Commissioner of Income Tax and Another vs Dwarika Industrial Development and Chains (P.) Ltd.

The present appeal, filed u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), arises out of the order of the Income Tax Appellate Tribunal dated July 26, 1999. It has been admitted on the following two substantial questions of law:

Whether on the facts and in the circumstances of the case and on the basis of material available on the records, the Income Tax Appellate Tribunal was legally correct in confirming the order of the Commissioner of Income Tax (Appeals) deleting the addition of Rs. 6,27,735 on account of disallowance of the assessee''s claim of bad debts made by the Assessing Officer?

Whether on the facts and in the circumstances of the case and the material available on the records, the Income Tax Appellate Tribunal was legally justified in confirming the findings of the Commissioner of Income Tax (Appeals) that the conditions of the provisions of Section 36(1)(vii) of the Income Tax Act, 1961 were met in the assessee''s case?

Briefly stated the facts giving rise to the present appeal are as follows:

The respondent-assessee, which is a private limited company, filed its return of loss on December 30, 1989 declaring total loss of Rs. 8,24,734. It had claimed bad debt of Rs. 6,27,735 on the ground that major shareholding of the respondent-assessee was with M/s. Roto Pumps and Hydraulic Ltd. and most of the activities by the assessee-company were for the said shareholder. The assessee had taken plant and machinery on lease from the said shareholder company. A sum of Rs. 6,27,735 was lying under the head "Sundry debtors" which the company was not able to realise as this money was due and payable by M/s. N.B. Enterprises. The assessee had sent several letters directing the debtor to pay the amount but the debtor did not even acknowledge the same. The Assessing Officer disallowed the claim on the ground that the debts have become bad and further the conditions for allowances of the bad debt as provided u/s 36(2)(i) have not been clearly brought out. However, the Commissioner of Income Tax (Appeals) has allowed the claim on the ground that the Assessing Officer has not pointed out that this debt has not been taken into account in computing the income in any earlier or previous year, which order has been upheld by the Tribunal.

We have heard Sri R.K. Upadhyay learned Counsel for the Revenue and Sri S.K. Garg learned Counsel for the respondent-assessee.

Sri Upadhyay learned standing Counsel submitted that the Commissioner of Income Tax (Appeals) has wrongly put the onus upon the authority to say that the amount in question have not been claimed as deduction in computing the income in any of the previous year and therefore the order of the Tribunal upholding the deletion is not justified.

We have gone through the record and upon consideration of various pleas raised by the learned standing Counsel find that before the assessing authority it was the specific case of the respondent-assessee that the amount represented the sales effected to M/s. N.B. Enterprises, but because of the fact that there was no documentary evidence in support of the claim as also the acknowledgments of the letters, the said amount was written off. The Assessing Officer did not make any comment on this issue and instead proceeded on the ground by simply saying that merely because the amount has become bad the assessee cannot claim to reduce the income and placed reliance on Section 36(2)(i) of the Act. In our opinion, the Commissioner of Income Tax (Appeals) had rightly observed that the assessing authority did not find any material on record to show that the said amount has not been taken into account in computing the income of any previous years. That being the position, in our considered opinion, the Tribunal had rightly upheld the deletion.

The appeal fails and is dismissed.