2021 (9) TMI 215 - AT - Income Tax

Provision for bad and doubtful debts - only reason for which the claim of the assessee is disallowed is because assessee has not made any provision in the books of accounts - HELD THAT - As relying on assessee's own case 2020 (2) TMI 1558 - ITAT DELHI we hereby remand the matter to the file of the Assessing Officer to examine the provisions with reference to the final accounts of the assessee. Difference in the P L account and computation of income - difference between the profit as per the P L account and the profit declared in the computation of income - HELD THAT - CIT(A) held that the assessee failed to submit the reconciliation statement whereas the contention of the assessee before the Tribunal was that the assessee has duly submitted the reconciliation statement as per the memorandum of changes. The same has been duly enclosed at page no. 5 of the paper book reflecting the contraction - AO is directed to verify the same with regard to books of accounts before accepting the reconciliation. In the result, the appeal of the assessee on this ground is allowed.

Summary

Issues:
1. Provision for bad and doubtful debts
2. Difference in the P&L account and computation of income

Analysis:

Provision for bad and doubtful debts:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) dismissing the claim of deduction on provision for bad and doubtful debts under Section 36(1)(viia) of the Income Tax Act, 1961. The Assessing Officer disallowed the deduction as the provision was not made in the books of accounts. However, the Co-Ordinate Bench of ITAT noted that Co-Operative Banks are eligible for the deduction, and the revised profit and loss account submitted by the assessee supported the claim. The case was remanded to the Assessing Officer to examine if the provision was correctly made in accordance with the law.

Difference in the P&L account and computation of income:
Another issue raised was regarding the difference between the profit as per the P&L account and the profit declared in the computation of income due to adjustments in branch accounts. The assessee claimed to have submitted a reconciliation statement, but the CIT(A) held otherwise. The Tribunal directed the Assessing Officer to verify the reconciliation statement before accepting it, ultimately allowing the appeal of the assessee on this ground.

In conclusion, the appeal of the assessee was allowed on both grounds, with the case being remanded for further examination of the provision for bad and doubtful debts and verification of the reconciliation statement for the difference in the P&L account and computation of income.