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Deputy Commissioner of Income-tax, Circle 4 (1) (2) , Bangalore Versus M/s. Measurements and Controls India Ltd.

2016 (3) TMI 644 - ITAT BANGALORE

Rectification of assessment order u/s 154 for withdrawal of claim of bad debts - Held that:- The AO has disallowed the claim of the assessee on the ground that the submissions are not supported by contemporary evidence. It is pertinent to note that the entire record was available with the AO and particularly the ledger accounts of the debtors wherein entries for bad debts written off has been carried out by the assessee along with provision for bad and doubtful debts made during the financial ye .....

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facts and circumstances of the case, we do not find any error or illegality in the impugned order of the CIT(A). The same is upheld. - ITA No.838/Bang/2015, Cross Objn.No.189/Bang/2015 - Dated:- 10-2-2016 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Revenue : Shri Praveen Kumar, JCIT(DR). For The Assesseee : Shri D.S.Vivek, CA. ORDER Per VIJAY PAL RAO, JM : This appeal by the revenue and the cross objections by the assessee are directed against the o .....

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in disallowing the claim of bad debts written off by the assessee by filing the letter dated 18/11/2013. The AO did not accept the contention of the assessee and disallowed the claim of ₹ 98,00,327/- by passing the order dated 20/1/2014 u/s 154. 3. The assessee challenged the action of the AO before the CIT(A) and submitted that this amount of ₹ 98,00,327/- was part of the provisions for bad and doubtful debts made by the assessee in the assessment year 2004-05 though no claim of bad .....

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ive submitted that the CIT(A) has considered fresh material and documents without giving an opportunity to AO before allowing the claim of the assessee. Thus, learned Departmental Representative has submitted that the assessee failed to furnish requisite details in support of the claim before the AO in the proceedings u/s 154, whereas before CIT(A), assessee has filed new evidence in support of the claim which was accepted by the CIT(A) without giving an opportunity to AO. Therefore, there is a .....

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ear under consideration, assessee has reversed the provisions to the extent of ₹ 98,00,327/- in the books of account. However, same amount has been claimed as bad debt written off in the computation of income. He has also referred to the affidavit filed by the assessee in this respect and submitted that the assessee has stated on solemn oath that no new document or evidence was filed in support of the claim before the CIT(A) but the documents and evidence which were filed before the assess .....

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2 of the impugned order passed u/s 154 as under: a. During the Financial year 2003-04 ('A. Y.2004-.05) the assessee company made a provision for bad and doubtful debts for ₹ 1,32,94,610/- 'and debited the same to the Profit and Loss account and credited to provision for and doubtful debts and shown in the Balahce sheet on the Liability d . At the tine of tax computation, the entire provision made for bad and doubtful debts debited to the profit and loss account was added to the pro .....

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dited to the profit and loss account. We are enclosing herewith the computation of total and taxable income for the A. Y. 2004-05 marked as annexure-3. c. To treat the amount as bad debts, as per the accounting principles, the amount' created as provision earlier has to be reversed and the same amount has to be charged off to profit and loss account. The company has adopted the same principles and accordingly reversed the earlier provisions made towards the doubtful debts amounting to ₹ .....

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is disallowed in the computation of total and taxable income. As mentioned in point No. 4(a) supra, the company even though has debited the amount towards the provision for bad debts in the profit and loss account during the A.Y.2004-05 has actually not availed any tax benefit since the same was added back in the computation of income. f. Since, a provision is not an allowable expenditure under the I.T. Act, any provision reversed would also be not an income which would be chargeable to tax unde .....

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same were no longer recoverable. The actual write off is an allowable expenditure under the income tax act. Hence, the claim of the Assessee is in order. i. Since, the assessee has claimed the actual bad debts as an expense in the year, in the computation we have again not shown as reduction of profit on reversal of provision. An alternate way to represent would have been to shows as reduction from taxable profit the Reversal of Provision of ₹ 98,00,327/- and not claim a deduction in compu .....

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profit and loss account but the assessee did not claim said amount in the return of income at the time of computation of income and the entire provision made for bad and doubtful debts debited to profit and loss account was added to the income shown in the profit and loss account in the computation of income. The AO has not disputed this fact while passing the impugned order u/s 154. Even before us, revenue has not disputed these facts explained by the assessee. During the year under considerat .....

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ssee in respect of bad debts written off during the year. The AO has disallowed the claim of the assessee on the ground that the submissions are not supported by contemporary evidence. It is pertinent to note that the entire record was available with the AO and particularly the ledger accounts of the debtors wherein entries for bad debts written off has been carried out by the assessee along with provision for bad and doubtful debts made during the financial year 2003-04 relevant to assessment y .....

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