NANDADEVI SUMERMAL JAIN,MUMBAI vs. ITO 19 (2) (4), MUMBAI

The only issue in this appeal of assessee is against the order of CIT(A) in not allowing business loss/ bad debts claimed by assessee amounting to ₹ 15,09,083/-. For this assessee has raised the following two effective grounds: -

I have heard the rival contentions and gone through the facts and circumstances of the case. I find from the facts of the case that the assessee has claimed bad debts in respect Amorya International Ltd. amounting to ₹ 8,06,497/- and Jostan Stainless Steel Co. Ltd. amounting to ₹ 7,02,486/-, which were advances given for purchase of iron and steel from these parties by the assessee. The AO has disallowed the claim of bad debt and CIT(A) confirmed the same. The CIT(A) and AO were consistent in observing that these advances were given to the parties mentioned but these amounts were never credited to the profit and loss account or offered as income in any year. I find that neither the AO nor CIT(A) has doubted the transaction or the sources of the transaction.

Before me, the learned Counsel for the assessee explained that these amounts were advanced by assessee for purchase of iron and steel from these two parties who have also confirmed. It is admitted fact that the assessee has made these payments through account payee cheque which is reflected in the copy of accounts of these parties in the books of the assessee which were filed in assessee’s paper book consisting of pages 1 to 51 that of Amorya International Ltd. and Jostan Stainless Steel Co. Ltd. The assessee has also filed Performa invoices of the commercial invoices, packing list, cargo transaction, insurance policy, certificate of origin and bill of lending in respect to these parties. The assessee has also filed the receipt of payments advise by these parties and communication with these parties in its paper book. Moreover, the assessee has made write off for this amount in this year in its books of account and that is a fact. I find that this issue is squarely covered by the decision of Hon'ble Supreme Court in the case of TRF Ltd v CIT 323 ITR 397 (SC) wherein Hon'ble Supreme Court has held that post 1st April, 1989 it is not necessary for any assessee to establish that the debt in fact has become bad. It is further held that if the debt has been written off in the books of accounts then it would be enough to allow the deduction. Further, Hon'ble Supreme Court in the case of Vijaya Bank v CIT 323 ITR 166 (SC) wherein Hon'ble Court has held that in order to allow the bad debt which is written off through the provision account, the only conditions that are required to be fulfilled may be stated as under:

In view of the above, I delete the disallowance of bad debts and allow the claim of the assessee.

In the result, the appeal of assessee is allowed.