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TMI Blog2022 (11) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... ed grounds of appeal before this Tribunal:- "1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in admitting new documentary evidence during the appeal proceedings in violation of Rule-46A of the I.T Rule, 1962 and not referring the said documents to the A.O seeking Comments. 2. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in deleting the addition of Rs 3,02,57,500/- made on the ground of bogus loss claimed by the assessee on sale of unquoted shares without considering the facts of the case. 3. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in allowing the bogus loss claimed by the assessee on sale of unquoted shares even though the genuineness of transactions was not established before the A.O. during the course of the assessment proceedings though the onus of providing substantive evidences vests solely with the assessee. 4. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred as findings are contrary to evidence and material on record. 5. Whether on the facts and in the circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad debited Rs.3,02,57,500 as Loss on Sale of Shares under the head "Other expenses" in its Profit & Loss Account. In this regard, it is submitted that the appellant company had purchased 19,000 shares of Aryaman Construction Pvt Ltd on 01,04.2010 from Neerza Jhunjhunwala. The said shares were purchased at a cost of Rs. 7017.50/unit and thus the cost price of the said shares was Rs. 13,33,32,500/-. The said shares were held as stock in trade in the books of appellant company. The appellant company agreed to sell the said 19,000 shares of Aryaman Constructions Pvt Ltd to Mr. Radhe Shyam Saraf on 02.03.2011@ Rs. 7,017.50 i.e. at the same price as the purchase price on the following terms and conditions: i. No. of shares 19,000 @ Rs. 7017.50 ii. The seller i.e. the appellant company shall ensure mutation of land belonging to the company is carried out along with other legal formalities if any within 6 months from the date of agreement. iii. Payment - The purchaser of shares shall pay to the seller total Rs 13,33,32,500/- within six months from the date of mutation of land, subject to the above legal formalities being complied to by the seller. Copy of the agreement of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of non-recoverability of debt. In connection to the above it is submitted that the loss on sale of shares amounting to Rs. 3,02,57,000/- constitutes bad debts written off. In this light it needs to be brought to your kind notice that the claim for bad debt is to be allowed in the year in which the bad debt has been written off as irrecoverable in the accounts of the assessee and the assessee is not required to establish the debt to have become bad in the relevant previous year. Reference in this regard is invited towards the provisions of section 36 of The Income Tax Act, 1961. The relevant extracts of the said section reads as under: Other deductions. (i) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- (ii) subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year. (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply- (i) no such deduction shall be allowed unless such de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JRS 2010-LL-0209-8), has stated that the position of law is well settled. "After 1.4.1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if bad debt is written off as irrecoverable in the books of accounts of assessee." 4. In view of the above, claim for any debt or part thereof in any previous year, shall be admissible under section 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of accounts of the assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of sub-section 36(2) of the Act." On a perusal of the above, it may kindly be appreciated that while computing the business profit, an assessee is entitled to avail deduction with respect to bad debts written off in the books if the following conditions are fulfilled: 1. The debt in question must be written off as irrecoverable in the books of accounts for the relevant previous year and 2. The amount of debt must be taken into accounts while computing the income ~ either during the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requesting the assessee company to accept payment of the said 19,000 shares @ Rs.5425/- per share, totalling to Rs.10,30,75,000/- as against the originally agreed rate of Rs.7017.50/- per share, totalling to Rs.13,33,32,500/-. The assessee, therefore, claim the above loss as debts written off. 7. The ld. D/R has submitted before us that this was a sham transaction made by the assessee of sale of shares whereas, the underlying transaction was relating to immovable property. The ld. D/R has also brought our attention to the fact that the business of the assessee is trading of iron and steel products. That the purchase and sale of shares was never the business of the assessee. Even the assessee is not dealing in sale, purchase or development of properties. The ld. D/R further invited our attention to the Explanation to Section 73 of the Act to submit that the principal business of the assessee company is not of trading in shares or investing, therefore, even otherwise, the said transaction relating to purchase and sale of shares by the assessee company would be deemed to be of speculation business and that as per the provisions of Section 73 of the Act, any loss, computed in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med by the assessee. 9. The ld. A/R, on the other hand, has relied upon the provisions of Section 36(1)(vii) & (2) of the Act to submit that the assessee has rightly claimed the loss as bad debt written off. 10. We have considered rival contentions and gone through the record. 11. The transactions in question, in our view is not bonafide transaction of sale of shares being stock in trade as alleged by the assessee. The facts speak itself that the underlying transactions is relating to the sale of immovable property i.e., land. Another fact on the file is that the assessee is neither in the business of purchase and sale of shares nor in the business of purchase and sale of immovable property, land etc. Therefore, the assessee, in our view, has treated the said shares as stock in trade for the purpose of evasion of due tax. The assessee firstly has evaded the levy of stamp duty by giving the colour to the transaction of sale of land as part of transaction of sale of shares. Secondly, the transaction in question, since was not related to the business activity of the assessee, therefore, the said land/shares cannot be said to be a stock in trade. Even if for the sake of argument it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.] ************************ *********************** [Explanation.-For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such income not forming part of the total income.]" The ld. D/R has further relied on the decision of the Co-ordinate Bench of ITAT Guwahati in the case of ACIT vs. Williamson Financial Services Ltd. reported in [2022] 140 taxmann.com 164 (Guwahati - Trib.). (Both of us herein being party to the said decision), to submit that the said explanation to Section 14A of the Act is retrospectively applicable. 14. However, the ld. A/R, has relied upon the recent decision of the Hon'ble Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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