2016 (3) TMI 318

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.... debt either under section 36(2) [section 36(1)(vii) - SIC] or as business loss under section 28 of the Income Tax Act, 1961 ["Act" in short]. 2. Brief facts of the case are that the assessee is partnership firm engaged in the business of civil contractor and filed its return of income declaring total loss of Rs..65,40,713/-. The return filed by the assessee was processed under section 143(1) of the Act and subsequently selected for scrutiny and notice under section 143(2) of the act was issued and served on the assessee on 09.09.2009. After considering the details filed by the AR of the assessee, the Assessing Officer has observed that the assessee has claimed the advance payment made towards purchase of land as bad debt. After considerin....

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....ion under section 36(1)(vii) of the Act as bad debt. By supporting the order passed by the Assessing Officer, the ld. DR has prayed that the order of the ld. CIT(A) should be reversed on this issue. 5. On the other hand, the ld. Counsel for the assessee, by filing various particulars in the form of paper book, supported the order passed by the ld. CIT(A) and prayed that the same should be confirmed. 6. We have heard both sides, perused the materials on record and gone through the orders of authorities below. We have also perused the paper book filed by the assessee. The Assessing Officer made the disallowance for the following reasons: This is the first year the assessee claims to be deviating from the actual business of civil contracto....

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....med, son of Mukthar Ahmed, Muslim aged about 41 years, Managing Partner of MAX VALUE HOUSING having office at G1-B, Ground Floor, 63/27, Eldams Road, Alwarpet, Chennai 600 018, hereinafter referred to as the PURCHASER which expression shall unless repugnant to or inconsistent with the context mean and include their heirs, legal representatives, executors, administrators and assigns of the OTHER PART." It is very clear from the above that the purchaser is Mr. M. Khadeer Ahmed, son of Mukthar Ahmed, Managing Partner of MAX VALUE HOUSING and not the assessee firm M/s. MAX VALUE HOUSING. Even the twenty rupees non-judicial stamp paper to execute the agreement for sale was purchased for Mr. M. Khadeer Ahmed and not for the assessee firm. Moreov....

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....ing shall not be liable or responsible." That being so, if at all any loss incurred by the partner of the firm Mr. Khadeer Ahmed towards any transaction, then, he has to bear the loss and not by the assessee firm. General authorization given in the partnership deed to carry out "any other activity" is no longer res integra in the absence of specific authorization is required in acquisition of capital assset when lakhs of rupees involved. So much so, when lakhs of rupees of public are involved, it is the duty of the assessee to get legal entity before entering into any transaction for acquisition of any property. It is a layman statement that the assessee has committed a mistake, out of which, it has incurred the loss, which cannot be acce....