TMI Blog2020 (4) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to justify the writing off the debts in the books of accounts as bad in the year has now been settled and decided in the case of TRF limited v. CIT [ 2010 (2) TMI 211 - SUPREME COURT] wherein it has been held that it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable and the accounting entry for write off is sufficient to claim the deduction for bad debts - Claim of bad debt actually written off in the books of the assessee should be allowed as deduction and, therefore, we allow the appeal of the assessee. Credit of TDS short granted - HELD THAT:- We are of the considered opinion that this factual issue needs to be verified by AO and if the credit of TDS has not been given to the assessee then it should be given in accordance to law. - I.T.A. No. 23/Kol/2017 - - - Dated:- 26-2-2020 - Shri A. T. Varkey, JM And Dr. A.L. Saini, AM For the Appellant : S/Shri J. P. Khaitan, Sr. Advocate And Pratyush Jhunjhunwala, Advocate For the Respondent : Dr. P. K. Srihari, CIT, DR ORDER PER SHRI A.T.VARKEY, JM: This is an appeal preferred by the assessee against the order of Ld. CIT(A)-4, Kolkata dated 07.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as bogus as well as informed the assessee that pursuant to the notice u/s. 133(6) of the Act, M/s. Kinetic Advertising India Pvt. Ltd. (previously known as M/s. Portland India Outdoor Advertising Pvt. Ltd. complied by letter dated 11.09.2015) revealed that closing debit/credit balance in the name of assessee company ending on 31.03.2010 was nil. However, according to AO, this SCN of AO dated 30.09.2015 to the assessee, could not elicit any reply from assessee. Therefore, the AO concluded that assessee s claim of debiting (bad/doubtful debts) are ingenuine/bogus and disallowed ₹ 40,78,373/-. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) who dismissed this ground of appeal by observing as under: 4.3. I have considered the submission of the ARs of the appellant in the disputed matter in the backdrop of the assessment order. I find that the issue relates to claim of bad debt written off amounting to ₹ 40,78,373/-. The appellant has explained that it has fulfilled the conditions specified in section 36(1)(vii) of the Act and therefore its claim should have been allowed by the AO. It has relied upon several decisions more particularly the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch we note that there were forty one (41) debtors whose addresses were duly furnished by the assessee (in some address PIN was not there, which was given by assessee later) and out of which the AO randomly selected six (6) parties and sent notices which even if could not be served upon the assessee cannot be the sole reason to disbelieve the existence of the entire debtors and brand them as bogus, when the fact remains that the assessee have duly taken this amount (debt) into its account in computing the income of the assessee in the earlier previous year and offered to tax. A perusal of page 125 clearly gives the following details (a) name of forty one (41) debtors, (b) write off amount year of recognition of income, (c) year for creation of provision of bad debts and page 126 gives the address of forty one debtors which were given to both AO Ld. CIT(A). Thus, we note that the amount actually written off in this year from the forty one debtors have been recognized as income by the assessee in the earlier years and accepted by the department in the earlier years and tax was computed accordingly. Thereafter, when six out of forty one debtor were randomly selected by the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T') vide Circular No. 551 dated 23 January 1990 has provided that bad debt written off is allowed as deduction in the year in which it is written off as irrecoverable in the account. The relevant extracts of the circular is produced below for your ease of reference: 6.6 The old provisions of clause (vii) of sub-section (1) read with sub-section (2) of the section laid down conditions necessary for allowability of bad debts. It was provided that the debt must be established to have become bad in the previous year. This led to enormous litigation on the question of allowability of bad debt in a particular year, because the bad debt was not necessarily allowed by the Assessing Officer in the year in which the same had been written off on the ground that the debt was not established to have become bad in that year. In order to eliminate the disputes in the matter of determining the year in which a bad debt can be allowed and also to rationalize the provisions, the Amending Act, 1987, has amended clause (vii) of subsection (1) and clause (i) of sub-section (2) of the section to provide that the claim for bad debt will be allowed in the year in which such a bad debt has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xx xxxx xxxx (vii) subject to the provisions of sub-section (2), the amount of any debt, or part thereof, which is established to have become a bad debt in the previous year. Post-1st April, 1989: Other deductions. 36.(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- (i) to (vi) xxxx xxxx xxxx (vii) subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year . This position in law is well settled. 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 debt is written off as irrecoverable in the books of account of the assessee. 11. Therefore, in the light of the facts and the law and the Hon ble Supreme Court decision in TRF Ltd. (supra), we are of the considered opinion that the claim of bad debt actually written off in the books of the assessee should be allowed as deduction and, therefore, we allow the appeal of th ..... 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