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Facts
The assessee claimed a deduction of Rs. 1,15,000/- for 'bad debts written off', which stemmed from a shortage of stock discovered and accounted for in the company's books. The Assessing Officer disallowed this claim, treating it as a business loss and initiating penalty proceedings. The assessee's appeal before the CIT(A) was also dismissed, confirming the addition.
Held
The Tribunal held that the assessee's claim for deduction as 'bad debts written off' was not sustainable. Furthermore, the claim for a business loss was also denied as it could not be established that the loss pertained to the relevant previous year and was a result of protracted court proceedings.
Key Issues
Whether a shortage of stock leading to a claim for 'bad debts written off' can be allowed as a business loss, and if the claim pertains to the relevant assessment year.
Sections Cited
142(1), 270A, 270A(2)(a)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH ‘B’, LUCKNOW
Before: SHRI SUDHANSHU SRIVASTAVA & SHRI ANADEE NATH MISSHRA
have been filed by Revenue against the order dated 16/08/2024 (DIN & Order No.ITBA/NFAC/S/250/2024-25/1067687143(1) and 29/08/2024 (DIN & Order No.ITBA/NFAC/S/250/2024-25/1068119844(1) respectively passed by learned CIT(A) and the appeal vide has been filed by the assessee against impugned appellate order dated 16/08/2024 (DIN & Order No.ITBA/NFAC/S/250/2024-25/1067687143(1).
, 576 & 584/Lkw/2024 Assessment Years:2017-18 & 2018-19 2 (B) First we will take up the appeal filed by the assessee. The grounds taken by the assessee are as under: “1. Because the CIT(A) has erred on facts and in law in not appreciating the facts of the case and has arbitrarily held that the amount of Rs.1,15,000/- being a trading loss / loss on account of embezzlement is not allowable as a business deduction.
Because the CIT(A) has failed to appreciate the fact that the income of Rs.1,15,000/- being loss incurred during the course of business on account of embezzlement, is a business loss and is allowable against the income for the year under consideration.
Because irrespective of the fact that the appellant having not claimed the said loss as a business loss, but claimed the same as bad debts, is immaterial, in as much as, the deduction is to be allowed as per the nature of the transaction and not on account of any nomenclature, the loss of Rs.1,15,000/- being a business loss be allowed.”
Although the assessee has taken three grounds of appeal, the issue in dispute in these grounds pertains to assessee’s claim for deduction of an amount of Rs.1,15,000/-. The original claim was made by the assessee in the return of income under the head ‘bad debts written off’. This was disallowed by the Assessing Officer. Relevant portion of the assessment order is reproduced below:
(B.1) The assessee’s appeal against the aforesaid addition of Rs.1,15,000/- was dismissed by the learned CIT(A) vide impugned appellate order dated , 576 & 584/Lkw/2024 Assessment Years:2017-18 & 2018-19 3 16/08/2024. The relevant portion of the order of the learned CIT(A) is reproduced as under:
(B.1.1) The present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 16/08/2024 of learned CIT(A) confirming the aforesaid addition of Rs.1,15,000/-.
(B.2) At the time of hearing before us, learned Counsel for the assessee fairly conceded that the assessee’s claim for deduction on account of ‘bad debts written off’ was not sustainable in view of the order of learned CIT(A) and the Assessing Officer. However, he submitted that the aforesaid amount can be allowed on the alternate ground, on the basis of being a business loss. However, he was not able to bring relevant materials to our attention to persuade us to take a view that business loss, as per alternate claim made from the assessee’s side, actually took place in the previous year relevant to assessment year 2017-18. Learned D.R. for Revenue opposed the submissions of learned Counsel for the assessee and supported the order of learned CIT(A) and the Assessing Officer.
