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2020 (5) TMI 141 - AT - Income TaxRevision u/s 263 - allowability of bad debts claimed by the assessee - HELD THAT:- AO is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return. The order passed by the AO becomes erroneous when an enquiry has not been made before accepting the genuineness of the claim which resulted in loss of revenue. In the present case AO without examining the issue allowed the provision for bad debts as deduction though it was not written off by crediting to the individual accounts of the parties concerned in the books of accounts of the assessee so as to claim deduction u/s. 36(1)(vii) which is erroneous and prejudicial to the interests of the Revenue. Being so, we do not find any infirmity in exercising power u/s. 263 by the Pr. CIT. Main contention of the Ld. AR is that the Assessing Officer had duly verified the accounts of the assessee and allowed deduction and also there is no mandate to write off of bad debts by debiting to the P&L account so as to claim deduction u/s. 36(1)(vii) - AR relied on the judgment of the Supreme Court in the case of Vijaya Bank Ltd. [2010 (4) TMI 46 - SUPREME COURT]. Unable to accept the proposition because profit and loss account is the final computation of profit made by the assessee based on which assessment is to be framed. Unless the bad debt is written off by debiting to the P&L account which necessarily means that the debtors’ account should be credited or so much of the amount debited in the profit and loss account should be written off from the amount due from the debtors, the condition as contemplated u/s. 36(1)(vii) is not satisfied. Even though the assessee’s Counsel contended that when bad debt is recovered, there is provision for assessment of the same u/s. 41 of the I.T. Act, we do not think that such a safety provision will entitle the assessee to claim bad debt as a deduction without satisfying the conditions contained in section 36(1)(vii). Judgment of the Supreme Court in the case of Vijaya Bank Ltd. [2010 (4) TMI 46 - SUPREME COURT] relied on by the assessee’s Counsel applies mainly to Banking companies and not to other assessees. Accordingly, we hold that the Pr. CIT is justified in exercising his power u/s. 263 of the I.T. Act so as to reconsider the allowability of bad debts claimed by the assessee - Grounds of appeal of the assessee are dismissed.
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