This article delves into the Income Tax Appellate Tribunal’s handling of ITA No. 1055/DEL/2020, concerning PME Power Solutions (India) Ltd.’s appeal against disallowed bad debts for the assessment year 2016-17.
PME Power Solutions faced a significant addition to its taxable income due to the disallowance of bad debts amounting to Rs. 4,35,16,422, claimed in the profit and loss account. The Assessing Officer (AO) disallowed this claim on grounds that the debts were not written off but were merely provisions. The case escalated to the CIT(A), who upheld the AO’s decision due to non-appearance of the appellant, leading to an ex-parte order.
The appellant argued that the provision for bad debts had been reversed in the profit and loss account, hence it should not have been added to the income. The tribunal recognized potential merit in this claim and decided to remand the matter back to the AO for a thorough re-examination of the assessee’s books and computation of income. This was to determine if there indeed had been a double disallowance as claimed by the appellant.
The tribunal’s decision to remand the case back to the AO emphasizes the importance of accurate bookkeeping and the need for clear communication of financial actions in tax filings. This case serves as a critical reminder for businesses about the complexities surrounding bad debts and provisions in tax assessments.
ITA 1055/DEL/2020 Review: PME Power Solutions Appeals Disallowed Bad Debts Claim
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