2014 (6) TMI 635 - AT - Income Tax

Remand report of AO - Disallowance of claim for bad debt u/s 36(1)(vii) of the Act - Held that - Assessee has failed to establish the correct nature of such debts and also whether the same had been offered for taxation in the past, assessee filed additional evidence before CIT(A) which was sent back by the CIT(A) to AO for his comments - the details regarding name and address of the parties, confirmed copies of their accounts for the earlier years are additional evidence which were not furnished during the course of assessment proceedings - as the assessee itself has affirmed that such details were sought by the AO on 14-11-2007, it is clear that he had sufficient time to furnish confirmation of the parties - it was not prevented by sufficient cause to furnish such details - CIT(A) admitted the additional evidence and decided the issue in favour of assessee without verifying the same thus, the matter is to be remitted back to the AO for fresh adjudication Decided in favour of Revenue.

Summary

Issues:
Appeal against CIT(A)'s order disallowing bad debt claim - Failure of assessee to provide necessary details - Additional evidence submitted before CIT(A) - CIT(A) admitting additional evidence without verification - Revenue's appeal allowed for statistical purpose.

Analysis:
The judgment pertains to the revenue's appeal against the order of the Ld. CIT(A)-XI Ahmedabad, which disallowed the claim for bad debt by the assessee. The Assessing Officer (AO) had assessed the income of the assessee at a different amount, disallowing the bad debt claim. The AO observed that the assessee failed to provide essential details and information to establish the nature of the debts and whether they had been offered for taxation in the past. The AO highlighted the lack of evidence regarding efforts made for debt realization and the absence of reasons for writing off the debts. The AO concluded that the deduction under section 36(1)(vii) was not admissible due to insufficient information provided by the assessee.

The assessee filed additional evidence before the Ld. CIT(A) to support their claim, which was then sent back to the AO for comments. The AO, in the remand report, stated that the additional evidence, including details of parties, their accounts, and correspondences with debtors, were not furnished during the assessment proceedings. The AO contended that the additional evidence should not be admitted as the assessee had sufficient time to provide the required details but failed to do so. The AO highlighted the lack of documentary evidence supporting debt recovery efforts and the absence of confirmed copies of accounts for specific parties. Despite these observations, the Ld. CIT(A) admitted the additional evidence and ruled in favor of the assessee without proper verification.

The Appellate Tribunal held that the matter should be remanded back to the AO for fresh consideration, taking into account the additional evidence submitted before the Ld. CIT(A). The Tribunal emphasized the need for the AO to re-examine the issue in light of the additional evidence to ensure a fair and thorough assessment. Consequently, the revenue's appeal was allowed for statistical purposes, indicating a procedural victory rather than a substantive decision on the merits of the bad debt claim.