2022 (1) TMI 489 - HC - Income Tax

Power of ITAT u/s 254 - Addition on account of bad debt deleted - addition as the books of accounts of the assessee corporation were not audited under section 44AB of the income tax act, 1961 and it could not be ascertained whether bandits were actually written off in the books or not - ITAT deleted the addition - HELD THAT - In the present case, the order of the Assessing Officer was challenged in appeal before the Commissioner. While deciding an appeal, the Commissioner has all the powers of Assessing Officer and he may affirm, reduce, endorse or annul the assessment. In the present case, the Commissioner, on the basis of material on record, recorded a categorical finding of fact, which has been affirmed by the Income Tax Appellate Tribunal in further appeal exercising the powers conferred on it by Section 254 (1) of the Income Tax Act, 1961 and we find no legal error in exercise of powers by the Income Tax Appellate Tribunal. Tribunal has committed no illegality in upholding the finding of fact recorded by the commissioner income tax deleting the addition made on account of bad debt by holding that the assessee has not raised any claim of bad debts either in the profit and loss account or balance sheet. Income Tax Appellate Tribunal is justified in dismissing the appeal of the Department by affirming the finding of fact recorded by the Commissioner regarding the addition having been made by the Assessing Officer and the orders of the commissioner as well as the Income Tax Appellate Tribunal or not perverse or erroneous. Penalty u/s 271(1)(c) - HELD THAT - Since the order passed by the Assessing Officer holding that the assessee had wrongly claimed benefit of bad debts written off was set aside by the Commissioner in appeal and the Commissioner s order has been affirmed by the Income Tax Appellate Tribunal and Income Tax Appeal filed by the department against the aforesaid order of the Income Tax Appellate Tribunal has been dismissed, consequently this appeal is also liable to be dismissed.

Summary

Issues:
1. Disallowance of bad debt in income tax assessment.
2. Authority of Commissioner and Income Tax Appellate Tribunal in determining additions in assessment.

Issue 1: Disallowance of bad debt in income tax assessment:
The appellant challenged the addition of ?5,97,61,000 made on account of bad debt in the income tax assessment. The Assessing Officer disallowed this amount as the books of accounts were not audited under section 44 AB of the Income Tax Act, leading to uncertainty about the actual write-off of debts. The appellant contended that the addition was unjustified due to lack of audit confirmation. The Commissioner of Income Tax (Appeal) ruled in favor of the appellant, noting that the audited accounts did not claim the amount as bad debts, hence it cannot be disallowed. The Income Tax Appellate Tribunal upheld this decision, emphasizing that the appellant did not raise any claim of bad debts in the audited accounts. The High Court affirmed this finding, stating that the Tribunal's decision was not erroneous as it was based on facts and circumstances of the case.

Issue 2: Authority of Commissioner and Income Tax Appellate Tribunal in determining additions in assessment:
The appellant argued that the Commissioner and the Income Tax Appellate Tribunal erred in deleting the addition made by the Assessing Officer without considering the audited balance sheet. However, the High Court held that the Commissioner, acting as an appellate authority, has the power to affirm, reduce, endorse, or annul the assessment. In this case, the Commissioner and the Tribunal based their decisions on the audited accounts and found no legal error in deleting the addition. The High Court emphasized that the Tribunal's finding was not perverse and that no material was presented to challenge the factual findings. Therefore, the High Court dismissed the appeal, concluding that the Tribunal's decisions were justified and in accordance with the law.

In summary, the High Court upheld the decisions of the Commissioner and the Income Tax Appellate Tribunal, ruling in favor of the appellant regarding the disallowance of bad debt in the income tax assessment. The Court emphasized the authority of the Commissioner and the Tribunal in determining additions in assessments based on audited accounts and factual findings, ultimately dismissing the appeals filed by the Income Tax Department.