The Joint Commissioner of Income Tax Vs. M/s Video-con Industries Ltd.
ITAT Mumbai
I.T.A. No. 7252/Mum/2007
(Assessment Year: 2003- 04)
Dated= 20.05.2011
ORDER
Per R.V.Easwar, President: This is an appeal by the revenue and the only effective ground is that the CIT(A) erred in allowing the claim for deduction of bad debts under section 36(1)(vii)of the Income Tax Act.
2. The appeal arises this way. The assessee is a public limited company engaged in the business of leasing and providing services. The assessment for the year under appeal was originally completed under section 143(3) on 11.03.2005 but it was set aside by the Commissioner under section 263 of the Act with directions to the Assessing Officer to redo the same afresh. A copy of the order of the CIT dated 2 1.12.2005 passed under section 263 is placed at pages 51 to 53 of the paper book, from which it is seen that proceedings were taken by the CIT on the ground that the claim of bad debts amounting to Rs.95 lakhs due from M/s. Potlurri Lease & Hiring Purchase Pvt. Ltd. was wrongly allowed in the assessment made on 11.03.2005 and that the Assessing Officer ought to have made proper enquiries into the assessee’s claim. The Commissioner observed that the assessee held shares of M/s. SMS Pharmaceuticals Ltd. which were sold to M/s.Potlurri Lease & Hiring Purchase Pvt. Ltd. for Rs. 3,37,50,000/- and out of the agreed sale price a sum of Rs. 95 lakhs could not be recovered by the assessee due to the bad financial position of the purchaser of the shares and that the assessee’s claim that the unrecoverable amount was allowable as bad debt was not properly examined by the Assessing Officer in the light of section 36(1)(vii) of the Act. Ultimately the assessment order was set aside on the ground that it was erroneous and prejudicial to the interest of the revenue and the Assessing Officer was directed to reframe the assessment after giving adequate opportunity to the assessee of being heard.
