M/S. NAVYUG COTTN COMPANY,NANDED vs. THE INCOME TAX OFFICER, WARD-1, NANDED

This appeal by the assessee arises out of the order dated 24-02-2023 passed by the CIT(A) in National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2013-14.

The first issue raised in this appeal is against the confirmation of addition of Rs.1,25,300/- debited by the assessee in its Profit and loss account as bad debts. The Assessing Officer (AO) made addition by observing that the assessee could not furnish details of legal action taken for recovery of the debt. No relief was allowed in the first appeal, against which the assessee has approached the Tribunal.

I have heard the ld. DR and gone through the relevant material on record. There is no appearance from the side of assessee despite notice. I am, therefore, proceeding to dispose the appeal ex parte qua the assessee.

It is seen that the amount of debt claimed as bad was duly debited by the assessee in its Profit and loss account. The view point of the AO that the assessee could not substantiate the debt turning bad, in my considered opinion, is no more relevant in the backdrop of the amendment to section 36(1)(vii) w.e.f 01-04-1989 providing for allowing deduction on simple write off dispensing with the requirement of separately proving that the debt actually became bad.

The other ground is against the confirmation of addition of certain expenses. The assessee claimed deduction towards Petrol and Diesel expenses, Car expenses, Interest on car expenses, Depreciation on cars, Travelling expenses etc. The AO made 25% disallowance out of these expenses towards personal use. In addition, the assessee also claimed Telephone expenses and Entertainment expenses. The AO disallowed 20% on ad hoc basis. Both these additions came to be affirmed in the first appeal.

Having regard to the facts of the instant case, it is seen that the assessee is a firm which has deployed vehicles for business use. In the absence of the assessee furnishing any details about the exclusive use of vehicles, some amount of expenses needs to be attributed towards personal use. Considering the entirety of the facts and circumstances of the case, I am of the considered opinion that it would be just and fair if 10% of the expenses claimed as deduction, in respect of which the AO made disallowance at 25%, is sustained. As regards the other expenses, namely, Telephone expenses and Entertainment expenses of which 20% was disallowed by the AO, I hold that 10% disallowance is sufficient. I order accordingly.

In the result, this appeal is partly allowed. Order pronounced in the Open Court on 17th May, 2023.