2016 (4) TMI 652 - HC - Income Tax

Claim of bad debts - ITAT confirming CIT (A) s order by allowing the claim as bad debts, the advances for other than regular business of the assessee whose corresponding income or sales were not offered in the previous year - Held that - Tribunal has recorded concurrent findings of fact to the effect that advances given by the assessee had become actually bad and such findings had remained uncontroverted. It is not the case of the appellant that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored, nor is the learned counsel for the appellant in a position to point out any material to the contrary to dislodge the concurrent findings of fact recorded by the Tribunal. In the aforesaid premises, the conclusion arrived at by the Tribunal being based upon the findings of fact recorded by it upon appreciation of the evidence on record, does not give rise to any question of law, much less, a substantial question of law, warranting interference. - Decided against revenue

Summary

Issues:
Challenge to order allowing bad debts claim for non-regular business activities.

Analysis:
1. The appellant, the revenue, challenged the order of the Income Tax Appellate Tribunal allowing the bad debts claim under section 260A of the Income Tax Act, 1961. The question raised was whether the Tribunal erred in confirming the claim as bad debts for advances not related to the regular business of the assessee, where corresponding income or sales were not offered in the previous year.

2. The appellant argued that the assessee's main business was trading in gold jewellery, land, and shares, and not in edible items like dehydrated onion flakes or potato powder. It was contended that bad debts can only be deducted if they were considered in computing the total income of the previous year. The appellant claimed that most of the bad debts were advances to concerns not included in the assessee's income computation, thus not meeting the criteria under section 36(1)(vii) of the Act.

3. The Assessing Officer disallowed most of the bad debts claimed by the assessee, stating that they were not incidental to the regular business activity. The Commissioner of Income Tax (Appeals) partially allowed the appeal, granting relief for a significant amount. The Tribunal upheld the decision, considering the bad debts as business losses incurred in the course of trading agricultural produce, even though the criminal cases against the entities involved were ongoing.

4. The Tribunal found that the bad debts claimed were related to the assessee's trading in processed agricultural produce, making the losses incidental to their business activities. The Tribunal emphasized that the losses were connected to the trading operations, even if there were no transactions in the current year. It was noted that the Commissioner (Appeals) had provided detailed findings on the bad debts becoming irrecoverable, which remained uncontested, leading to the confirmation of the relief granted.

5. The Tribunal's decision was based on concurrent findings of fact that the advances given by the assessee had indeed become bad debts. The appellant failed to show any material disregarded by the Tribunal or present any evidence to challenge the factual findings. Consequently, the Tribunal's conclusion, supported by factual evidence, did not raise any substantial question of law, leading to the dismissal of the appeal.