ITAT Delhi Allows Bad Debt Deduction Without Proof of Irrecoverability

The “E” Bench of the Income Tax Appellate Tribunal, New Delhi, delivered its order on 17 February 2026 in the case of ATOP Products Pvt. Ltd. for Assessment Year 2023–24. The appeal challenged disallowance of ₹27.86 lakh claimed as bad debts written off in the company’s books of account.

Disallowance by Tax Authorities

The assessee, engaged in manufacturing auto components for major automobile companies, had claimed deduction for bad debts in its profit and loss account and return of income. During assessment, the Assessing Officer sought details to establish that the debts had become irrecoverable. Although the assessee furnished information in response to the show cause notice, the Assessing Officer disallowed the claim on the ground that irrecoverability was not proved. The National Faceless Appeal Centre upheld this disallowance.

Tribunal’s Ruling on Post-1989 Law

The ITAT noted that after the amendment effective from 1 April 1989, an assessee is no longer required to prove that a debt has actually become bad. The only requirements are that the amount must be written off as irrecoverable in the books and that the related income must have been offered to tax earlier or during the relevant year. Since both conditions were fulfilled in this case and not disputed by the Assessing Officer, the Tribunal held that the deduction could not be denied. Accordingly, the disallowance of ₹27.86 lakh was deleted and the assessee’s appeal was allowed.