Income Tax Appellate Tribunal - Bangalore
Assistant Commissioner Of Income Tax ... vs Mrs.Padmavathi V, Hospet on 1 June, 2018
ITA.1973/Bang/2017 Page - 1
IN THE INCOME TAX APPELLATE TRIBUNAL
BENGALURU BENCH 'C', BENGALURU
BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER
AND
SHRI. LALIET KUMAR, JUDICIAL MEMBER
I.T.A No.1973/Bang/2017
(Assessment Year : 2012-13)
Asst. Commissioner of Income-tax,
Circle -1, Bengaluru .. Appellant
vs.
Smt. Padmavathi V,
Prop : Mineral Embassy, Flat No.7, Ashwasthi Apartment,
Vivekananda Nagar,Hospet 583 201 .. Respondent
PAN : APFPP29623
Assessee by : None
Revenue by : Dr. P. V. Pradeep Kumar, Addl. CIT
Heard on : 23.05.2018
Pronounced on : 01.06.2018
ORDER
PER LALIET KUMAR, JUDICIAL MEMBER :
The present appeal is filed by the Revenue against the order of the CIT (A), Gulbarga, dt.31.07.2017, for the assessment year 2012-13, on the following grounds :
ITA.1973/Bang/2017 Page - 2 ITA.1973/Bang/2017 Page - 3
02. Brief facts are, the assessee filed the return of income for AY 2012-13 and has claimed business loss of Rs.7,89,38,200/-. The assessee subsequently filed a revised return claiming business loss at Rs.8,54,28,290/-. Case of the assessee was selected for scrutiny and notice was issued to the assessee. During the course of assessment proceedings, it was noticed that the assessee had written off the debtors for Rs.4,94,40,133/-, out of which Rs.1,33,40,133/- belonged to M/s. BST HK Ltd and Rs.3,61,00,000/- belonged to Prasanna V. Ghotge. The contention of the assessee was examined by the AO. However, the AO was not convinced with the submission made by the assessee and therefore had disallowed the write-off of the debts to the extent of Rs.3,61,00,000/-. The order of the AO to this effect is reproduced herein below :
"Assessee's submission is duly considered. As per the provisions of section 36(2) of the Act, only debts in respect of which income has been offered to tax in earlier years can be claimed as bad debts if they become irrecoverable. It can be seen from the assessee submission that it is only an advance paid for supply of goods. Further such advance has been made only during the year under assessment. Therefore the loss claimed cannot be allowed as bad debt u/s.36. Hence assessee's claim of bad debts for Rs.3,61,00,000/- is disallowed and accordingly Rs.3,61,00,000/- is added to the returned income of the assessee."
Feeling aggrieved by the decision of the AO, the assessee filed an appeal before the CIT (A).
ITA.1973/Bang/2017 Page - 4
03. The CIT(A) had allowed the appeal of the assessee treating the bad debts as business loss. The finding of the CIT (A) is recorded as under :
The appellant made a reasonable contention that Learned AO was unjustified in law by disallowing the claim since there is no prohibition of law against the deduction and that the AO failed to interpret that the expression of trade advance written off gives such description of debt which cannot reasonably be expected to be realized and the same is to be allowed as business loss u/s 28. Appellant further made a reasonable contention that by considering the bad financial position of the party was convinced with the fact that it would be impossible to recover the money from him especially in the light of the fact that the advance written off during the year under consideration is not recovered till date by the Appellant and the possibility of realization is unachievable. Thus the contention of the appellant that the decision of Appellant towards the expenditure is the honest and bona fide, is considerable and acceptable. The Appellant's contention with all the material fact that the said expenditure is purely a business loss, has not been rejected or proved false by the AO. The appellant further relied upon the judgment in the case of ITO v. Reliance Engineering Association P. Ltd, wherein it was held that when deposits made for residential accommodation of employees of assessee company is irrecoverable it is allowable as business loss u/s.28.
In view of the above, the CIT (A) has held that the amount of Rs.3,61,00,000/- was allowable as business loss instead of write-off of the same as bad debts.
04. The Ld. DR before us, has submitted that there is no finding of fact by the CIT (A), either by calling a remand report or otherwise that the assessee has incurred the business loss to the extent of Rs.3,61,00,000/-, in the year under consideration. Further it was submitted that the judgment relied upon by the CIT (A) in the ITA.1973/Bang/2017 Page - 5 matter of Reliance Engineering Association P. Ltd (supra), is not relevant for adjudication of the ground.
05. At the time of hearing none appeared on behalf of the assessee despite the service of notice. Therefore, we are constrained to decide the appeal without any assistance from the assessee.
06. We have heard the Ld. DR and perused the record. In our view, once the assessee has taken a stand before the AO that the assessee has written off Rs.3,61,00000/-, then the assessee cannot change its stand to say that it was a business loss arising on account of gross sales of iron ore. For the purpose of business loss, under the provisions of Section 28, it is necessary for the assessee to prove that the business loss has been actually caused to the assessee. The write-off of bad debts and write-off of the trading liability / business loss, operate in different fields and different yardsticks are required to be applied for allowing these by the revenue . In our view, the CIT (A) has not brought on record the factual foundation of treating the amount of Rs.3,61,00,000/- as business loss, instead of write-off of bad debts. Therefore it becomes necessary for us to remand the matter back to the file of the CIT (A) to decide a afresh all the issues raised in the present appeal. Needless to say that the CIT (A) shall give opportunity of hearing to the assessee and also take the remand report from the AO before the deciding the issue finally.
ITA.1973/Bang/2017 Page - 6
07. In the result, appeal of the Revenue is allowed for statistical purpose.
Order pronounced in the open court on 1st day of June, 2018.
Sd/- Sd/-
(A. K. GARODIA) (LALIET KUMAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Bengaluru
Dated : 01.06.2018
MCN*
Copy to:
1. The assessee
2. The Assessing Officer
3. The Commissioner of Income-tax
4. Commissioner of Income-tax(A)
5. DR
6. GF, ITAT, Bangalore
By order
Senior Private Secretary,
Income Tax Appellate Tribunal,
Bangalore.