See Has Been Following Mercantilesystem Of Accounting And Therefore Thebusiness Loss Pertaining To The Year _ Oaccount Alone Can Be Claimed As Expenditureand Bi v. Cit, 323 Itr 396(Sc) And Held That An Addition Made To The Bad Debtswas Contrary To The Aforesaid Decision. Accordingly, Thededuction Was Allowed. The Revenue T

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE O/ DAY OF DECEMBER 2070 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD BETWEEN: I1T.A. NC.66 OF 2012 1.|COMMISSIONER OF INCOME TAX-III, CENTRAL REVENUE | BUILDINGS, QUEENS ROAD, | BANGALORE - 560 OO1. 2 |THE ASSISTANTCOMMISSONER OF INCOME TAX,COMMISSONER OF INCOME TAX, CIRCLE-2 (1), BANGALORE. (BY SRI.E.I.L.SANMATHI, ADV., .., APPELLANTS~ AND* M/S SHRIRAM CHITS (KAR)PVT LTD NO.259/31, ©| FLOOR, 10 CROSS,WILSON GARDEN,BANGALORE.PVT LTD NO.259/31, ©| FLOOR, 10 CROSS,WILSON GARDEN,BANGALORE. .., RESPONDENT (BY SRI. M.V. SHESHACHALA SENIOR COUNSEL FORSRI. BALRAM R.RAO., ADVOCATE FOR RESPONDENT) |SRI. BALRAM R.RAO., ADVOCATE FOR RESPONDENT) | THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,|1961 ARISING OUT OF ORDER DATED 31.10.2011 PASSED IN ITA. NO.1386/BANG/2010&|TTANO.1547/BANG/2010FORTHEASSESSMENT YEAR 2005-06, PRAYING TO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND/OR|SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BYTHE HON BLE COURT AS DEEMED FIT. (II) SET|ASIDE.THE|ORDER|OFTHE|INCOME-] AZAPPELLATETRIBUNALDATED: 31.10.2Z0LIN|LIANO.1386/BANG/2010 & ITA, NO.1547/BANG/2010 FOR’ THEASSESSMENT YEAR 2005-16. THIS ITA COMING ON FOR HEARING, THIS DAY,ALOKARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (nereinafter referred to as the Act for short)nas been preferred by the revenue. The subject matterof the appeal pertains to the Assessment year 2005-06.The appeal was admitted by a bench of this Court videorder dated 31.07.2012 on the following substantial|questions of law: Dad debts a)|WhetherIn|thefactsandcircumstances of tne case, tne tribunal Is justified in law in dismissing Revenue's appealon disallowance of bad debts written off while such issue In the assessee'S own case was|remitted to tne file of the Assessing Officer by|the Hon bie High Court in the A.Y. 1998-99 with a direction to reconsider the issue in thelight of provision of section 145(1)/(2) of the Act? D)|WhetherIn|thefactsandcircumstances of the case, the tribunal Is justified in law in dismissing Revenue's appealon disallowance of bad debts written . Ofwithout appreciating that the assessee hasnot furnished any details of such bad debts|whetsoeverdespitegivingsufficient.opportunity? Cc)WhetherIn.thefactsandcircumstances of the case, the tribunal Is justified in law in dismissing Revenue's appealon disallowance of pad debts written off while sucnN issue in tne assessee's Own case wesremitted to tne file of the Assessing Officer by|the Honble Hign Court in the assessment.year 1998-99 with a direction to reconsider|the issue in the light of provision of section|145(1)/(2) of the Act? Cd)WhetherIn|thefactsandcircumstances of the case, the tribunal Is justified in law in dismissing Revenue's appealOf)bidlossclaimedby aASSCSSCEofRs.1,61,77,897/- in computation but not.debited to the profit and Loss account and a.sum of Rs.5,79,57,84/7/- debited to P& Laccount as loss on own bidding even when.the assessee has been following mercantile|system of accounting and therefore the|business loss pertaining to the year _ oaccount alone can be claimed as expenditure|and bid loss pertaining of the entire chit|periodsWasrightlydisallowedby theassessing authority? 