2023 (5) TMI 622 - AT - Income Tax

Rectification of mistake - provision of bad debts and settled against provision for doubtful debts - AO did not grant deduction of the bad debts so written off on the ground the assessee was not able to prove that the debt bad become bad during the year - assessee submitted that based on the Supreme Court decision of TRF Limited 2010 (2) TMI 211 - SUPREME COURT the assessee was entitled to deduction of the same without having to prove that the debt has become bad - contention of the Ld. AR that the Tribunal has not considered the decision of Hon ble Apex Court in the case of TRF Limited. HELD THAT - It appears that there is a mistake apparent on record. Therefore, we recall the order 2022 (10) TMI 274 - ITAT AHMEDABAD passed by the Tribunal to the extent of Ground No.3 only. The Registry is directed to place the appeal for hearing on 17.04.2023 to the extent of Ground No.3. Issue notice to both the parties accordingly. Hence, the present Miscellaneous Application is allowed.

Summary

Issues involved:
The issue in this case revolves around the deduction of bad debts written off by the assessee and the necessity to establish that the debt has become bad during the year for claiming such deduction.

Comprehensive details of the judgment for each issue:

1. Deduction of Bad Debts:
The assessee had written off bad debts totaling Rs. 1,06,00,000, with Rs. 36,75,000 debited to the Profit & Loss Account and the remaining Rs. 69,33,446 debited to provision of bad debts. The Assessing Officer denied the deduction on the grounds that the assessee failed to prove that the debt had become bad during the year. However, the CIT(A) allowed the deduction of Rs. 36,75,000 citing the decision in the case of TRF Limited vs. CIT, 323 ITR 397, stating that it is not necessary to establish that the debt has become bad. The CIT(A) confirmed the disallowance of Rs. 69,33,446 as it was not actually written off. The assessee appealed to the Tribunal, arguing that the Department did not challenge the CIT(A)'s decision based on the TRF Limited case. The Tribunal initially confirmed the disallowance, but upon review, it recalled the order to consider the decision of the Honorable Apex Court in the TRF Limited case.

2. Review of Tribunal's Order:
The Tribunal, upon considering the arguments of both parties and the contention raised by the Ld. AR regarding the TRF Limited case, found a mistake apparent on the record. Consequently, the Tribunal recalled the order to the extent of Ground No.3, directing a rehearing of the appeal specifically on that ground. The Tribunal allowed the Miscellaneous Application filed by the assessee, setting the appeal for further hearing on a specified date.

In conclusion, the Tribunal's decision in this case primarily focused on the deduction of bad debts and the necessity to establish the bad debt for claiming such deduction, with a specific reference to the TRF Limited case. The Tribunal's reconsideration of its initial decision highlights the importance of legal precedents and the proper application of relevant case law in tax matters.