2018 (7) TMI 1989 - AT - Income Tax

Disallowance on account of provision for bad and doubtful debts made by assessee u/s 36(1)(vii) - HELD THAT - As GUJARAT STATE FINANCIAL CORPORATION 2016 (10) TMI 1265 - ITAT AHMEDABAD where assessee bank had written off impugned bad debt in its books by way of a debit to profit and loss account, simultaneously reducing corresponding amount from loans and advances to debtors depicted on assets side in balance sheet at close of year, the assessee - bank was entitled to deduction u/s 36(1)(vii) and for that purpose, it was not necessary for it to close individual account of each of its debtors in its books. We are in complete agreement with the view taken by the Tribunal - Decided against revenue.

Summary

Issues:
Challenge to correctness of order deleting disallowance for provision of bad and doubtful debts.

Analysis:
The Assessing Officer challenged the order deleting a disallowance amounting to a significant sum made by the assessee for provision of bad and doubtful debts. During the hearing, both parties agreed that a previous decision by a co-ordinate bench in the assessee's own case for another assessment year supported the assessee's position. The co-ordinate bench observed that the actual bad debts written off were justified for deduction as bad debts. The provision made by the assessee was also considered, and it was noted that while there was no evidence of individual accounts being squared up, the provision was debited to the profit and loss account and reduced from the loans and advances in the balance sheet. The co-ordinate bench found this issue to be in favor of the assessee based on a judgment by the jurisdictional High Court. The tribunal, in line with the co-ordinate bench's decision, declined to uphold the Assessing Officer's plea and confirmed the relief granted by the CIT(A).

This judgment highlights the importance of following precedents and judicial decisions in tax matters. The tribunal's decision to rely on a previous co-ordinate bench ruling and a High Court judgment showcases the significance of legal consistency and interpretation in tax disputes. The assessee's position was supported by established legal principles regarding bad debts and provisions, leading to the dismissal of the Revenue's appeal. The judgment emphasizes the need for thorough examination of facts and legal precedents in tax assessments to ensure fair and consistent application of the law.