SC
in the case of Vijya Bank vs. CIT 323 ITR 168 has held that
What is being insisted upon by the Assessing Officer is that
mere reduction of the amount of loans and advances or the debtors at the
year-end would not suffice and, in the interest of transparency, it would be
desirable for the assessee-Bank to close each and every individual account of
loans and advances or debtors as a pre-condition for claiming deduction under
Section 36(1)(vii) of 1961 Act……..because the Assessing Officer apprehended
that the assessee-Bank might be taking the benefit of deduction under Section
36(1)(vii) of 1961 Act, twice over.
In this context, it may be noted that there is no finding of the Assessing
Officer that the assessee had unauthorisedly claimed the benefit of deduction
under Section 36(1)(vii), twice over. The Order of the Assessing Officer is
based on an apprehension that, if the assessee fails to close each and every
individual account of it's debtor, it may result in assessee claiming deduction
twice over. In this case, we are concerned with the interpretation of Section
36(1)(vii) of 1961 Act. We cannot decide the matter on the basis of
apprehensions/desirability. It is always open to the Assessing Officer
to call for details of individual debtor's account if the Assessing Officer has
reasonable grounds to believe that assessee has claimed deduction, twice over.
In fact, that exercise has been undertaken in subsequent years.
There is also a flipside to the argument of the Department.
Assessee has instituted recovery suits in Courts against it's debtors. If
individual accounts are to be closed, then the Debtor/Defendant in each of
those suits would rely upon the Bank statement and contend that no amount is
due and payable in which event the suit would be dismissed.
Further Held by Supreme Court that if amount is recovered subsequently
and it is more than difference between debt and amount so allowed , the balance
can be taxed u/s 41(4).
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