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Income Tax Appellate Tribunal, DELHI BENCHES : G : NEW DELHI
Before: SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM
Date of Hearing : 17.05.2016 Date of Pronouncement : 18.05.2016 ORDER
PER R.S. SYAL, AM:
This appeal by the assessee arises out of the order passed by the CIT(A) on 31.10.2012 in relation to the assessment year 2008-09.
The first issue raised in this appeal is against not allowing bad debts amounting to Rs.1,24,14,060/- on the ground that this deduction was not claimed in the return of income. The facts apropos this issue are that the assessee claimed deduction amounting to Rs.1.24 crore on account of bad debts, which was not allowed by the AO on the ground that the claim was not made in the return of income. The ld. CIT(A) upheld the addition.
We have heard the rival submissions and perused the relevant material on record. We find from the reproduction of the assessee’s submission in the assessment order that a provision was made for bad debts during the financial year 2003-04 amounting to Rs.31.61 lac and during the financial year 2004-05 amounting to Rs.92.52 lac, which were not claimed as deduction. This amount represented subscription receivable from MEN. Copies of account for Financial years 2003-04 and 2004-05 along with tax computations were enclosed before the AO showing that no deduction was claimed in respect of such amounts in earlier years. This shows that the amount in question represents the revenues credited to the Profit & Loss Account in earlier years which were not realized and written off during the year for which no deduction was ever claimed in the past. The Hon’ble Supreme Court in the case of T.R.F Ltd. vs. CIT (2010) 323 ITR 397 (SC), has held that after 1.4.1989 the assessee is not required to establish that the debt has become bad in 2 the previous year and a simple write off is sufficient to claim deduction u/s 36(1)(vii). In view of the fact that the assessee has actually written off the amount of bad debts in its books of account for the instant year, but, omitted to claim deduction in the return of income, no disallowance can be made, which is otherwise legally admissible to the assessee. As regards the AO’s point of view about not allowing deduction due to absence of such a claim in the return of income, we find that the Hon’ble Supreme Court in Goetze (India) Ltd. vs. CIT (2006) 284 ITR 323 (SC) has held that though the AO has no power to entertain claim made otherwise than by way of revised return, but, the powers of the appellate authorities are not affected by it. In view of this judgment of the Hon’ble Supreme Court, it is clear that the Tribunal has power to consider the claim made before the AO otherwise than through the return of income.
Taking a holistic view of the matter, we are inclined to allow deduction on account of bad debts amounting to Rs.1.24 crore which is otherwise available to the assessee in terms of T.R.F Ltd. (SC) (supra).
The only other ground taken by the assessee in its appeal is against disallowance of expenses amounting to Rs.77,42,445/-. The facts of this 3 ground are that the assessee claimed certain expenses amounting to Rs.77.74 lac, which were disallowed by the AO on the ground that no business activity was carried on. The ld. CIT(A) confirmed the addition by noticing that no evidence was filed in support of such expenses.
After considering the rival submissions and perusing the relevant material on record, we find that the assessee was earlier into business. Due to certain change in the Government policy, its business activities could not take place during the year. Notwithstanding the carrying on of the main activity, the assessee received some amount as Decoder rent, which was offered as `Business income’ in the year in question as was being done in the past. This shows that the assessee’s business was continuing during the year, albeit partly. That being the position, there can be no reason to disallow the expenses claimed in the Profit & Loss Account on the reason of discontinuation of business. Since the necessary details about the incurring of expenses and the supporting evidence, etc., are not readily available, we deem it appropriate to set aside the impugned order and remit the matter to the file of AO for deciding the deductibility or otherwise of expenses on merits, after allowing a reasonable opportunity of being heard to the assessee.
In the result, the appeal is partly allowed.
The order pronounced in the open court on 18.05.2016.