TMI Blog2012 (8) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... n Kumar Gupta for the Appellant. Subhash Chandra for the Respondent. ORDER Bhavnesh Saini, Judicial Member - This appeal by the assessee is directed against the order of ld. CIT(A), Central, Jaipur dated 17.09.2010 for the assessment year 2001-02, challenging the disallowance of Rs. 4,22,000/- on account of bad debts. 2. The brief facts of the case are that during the course of search, it was unearthed that the assessee is advancing loan to various persons and these are not disclosed in the regular books of account and consequently in the regular returns. From the scrutiny of seized documents, it was noticed that the assessee has purchased land having registered sale deed value of Rs. 3.5 lakhs but was actually purchased for Rs. 11.5 lakhs and Rs. 8,01,000/- was paid in cash. The assessee prepared the cash book of total transactions till the search period after the search and survey operation and there was deficiency of Rs. 4.65 lakhs for making aforesaid payment same was surrendered. Similarly, there was deficient cash at other point of time in the relevant period making total deficiency of Rs. 6.65 lakhs. Apart from it undisclosed debtors coming from vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier previous years [36(2)]. The debts out of which certain debts have been shown as written off during the year under consideration, were not reflected in the regular books of account of the appellant. Thus, it is undisputed that these debts have not been taken into in computing the income of the appellant either in this year or in any earlier previous year. Even after the search and seizure action these debts have no where been taken into account in computing the taxable income of the appellant of any previous year as these were stated to be old and beyond time period of notice u/s. 153A. Accordingly, the condition specified in section 36(2) is not at all fulfilled in the case of appellant. Accordingly, all the arguments taken by the appellant, which are mainly in relation to debt being written off in A.Y. 2001-02 and accordingly be allowed, irrespective of the fact that these have actually become bad debts are irrelevant. 2.4 Without prejudice to above, it is useful to refer to below mentioned cases wherein Hon'ble Court has held even after the amendment the onus to prove that debts has really become bad, is on assessee. Accordingly, writing off the debts in particular yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions : ( i ) All Grow finance Investment (P) Ltd. v. CIT [2011] 338 ITR 496 (Delhi), in which it was held as under : "Debts in question having been undisputedly advanced in assessee's ordinary course of money lending business, claim of bad debt was allowable under s. 36(1)(vii) r/w second limb of sub-s. (2) of s. 36." ( ii ) CIT v. Nai Dunia [2007] 295 ITR 346 (MP), in which it was held as under : "Question whether a debt has become bad and / or at what point of time being a pure question of fact, appeal against the impugned order of the Tribunal allowing assessee's claim for bad debt is dismissed as it does not involve a substantial question of law notwithstanding the fact that the Court has admitted the appeal and framed the question." ( iii ) T.R.F. Ltd. v. CIT [2010] 323 ITR 397 (Hon'ble Supreme Court), in which it was held "After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in act, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the AO has not examined whether the debt has, in fact, been written off in account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso provides that no such bad debt deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year, in which the amount of such bad debt or part thereof is written off or of earlier previous year or represents money lent in the ordinary course of business of banking or money lending, which is carried on by the assessee. Therefore, the essential feature for claiming deduction on account of bad debt has been that such bad debt is written off as irrecoverable in the accounts of the assessee for the previous year and such business was conducted by the assessee in ordinary course of business. There is no dispute about the legal proposition as have been propounded by various High Court and Supreme Court in the cases referred to above. In these judgments also, the debts in question were undisputedly advanced in assessee's ordinary course of money lending business and the amounts were written off in the accounts of the assessee. However, the AO has specifically noted in the assessment order that during the course of search conducted on 02.12.2004, books of account and other incriminating documents were sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e quantum of undisclosed income. The facts recorded by the AO in the assessment order have not been disputed by the ld. Counsel for the assessee during the course of arguments. It is, therefore, clear that whatever books of account maintained by the assessee in the regular course of business did not have mention of any loan and advance. Therefore, there is no question of taking the same figures in the accounts of the assessee maintained in the ordinary course of business of money lending. The assessee filed return of income originally at a meager income u/s. 139(1) of the IT Act and it was only when the search was conducted later on 02.12.2004, the undisclosed income was unearthed by the department. On the basis of the seized material, quantum of undisclosed income was determined and according to the reply of assessee, the assessee made a claim of bad debt as per the accounts prepared on the basis of the seized material. Therefore, the same could not be treated that the assessee has written off the bad debt as irrecoverable in the accounts maintained for previous year in the ordinary course of business. The assessment is framed u/s. 153A of the IT Act, which is specifically meant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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