KISHOR CHANDRAKANT DHARIA,NAVI MUMBAI V. DCIT 27(2), VASHI

ITA 8599/MUM/2025

AI Insights

The case involves Kishor Chandrakant Dharia, who operates a petrol pump and claimed a deduction for bad debts written off amounting to Rs. 14,62,372 during the assessment year 2023-24. The Assessing Officer disallowed this claim, which was upheld by the CIT(A). The main contention was whether the assessee had provided sufficient evidence to substantiate the claim of bad debts under section 36(1)(vii) r.w.s. 36(2) of the Income Tax Act, 1961. The Tribunal examined the submissions, evidence, and relevant legal provisions, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848415 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Mumbai
• Assessment Year: 2023-2024
• Appeal Filed On: 12-12-2025
• Other Referred Cases: TRF Ltd. in Civil Appeal Nos. 5292 to 5294 of 2003
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASSESSEE; ASSESSEE; ASSESSEE; HEMANSHU JOSHI
• Assessee Lawyers: ABHISHEK SAMDANI
• Keywords: Set aside; Bad and doubtful debts

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 8599/MUM/2025 Assessment Year: 2023-24 Kishor Chandrakant Dharia F 1001, 10th Floor, Sai Radiance, Sector 15, Belapur CBD, Navi Mumbai - 400614 Vs. DCIT 27(2) Vashi Railway Station Building, Thane- 400703 PAN NO. ACXPD 2151 Q Appellant Respondent Assessee by : Mr. Abhishek Samdani Revenue by : Mr. Hemanshu Joshi, SR DR Date of Hearing : 04/03/2026 Date of pronouncement : 25/03/2026 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 17.10.2025 passed by the Ld. Commissioner of Income-tax (Appeals)-National Faceless Appeal Centre- Delhi [in short ‘the Ld.CIT’] for assessment year 2023-24, raising following grounds:- “1. The Id. CIT(A) erred in sustaining the addition made by the AO of Rs.14,62,371/- as claim of bad debts written off u/s.36(1)(vii) r.w.s. 36(2) of the Act on the alleged ground that the appellant despite giving sufficient opportunities failed to furnish any evidence during assessment proceedings. Printed from counselvise.com 2. The Id, CIT(A) ought to have appreciated the submissions & evidence filed before him during the appeal proceedings. The Id. CIT(A) erred in dismissing the appeal without considering the submissions filed. 3. The Id. CIT(A) erred in ignoring the directions of the Circular No. 12/2016 dt. 30.05.2016 (F.No. 279/Misc./140/2015 ГГІ). 4. The Id. CIT(A) did not appreciate that complete details debts written off were submitted along with ledger accounts reflecting that such debts are included in income of the appel years and debts actually written off in the books of account during the year under assessment. 5. The Id. CIT(A) erred in ignoring that conditions specified u/s 36(1)(vii) r.w.s. 36(2) of Income Tax Act 1961 are fulfilled. Your appellant, therefore, prays this Hon'ble Tribunal to delete the additions made by the AO and confirmed by the CIT(A). The appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or bef 2. Briefly stated facts of the case are that the assessee in business of operating a petrol pump of Indian Oil Corporation Ltd. (IOCL) at Mumbai Goa Highway, Tal. Mahad, Dist. Raigad, through his proprietorship namely M/s. the year under consideration assessee filed return of income on 10.10.2023 declaring total income of Rs. 36,10,690/ income was selected for scrutiny assessment and statutory notices under the Income Tax Act, 1961 ( and complied with. During the Assessing Officer noted bad debt was disallowed by him CIT(A) ought to have appreciated the submissions & evidence filed before him during the appeal proceedings. The Id. CIT(A) erred in dismissing the appeal without considering the submissions filed. 3. The Id. CIT(A) erred in ignoring the directions of the Circular No. 12/2016 dt. 30.05.2016 (F.No. 279/Misc./140/2015 4. The Id. CIT(A) did not appreciate that complete details debts written off were submitted along with ledger accounts reflecting that such debts are included in income of the appellant in preceding years and debts actually written off in the books of account during the year under assessment. 