@JUDGMENTTAG-ORDER
1. In this appeal u/s 260A of the Income Tax Act, 1961 (''the Act''), the Revenue has challenged the judgment dated 24th February, 2006 passed by the Income Tax Appellate Tribunal, Delhi Bench ''F'' (''Tribunal'') in ITA No. 4045/Del/1999 for the Assessment Year 1995-96.
2. Admit.
3. The following question of law arises for consideration:
Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in holding that a sum of Rs. 9 lakh sought to be written off by the assessed as a bad debt was in fact a business loss and liable to be treated as such?
Filing of paper books is dispensed with.
4. The case of the assessed before the Assessing Officer (''AO''), when asked to explain the writing off the sum of Rs. 9 lakh as bad debts, was that one Shri Harmohan Dhawan had been inducted in the Board of Directors along with Shri Sabharwal. These two Directors had on behalf of the assessed made a down payment of Rs. 9 lakh to M/s. Kapoor Sons for purchase of a premises for the assessed at Okhla, New Delhi. However, later Shri Harmohan Dhawan and Shri Sabharwal resigned and the transaction of purchase of the premises could not be completed. According to the assessed, despite requests made to M/s. Kapoor Sons, they refused to return the money. After waiting for over three years, on the advice of its auditors, the assessed decided to write off the said amount as a bad debt.
5. The AO did not accept the above Explanation. Relying on the judgment of the Supreme Court in
6. The Commissioner of Income Tax (Appeals) [''CIT(A)''] dismissed the appeal filed by the assessed by holding that since the money was paid for purchase of a capital asset, and after purchase would have been shown in the balance sheet as such, the said sum constituted a capital loss and not a business loss.
7. In the further appeal filed by the Assessee, the Tribunal took the view that since the asset was in fact not purchased and any hope of the money being recovered was lost, the said sum constituted only a business loss and had to be allowed as such.
8. Ms. Sonia Mathur, learned Standing Counsel appearing on behalf of the Revenue submits that the impugned order of the Tribunal on this aspect suffers from perversity since the Tribunal appears to have accepted the submission, made for the first time by the assessed before it, that the sum advanced to M/s. Kapoor Sons was an advance rent and its non-return constituted a business loss. She further submits that when the assessed had itself taken the stand before the AO that the sum was advanced to purchase a capital asset, the Tribunal could not have possibly treated the non-return of the money so advanced as a business loss.
9. Appearing for the assessed, Mr. Satyen Sethi, learned Counsel did not dispute that the assessed indeed took the stand before the AO that the money had been advanced for the purchase of capital asset. Nevertheless he submitted that the said stand was a mistake. According to him the sum was only to be treated as a bad debt, the non-recovery of which was a business loss.
10. We find that the learned Counsel for the Revenue is right in her submission that the stand of the assessed before the AO was indeed that the amount had been advanced to M/s Kapoor Sons for purchase of a capital asset for the assessed. This is clear from the following letter dated 22nd September, 1997 written by the assessed to the AO:
The Company to strengthen its Board, inducted Sh. Harmohan Dhawan (Ex-civil Aviation Minister, GOI) and Sh. Sabarwal and these new directors with an approach to enlarge the wings of the company decided to go for its own premises. Accordingly, they gave down payment of Rs. 9 lacs to Kapoor Sons for their premises in Okhla, New Delhi. Since, Shri Harmohan Dhawan lose the election, went back to his home town, the newly introduced directors decided to resign. The assessed in great financial difficulties and so could not pay the entire consideration of premises it decided to purchase.
M/s. Kapoor Sons were pursued to refund the money which they refused and after waiting for three longs years, it was advised by company''s auditor to write off the amount of Rs. 9 lacs. The company acted as per advise of its statutory auditors and decided to write off this amount of Rs. 9 lacs as bad debits.
11. The Tribunal did not refer to this letter at all. It simply concluded that since no asset was purchased by the assessed, the amount could not be treated as a capital loss. We find that on the face of it, the impugned order of the Tribunal is contrary to the facts of the case. We are unable to countenance the submission of learned Counsel for the assessed that what was stated by the assessed in the aforementioned letter was a mistake. No such plea was taken at any time earlier either before the CIT (A) or the Tribunal by the assessed. The case of the assessed before the Tribunal was that the sum was paid as advance rent which is totally unsupported by the evidence brought on record. We find that the conclusion arrived at by the Tribunal that the non-recovery of the said sum was a business loss is contrary to assessed''s letter dated 22nd September, 1997 which makes the position explicit that it was advanced for the purchase of a capital asset. We find no infirmity in the order of the AO as well as in the order of the CIT (A) which holds that the non-recovery of sum of Rs. 9 lakh by the assessed would, in the facts of the present case, amount to a capital loss and cannot be allowed as a business or revenue loss.
12. In that view of the matter, the impugned order dated 24th February, 2006 is set aside and the substantial question of law framed in para 3 is answered in the negative that is in favor of the Revenue and against the assessed.
13. Accordingly, this appeal stands disposed of.
