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Claim of bad debt disallowance by the ITO for two parties - M/s Kamani Bros. Pvt. Ltd. and M/s Kes Bros. Analysis: The appeal was filed against the order of the CIT(A)X, Bombay, regarding the disallowance of a bad debt claim amounting to Rs. 1,31,471. The assessee argued that the bad debts in question were related to two parties, M/s Kamani Bros. Pvt. Ltd. and M/s Kes Bros., totaling the claimed amount. The facts presented by the counsel showed that the assessee-firm had made significant efforts to recover the debts. For M/s Kamani Bros. Pvt. Ltd., the company petitioned for insolvency, issued legal notices, and even filed a suit for recovery. Despite these efforts, no recovery was made, leading to the debt being written off in the books of account during the relevant accounting year. The Tribunal noted that the assessee had made sincere efforts for recovery, even within the limitation period, and therefore, the claim was allowable as a bad debt. For the second party, M/s Kes Bros., the assessee supplied goods but failed to recover the amount owed. The counsel highlighted that a cheque issued by M/s Kes Bros. was dishonored, and despite filing a suit for recovery, no progress was made. The ITO considered this as a premature writing off of the debt and questioned the sincerity of recovery efforts. However, after examining the facts and arguments, the Tribunal found that the assessee had indeed made continuous and sincere efforts to recover the debt. The Tribunal also referenced a relevant case law to support the assessee's claim. Considering the unsuccessful recovery attempts and the dishonored cheque, the Tribunal concluded that the claim of bad debt for M/s Kes Bros. was also allowable. In the final analysis, the Tribunal acknowledged the diligent efforts made by the assessee to recover the debts from both parties, which ultimately proved unsuccessful. Despite legal actions taken and decrees obtained, no actual recovery was achieved. Therefore, the Tribunal held that the assessee's claim of bad debt for both M/s Kamani Bros. Pvt. Ltd. and M/s Kes Bros. was valid and allowed the appeal in favor of the assessee.
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