9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (2) TMI 1028 - AT - Income TaxRevision u/s 263 - assessee has claimed deduction on account of bad debts in spite of having credit balance in BDDR account - Pr. Commissioner of Income Tax further opined that the order of assessment passed u/s.143(3) dated 13.12.2016 was erroneous in so far as it was prejudicial to the interest of the revenue because assessment has been made without verification of the claim of written off bad debts as deduction.- Whether any verification or examination was done by the Assessing Officer or not with respect to the bad debts? - HELD THAT - As already examined that such verification and examination on bad debts was not done by the Assessing Officer. The Assessing Officer has not called for any specific details regarding bad debts. He has also not called for or verified list of bad debts. The Assessing Officer has also not analyzed the Board Circular Instruction vis- -vis facts of the assessee case and therefore, the assessment order is erroneous and prejudicial to the interest of the revenue. We are of the considered view that the Ld. Pr. Commissioner of Income Tax was correct in assuming revisionary jurisdiction and passing order u/s.263 of the Act since the order of the Assessing Officer dated 13.12.2016 was erroneous so far as it is prejudicial to the interest of the Revenue. - Decided against assessee.
Issues Involved:
1. Assumption of revisionary jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Examination and verification of bad debts written off. 3. Compliance with Section 36(1)(vii) and Section 36(1)(viia) of the Income Tax Act. 4. Validity of the assessment order passed under Section 143(3) of the Income Tax Act. 5. Applicability of Board Circular and Instruction No.17/2008. Detailed Analysis: 1. Assumption of Revisionary Jurisdiction under Section 263 of the Income Tax Act, 1961: The primary issue revolves around the Ld. Pr. Commissioner of Income Tax assuming revisionary jurisdiction under Section 263 of the Act. The legislative intent behind Section 263 is to empower the Commissioner to revise an assessment order if it is erroneous and prejudicial to the interest of the revenue. It was observed that the assessment order dated 13.12.2016 was erroneous and prejudicial because the Assessing Officer (AO) did not verify the claim of bad debts written off by the assessee. 2. Examination and Verification of Bad Debts Written Off: The AO accepted the assessee's claim of bad debts without proper verification. The AO had asked for details of large deductions but did not specifically inquire about the bad debts written off. The Ld. Pr. Commissioner noted that the AO allowed the claim without calling for basic requisite information like the list of bad debts, proving that the assessment was completed without proper application of mind. 3. Compliance with Section 36(1)(vii) and Section 36(1)(viia) of the Income Tax Act: As per the proviso to Section 36(1)(vii), for an assessee to whom Section 36(1)(viia) applies, only the amount of bad debts written off in excess of the credit balance in the bad and doubtful debts reserve (BDDR) can be allowed as a deduction. The assessee had a substantial credit balance in the BDDR account, and thus, the deduction for bad debts was not permissible unless the reserve was exhausted. The AO failed to verify this compliance. 4. Validity of the Assessment Order Passed under Section 143(3) of the Income Tax Act: The Tribunal referred to various judicial precedents, including the Hon'ble Bombay High Court's decision in Commissioner of Income Tax Vs. Ballarpur Industries Ltd., which emphasized that a view taken by the AO must be preceded by an examination of the claim. In this case, the AO did not conduct any specific inquiry into the bad debts, making the assessment order erroneous and prejudicial to the revenue. 5. Applicability of Board Circular and Instruction No.17/2008: The Ld. Pr. Commissioner and the Tribunal referred to the Board Circular and Instruction No.17/2008, which mandates that the deduction for bad debts should be allowed only if the amount exceeds the credit balance in the BDDR account. The AO did not distinguish this Circular vis-à-vis the assessee's case, further proving the lack of verification. Conclusion: The Tribunal upheld the order passed under Section 263 by the Ld. Pr. Commissioner of Income Tax, concluding that the assessment order dated 13.12.2016 was erroneous and prejudicial to the interest of the revenue due to the AO's failure to verify the bad debts claim. The appeal of the assessee was dismissed, and it was noted that during the consequential order's passing, the assessee would have the opportunity to justify its stand with relevant evidence. Order Pronounced: The appeal of the assessee is dismissed. Order pronounced on 22nd February 2021.
|
