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TMI Blog2022 (10) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirming the addition of Rs. 1,10,00,000/- on account of bad debts claimed u/s 36(2)(i) of the Income Tax Act, whereas as per the explanations furnished and material placed on record, the addition so confirmed is unjustified and uncalled for. The same be deleted. 2. On the facts & in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs. 1,10,00,000/- on account of bad debts claimed u/s 36(2)(i) of the Income Tax Act by holding that the amount which has been passed through the profit and loss account could only be eligible for claim under section 36(2)(i) of the Income Tax Act. 3. That the appellant craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed of." 3. Brief fact of the case is that the assessment was completed u/s 143(3) of the Act. The assessee is a company incorporated under the Companies Act, 1956 and doing business promoting and development and the housing project. During the assessment proceedings, it was noticed that the assessee has debited Rs.1,10,00,000/- under the head 'Amount written off paid against advance of land.' The Revenue asked to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee filed an appeal before the ld. CIT(A). The ld. appellate authority adjudicated the issue against the assessee. Being aggrieved, the assessee filed an appeal before us for further adjudication. 4. The ld. counsel of the assessee Mr. Sudhir Sehgal vehemently argued and relied on the written submission filed before the Bench which is kept in record. Mr. Sehgal first argued and mentioned that the loss of investment of the land is a nature of business loss. The assessee is a promoter and dealing with the land. The purchase of land was stock in trade. The ld. counsel has drawn our attention in paper book pg. 45 of the APB. In the audit report & the financial statement, the amount or Rs.1,10,00,000/- is adjusted in the head expenses 'under the head amount written of paid against advance of land'. 5. The ld. counsel further argued with the same question was raised during the assessment proceedings in the notice u/s 142(1) of the Act, in point no. 10C which is extracted as follows: - "please furnish the details of that amount written of paid against advance of land' amounting to Rs.1,10,00,000/- under the head of other expenses and P & L account explain the steps taken to recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raises a query during assessment proceedings as per pages 60 to 61 of the paper book and at page 61, para 10, the said query had been raised. v). The assessee has replied as per the copy of the letter placed at pages 62 to 63 of the Paper Book and at page 62, in para 2, the business of the assessee company has been stated and at page 63, the reason for claiming the bad debit has been mentioned therein. vi). Again, further clarification has been given at pages 64 to 66 of the Paper Book alongwith copy of account, and the amount has been written off at page 67 of the Paper Book. vii). Copy of the agreement to purchase of land with the land owner, dated 13.09.2005 is at pages 68 to 72 of the Paper Book, where the detail of the payments have been mentioned and not doubted by the department. viii). The Judgment of Hon'ble Punjab Et Haryana High Court dismissing the appeal of the land owner is there at pages 73 to 122 vide order, dated 12.11.2009. ix). The facts as given to the CIT(A) are there at pages 124 to 126 and at page 127 of the Paper Book. 2. From the above details, it is very clear that it was not the capital expenditure but the amount advanced for business expedien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,60,337.00 on the ground that none of the advances was routed through the profit and loss account and also the advances were not made to obtain any current assets of the business." He also relied in the order of the Hon'ble Supreme Court in the case of CIT v. Mysore Sugar Co. Ltd. [1962] 46 ITR 0649 (SC), in this case we respectfully observe that the advance was given to the farmer for harvesting the sugarcane, the some amount was irrecoverable. This particular amount was not in investment. The irrecoverable amount being Revenue loss deductible in computing business of the assessee. He further relied on the order of CIT v. Woodcraft Products Ltd. (1996) 217 ITR 0862 (Kol). 6. The ld. Sr. DR vehemently argued and mentioned that the nomenclature of the loss is a bad debt. He further mentioned that in the return of the assessee in page no. 12 of APB in column no. 39, the amount is declared as back date. So, the entire amount is treated u/s 36(2) as bad and doubtful debts. On the other hand, this amount is not related to origination of Revenue, so it is not covered the sale proceed. So, this particular amount is not acceptable as bad & doubtful debt & as business class. 6.1. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se It does not comply to requirement of 36(2)(i) Income Tax Act. The only difference between claim of expenditure of bad debt and claim of business loss is about the eligible financial year. In the case of bad debt written off the eligibility is in the year in which such bad debt has been written off. However the business loss can be claimed only in the year then the same has been ascertained and has become final." 7. Mr. Sehgal further argued that the Revenue Authority once it is accepted that it is for business purpose but on other hand it is taken as capital advance. The Revenue Authorities is distorted our view from normal business loss to bad debt. The assessee never claimed that this particular amount is a bad debt. But in the return the amount was mentioned in the column bad debt due to the reason that there is no other column was allocated for the other business loss. The assessee filed tax audit report and balance sheet with the return of income, and the claim was clearly mentioned in the audit report & profit and loss account. On the other hand, the question of the ld. CIT(A) was that on the claim was not made in 2009 on which the judgment of the Hon'ble Punjab & Harya ..... X X X X Extracts X X X X X X X X Extracts X X X X
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