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TMI Blog2021 (11) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, these appeals were heard together and are being disposed off by this consolidated order. 2. The assessee has more or less raised common grounds of appeal for both assessment years. Therefore, for the sake of brevity, grounds of appeal for assessment year 2007-08 are reproduced as under:- 1. Validity of reopening proceedings Under Section 147 A. The Hon CIT Appeals Erred in Concluding the Validity of reopening proceedings Under Section 147 was correct. B. The Hon CIT Appeals failed to appreciate the fact that that the assessment order passed under Section 143(3) read with Section 147 suffers from fundamental defects insofar as the Assessing Officer had no jurisdiction to reopen the assessment in the instant case. c The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant submits a sum of Rs. 2,76,82,870/-. was written off by him in the books of accounts and the Assessing Officer in this assessment order chose disallow only 50% of the claim of bad debts without assigning any reason and Hon CIT erred in confirming the disallowance of 50% of the bad debts claimed by the appellant. C. The CIT Appeals failed to appreciate the fact that if the debt is written off as irrecoverable in the accounts of the previous year, it is sufficient compliance for claiming debt as bad debt under section 36(i)(vii) and the onus is of course on the assessee to show that he has written off the debt which is permissible under the amended provisions. This point of view is further emphasised by Supreme Court decision in TRF l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 6,05,43,609/- for assessment year 2007-08 and Rs. 5,25,80,928/- for assessment year 2008-09 by making various additions including addition towards disallowance of bad debts u/s.36(1)(vii) r.w.s. 36(2) of the Act, on the ground that the assessee has failed to file any evidences to show debts really become bad and has made sufficient efforts to recover the outstanding debts. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has challenged reopening of assessment for both assessment years on the ground that assessments have been reopened on mere change of opinion without there being any fresh tangible material suggesting escapement of income and also there is a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that once the AO accepted the fact that debts become bad, question of making adhoc disallowance of bad debts is not correct, because a debt becomes bad means it is bad in full but it cannot be bad debt for 50% and good debt for remaining 50% of the amount. He further submitted that the assessee has written off debts in his books of accounts and once debt has been written off in books of accounts as bad, then it is sufficient compliance of provisions of section 36(1)(vii) r.w.s. 36(2) of the Act and thus, there is no necessity to prove that debts become really bad. He supported his arguments with the help of the decision of Hon'ble Supreme Court in the case of T.R.F Limited vs. CIT, 323 ITR 397. 7. The ld.DR on the other hand strongly sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g which is carried on by the assessee. Further, the assessee should prove that such debt has been written off in the books of accounts of the assessee. In this case, the assessee claimed that he is in the business of money lending. Once the assessee is in the business of money lending then the question of offering income in the earlier previous years does not arise because any advances or loans given in the ordinary course of business which is bad or irrecoverable can be written off once such debts become irrecoverable. But, fact remains that although, the assessee claims to have in the business of money lending but no evidences have been filed to prove that he is carrying on business of money lending either by furnishing necessary license ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the considered view that the issue needs to go back to the file of the AO to decide the issue afresh in accordance with provisions of Section 36(1)(vii) r.w.s 36(2) of the Act. We further direct the AO while deciding the issue, he must take into account the ratio laid down by the Hon'ble Supreme Court in the case of T.R.F. Limited vs. CIT, supra, where it has been clearly held that once debt has been written off in books of accounts as irrecoverable, then the assessee need not to prove that said debt become really bad debts. Accordingly, we set aside the issue to the file of the AO and direct him to reconsider in light of our observations given herein above. 9. In the result, the appeals filed by the assessee for assessment years 2007- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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