DCIT, CIRCLE 4(2), NEW DELHI vs. BONANZA PORTFOLIO LTD, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”, NEW DELHI BEFORE SHRI MAHAVIR SINGH, ACCOUNTANT MEMBER and SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.1596/DEL/2025 (Assessment Year : 2021-22) DCIT, Circle 4 (2), vs. Bonanza Portfolio Limited, Delhi. 453/4C, Madan Mohan Street, Ansari Road, Darya Ganj, Delhi – 110 002. (PAN : AAACB0764B) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Arijit Chakravorty, Advocate REVENUE BY : Shri Mahesh Kumar, CIT DR Date of Hearing : 18.03.2026 Date of Order : 05.06.2026 O R D E R PER S. RIFAUR RAHMAN, AM : 1. This appeal is filed by the Revenue against the order of the Ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)] dated 30.01.2025 for the Assessment Year 2021-22 raising following grounds of appeal :- “1. Whether the Ld. CIT (A) has erred in deleting the disallowance of Rs.25,20,43,708/- under section 36(1)(vii) without adequately addressing the factual findings of the AO that many of the written off

2 ITA No.1596/DEL/2025 debts were not genuinely irrecoverable. 2. Whether Ld. CIT (A) has erred in deleting the disallowance of Rs.25,20,43,708/- under section 36(1)(vii) without observing the fact brought on record by AO in the assessment order that assessee company entered into transaction with many of the same parties even after the claims had been written off in the books of accounts, which contradicts the principle of recoverability required under section 36(1)(vii) of the Income Tax Act, 1961. 3. Whether the ld. CIT (A) failed to appreciate the AO’s findings that certain amounts had later on been recovered from parties in respect of whom bad debts were previously considered irrecoverable, making them unfit for write off.” 2. Brief facts of the case are, assessee filed its return of income on 02.02.2022 disclosing income of Rs.7,20,83,800/-. The case was selected for complete scrutiny and accordingly notices under section 143(2) and 142 (1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee. The AO observed that a separate show-cause notice was issued on the basis of large refund claimed out of self-assessment tax. In response, ld. AR of the assessee vide letter dated 13.07.2011 submitted as under :- “The assessee furnished her reply dated 13.07.2011. In the submissions, the assessee explained that “the assessee company is engaged in the business of share broking, financial product distribution, depository services, trading of securities and portfolio management services. It is registered with SEBI, NSE, BSE and other exchanges in India. It is further stated that “the large refund claimed in ITR vis-à-vis self-assessment tax paid for the Assessment Year under consideration was due to the company opting for section 115BAA at the time of filling of return i.e. 02.02.2022, whereas self-assessment tax paid on 30.09.2021 and the advance tax was paid based on the tax working under normal tax provisions of the Income Tax Act, 1961.”

3 ITA No.1596/DEL/2025 3. The assessee basically raised grounds of appeal on the issue of bad debts which are written off in their books of account. However, the AO rejected the same. The relevant facts relevant to the above grounds are, the assessee during the year under consideration written off bad debts and assessee regularly writing off the bad debts, which is peculiar to its business. When the assessee was called upon to explain the same, assessee submitted the detailed submissions for the impugned assessment year as under :-

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8 ITA No.1596/DEL/2025 mentioned but no further details like PAN, address, mail id or contact number was furnished against the amount written off. When the assessee was asked vide notice dated 11.11.2022 to furnish the above details which were not given in the above submissions and he noticed that the assessee has furnished details in few cases and rest of the cases remain unexplained. After perusing all the bad debts written off and ledger extract submitted by the assessee, he noticed that the assessee had claimed that no such instances found where the clients had credited money in the year 2021-22 and same was written off. It was claimed that this is clear enough that in the year 2021-22the assessee had rightly written off the bad debts. Further assessee referred to the provisions of section 36(1)(vii) of the Act and submitted that bad debts could be written off when the amount is irrecoverable in the previous year. However, the AO rejected the same and observed that when the debtor is paying on regular basis and even if paid the debt amount on the date of written off or after the date of written off, how it could be drawn that the amount is irrecoverable and the debt is bad in nature. With the above observation, the AO found that the assessee wants to reduce the profit to minimize the income-tax liability by way of above adjustment in their books of account. Further AO observed that assessee has raised certain issues before him as per which the case of the assessee was covered in favour of it

