2018 (6) TMI 168 - AT - Income Tax

Disallowance of professional charges - Held that - For the expenses for which there is no material/evidence on record that these are incurred wholly and exclusively for the purposes of business have been disallowed. The assessee fails on this addition. Applicability of provisions of Section 36(1)(vii) - sum written off - Held that - We are accepting this claim of the assessee as sale invoice value as raised by assessee in favour of Tropicana Properties is included for computing income. Thus,in nut-shell we are allowing claim of the assessee towards write off of sundry balance of ₹ 29,967/- recoverable from Tropicana Properties keeping in view provisions of Section 36(1)(vii) of the 1961 Act. The assessee succeeds on this addition. Sundry balance write off of minor /fractional amount of in-significant value of ₹ 0. 59 being written of - Held that - Keeping in view that amount involved is insignificant and is merely short/excess being fractional amount of paise fifty nine only written off,the same is allowed. The assessee succeeds on this addition Write off of sundry balance recoverable from Akash Overseas Company - Held that - There is no sales made to said party by assessee. Hence,it could not be shown by assessee that the said amount constituted income which was included while computing taxable income of the assessee. Thus,based on material on record,the claim of the assessee cannot be allowed within the parameters of Section 36(1)(vii) of the 1961 Act and hence claim of the assessee is rejected Write off of sundry balances to M/s Ganesh Stone Company - Held that - It is for the assessee to have brought on record reasons as to why large receipts post sales cannot be appropriated towards sales. No such evidences are brought on record and this is second round of litigation. Under these circumstances there is no valid justification for allowing this amount of ₹ 93862. 80 as write off of sundry balances as no justification/ business exigency is shown. In the absence of proper explanation/evidences on record,the assessee claim cannot be allowed. Write off with respect to Pacific Marbles Private Ltd. it is shown vide ledger account and sales invoices that sales have been made to the tune of ₹ 3,46,000/- on 09. 09. 2005 ,out of which ₹ 2 lacs was recovered on 05. 10. 2005 and the balance amount of ₹ 1,46,000/- was written off. In view of evidences brought on record ,keeping in view provision of Section 36(1) (vii) deduction while computing income of the assessee to be allowed.

Summary

Issues:
Disallowed sundry balances write-off amounting to ?2,57,379 in the assessment year 2006-07.

Analysis:
The appeal filed by the assessee was directed against the appellate order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2006-07. The dispute arose from the disallowance of ?2,57,379 on account of sundry balances written off. The Tribunal in the first round of litigation had directed the assessee to provide evidence justifying the write-off. However, in the second round, the Assessing Officer disallowed the claim again, stating that the assessee failed to provide sufficient documentation to support the write-off. The AO observed discrepancies in the ledger accounts provided by the assessee, leading to the rejection of the claim.

During the second round of litigation, the assessee contended that the written-off amounts were insignificant and related to earlier years. However, without proper evidence linking these amounts to previous income computations, the claim was rejected by the CIT(A). The assessee then approached the Tribunal with a paper book containing various financial documents and invoices. The Tribunal scrutinized the evidence and made specific decisions on each written-off amount.

The Tribunal analyzed each written-off amount individually. For expenses paid to a specific company, the claim was rejected due to lack of evidence showing business-related expenses. However, for another party, the claim was allowed as the unrecovered amount was justified by a sales invoice. The Tribunal also considered a minor balance write-off and allowed it due to its insignificant value. In another case, where sales were made to a company but no valid reason was provided for non-appropriation of subsequent receipts, the claim was rejected. Finally, for a significant write-off amount recoverable from a particular company, the Tribunal allowed the deduction based on the evidence presented, complying with the provisions of the Income-tax Act.

In conclusion, the Tribunal partially allowed the appeal of the assessee, granting deductions for specific written-off amounts based on the evidence and provisions of the Income-tax Act. The judgment was pronounced on 1st June 2018.