2016 (9) TMI 1076 - AT - Income Tax

Disallowance of bad debts - applicability of condition laid down u/s 36(2) - Held that - We are of the considered view that the only condition which required to be fulfilled by the assessee for claiming relief u/s 36(1)(VII) is to demonstrate that the amount claimed as bad debt should have been considered in the income of assessee of the year under consideration or in any earlier year. Ld. CIT(A) has pointed out that during assessment proceedings the assessee was not able to explain as to in which year the said amount claimed as bad debt was considered as the income of assessee. The said fact was however verified by CIT(A) by asking the assessee to furnish said details but the assessee could not furnish any such details even before CIT(A). Therefore, considering this factual position ld. CIT(A) has rightly come to the conclusion that the condition laid down u/s 36(2) of the I.T. Act has not been fulfilled. Therefore, the assessee claim of bad debts was rightly disallowed by CIT(A).Even before us no new circumstance have been brought on record in order to controvert or rebut the findings recorded by the learned CIT (A). Moreover, there is no reason for us to deviate from the findings recorded by the learned CIT (A). Therefore, we are of the considered view that the findings recorded by the learned CIT (A) are judicious and are well reasoned. Accordingly, we uphold the same.- Decided against assessee. Unexplained cash credit u/s 68 - Held that - As in this respect no such explanation was furnished before AO even after availing several opportunities. We have also noticed that copy of letter dated 19/11/2009 relied upon by the assessee was also not filed during appellate proceedings and even before us no application for leading additional evidences has been moved. Therefore, the assessee s claim had remained unsubstantiated that it had filed ledger accounts of the parties before the AO in support of its claim of reconciliation. From the facts and circumstances of the present case and after going through the impugned orders passed by CIT(A), we are of the considered view that since the assessee had failed to furnish explanation and reconciliation in respect of fresh credits appearing in its books of accounts and the assessee has also failed to discharge the onus of proving creditworthiness of the parties by not filing the confirmations of the parties. Therefore, ld. CIT(A) has rightly dismissed this ground of appeal.- Decided against assessee.

Summary

Issues:
1. Disallowance of bad debts
2. Addition of unexplained cash credit under section 68
3. Disallowance of excess salary paid
4. Disallowance under section 40(a)(ia)

Issue 1: Disallowance of Bad Debts
The appellant appealed against the disallowance of bad debts of ?4,00,872 by the AO, which was confirmed by the CIT(A). The appellant argued that the bad debts were written off in the normal course of business and were allowable under section 36 of the Income Tax Act, 1961. However, the CIT(A) found that the appellant failed to demonstrate that the amount claimed as bad debt was considered in the income of the appellant in the relevant year or any earlier year. The CIT(A) upheld the disallowance, stating that the condition under section 36(2) was not fulfilled. The tribunal agreed with the CIT(A) and dismissed the ground raised by the Assessee.

Issue 2: Addition of Unexplained Cash Credit
The appellant contested the addition of ?94,72,889 as unexplained cash credit under section 68 of the IT Act. The appellant argued that certain amounts received were erroneously reflected in ledger accounts due to clerical errors. However, the CIT(A) noted that the appellant failed to provide confirmations or reconciliations despite multiple opportunities. The tribunal observed that the appellant did not substantiate the explanations provided, and the onus to prove creditworthiness was not discharged. As no new material was presented to challenge the CIT(A)'s findings, the tribunal upheld the order and dismissed the grounds of appeal.

General Observations
The tribunal dismissed the appellant's appeal, noting that no new material was presented to counter the CIT(A)'s findings. The tribunal upheld the decisions of the CIT(A) regarding the disallowance of bad debts and the addition of unexplained cash credit. The appeal was deemed to be general in nature and required no specific adjudication. The order was pronounced in open court on 10/08/2016.