SOUTHERN GROUP INDUSTRIES P LTD.,CHENNAI vs. ITO, CORP WARD -6(3), CHENNAI

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ITA 150/CHNY/2019Status: DisposedITAT Chennai28 November 2019AY 2013-147 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the issue to the Assessing Officer for fresh adjudication. The assessee was directed to provide evidence linking the written-off loans and advances to the business of selling bullet-proof jackets and to show that income from this business was offered for taxation in earlier years.

What were the facts?

The assessee claimed bad debts written off amounting to Rs. 24,05,004/-. The Assessing Officer disallowed this claim, treating it as a capital loss. The CIT(A) upheld the disallowance.

What were the issues?

Whether the written-off bad debts, which were loans and advances, were inextricably linked to a business that had ceased to exist, and whether the assessee had offered income from that business for taxation in prior years.

Which sections of the Income-tax Act were involved?

Section 36(1)(vii),Section 36(2)

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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: SHRI RAMIT KOCHAR & SHRI DUVVURU R.L.REDDY

Hearing: 28.11.2019

evidence in order to prove that income(which include losses) related to business of selling bullet-proof jackets were offered for taxation in earlier years and thirdly that these loans and advances are inextricably linked to said business of selling bullet-proof jackets carried on by assessee in those years. The aforesaid primary onus is on assessee to get deduction u/s 36(!)(vii) of the 1961 Act read with Section 36(2) of the 1961 Act.

Under these circumstances, we restore this issue to the file of the AO for framing fresh assessment denovo. Needless to say that AO shall grant adequate and proper opportunity to the assessee in accordance with principles of natural justice in accordance with law, in denovo assessment proceedings. The additional evidences/explanations filed by assessee in its defense during de-novo assessment proceedings will be admitted by AO and the issues be adjudicated by AO in denovo assessment proceedings on merits in accordance with law. We order accordingly.

In the result, the appeal filed by assessee in 2013-14 is allowed for statistical purposes.

Order pronounced in Open Court on this 28th day of November, 2019 in Chennai.

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