hearing of Suresh Gaikwad counsel for the revenue concluded a decision.
The tribunal observed that the amount of debt claimed as bad had been duly debited by the assessee in its Profit and loss account. The AO pointed was that the assessee could not substantiate the debt turning bad.
Furthermore, “it is no more relevant in the backdrop of the amendment to Section 36(1)(vii)of Income Tax Act with effect from 01-04-1989 providing for allowing deduction on simple write off dispensing with the requirement of separately proving that the debt actually became bad.” A single member of the tribunal R.S. Syal, (Vice President) deleted the addition imposed by the assessing officer.
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