2019 (2) TMI 1581 - HC - Income Tax

Adjournment petition - assessee s counsel is not in good medical condition and alternate person who was supposed to appear in the place of the authorized representative did not appeared - assessee filed an affidavit stating that one Chartered Accountant had suffered cardiac arrest and on account of which he failed to appear before the Tribunal - HELD THAT - The conduct of the assessee has not been found to be deliberate or wilful nor the assessee found to be guilty of unnecessarily prolonging the matter before the Tribunal by repeatedly filing affidavit for adjournment. Very often before us, both the assessee and the revenue seeking adjournment on more than three occasions citing various personal reasons by the respective counsels and the Hon ble Division Bench have entertained such request unless it is found that one of the party in purposely dragging on the matter. Therefore, we are of the considered view that liberal approach can be adopted in the instant case. Accordingly, petition allowed - order passed by the Tribunal stands recalled and the appeal stands restored to the file of the Tribunal to be heard and decide afresh.

Issues:
1. Dismissal of the Application of Miscellaneous Petition u/s.254(2) by the Tribunal.
2. Allowability of bad debts under section 36(1)(vii) of the Act.
3. Disregard of the accounting method accepted by Statutory Authorities.
4. Qualification of money receivable by a stockbroker as a trading loss.

Issue 1: Dismissal of the Miscellaneous Petition:
The High Court considered the appeal against the order dismissing the Miscellaneous Petition filed by the assessee. The assessee sought to set aside the order and restore the appeal, claiming that their authorized representative was unable to appear due to illness. The Tribunal rejected the application, noting discrepancies in the reasons provided by the assessee. However, the Court found the assessee's conduct not deliberate and allowed the appeal, setting aside the order and restoring the appeal for fresh consideration.

Issue 2: Allowability of Bad Debts:
The appeals raised questions regarding the allowability of bad debts under section 36(1)(vii) of the Act for the assessment year 2006-07. The Tribunal had held that bad debts amounting to a specific sum were not allowable under the mentioned section. The Court was tasked with determining whether the Tribunal's decision was justified based on the facts and circumstances of the case.

Issue 3: Disregard of Accounting Method:
Another question raised was whether the Tribunal was correct in disregarding the accounting method adopted by the appellant, which had been accepted by the Statutory Authorities. The appellant argued that the Tribunal provided no legal sanction to their accounting method, despite its acceptance elsewhere. This issue required a thorough examination of the Tribunal's reasoning and the legal implications of disregarding an accepted accounting practice.

Issue 4: Qualification of Money Receivable as Trading Loss:
The final issue pertained to the classification of money receivable by a stockbroker from clients as a trading loss and its allowance as a bad debt under Section 37(1)(vii) of the Act. The Tribunal had ruled that such money, if unrecovered, did not qualify as a trading loss and, consequently, could not be considered a bad debt under the Act. This issue involved a nuanced analysis of the legal provisions and their application to the specific circumstances of the case.

In conclusion, the High Court allowed the appeals, remanding the matter to the Tribunal for fresh consideration. The Court refrained from expressing an opinion on the revenue's appeal due to the low tax effect, leaving it open for the assessee to address before the Tribunal. The judgment provided a detailed analysis of each issue raised, ensuring a comprehensive review of the legal complexities involved in the case.

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