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TMI Blog2013 (9) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to provisions of sub-section (2), the amount of any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year. There is no requirement under sub section (2) of Section 36 of the Act that assessee should produce evidence before the AO that he has made sufficient effort to recover the amount. As a prudent business man in carrying out business and maintaining accounts, the reasons for which the amount, which was actually written off as irrecoverable, is not subject to scrutiny by the AO, unless and until there was some material, which could suggest that writing off debt as irrecoverable was not for bonafide purpose or that the assesee was in fact suppressing the income to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of basic phones, intercom, voice mail systems, MOH and small EPABX etc. During the year, total turn over was declared at Rs.19,53,29,480/-, as compared to turn over of Rs.12,67,33,514/- in the immediately preceding year and gross profit was declared at Rs. 6,28,18,001/- as compared to Rs.4,06,87,473/- in the last year GP rate of 32.16%, was declared as compared to 32.10% in the previous year. The net profit was declared at Rs.1,59,32,702/- at NP rate of 8.16 % as against net profit of Rs.1,28,92,081/- at NP rate of 10.17% in the last year. 6. The assessee claimed allowance of bad debts of Rs. 11,52,901/-, which he had written off in his accounts books. The AO found that there was no documentary evidence to prove that the above amount c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowable to it, in terms of the Hon'ble ITAT's judgment in the case of Minda HUF Ltd. relied upon, for the purpose, as none of the amount of advances can be held to be for non-business purposes. I, therefore, hold that the claim of Rs.1,59,149/- is allowable to the appellant. In view of above observations, the disallowance of bad debts written off at Rs.11,52,901/- is deleted." 8. The appeal filed by the department was dismissed by ITAT. The findings with regard to write off of bad debts, and its allowance under Section 37 of the Act recorded by the Tribunal in paras 3 and 4 of the judgment are as follows: "3. The brief facts of the case are that assessee has filed its return of income on 29th June, 2006 declaring an income of Rs.1,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference to various other case laws on this issue, namely Suresh Gaggal Vs. ITO 222 CTR 96(HP). With the assistance of Ld. DR we have gone through the order of Ld. CIT(A) and do not find any error in the view taken by the Ld CIT(A) . The view of the Ld. CIT(A) is directly in consonance with various authoritative pronouncement referred by Ld. CIT(A) in impugned order, namely CIT Vs. Autometers, Suresh Gaggal Vs. ITO etc. There is no dispute in the preposition that after 1.4.89 assessee is not supposed to bring demonstrative prove on the record to show that debts have actually become bad. The requirement is that such debts have been written off in the accounts as irrecoverable. In view of the above discussion ground No.1 raised by the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... government entities. 11. We are of the view that as a prudent business man in carrying out business and maintaining accounts, the reasons for which the amount, which was actually written off as irrecoverable, is not subject to scrutiny by the AO, unless and until there was some material, which could suggest that writing off debt as irrecoverable was not for bonafide purpose or that the assesee was in fact suppressing the income to be taxed. The amendment in section 36 (1) (vii) provides for the assessee to write off bad debts as irrecoverable. It does not require him to prove by documents/evidences before the AO that he had made sufficient effort to recover the debts. The exceptions under Section 36 (1) (vii) and (2) also do not place any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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