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TMI Blog2020 (2) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... olvent and accordingly the assessee was of the view that the amount due from it was not recoverable. Undisputedly, the party namely M/s Shree Hari Enterprises has agreed to make the payment to the assessee as evident from the order of the Debt Recovery Tribunal dated 29.03.2016. This order of the tribunal was passed on 29th of March 2016 whereas the case before us pertains to the assessment year 2014-15 and this fact was not in the knowledge of the assessee at the relevant point of time. As such it was not possible for the assessee to foresee in future for the recovery of the amount by the order of the Debt Recovery Tribunal. As such, the assessee cannot be blamed for claiming the bad debts in the year under consideration. We hold that the assessee was entitled for the bad debts claimed by him in the year under consideration. - Decided in favour of assessee Disallowances on account of land levelling expenses - absence of sufficient documentary evidence, that such expenditure were not incurred by the assessee for its alleged business activities - HELD THAT:- We note that the assessee in support of the expenses incurred toward the land levelling/ Mati puran have furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-3, Ahmedabad, dated 07/063/2018 (in short Ld.CIT(A) ) arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) dt.16/12/2016 relevant to the Assessment Year 2014-2015. The assessee has raised the following grounds of appeal. 1. The Learned Commissioner of Income Tax(Appeals)-3, Ahmedabad has erred in law and on facts of the case by confirming the disallowance made by the Assessing officer in respect of bad debt of rs.11,50,00,000/- in respect of sale of project to Shakun Corporation Pvt. Ltd. after holding that the claim of bad debt has arisen within the same assessment year and is immature and highly susceptible. 2. The Learned Commissioner of Income tax (Appeals)-3, Ahmedabad has erred in law and on facts of the case by confirming the disallowance of rs.33,42,400/- made by the Assessing Officer being land leveling expenses incurred by the appellant after considering the same as bogus expenditure, which has been claimed just to reduce tax liability. 3. Your Appellant prays to reserve the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot bind them for the payment. As such the promise of M/s Shree Hari Enterprises is moral and not legal. 3.4 However the AO held that assessee had not taken any concrete step to get sale contract cancelled after repeated dishonor of the cheques. He should have stayed the sale of flats by the purchaser. Further the claim of the assessee that M/s shree Hari Enterprise has no legal obligation to pay is not true. As in transfer letter by the Debt Recovery Tribunal it is specifically mentioned that the purchaser M/s Shree Hari Enterprises has to bear all the charges and liability including the claim of the original owner i.e. the assessee for ₹ 11.5 crore. Hence assessee has legal right to recover the money from M/s Shree Hari Enterprises. Accordingly, the AO in view of the above disallowed the claim of bad debt and added the same to the total income of the assessee 4. Aggrieved assessee preferred an appeal before the learned CIT (A). The assessee before the ld. CIT-A reiterated the submissions as made before the AO. 5. However, the learned CIT (A) observed that the assessee has not been doing any business of real estate development. As the assessee is showing income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets in its balance sheet as on 31st March 2012, 31st March 2013, 31st March 2015, 31st March 2016 and 31st March 2017. Similarly the assessee was showing income under the head capital gain, other income and business income which was limited to the extent of income from the partnership firm in the earlier as well as subsequent assessment years. As such the income from the partnership firm by way of remuneration, interest on the capital and share of profit does not mean that the assessee is actually carrying on any separate business activity of real estate. b. There was no closing viz-a-viz opening stock in trade of the properties either in the earlier years or subsequent years except a single transaction which was shown as opening WIP in the year under consideration for the land under dispute. c. There was the single transaction in the year under consideration which was treated as business whereas no such transaction was shown as business in the earlier and the subsequent assessment years. 8.2 The above allegations of the learned CIT (A) certainly create a doubt that whether the assessee is carrying on any business activity of the real estate or not. However, the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection of whatsoever between assessee with M/s Shukan Corporation Pvt. Ltd. As such the transaction was carried out at the arm length price. Therefore, in the absence of any such allegation i.e. bogus transaction, the assessee cannot be denied the benefit of the deduction as provided under section 36(1)(vii) of the Act. vi. There was the recovery of the bad debts written off by the assessee in the year under consideration in the subsequent assessment year as evident from the profit and loss account for the year ended 31st March 2016 for ₹ 2.6 crore which is placed on page 108 of the paper book. As such the recovery of the bad debts was offered to tax by the assessee and the same was accepted by the Revenue. 8.3 In view of the above, we hold that the assessee was carrying out the business activities in the year under consideration. Accordingly, we are not impressed with the finding of the learned CIT (A) for the reasons as discussed above on the issue that the assessee was not carrying out any business activity of the real estate. 8.4 Now coming to the 2nd question as discussed above, we note that the assessee is entitled for the bad debts once he has written off th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration. Accordingly, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. 9. The 2nd Issue raised by the assessee is that the learned CIT (A) erred in confirming the disallowances of ₹ 33,42,400/- on account of land levelling expenses. 10. The assessee during the year under consideration claimed land leveling expenses of ₹ 33,42,400/- but failed to submit the documentary evidences as required by the AO. Thus the AO disallowed the entire expenses under the head land leveling /Mattipuran. 11. Aggrieved assessee preferred an appeal before the learned CIT(A) who confirmed the disallowances by observing that the assessee has not filled any material evidence such as bill/identity of contractor, confirmation and mode of payment etc with respect to the impugned expenses claimed. Further, the Ld. CITA also observed that the assessee has claimed the expenses after transfer of the property. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 12. The learned AR before us submitted that the assessee has incurred the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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