TaxTMI 
TaxTMI 
2010 (8) TMI 1158
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....n the second round of litigation in the order u/s. 153A read with section 143(3) passed by the Ld. A.O. which were carried into further appellate proceedings before the learned CIT(A) and ITAT in respective proceedings and were adjudicated upon by them before Ld. CIT passed order u/s. 263 of the Act. 1.2. The Ld. C.I.T. erred in law and on facts in wrongly passing the order u/s. 263 qua the amount of bad debts of Rs. 71,08,600/- which were allowed in the original assessment order u/s. 143(3) dated 18-03-2004 and for which the time limit of 2 years prescribed u/s. 263(2) was already over. The Ld. CIT wrongly assumed jurisdiction u/s. 263 for the above same amount presuming that the same is allowed for the first time in the order passed u/s. 153A r. w. section 143(3) dated 31-12-2007. Thus, the order passed by the Ld. C.I.T. being beyond the time limit prescribed u/s. 263(2) is barred by limitation and bad in law. 1.3. The Ld. C.I.T. has wrongly assumed jurisdiction u/s. 263 in respect of the issue of bad debts allowed by the Ld. A.O. u/s. 153A r. w. section 143(3) as such issue was not for the first time considered in the order u/s. 153A r. w. sec. 143(3). The Ld. ....
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....ted at 226 CTR-468. It is submitted that it be so held now and order passed u/s. 263 by Ld. CIT be quashed." 2. The facts of the case are that assessee is a broker dealing in shares business. The return of income was filed at a loss of Rs. 1,52,980/- on 30-10- 2001 for the Assessment Year 2001-02 and the assessment thereof u/s. 143(3) was completed on 18-3-2004 at a total income of Rs. 52,76,440/-. In that case, an addition of Rs. 21,22,560/- was made in respect of bad debts disallowed. The assessee went in appeal before the Ld. C.I.T.(A) who vide his order dated 8-11-2004 confirmed the order of the Ld. A.O. in not allowing claim of bad debts as well as not allowing the claim as trading loss u/s. 28(1). In this regard we refer to paragraph 6.2 to 6.4. from that as under :- "6.2. I have carefully considered the issue. It is seen that the appellant is carrying on business of buying and selling shares on behalf of its clients and in that process it earns income by way of brokerage. Thus the transactions are carried out in the course of business of the appellant. However, apparently this is a case where sale and purchase is not of the appellant but he is working as an agent....
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....w that any steps were taken for recovery of this amount. It is clear that in the year under consideration, the amount cannot be said to be irrecoverable as the party in question had sufficient assets and no steps were taken to recover this amount. In view of the above, the claim of the appellant cannot be allowed and the A. O's action is upheld." 3. The assessee then went in appeal before the Tribunal which vide their order dated 27/2/2009 in the case of 35 assessees including this assessee who was listed at item No.19 and 20 therein, restored the matter to the file of the Assessing Officer to verify whether assessee has written off the amounts in the books of accounts and if yes, the deduction should be allowed to the assessee but where assessee has merely made the provision then deduction should not be allowed. In this regard we refer to paragraph 64 of the order of the Tribunal as under :- "64. However, in ITA No.99/Ahd/05 for A.Y. 2001-02, it is not clear from the record whether the assessee has written off the amount in its books of account or has made the provision. We, therefore, direct the A.O. to verify the audited books of account and in case the A.O. finds th....
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....sition shall abate. The assessment for A.Y. 2000-01 and 2001-02 were not pending on the date of search/requisition. Hence the legal objections of the appellant are not acceptable and are therefore, rejected. 8. The disallowance made by the A./O. for sub-brokerage and the provisions for bad debt is based on the reasons in the original assessments. The CIT (A) in his order dated 8-11-2004 for A.Y. 2000- 01 and 2001-02 has deleted the disallowance for the sub-brokerage as discussed in his order in Appeal No. CIT (A)/Cir./94/04-05 dated 8/11/2004. The facts and circumstances being the same the disallowance of sub-brokerage i.e. Rs. 98,720/- and Rs. 3,46,286/- in A.Y. 2000-01 and 2001-02 is therefore, deleted. In respect of the disallowance for provision of bad debt it is seen that the disallowance was confirmed for both the assessment years in the appellate orders by the Cs. IT(A). The facts and circumstances, contentions being the same, the disallowance for provisions of bad debt ius upheld. The related ground(s) of appeal is rejected." 6. Thereafter, the matter traveled to the Tribunal which vide their order in ITA No.800 & 801/Ahd/2009 pronounced on 5-6-2009 deleted the ....
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....e/263/Mahipat/08-09 March, 18, 2009. The Principal Officer, Mahipat Raichand Share Broking Pvt. Ltd., 701-702, Premium, Behind Handloom House, Off. Ashram Road, Ahmedabad. Sir, Sub:- Show cause notice for action u/s. 263 of the I.T.Act - A.Y. 2001-02 - PAN AABCM 0357 Q - reg. - ---- The assessment for A.Y. 2001-02 was finalized in your case u/s. 153A r. w. s. 143(3) on 31.12.2007 by DCIT, Central Circle 2(2), Ahmedabad, which was subsequently modified by order u/s. 154 dated 18.02.2009. The orders passed by the A.O. have been perused by me. It is observed from the orders that: "While determining the total income at Rs. 45,32,957/-, the bad debts written off incorporat....
