TaxTMI 
TaxTMI 
TaxTMI 
2025 (3) TMI 812
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....The assessing authority examines the claim in detail, ultimately accepting the assessee's claim to an extent of Rs. 4.07 crores (approx.) negativing the claim of bad debts qua the period 01.04.2005 onwards. The discussion in this regard in order of assessment dated 23.12.2011 is as follows: 3.1 Out of the total bad debts of Rs. 4,99,12,188/-, the assessee has during the year written-off bad debts of Rs. 4,94,91,343/- thereby reducing the taxable long-term capital gain. The entire Bad debts relate to the amounts receivable from M/s. Polaris Health Care Pvt Ltd. The assessee company had been doing certain job works for M/s. Polaris Health Care Pvt. Ltd and the volume of job undertaken during FY 2003-04 & 2004-05 for a value of Rs. 3,21,37,707/- & Rs. 3,09,37,577/- respectively. In Financial Year 2005-06, further job contract for a value of Rs. 1,10,89,224/- was undertaken. In FY 2004-05 itself, the assessee knew that the amount due from M/s. Polaris Health Care Pvt. Ltd (PHCPL for brevity) would not be recoverable and therefore crated a provision of Rs. 4,07,03,328/- as at 31.03.2005. The provision was added back in the memo of computation of total income. Though the assessee r....
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.... of Rs. 93,44,509/- and sale of scrap written-off not in any way impart the characteristic of business activity during the year. Further for same reason, of that there was no business activity, ignoring the business loss and only short term capital gain was brought to tax, during the assessment year 2008-09. Based on the reasons enumerated above, the write-off of bad debts of Rs. 4,07,03,328/- during the AY 2009-10, which is relating to business is not allowable expenditure and the same is not eligible for set-off against the capital gain during the year. Since the activity for the year does not exhibit real, substantial and systematic or organized course of activity of conduct with a set purpose. Therefore, the expenditure akin to business debited in the profit and loss account is not allowable. Hence the allowability of deduction of Rs. 4,07,03,328/- towards bad debts as a business loss against the capital gain requires to be withdrawn. As the assessee has failed to disclose fully and truly all material facts necessary for the assessment, I have reasons to believe that income chargeable to tax has escaped assessment within the meaning of section u/s 147 of the Income Tax Act.....
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....the assessee, all materials necessary to adjudicate upon on the merits of the matter had been presented to the assessing authority even at the time of original assessment. Hence, and as the reasons would itself reveal, there was nothing new that had been brought to the table by the assessing authority. The impugned proceedings are thus nothing but a review in the garb of re-assessment, which is impermissible in law. 11. On the merits of the disallowance, the appellant would rely on the judgment of the Supreme Court in TRF Ltd. V. Commissioner of Income Tax (323 ITR 397). As per that judgement, once there had been a reversal of the bad debt in the previous year relevant to the subject assessment year, nothing further needed be done, and the write-off of the debt was permitted in law. 12. Per contra, Mr.Ramana Kumar, learned Senior Standing Counsel would defend the impugned order pointing out that there was an error in the order of assessment, which is what had been remedied in the subject re-assessment proceedings. He would further submit that the assessee had failed to place the issue in proper context in the original assessment which is what had led to the error in the first pla....
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....Discount and Finance House of India Ltd. v. S.K. Bhardwaj, CIT reported in MANU/MH/0628/2002, as also in another decision of the Bombay High Court reported in MANU/MH/0629/2002 in the case of CIT v. United Western Bank Ltd. It is not in dispute that the revenue has accepted the aforesaid two judgments of the Bombay High Court. We are in agreement with the view expressed by the Bombay High Court. 19. In a recent judgment in the case of Mangalam Publications V. Commissioner of Income Tax, Kottayam (461 ITR 159), the Supreme Court dealt with the 'perennial question in Income tax jurisprudence' relating to re-assessment of income under Section 147 of the Act as in the present case. The defence taken by that assessee, as in the present case, was that the re-assessment proceedings were barred by limitation as the notice had been issued beyond the period of 4 years from the end of the relevant assessment year. 20. Judgments of the Supreme Court in the case of Kelvinator (supra), CIT V. Bimal Kumar Damani (261 ITR 87), Srikrishna (P) Ltd. V. CIT ((1999) 9 SCC 534), Phool Chand Bajrang Lal V.CIT ((1993) 4 SCC 77), CIT V. Lakhmani Mewal Das (103 ITR 437) and Calcutta Discount Co. L....
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....years was much higher than what was assessed and therefore, had escaped assessment. This is nothing but a mere change of opinion which cannot be a ground for reopening of assessment. 21. In light of the discussion supra, and the admitted and apparent position that the Department has not brought on record any material to establish failure of the Appellant to make a full and true disclosure, the assumption of jurisdiction under section 147 if held to be bad in law. Though the discussion in regard to the assumption of jurisdiction beyond the period of limitation would suffice to allow this writ petition, in the interests of completion, we add a few words on the merits too. 22. The Supreme Court in TRF Ltd (supra), has held that post amendment to Section 36(1)(vii) of the Act, with effect from 01.04.1989, all that is necessary for an assessee to claim a bad debt is for reversal or write-off of the debt in the relevant financial year. There is no necessity for a justification that the debt has, in fact, gone bad. The relevant portion of the judgment is extracted below: For the sake of clarity, we re-produce herein below provisions of Section 36(1)(vii) of the Act, both prior to 1st ....