Hemant Brothers (Firm) Vs ACIT (ITAT Ahmedabad)
Material Facts
The appeal arose from the order of the CIT(A) affirming the Assessing Officer’s disallowance of ₹2,69,16,348 claimed as bad debts for AY 2014-15. The assessee, engaged in trading in shares and commodities, had undertaken commodity transactions on the National Spot Exchange Limited (NSEL) through M/s Chimanlal Popatlal Commodities Brokers Pvt. Ltd. The amount was written off by debiting the Profit & Loss Account.
Procedural History
The original assessment under Section 143(3) was revised under Section 263, following which a fresh assessment under Sections 143(3) read with 263 disallowed the bad debt claim. The CIT(A) upheld the disallowance on the ground that recovery proceedings relating to NSEL transactions were still pending and the claim was premature. The assessee appealed before the Tribunal.
Legal Issues
- Whether the assessee was entitled to deduction of ₹2,69,16,348 as bad debt under Sections 36(1)(vii) and 36(2).
- Alternatively, whether the amount was allowable as a business loss under Section 28.
Relevant Statutory Provisions
Sections 28, 36(1)(vii), 36(2), 43(5), 143(3) and 263 of the Income-tax Act, 1961.
Parties’ Contentions
The Assessing Officer held that the assessee had not established actual delivery of commodities and that the bad debt claim was premature as recovery proceedings were pending. The assessee relied on contract notes, broker confirmations and delivery reports, contending that the amount had become irrecoverable and had been duly written off in its books.
