TMI Blog2010 (10) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Commissioner of Income tax (A)- XI, Ahmedabad has erred in law and on facts in deleting the addition made of ₹ 34,28,891/- on account of disallowance of bad debt . 4. According to the AO, the assessee has not fulfilled the conditions as per amended provisions of Section 36(1) (vii) of the IT Act and accordingly disallowed the sum of ₹ 34,28,891/-. It was submitted before the learned CIT(A) that the amount disallowed on account of bad debt pertains to Gujarat Water Sewerage Board. Since the amount has been written off as bad debt and the amount relates to the sales made, therefore, AO should have allowed the claim of bad debt. It was also explained that several letters were written to the Chairman and other officers of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount is credited, thus, closing the account of the customer. In the case of Companies, the provision is deducted from Sundry Debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This exercise has not been undertaken by the Assessing Officer. Hence, the matter is remitted to the Assessing Officer for de novo consideration of the above-mentioned aspect only and that too only to the extent of the write off. 6. On consideration of the facts, we do not find any merit in this ground of appeal of the revenue. Admittedly, the amount in question was written off as irrecoverable in the books of account of the assessee. The assessee made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial had not ceased the claim for recovery of cost for the material. Therefore, it appears that it was pre-mature to decide that the assessee had gained due to alleged cessation of liability. It was also noted that the matter is still under dispute for settlement and until the mater is settled, the assessee could not be said to have gained anything. It was, therefore, held that the provisions of section 41(1) of the IT Act would not apply. The addition was accordingly deleted. 10. We have considered the rival submissions and material available on record. Section 41 (1) (a) of the IT Act reads as under: 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aide the order of the Commissioner. On appeal to the High Court: Held, that the assessee had continued to show the admitted amount of ₹ 8,22,925 as liability in the balance-sheet. The undisputed fact was that it was a liability reflected in the balance-sheet. Once it was shown as liability by the assessee, the Commissioner was wrong in holding that it was assessable under section 41(1) of the Act. Unless and until there is a cessation of liability, section 41 is not applicable . 10.2 Hon ble Punjab and Haryana High Court in the case of Smt. Sita Devi Juneja 187 Taxman 96 held as under: It is the conceded position that in the assessee s balance sheet the aforesaid liabilities have been shown, which are payable to the sundr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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