2009 (12) TMI 413 - HC - Income Tax

bad debt- condition president- The assessee claimed deduction of bed debts written off in the books of account. The Assessing Officer did not allow it because the assessee could not establish in which year these amount were debited in the customer s account. The Tribunal allowed the deduction. Held that- the amount was rightly claimed by the assessee as a deduction towards bad debts and if it was not proved disallowance was the consequence because the amount could not be claimed as a trading loss of the previous year as the transactions were of earlier year. However the assessee could be given one more opportunity to prove the claim of bad debts before the officer with evidence.

Summary

Issues:
1. Justification of confirming the order of the Commissioner of Income-tax (Appeals) allowing deduction of Rs. 6,74,261 towards bad debt written off in the accounts.

Analysis:
The High Court of Kerala deliberated on the question of whether the Tribunal was justified in upholding the order of the Commissioner of Income-tax (Appeals) regarding the deduction claimed by the assessee amounting to Rs. 6,74,261 for bad debt written off in the accounts. The Assessing Officer initially disallowed the claim under section 36, stating that the assessee failed to establish the year in which these amounts were debited in the customer's account. The court observed that the assessee, before the Commissioner of Income-tax (Appeals), abandoned the claim of deduction of bad debt but argued that the amount constituted a trading loss. The court noted that the disputed amounts did not pertain to any recent transactions but related to earlier periods. The court opined that the assessee was justified in claiming the amount as a deduction for bad debts. However, due to lack of proof, the disallowance was upheld. The court, therefore, set aside the Tribunal's order and remanded the matter to the Assessing Officer, granting the assessee another opportunity to substantiate the claim with evidence.

In conclusion, the High Court allowed the appeal, overturning the Tribunal's decision and instructing the Assessing Officer to permit the assessee to present evidence supporting the claim of bad debt. Failure to provide sufficient proof would result in the reconfirmation of the disallowance by the officer.