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TMI Blog2011 (1) TMI 1531X X X X Extracts X X X X X X X X Extracts X X X X ..... able and, therefore, this issue could not be raised before the CIT[A]. later on the issue could not be raised even before the Tribunal because papers were not available. When all papers became available, this ground has now been filed and he made a prayer that this ground may be admitted. 4. On the other hand, ld. DR submitted that this is purely a factual ground and does not raise any legal issue. The assessee has chosen not to file appeal on this issue earlier when original appeal was filed and, therefore, assessee cannot be allowed to raise this ground now as additional ground. In any case, no evidence regarding change of Chartered Accountant or non-availability of papers has been filed. 5. We have considered the rival submissions carefully and find force in the submissions of the ld. DR. The additional ground relates to one of the additions and if the same was not raised in the appeal before the CIT[A] or even in the original appeal filed before the Tribunal, then the only presumption would be that assessee has accepted that particular addition. In any case, there is nothing on record to show that there was a change in the Chartered Accountant or that all papers were not avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he paper book, which is a copy of the account of the assessee in the books of M/s. Mech Marine Engineers (P) Ltd. and pointed out that as on 1st April, 1999 there was a debit balance of Rs. .28,24,700/-. After that assessee on 1st April, 1999 itself sold various assets like, computer, machinery, vehicle, crane etc., to the private limited company worth Rs. .13,92,378/- against which assessee started receiving various payments and during the year assessee also transferred certain amounts to the company and certain other trading transactions. He further pointed out that closing balance in the account was only Rs. .25,10,155/-. Therefore, during the year no fresh loan has been raised and, in fact, all the transactions are trading transactions only and the same cannot be construed as loans. Therefore, section 2(22)(e) is not applicable. He also read the provision and pointed out that section starts with the word "any payment by a company", which would mean payment during the year and not the opening balance. 10. He also referred to page 88 of the paper book and pointed out that at the end of the year there were reserves of Rs. .6,66,643/- whereas reserve in the previous year was Rs. . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and there would be corresponding credit balance in the books of the company in the name of the assessee on account of such trading transactions. Only after these transactions, the assessee company has made certain payments but in turn assessee has also transferred certain money through other transactions and the net result of the account is that the outstanding loan at the beginning of the year which was at Rs. .28,24,700/- got reduced to Rs. .25,10,155/-. Therefore, it is clear that all the transactions are mainly trading transactions and in our view provisions of section 2(22)(e) are not applicable even if the money is received against the sale of assets or from other trading transactions. Accordingly, we set aside the order of the ld. CIT[A] and delete the addition on account of deemed dividend. 13. Ground Nos.2 & 3: After hearing both the parties, we find that during the assessment proceedings it was noticed by the AO that assessee had made a claim of bad debts amounting to Rs. .29,28,311/-. He further found that the amounts were written off at the end of the year. From the details filed for such amounts it was noticed that in three cases the amounts shown by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad debt there was a loss of Rs. .21,23,077/-. He submitted that assessee had filed return in which income from salary from the company was declared along with the income from house property as well as loss of the proprietary concern and AO has also accepted the same. Therefore, it cannot be said that the proprietary business was closed. 16. As far as the discrepancies noticed by the AO are concerned, he argued that these differences were because the customers had not accepted certain bills and had also raised other disputes. Because of these differences etc., only the amounts had to be written off. He submitted that after the amendment to section 36 w.e.f. 1-4-1989 it is no more a requirement of the law that to prove that the debt has actually become bad and it is sufficient if the debt is written off. In this regard he relied on the decision of the Hon'ble Supreme Court in the case of CIT VS. TRF Ltd. (323 ITR 395). 17. On the other hand, ld. DR referred to the assessment order and pointed out that as per Deed of Agreement with M/s. Mech Marine Engineers (P) Ltd., the company was to take over the business of the proprietary concern and was also to acquire all the assets. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness. Further, there was a turnover of Rs. .18,79,500/- in the proprietary business and after claiming bad debts the assessee had declared loss of Rs. .21,23,077 and the return was filed accordingly. The AO has also considered these amounts which becomes clear from computation of the income at page 14 of the assessment order which is as under: Subject to the above, the total income of the assessee is computed as under: Income from salary as per statement Rs.65,000/- Income from House property (As per statement) (-) ₹ 75,000 Income from Business Net loss as per profit and loss account (-) 2123077 Add: On a/c. of bad debts 2928311/- Deemed dividend 666643/- Cessation of liability u/s.41 [as discussed 299495/- Sale to Gesco 93500/- 3987949 Add: disallowances i) Transporting charges 17400 ii) Purchase of raw materials 25000 iii) Advertisement 500 iv) Crane Hire charges 13500 v) Repairs and service charges 3500 59900 Rs.19,24,772 Income declared u/s.133A [as per return filed] Rs.14,00,000 Interest from R.F. M/s Oceanic marine Shippers ₹ 4,50,000 TOTAL INCOME Rs.37,64,772/- ROUNDED OFF TO Rs.37,64,770/- From the above it becomes cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be carried on by the company. However, some funds were required for successful completion of the existing business for which amounts were withdrawn and, in fact, the amounts were raised for business purposes only and, therefore, lenient view may be taken. 25. On the other hand, ld. DR strongly supported the orders of the CIT[A] and the AO. 26. We have considered the rival submissions carefully. It seems that assessee was coaxed to start a new company without understanding the implications of the law. The assessee was carrying on the business as a proprietary concern and new contracts were being taken by the company. Therefore, assessee might have withdrawn the amounts without understanding the implications. Since the money has been used for the purpose of business which was confused by the assessee to be one and, therefore, we are of the view that a lenient view can be taken in this matter and, accordingly, we set aside the order of the Ld. CIT(A) and delete the penalty. 27. In the result, appeal in I.T.A.No.740/M/10 for A.Y 1999-2000 is allowed. 28. I.T.A.No.741/M/10 - A.Y 2000-01: Through this appeal also assessee has challenged the order of the CIT(A) for confirming the pen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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