Reassessment notice was justified as though assessee availed deduction in respect of bad debts on ground that it had transferred bad debts to another bank for realisation of these debts but revenue authorities found no material available on record to indicate that assessee had written off its bad debts as mandatorily required under section 36(1) (vii)

SUPREME COURT OF INDIA

CIVIL APPEAL NO. 6998 OF 2016

Deputy Director of Income-tax..............................................................Appellant.
v.
Sumitomo Mitsui Banking Corporation ................................................Respondent

RANJAN GOGOI AND PRAFULLA C. PANT, JJ.

Date :JULY 26, 2016

Appearances

K. Radhakrishnan, Sr. Adv., Rupesh Kumar, Gargi Khanna, Amarjeet and Mrs. Anil Katiyar, Advs. for the Petitioner.
Niraj Sheth and Rustom B. Hathikhanawala, Advs. for the Respondent.

Section 36(1)(vii) read with section 148 of the Income Tax Act, 1961 — Bad debts — Reassessment notice was justified as though assessee availed deduction in respect of bad debts on ground that it had transferred bad debts to another bank for realisation of these debts but revenue authorities found no material available on record to indicate that assessee had written off its bad debts as mandatorily required under section 36(1) (vii) — Deputy Director of Income Tax vs. Sumitomo Mitsui Banking Corporation.

ORDER

1. Delay condoned.

2. Leave granted.

3. The revenue challenges the order of the High Court dated 22.02.2011 passed in Writ Petition (LOD) No.140 of 2011 by which the reopening of the assessment of the respondent-assessee (Sumitomo Mitsui Banking Corporation) sought to be made by issuing a notice under Section 148 of the Income Tax Act, 1961 has been interfered with.

4. We have gone through the order passed by the High Court. We have also perused the reasons recorded for the reopening of the assessment of the respondent-assessee.

5. Having regard to the fact that though the assessee has disclosed that the bad debts were transferred to Kotak Mahindra Bank Ltd. for realization, the authority recording the reasons prior to issuance of notice under Section 148 of the Income Tax Act, 1961 has specifically recorded that there was no material available on record to indicate that the bad debts have been written off as mandatorily required under Section 36(1)(vii) of the Income Tax Act, 1961 as amended with effect from 01.04.1989. If that be so, we find no fault with the notice issued. Consequently, we allow this appeal by setting aside the order of the High Court and dismissing the writ petition filed by the respondent-assessee challenging the said notice.

6. We, however, make it clear that we have expressed no opinion on the merits of the reassessment, which has been made on 24.12.2010 and it will be open for the respondent-assessee to urge all questions as may be open, in law, in the event the assessee seeks to challenge the reassessment order dated 24.12.2010.

[2016] 243 TAXMAN 514 (SC),[2016] 290 CTR 484 (SC)