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Income Tax Appellate Tribunal, “D” BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI. G. PAVAN KUMAR
आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is directed against order of the Commissioner of Income-tax (Appeals)-Central -I, Chennai in -2014, dt 26.11.2013 for the assessment year 2008-
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2009 passed u/s.143(3) and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).
The assessee has raised only one substantive ground that the ld. Commissioner of Income Tax (Appeals) erred in sustaining the disallowance of bad debts �.2,00,00,000/- without proper reasons and ignored the circumstances and contention of the assessee whose core business activity being financial services and also ld. Commissioner of Income Tax (Appeals) has not granted relief u/s.36(1) of the Act or u/s. 37(1) of the Act and ignored the evidence filed in support of claim and no proper opportunity was provided to the assessee and confirmed the order of the ld. Assessing Officer.
The Brief facts of the case is that the assessee is engaged in the business of financial services and filed return of income on 30.09.2008 admitting total loss of �.1,40,16,382/-. Subsequently, the case was selected for scrutiny and notices u/s.143(2) and 115WE(2) was issued. In compliance to notices, the ld. Authorised Representative of assessee appeared from time to time and produced details and furnished explanations. The disputed issue being the claim of Bad debts of �.2,00,00,000/- dealt and referred by the ld. Assessing Officer at page 2 & 3 of the order. The contention of the assessee company that the amount was advanced in the normal business wholly and exclusively through bank account and the assessee’s main object was ITA No.111/Mds/2014 :- 3 -:
financial and lending business. The ld. Assessing Officer considered the submissions and applicability of provisions of Sec. 36 and Sec.37 of the Act and financial conditions of the assessee company in comparison with earlier years. The ld. Authorised Representative filed letter dated 20.12.2010 to allow deduction u/s.36 and u/sec. 37 of the Act. The ld. Assessing Officer on perusal of the profit and loss account, Balance sheet gave exhaustive findings with the reasons and disallowed the claim of Bad debts �.2,00,00,00/- and completed assessment vide order u/s.143(3) of the Act dated 23.12.2010.
Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals).
In the appellate proceedings, the ld. Authorised Representative of the assessee reiterated the submissions with evidence of advance �.2,00,00,000/- disallowed by the ld. Assessing Officer without considering basic genuine facts. The assessee was duped by the debtor alongwith many persons in Chennai and Delhi and criminal cases are pending in Courts. The ld. Commissioner of Income Tax (Appeals) perused the grounds and supporting claims and findings of the Assessing Officer. The ld. Authorised Representative submitted detailed explanation of facts referred at para 6.1 of the order. The ld. Commissioner of Income Tax (Appeals) relied on the ITA No.111/Mds/2014 :- 4 -:
findings of the ld. Assessing Officer and observed at para 6.2 and 6.3 of his order and dismissed the appeal as under:-
‘’6.2 After having gone through the Assessing Officer’s observations in the assessment order and the Authorised Representative’s submissions in this regard, I am of the considered opinion that the AO is justified in not entertaining the appellant's claim and I am in agreement with the reasons stated by the AO in the assessment order. As it can be seen that the appellant has not filed any evidence to the effect that the debt has been taken into account in computing the income of the appellant of the previous year in which the amount of such debt are part thereof is written off; As per the provisions of sec. 36(1), those amounts which have contributed to the !computation of income or loss for any of the earlier asst. years could be written off as bad debts. Secondly, the said amount, which was claimed as bad debt of Rs. 2 crores cannot be deducted u/s 37(1) as the amount has not been proved to be given for the purpose of the business in the previous year relevant to the asst.year under appeal. Further, the Hon'ble jurisdictional ITAT, 'A' Bench In the case of M/s. Deccan Estates vs. DCIT, central Circle-Ill (4) vide for assessment year 2008-09 dated 23.09.2013 held as under:-
"This amount cannot be treated as bad debt, because this Amount has never been part of computation of profit or loss of the business of the assessee in :any of the earlier Asst. Years. Only those amounts which have contributed to the computation of income or loss for any of the earlier asst.years could be written of as bad debts u/s 36(1)."
6.3 Since the issue involved in this appeal is squarely covered by the above decision, the same is hereby followed. In view of the above, the action of the Assessing Officer in disallowing the claim made by the appellant towards ‘bad debts’ of �2 crores in hereby upheld and the grounds of appeal raised in this regard are dismissed’’.
Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before us.
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Before us, the ld. Authorised Representative argued the grounds and reiterated the submissions made in the assessment proceedings and appellate proceedings alongwith evidence. The ld. Authorised Representative contention that main object of the assessee company is financial services and this advance was provided in the normal course of business and also explained the reasons for claim of Bad debts due to various criminal and court cases are pending against the Debtor. The ld. Commissioner of Income Tax (Appeals) and ld. Assessing Officer has not considered the intention of the business transaction and supporting evidence that amount was in the nature of advance and could not be recoverable due to various circumstances arised over a period of time and prayed for allowing the appeal.
Contra, the ld. Departmental Representative relied on the orders of the lower authorities and opposed the grounds of the assessee.
We heard the rival submissions and perused the material on record. The only contention of the ld. Authorised Representative that Commissioner of Income Tax (Appeals) erred in confirming the findings of the Assessing Officer and assessee has bonafide evidence with proof that amount was paid in the normal course of business and in the nature of commercial transaction. The assessee being a ITA No.111/Mds/2014 :- 6 -:
financial company and financial activities plays a important role and the advances are supported with a adequate documents. We on perusal of the Commissioner of Income Tax (Appeals) order found that the Commissioner of Income Tax (Appeals) has relied on the findings of the ld. Assessing Officer and decision of the Tribunal and dismissed the appeal without providing proper reasons. We, considering the apparent facts, court cases and bonafide evidence, are of the opinion that matter has to be re-examined by the Assessing Officer in depth, to verify the genuineness of evidence filed and pass the order.
Accordingly, we set aside the order of Commissioner of Income Tax (Appeals) to the file of the Assessing Officer for fresh consideration.
In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced on Wednesday , the 25th day of May, 2016 at Chennai.