2018 (5) TMI 427 - AT - Income Tax

Disallowance of bad debt written off - Held that - All the necessary details were filed by assessee before Ld. CIT(A) showing the amount of bad debt and corresponding sales. This fact is evident from the observation of Ld. CIT(A) which was rejected on the ground that it is a general reply but no specific defect was pointed out by Ld. CIT(A). On perusal of the details filed in paper book on pages 1 to 8 we note that the details of bad debts & corresponding income were available with the AO during assessment proceedings. DR has also not brought anything on record contrary to the arguments advanced by the ld. AR for the assessee. Therefore, we hold that all the necessary details with regard to bad debt and its corresponding income was duly shown by assessee before Ld. CIT(A) Disallowance against the Short Term Capital Gains (STCG) - Held that - Assessee is entitled to claim the deduction for the expenditure incurred wholly and exclusively in connection with the transfer of capital assets but on perusal of the above expense we note that these expenses were incurred by assessee in relation to its activity of carrying on investment. The provision of Sec. 48 of the Act requires that the deduction will be available for those expenses incurred wholly and exclusively in connection with the transfer of capital assets. Above expenses had not incurred wholly and exclusively in connection with transfer as capital asset. No reason to interfere in the order of CIT(A). This ground of assessee is dismissed. Not giving direction to AO for adjusting the STCG - whether the assessee can make a fresh claim during the assessment proceedings which was not claimed in the return of income? - Held that - The law is fairly settled by the judgment in the case of Goetze (India) Ltd. 2006 (3) TMI 75 - SUPREME Court has prohibited the Assessing Officer to entertain any claim / deduction of the assessee otherwise than claimed in the return / revised return. This restriction was not imposed by Hon ble Supreme Court in the case of appellant authority. It can be concluded that the appellant authority are very much entitled to admit the fresh claim of the assessee which was not made in the income tax return. We direct the AO to adjudicate the issue raised by the assessee during the assessment proceedings. Thus the ground of appeal of the assessee is allowed for statistical purposes.

Summary

Issues involved:
1. Disallowance of bad debts
2. Disallowance of expenses against Short Term Capital Gains (STCG)
3. Direction to adjust STCG
4. Credit of tax at source

Issue 1: Disallowance of Bad Debts:
The appellant contested the disallowance of bad debts amounting to ?47,767 by the Assessing Officer (AO) and the confirmation of the same by the Commissioner of Income Tax (Appeals) (CIT(A)). The appellant argued that all necessary details were provided during assessment proceedings, which were not considered. The ITAT held that the details were indeed submitted, and the disallowance was unjustified. The ITAT reversed the decision of the lower authorities, directing the AO to allow the bad debts claimed by the appellant.

Issue 2: Disallowance of Expenses against STCG:
The appellant challenged the disallowance of expenses amounting to ?2,85,209 against Short Term Capital Gains (STCG). The AO disallowed these expenses as they were not directly related to the transfer of capital assets. The CIT(A) upheld the AO's decision citing tax laws. The ITAT agreed with the CIT(A), stating that the expenses were not incurred wholly and exclusively in connection with the transfer of capital assets. Therefore, the disallowance was justified, and the appeal on this ground was dismissed.

Issue 3: Direction to Adjust STCG:
The appellant sought a direction for adjusting the Short Term Capital Gains (STCG) as per the correct classification. The ITAT acknowledged the mistake in classification but referred to a Supreme Court judgment regarding fresh claims during assessment proceedings. The ITAT directed the AO to adjudicate the issue raised by the appellant during the assessment proceedings, allowing the appeal for statistical purposes.

Issue 4: Credit of Tax at Source:
The appellant's claim regarding the credit of tax at source was not pressed during the hearing and was dismissed as such. The ITAT partially allowed the appeal for statistical purposes. The judgment was pronounced on 03/05/2018 by the ITAT Kolkata, with detailed reasoning provided for each issue raised by the appellant.