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TMI Blog2006 (3) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... iving income from consultancy in respect of which commission and professional fee are the receipts. In the year under consideration, an amount of Rs. 10 lakhs had been debited to the Profit and Loss Account towards "bad debts written off". Assessing Officer being of the opinion that such write off is capital in nature, sought assessee s explanation regarding the same. Assessee replied that it had given a loan of Rs. 10 lakhs to M/s. JVG Finance Limited on 8-12-1995 at the rate of 18 per cent interest per annum. The said party not being in a position to repay the loan, assessee had filed a civil suit on 8-12-2000 before the honourable Delhi High Court for recovery of the loan and that the suit is still pending. It was explained that in view of the same the loan was written off as a bad debt during the previous year 2000-01. It was claimed that as the loan had been advanced in the course of business of money lending, that the write off is allowable as a business expenditure. Assessing Officer held that the debt written off by the assessee is not a trade debt and being capital in nature, that the same cannot be allowed as a bad debt written off. CIT(A) upheld the disallowance made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i ) Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) In this case when notice under section 10(2)( vi ) of 1922 Act was issued after the end of four years in case of an assessment originally completed. It was held that when the Assessing Officer relying on the assessee s records commits an error in granting depreciation, that such an error cannot be considered in the reassessment proceedings. This case would not be of on any assistance to the assessee not only because it deals with the provisions under the 1922 Act but also because in assessee s case neither an assessment has been made under section 143(3) nor the re-opening has been resorted to after a period of 4 years from the end of the assessment year. In assessee s case, the notice has under section 148 has been issued on 28-3-2005 well within 4 years from the end of the assessment year of 2001-02. ( ii ) CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 In this judgment of the hon ble Full Bench of the Delhi High Court, it was held that mere change of opinion of the Assessing Officer in respect of an assessment completed under section 143(3) cannot validly invoke application of the re-assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejudice to the above submissions, AR submitted that even on merits the addition made by the Assessing Officer is one which is not warranted. 6. Following are the submissions made by the AR on the merits of the case. It is a fact that the assessee had been consistently offering interest received on the loan written off as a bad debt only under the head income from business. As per the Memorandum of Articles of Association filed in the Paper Book, under clause 23 under other objects incidental to the main objects, assessee can accumulate funds and lend monies with or without security in such manner as the directors think fit . It is also submitted that the lending of money being one amongst the other objects for which the assessee-company has been established. That such activity of the assessee cannot be treated as not being an activity of assessee s business. AR submitted that since several years the interest received by the assessee on the money invested on loans for the purpose of earning interest had been assessee only as income from business. Our consideration was sought to the following extracts from the letter dated 3-10-2005 filed before the CIT(A). "The funds of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 143(1) for the assessment year 2001-02 within a period of four years from the end of the assessment year on 23-2-2005. In the light of said directions to DR, we consider it appropriate to refer to the following case relied upon, which is relevant to the appeal before us. ITO v. Honey Enterprises [2004] 89 ITD 301 (Delhi) In this case, it was held that a change of opinion can be considered to be involved only when an opinion is required to be formed while passing an intimation under section 143(1) and not otherwise. We have considered the other cases relied upon by the DR and find that they are not applicable to the facts and the provisions of law in the case before us. 9. DR submitted that the AR s argument that res judicata is not applicable under the income-tax proceedings and that the argument that the assessee s stand having been accepted in the earlier assessment years particularly in the intimation passed under section 143(1)( a ) cannot refrain the department from resorting to the provisions of section 147 when a claim made by the assessee is found not to be not valid on merits, is also not valid. DR at length referred to the orders of Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stating that a loan of Rs. 10 lakhs has been written off as a bad debt, there is no material or evidence to prove that assessee is in the regular business of money lending. In fact, according to us, reference to the annual accounts and the information contained therein, only leads to a conclusion that the assessee had written off as a bad debt an amount not received from money lending business but only an advance given during the course of its other business. In fact, in the balance sheet under Schedule F under the head Current Assets, Loans and Advances , there are two categories under loans and advances, one in respect of unsecured considered doubtful and the other in respect of unsecured considered good . The debt which is claimed as a bad debt is classified under the head Loans and advances unsecured considered doubtful in the annual accounts. From these facts, according to us, the conclusion would be that the advance that has been written as bad debt only represents loan or advance written off but not arising from the business of money lending, particularly there neither being any interest received nor any mention anywhere in the annual accounts that the assessee is car ..... X X X X Extracts X X X X X X X X Extracts X X X X
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