9911796707
TMI Blog2012 (8) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... here was deficiency of Rs. 4.65 lakhs for making aforesaid payment same was surrendered. Similarly, there was deficient cash at other point of time in the relevant period making total deficiency of Rs. 6.65 lakhs. Apart from it undisclosed debtors coming from various preceding years were also noticed and as on 31.03.2001 such debtors were to the tune of Rs. 24,82,640/-. As these debtors were appearing beyond the period, for which a notice u/s. 153A can be issued, these were not within the ambit of taxation. The assessee however, included interest of Rs. 1,88,573/- on these debtors. Thus, total undisclosed income should have been Rs. 8,35,250/- but assessee has further reduced his income by writing off loans and advances to the tune of Rs. 4,22,000/-. The AO rejected the claim of assessee of writing off the debts and assessed undisclosed income at Rs. 8,35,250/-, which after including the regular income of Rs. 1,88,573/-, comes to Rs. 10,23,820/-. 3. Before the ld. CIT(A), it was submitted that the AO has not rightly appreciated the provisions of bad debts. After the amendment w.e.f. 1.4.89, it is sufficient if the bad debts or part thereof is written off as irrecoverable in the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2.4 Without prejudice to above, it is useful to refer to below mentioned cases wherein Hon'ble Court has held even after the amendment the onus to prove that debts has really become bad, is on assessee. Accordingly, writing off the debts in particular year will only crystallize the issue of year of allowability of deduction, but primary condition has to be satisfied that the debt has really become bad. It does not mean that first condition of debt becoming really bad is not required to be satisfied by the assessee and AO can enquire into the veracity of the same. In the instant case the appellant has also not been able to fully prove that these debts have become bad. (i) In the case of M/s. Kashmir Trading Corpn. v. DCIT 291 ITR 228, the Hon'ble Rajasthan High court held that the Tribunal was justified in not allowing the bad debt as the entry of writing off is prima facie evidence of debt having become bad but it is not a conclusive criterion and the onus rests on the assessee to establish that the debt has become bad in the relevant year. Thus only making entry of bad debt in the books of account does not make the debt bad finally but the assessee has to prove tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debt, in act, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the AO has not examined whether the debt has, in fact, been written off in accounts of the assessee. This exercise has not been undertaken by the AO. Hence, the matter is remitted to the AO for de novo consideration of the above-mentioned aspect only and that too only to the extent of the write off. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee." (iv) CIT v. Star Chemicals (Bombay) (P) Ltd. [2009] 313 ITR 126 (Bom.), in which it was held - "Once the assessee has written off the debt as bad debt, requirement of s. 36(1)(vii) is satisfied and the claim for deduction of bad debt is allowable." (v) CIT v. Potential Management Services Ltd. 23 DTR 183 (Cal.) in which it was held - "Loan given in ordinary course of business of money lending having undoubtedly become bad and written off during the relevant previous year is allowable deduction un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were written off in the accounts of the assessee. However, the AO has specifically noted in the assessment order that during the course of search conducted on 02.12.2004, books of account and other incriminating documents were seized. The assessee was required to file the return u/s. 153A of the Act which was filed on 01.08.2005 at Rs. 6,01,823/-. The same undisclosed income comprised interest income from undisclosed debtors at Rs. 4,13,250/-. However, in the original return of income filed on 08.08.2001 u/s. 139(1), the assessee declared income of Rs. 1,88,573/-. Thus, no income on account of undisclosed interest from debtors was shown in the original return of income. The assessee on the basis of the seized documents submitted that certain loans and advances have not been recorded in the regular books of account. On tally programme of accounting, cash book and ledger was prepared on the basis of the information and data available, which was found during the course of search and it was found that the assessee earned undisclosed interest income from the unrecorded loans and advances. Such facts were not recorded in the regular books of account. Since such loans and advances were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated that the assessee has written off the bad debt as irrecoverable in the accounts maintained for previous year in the ordinary course of business. The assessment is framed u/s. 153A of the IT Act, which is specifically meant for computation of undisclosed income, which is found during the course of search. The assessee in order to circumvent the provisions of law have tried to reduce the amount in question out of total undisclosed income determined in the course of search by claiming a bad debt which was never claimed in the regular books of account or in the original return of income filed u/s. 139(1) of the IT Act. The claim of the assessee is, thus, not supported by the provisions of law and the seized material could not be considered as books of account maintained by the assessee in the regular course of business. Since, as per section 153A of the Act, the assessment is to be framed on conducting the search in the case of assessee to compute income of the assessee for the block period. Therefore, the assessee cannot be allowed to flout the provisions of law by making wrong claim. Thus, the condition of section 36(1)(vii) have not been satisfied in this case. The authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