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....debts and Assessing Officer, after verifying certain details, concluded that a sum of Rs. 21,22,560/- as not eligible for deduction u/s. 36(1)(vii) of the Act. Regarding the balance amount of Rs. 71,08,600/-, even though the Assessing Officer carried out some verification, the claim as bad debts was accepted. The disallowance made by the Assessing Officer was deleted by the Hon'ble ITAT wherein it was held that the amount was allowable as business loss u/s. 28(1) of I.T. Act. This would show that the deduction allowed by the Assessing Officer for Rs. 71,08,600/-was without proper verification as to the nature and correctness of the claim both on facts and in law. It is the contention of the assessee that the issue of erroneous deduction of Rs. 71,08,600/- as bad debts has merged with the decision of the Hon'ble ITAT on the issue of deduction of Rs. 21,22,560/- as allowed. The argument is incorrect as the issue is different and Hon'ble ITAT had no occasion to consider the allowability of Rs. 71,08,600/- which the Assessing Officer had allowed u/s. 36(1)(vii); whereas the amount of Rs. 21,22,560/- held by the Hon'ble ITAT as allowable u/s. 28(1) of the I.T. Act. As the issue was neve....
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.... section 263 cannot be invoked in respect of the claim of bad debts which was already considered by the A.O. in the original assessment order passed on 18-3-2004 which was subsequently merged in to the order of appellate authorities like CIT(A) and Tribunal in the first round of assessment order passed u/s. 143(3). He submitted that A.O. had in fact considered entire claim of bad debts of Rs. 92,31,610/- and out of them he had considered fit to make addition in respect of 3 items only whose amount total up to Rs. 21,22,560/-. He referred to page-6 of the assessment order dated 18-3-2004 wherein Assessing Officer had considered 7 items of bad debts as under:- Sr. No. Name of the parties. Amount.(Rs.) 1. Amit Arun Bhargav 11,310/- 2. Chandrakant S.Trivedi 64,680/- 3. Mundra Investment 1,22,862/- 4. Prime Share & Stock Pvt. Ltd. 21,06,783/- 5. Pee Square Trading Co. 16,400/- 6. Sneha Securities Pvt. Ltd. 4,465/- 7. Tejbahadursingh Deshrajsingh Rajput. 69,05,107/- Total 92,31,610/- 10.2 The ld. AR referred to paragraphs 14, 18 and 19 where A.O. had discussed the issue of bad debts in respect of S....
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....the account of Mahipat Raichand Sharebroking Pvt. Ltd. from my books of accounts up to 31-03- 2002 moreover, I am also submitting acknowledgement of my return of income filed for A.Y. 2002-03. Q.10. State whether have you paid any of the amount of the above stated amount in Question No.8? A.10. No, I have not paid any of the above stated amount due by me till today because of my bad financial position." 10.3 Thus, once the issue is considered by the A.O. in the original assessment and was accepted and no material is found in the search against this claim then the same cannot be considered u/s. 153A again and therefore, the same cannot be the subject matter of revision under section 263. 10.4 The Ld. A.R. then submitted that issue regarding the trading loss has also been considered by the Tribunal in their order dated 27-2-2009 in para 62,63 and 64 and also in their order dated 5-6-2009. Once this bad debt is also considered as trading loss by the Tribunal then the order of the A.O. merged in the order of the Tribunal. Then, the same cannot be revised by the Commissioner u/s. 263 by virtue of clause (c) of section 263(1). 10.5 In any case, Ld. A .R. submit....
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....r dated 18-3-2004 which reads as under :- "4. The copies of accounts of above said parties were verified and from such accounts it was seen that the debit balances of the above said parties in the books of accounts of the assessee had arisen mainly on account of quantum of such transactions on which the assessee was earning only brokerage. It would be important to repeat here that assessee was earning only brokerage income and not engaged into the trading of shares in these accounts. The revenue income transactions with the above said parties were limited solely and exclusively to brokerage on the quantum of the transactions. Only for the purpose of accounting of ledger account was maintained in the books wherein all purchase and sales of transactions of the above said parties, made through the assessee, were recorded and the difference of such amounts was the debit or credit balance reflected therein. It is also possible that such ledger accounts of these parties consisted of certain loans/advances." He also recorded the statement of Shri Tejbahadursingh Deshrajsingh Rajput and he was apparently satisfied that claim of bad debts in respect of other four parties was acc....
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....lowance. It was held that subject matter of grant of investment allowance was considered by AO. Therefore, it was necessary to go into the question of validity of the ground of investment allowance for the items already made admissible by the A.O. since the ground of investment allowance on all the items were matters for consideration by the Appellate Authorities clause (c) of the Explanation of section 263(1) would be attracted. Therefore, the CIT could not exercise his revisional powers. 17. In CIT vs. Nirma Chemical Works Pvt. Ltd., (2009) 309 ITR- 67 (Guj.) where the Commissioner took a different view on the claim of deduction u/s. 80I which was allowed partially by the A.O., and disallowed partially by CIT(A), it was held that it is not the case of an order erroneous and prejudicial to the interest of Revenue. 18. In the case of John Wyeth & Brothers Ltd. vs. CIT reported at 312 ITR- 80 (ITAT Mumbai Bench), it was similarly held that if the order of A.O. is merged in the order of CIT(A), then Commissioner has no power to assume jurisdiction to revise the order of AO in respect of the amounts covered in appeal. But where an issue is not taken up in appeal, the Commissione....