2015 (9) TMI 1527 - AT - Income Tax

Addition u/s 68 - Held that - Assessee furnished before the lower authorities a copy of the FIRC issued by the Bank. The identity and creditworthiness of the creditor and genuineness of the transaction stood satisfactorily explained. In the absence of any credible material with the Revenue to disprove the findings of the CIT(A) we hereby affirm the same - Decided in favour of assessee Disallowance of Provision for doubtful debts - Held that - The assessee company is in the business of transportation and the impugned sum has been found to be short recovery of transportation charges from the clients on account of losses occurred on account of retention loss of stock and damage to stock. Furthermore the CIT(A) has also recorded a finding that the invoices raised by the assessee which have been credited in the books of account as income cover the impugned sums also. Therefore the CIT(A) has found that the conditions laid down in section 36(1)(vii) r.w.s. 36(2) of the Act have been complied with. We hereby affirm the aforesaid finding of the CIT(A) in the absence of any credible material or reasoning brought out by with the Revenue before us. - Decided in favour of assessee

Summary

Issues:
1. Disallowance of share application money under section 68 of the Income Tax Act, 1961.
2. Disallowance of provision for doubtful debts.
3. Allowing deduction claimed otherwise than through revised return of income.

Issue 1: Disallowance of Share Application Money under Section 68:
The Revenue appealed against the CIT(A)'s order deleting the addition of share application money under section 68 of the Act. The Revenue argued that the share application money received exceeded the authorized share capital. The CIT(A) accepted the assessee's explanation based on the Foreign Inward Remittance Certificate (FIRC) and deleted the addition. The Tribunal affirmed the CIT(A)'s decision, stating that the nature and source of the credit were satisfactorily explained through banking channels. The Revenue failed to disprove the findings, leading to the affirmation of the CIT(A)'s decision.

Issue 2: Disallowance of Provision for Doubtful Debts:
The second issue pertained to the disallowance of a sum as a provision for doubtful debts by the Assessing Officer. The CIT(A) overturned this disallowance, categorizing the amount as a bad debt written-off, deductible under section 36(1)(vii) r.w.s. 36(2) of the Act. The Assessing Officer disallowed the claim, considering it as a provision for doubtful debts. The CIT(A found that the amount represented non-recoverable debts from customers due to losses in transportation business. The CIT(A) allowed the deduction as a bad debt, complying with the Act's provisions. The Tribunal affirmed the CIT(A)'s decision as the Revenue failed to provide contrary evidence or reasoning.

Issue 3: Allowing Deduction Claimed Otherwise Than Through Revised Return:
The third issue involved the Revenue's appeal against allowing a deduction claimed without a revised return of income. The CIT(A) deleted the addition, considering the amount as a bad debt written-off rather than a provision for doubtful debts. The Tribunal upheld the CIT(A)'s decision, emphasizing that the conditions under section 36(1)(vii) r.w.s. 36(2) of the Act were met. The Revenue's appeal was dismissed, affirming the CIT(A)'s order.

In conclusion, the Tribunal upheld the CIT(A)'s decisions in favor of the assessee, dismissing the Revenue's appeal on all grounds. The judgment highlighted the importance of substantiating claims, complying with legal provisions, and providing satisfactory explanations for financial transactions to avoid disallowances under the Income Tax Act.