2015 (6) TMI 1179

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..... and corresponding debt becomes irrecoverable, the said debt can be allowed as bad debt, as sales have gone into the computation of the assessee’s income. In the instant case, there is no material to suggest that the debt was incurred in ordinary course of business and corresponding amount has gone into the computation of the assessee’s income and the assessee has not established beyond any doubt that the debt was incurred in normal course of business carried on by the assessee and the method followed by the assessee in writing off debt is not correct. - Decided in favour of revenue - ITA No. 1166/Mds/2014 - - - Dated:- 5-6-2015 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER For the Appell .....

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..... ients outstanding account and because of this method, the amount of clients which are doubtful, does not appear in the sundry debtors account, as it was reduced from the capital account. This method of accounting is followed by the assessee consistently from year to year. Accepting this method, the Commissioner of Income-tax(Appeals) allowed the claim of assessee. Against this, the Revenue is in appeal before us. 5. The ld. DR submitted that the assessee has not written off bad debts against sundry debtors of earlier previous years but deducted as drawings from the capital account and crediting the outstanding customers account. In our opinion, this method shows that the assessee has not actually written off the debts instead the assesse .....

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..... of the assessee s income. Thus, in the case of a trader, if the sales have been made on credit and corresponding debt becomes irrecoverable, the said debt can be allowed as bad debt, as sales have gone into the computation of the assessee s income. In the instant case, there is no material to suggest that the debt was incurred in ordinary course of business and corresponding amount has gone into the computation of the assessee s income and the assessee has not established beyond any doubt that the debt was incurred in normal course of business carried on by the assessee and the method followed by the assessee in writing off debt is not correct. In view of this, we reverse the findings of the Commissioner of Income-tax(Appeals) on this groun .....

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