The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has upheld the revision of bad debts allowed under Section 36(1)(vii) of the Income Tax Act, 1961 as there was no enquiry conducted by the Assessing Officer (AO).
The Principal Commissioner of Income Tax ( PCIT ), after examining the detail found that as per the chart placed at page number 44 of the revisionary order showed that the allowable bad debts written off was allowed by the assessing officer of ₹ 7,921,149,070/– whereas according to the PCIT, the allowable bad debts written off should be restricted to ₹5,42,07,79,550/– and therefore there is an excess disallowance of deduction of ₹ 250,03,69,520.
The AO, after considering the opening bad debts provision of ₹1,855 crores reduced the earlier years provision for bad debts by ₹1,063 crores, ultimately allowed bad debts of ₹792,11,49,070/-, which has resulted in excess allowances of deduction of ₹250,03,69,520/- under Section 36(1)(vii) of the Income Tax Act.
The Excess of debit allowed of ₹312,69,37,766/- as the Assessing Officer failed to correctly compute the allowability of bad debt written off. According to the PCIT, the Assessing Officer has allowed the bad debt without considering the provisions of Section 36(1) (vii).
The two member bench of the tribunal comprising Sandeep Singh Karhail (Judicial member) Prashanth Maharishi (Accountant member) observed that “During the course of assessment proceedings neither there is any discussion not there is any detail called for by the assessing officer and therefore we do not find infirmity in the order of the learned principal Commissioner of income tax in holding that not making any enquiry by the learned assessing officer on this aspect makes the order of the learned AO erroneous so far as judicial to the interest of the revenue.”
Accordingly, ITAT dismissed the appeal of the assessee.
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