Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (1) TMI 998 - ITAT AHMEDABADDisallowance & enhancement of Bad debt claim - Allowability of bad debts in terms of section 36(1)(vii) r.w.s. 36(2) - scope for estimation for determining eligibility of claim - Held that:- We note that the AO has resorted to estimate disallowance of bad debt at ₹ 2,58,046/- being 10% of the total bad debts claimed. We totally fail to understand the rationale for such estimation. Clearly, the AO has acted in a non challant and mechanical manner without any accord with the purport of the provisions of section 36(1)(vii) r.w.s.36(2) of the Act. The allowance for bad debt is either allowable or not allowable based on evaluation of facts objectively. There is no scope for estimation for determining eligibility of such claims. Such uncalled for action cannot be thus sustained at all. On facts, the AO has admitted that party-wise break-up of the bad debt has been provided by the assessee for his consideration. The sole basis for rejection of the bad debt is lack of justification towards genuineness of bad claim without any elaboration. The CIT(A), on the other hand, has resorted to enhancement on the ground that requisite details have not been filed. The stand of the AO for disallowance and that of CIT(A) are on a mutually contradictory footing. We note that there is no quarrel to the fact that the assessee has written off the debt as irrecoverable in its financial account. It is well settled that the Department cannot insist on demonstrative and infallible proof that a debt has turned bad. There is no requirement in law for the assessee to establish that the impugned debt in fact has become bad in the view of the decision in the case of TRF Ltd. vs. CIT (2010 (2) TMI 211 - SUPREME COURT ). As per the scheme of the Act, the aforesaid claim of the assessee is admissible for deduction either in the form of bad debt or alternatively in the form of business loss and thus cannot be denied in wholesome without any sound basis. Both the authorities have failed to pinpoint any justifiable cause for drawing adverse inference. Thus, the action of the CIT(A) cannot be validated and requires to be reversed. As a result, appeal of the Assessee is allowed.
|