9 ITA No.1596/DEL/2025 by the Hon’ble High Court of Delhi in assessee’s own case in AY 2001-02 [(2010) 320 ITR 178 (Delhi)] and assessee was allowed deduction u/s 36(1)(vii) of the Act in the subsequent years based on the above decision. He has also listed out the bad debts claimed in the earlier year at page 26 of the assessment order. After considering the same, he came to the conclusion that assessee was given ample opportunity to make submissions in reply to the show-cause notice but assessee has not complied so far and has not come up with any documentary evidence in support of its claim. On the basis of facts and circumstances and material available on record, he came to the conclusion that Rs,7,58,705/- debited under the head interest on ‘Short payment of advance’, assessee already accepted vide letter dated 08.11.2022 and further observed that Rs.25,20,43,708/- as mentioned in Annexure ‘A’ as bad debt in the year under consideration, he found it to be not allowable. Accordingly, he added the same to the income of the assessee. 5. Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and filed detailed submissions before the ld. CIT (A) which is reproduced at pages 4 to 17 of the appellate order. After considering the detailed submissions, ld. CIT (A) allowed the grounds raised by the assessee on merits by observing as under :-

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18 ITA No.1596/DEL/2025 transactions. He drawn our attention to page 17 of the impugned order and objected to the relief granted by the ld. CIT (A) for relying on the decision of Hon’ble Supreme Court in the case of TRF Ltd. vs CIT 323 ITR 397 (SC) and further Ld CIT(A) relied on the decision of assessee’s own case wherein Hon’ble Delhi High Court held in favour of the assessee. In this regard, he submitted that facts in the present year are distinguishable to the facts in the earlier years. He submitted that facts are to be considered year on year basis. In this regard, he relied on the decision of ITAT, Ahmedabad Bench in the case of Amar Enterprises vs. ITO in ITA No.2520/Ahd/2011 dated 05.06.2015. 8. On the other hand, ld. AR of the assessee brought to our notice page 25 of the assessment order wherein he drawn our attention to the conclusion of the AO. Further he relied on the Circular No.19 of 2015 at ICDS. Further he brought to our notice proviso to section 35(1)(vii) of the Act and he submitted that as per the provisions, assessee has written off bad debts in its books of account and further relied on second proviso to section 36(1)(vii) of the Act. He brought to our notice page 4 of the paper book which is CBDT Circular No.12/2016 and submitted that it is binding circular on the revenue authorities. He also brought to our notice page 1 of the paper book which is the decision of Hon’ble Supreme Court in the case of TRF Limited

19 ITA No.1596/DEL/2025 (supra) and submitted that it is held that is not necessary for assessee to establish that debt has become irrecoverable, it is enough if bad debt is written off as irrecoverable in accounts. Further he brought to our notice page 22 of the paper book which is the decision of Hon’ble Delhi High Court in assessee’s own case and he heavily relied on the findings of the ld. CIT (A). 9. Considered the rival submissions and material placed on record. After careful consideration of the peculiar case of the assessee that it is engaged in share broking, financial product distribution etc., and also undertake activities like purchase/sale of shares and make transactions in F&O/cash segment on behalf of its clients and settle their dues with the exchange on behalf of its clients. After careful consideration of the data submitted before us, we noticed that the amount of transaction entered by the assessee with its clients, the net amount written off by the assessee at the end of total transactions, we noticed that it ends up giving discount or writes off about 10.25% of the total transaction. It is standard pattern observed in each case. Since the assessee also involved in the settlement of dues with the exchange, it regularly writes off bad debts which are not recoverable. We noticed that the assessee regularly claims the amount which are not recoverable in every year. That is for the reason that the assessee regularly faces the same issues

20 ITA No.1596/DEL/2025 over the years. We noticed that the assessee had obtained favourable order from the Hon’ble High Court and the court had analysed the peculiar nature of the business and allowed the claim of bad debts in its favour. Therefore, every business is different depending upon the complexity of its business. In the given case, we noticed that the clients had settled the agreed amount and the rest was written off. It is only the assessee would know which are not recoverable and as per the amended provisions of section 36(1)(vii) of the Act, it is enough to show that the debts are not recoverable and the same was written off in the books. It is in line with the decision of Hon’ble Supreme Court in the case of TRF Ltd (supra) that the assessee had only to establish that the debt has become irrecoverable and the same is written off as irrecoverable in the accounts of the assessee. Therefore, after considering the detailed findings of Ld CIT(A), we do not see any reason to disturb the same. In the result, grounds raised by the Revenue are dismissed. 10. In the result, appeal filed by the Revenue is dismissed. Order pronounced in the open court on this 5th day of June, 2026.

Sd/- sd/- (MAHAVIR SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 05.06.2026 TS

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