TaxTMI 
TaxTMI 
2011 (5) TMI 686
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....der section 263 of the Act with directions to the Assessing Officer to redo the same afresh. A copy of the order of the CIT dated 2 1.12.2005 passed under section 263 is placed at pages 51 to 53 of the paper book, from which it is seen that proceedings were taken by the CIT on the ground that the claim of bad debts amounting to Rs.95 lakhs due from M/s. Potlurri Lease & Hiring Purchase Pvt. Ltd. was wrongly allowed in the assessment made on 11.03.2005 and that the Assessing Officer ought to have made proper enquiries into the assessee's claim. The Commissioner observed that the assessee held shares of M/s. SMS Pharmaceuticals Ltd. which were sold to M/s.Potlurri Lease & Hiring Purchase Pvt. Ltd. for Rs.3,37,50,000/- and out of the agreed sa....
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..... is concerned, it was treated in the books of account as investment and loss arising from the sale of shares was treated under the head "long term capital loss" and set off against the long term capital gains in the later years. After making these observations the Tribunal eventually held that the CIT was correct in acquiring jurisdiction to revise the assessment order under section 263 of the Act. 4. We may also notice one more aspect of the matter. In the same paragraph, the Tribunal in its order also observed that prima-facie the claim of bad debt cannot be considered under section 36(1)(vii) and from the facts on record and submissions made "it can be concluded that the assessee has wrongly claimed the amount not recoverable from M/....
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....at the said loss of Rs.95,00,000/- should be allowed as a business loss and thereby writing it off as bad debt under section 36(1)(vii) of the Income Tax Act cannot be allowable as the conditions laid down by section 36(1)(vii) of the Income Tax Act, 1961 are not satisfied by the assessee company. 4.4 Hence, the aforesaid claim of bad debts of Rs.95,00,000/- is disallowed as business loss and treated as capital loss of the earlier year and are allowed to be c/f as per law". 6. On appeal the CIT (A) recorded the following findings:- a) Merely because the shares of SMS Pharmaceuticals Ltd. were shown in the assessee's balance sheet as non-trade investments, it cannot be said that they were not held for trading purpo....
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....Pvt. Ltd. was a business debt and since the same could not be recovered and was written off as bad debt in the assessee's books, it is allowable as bad debt under section 36(1)(vii) of the Act. On the basis of the above findings, the CIT (A) allowed the claim of the debt. 7. The revenue is aggrieved by the aforesaid decision of the CIT (A) and has come in appeal before the Tribunal. In our opinion, their grievance is fully justified. There is no dispute that the shares of M/s. SMS Pharmaceuticals Ltd. were shown under the head "investments non-trade" in Schedule 5 to the balance sheet. Even if it is assumed that this is only to describe the type of investments made vis-a-vis the other business activities of the company and it do....
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....shares said to have been carried on by the assessee, the assessee's conduct in claiming the loss on the sale of the same shares as capital loss in the return filed for the assessment year 1999-2000 clearly indicates that the claim is untenable and it should not have been accepted by the CIT(A). The assessee also claimed to carry forward the long term capital loss, which included the loss on the sale of shares of M/s. SMS Pharmaceuticals Ltd. and set it off against the long term capital gains for the subsequent assessment years. Having thus claimed that the loss on the sale of shares was a capital loss (long term), the assessee is now taking a completely contradictory position by claiming that the unrecovered amount of Rs.95 lakhs from the s....