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TMI Blog2025 (1) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... al : "On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) has: I. General Ground: Erred on facts and in circumstances of the case and in law by not accepting the returned income of the Appellant for the captioned AY. II. Disallowance of Rs. 36,60,197 under section 37 of the Act: Erred on the facts and in circumstances of the case and in law by confirming the disallowance for the provision of bad debts written back of Rs. 36,60,197 without appreciating the fact that these bad debts comprise of bad debts written off/ bad debts written back. Erred on the facts and in circumstances of the case and in law by not considering the submission of the Appellant explaining that the provision for bad debts we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal on the following two issues : (a) Disallowance for provision of bad debts written back at Rs. 36,60,197/- (b) Disallowance for warranty provision of Rs. 12,32,732/-. 4. At the outset, Ld. Counsel for the assessee submitted that the ld.CIT(A) sustained the disallowances only without considering the adjustment being made based on the observation of the Auditor in the Tax Audit Report but the ld.CIT(A) failed to consider the fact that assessee has already added back the provision for doubtful debts and provision for warranty debited in the profit and loss account and has only claimed the actual amount of bad debts written back and the warranty expenses actually incurred during the year. He further referring to the relevant pages of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net amount of Rs. 23,88,411/- treating it as liability contingent in nature u/s. 37. In this regard, a question arises as to when the auditor reported Rs. 72,81,340/- as liabilities contingent in nature for disallowance u/s. 37, how the appellant had reduced the liability to Rs. 23,88,411/-. If the claim of the appellant were true regarding incurring expenditure on warranties and writing off bad debts, only resulting amount of Rs. 23,88,411/- ought to have been closing balance of the said two provisions, and reported by the auditor in Form No.3CD for disallowance. But he qualified Rs. 72,81,340/- for disallowance u/s. 37. If what the appellant claims is a fact, then suitable adjustment entries might have been made and correct balance of Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn, the assessee in Column 7(i) of Part A - Other Income (mandatory if liable for Audit u/s. 44AB) the amount mentioned as against amount of any liability of a Contingent nature is stated at Rs. 23,88,412/-. The CPC while processing the return, on one hand, took note of the observation of the Auditor mentioning the amount of Rs. 72,98,341/- and, on the other hand, actual amount of liability shown in the income-tax return under the head amount debited to the profit and loss account to the extent disallowable u/s. 37 at only Rs. 23,88,412/-. Accordingly, the difference of Rs. 48,92,929/- have been disallowed for which the assessee has raised Grounds of appeal No.2 and 3 for the respective amount towards provision for bad debts and provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wable during the year. Even though these details were filed before the AO it seems that he has overlooked the submissions filed by the assessee. I therefore under the given facts and circumstances of the case and also considering the details of actual break up of warranty supplied during the year placed at page 286 of the paper book and the customer-wise break up of bad and doubtful debts written back during the year which are majorly the limited companies and mainly include Tata Motors Ltd. and Ashok Leyland Ltd. etc., find that the claim of the assessee was justified and CPC erred in making the alleged adjustments. I therefore set-aside the finding of the ld.CIT(A) and delete the disallowances made u/s. 37 of the Act at Rs. 36,60,197/- an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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