5. The Id. CIT(A) erred in ignoring that conditions specified u/s 36(1)(vii) r.w.s. 36(2) of Income Tax Act 1961 are fulfilled. t, therefore, prays this Hon'ble Tribunal to delete the additions made by the AO and confirmed by the CIT(A). The appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing.” stated facts of the case are that the assessee in business of operating a petrol pump of Indian Oil Corporation Ltd. (IOCL) at Mumbai Goa Highway, Tal. Mahad, Dist. Raigad, through his proprietorship namely M/s. Kishore Automobiles the year under consideration assessee filed return of income on 10.10.2023 declaring total income of Rs. 36,10,690/ income was selected for scrutiny assessment and statutory notices under the Income Tax Act, 1961 ( in short ‘ the Act’) and complied with. During the assessment proceeding fficer noted bad debt written off of 14,62,372/ was disallowed by him. On further appeal, the Ld. CIT(A) upheld the Kishor Chandrakant Dharia 2 ITA No. 8599/MUM/2025 CIT(A) ought to have appreciated the submissions & evidence filed before him during the appeal proceedings. The Id. CIT(A) erred in dismissing the appeal without considering the 3. The Id. CIT(A) erred in ignoring the directions of the CBDT Circular No. 12/2016 dt. 30.05.2016 (F.No. 279/Misc./140/2015- 4. The Id. CIT(A) did not appreciate that complete details debts written off were submitted along with ledger accounts reflecting lant in preceding years and debts actually written off in the books of account during 5. The Id. CIT(A) erred in ignoring that conditions specified u/s 36(1)(vii) r.w.s. 36(2) of Income Tax Act 1961 are fulfilled. t, therefore, prays this Hon'ble Tribunal to delete the additions made by the AO and confirmed by the CIT(A). The appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of stated facts of the case are that the assessee is engaged in business of operating a petrol pump of Indian Oil Corporation Ltd. (IOCL) at Mumbai Goa Highway, Tal. Mahad, Dist. Raigad, Kishore Automobiles. For the year under consideration assessee filed return of income on 10.10.2023 declaring total income of Rs. 36,10,690/-. The return of income was selected for scrutiny assessment and statutory notices in short ‘ the Act’) were issued proceeding, the ld of 14,62,372/- which the Ld. CIT(A) upheld the Printed from counselvise.com addition made by the assessi appeal before the Tribunal by way of raising grounds is reproduced as above. 2. In all the grounds raised the sole issue and dispute is regarding bad debt been allowed by the lower authorities as deduction. 3. Before u/s. the learned counsel for the assessee filed a paper book containing pages 1 4. The learned counsel submitted that th made addition of Rs. 14,62,372/ assessee has not submitted complete details like PAN and full address regarding bad debt year under consideration; (b) The details regarding head of expenditure in respect of bad debts written off ; (c) The regarding efforts made to recover the bad debts written off amount; (d) The assessee has not been able to p debts was taken into account while computing the income either during previous year or during the earlier years. 4.1 In this regard the ld. counsel submitted that all the details were duly filed before the into consideration including 3 years reflecting the income received from those parties addition made by the assessing officer. Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds is reproduced In all the grounds raised the sole issue and dispute is regarding bad debt written off of Rs. 14,62,372/- by the lower authorities as deduction. Before u/s. the learned counsel for the assessee filed a paper book containing pages 1-196. The learned counsel submitted that the Assessing O made addition of Rs. 14,62,372/- mainly for the reason tha has not submitted complete details like PAN and full address regarding bad debts which has been written off during the year under consideration; (b) The assessee has not provided any details regarding head of expenditure in respect of bad debts ; (c) The assessee has not submitted any explanation regarding efforts made to recover the bad debts written off amount; has not been able to prove that this amount of debts was taken into account while computing the income either during previous year or during the earlier years. In this regard the ld. counsel submitted that all the details were duly filed before the ld Assessing Officer but including copy of ledger of the each party for last 3 years reflecting the income received from those parties Kishor Chandrakant Dharia 3 ITA No. 8599/MUM/2025 the assessee is in appeal before the Tribunal by way of raising grounds is reproduced In all the grounds raised the sole issue and dispute is which has not Before u/s. the learned counsel for the assessee filed a paper e Assessing Officer mainly for the reason that (a) the has not submitted complete details like PAN and full which has been written off during the has not provided any details regarding head of expenditure in respect of bad debts has not submitted any explanation regarding efforts made to recover the bad debts written off amount; rove that this amount of debts was taken into account while computing the income either In this regard the ld. counsel submitted that all the details he did not take copy of ledger of the each party for last 3 years reflecting the income received from those parties along with Printed from counselvise.com bad