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2023 (2) TMI 796 - ITAT DELHIGenuineness of claim of bad debt/business loss - rejection of goods in inferior quality by the customers - HELD THAT:- Loss claimed by the assessee on account of inferior supply of goods was rejected by the AO disbelieving that such goods rejected by the customer has some value. In the course of appeal proceedings the assessee produced copy of ledger accounts of the assessee in the books of the customers and also the communication sent by the customer to the assessee rejecting the goods supplied for the inferior quality. These evidences were disbelieved by the CIT (A) for the reason that the customer of the assessee did not reply to the notice issued u/s 133(6) by the AO. It is the contention of the assessee that since there was dispute between the assessee and its customer the customer did not respond to the said notice. Customer had not been making any payment for almost two years on dispute raised by the assessee for poor/inferior quality of goods supplied and the assessee company could realize its out-standing debt only on settlement of the claim of the customer for inferior quality of goods. Therefore, it is the contention of the assessee that since there was dispute the customer did not respond to the notice issued by the AO. In our view simply because the customer of the assessee did not respond to notice u/s 133(6) of the Act the mail sent by the customer to the assessee rejecting the goods worth supplied for poor quality cannot be ignored and disbelieved only for the reason that the party did not respond to the notice issued by the AO. At the same time the ledger account show that the assessee had written off in its books of accounts the loss suffered on account of quality of supply of inferior goods. The assessee has credited the customers account with the said amount and finally settled its accounts with the customer. All these goes to show that the assessee has incurred loss in the course of business. Therefore, the write off of debtors is nothing, but bad debt / business loss. There is no justification in rejecting the claim of the assessee for write off of bad debts. Thus, we set aside the order of the CIT (A) and allow the grounds raised by the assessee.
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