2024 (12) TMI 766 - AT - Income Tax

Admissibility of the claim for deduction of bad debts not made in the original return - claim made by way of filing of revised return - HELD THAT - Admittedly, facts relating to disclosure of claim of bad debts written off in the audited financial statements under note no. 19 are not in dispute. These financial statements were before the ld. AO. Claim was made by furnishing a revised computation along with complete details of the parties whose balances were written off. Also, assessee substantiated its claim by submitting that corresponding income was offered to tax in the preceding years, against which nothing cogent was brought on record by the Revenue to controvert the same. Assessee also explained the reasons which lead to the irrecoverability of the balances and were finally written off as bad debts. Position of law on the issue before us is a settled position, especially by the decision of TRF Ltd. 2010 (2) TMI 211 - SUPREME COURT coupled by CBDT circular referred above. On perusal of the judgement in the case of Goetz (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT , no doubt Hon ble Court held that assessee can make a claim of deduction which has not been claimed in the return, only by filing a revised return within the time allowed. However, in the same judgement, Hon ble Court held that nothing impinges on the power of the appellate authorities to entertain such a claim of the assessee . Thus, power of an appellate authority to admit additional claim is not affected. In the present case before us, there is no dispute on facts that bad debts have been written off. Thus, under the law, assessee is undisputedly eligible for the claim so made. The only hurdle created by the AO is on account of this claim not made by way of filing of revised return. Claim of assessee is ought to be allowed, more particularly when there is no embargo applicable on the appellate authority to consider such claim as enunciated in Goetz (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT Accordingly, ground taken by the assessee is allowed. Appeal of the assessee is allowed.

Summary

Issues Involved:

1. Condonation of delay in filing the appeal.
2. Admissibility of the claim for deduction of bad debts not made in the original return.
3. Application of the Supreme Court decision in Goetz (India) Ltd. regarding the filing of revised returns for additional claims.

Issue-wise Detailed Analysis:

1. Condonation of Delay:
The appeal filed by the assessee before the Mumbai Bench of ITAT was delayed by 103 days. The delay was attributed to the initial filing of the appeal before the Chennai Bench of ITAT under the belief that it was the correct jurisdiction, as the first appellate authority was located in Coimbatore. However, the Chennai Bench dismissed the appeal due to lack of jurisdiction, clarifying that the appeal should be filed before the Mumbai Bench, as the jurisdiction is determined by the location of the Assessing Officer. The Chennai Bench granted the assessee liberty to file a fresh appeal before the Mumbai Bench and seek condonation of delay. The Mumbai Bench condoned the delay, considering the facts and the liberty granted by the Chennai Bench.

2. Admissibility of the Claim for Deduction of Bad Debts:
The assessee claimed a deduction for bad debts amounting to Rs. 6,17,28,003/- during the assessment proceedings, which was not claimed in the original return. The claim was made through a revised computation submitted during the assessment proceedings. The assessee argued that the bad debts were written off in the books of accounts, and the corresponding income had been offered to tax in previous years. The assessee relied on the decision of the Bombay High Court in Pruthvi Brokers and Shareholders Pvt Ltd, which allowed additional claims for deduction even if not made in the original return, provided the omission was not deliberate or malafide.

3. Application of the Supreme Court Decision in Goetz (India) Ltd.:
The Assessing Officer rejected the claim for bad debts based on the Supreme Court decision in Goetz (India) Ltd., which held that a claim for deduction not made in the return can only be claimed by filing a revised return. However, the Tribunal noted that the Supreme Court also stated that this does not affect the powers of appellate authorities to entertain such claims. The Tribunal observed that the financial statements disclosed the bad debts, and the claim was substantiated with details of the parties and evidence that the corresponding income was previously taxed. The Tribunal concluded that the assessee was eligible for the claim, as the appellate authority has the power to admit additional claims. The Tribunal allowed the claim for bad debts, emphasizing that the law allows for such claims when the debts are written off in the books, as supported by the decision in TRF Ltd and relevant CBDT circulars.

Conclusion:
The appeal was allowed, and the claim for deduction of bad debts was admitted. The Tribunal emphasized the power of appellate authorities to consider additional claims, even if not made in the original return, provided they are substantiated and supported by law.