The Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the disallowance on bad debts and limited the unrecovered debtors’ balance to Rs. 228.87 lakhs.
The assessee was engaged in the manufacture of IMFL, and when an enquiry under Section 131(1A) of the Income Tax Act, 1961 was conducted at the business premises of the assessment, it was revealed that the assessee deposited cash of Rs.29.50 crores in Specified Bank Notes (SBNs) in the State Bank of Hyderabad during the demonetization period.
In the statement recorded on the same day, the director stated that the cash deposits were sourced out of receipts from three entities, viz. M/s Oceanic Impex, M/s Topaz International, and M/s Eshikimpex.
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At the end of the proceedings, the assessing officer (AO) was of the opinion that the assessee failed to explain the source of cash remittance into the bank accounts.
Another issue in this case, which was challenged by the assessee before the ITAT was in relation to the disallowance of bad debts by the AO amounting to Rs. 2.60 crores.
On the issue of bad debts written off, the assessee claimed that the amount of Rs.2.60 crores was offered under PMGKY and the actual writeoff was for Rs. 2.88 crore only.
The bench after going through the details furnished by the assessee’s counsel observed that “it could be seen that the balance receivable from the debtors was Rs.2585.49 Lacs whereas the assessee has recovered the sum of Rs.2356.62 Lacs from the three debtors. The balance which was not recovered was Rs.228.87 Lacs. Since we have accepted the explanation with respect to realization from debtors, the balance amount which could not be recovered would be Rs.228.87 Lacs only and not Rs.488.87 Lacs as claimed by the assessee.”
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The ITAT, comprising Mahavir Singh (Vice President) and Manoj Kumar Aggarwal (Accountant Member) upheld the disallowance.
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