1984 (3) TMI 180 - AT - Income Tax

Summary

Issues: Disallowance of bad debt of Rs. 14,062

Analysis:
The appeal was filed by the assessee challenging the disallowance of bad debt amounting to Rs. 14,062 by the AAC. The assessee, an HUF dealing in business as a Kachcha Adatia, claimed the deduction for bad debt against M/s Maheshwari & Co. The ITO disallowed the claim citing lack of evidence of efforts made to recover the outstanding debt and the fact that a suit filed against M/s Maheshwari & Co. was not contested. The AAC upheld the disallowance, emphasizing the absence of evidence of recovery efforts and questioning the competency of the Kachcha Adatia's Association's certification regarding the debtor's capacity to discharge debts. The AAC also noted the dismissal of a suit filed by another party against M/s Maheshwari & Co., suggesting a possible amicable settlement. The assessee, in the appeal, argued that a registered notice was issued to the debtor and referred to the allowance of a similar bad debt claim by M/s Nutan Trading Co. The assessee relied on the decision of the Gujarat High Court and contended that the criteria for bad debt allowance were met. After considering the arguments, the ITAT allowed the appeal, emphasizing the failure to recover the outstanding amount, the closure of the debtor's business, and the allowance of a similar claim by another party. The ITAT relied on the decision of the Gujarat High Court and allowed the deduction of bad debt amounting to Rs. 14,062 against M/s Maheshwari Trading Co.

Conclusion:
The ITAT allowed the appeal filed by the assessee, overturning the disallowance of bad debt of Rs. 14,062 against M/s Maheshwari Trading Co. The decision was based on the failure to recover the outstanding amount, the closure of the debtor's business, and the allowance of a similar claim by another party. The ITAT relied on the decision of the Gujarat High Court and granted the deduction for bad debt in favor of the assessee.