Delhi H.C : Commissioner (Appeals) can entertain claim of bad debts written off by assessee even during course of appellate proceedings otherwise than by way of a revised return

High Court Of Delhi

Pr.CIT vs. Western India Shipyard Ltd.

Assessment year 2006-07

Section 36(1)(vii)/(1)

Dr. S.Muralidhar And Vibhu Bakhru, JJ.

IT Appeal No. 644 Of 2015

August 25, 2015


1. This appeal is filed against the order dated February 25, 2015, passed by the Income-tax Appellate Tribunal (“the ITAT”) in I.T.A. No. 2615/Del/ 2012 for the assessment year 2006-07.

2. It is recorded in the impugned order of the Income-tax Appellate Tribunal that the Assessing Officer (“the AO”) rejected the claim made by the assessee by way of a letter, during the assessment proceedings, for deduction of the bad debts written off by him on the ground that it could have only been made by way of revised return under section 139(5) of the Act. The Commissioner of Income-tax (Appeals), however, accepted the assessee’s claim and granted the deduction. The Income-tax Appellate Tribunal on an analysis of section 36(1)(vii) and section 36(2) of the Act observed that the bad debts written off during the previous year can be allowed as deduction provided it was taken to the account in computing the income of the assessee for the relevant year. The Income-tax Appellate Tribunal rightly observed that while the Commissioner of Income-tax (Appeals) could have considered such claim even during the course of the appellate proceedings otherwise than by way of a revised return, the Commissioner of Income-tax (Appeals) did not examine whether, in fact, the assessee had taken such debts into consideration while computing its total income. It was for that purpose that the Income-tax Appellate Tribunal remanded the matter to the Assessing Officer for a decision afresh.

3. It is urged by Ms. Suruchi Aggarwal, learned senior standing counsel for the appellant, on the strength of the decision of the Supreme Court in Goetze (India) Ltd. v. CIT [2006] 284 ITR 323/157 Taxman 1 (SC), that the Income-tax Appellate Tribunal erred in accepting the claim of the assessee for deducting the bad debts written off, without insisting that it could only be done by filing a revised return.

4. The said decision in Goetze (India) Ltd. (supra) is in the context of the lack of the power of the Assessing Officer to entertain a claim for deduction, during assessment proceedings, otherwise than by a revised return. The Income-tax Appellate Tribunal is right in holding that while there was a bar on the Assessing Officer entertaining such claim without a revised return being filed by the assessee, there was no such restraint on the Commissioner of Income-tax (Appeals) during the appellate proceedings. However, while permitting such a claim the Commissioner of Income-tax (Appeals) ought to have examined whether in fact the bad debts were written off by the assessee in the first instance in the accounts and then taken into consideration while computing the income. The remand of the matter to the Assessing Officer for that purpose was, therefore, justified.

No substantial question of law arises. The appeal is dismissed.

[Citation : 379 ITR 289]