2019 (7) TMI 1045 - HC - Income Tax

Disallowance on account of setting of STCG against depreciation - carry forward of unabsorbed depreciation - HELD THAT - Tribunal held that as Respectfully following the judgment passed in MAHALAXMI SUGAR MILLS COMPANY LIMITED 1986 (7) TMI 83 - SUPREME COURT which decided the issue of the present case relating to setting off STCG against brought forward unabsorbed depreciation in favour of the assessee we find no justification to interfere with the order passed by the Ld. CIT(A) and dismiss this ground of appeal preferred by the Department. Addition u/s 68 - Tribunal upholding the decision of CIT(A) deleting the addition - HELD THAT - The finding of fact recorded by the CIT(A) is that loan was accepted through banking channel and the details furnished by the authorized signatory of the Director were not verified vis-a-vis the records available with the AO in its proper perspective. This finding of the CIT(A) also came to be affirmed by the Appellate Tribunal. Disallowance on account of bad debts written off - Tribunal upholding the decision of CIT(A) deleting the addition - HELD THAT - After Hon ble Supreme Court decision in the case of TRF Ltd. 2010 (2) TMI 211 - SUPREME COURT it is not mandatory on the part of appellant to establish that debt has become bad or appellant s bonafide about the irrecoverability of debt. The only conditions required for claim of bad debt are (as per provisions) . The debt must be trade debt and the same should have been taken in computing income of appellant of any year i.e current year and earlier years. The debt should be written off from the books of accounts of appellant. Relying upon the judgment of TRF Ltd. (supra) as being settled principle of law we find no infirmity in the order passed by the Ld. CIT(A) and the same if hereby upheld Addition on account of cash deposit - Tribunal upholding the decision of CIT(A) deleting the addition - HELD THAT - CIT(A) found the addition is based on surmises conjectures in the absence of verification made by the Ld. Assessing Officer. Relying upon the judgment of the Saurin Nandkumar Shodhan 2013 (6) TMI 522 - ITAT AHMEDABAD holding that presumption on surmises by the Ld. Assessing Officer cannot be justified for such audited cash book and bank book the Ld.CIT(A) deleted such addition. Taking into consideration the ratio laid down by the Co-ordinate Bench in the matter of Saurin Nandkumar Shodhan we find no infirmity in the order passed by the ld.CIT(A) same is hereby upheld. Thus this ground of appeal raised by the Revenue is dismissed

Summary

Issues:
1. Disallowance of short-term capital gains against depreciation.
2. Addition under Section 68 of the Income Tax Act.
3. Disallowance of bad debts written off.
4. Addition on account of cash deposit.

Analysis:

Issue 1: Disallowance of short-term capital gains against depreciation
The appeal by the Revenue challenged the order of the Appellate Tribunal regarding the disallowance of Rs. 83,71,764 on account of setting off short-term capital gains (STCG) against depreciation. The CIT(A) and the Tribunal relied on the decision in CIT vs. Mahalakshmi Sugar Mills Co.Ltd. (1986) 160 ITR 920, which allowed unabsorbed depreciation to be carried forward for unlimited years. The Tribunal upheld the decision of the CIT(A) based on the Supreme Court's ruling in Mahalakshmi Sugar Mills Co.Ltd., stating that there was no justification to interfere with the order passed by the CIT(A).

Issue 2: Addition under Section 68 of the Income Tax Act
The Revenue questioned the deletion of the addition of Rs. 20,90,000 made under Section 68 of the Act. The CIT(A) observed that the loan was accepted through banking channels, and the authorized person provided necessary details to establish identity, genuineness, and creditworthiness. The Tribunal affirmed the CIT(A)'s findings, emphasizing that the loan transaction was through legitimate channels, and the AO failed to verify the details properly, leading to the deletion of the addition.

Issue 3: Disallowance of bad debts written off
Regarding the disallowance of Rs. 5,49,74,891 on account of bad debts written off, the Tribunal referred to the TRF Ltd. case where the Supreme Court stated that after April 1, 1989, the assessee must establish the debt's irrecoverability or write it off in the accounts. The CIT(A) relied on the TRF Ltd. judgment and directed the AO to allow the claim of bad debts written off. The Tribunal upheld the CIT(A)'s decision based on the settled principle of law established in TRF Ltd.

Issue 4: Addition on account of cash deposit
The Revenue challenged the deletion of the addition made on account of cash deposit. The CIT(A) and the Tribunal found no fault with the assessee as the cash deposits were supported by audited books of accounts and cash book evidence. The Tribunal emphasized that the addition was based on surmises and conjectures by the AO without proper verification. Relying on precedent cases, the Tribunal upheld the CIT(A)'s decision to delete the addition.

In conclusion, the Tax Appeal failed as it was more fact-based, and no substantial question of law was identified. The Tribunal's orders were upheld, and the appeal was dismissed.