The Income Tax Appellate Tribunal (ITAT), Hyderabad bench, while deleting the addition made by the Assessing Officer, held that unbilled revenue could not be considered as income once it had been written off. The assessee, Pennar Industries Ltd, engaged in the business of executing subcontract work in respect of laying power lines. During the assessment proceedings, the AO denied the unbilled revenue claimed as a deduction as per ICDS adjustment in the Tax Audit Report. Aggrieved, the assessee filed a further appeal before the CIT(A), who allowed the disallowance made by the assessing officer.
Thereafter, the assessee filed a second appeal before the tribunal. During the proceedings, Mohd. Afzal, Counsel for the assessee, argued that if the assessee had written off the unbilled revenue in the total income, then the “said unbilled revenue” cannot be considered as the income of the assessee.
Thus, once the assessee has fulfilled the prerequisite of the written off while computing the income, the Assessing Officer was left with no option but to allow the same. Further, it was argued that the Assessing Officer also did not record any reasons to reject the suo motu disallowance made by the assessee towards administrative expenses and proceeded to compute the disallowance afresh towards administrative expenses.
CH V Gopinath, Counsel for Revenue, supported the order of the lower authorities. The tribunal observed that once the assessee has written off any amount or part thereof while computing the income of the previous years in which the amount of such debt or part thereof has become irrecoverable without recording the same into account, then such debt or part thereof shall be allowable in such previous year. After reviewing the facts and records, the two-member bench of R.K. Panda (Vice-President) and Laliet Kumar (Judicial Member) held that unbilled revenue could not be considered as income once it had been written off. Hence, the bench allowed the appeal of the assessee.