ATOP PRODUCTS PRIVATE LIMITED,DELHI vs. AU, ITD, MINISTRY OF FINANCE,GOVERNMENT OF INDIA, DELHI
Facts
The assessee, a private limited company, claimed a deduction of Rs. 27,86,561/- on account of bad debts written off. The Assessing Officer (AO) disallowed this claim, stating that the assessee failed to prove the debts had become irrecoverable. The assessee provided details of bad debts, including customer-wise amounts and ledger accounts, arguing that the conditions for deduction were met.
Held
The Tribunal held that after the amendment effective from 01.04.1989, an assessee only needs to prove that bad debts were written off as irrecoverable in the books of account and that the income was offered to tax. These conditions were satisfied in this case, as acknowledged by the AO.
Key Issues
Whether the disallowance of bad debts written off amounting to Rs. 27,86,561/- was justified, considering the assessee had provided the necessary documentation and met the conditions for deduction.
Sections Cited
143(3), 142(1), 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI M. BALAGANESH
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No. 5012/Del/2025 (Assessment Year: 2023-24) ATOP Products Pvt. Ltd, Vs. DCIT, A-118, Brotherhood Housing Circle-1(1), Society, Plot No. 17, Bodela, New Delhi Phase-II, Vikashpuri, New Delhi (Appellant) (Respondent) PAN: AAACA7693Q
Assessee by : Shri Rajneesh Behari Mathur, CA Revenue by: Ms. Ankush Kalra, Sr. DR Date of Hearing 17/02/2026 Date of pronouncement 17/02/2026
O R D E R PER M. BALAGANESH, AM 1. The appeal in ITA No.5012/Del/2025 for AY 2023-24, arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 19.06.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 03.04.2025 by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as ‘ld. AO’).
The only effective issue to be decided in this appeal is as to whether the ld NFAC was justified in confirming the disallowance of ₹ 27,86,561/- on account of bad debts written of in the facts and circumstances of the instant case.
ITA No. 5012/Del/2025 ATOP Products Pvt. Ltd
We have heard the rival submissions and perused the materials available on record. The assessee is a private limited company engaged in the business of manufacturing and sale of auto components to Auto Majors like Mahindra and Mahindra, Ashok Leyland and Hero Motocorp. The return of income was filed u/s 139(1) of the Act on 30.10.2023, declaring total income of ₹11,96,60,159/-, which was revised on 29.12.2023, declaring revised income of ₹11,65,27,020/-. The revised return was duly processed u/s 143(1) of the Act on 29.12.2023. The ld AO observed that the assessee had claimed deduction on account of bad debts written off in the sum of ₹27,86,561/- in the profit and loss account and in the return. Vide notice u/s 142(1) of the Act, the ld AO asked the assessee to provide the details of bad debts, name and address, amount, etc, and in which year, the income of such transaction was offered to tax with supporting evidences. The ld AO noted that the said details were not furnished. Accordingly, he issued a show cause notice dated 05.03.2025 show causing the assessee as to why the bad debts of ₹27,86,561/- should not be disallowed in the assessment. In response to the show cause notice, the assessee uploaded the details on 10.03.2025. The reply of the assessee is reproduced at page 7 of the assessment order, which is as under:-
ITA No. 5012/Del/2025 ATOP Products Pvt. Ltd
ITA No. 5012/Del/2025 ATOP Products Pvt. Ltd
ITA No. 5012/Del/2025 ATOP Products Pvt. Ltd
ITA No. 5012/Del/2025 ATOP Products Pvt. Ltd
The ld AO proceeded to disallow the claim of bad debts written off on the ground that the assessee was not able to prove that the bad debts have become irrecoverable. This action of the ld AO was upheld by the ld CIT(A).
We find that after the amendment effective from 01.04.1989, the assessee need not to establish that the debts had become bad. After 01.04.1989, the assessee should only have to prove that the bad debts has been actually written off as irrecoverable in the books of account and the income in respect of which had been duly offered to tax either in earlier years or during the year under consideration. Once these two conditions are satisfied, post 01.04.1989, the assessee would be entitled for deduction on account of bad debts written off. These two conditions have been duly satisfied by the assessee in the instant case, which is not even disputed by the ld AO. Even the CBDT had issued a Circular No. 12/2016 dated 30.05.2016, accepting the view of the Hon'ble Supreme Court in the case of TRF Limited reported in 190 taxman 391. For the sake of convenience, the said Circular is reproduced below:-
