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2018 (10) TMI 1426 - AT - Income TaxDisallowance of Bad Debts written off - AO observed that the aforesaid claim was not a bad debt at all and that it had been wrongly categorized by the appellant as a bad debt - what has happened to the delivery of the goods purportedly obtained on purchase as per the contract note which has given rise to the present unrealized debt in question? - Held that:- The integral aspect about the fate of delivery of commodity acquired and retained in the warehouses by the intermediatories purportedly on behalf of the assessee is required to be necessarily examined. A perusal of the order of the lower authorities gives an infallible impression that such crucial aspect has not been addressed. Without understanding the fate of the goods purchased purportedly in the custody of or on behalf of the assessee, it will not be possible to determine the issue. Where the purchase with delivery is settled by cross contract of sale with delivery at future date against sale proceeds, the entire debt turning bad is rather innocuous. We therefore consider it expedient to remit the matter back to the file of the AO to ascertain as to whether the transaction of purchase and sale were backed by actual delivery as claimed or not and a fair value of stock lying undelivered against unrealized sale is thus required to deducted from the quantum of debt. The solemn duty requires us to direct the AO to examine the issue after taking note of crucial aspect of actual delivery of commodity, if any, as claimed and to ascertain as to how the entire debt has turned bad when the assessee was purportedly in possession of the goods purchased. The matter is remanded back to the file of AO accordingly. - Appeal of the assessee is allowed for statistical purposes.
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