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2020 (8) TMI 805 - AT - Income TaxDisallowances of expenses claimed in Raunak Agency (RA) - AO disallowed the total expenses claimed by the assessee with regard to Raunak agency by taking view that no business was carried out by Raunak agency during the year as it was discontinued in earlier years - HELD THAT:- CIT (A) while affirming the action of assessing officer also held that Raunak agency and Amber agency are two different and distinct business carried by assessee and therefore, they did not constitute the same business. As held that only stoppage of the business activities of Raunak agency no deduction was admissible for an expenditure including the bad debts. As held that merely recovering dues and discharging liability after discontinuance of business activity does not amount to carry on business. And that deeming provision of section 41 (1) cannot be extended merely income was offered to tax under section 41. The case law relied by ld. DR for the revenue in Karnataka Instrade Corporation Ltd. vs. ACIT [2009 (2) TMI 248 - ITAT, BANGALORE] is also not helpful to the revenue. In the said case it was held that in order to allow business loss under section 72(1)(i) condition is that assessee should carry on business in year under appeal and it is only against profits of such business that brought forward loss can be set off. Where assessee’s profits were assessed under section 41(1) as business income, said profits did not represent profits and gains of any business carried on by assessee and therefore, brought forward business loss was not allowable against profits assessed under section 41(1). In the case in hand the assessee throughout the proceedings is claiming that he is carrying his lottery business under two limbs and is entitled for the deductions of bed debts and other expenses. In the result the Ground No. 1 of the appeal is allowed. Disallowance of Debit balances written off in M/s. Amber Agency - assessee submits that MLPL was acting as a sole stockist of Amber agency in Kolkata for marketing the lotteries through a network of its customer - HELD THAT:- We have noted that the alternative plea of the assessee was not accepted by ld CIT(A) by taking view that no cogent evidence is furnished by the assessee, the assessee not proved that loss occurred in the course of business or it was a trading loss and not capital. As also held that there is no evidence that advance given to MLPL was utilised for the purpose of business. The assessee has also filed various documentary evidences, which we have recorded in para -3 supra. The assessee has certified that all these evidences were furnished before the lower authorities. We have noted the alternative plea of business loss was raised for the first time before ld CIT(A) and it was rejected summarily without reference to the aforesaid evidence. Therefore, we deem it appropriate to restore the alternative claim of business loss to the file of assessing officer to consider it afresh. Needless to direct that before passing the order afresh the assessing officer shall grant reasonable opportunity of hearing to the assessee and will pass the order in accordance with law. In the result the ground No. 2 of the appeal is allowed for statistical purpose.
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