Commissioner of Income Tax vs Popular Vehicles and Services Ltd.

C.N. Ramachandran Nair, J.—The only question raised is whether the Tribunal was justified in confirming the order of the Commissioner (Appeals) allowing deduction of Rs. 6,74,261.

We have heard standing counsel appearing for the Appellant and Sri P. Balakrishnan appearing for the Respondent.

The Assessee claimed deduction of Rs. 6,74,261 towards bad debt written off in the accounts. However, the assessing officer found that the claim cannot be allowed u/s 36 and the Assessee could not establish as to in which year these amounts were debited in the customers account. The officer cannot be found fault with for the disallowance because unless it is shown that the amount is accounted as part of the turnover in any year, the Assessee cannot write off the same in a later year. It is seen from the first appellate order that before the Commissioner (Appeals), the Assessee gave up the claim of deduction of bad debt, but contended that the amount represents trading loss. Admittedly, these amounts do not represent any sales or other debits made by the Petitioner against any other charge, but relate to some back periods. In our view, the amount was rightly claimed by the Assessee as a deduction towards bad debts and if it is not proved/disallowance is the consequence because the amount cannot be claimed as a trading loss of the previous year as the transactions are of earlier year. In the circumstances, we are unable to sustain the order of the Tribunal confirming the order of the Commissioner (Appeals). However, we feel the Assessee can be given one more opportunity to prove the claim of bad debt before the officer with evidence.

The appeal is accordingly allowed vacating the order of the Tribunal and remanding the matter to the assessing officer permitting the Assessee to produce the proof to substantiate the claim of bad debt, failing which disallowance can be reconfirmed by the officer.