TMI Blog2008 (5) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... o the interest of the Revenue. Ground No. 3 : That under the facts and circumstances of the case, learned CIT has erred by holding regarding the receipt considered as capital receipt by the assessee that This issue needs reconsideration in the light of the authority relied by the learned counsel for the assessee, hence, the facts being brought on record during the course of proceedings pursuant to the assessment being cancelled under s. 263. Ground No. 4 : That under the facts and circumstances of the case, learned CIT has erred by cancelling the entire assessment made under s. 143(3) and directing the AO to frame a fresh assessment. 2. We have heard the parties. The brief facts of the case in ground Nos. 1 to 4 of the assessee are that the learned CIT-1, Jaipur after considering the submission of the assessee, has held the order made by the AO as erroneous insofar as it is prejudicial to the interest of Revenue for the following reasons : 1. The assessee had claimed a sum of ₹ 14,36,604 as bad debts. During the course of assessment proceedings, assessee stated that amount of bad debts arose on account of advance given to a supplier of goods M/s Natraj Textiles about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to claim the above amount and also at the time of cross-examination held on 2nd March, 2006, he has not shown any supporting documents in proof of his claim. Further he could not prove any efforts for recovery of above sum. This shows that the claim of Shri Om Prakash Kankarwal, was wrong being without any supporting documents. In support of its claim, the assessee has submitted copy of account of M/s Natraj Textiles during assessment proceedings to the AO as appearing in his books since inception i.e., from 1st April, 1996 to 31st March, 2001 with details regarding mode of payments, description of the goods ordered and goods received from the said party, copy of bills and copy of bank statement in support of payments given to the party (paper book pp. 19-47). It appears that the claim of the assessee to write off the amount as bad debts was correct on the facts on record whereas the claim of Shri Om Prakash Kankarwal, partner M/s Natraj Textiles was wrong and without any support. In the statement recorded on 8th Feb., 2006, Shri Om Prakash Kankarwal has stated that he does not have knowledge of any legal notice served to his firm by the assessee whereas copy of the registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case. The decision of the learned CIT was basically on the basis of the statement of Shri Om Prakash Kankarwal, one of the partners of M/s Natraj Textiles, who denied of owing any sum of M/s Sarita Impex being the proprietary concern of the assessee and rather he claimed ₹ 2,39,696 from the assessee. The facts are that Shri Om Prakash Kankarwal has stated that his firm M/s Natraj Textiles had supplied goods vide various invoices and at the same time has not denied of advance given by the assessee. As regards the amount receivable by M/s Natraj Textiles amounting to ₹ 2,39,696 from the assessee, it has not produced any documentary evidence in support of its claim except a copy of account having the opening balance which has also not been explained, how the same is receivable. Whereas the assessee has submitted the copy of account with M/s Natraj Textiles from 1st April, 1996 to 31st March, 2001 with the details, mode of payments, description of goods ordered and received, copy of bills. The assessee has also produced copy of bank statements in support of the payments given (paper book 19-47). As regards legal notice (paper book 33-36), on perusal, it appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the operation of the business vide CIT vs. Nainital Bank Ltd. (1965) 55 ITR 707 (SC). In that view of the matter, therefore, for the reasons stated in this order, we are of the opinion that the said loss being a bad debt is allowable as trading loss under s. 28 of the IT Act, 1961 and therefore, for the reasons stated hereinabove, the answer to the question referred to us in the affirmative, that is, in favour of the assessee and against the Revenue. Reliance is also placed on the decision of Hon ble Chennai High Court in the case of CIT vs. Crescent Films (P) Ltd. (2001) 171 CTR (Mad) 239 : (2001) 248 ITR 670 (Mad) where advances though made in the course of business were not made in the course money lending business and therefore, the money so advanced has only to be regarded as a further advance of capital and not an advance which can be regarded as a trading transaction. The Hon ble Court has held that the loss to the assessee being a revenue loss which had been incurred in the course of business, the assessee was entitled to deduct the same under s. 37 of the Act. Hon ble Allahabad High Court in the case of CIT vs. Late Sri Ram Gupta (2005) 199 CTR (All) 43 : (2008) 296 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made the enquiries and the assessee vide various letters dt. 11th Aug., 2003; 27th Aug., 2003; 24th Sept., 2003 and 3rd Feb., 2004 during the course of assessment proceedings has submitted to the AO and the AO has reached to a definite conclusion which is permissible under the law in view of decisions of various Courts of law as discussed hereinbefore. Therefore, the learned CIT cannot take a different view even if it has resulted in loss of Revenue. These views are supported by the decision of Hon ble Supreme Court of India in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC) where the Hon ble Court held that where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order and prejudicial to the interest of the Revenue unless the view taken by the ITO is unsustainable in law. Therefore, in the present case, the learned CIT does not acquire jurisdiction under s. 263 and the order made by the learned CIT under s. 263 on the claim of bad debt of ₹ 14,36,604 is set aside and the order of the AO is sustained. As regards the capital gains declared by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed dt. 9th July, 2000. Therefore, the assessee had incurred a cost of ₹ 7 lacs during the financial year 1997-98 which has been extinguished during the impugned year giving rise to a capital gain. The assessee had submitted the explanation to AO during the course of assessment proceedings and the AO had reached a definite conclusion and the learned CIT cannot take a different view rather cannot direct the AO for reconsidering the issue. The decisions of various Courts of law have been relied upon hereinbefore against the decision of learned CIT in the present case and are applicable on the present issue. We place reliance on the decision of Hon ble Madras High Court in the case of K.R. Srinath vs. Asstt. CIT (2004) 190 CTR (Mad) 517 : (2004) 268 ITR 436 (Mad). In this case, the assessee was paid a sum for agreeing to termination of an agreement whereby he had a right to obtain conveyance of a property and for allowing the vendor to sell the said property to any person at any price. He gave up or relinquished his right of specific performance for a consideration ..... right, title and interest acquired under the agreement of sale clearly fall within the definition of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1,17,500 and interest. The question arose whether that amount received by the assessee was a capital asset. A Division Bench of Bombay High Court held that under the agreement to purchase the property, the assessee had acquired the right to have the immovable property conveyed to him and under the law, he was entitled to exercise that right not only against his vendors but also against a transferee with notice or a gratuitous transferee. The assessee could have also assigned that right. Hence, what he acquired under the said agreement for sale was therefore, property within the meaning of IT Act, 1961 and consequently a capital asset. The Court further held that his giving up of the right to claim specific performance by conveyance to him of the immovable property was a relinquishment of the capital asset and therefore, there was a transfer of a capital asset within the meaning of the IT Act. Therefore, in the present circumstances and facts of the case and decisions of various Courts of law relied upon hereinbefore, the learned CIT does not acquire jurisdiction under s. 263 and the order made by the learned CIT under s. 263 on the claim of capital gain of ₹ 61,374 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
