2010 (3) TMI 704 - HC - Income Tax

Bad debts - irrecoverable - AO disallowed the claim of bad debts - CIT(A) allowed the claim - ITAT set aside the order of CIT(A) and restored the matter before AO - Power of the tribunal to remand the matter - Held that - We are satisfied that the Income Tax Appellate Tribunal having been satisfied, that there was no sufficient material, documentary or otherwise, to support the conclusion recorded by the Assessing Officer, as also on the basis of the further report sought by the Commissioner of Income Tax (Appeals), relevant part whereof has been extracted in paragraph 13 of the order passed by the Income Tax Appellate Tribunal, there was no other alternative with the Income Tax Appellate Tribunal but to remand the matter for adjudication to the Assessing Officer with the clear direction that the issue should be re-determined keeping in mind the satisfaction of the statutory conditions. - Assessee s appeal dismissed.

Summary

Issues:
1. Deductions claimed by the appellant/assessee on account of bad debts.
2. Appeal against the order passed by the Commissioner of Income Tax (Appeals).
3. Challenge to the order of the Income Tax Appellate Tribunal remanding the matter to the Assessing Officer.
4. Interpretation of Section 254(4) of the Income Tax Act, 1961.

Analysis:
1. The appellant/assessee sought deductions for bad debts claimed as irrecoverable. The Assessing Officer initially did not accept these deductions in the final order. The Commissioner of Income Tax (Appeals) found the Assessing Officer wrong in disregarding the detailed reply furnished by the appellant/assessee and allowed the deductions based on Section 36(1)(vii) of the Income Tax Act, 1961. The Commissioner concluded that the bad debts had been written off as irrecoverable based on the appellant's detailed reply.

2. Dissatisfied with the Commissioner's order, the department appealed to the Income Tax Appellate Tribunal. The Tribunal observed that no supporting documents were available on record to satisfy the statutory requirement for allowing the claim of bad debts. The Tribunal set aside the order and remanded the matter to the Assessing Officer for a fresh determination after examining the seized records.

3. The appellant challenged the Tribunal's decision, arguing that under Section 254(4) of the Income Tax Act, orders passed by the Appellate Tribunal should be final. However, the Court found that there was no restriction on the Tribunal remanding the matter for re-determination if there was insufficient material to support the Assessing Officer's conclusion. The Tribunal's decision to remand the matter was deemed appropriate under the circumstances.

4. The Court concluded that no substantial question of law arose in the appeal filed under Section 260-A of the Income Tax Act, 1961. Therefore, the appeal was dismissed as the Tribunal's decision to remand the matter to the Assessing Officer was found to be justified based on the lack of sufficient material to support the original conclusion.