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TMI Blog2025 (4) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... ed activity of money lending, the effect has to be given to the provisions regarding bad debts in respect of the loans given in the said money Lending activity. 3. The assessee craves leave to add, to modify to delete or to amend any or all of the above grounds of appeal." 3. Brief facts of the case are that the assessee is an individual and was subjected to search u/s. 132 of the Act on 23.09.2004 along with the search at group of cases in the case of M/s. Ramdeo Oil Industries Pvt. Ltd. Certain documents, unaccounted jewellery and other miscellaneous items were found. Notice u/s. 153A of the Act was served to file the return of income to which necessary compliance was made. Return for A.Y. 2002-03 filed on 24.04.2006 declaring loss of Rs. 2,19,108/-. So far as the issue under consideration is concerned, the same relates to claim of bad debts at Rs. 21,20,000/- made by the assessee in his return filed u/s. 153A of the Act. After the return being selected for scrutiny and validly serving of notices u/s. 143(2) and 142(1) of the Act, ld. AO during the course of assessment proceedings noticed that the assessee has declared income from carrying on business of investments and loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see are allowed for statistical purposes." 5. On the directions of this Tribunal vide order dated 17.11.2017, ld.CIT(A) carried out the appellate proceedings and during the course of proceedings it was claimed by the assessee that out of the alleged claim of bad debts assessee has recovered Rs. 10.00 lakh in the subsequent period and they have been disclosed as income (bad debts recovered) in A.Y. 2005-06 and offered it to tax and the same has also been accepted by the Revenue authorities. Therefore, since the Revenue authorities have accepted the claim of bad debts recovered in A.Y. 2005-06, ld. AO erred in denying the claim for the instant year and further erred in observing that the assessee has not carried out any such activity of giving loans and advances. However, ld.CIT(A) was not satisfied with these arguments and affirmed the action of the AO observing as follows : "4.7 I have considered the submissions and the material on record. The deduction u/s. 36(1) (vii) of the IT Act could have been allowed in favour of the appellant "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant has advanced huge sums to the borrower. The appellant could not give any justification. The facts recorded by the AO in the assessment order have not been disputed by the appellant. It is, therefore, clear that whatever books of accounts maintained by the appellant in the regular course of business did not have mention of any loans and advances. Therefore, there is no question of taking the same figures in the accounts of the appellant maintained in the ordinary course of business of money lending. The appellant filed returns of income originally at very meager income u/s 139(1) of the IT Act and it was only when the search was conducted, the undisclosed income was unearthed by the department. On the basis of the seized material, the appellant made a claim of bad debt as per the accounts prepared on the basis of the seized material. Therefore, it cannot be accepted that the appellant has written off the bad debt as irrecoverable in the accounts maintained for previous year in the ordinary course of business. The assessment is framed u/s. 153A of the IT Act, which is specifically meant for computation of undisclosed income, which is found during the course of search. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the regular business account and income-tax return. Since during the course of search it was unearthed that assessee is carrying on this business of giving loans and advances and income from such business income has been offered to tax, therefore, the bad debts arising from such business also needs to be allowed. 8. On the other hand, ld. Departmental Representative vehemently argued supporting the orders of the lower authorities. 9. We have heard the rival contentions and perused the record placed before us. Claim of bad debts of Rs. 21.20 lakh is in dispute before us. From the assessee's side, the contentions putforth by the ld. Counsel for the assessee in short are that the assessee along with his three brothers gave some loans and advances to Mr. Mohd Ali Ganji on interest and agreements were entered are duly notarized. Lateron, there was default from Mr. Mohd Ali Ganji and therefore the assessee and his brothers who were having the post dated cheques given by Mr. Mohd Ali Ganji lodged the complaint/FIR and subsequently part of the amount was recovered. It has been claimed from the assessee's side that since in the return filed in response to notice u/s. 153A after the carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs but still this transaction has been declared in the hands of assessee during the course of search. 12. It is also an admitted fact that it is not the assessee who is claiming to have given the loan but the loan has been given by the assessee's brothers also and it is not known as to what is the fate in the income assessed in their respective hands of assessee's brothers. The facts are not narrated properly so as to bring to the concrete conclusion that whether the assessee was carrying on the business of money lending/giving loans and advances on interest or it was a mere deal of keeping the share in the business carried out by Mr. Mohd Ali Ganji in case he is unable to pay the sum advanced. Even some documents reveal that Mr. Mohd Ali Ganji agreed to pay the sum at a future date to assessee and his brothers to leave the partnership business orally agreed upon. 13. However, it remains an undisputed fact that assessee had offered the income for the A.Y. 2005-06 under the head 'other business income' including bad debts amounting to Rs. 23.00 lakh. This income is part of the total income (Revenue) of Rs. 30,49,228/- for the F.Y. 2004-05. Assessee has also claimed expenses of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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