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Where the assessee-bank 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
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As regards Department’s contention that it is necessary to square off each individual account failing which there is likelihood of escapement of income from assessment, section 41(4), inter alia, lays down that, where a deduction has been allowed in respect of a bad debt or a part thereof under Section 36(1)(vii), then, if the amount subsequently recovered on any such debt is greater than the difference between the debt and the amount so allowed, the excess shall be deemed to be profits and gains of business and, accordingly, chargeable to income tax as the income of the previous year in which it is recovered; in the circumstances, the Assessing Officer is sufficiently empowered to tax such subsequent repayments under Section 41(4) and, consequently, there is no merit in the contention that, if the assessee succeeds, then it would result in escapement of income from assessment.
SUPREME COURT OF INDIA
Vijaya Bank
v.
CIT
CIVIL APPEAL NOS.3286-3287 OF 2010
April 15, 2010
