AI Drafter 
TaxTMI 
TaxTMI 
2017 (2) TMI 1340
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.... "On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 4,32,42,500/- made on account of disallowance of advance written off." 3. The brief facts qua the issue involved are that, the assessee company is engaged in the business of promotion, construction, development and sale of integrated townships, residential and commercial multi-storeyed buildings, flats, shopping malls, IT parks, Hotels SEZs, houses and apartments. As culled out from the impugned order the assessee in the financial year 2006-07 has made payment of Rs. 11,64,20,000/- to one Mr.M. Kishore for acquisition of land at Pilerne, Goa in the normal course of its business activity. However, out of the total advance mad....
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....r account in the name of Mr.M.Kishore wherein this amount has been shown as recoverable was also filed before the authorities below. It has also been pointed out by him that these facts were disclosed even before the Joint Director of Income Tax (Investigation Wing), Panaji, Goa vide letter dated 23.1.2010, under proceedings issued under section 131 of the Income Tax Act,1961 (the Act). The A.O. first of all disallowed the claim of 'bad debt' on the ground that he has not filed any confirmation from Mr. M.Kishore, and, thereafter he proceeded to invoke the provisions of section 79 of the Act on the ground that, 100% shareholding of the assessee company has been changed during the year under consideration. Therefore, any previous losses/bad ....
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.... the said amount is to be treated as 'business loss' incurred during the normal course of business, because it amounts to transaction relating to purchases of stock in trade. Therefore, any loss in the course of such a transaction is to be allowed as business loss only. He also strongly relied upon the decisions of Honourable Delhi High Court as have been relied upon by the learned CIT(A). 7. The Ld.D.R. had strongly relied upon the order of the Assisting Officer and also submitted that the amount which was advanced to Mr. M.Kishore as not been demonstrated or substantiated that, how it has become irrecoverable. Further the assessee cannot claim the loss both as a 'bad debt' and also as a 'business loss', because the conditions precedent....
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....nder. Date Particulars Vch type Debit - Rs. Credit-Rs. 31.3.2006 To Emmar MGF Land P.Ltd.-SD Being advance paid to M.Kishore towards advance against land Journal 40,000,000 15.5.2006 To HSBC A/c 051-330918-001 Ch.no.288252 issued in favour of M.Kishore Alia Kishore Mulla Payment 31,420,000 30.6.2006 To Emmar MGF Land P.Ltd.-SD Being payment made By Emmar to M.Kishore on our behalf Journal 45,000,000 31.3.2007 By Index No.78/0 & 84/0 Date of registry 23.5.2006, registry amount Rs. 7,31,72,000/- ,stamp duty 29,28,900/- (Paid by Chintz Buildcon P.Ltd.) & Misc. Rs. 5,500/-. Journal 116,420,000 73,177,500 73,177,500 43,242,500 Closing Bal....
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.... have taken the cost of the inventory/stock in trade in the trading account by including this sum of Rs. 4,32,42,500/- that is added to the cost of land, and in this year if the assessee had made sales and part of the said amount which remained irrecoverable, would have written off, then the assessee would have claimed it as a bad debt. The conditions precedent for claiming the bad debt has laid down in S.36(2) read with S.36(1)(vii) is not satisfied. The said claim cannot be allowed as bad debt. Further, in the balance sheet the amount appearing as advance to others for land under 'loans and advances', in Schedule 5 is still showing outstanding in the year, and, therefore, this amount appears to be different, hence it is not a case of bad ....