CJ DARCL LOGISTICS LIMITED,GURUGRAM V. INCOME TAX OFFICER, GURUGRAM

ITA 5398/DEL/2025

AI Insights

CJ DARCL Logistics Limited appealed against the order of the National Faceless Appeal Centre/Commissioner of Income Tax (Appeals), which upheld the disallowance of Rs. 45,54,957 related to debts and miscellaneous balances written off. The Tribunal examined the consistency of the decision with previous cases and the applicability of the Supreme Court's ruling in TRF Limited, which allowed for the deduction of bad debts if they were written off as irrecoverable in the accounts. The Tribunal found that the facts of the current case were identical to those of a previous case for AY 2013-14, where a similar disallowance was deleted.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840301 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2017-2018
• Appeal Filed On: 30-08-2025
• Other Referred Cases: TRF Limited vs. CIT, CIT vs. Triveni Engg. & Industries Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKUSH KALRA
• Assessee Lawyers: K.M. GUPTA; JASKARAN SINGH
• Keywords: Business expenditure; Bad and doubtful debts; Rule of consistency; Initiation of penalty proceedings
• Section: 234B; 37; 28

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘E’: NEW DELHI BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTNAT MEMBER ITA No.5398/DEL/2025 [Assessment Year: 2017-18] CJ DARCL Logistics Limited, DARCL House, Plot No.55P. Sector-44, Institutional Area, Gurugram, Haryana-122003 Vs Income Tax Officer, Ward-1(1), HSIIDC Building, Vanijya Nikunj, Udhyog Vihar, Phase-V, Gurgaon, Haryana-122001 PAN-AAACD2086J Assessee Revenue Assessee by Shri K. M. Gupta, Adv. & Shri Jaskaran Singh, CA Revenue by Ms. Ankush Kalra, Sr. DR Date of Hearing 24.02.2026 Date of Pronouncement 27.02.2026 ORDER PER AMITABH SHUKLA, AM, This appeal filed by the assessee is against order dated 26.06.2025 of National Faceless Appeal Centre/learned Commissioner of Income Tax(Appeals), New Delhi, [hereinafter referred to as ‘ld. CIT(A)] arising out of assessment order dated 16.12.2019 passed under section 270A of the Income Tax Act, 1961 pertaining to Assessment Year 2017-18. The word ‘Act’ herein this order would mean Income Tax Act, 1961. 2. The assessee has raised following grounds of appeal:- Printed from counselvise.com ITA No.5398/Del/2025 Page 2 of 7 1. On the facts and circumstances of the case, the appellate order passed by the Hon'ble Commissioner of Income tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as 'CIT(A) or 'NFAC*) dated 26 June 2025 under section 250 of the Income-tax Act, 1961 ('the Act) is bad in law. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the disallowance of IN 45,51,957 towards debtors written off and miscellaneous driver / employee balance written off without appreciating the fact that such expenditure has been incurred wholly and exclusively for business purposes. 2.1. That the Ld. CIT(A) has not appreciated that - 2.1.1. The write-off amounting to INR 17,36,043 pertaining to debtors written off was duly made in the books of account, satisfying the requirements of section 36(1)(vii) read with section 36(2)(i) of the Act. 2.1.2 The Appellant's case is covered by the Supreme Court decision in TRF Limited us. CIT (Civil Appeal No. 5292 to 5294 of 2003), which allows such deduction; and 2.1.3 The condition laid down by the CBDT vide circular no. 12/2016 dated 30 May 2016 has been duly complied by the Appellant. 2.2. That The CIT(A) erred in sustaining the disallowance of IN 28,15,914 relating to miscellaneous driver / employee balances written off, which are allowable as business expenditure under section 37 of the Act, being incurred wholly and exclusively for business purposes. This issue is also covered by the Tribunal's order in the Appellant's own case (ITA No. 2506/Del/2019 for AY 2013-14), and the principle of consistency has not been followed. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding of levying the interest under section 234B of the Act. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the initiation of penalty proceedings under section 270A of the Act against the Appellant on account of the addition made in the assessment order. Printed from counselvise.com ITA No.5398/Del/2025 Page 3 of 7 3. First issue raised by the ld. Counsel for the assessee is regarding the action of the ld. CIT(A) in upholding disallowance of Rs.45,54,957/- towards debtors written off and miscellaneous driver/employee balance written of. It was contended that the ld. First Appellate Authority had failed to appreciate that the impugned amount was an expenditure wholly and exclusively for the purposes of business. 4. The ld. Counsel for the assessee argued that the issue is covered in its own case by the order of this Tribunal for AY 2013-14. It was stated that in the said assessment year, the ld. AO had made a disallowance of Rs.15,76,774/- which was deleted by the ld. CIT(A). The Revenue had preferred appeal and a Co- ordinate Bench of this Tribunal in assessee’s own case vide ITA No.2506/Del/2019 AY 2013-14 dated 25.10.2021 had ruled as under:- “ 3. In so far as the addition of Rs. 15,76,774/- made on account of bad debt, the brief facts are that assessee has claimed irrecoverable balances amounting to Rs. 99,68,637/- which have been written off by the appellant. After perusal of the details related to these balances written off, the AO observed that an amount of Rs. 15,76,774/- relates to the balances which were advanced to the employees/drivers of the appellant company. The AO has disallowed this sum by stating that the same are not allowable u/s 36(2) of the Act. 4. Ld. CIT(A) has deleted the said disallowance after observing as under :- “6.3 I have gone through the facts of the case and the submission made by\"' the AR. It has been