debt written off in the year under consider counsel submitted that which is reflected in the profit and loss account referred to the audited financial where reported in the schedule 15 year under consideration. Before of the all ledger account duly for the FY FY 2023-24. The ld counsel for the assessee submitted that as prudent business man irrecoverable based on the facts of each mainly amount paid short by those customer to earlier years which has resulted in unpaid balances. As such amount would have continued to remain unpaid was written off as bad debt in the profit and loss account year under consideration. Further ld. counsel for the assessee referred to the decision of the Hon’ble Supreme Court in the case of TRF Ltd in Civil Appeal Nos. 5292 to 5294 of 2003. also referred to the CBDT circular no. 12/ clearly stated that claim of debt or part of the debt in any previous year shall be admissible u/s 36(1)(vii) if it is written off as irrecoverable in the books of the assesse stipulated in sec 36(2) of the Act is fulfilled. counsel submitted that claim of bad debt allowed to the assessee bad debt written off in the year under consideration submitted that bad debt written off itself which is reflected in the profit and loss account. Learned counsel to the audited financial where the bad debt the schedule 15 of the profit and loss account for the ration. Before us also the assessee filed the copy ledger account duly for the FY 2021-22; FY 2022 24. The ld counsel for the assessee submitted that as prudent business man, the assessee written off the debt as ased on the facts of each case. He submitted that mainly amount paid short by those customers for dispute relating years which has resulted in unpaid balances. As such amount would have continued to remain unpaid and thus, same s bad debt in the profit and loss account year under consideration. Further ld. counsel for the assessee the decision of the Hon’ble Supreme Court in the case of n Civil Appeal Nos. 5292 to 5294 of 2003. also referred to the CBDT circular no. 12/2016 whereas CBDT has clearly stated that claim of debt or part of the debt in any previous year shall be admissible u/s 36(1)(vii) if it is written off as in the books of the assessee and stipulated in sec 36(2) of the Act is fulfilled. According to the ld. counsel submitted that claim of bad debt written off assessee. Kishor Chandrakant Dharia 4 ITA No. 8599/MUM/2025 ation. Further Ld. written off itself is expenditure Learned counsel the bad debt written off is the profit and loss account for the also the assessee filed the copy FY 2022-23 and 24. The ld counsel for the assessee submitted that as a the assessee written off the debt as e submitted that for dispute relating years which has resulted in unpaid balances. As such and thus, same s bad debt in the profit and loss account during the year under consideration. Further ld. counsel for the assessee the decision of the Hon’ble Supreme Court in the case of The ld. counsel 16 whereas CBDT has clearly stated that claim of debt or part of the debt in any previous year shall be admissible u/s 36(1)(vii) if it is written off as the conditions According to the ld. written off should be Printed from counselvise.com 4.2 On the contrary Ld. authorities. 5. We have heard rival submissions of the parties and perused the relevant material on record. We find that Ld. CIT(A) in para 4 of impugned order mentioned that assessee filed submission on 09.04.2025 and 26.09.2025. However, 5.3 the Ld. CIT(A) mentioned that the assessee has not filed any submissions and therefore he up the assessee. Before us ld. counsel for the assessee has filed acknowledgement of the documents filed with details of the documents filed. We find that in the case assessee has written off the bad debt parties. Kishore Chandrakant Dharia Kustomer-wise summary of bad debts written off A.Y. 2023-24 Name of Customer Balance on 01.04.21 Sales Receipt Prajakta Dalvi 11,998 5,20,478 4,82,100 Deputy Sub. Div. 2,19,852 4,22,239 1,91,289 Dulfon Ind. Pvt. Ltd 1,73,785 19,43,339 19,14,558 Privi Speciality Chemicals Ltd 1,85,151 37,43,198 37,52,175 Sakpal Tours And Travels 4,16,082 20,32,704 20,54,820 Sanjivani Prathisthan 77,038 3,36,317 3,15,143 Shri Samarth Krupa 6,81,888 1,40,795 6,82,000 On the contrary Ld. DR relied on the finding of the lower We have heard rival submissions of the parties and perused the relevant material on record. We find that Ld. CIT(A) in para 4 of order mentioned that assessee filed submission on 09.04.2025 and 26.09.2025. However, while adjudicating in para 3 the Ld. CIT(A) mentioned that the assessee has not filed any submissions and therefore he upheld the addition in the hands of the assessee. Before us ld. counsel for the assessee has filed acknowledgement