2022 (6) TMI 651 - SCH - Income Tax

Disallowance on account of bad debts written off - question Whether the Appellate Tribunal was right in deleting the disallowance on account of bad debts written off has not? been framed by the High Court, the Revenue has preferred the present Appeal - HELD THAT - As considering the findings recorded by the CIT A that the written off amount as bad debts by the assessee was fraudulent and not genuine and since there is no further discussion by the High Court in the impugned order on the aforesaid, we are of the view that the High Court ought to have framed the aforesaid additional question so that the same could have been heard along with the other questions of law framed while admitting the appeal. In view of the above and for the reasons stated above and without expressing anything on merits on the proposed additional question, we set aside the impugned order passed by the High Court and we direct that the following question of law, namely, Whether the Appellate Tribunal was right in deleting the disallowance on account of bad debts written off be also dealt with and considered by the High Court along with the other questions of law in accordance with law and on its own merits.

Summary

Issues: High Court's failure to frame additional question on bad debts disallowance

Issue 1: Failure to frame additional question by High Court

The Supreme Court addressed the issue of the High Court's failure to frame an additional question proposed by the Revenue regarding the disallowance of bad debts written off. The Court noted that the High Court did not frame the additional question, leading to the Revenue's appeal. The Court emphasized the importance of such framing to ensure comprehensive consideration of all relevant aspects during the appeal process. The absence of this question hindered a thorough examination of the matter.

Issue 2: Lack of discussion on fraudulent bad debts

The Court highlighted the lack of discussion by the High Court on the nature of the bad debts amounting to Rs. 6.65,78,426/- that were written off by the assessee. The Court noted the CIT-A's findings that the written-off amount was fraudulent and not genuine. Despite this, the High Court did not delve into this aspect in its order. The Supreme Court found this omission significant and emphasized the need for a detailed examination of such crucial aspects during the appellate process.

Judgment Analysis:

In the judgment delivered by Hon'ble Mr. Justice M.R. Shah and Hon'ble Mrs. Justice B.V. Nagarathna, the Supreme Court granted leave and allowed the appeal filed by the Revenue. The Court set aside the impugned order of the High Court, directing the High Court to consider the additional question regarding the disallowance of bad debts written off. The Supreme Court emphasized the necessity of addressing this question along with other legal issues to ensure a comprehensive and fair adjudication of the matter. The Court refrained from expressing any opinion on the merits of the proposed question but emphasized the importance of its consideration by the High Court. The appeal was allowed, and no costs were imposed in this regard. The judgment underscored the significance of framing all relevant questions and thoroughly examining critical aspects during the appellate process to uphold the principles of justice and fairness in legal proceedings.