2019 (9) TMI 305 - AT - Income Tax

Disallowance of assessee s claim of bad debt written off u/s 36(2)(i) - alternative claim u/s 37 - HELD THAT - assessee failed to prove that for what purpose the amount was given - whether it was for business purpose or for purchase of land - We also find nothing on record to show that any legal remedies were attempted by the assessee for recovery of the aforesaid amount. Assessee s claim for business loss or for deduction u/s 37 is not sustainable. There is, further, no material on record to show that aforesaid amount of ₹ 50, 00, 000/- or any part thereof has been taken into account in computing income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year; and thus, mandatory condition u/s 36(2)(i) of the Act is not fulfilled for claim of bad debt. Assessee also expressed inability to bring any further material on record in support of the assessee s claim for the aforesaid amount of ₹ 50, 00, 000/-. In the forgoing facts and circumstances, the assessee s claim for deduction of the aforesaid amount of ₹ 50, 00, 000/- deserves to be rejected whether this claim is made as bad debt written off u/s 36 of the Act or alternatively u/s 37 of the Act - Decided against assessee Disallowance on account of earth filling expenses - HELD THAT - The assessee had filed no evidences before Ld. CIT(A) to explain how the assessee claimed an amount of ₹ 12, 72, 400/- when the valuation of the boundary wall by the Stamp Valuation Authority was only for ₹ 50, 00, 000/-. Even in the appellate proceedings in ITAT, the assessee has not adduced any evidences to support the claim of having actually incurred the aforesaid expenditure amounting to ₹ 12, 72, 400/- towards cost of earth filling/boundary wall. The assessee has failed to bring any material for our consideration to justify any further relief in addition to relief of ₹ 50, 000/- already allowed by Ld. CIT(A) on the basis of the valuation of boundary wall by Stamp Valuation Authority. In the absence of any supporting evidences in support of assessee s claim of the aforesaid amount of ₹ 12, 22, 400/- disallowance of which has been sustained by Ld. CIT(A) , we are of the view that this claim of the assessee for aforesaid ₹ 12, 24, 400/- is unsustainable in law. As all the relevant evidences submitted by the assessee have already been appraised by the lower authorities CIT(A) AO and moreover, as no further material has been placed before us from assessee s side in support of the assessee s claim for deduction of aforesaid amount of ₹ 50, 00, 000/- ₹ 12, 22, 400/-, no useful purpose will be served by restoring the disputed issues back to the file of Ld. CIT(A). - Decided against assessee

Summary

Issues Involved:
1. Sustaining the addition of Rs. 50,00,000/- under Section 36(1)(viii) read with Section 37 of the Income Tax Act, 1961.
2. Sustaining the addition of Rs. 12,22,400/- on account of earth filling expenses.

Issue-wise Detailed Analysis:

1. Sustaining the Addition of Rs. 50,00,000/- under Section 36(1)(viii) read with Section 37 of the Income Tax Act, 1961:

The assessee contended that the amount of Rs. 50,00,000/- was given for the purchase of land and should be allowable as a bad debt under Section 36(1)(vii) of the Income Tax Act, 1961. The assessee relied on the Supreme Court judgments in the cases of TRF Ltd. v/s CIT (190 Taxmann 391) and Vijaya Bank Ltd v/s CIT (190 Taxmann 257), which state that if an amount is written off as a bad debt in the books of accounts, it should be allowed as a deduction.

However, the Tribunal found that there was no evidence to prove that the amount was paid for business purposes or for the purchase of land. Additionally, there was no record of any legal remedies attempted by the assessee to recover the amount. The Tribunal also noted that the mandatory condition under Section 36(2)(i) of the Act, which requires that the amount of debt written off should have been taken into account in computing the income of the assessee, was not fulfilled. Consequently, the Tribunal held that the assessee’s claim for deduction of Rs. 50,00,000/- was unsustainable both as a bad debt under Section 36 and as a business loss under Section 37 of the Act.

2. Sustaining the Addition of Rs. 12,22,400/- on Account of Earth Filling Expenses:

The assessee claimed an amount of Rs. 12,72,400/- towards earth filling expenses. The Assessing Officer (AO) disallowed the entire claim due to the lack of supporting documents. The Commissioner of Income Tax (Appeals) [CIT(A)] provided partial relief by deleting Rs. 50,000/- based on the Stamp Valuation Authority’s valuation of the boundary wall.

The Tribunal noted that the assessee failed to provide any evidence to support the remaining claim of Rs. 12,22,400/-. No documents were submitted to justify the expenditure, and the valuation by the Stamp Valuation Authority was significantly lower than the claimed amount. Therefore, the Tribunal upheld the disallowance of Rs. 12,22,400/- as the assessee could not substantiate the claim with any material evidence.

Conclusion:

The Tribunal dismissed all the grounds of appeal. The assessee's claims for the deductions of Rs. 50,00,000/- and Rs. 12,22,400/- were found to be unsustainable in law due to the lack of supporting evidence and failure to meet the statutory requirements under the Income Tax Act, 1961. The appeal was thus dismissed in its entirety.