PER R.P. TOLANI, J.M:: This is assessees appeal against the consolidated order of CIT(A)- XXI, New Delhi dated 2-1-2013 relating to A.Y. 2009-10. Sole issue raised is in respect of addition of Rs. 5,86,052/- on following grounds:

1. The action of the learned CIT(A) in upholding the addition made by A.O. of Rs. 5,86,052/- being bad debts written off is unjust, illegal, arbitrary, illusory and the expenditure may kindly be allowed.

2. That his action in making the addition of Rs. 5,86,052/- based on assumptions, suspicion, surmises that they relate to persons specified u/s 13(3) is without any basis and therefore the addition is unjust, illegal, arbitrary, illusory and the expenditure may kindly be allowed. 2

3. That his action in not allowing the benefit of section 11 & 12 in respect of Rs. 5,86,052/- is unjust, illegal, arbitrary, illusory6 and the expenditure may kindly be allowed.

2. Brief facts are: Assessee is a charitable hospital for relief of blinds. During the course of assessment proceedings the assessing officer, inter alia, made addition of Rs. 20,19,950/- by observing that the assessee had debited an amount of Rs. 20,19,950/- being unpaid medical bills as bad debts. Vide order sheet entry dated 15-9-2011 the assessing officer required the assessee to file details and reasons thereon. In response the assessee submitted that the amount was outstanding since long from the patients who had undergone treatment in the hospital and have failed to pay them. According to A.O., the assessee failed to furnish the addresses of the patients; since the assessee failed to corroborate the claim of bad debts, the claim was disallowed and added to the income of the assessee.

2.1. Aggrieved, assessee preferred first appeal, wherein the CIT(A) called for a remand report in which the assessing officer accepted the following position: After considering the above submission of the assessee it can be said that the Persons/ patients to whom the treatment was given are not verifiable. Further, in absence of details and efforts of the assessee to recover the outstanding bills, the undersigned do not find in position to allow bad debts of Rs.5,86,052/-. So out of the total bad debts claim of Rs.20,19,250/-, an amount of Rs.5,86,052/- remains unverified. 3 The contention of the assessee that the bad debts cant be verified at this stage, because the income has already been taken in the previous years cant be accepted. These persons could be the specified persons of the trust which attract section 13 of the Income Tax Act, 1961. "

2.2. The assessee filed a rejoinder thereon and contended on this issue as under: 2. An amount of Rs.20,10,950/- was claimed as bad debts written off u/s. 36(2) of IT Act. Out of this a sum ofRs.5,86,052/- related to unpaid bills of individual patients whose names, addresses could not be traced since they related to bills made in the preceding financial years. Section 36(2) reads as under:- i) No such deduction shall be allowed unless such debt or part thereof has been taken in computing the income of assessee of previous year in which the amount of such debt or part thereof is written off or for an earlier previous year, or represents money length in the ordinary course of business of banking or money landing which is carried on by the assessee. " It may be appreciated that the section does not require any confirmation from the party before allowing the bad debt. This claim is only made when the debtor is either not traceable or refuses to co-operate in any manner. Further debts normally relate to a period exceeding three years and therefore more difficult to confirm As per details enclosed we had shown that debts written off were taken in computing the income of assessee in an earlier year. Nothing else is required to be done at the assessees end. It is thus requested that the addition of Rs.5,86,052/- proposed by the AO is not justified either in law or in facts of the case. 4 Therefore, this addition does not deserve to be retained and may kindly be dropped. "

2.3. CIT(A), however, upheld the addition by following observations:

6. Ground No 1(c) pertains to Bad Debts written off amounting to Rs. 20,19,950/-. In this regard vide Para 3 of the Remand Report dated 16.11.2012 AO has worked out that a sum of Rs. 5,86,052/- relates to bills raised on private parties but which could not be recovered from them. So, he has observed that persons could be specified persons of the Trust which attract provisions of Sec. 13 of the IT Act. In this regard reply has been filed vide letter dated 14. I 2.20 I 2, wherein, it has been contended that Bad Debts have been written back u/s 36(2) of the IT Act and a sum of Rs. 5,86,052/- related to unpaid bills of individual patients whose names, addresses could not be traced. In this regard observation of the AO in the Remand Report has not been controverted that these bills do not relate to persons specified u/s. 13(3) of the IT Act, which has been observed by AO that bills could be pertaining to persons specified u/s. 13(3) of the IT Act. So, these are the persons covered u/s. 13 of the IT Act. In this regard specific opportunity was given so as to give rejoinder on the observation and finding of the AO in the Remand Report, but, Ld AR of the appellant has tried to get shelter of Sec. 36(2) of the I.T. Act. He should have given specific reply of the observation of the AO that theSe15ils are not pertaining to persons specified u/s. 13 of the IT Act. In my considered opinion taxability of the Trust registered u/s. 12A of the IT Act are decided as per provisions of Sec. 11 to 13 of the I.T Act, not by the other sections. When violation u/s. 13(3) of the I.T. Act has been noticed and it has not been fully controverted, the appellant cannot take the shelter of Sec. 36(2) of the IT Act. So, addition pertaining to Rs.5,86,052/- which is in the nature of Bad Debts is sustained. Ground No.1 ( c) of the appellant is dismissed. 5

7. Ground No.2 pertains to not allowing benefit of Sec. 11 and 12 of the IT Act. As violation has been noted u/s. 13 of the IT Act by AO, which has been upheld, ground No.2 of the appeal is dismissed.

2.4. Aggrieved, assessee is before us.

3. Ld. Counsel for the assessee contends that it has not been disputed that the assessee carries on a charitable hospital for the purpose of relief to blind persons. For treatment, patients from various parts of country come, at times due to prolonged treatment poverty or difficulties, some of the bills payable by them to hospital over run their means. As per government regulations, a patient cannot be detained in hospital in case of non-payment or deficient payment of medical bill. The patients got discharged and undertook to repay the balance dues. Being a charitable hospital the assessee cannot be inhuman to detain or refuse them as its averred object is of charity i.e. relief to blinds. Since the bills are raised, they are shown as income of the hospital in the respective years. Thus it is clear that the outstanding bills form part of the hospital income in earlier years, a fact which has not been disputed by the department. As these bills were outstanding since couple of years and there was bleak hope of their recovery the assessee trust by a proper decision wrote off these as bad debts in books of accounts. The lower authorities have disallowed the claim on two counts: (i) That the addresses are not verifiable; and 6 (ii) There is possibility that section 13 may have been violated.

3.1. Reliance is placed on Honble Supreme Court judgment in the case of TRF Ltd. Vs. CIT 323 ITR 397 for the proposition that after amendment in law it is not necessary for the assessee to establish that the debt in fact has become irrecoverable. For allowability of claim it is sufficient that the bad debt is written off as irrecoverable in the accounts of the assessee. The fact that these outstanding bills were included in the income of the hospital in earlier year which indicates that the patients and treatment given was genuine and such bills remained partly unpaid. In view of Honble Supreme Court judgment in TRF Ltd. (supra) the assessee has no further obligation to demonstrate that the debts have become actually bad. Beside, the revenues interest is protected inasmuch as if any recovery in this behalf is made in subsequent years the same will be credited to the income as per the provisions of the Act.

3.2. Apropos the second assumption that there may be possibility of violation of sec. 13, it is pleaded that in the assessment order the assessing officer ha not even whispered about this aspect and it is only in the remand report that by a last line the assessing officer has raised a doubt about possibility of violation of sec. 13. The CIT(A) ought to have appreciated that when the assessing officer did not raise this question in the original 7 proceedings there was no justification on his part to rack up the issue in remand proceedings. Besides, ld. CIT(A) also has not put forth any cogent reasoning or evidence to suggest which of the beneficiaries were related to which of the trustees. Thus in the absence of any allegation in the original assessment order and on a vague and generalize presumption in remand proceedings which are denied by the assessee sec. 13(1) cannot be invoked on surmises and conjectures.

4. Ld. DR supported the order of lower authorities.

5. We have heard the rival contentions and perused the material available on record. From the record it clearly emerges that the amounts in question are unpaid hospital bills of earlier years, which were included in the income of the charitable hospital. It has not been disputed that assessee could not have detained the patients and not discharge them due to unpaid bills. This would have been a matter of jeopardy for the assessee as these patients had no money and for detaining them the lodging and boarding was to be provided by the assessee. Besides, its object being charitable, if some amount remained unpaid, the letting go of the patient does not militate against the object of the assessee. Relying on Honble Supreme Court judgment in the case of TRF Ltd. (supra), we have no hesitation to hold that the assessee has no obligation to give a demonstrative proof that the dues have become actually bad.

5.1. Apropos the second presumption that there is a possibility that these patients may be related to some of the trustees, there is no instance or 8 material available on record to suggest any specific allegation. Not even a single instance has been put forth before us. Besides, the assessing officer in the original assessment proceeding has neither made any whisper nor any allegation that the patients may be related to the trustees. It is only in remand proceedings that a new case was being sought to be made out on assumptions which, in our view, is not tenable. In any case such observations being purely based on surmise and conjectures, we see no merit in such assumptions. In view thereof, we allow the claim of writing off of the bad debt of the assessee

6. In the result, assessees appeal is allowed. Order pronounced in open court on 28-01-2014. Sd/- Sd/- ( T.S. KAPOOR ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 28-01-2014. MP Copy to :

1. Assessee

2. AO

3. CIT

4. CIT(A)

5. DR