TaxTMI 
TaxTMI 
2024 (7) TMI 346
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.... 154 of the Act by the Income Tax Officer, Ward-6(1), Lucknow [in brief 'AO'] 2. The case was called twice, none appeared at the bequest of the assessee. Adverting to letter dt. 26/06/2024 the Ld. DR Mr SK Sharma reiterated the contents thereof and prayed for adjournment which reads as; 'in this case, AO has sought more time to trace the copy of RAP objection, which is being traced in various relevant offices (mail received from AO is enclosed herewith). In the interest of justice, it is requested that the hearing in this case may kindly be adjourned for any other regular date due, as deemed appropriate. . . .'. 3. We are mindful to the fact that the instant appeal was filed way-back in the year 2020 and was adjourned from time-time for v....
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....998/- towards depreciation claimed as per Company Law. Post assessment owning to Revenue Audit Objection [in brief 'RAO'] the Ld. AO invoked his rectification jurisdiction by notice u/s 154 of the Act and called upon the assessee to show cause as to why 'provision for loss in investment' claimed in the return not to be disallowed and rectified the assessment accordingly. In the absence of effective representation, an amount of Rs.70,95,000/- representing provision for loss in investment was disallowed and added to total income/loss by an order of rectification dt. 29/03/2014. The assessee challenged the rectification in appeal before the Ld. CIT(A). Finding force in the merits of the case, the Ld. CIT(A) stuck-down the rectification holding....
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....hallenge thus seeks to answer twin questions viz; (1) as to whether disallowance of 'provision for loss in investment' is a debatable issue? And (2) as to whether non-disallowance of such provision is apparent on the face of the record so has to fall within the ambit of section 154 of the Act? 6. Before we procced to fetch answer to former twin questions, we note that, there is much less dispute over that; (a) the assessee is maintaining its books of accounts on mercantile/accrual basis and thus all income & expenses are booked as when they are incurred irrespective of actual receipt or payment thereof, (b) the assessee holds certain investments and the provision for loss in investment was debited to profit & loss account and claimed in th....
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....ck of assets is mandatory irrespective of creation of provision or claim in the return. Lastly, the regulatory provisions which either originate from applicable corporate, security, business & other regulatory laws etc., or from accounting/reporting standards which mandates the creation of provisions for diminishing in the value of assets, investment, losses and liabilities as the case may be. These regulatory provisions are expressly instituted by either the regulatory laws or the mandatory accounting & reporting standards etc. as applicable to an assessee. 8. All provisions created in books not necessarily be deductible under the Act and all deductible provisions need not required to be accounted in books as well. The provisions for expe....
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.... capital assets held for earning income by way of interest, dividend, rentals, capital appreciation and for such other non-financial benefit including management, control and business arrangement etc. All capital assets are investment but not all investment partake the character of block of asset for the purpose of depreciation under the Act. The provisions of corporate laws through accounting standards mandates the creation of provision for loss or diminish in the value of investment and provisions against the impairment of certain capital assets, however, no portion of such provision created against/for loss or diminish in the value of investment or no portion of impairment of capital assets is entitled for deduction under the Act. 11. K....
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....13. Now coming to the second question, it shall suffice to state that the impugned item i.e. 'provision for loss in investment' was appearing glaringly on the face of financial statement which travelled to computation of income. The Ld. AO however lost sight of impugned item while framing the assessment u/s 143(3) of the Act. The audit objection notified the mistake of allowing the impugned item which was obvious & patent and not something which can be established by a long-drawn process of reasoning on points on which there may be two opinions. In the event after following the due process & according reasonable opportunity to the assessee, Ld. AO reversed the impugned allowance by an order passed u/s 154 of the Act. 14. In the event of ef....