IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER Assessment Year : 2012-13 Smt. Padmavathi. V, The Assistant Flat No. 7, Ashwashthi Commissioner of Apartment, Income Tax, Vivekananda Nagar, Central Circle – 1(1), Hospet, Bengaluru. Vs. Karnataka – 583 201.

PAN: APFPP2962J APPELLANT RESPONDENT Assessee by : Shri T. Srinivasa, CA Shri Thamba Mahendra, Revenue by :

JCIT-DR Date of Hearing : 23-07-2025 Date of Pronouncement : 18-08-2025

ORDER

PER SOUNDARARAJAN K., JUDICIAL MEMBER This is an appeal filed by the revenue challenging the order of Ld.CIT(A)-11, Bengaluru dated 21/08/2024 in respect of the A.Y. 2012-13 and raised the following grounds.

“(i) Whether the Id. CIT(A) was correct on law and facts in allowing the alternate claims of trading loss incurred by the assessee, in absence of any documentary evidence produced by the assessee.

(ii) Whether the Id. CIT(A) was correct on law and facts in not considering the fact that the claims of trading loss raised by the assessee has not crystallised during the relevant assessment year.”

2. This appeal was filed by the revenue with a delay of 5 days and in support of the said delay, the revenue had filed an application to condone the said delay.

3. We have considered the said application and also the fact that the delay is only 5 days we condone the said delay and proceeded to decide the appeal on merits.

4. The brief facts of the case are that the assessee filed her return of income on 30/09/2012 u/s. 139(1) of the Act. Subsequently, she filed her revised return on 19/02/2013. The AO found that the assessee had claimed deduction under Chapter VIA and has also reported a higher business loss in the revised return. Therefore the case was selected for scrutiny and notice u/s. 143(2) was issued on 23/09/2013. At the time of the assessment proceedings, the AO had not accepted bad debts written off from Mr. Prasanna V. Ghotge whereas allowed the said written off from M/s. BST HK Ltd. The assessee submitted that the said written off done by the assessee are the trade advances for the supply of materials during the course of the business which could not be recovered from the said Mr. Prasanna V. Ghotge and therefore the said bad debt is eligible for deduction u/s. 36 of the Act. The AO also observed that the assessee had not got audited his books of accounts u/s. 44AB of the Act even though the turnover exceeds the limits.

5. As against the said order, the assessee filed an appeal before the Ld.CIT(A)-11, Bengaluru. The Ld.CIT(A) also sought for a remand report from the AO and obtained rejoinder from the assessee to the said remand report. The Ld.CIT(A) after considering the submissions made by the assessee as well as the remand report and the rejoinder had discussed the issue in detail and arrived a conclusion that the claim of deduction u/s. 36(1)(vii) could not be granted since the requirement mentioned in 36(2) was not met out by the assessee. However, the Ld.CIT(A) had considered the alternate prayer made by the assessee that the bad debts written off by the assessee was in the course of its business and therefore the same is a business expenditure eligible for deduction u/s. 28 of the Act. The Ld.CIT(A) considered the alternate plea made by the assessee and based on the judgements of the Hon’ble Supreme Court as well as the others judgements of the Hon’ble High Courts, had allowed the appeal of the assessee.

6. As against the said order, the revenue is in appeal before this Tribunal.

7. At the time of hearing, the Ld AR relied on the findings given by the Ld.CIT(A) and prayed to dismiss the appeal filed by the revenue. The Ld.AR further submitted that admittedly, the amount was given as advance for supplying the materials but unfortunately the supplier has not supplied the entire quantity of the material agreed and also not returned the balance amount which he received as an advance and theref