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2019 (4) TMI 1221 - AT - Income TaxRevision u/s 263 - Debit balances written-off - claimed as business loss u/s 37 or under section 28 - HELD THAT - A.O. passed the assessment order under section 143(3) of the I.T. Act, 1961, in which the A.O. did not mention any fact, explanation of assessee or his findings with regard to issue of debiting balance written-off by the assessee in the books of account. Assessee failed to produce any evidence or material on record including the order sheet of the A.O. to establish if A.O. examined the said issue at assessment stage. He has merely referred to certain replies filed by the assessee without reference to any query raised by the A.O. It is, thus, established on record that the A.O. did not examine this issue at assessment stage. Since no investigation or enquiry have been made on the present issue and the Ld. Pr. CIT passed the Order on 31.03.2016, therefore, Explanation-2 to Section 263 is clearly attracted in the present case The conditions of Explanation-2 to Section 263 of the I.T. Act which clearly satisfied in the present case. Therefore, the assessment order is clearly erroneous in so far as it is prejudicial to the interests of the Revenue on this issue. - Decided against assessee
Issues involved:
Appeal against order under section 263 of the Income Tax Act, 1961 for the assessment year 2011-2012; Challenge regarding debit balances written-off claimed as business loss under section 37 or section 28 of the IT Act, 1961. Analysis: The appeal was directed against the Order of the Ld. Pr. CIT, Delhi-4, New Delhi, for the A.Y. 2011-2012 under section 263 of the Income Tax Act, 1961. The assessee company, engaged in selling tickets of entertainment and sports activities, filed its return showing a total loss. The AO made additions on interest income and foreign travel expenses, resulting in a loss assessment. The Ld. Pr. CIT found discrepancies and set aside the assessment order for fresh consideration. The assessee appealed on four grounds, with two grounds challenging the order concerning debit balances written-off as business loss. The Ld. Pr. CIT noted the debit balances written-off by the assessee and found the details lacking in the record. The AO did not examine if the written-off amount was shown as income in earlier years, leading to an erroneous assessment order. The assessee claimed the written-off amount as a deduction under relevant sections of the IT Act, stating it was advances written-off due to irrecoverability. The Ld. Pr. CIT set aside the AO's order, directing a fresh assessment. The Learned Counsel for the Assessee argued for the deduction of the written-off amount, citing submissions made before the authorities. However, the Ld. CIT(A) upheld the addition, stating the assessee failed to establish the written-off advances were considered as income in previous years. The Ld. CIT-D.R. supported the Ld. Pr. CIT's decision, emphasizing the lack of examination by the AO and the non-establishment of the written-off advances as income in previous years. The Tribunal observed that the AO did not address the issue of debit balances written-off in the assessment order, indicating a lack of inquiry. With Explanation-2 to Section 263 applicable, the assessment order was deemed erroneous and prejudicial to revenue interests. The Ld. Pr. CIT rightly exercised jurisdiction under section 263, as the assessee failed to satisfy the authorities regarding the claim's legality. The appeal was dismissed, confirming the Ld. Pr. CIT's order. In conclusion, the appeal against the order under section 263 of the IT Act, 1961 for the assessment year 2011-2012 was dismissed, with the Tribunal upholding the Ld. Pr. CIT's decision regarding the debit balances written-off claimed as business loss under relevant sections of the IT Act.
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