contended that the AO has disallowed the irrecoverable balances which were advanced to employees and drivers, by treating the same as bad debts whereas the appellant has not made the claim u/s 36(vii) of the Act but u/s 28 and/or u/s 37 of Printed from counselvise.com ITA No.5398/Del/2025 Page 4 of 7 the Act. It has been submitted that these expenses are allowable as trading loss as it is incidental to the business activities. The AR has also furnished the details of these \"advances written off which shows that the advances were made to the employees/drivers and these advances have become irrecoverable as these employees/drivers have left the employment of the appellant company. The AR has relied upon the judgment of Hon’ble Delhi High Court in the case of CIT vs. Triveni Engg. & Industries Ltd., [2010] 8 taxmann.com 135 (Delhi) along with other decisions. On perusal of the facts of the case and the legal position on the issue as decided by the jurisdictional High Court, I am of the opinion that the facts in this case are similar and therefore, the addition made by the AO is deleted and the ground of appeal is allowed” 5. After hearing both parties we find that it is not a dispute that an amount of Rs. 15,76,774/- which were advanced to the employees and drivers had become irrecoverable and assessee has not claimed as a bad debt but as a business loss, which is clear from the submissions made during the course of the assessment proceedings, and the details of these advances were furnished before the AO and Ld. CIT (A). Assessing Officer has not disputed that these advances have become irrecoverable. Under these circumstances it is nothing but the loss incurred during the course of business and we do not find any infirmity in the findings and conclusion of the Ld. CIT (A) as incorporated above and the same is confirmed. Accordingly this ground raised by the revenue is dismissed. 6. In the result the appeal of the revenue is dismissed….” 5. We have noted that the facts of the present case are identical to those for AY 2013-14 and no distinguishment has been pointed out by the Revenue. Accordingly, for the purposes of consistency and in respectful compliance to the decision of Hon’ble Co-ordinate Bench (supra), we set-aside the order of the ld. CIT(A) and direct the ld. AO to delete the impugned addition of Rs.41,40,088/- Printed from counselvise.com ITA No.5398/Del/2025 Page 5 of 7 (the amount added by the ld. AO as per para-3.1 of his order). The grounds of appeal raised by the assessee on the issue is therefore allowed. 6. The next issue contested by the assessee is regarding addition of Rs.17,36,043/- made by the ld. AO on account of bad debts written off under section 36(1)(vii) of the Act. The ld. Counsel for the assessee argued that the ld. AO has made the impugned additions qua para 3.2 of his order on the premise of lack of any efforts of recovery. The ld. Counsel further submitted that the ld. CIT(A) concurred with the AO’s finding qua failure to produce documents concerning efforts for recovery and confirmed the addition. 7. The ld. Counsel for the assessee vehemently argued that post the decision of Hon’ble Apex Court in the case of TRF, there is no necessity for a tax payers to establish the efforts of recovery made and that a claim of bad debts if shown as income in preceding years, would qualify the allowance. The ld. Counsel submitted that the impugned debts have been adequately reflected in the financial affairs of earlier years. 8. Per Contra, the ld. DR relied upon the order of the lower authorities. 9. We have heard rival submissions in the light of material placed on record. We have noted that the disallowance has been made by revenue authorities on the premise of assessee’s failure to adequately demonstrate efforts of recovery made qua its claim of bad debts. We have also noted that honourable apex court Printed from counselvise.com ITA No.5398/Del/2025 Page 6 of 7 in the case of TRF Limited 323 ITR 397 has now finally settled the controversy regarding allowance of bad debts. Thus, it has been laid down that:- “…. 36.(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28-- (i) to (vi) xxxx xxxx xxxx (vii) subject to the 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.\" This position in law is well-settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer's account is credited, thus, closing the account of the customer. In the case of Companies, the provision is deducted from Sundry Debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This exercise has not been undertaken by the Assessing Officer. Hence, the matter is remitted to the Assessing Officer for de novo consideration of the above-mentioned aspect only and that too only to the extent of the write off….” 10. Thus, we have noted that the allowance of bad debts is required to be made in the year in which it is claimed by an assessee. We have, however noted that the impugned allowance is subject to filing of necessary evidences in this regard by the assessee qua disclosure of income in earlier years. We have also noted that Ld.AO has given a categorical finding that the assessee was found wanting in having filed the required details of efforts of recovery made. Printed from counselvise.com ITA No.5398/Del/2025 Page 7 of 7 Accordingly in respectful compliance to the decision of Hon’ble Apex Court in TRF Ltd. (supra), we set-aside the order of the lower authorities and direct the ld. AO to delete the impugned addition of Rs.17,36,043/-. The ground of appeal raised by the assessee are therefore allowed. 11. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 27th February, 2026. Sd/- Sd/- [YOGESH KUMAR U.S.] [AMITABH SHUKLA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:27.02.2026 f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi, Printed from counselvise.com "