(B.2.1) We have heard both sides. We have perused the materials on record. For the amount of Rs.1,15,000/- to be allowed as business loss, as , 576 & 584/Lkw/2024 Assessment Years:2017-18 & 2018-19 4 claimed from assessee’s side during appellate proceedings in Income Tax Appellate Tribunal, is required to be established by the assessee that business loss claimed by the assessee did pertain to the previous year relevant to assessment year 2017-18. However the records suggest that the amount represented the outcome of protracted court proceedings in matter which went upto the Hon'ble High Court. There is no material on record to show that the business loss, as alternately claimed on behalf of the assessee, actually took place in the previous year relevant to assessment year 2017-18. Therefore, even the alternate basis on which the claim has been made from the assessee’s side, is not supported by materials on record. Accordingly, the addition of Rs.1,15,000/- is confirmed and all the grounds of appeal in the appeal filed by the assessee are dismissed. (C) Now we will deal with the appeals filed by Revenue vide . These appeals have been filed by Revenue against the order dated 16/08/2024 (DIN & Order No.ITBA/NFAC/S/250/2024-25/1067687143(1) and 29/08/2024 (DIN & Order No.ITBA/NFAC/S/250/2024-25/1068119844(1) for assessment year 2017-18 and 2018-19 respectively. The grounds taken by Revenue are reproduced below:
“1. The learned CIT(A) NFAC has erred in law and on facts of the case in allowing the appeal of the assessee on the issue of addition of Rs.40,18,18,340/- relying on the order of Hon'ble ITAT Lucknow in assessee's own case without appreciating the fact that the department had not accepted the order of the Hon'ble ITAT Lucknow and had appealed before Hon'ble Allahabad High Court.”
I.T.A. No.576/Lkw/2024
“1. The learned CIT(A) NFAC has erred in law and on facts of the case in allowing the appeal of the assessee on the issue of addition of Rs.10,28,65,566/- under the head ‘ provision for interest’ relying on the order of Hon'ble ITAT Lucknow in assessee's own case without , 576 & 584/Lkw/2024 Assessment Years:2017-18 & 2018-19 5 appreciating the fact that the department had not accepted the order of the Hon'ble ITAT Lucknow and had appealed before Hon'ble Allahabad High Court.”
(C.1) During the course of hearing learned D. R. relied on the assessment orders in both the assessment years. However, he fairly conceded that the issue in dispute in both the appeals filed by Revenue, is identical, and is covered by order of Co-ordinate Bench of ITAT, Delhi in assessee’s own case; though the order of ITAT, Lucknow has not been accepted by Revenue and the appeal is pending before Hon'ble Allahabad High Court.
(C.1.1) Learned A. R., on the other hand, supported the order of learned CIT(A). He also submitted that the issue involved in the present appeal is duly covered in favour of the assessee in assessee’s own case by the consolidated order of Lucknow Bench of the Tribunal in to 332 & 508/Lkw/2016 dated 28/02/2019 for the assessment year 2010-11 to 2013-14 and order dated 04/07/2022 in I.T.A. No.616/Lkw.2019 for assessment year 2014-15 and consolidated order dated 04/07/2022 in for assessment year 2015-16, I.T.A. No.331/Lkw/2020 for assessment year 2016-17, I.T.A. No.291/Lkw/2020 for assessment year 2009-10 dated 04/07/2022.
(C.2) We have heard both sides. We have perused the materials on record. There is no dispute that the issue involved in the present appeal is duly covered in favour of the assessee in assessee’s own case by the consolidated order of Lucknow Bench of the Tribunal in to 332 & 508/Lkw/2016 dated 28/02/2019 for the assessment year 2010-11 to 2013-14 and order dated 04/07/2022 in I.T.A. No.616/Lkw.2019 for assessment year 2014-15 and consolidated order dated 04/07/2022 in for assessment year 2015-16, I.T.A. No.331/Lkw/2020 for assessment year 2016-17, I.T.A. No.291/Lkw/2020 for assessment year , 576 & 584/Lkw/2024 Assessment Years:2017-18 & 2018-19 6 2009-10 dated 04/07/2022. No facts or circumstances or provisions of law or decided precedents have been brought for our consideration to persuade us to take a view different from view taken in the aforesaid orders of Co- ordinate Bench of ITAT; or to distinguish facts and circumstances of the present appeal from the facts and circumstances of aforesaid orders of Co- ordinate Bench of ITAT, Lucknow. Respectfully following the aforesaid orders of the Co-ordinate Bench of ITAT, Lucknow in assessee’s own case, we find no infirmity in the order of learned CIT(A). Therefore, appeals filed by Revenue are dismissed.
(D) In the result, both the appeals filed by Revenue and also, the appeal of the assessee are dismissed. (Order pronounced in the open court on 03/03/2025)