TaxTMI 
TaxTMI 
2016 (4) TMI 476
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....he same comprised of advances to M/s. Moogambiga Supplies, RRRDA (Rural Research and Rehabilitation Development Agency) and Molin Mission Church of Rs. 1,90,450/-, Rs. 8,50,000/- and Rs. 10 lacs respectively on purchase of inter alia materials, transport, earnest money deposit for obtaining construction work for building houses etc. It emerges that the assessee has also initiated criminal proceedings alleging fraud and cheating. The Assessing Officer in assessment order dated 26-12- 2008 inter alia observed that the assessee had not furnished relevant accounts and work order, details of measures undertaken for recovery of debts and failed in substantiating its claim as per section 36(1)(vii) r.w. sub-section 2 of the Act. He would place reliance on hon'ble jurisdictional high court decision in (2007) 162 TAXMAN 114 (Guj) Dhal Emprises and Engineers India Pvt. Ltd that mere debiting of the amount in question is not sufficient and the same have to be written off as well. This discussion resulted in the impugned disallowance being made in assessee's case. 3. The CIT(A) confirms Assessing Officer's findings as under:- "3.0 The second ground of appeal is regarding the addition of ....
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....ntention that, mere debiting the amount to Profit & Loss account was not sufficient. 1.2 The Appellant strongly submits that the Appellant has taken sufficient steps to recover the amount and filed criminal complaints against the parties concerned and till date no recovery has been made. Further, amounts were given to the parties concerned in course of business of construction by the Appellant. As the same could not be recovered in spite of the efforts made by the Appellant, the same were written off as business loss and such loss is allowable u/s 27/37 of the Income Tax Act, 1961 since the advance were given by the Appellant in course of his business. 1.3 Our above contention is supported by the following decisions: (I) Lords Dairy Farms Ltd. v. CIT (27ITR 700 (Bom)) (II) Minda HUF Ltd. v. Jt. CIT (101ITD 191 (Del)) (III) CITv. Inden Biselers(181 ITR69(Mad)) (IV) CIT v. Abdul Razak & O. (136 ITR 825 (Guj.)) 1.4 It is submitted that as regards decision of Dhall Enterprises & Engineers (P) Ltd. (207 CTR 729 (Guj.)), the same has been overruled by the decision of the Hon'ble Supeme Court in case of Rajendra Y. Shah (3....
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.... 296 ITR 514 (Mad.). Secondly, even if it is treated as loss, the same will be capital loss and not the revenue loss as the initial payments were made for earnest money deposits. Anyhow, as per the decision of the Hon,ble Gujrat High Court in the case of Dhall Enterprises 295 ITR 481 (Guj.), the bad debts can be allowed only if the assessee prove that the debt had become bad. The appellant could not established the same and therefore, the same cannot be allowed as bad debt. The disallowance so made for Rs. 18,50,000/- is accordingly confirmed. The second ground of appeal is accordingly dismissed." 4. Heard both sides. Relevant findings perused. There can be hardly any dispute about the legal positions in view of hon'ble apex court decision in TRF Ltd. vs. CIT 323 ITR 397 that after amendment in section 31(vii) of the Act post facto 01-04-1998 that it is not necessary for an assessee to establish the debts to have actually become bad. It impliedly overruled hon'ble jurisdictional high court decision in Dhall Enterprises (supra). We find that the assessee has filed all necessary details even before the CIT(A) qua the bad debts in question. There is no evidence much less cogent one....
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....bility of expenses was not related to the year under consideration. The Ld. Counsel could not prove that the liability was materialised during the year under condideration. Since, the expenses were incurred in the A.Y. 2003- 04 and A.Y. 2004-05, the same cannot be allowed. In view thereof, have no alternative except to confirm the finding of the Assessing Officer. The disallowances of expenses of Rs. 17,23,034/- (Rs. 9,90,400/- + Rs. 7,32,634/-) are accordingly sustained. I have also gone through the details of other expenses. The leveling expenses were paid to eight-nine persons in cash on self made vouchers on the basis of Rs. 8,000/- to 9,400/- per day. The Ld. Counsel could not explain as to what was the basis of Rs. 8,000/- to 9,400/- per day per person. The land wire fencing expenses of Rs. 4,49,100/- were paid to one Shri Bharatbhai Prajapati on the basis of Rs. 18,500/- Rs. 19,000/- and Rs. 19,500/- per day for twenty four days and the same were paid in cash. The Ld. Counsel could not explain as to what was the basis of Rs. 18,500/- to 19,500/- per day. Likewise, the land development expenses of Rs. 25,58,400/- were paid to sixseven persons on the basis of Rs. 12,000/- to 1....