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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI B.P. JAIN, & SHRI SUDHANSHU SRIVASTAVA
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘A’ BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER, AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER Year: 2011-12] The I.T.O Vs. Shri Ved Prakash Sachdeva Ward 2(5) Prop. SAM Overseas Noida B-83, Sector 83, Noida PAN : ABDPS 5802 N [Appellant] [Respondent] Date of Hearing : 08.11.2017 Date of Pronouncement : 09.11.2017 Assessee by : None Revenue by : Shri S.K. Jain, Sr. DR ORDER PER B.P. JAIN, ACCOUNTANT MEMBER,
This appeal filed by the Revenue arises from the order of the CIT(A)-I, Noida vide order dated 28/12/2015 for A.Y 2011-12.
The Revenue has raised the following grounds of appeal:
“1. That the CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,57,67,013/- made by the AO on account of bad debts as written off treating not genuine in view of RBI guidelines
2. That the CIT(A) has erred in law and on facts in deleting the addition of Rs.3,60,000/- made by the AO u/s 40A(3) of the Act holding that once ht books of accounts have been accepted by the AO, he cannot hold the individual issue recorded in the books of accounts to be incorrect.”.
None appeared on behalf of the assessee. Therefore, we are proceeding to decide the issue exparte qua the assessee after hearing the ld. DR at length who relied on the orders of the AO and perused the relevant material on record.
Briefly stated, the facts of the case pertaining to both the grounds are that the assessee has claimed the amount outstanding in respect of 13 debtors amounting to Rs. 1,57,67,013/- on the basis of instructions issued by the Reserve Bank of India for permitting write off of the bad debts. However, the AO was of the opinion that the write off claimed by the assessee as bad debts were not genuine and not allowable. Accordingly, he rejected the claim of the assessee with regard to bad debts.
As regards the addition of Rs. 3,60,000/- made u/s 40A(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act', it was held by the AO that the assessee had shown payments exceeding Rs. 20,000/-in one go in a single day and the same has been bifurcated in multiple of days so that payment of cash should not exceed Rs. 20,000/- on a single day either in aggregate or individually, so as to save from provisions of section 40A(3) of the Act. Accordingly, the AO disallowed the payments so made u/s 40A(3) of the Act and added the same to the income of the assessee.
The CIT(A) allowed relief to the assessee on both the counts vide paras 7 and 8 of his order for the reasons mentioned hereinbelow:
“The law relating to the writing off of the bad debts is fairly well settled. Once an assessee chooses to write off a particular debt on the ground the same has become bad. The assessee has the freedom to arrive at such a decision. Necessary entries ore required to be made in the books of accounts and if the same has been done the Id. A.O. has no jurisdiction to reject the same. In The instant case-the appellant has followed the dun procedure to write off certain debts holding that the same has become bad. The Id. A.O. could not have questioned the discretion of the appellant in doing the same, In any case the write off is always subject to the condition that any recovery in future will be liable to be included in the income of the appellant. In view of this I do not find any force in the stand of the Id. A.O. Further, the Id. A.O. has held that the bad debts which were written off were not genuine. I am unable to comprehend what was intended by the Id. A.O, if the debts were not genuine, the same needed to be proved. As in the years when the debts were incurred, there was no such conclusion drawn by the revenue, it is not open to the revenue to arrive at such a conclusion in the year when the debts are written off on the grounds of being bad. In view of this I am unable to uphold the orders of the Id. A.O. on the issue of addition of bad debts on the grounds of not being genuine. The same is therefore deleted. The appellant gets relief of Rs.1,57,67,013/-.
8. The addition of Rs. 3,60,000/- can also not be sustained as admittedly the appellant has recorded the transactions on various dates within the limit prescribed u/s. 40(A)(3) of the I T. Act, 1961. The contention of the Id. A.O. that the same was done deliberately has no strength in law. Once the books of accounts were verified and accepted by the Id. A.O, it is not open to him to impute such manipulation of books of accounts that too without rejecting the books of accounts and without bringing any evidence on the record to. prove the same. In view of the fact that the AO has acted merely on its opinion and not on the basis of the material evidence the addition of Rs. 3,60,000/- cannot be sustained in the eyes of the law. The same is therefore deleted and appellant gets relief to that extent.”
After considering the submissions of the ld. DR, we find that as per section 36(1)(vii) of the Act, if the assessee has written off bad debts as irrecoverable in the accounts of the assessee for the previous year, the same is allowable. The provisions in the Act simply speak of passing the entry for bad debts by the assessee and the AO cannot question the same. Therefore, under the facts and circumstances of the case, we find no infirmity in the order of the CIT(A) who has allowed the claim of the assessee regarding bad debts. The ground raised by the Revenue on this count is dismissed.
As regards the addition of Rs. 3,60,000/-, the observation of the AO is that the same was done deliberately i.e. the payments have been bifurcated to less than Rs. 20,000/- to avoid the invocation of provisions of section 40A(3) of the Act. In this regard, the AO on the one hand has accepted the books of accounts whereas on the other hand, he has not rejected the sale and has not found any defect in such payments. In such facts and circumstances of the case, we find no infirmity in the order of the CIT(A) who has allowed the claim of the assessee. Accordingly, both the grounds of the Revenue are dismissed.
In the result, the appeal of the Revenue in is dismissed.
The order is pronounced in the open court on 09.11.2017.