S.B.& T. DESIGNS LTD,MUMBAI vs. THE DY. CIT 8(1)(2), MUMBAI

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ITA 814/MUM/2023Status: DisposedITAT Mumbai20 July 2023AY 2015-164 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the issue of bad debts to the CIT(A) for fresh adjudication, noting the assessee's submission that the debts were accounted for as income and supported by ledger copies. The issue of sundry balances written off was also directed to be adjudicated by the CIT(A).

What were the facts?

The assessee claimed bad debts amounting to Rs. 6,18,65,166/- and sundry balances written off. The Assessing Officer disallowed the claim, stating the assessee failed to prove the debts were part of the income in previous years. The CIT(A) dismissed the appeal.

What were the issues?

Whether bad debts and sundry balances written off are allowable deductions without proper substantiation of their inclusion in the income of previous years. Whether the CIT(A) properly adjudicated all grounds of appeal.

Which sections of the Income-tax Act were involved?

Section 36(1)(vii),Section 37(1)

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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

For Appellant: Dr. P. Daniel
Hearing: 10.07.2023Pronounced: 20.07.2023

Per Amarjit Singh (AM): This appeal filed by the assesse is directed against the order passed by the ld. CIT(A) NFAC, dated 23.02.2023 for A.Y. 2015-16. The assessee has raised the following grounds before us:

“1. The Learned C.I.T(A) has erred in law and in facts in confirming the disallowance of Rs. 6.18,65,166/-, being the bad debts claimed.

2.

The Learned C.I.T(A) has erred in law and in facts in confirming the disallowances of Bad Debts of Rs. 6,18,65,166/-, being the Sundry Drs. Written off as well as Sundry balances written off.

3.

The Learned C.I.T(A) erred in not following the Principles of Natural Justice.

4.

The Learned C.IT(A) confirmed the order of the A.O. directing the assessee to prove the impossible acts.

P a g e | 2 S.B. & T. Designs Ltd. Vs. The DCIT 8(1)(2)

5.

The Learned CIT(A) did not follow the Supreme Court Orders, wherein the Bad Debts claimed by writing off in the books of accounts be allowed. The appellant craves leave to add to alter, amend and/or delete all or any of the foregoing grounds of appeal.”

2.

During the course of assessment the assessing officer noticed that assessee has shown ‘sundry balance written off’ amounting to Rs.596,53,854/- under the “Miscellaneous Expenses”. On query the assessee explained the reasons for claiming the sundry balance written off as under: Name W/off Amount Explanation Lucas USA Inc. Rs.1,50,10,961/- Assessee written off the amount as it was outstanding from the year 2006-07 and since such a long time has passed and unable to recover the money. Copy of ledger attached. S B & T (U.K.) Ltd. Rs.3,87,23,514/- The company has been dissolved and stuck off the register in UK and hence amount W/off. Copy of companies house letter attached.

However, AO had not accepted the above mentioned submission of the assessee stating that assesse had failed to prove that the sundry balance written off was from the income component of the previous year, therefore, the claim of sundry balance written off amounting to Rs.596,53,854/- was not allowed under the provisions of Sections 36(1)(vii) of the Act.

3.

Further, during the course of assessment the AO called upon the assessee to furnish the party wise ledger account of various expenses incurred during the year. However, in the absence of any confirmation from the parties the AO has disallowed the expenses amounting to Rs.22,11,312/- u/s 37(1) of the Act.

4.

The assessee has filed the appeal before the ld. CIT(A). However, the ld. CIT(A) had dismissed the appeal of the assessee.

P a g e | 3 S.B. & T. Designs Ltd. Vs. The DCIT 8(1)(2)

5.

Heard both the sides and perused the material on record. The ld. CIT(A) has dismissed the claim of deduction u/s 36(1)(vii) of the Act holding that assessee has not filed supporting documetns to substantiate that the debt has been taken into account in computing income of the assessee. We find that assesse has categorically submitted that debt amount was accounted in the sales as income in books of accounts in previous years same was written off due to irrecoverable of amount. In the submission of the assessee reproduced both in the assessment order and in the appeal order, the assessee submitted that copies of ledger account were attached. In support of its contention the assessee has also referred the decision of Hon’ble Regarding sundry balance written off of Rs.22,11,312/-:

6.

The ld. Counsel submitted that ld. CIT(A) has not adjudicated this part of ground of the appeal filed by the assesse.

7.

During the course of assessment the AO has disallowed claim of expenses amounting to Rs.22,11,312/- u/s 37(1) of the Act for want of confirmation from the parties. We find that this issue was not adjudicated by the ld. CIT(A) as evident from the order passed u/s 250 of the Act at 23.02.2023, therefore, we direct the ld. CIT(A) to adjudicate this issue after affording adequate opportunity to the assesse.

P a g e | 4 S.B. & T. Designs Ltd. Vs. The DCIT 8(1)(2) Therefore, all the ground of appeal of the assessee are allowed for statistical purposes.

8.

In the result, the appeal of the assesse is allowed for statistical purposes. Order pronounced in the open court on 20.07.2023 (Aby T Varkey) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 20.07.2023 Rohit: PS

आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai गार्ड फाईल / Guard file. 5. सत्यावपि प्रवि //// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt.

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