2019 (2) TMI 533 - HC - Income Tax

Disallowance of Writing of the bad debts - Held that - Tribunal in the impugned judgment noticed that the assessee had business relations with M/s. Kiraj Consultants Pvt Ltd who was sub-broker of the assessee. In the course of such business transactions, the assessee transferred an amount of ₹ 2.61 crores to bad debts account. AO also verified that the amount was in fact written of despite which did not grant the assessee s claim. The Tribunal in the impugned judgment referred to and relied upon a decision in the case of TRF Ltd Vs. CIT 2010 (2) TMI 211 - SUPREME COURT . The Tribunal was of the opinion that the AO could not have questioned the decision of the assessee to write of the debt as bad debt. We are broadly in agreement with the view of the Tribunal. The assessee found that the debts of M/s. Kiraj Consultants Pvt Ltd were irrecoverable and therefore, wrote of the same as bad debts. The Assessing Officer could not have disallowed the same merely on the ground of doubting with the assessee s wisdom to do so. - Decided against revenue.

Summary

Issues:
- Appeal against the judgment of the Income Tax Appellate Tribunal regarding the claim of bad debts and the Assessing Officer's verification.

Analysis:
The High Court of Bombay heard an appeal where the Revenue challenged the Tribunal's decision on the claim of bad debts amounting to ?2.61 crores. The main question was whether the Tribunal was justified in allowing the claim and directing the Assessing Officer to verify only the write-off of bad debts without considering the ongoing business relations with the sub-broker. The Tribunal relied on the TRF Ltd Vs. CIT case and held that the Assessing Officer could not question the decision to write off the debt as bad debt.

The Court agreed with the Tribunal's view, stating that the assessee had deemed the debts irrecoverable and therefore wrote them off as bad debts. The Assessing Officer's doubts about the wisdom of the assessee's decision were deemed insufficient to disallow the claim. Consequently, the Court found no legal question to be addressed and dismissed the Income Tax Appeal.

In conclusion, the judgment upheld the Tribunal's decision, emphasizing the assessee's right to write off bad debts based on their assessment of irrecoverability, without undue interference from the Assessing Officer.