THE PR.COMMISSIONER OF INCOME TAX vs. M/S RAJESH EXPORTS LTD

THE PR.COMMISSIONER OF INCOME TAX CIT(A), CETNRAL CIRCLE C.R. BUILDING, QUEEN’S ROAD BENGALURU-560 001.

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(2) PRESENT ADDRESS ACIT, CENTRAL CIRCLE-1(2) C.R. BUILDING, QUEENS ROAD BENGALURU-560 001. …APPELLANTS

THE PR.COMMISSIONER OF INCOME TAX CIT(A), CETNRAL CIRCLE C.R. BUILDING, QUEEN’S ROAD BENGALURU-560 001.

THE ASST. COMMISSIONER OF INCOME TAX CIRCLE-1(2) PRESENT ADDRESS ACIT, CENTRAL CIRCLE-1(2) C.R. BUILDING, QUEENS ROAD BENGALURU-560 001. …APPELLANTS

ITA No.496/20182 has been admitted to consider following questions of law: 1. Whether on the facts and in the circumstances of the case, the Tribunal has recorded a perverse finding of fact in remitting back to the Assessing Officer the addition on account of bad debt amounting to Rs.50,00,000/- even though the advance was for acquisition of capital asset and accordingly the resultant loss was a capital loss?

Whether on the facts and in the circumstances of the case, the Tribunal is right in recording a perverse finding of fact in remitting back the addition on account of bad debt amounting to Rs.1,40,00,000/- to the Assessing Officer even

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the addition made by assessing authority of Rs.50,69,933/- claimed as interest attributable on advance for property to Mr. Srinivas for purchase of property even when the same was rightly added by assessing authority as assessee could not prove that it had surplus funds at its disposal?

ITA No.497/20183 has been admitted to consider following questions of law: 1. Whether on the facts and in the circumstances of the case, the Tribunal is right in recording a perverse finding of fact in remitting back the addition on account of bad debt amounting to Rs.1,40,00,000/- to the Assessing Officer even though the assessee failed to produce evidence that the amount of advance was offered for taxation in the financial year 2009-10 or any earlier year thereby violating the conditions of Section 36(2) and moreover business loss on account of non-recovery of advance was

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the assessing officer to allow the claim of bad debts of Rs.1,40,00,000/- if the assessee succeeds in establishing that he has made a sincere efforts to recover the said amounts, without giving any direction that the alleged business loss must also be established to have taken place during the previous year 2009-10?

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the addition made by assessing authority of Rs.50,69,933/- claimed as interest attributable on advance for property to Mr. Srinivas for purchase of property even when the same was rightly added by assessing authority as assessee could not prove that it had surplus funds at its disposal?

Heard Shri M.Dilip, learned standing counsel for the Revenue and Shri Raghu Hulikal, learned advocate for the respondent-assessee.

By the common impugned order, the ITAT has remitted the matter to the file of the AO for fresh consideration with regard to questions No.1 and 2 in ITA No.496/2018 and questions No.1 to 3 in ITA

Shri Dilip submitted that whenever a remand order is passed, the authority to which the file is remitted must have liberty to examine the matter afresh. He prayed that this court may clarify that the AO shall be at liberty to consider the matter wholly uninfluenced by the orders passed by the CIT(A)4 and the ITAT.

Shri Raghu submitted that ITAT has not issued any specific direction to consider the matter in a particular manner. Therefore, Revenue’s appeals on this ground are untenable.

With regard to question No.3 in ITA No.496/2018, Shri Dilip submitted that the assessee did not have the sum of Rs.50,69,993/- claimed to have been given to one Shri Srinivas for purchase of property.

In reply, Shri Raghu, adverting to para 33 and 34 of the impugned order, pointed out that ITAT has recorded a finding of fact based on the remand report. Therefore, the contention urged by the Revenue is untenable.

We have carefully considered rival contentions and perused records.

In para 34 of the impugned order is stated as follows: “34. Having carefully examined the orders of the authorities below in the light of rival submissions, we find that in the remand report, AO had admitted that there was sufficient interest free funds available with the assessee out of which the advances were made. Moreover, the CIT(A) has followed its earlier order for assessment year 2008-09 which has not been reversed so far by the appellate authorities. Under these circumstances, we find no infirmity in the order of the CIT(A). Accordingly, we confirm the same.”

Thus it is clear that the remand report was unambiguous that the assessee had interest free funds. Therefore, we find no merit in the contention urged by the Revenue. Hence, the following; ORDER (i) Appeals are disposed of by directing the AO to examine the matter afresh with regard to questions No.1 and 2 in ITA No.496/2018 and questions No.1 to 3 in ITA No.497/2018 wholly uninfluenced by the orders passed by the CIT(A) and the ITAT; and (ii) Question No.3 in ITA No.496/2018 is answered in favour of the assessee and against the Revenue.