of the documents filed before the Ld. CIT(A) alon with details of the documents filed. We find that in the case assessee has written off the bad debt in respect Balance on 31.03.22 Sales Receipt Bad Debts Balance on 31.03.23 50,376 4,53,295 3,95,626 18,928 89,117 4,50,802 1,84,126 4,46,264 99,235 89,429 19,14,558 2,02,566 20,24,539 18,84,502 99,432 2,43,171 37,52,175 1,76,174 1,74,629 1,18,627 1,75,675 56,501 20,54,820 3,93,966 22,94,775 22,29,807 1,78,281 2,80,653 98,212 10,886 10,000 71,014 28,084 1,40,683 - 30,000 1,10,683 - Kishor Chandrakant Dharia 5 ITA No. 8599/MUM/2025 DR relied on the finding of the lower We have heard rival submissions of the parties and perused the relevant material on record. We find that Ld. CIT(A) in para 4 of order mentioned that assessee filed submission on adjudicating in para 3 the Ld. CIT(A) mentioned that the assessee has not filed any held the addition in the hands of the assessee. Before us ld. counsel for the assessee has filed the Ld. CIT(A) along with details of the documents filed. We find that in the case of following 11 Balance 31.03.23 Sales Receipt Balance on 31.03.24 5,26,871 5,75,377 40,611 3,24,067 2,82,093 1,31,403 2,43,171 24,77,473 23,83,814 3,36,830 1,49,324 1,43,583 62,242 2,80,653 27,62,416 29,16,003 1,27,066 - 15,000 13,084 - - - Printed from counselvise.com SMC Infra Pvt Ltd 9,79,000 25,09,276 30,62,966 State Bank of India (Mahad) 1,19,183 91,101 80,108 Subhash Narayan Malusare 3,77,323 7,59,042 8,00,000 Vasundhara Rasayan Ltd 2,40,568 5,95,766 6,35,925 Total Bad Debts during F.Y. 2022-23: 6. On perusal of the above chart written off the amount which is not recoverable out of the running sales ledger of those parties. Before copy of those ledgers which 167. Thus, the assessee ha taken into account while computing the income either during the previous year or during the earlier years. Further also we note that stated amount is already been written off party. The Hon’ble Supreme Court held that for allowing the bad debt requirement for the assessee to establish that the debt, as in fact become irrecoverable written off in the books of account in the assessee and debt was taken into the income either in the current year or in the earlier years. In this follow the decision of the H 30,62,966 4,25,310 8,60,972 10,36,726 2,41,357 8,199 1,30,176 35,371 24,274 1,41,273 - 3,36,365 4,64,179 5,15,014 2,33,824 51,706 2,00,409 1,30,675 2,35,413 92,670 3,001 14,62,372 On perusal of the above chart, we find that assessee has written off the amount which is not recoverable out of the running sales ledger of those parties. Before us the assessee has also filed copy of those ledgers which are available from paper book page 53 the assessee had provided details of the amount into account while computing the income either during the previous year or during the earlier years. Further also we note that stated amount is already been written off in the ledger of the said Supreme Court in the case of TRF Ltd. held that for allowing the bad debt written off requirement for the assessee to establish that the debt, as in fact irrecoverable and only two conditions: (i) The debt has been written off in the books of account in the assessee and debt was taken into the income either in the current year or in the n this regard, the CBDT has also issued a circular to follow the decision of the Hon’ble Supreme Court in the case of TRF Kishor Chandrakant Dharia 6 ITA No. 8599/MUM/2025 - - 8,199 92,918 91,418 1,500 - 25,000 26,706 1,25,866 1,25,331 3,536 we find that assessee has written off the amount which is not recoverable out of the running assessee has also filed available from paper book page 53- d provided details of the amount of debt into account while computing the income either during the previous year or during the earlier years. Further also we note that he ledger of the said TRF Ltd. (supra) written off there was no requirement for the assessee to establish that the debt, as in fact The debt has been written off in the books of account in the assessee and (ii) the said debt was taken into the income either in the current year or in the also issued a circular to on’ble Supreme Court in the case of TRF Printed from counselvise.com ltd (supra). Relevant part of the CBDT circular as under: “ Proposals have been received by the Central Board of Direct Taxes regarding filing of appeals/pursuing litigation on the issue of allow of bad debt that are written off as irrecoverable in the accounts of the assessee. The dis assessee to establish that the debt is irrecoverable 2 Direct Tax Laws (Amendment) Act, 1987 amended t sections 36(1)(vii) and 36(2) of the Income Tax Act 1961, (hereafter referred to as the Act) to rationalize the provisions regarding allowability of bad debt with effect from the 1 April, 1989. 