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Facts
The assessee challenged two additions made by the Assessing Officer and confirmed by the CIT(A). The first addition related to a bad debt of Rs. 1,34,39,889/- arising from an advance paid to B.S. Ltd. which had gone into liquidation. The second addition pertained to the disallowance of expenses amounting to Rs. 36,98,730/-.
Held
The Tribunal held that the bad debt claimed by the assessee was allowable, following the Supreme Court decision in TRF vs CIT, as it was written off as irrecoverable in the assessee's books. For the disallowance of expenses, the Tribunal restored the issue to the Assessing Officer for physical verification of bills and vouchers, granting the assessee an opportunity to produce them.
Key Issues
1. Whether the bad debt claimed by the assessee is allowable as per law. 2. Whether the disallowance of expenses is justified and if the assessee should be allowed to produce supporting documents.
Sections Cited
IT Act
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
("नधा"रण वष" / Assessment Year : 2018-19) Brahmani Developers Pvt Ltd., K4- Vs ACIT, Rourkela Circle, Rourkela 9, Civil Township, Rourkela769004 PAN No. : AADCB 2197 H (अपीलाथ" /Appellant) .. (""यथ" / Respondent) "नधा"रती क" ओर से /Assessee by : Shri P.R.Mohanty, Adv राज"व क" ओर से /Revenue by : Shri Vijaya Singh, ld Sr DR सुनवाई क" तार"ख / Date of Hearing : 4 /12/2025 घोषणा क" तार"ख/Date of Pronouncement : 4 /12/2025 आदेश / O R D E R Per Bench :
This is an appeal filed by the assessee against the order dated 10.7.2024 passed by ld CIT(A), NFAC, Delhi in Appeal No.NFAC/2017-18/10083096 for the assessment year 2018-19. 2. Shri P.R.Mohanty, ld AR appeared for the assessee and Shri Vijaya Singh, ld Sr DR appeared for the revenue.
It was submitted by ld AR that two additions are challenged in this appeal. The first addition was in regard to bad debt of Rs.1,34,39,889/-. It was 2 आयकर अपील सं/ ("नधा"रण वष" / Assessment Year : 2018-19) the submission that this was a payment made to B.S.Ltd., for the purpose of executing the work contract service between the assessee and Chattisgarh Power Transmission Corporation Ltd., in regard to the project works of the assessee contracted with and Chattisgarh Power Transmission Corporation Ltd., It was the submission that the said B.S. Ltd., had gone into liquidation and consequently, the assessee was unable to recover the said advance and same was claimed as bad debt. It was the submission that the Assessing Officer did not accept the contention of the assessee and took stand that in the return there is no claim of bad debt even if it is shown in the profit and loss account. It was the submission that the ld CIT(A) also questioned the credibility of B.S. Ltd., insofar as he has extracted the portion of NCLT order at page 19 of the ld CIT(A)’s order. It was the submission that the assessee had bonafide transaction with B.S. Ld., and how B.S.Ltd., maintained its fund and had gone into liquidation is not in the hands of the assessee and the Bonafide transaction with B.S.Ltd., cannot be disallowed in the hands of the assessee, especially because there is no indifference and non-business reasons mentioned either by the AO or ld CIT(A) in respect of transaction of the assessee with B.S. Ltd. It was the prayer that as the amount of bad debt also shown in the profit and loss account of the assessee, in view of the decision of the Hon’ble Supreme Court in the case of TRF vs CIT (2010) 323 ITR 397 (SC) , wherein, it has been categorically held that after 1.4.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. He submitted that the disallowance of bad debt as made by the AO and confirmed by the ld CIT(A) is liable to be deleted.
In reply, ld Sr DR submitted that the assessee has not written off the bad debt in the computation of total income. It was the submission that the order of the AO and ld CIT(A) are liable to be upheld.
We have considered the rival submissions. A perusal of the findings of the Assessing Officer at para 13 of his order at page 8 clearly shows that the assessee had written off the said amount in its books of account being irrecoverable as the company had gone into liquidation. The Assessing Officer himself having recognized that the assessee has written off the bad debts in its books of account as irrecoverable on account of the company B.S.Ltd., has gone into liquidation, in view of the decision of the Hon’ble Supreme Court in the case of T.R.F Ltd (supra), the Assessing Officer is directed to accept the claim of bad debt to an extent of Rs.1,34,39,889/- in respect of advances paid to B.S. Ltd., Hence, this ground of the assessee stands allowed.
It was submitted by ld AR that the second issue is in regard to disallowance of expenses of Rs.36,98,730/- by the Assessing Officer. Ld AR drew our attention to para 9 page 6 of the assessment order, wherein, the AO at first proposed to disallow 20% of the expenses but subsequently the assessee had given details of the expenses and the Assessing Officer after considering the various details, disallowed amount of Rs.36,98,730/- as the assessee has not been able to produce all the invoices. It was the submission that at page 15 of the assessment order, the assessee had specifically requested that the assessee may be allowed to produce all vouchers/invoices in 4 आयकर अपील सं/ ("नधा"रण वष" / Assessment Year : 2018-19) physical form before the Jurisdictional Assessing Officer for verification as per the SOP of faceless assessment scheme, the same had also been rejected by the Faceless Assessing Officer and addition had been made. It was the submission that the assessee is in possession of bills and invoices and if an opportunity is given, the assessee will produce the same before the Jurisdictional Assessing Officer. Ld Sr DR had no objection if the issue is restored to the file of the Jurisdictional Assessing Officer for verification of the expenses by production of bills and invoices.
Considering the submission of both the parties, the issues are restored to the file of the Jurisdictional Assessing Officer for physical verification of the bills and vouchers, invoices of the expenses of Rs.36,98,730/- as made by the Assessing Officer. The Jurisdictional Assessing Officer shall issue notice to the assessee to produce the necessary details and readjudicate the issue after granting adequate opportunity of being heard to the assessee. This ground is partly allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order dictated and pronounced in the open court on 4/12/2025. (राजेश कुमार) (जाज" माथन) (RAJESH KUMAR) (GEORGE MATHAN) लेखा सद"य/ ACCOUNTANT MEMBER "या"यक सद"य / JUDICIAL MEMBER "दनांक Dated 4/12/2025 B.K.Parida, Sr.P.S(OS)