RATNAKAR SECURITIES PRIVATE LIMITED,AHMEDABAD vs. DCIT - 1(1)(1), AHMEDABAD

On the facts and in the circumstances of the case and in law the Hon’ble CIT(A) erred in upholding the addition made by the Ld. AO of Rs. 19,62,167/- to the returned income without assigning any valid reason and the reason assigned for doing so are wrong and contrary to the Provisions of Income Tax Act and Rules made there under. Asst.Year –2016-17 - 2–

On the facts and in the circumstances of the case and in law the Hon’ble CIT(A) erred in confirming penalty u/s. 271(1)(c) of the IT Act 1961 and the reason assigned for doing so are wrong and contrary to the Provisions of Income Tax Act and Rules made there under.

On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) erred in charging interest u/s. 234A/234B/234C/234D of the IT Act and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under.

Your appellant craves leave to add, to amend alter or delete any of the above grounds of appeal on or before the date of hearing.”

The brief facts of the case are that the assessee is a share broker. During the course of assessment, the assessee had claimed bad debts amounting to Rs. 17,85,445/-. The Assessing Officer raised several queries to the assessee in respect of these bad debts, but till the pasing of assessment order, no explanation / details were furnished by the assessee. Accordingly, the claim of bad debts amounting to Rs. 17,85,445/- was added to the income of the assessee. Further, the Assessing Officer observed that assessee had incurred Labour and Cartage Expenses amounting to Rs. 19,62,167/-. The Assessing Officer inquired into the nature of these expenses, but observed that till the finalization of assessment, no details were furnished by the assessee. Accordingly, in absence of any explanation, a sum of Rs. 19,62,167/- was added to the income of the assessee.

In appeal, the assessee furnished ledger extracts of debtors, which were written off. The assessee submitted that these amounts are commission receivable from various clients and since the debtors had become irrecoverable, the amount was written off by the assessee. However, Ld. CIT(A) observed that during the course of appellate proceedings, the assessee had only filed ledger extracts of the clients and had not filed any other requisite information / details. Ld. CIT(A) observed that the basic requirements of a bad debt to be allowable is that Ratnakar Securities Pvt. Ltd. vs. DCIT Asst.Year –2016-17 - 3–

The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A).

Before us, the Counsel for the assessee submitted that the assessee is a registered member of BSE as well as NSE and the brokerage earned on the transactions affected on these Nationalised Stock Exchanges has been duly offered to tax by the assessee in it’s Profit & Loss Account. Asst.Year –2016-17 - 4– 7. In response, Ld. D.R. submitted that in this case, despite issuance of several opportunities of hearing by the Assessing Officer as well as by the Ld. CIT(A), the assessee had not submitted the necessary details as called for by the Tax Authorities, to ascertain the genuineness of the claim of such bad debts / business loss by the assessee. It was submitted that the plea of business loss was not taken by the assessee before any of the Tax Authorities and was taken first time before the Tribunal. Further, the assessee has also not filed necessary details like the list of scrips / shares which were purchased and sold on behalf of it’s clients on which commission became irrecoverable, the assessee has failed to Ratnakar Securities Pvt. Ltd. vs. DCIT Asst.Year –2016-17 - 5–

On going through the records of the case, while we agree with the proposition that once certain debts have become irrecoverable and the assessee has written off the same in his books of accounts, the same should be allowed to the assessee, but at the same time we also observe that for allowability of claim of bad debts the assessee has to demonstrate that income has been offered to tax in any of the earlier assessment years. In the instant case, even in the written submissions filed before Ld. CIT(A), and also from the copy of Paper Book filed by the assessee, the assessee has not been able to demonstrate as to the year when the commission income was offered to tax by the assessee in it’s return of income. Further, we also observe that the assessee has failed to furnish the necessary information as called for viz. details of shares / Asst.Year –2016-17 - 6–

In the result, Ground No. 1 of the assessee’s appeal is allowed for statistical purposes.

Regarding disallowance of labour charges, the Counsel for the assessee submitted that all payments were made through banking channels, all details were filed before the Ld. CIT(A) and further, during the course of assessment proceedings, as per Para 4 of the assessment order, only one notice of hearing was issued to the assessee and hence, complete evidences / details could not be furnished during the course of assessment proceedings.

On going through the facts of the instant case, we observe that the assessee did not file any evidences in support of these expenses either before the Assessing Officer and called before the Ld. CIT(A). However, considering the arguments of the Counsel for the assessee, in the interest of justice, the matter is restored to the file of Assessing Officer for carrying out necessary verification.

In the result, Ground No. 2 of the assessee’s appeal is allowed for statistical purposes.

In the combined result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 19/06/2025 (ANNAPURNA GUPTA) JUDICIAL MEMBER Ahmedabad; Dated 19/06/2025