3. The legislative intention behind the amen litigation on the issue of the allowability of the bad debt by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on the issue of allowability continue, mostly for the reason that the debt has not been established to be irrecoverable. The Hon'ble Supreme Court in the case of TRF Ltd. In CA Nos. 5292 to 5294 of 2003 vide judgment dated 9.2.2010, has stated that the position of law is w 1.4.1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if bad debt is written off as irrecoverable in the books of accounts of assessee.\" 4 In view of the above, claim for any debt or put thereof in any previous year, shall be admissible under section 36(1)(vii) of the Act, if it is written off as irrecoverable in the b previous year and it fulfills the conditions stipulated in sub section (2) of sub-section 36(2) of the Act.” 7. In view of above 36(1)(vii) r.w.s 36(2) are duly satis Accordingly, the order of the lower authorities o dispute are set aside and addition made by the elevant part of the CBDT circular(supra) Proposals have been received by the Central Board of Direct Taxes regarding filing of appeals/pursuing litigation on the issue of allow of bad debt that are written off as irrecoverable in the accounts of the assessee. The dispute relates to cases involving failure on the part of assessee to establish that the debt is irrecoverable 2 Direct Tax Laws (Amendment) Act, 1987 amended t sections 36(1)(vii) and 36(2) of the Income Tax Act 1961, (hereafter referred to as the Act) to rationalize the provisions regarding allowability of bad debt with effect from the 1 April, 1989. 3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the bad debt by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on llowability continue, mostly for the reason that the debt has not been established to be irrecoverable. The Hon'ble Supreme Court in the case of TRF Ltd. In CA Nos. 5292 to 5294 of 2003 vide judgment dated 9.2.2010, has stated that the position of law is w 1.4.1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if is written off as irrecoverable in the books of accounts of 4 In view of the above, claim for any debt or put thereof in any previous year, shall be admissible under section 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of accounts of the assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of section 36(2) of the Act.” of above discussion, we find that provisions of section ) r.w.s 36(2) are duly satisfied in the case of the assessee. order of the lower authorities on the issue and set aside and addition made by the ld Assessing O Kishor Chandrakant Dharia 7 ITA No. 8599/MUM/2025 (supra) is reproduced Proposals have been received by the Central Board of Direct Taxes regarding filing of appeals/pursuing litigation on the issue of allowability of bad debt that are written off as irrecoverable in the accounts of the relates to cases involving failure on the part of 2 Direct Tax Laws (Amendment) Act, 1987 amended the provisions of sections 36(1)(vii) and 36(2) of the Income Tax Act 1961, (hereafter referred to as the Act) to rationalize the provisions regarding allowability of bad dment was to eliminate litigation on the issue of the allowability of the bad debt by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on llowability continue, mostly for the reason that the debt has not been established to be irrecoverable. The Hon'ble Supreme Court in the case of TRF Ltd. In CA Nos. 5292 to 5294 of 2003 vide judgment dated 9.2.2010, has stated that the position of law is well settled. \"After 1.4.1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if is written off as irrecoverable in the books of accounts of 4 In view of the above, claim for any debt or put thereof in any previous year, shall be admissible under section 36(1)(vii) of the Act, if it is written ooks of accounts of the assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of we find that provisions of section fied in the case of the assessee. n the issue and ld Assessing Officer Printed from counselvise.com is deleted. The ground of the appeal of the assessee is accordingly allowed. 8. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 25/03/2026 Disha Raut, Stenographer Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// is deleted. The ground of the appeal of the assessee is accordingly result, appeal of the assessee is allowed. Order pronounced in the open Court on 25/0 Sd/ SANDEEP SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Kishor Chandrakant Dharia 8 ITA No. 8599/MUM/2025 is deleted. The ground of the appeal of the assessee is accordingly result, appeal of the assessee is allowed. /03/2026. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "