Loading judgment…
No AI summary yet for this case.
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal arising from the appellate order dated 17.09.2024 is filed by the Revenue against the order passed by the Learned Commissioner of Income-tax (Appeal)/CIT(A)-50, Mumbai[hereinafter referred to as “CIT(A)”] pertaining to assessment order u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 28.12.2017 as passed by the DCIT, CC-8(1), Mumbai for the Assessment Year [A.Y.] 2015-16.
A.Y. 2015-16 Fairdeal Infin Services Private Limited 2. The grounds of appeal are as under: “Whether on the facts and in the circumstances of the case and in law, 1. the Ld. CIT (A) is justified in deleting the disallowance of loss booked through trading in penny scrips amounting to Rs.26,98,630/- and commission of Rs.69,870/- paid to the broker without appreciating the fact that during search and survey proceedings it was established that the penny stocks in which the assessee traded and booked losses have been used for providing bogus LTCG/STCL?” “Whether on the facts and in the circumstances of the case and in law, 2. the Ld. CIT (A) is justified in deleting the disallowance of loss booked through trading in penny scrips amounting to Rs.26,98,630/- and commission of Rs.69,870/- paid to the broker without appreciating the fact that the trading loss booked by assessee in his books were pre-arranged method to evade taxes?” “Whether on the facts and in the circumstances of the case and in law, 3. the Ld. CIT (A) is justified in deleting the disallowance of loss booked through trading in penny scrips amounting to Rs.26,98,630/- and commission of Rs.69,870/- paid to the broker without appreciating the fact that the Securities and Exchange Board of India (SEBI) found that price of these scrips were rigged uncommonly to provide benefit to persons holding or trading in such shares in the form of accommodation entries?” “Whether on the facts and in the circumstances of the case and in law, 4. the Ld. CIT (A) erred in deleting the disallowance of bad debt on account of “Bad Debt-NSEL” without appreciating the fact that the investment/transaction didn't pertain to the assessee, being many of the traders have merely lent their PAN & name and are front of someone else as per the findings of NSEL?”
3. We deal with ground nos. 1 to 3 first.Facts of the case are that the assessee, a Private Limited Company is engaged in the business of trading in shares and securities, equity and index derivatives and derivatives of commodities. A return of income was filed declaring the total income of Rs.9,67,690/-. The assessment was completed u/s 143(3) of the Act determining total income at Rs.83,31,940/-. The AO made addition of Rs.26,98,630/- on account of disallowance of Business loss A.Y. 2015-16 Fairdeal Infin Services Private Limited and of Rs.45,95,746/- on account of disallowance of bad debts written off. During the assessment proceeding, the AO noticed that the assessee inter alia had traded in seven penny stocks and incurred above loss. These shares were LAZ0N, MARBL, JNNO INDUSTR, ESAAR INDIA, UMINAI TECH, SUN ASIAN,IVORYO IND,MAHAREM .In the light of certain information received from Kolkata Investigation Wing of the Department in respect of large number of penny stocks, he observed that the impugned transactions were sham as in large number of other cases involving bogus Long Term Capital Gains, STCG and losses for setting off against profit as found in the said report. Thus, the claimed business loss was disallowed.The ld.AO also made an estimated addition of Rs 69,870/-u/s 69C of the Act presuming payment of commission paid out of books to the entry providers.
4. Before the ld.CIT(A),the assessee inter alia contented that it was engaged in the business of trading and Investment in shares and securities, equity and index derivatives and derivatives of commodities. The assessee is also a SEBI registered Sub-broker following all the rules and regulations of SEBI and exchanges. During the year under consideration, it had had traded in more than 1300 scrips on the online trading platform provided by the BSE/NSE through its SEBI Registered brokers only and submitted scrip wise trade details of securities traded A.Y. 2015-16 Fairdeal Infin Services Private Limited showing date wise purchase and sales of securities with price and value of trades. It further contented that it did not recognize the scrips mentioned by the AO as penny stock as it entered into transactions in the selected shares by it in the ordinary course of its business of trading in shares. Also, when the assessee traded in the scrip alleged to be penny stock were not declared by the regulators as penny stock and therefore there was no restriction or bar by the SEBI or Exchange to deal in these so called penny stocks at that time. In absence of any such restrictions, the dealing of the assessee in these scrips could not be termed as non- genuine transactions without any proof to the contrary and also when the assessee’s regular business is trading and investment in shares etc. and it had traded in more than 1300 scrips during the relevant previous year. The assessee also submitted details of transactions entered into by it in the selected scrips and had also provided copies of contract notes of the transactions issued by its usual SEBI registered brokers. The transactions entered into by it were genuine trading transactions which were declared by the regulators as penny stock subsequently. From the contract notes, it is further evident that the alleged scrips which were traded on a particular day were not the only scrip in the contract notes but there were several other trades in different scrips also on that particular day.Copies of the contract notes dated 26.06.2014 and A.Y. 2015-16 Fairdeal Infin Services Private Limited 04.12.2014 were submitted with AO at the time of assessment proceedings. It was further pleaded that during the year, the assessee Company’s total sales were Rs.1365.07 cr. in shares, derivatives and commodities etc. against total purchases of Rs. 1387.78 Cr., whereas the total sales in the selected scrip as alleged by the A.O. as penny stock was amounting to Rs. 25.27 lakh (i.e 0.018% of total sales) and the total purchase in the selected scrip as alleged by him as penny stock amounting to Rs. 50.25 lakh (i.e 0.036% of total purchase) only. It was argued that it was mere imagination, surmise, conjecture and suspicion of AO that the assessee had entered into transaction of penny stock to bring non-genuine loss to reduce the taxable income as there was no evidence against the assessee which could prove that loss. The A.O. made the addition only on the basis of a general report prepared by the Kolkata Investigation Directorate which in turn, based its report on the statements of various operators, entry providers and the stock brokers. Moreover, no independent inquiry was made by the A.O. as regards to the transactions related to the assessee and documentary proof was provided to the assessee that its name was referred in any statements of operators/entry providers/brokers. Therefore, allegation made by AO was without any basis and any cogent evidence. Thus, a genuine business loss incurred by the assessee could not be termed as non-
The ld.CIT(A) after taking into consideration the relevant facts of the case and the contents of the detailed submissions made by the appellant held as below:
“I have considered the assessment order, written submission and paper book filed by the appellant and facts available on record. It is an undisputed fact that the appellant is a private limited company engaged in the share trading business including future, options and commodities. The assessee is also a SEBI registered Sub-broker. The AO has disallowed Rs.26,98,630/- being loss incurred by the assessee in shares stated in above table on the allegation that they are penny stock as per the information received from Kolkata Investigation wing. 5.4.2 On perusal of the financials, it is observed that, the appellant is a regular trader and investor in shares. During the year under consideration, the appellant has traded in more than 1300 scrips which inter alia include above seven scrips also. Total volume of sales is Rs.1,365.07 Crores whereas the sales consideration of above seven alleged penny stock is Rs.23,27,044/. The sales consideration of alleged stock as compared with total sales works out to 0.017% of the total sales. This is highly improbable that a company, who is regular trader or for that matter whose business is trading only, with turnover of Rs.1,365.07 Crores will intentionally do the trading in penny stock for Rs.23,27,044/-. Furthermore, the AO has alleged that the appellant has done the trading in alleged penny stock to earn fictitious losses. On perusal of the trading details it is observed that the appellant has incurred losses in various other scrips also some of which are tabulated as under..................................... It can be seen that the appellant has incurred huge losses in other scrips also and, hence, it cannot be concluded that the loss incurred in the alleged seven scrips is intentional. The above facts show that appellant is a regular trader and all the shares traded during the year under consideration have been bought and sold in the ordinary course of business. Therefore, the disallowance made by the AO is not justified. 5.4.4 Further, the AO has relied on the general report prepared by the Kolkata Investigation Directorate which in turn has based its report on the A.Y. 2015-16 Fairdeal Infin Services Private Limited statements of various operators, entry providers and the stock brokers. The assessment order is very general and does not discuss anything pertaining to the appellant. No independent inquiry was made by the AO as regards to the transactions related to the appellant. The AO has relied upon the modus operandi of penny stocks as described by the Investigation Wing, however, he has not mentioned anything specific related to the appellant. On the contrary, the shares have been credited in the demat account and transferred out of demat account at the time of sale. Both purchase and sale transactions are carried out through banking channel and the broker of the appellant. T The AO has not brought anything on record to refute the genuineness of the evidences furnished by the appellant. Thus, additions merely on the basis of suspicions, conjectures or surmises without bringing anything specific on record cannot be sustained in the eyes of law. Therefore, appeal on ground no. 1 is ALLOWED and the AO is directed to delete the disallowance of loss of Rs.26,98,630/-.
GROUND NO 2 In this ground the appellant has challenged the addition made of Rs.69,870/- being 3 percent of the entire sale proceeds of alleged penny stocks as unexplained expenditure u/s 69C of the Act. 6.2 This ground of appeal
is consequential to grounds of appeal number
1. As the disallowance made on account of alleged loss is deleted, the addition made on account of 3% commission on alleged accommodation entries will not survive. Therefore, addition made by the AO is deleted. Accordingly, appeal on this ground is ALLOWED.”
6. Before us, the ld. Departmental Representative has vehemently agitated the relief allowed by the ld.CIT(A) without appreciating facts of the case in proper perspective as the addition was made on the basis of detailed Investigation report which proved that such losses in Penny stock transaction were premeditated and pre- arranged and not genuine. Per contra, the ld.AR has reiterated the same contentions as made before the ld.CIT(A).It has been emphasised that the action of the AO was not correct in as much as he disbelieved only the loss incurred by the assessee in the said scrips while no adverse A.Y. 2015-16 Fairdeal Infin Services Private Limited finding has been adduced in respect of gains/profit earned on them. Further, the assessee had a turnover of Rs 1365 cr.in share trading and losses in other scrips were duly accepted by the AO.
6.1 We have carefully considered all the relevant facts of the case,rival submissions as also the detailed order passed by the ld.CIT(A). We notice that the AO has primarily placed reliance on the report given by the Investigation Wing of the Income-tax Department, Kolkata in order to arrive at the conclusion that the business loss in scrips reported by the assessee was bogus in nature. We find that the said investigation report is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains etc. The ld.AO has placed reliance on the said report, without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people, who were involved in the alleged manipulations. He has not disproved the contract notes and other evidences furnished by the assessee before him. It may be stated here that the hon’ble jurisdictional High Court in the case of Further, in the case of CIT vs. Jamnadevi Agarwal taxmann.com 529 (Bom), has held that the transactions of A.Y. 2015-16 Fairdeal Infin Services Private Limited purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. In the case of PCIT vs. Indravadan Jain (HUF) (ITA No. 454 of 2018) (Bom), the broker through whom the assessee had carried out the transactions have been alleged to have been indulged in price manipulations and the SEBI had also passed an order regarding irregularities and synchronized trades carried out in the shares by the said broker. However, the evidences furnished by the assessee with regard to purchase and sale of shares were not doubted. Under these set of facts, the Hon'ble Bombay High Court held as under:-
....The CIT(A) came to the conclusion that respondent bought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange.. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Dematinstruction slips and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT(A) found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The Tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal.
A.Y. 2015-16 Fairdeal Infin Services Private Limited 7. In our considered view, the documentary evidences put forth by the assessee could not be rejected without bringing on record any substantial contrary piece of evidence. Moreover, the jurisdictional High Court decisions and as also plethora of co-ordinate benches of Mumbai tribunal support the above observations. We have no hesitation in deleting both the additions. The AO is therefore, directed to allow the business loss claimed by the assessee.Also the addition made u/s 69C w.r.t alleged commission paid being devoid of any basis is also deleted. Accordingly, ground nos. 1 to 3 are dismissed.
In ground no.4,the Revenue has contested the deletion of addition made by the AO in respect of Rs.45,95,746/-, being the amount receivable from National Spot Exchange Limited (NSEL) written off and claimed as Bad Debt. During the course of assessment proceedings, it was noted by the ld.AO that the above amount due from NSEL had been written-off by the assessee .The AO observed that as per the information received by from NSEL, the NSEL exchange platform was misused and exploited by unscrupulous brokers and traders to lend huge sums of black money. Many of these traders had merely lent their PAN etc. In the light of these facts and the fact that the assessee had also traded on A.Y. 2015-16 Fairdeal Infin Services Private Limited NSEL platform and was receivable of Rs.1.86 cr, the amount of Rs.45,95,746/- , out of the same, written - off was not found to be an allowable expenditure u/s 36(i)(vii) of the Act. Accordingly, the Bad debt claim was disallowed.
In the subsequent appeal before the ld.CIT(A),it was contented by the assessee that it regularly traded in shares and commodities and had an amount of Rs.183.83 lakh receivable from NSEL. Out of the entire amount recoverable from NSEL, the assessee during the year under consideration had written off an amount of Rs. 45.96 lakh, (i.e. 25% of 183.83 lakhs) after pursuing legal action against NSEL and others through NSEKL Investor Forum. However, the AO made an addition of Rs.45,95,746/- by holding that the assessee had merely lent its name and PAN No. to NSEL, and there were no actual trades on the exchange, hence, deduction on account of write off of amount irrecoverable from NSEL was disallowed. It was submitted that in the FY 2013-14, the assessee company had entered into transactions in commodities on National Spot Exchange Ltd. (NSEL) through its broker India Infoline Commodities Ltd. and an amount of Rs. 183.83 lakh was due to it from NSEL and since NSEL had not been able to adhere to its payment obligation as scheduled and it had pursued legal action against NSEL through NSEL Investor Forum, pending final outcome which is A.Y. 2015-16 Fairdeal Infin Services Private Limited uncertain, the Company had written off an amount of Rs. 45.96 lakh i.e. 25% of the total outstanding of Rs. 183.83 lakh as bad debt during year and claimed this amount as bad debt u/s. 36(1)(vii).It was further stated that the assessee had duly recorded the income from the transaction at NSEL through its member India Infoline Commodities Ltd., in the books of accounts maintained by it. The assessee has also offered the income for tax under the head income from business and profession. The bad debts written off duly fulfil the conditions stipulated in section 36(2) i.e. it has been taken into account in computing the income of the assessee of the previous year or in any earlier year in which the amount of such debt or part thereof written off and it is written off in the books of the accounts of the assessee as irrecoverable either in full or in part. The AO passed the order in a very casual manner without proper appreciating the facts. The finding is mere imagination, surmise, conjecture and suspicion of AO and there is no evidence against the assessee which could prove that it had lent its PAN,name and is front of someone else. The assessee further submitted that it had invested in commodities of NSEL through its own sources and submitted evidences of the same. Further, the bad debt written off duly fulfil the conditions stipulated under section 36(2) of the Act and submitted copies of contract notes of the transactions in evidence of the same. The assessee further submitted A.Y. 2015-16 Fairdeal Infin Services Private Limited that it had written off an amount of Rs. 45.96 lakh during the F Y 2013- 14 also and the same was duly allowed during the course of assessment proceedings u/s. 143(3) of the Act for the A Y 2014-15. Once the bad debts was allowed in the earlier year and the assessee had written off the part of debts again in the subsequent year, the department could not take a different view and therefore claim of the bad debts was admissible u/s. 36(1)(vii) of the Act and should be allowed as deduction. Even Central Board of Direct Taxes, Ministry of Finance through its Circular No. 12/2016 had clarified that once bad debt is written off by the assessee in its books of account, the same is admissible as deduction u/s. 36(1)(vii). The Direct Tax Laws (Amendment) Act, 1987 has deleted the phrase “which is established to have become a bad debt in the previous year” from section 36(1)(vii). This clearly showed that it is not for the assessee now, i. e. after the amendment of the clause with effect from 1- 4-1989, to establish that the debt had become bad in the previous year. On the other hand, if it has been written off as irrecoverable in the accounts of the assessee for the previous year, it will suffice for claiming it as bad debt, as per the amended clause. It is clear that once a debt is written off as irrecoverable in the accounts of the assessee, it has to be allowed. It is not required that debt should have arisen on account of transactions in any preceding years. Once a debt is claimed as bad and A.Y. 2015-16 Fairdeal Infin Services Private Limited written off in the accounts it has to be allowed as held by the ITAT Chennai in the case of Megh Sakariya International P. Ltd. vs DCIT, Corporate Circle 4(1). In the case of T.R.F. Ltd. v/s. CIT [2010] 190 Taxman 391/323 ITR 397, it was held by the hon’ble Supreme Court that after 01.04.1989, it is not necessary for assessee to establish that debt, in fact, has become irrecoverable, it is enough if bad debt is written off as irrecoverable in accounts of assessee.
The ld.CIT(A) after taking into account the facts of the case and the submissions made, observed as below:
“I have considered the assessment order, written submission and paper book filed by the appellant and facts available on record. It is a fact that the appellant is engaged in the business of trading in shares, derivatives and commodities. The appellant had an amount of Rs.183.83 lakh recoverable from NSEL during the Financial Year 2013-14. Thus, the bad debt has arisen in the course of commodity trading activity due to non-receipt of money against the sale of commodities issued by the commodity brokers affiliated to NSEL. It is further the case of the appellant that it is a matter of record that a nefarious scam broke out in July, 2013, whereby the commodity trading activity on the platform of the NSEL was perennially suspended under the directions of Government of India. The National Spot Exchange could not recover money of the participants from the corresponding buyers of commodity. Subsequently, the dues of the NSEL became irrecoverable, and the same need to be written off in the books of the appellant. It is submitted that the amount due from NSEL have been recognized and recorded in books of accounts as revenue from operations. Under the circumstances, the debt outstanding from the respective brokers was rightly written off in the accounts as bad debt. Therefore, the disallowance made on account of deduction of bad debts needs to be allowed. Further, the deduction of amount receivable from NSEL is not res integra as the same issue is decided in series of judgments in favour of the appellant. 7.4.2 JCIT vs Aditya Commodities Private Limited (ITA 1971/Mum/2018) In the above case, the grounds of appeal was “On the facts and in the A.Y. 2015
16. Fairdeal Infin Services Private Limited circumstances of the case and in law, the Ld. CIT (A) erred in deleting the disallowance of bad debt on account of "Bad Debt- NSEL” The above grounds of appeal by the department has been dismissed by the Hon’ble Mumbai ITAT in following words:
7. We notice that the Ld. CIT (A) has based his findings on the judgment of the Hon'ble Supreme Court in the case of TRF Ltd. vs. CIT (supra) in which the Hon'ble Supreme Court has held that it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. The Ld. CIT (A) has further referred the Circular No. 12/2016 dated 30.05.2016 in which it has been mentioned that in view of the judgment of Hon'ble Supreme Court in the case of TRF Ltd. vs. CIT, claim for debt or part thereof in any previous year shall be admissible u/s 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of account of the assessee for that previous year and it fulfills the conditions of stipulated in sub-section 2 of section 36(2) of the Act. The Ld. CIT (A) has specifically mentioned that it is not the case of revenue that any of the conditions either u/s 36(1)(vii) or section 36(2) of the Act are not fulfilled by the assessee. Admittedly, the assessee has written off the bad debts in its books of account. In the light of the aforesaid facts, we do not find any legal or factual infirmity in the order passed by the Ld. CIT (A) to interfere with the same. Hence, we dismiss the sole ground of appeal of the revenue and uphold the findings of the Ld. CIT (A). Accordingly, we direct the AO to delete the addition.” 7.4.3 Chowdry Associates vs ACIT (184 ITD 222 Del)
28. Thus, we find that the CBDT has unequivocally allowed the claim of bad debts once the same is written off in the books of accounts as irrecoverable. Thus, the argument of the learned Departmental Representative that the bad debts should not be allowed which is based on the letter issued by the NSEL that NSEL is in the process of settling the amounts in view of the sufficiency of the assets and not to allow bad debts as the claim is pre-mature.
29. We also hold that, if in any previous year, the debt has been written off as bad and the relevant deduction has also been claimed but later on the same debt is recovered in full or part, then the amount so recovered will be included as income of the financial year in which such amount has recovered. Owing to taxability of the amounts recovered, the revenue would at liberty to tax the amount as and when received in accordance with the provisions of the Act. The Department must obtain the information pertaining to payment by the NSEL to brokers/traders on real time basis and bring these amounts to tax net. Hence, the advisory of the NSEL not to al low the bad debts claim would be legally untenable owing to the provisions of the Act, Circular of the CBDT and ruling of the Hon’ble Apex Court in the case of TRF Ltd. vs. CIT (supra).
A.Y. 2015-16 Fairdeal Infin Services Private Limited 30. Further, we have also perused the order in the case of M/s Omni Lens (P) Ltd. in ITA No. 2818/Ahd./2010 wherein the matter was referred back to the file of the AO to examine the issue of speculation/non-speculation business after taking note of crucial aspect of actual delivery of the commodity, if any, as claimed and to ascertain as to how the entire debt has turned bad when the assessee was purportedly in possession of the goods purchased. The issue before us is clear on this aspect.
The matter before us deals with the non-recovery of the advances given to the brokers. The AO, for the instant year held that the assessee is dealing in speculative transactions and invoked provisions s. 43(5) of the Act. The AO has also held that the assessee has been carrying trade in commodity derivatives. Sec. 43(5)(e) considers an eligible transaction in respect of trading in commodity derivatives carried out in a recognized association shall not be deemed to be a speculative transaction. Hence, we hold that the transactions of the assessee shall not be deemed to be speculative transactions. Chapter VII of the Finance Act, 2013 w.e.f. 1st April, 2014, details as to what is a commodity derivative in the Commodities Transaction Tax (CTT). As per the CTT commodity derivative means a contract for delivery of goods which is not a ready delivery contract or a contract for differences which derives its value from the prices of such underlying goods. Thus, we find that the assessee is in the business of commodity derivatives but not in the speculation transaction as held by the AO. The revenue has also accepted the income from the transactions of the assessee as business income but not as income from speculation for all the The revenue has also accepted the income from the transactions of the assessee as business income but not as income from speculation for all the earlier years. (Owing to collapse of the NSEL, no further trading could be conducted by the assessee in the latter years). It is also an undisputed fact that the trade advances given by the assessee stands irrecoverable.
In conclusion, keeping in view the facts of the case, a tax history of the assessee, treatment given by the revenue to the transactions undertaken by the assessee, finding of the AO that the assessee is into commodity derivatives, provisions of the s. 43(5) invoked by the AO, provisions of s. 43(5)(e) relied upon by the learned Authorised Representative, Explanation (2) of s. 43 as to what constitutes commodity derivatives, Para 5 of Chapter VII of Finance Act, 2013, CBDT Circular No. 3/2006 dt. 27th Feb., 2006, orders of the Co-ordinate Bench of Tribunal in Megh Sakariya International (supra), Omni Lens (P) Ltd. (supra), judgment of the Hon’ble Apex Court in the case of TRF Ltd. (supra), we hereby hold that the business loss claimed by the assessee is allowable under s. 28 of the Act.
In the result, the appeal of the assessee is allowed.”
A.Y. 2015-16 Fairdeal Infin Services Private Limited 8.4.4 Further, it is seen that the appellant has claimed the total bad debts in three years. The same bad debt has been claimed in the immediately preceding year. The AO has allowed the claim of the appellant. Therefore, when the same claim made by the appellant has been allowed by the AO in the immediately preceding year then there is no reason to disallow the same in the subjected year. 8.4.5 It is a fact that the appellant has written off the bad debts in the books of accounts and it fulfils the conditions stipulated in sub-section 2 of section 36(2) of the Act. Therefore, the deduction is allowable u/s 36(1)(vii) of the I.T. Act. In view of the facts of the case and decisions discussed above, I am of the view that the disallowance made by the AO is unjustified; hence, the disallowance made by the AO is deleted. Therefore, the appeal on this ground is ALLOWED.”
We have carefully considered all the relevant facts of the case, the provisions of law in the matter and find no infirmity in the conclusion drawn by the ld.CIT(A).The disallowance has been made by the AO without any basis and against the well laid down provisions of the Act and also in contraventions of the Board Circular. Similar claim of Bad debt written off has been allowed by the department on similar facts and the circumstances in other assessment years. Therefore, there is no justification for disallowing the same in the year under consideration. Though the principles of res judicata are not attracted to income tax proceedings since each assessment year is separate in itself, there ought to be uniformity in treatment and consistency when the facts and the circumstances are identical. Order of the AO is silent on this important aspect of the deduction as there is no finding on record showing any justification for adopting divergent approach for the year under A.Y. 2015-16 Fairdeal Infin Services Private Limited consideration.Accordingly, the AO is directed to delete the addition made. The ground of appeal no. 4 above is therefore dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 07/04/2025.