2.Facts leading to filing of this appeal brieflystated are that the assessee is engaged in the chitbusiness. The assessee filed the return of income for the.Assessment Year 2005-06 on 31.10.2005 declaring abusiness loss of Rs.2,96,35,0/74/-. The return wasprocessed under Section 143(1) of the Act and wassubsequently taken up for scrutiny and notices underSection 143(2) and 142(1) were issued to the assessee.The Assessing Officer by an order dated 24.12.2007 2.Facts leading to filing of this appeal brieflystated are that the assessee is engaged in the chitbusiness. The assessee filed the return of income for the.Assessment Year 2005-06 on 31.10.2005 declaring abusiness loss of Rs.2,96,35,0/74/-. The return wasprocessed under Section 143(1) of the Act and wassubsequently taken up for scrutiny and notices underSection 143(2) and 142(1) were issued to the assessee.The Assessing Officer by an order dated 24.12.2007 inter alia disallowed the claim of bid loss to the extent of.Rs.7,41,35,/744/- on the ground that the aforesaid claimpertains to beyond the relevant Previous Year andassessee is following hybrid system of accounting. It was.also held that despite several opportunities beingafforded to the assessee, the assessee failed to producethe books of accounts to substantiate the aforesaid loss. 3.The assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeal). TheCommissioner of Income Tax (Appeals) relied on thejudgment of the tribunal in the case of assessee and by.order dated 06.09.2010 held that bid loss Is an allowable|deduction. The Commissioner of Income Tax (Appeals)with regard to the bad debts placed reliance on decisionof the Supreme Court in TRF LTD. VS. CIT, 323 ITR 396(SC) and held that an addition made to the bad debtswas contrary to the aforesaid decision. Accordingly, thededuction was allowed. The revenue thereupon filed anappeal before the Income Tax Appellate Tribunal (hereinafter referred to as ‘the tribunal for short). The)tribunal by an order dated 31.10.2011 by placingreliance on its earlier decision, which was based on thejudgment of the Supreme Court held that the claim ofthe assessee with regard to bid loss is an allowable.deduction. It was further held that in view of decision of TRF Ltd., the deduction regarding bad debts is.permissible. However, the Assessing Officer was directedto verify the claim of the assessee. In the aforesaidfactual background, this appeal has been filed. 4Learned counsel for the revenue submittedthat the Commissioner of Income Tax (Appeals) as wellas tne tribunal Nas placed reliance on earlier decision ofthe tribunal, which was subject matter of challengebefore this court at the instance of the revenue inI.T.A.No.920/2008 and the same was disposed of by thiscourt vide order dated 09.01.2015 and had remitted the|matter to the assessing autnority with the liberty to theassessee to produce evidence in respect of issue pertaining to bid loss. In this connection, our attentionhas been invited to para 5 of the aforesaid judgment. Itis contended that in the instant case, the assessee hasnot been able to substantiate its claim for bid loss byproducing the relevant material. It is further submittedthat the assessee has failed to furnish the factual|information with regard to the quantification of theamount of bid loss to the extent of Rs.7,20,32,155/-..Tnerefore, in the facts situation of the case, the matterdeserves to be remitted to the Assessing Officer for.decision afresh in accordance with law. 5.On the other hand, learned counsel for the|aSSe@SS€2submittedtnat|Its|claimfor.allowing|expenditure in the year pricing itself and not carrying itfor the entire duration of the chits scheme stands'concluded by judgment of the Supreme Court in Taparia.Tools vs. JCIT, 372 ITR 605 (SC). It is also pointed outthat for Assessment Years 2010-11, 2011-12, 2012-13and 2013-14, the revenue has already accepted the method of accounting of claiming bid loss during theyear of pricing. It is also pointed out that in respect ofAssessment Year 2017-18, the Assessing Officer has_accepted the claim of bid loss and the matter standsconcluded by the decision of the Supreme Court andsince, no factual adjudication requires, therefore, there|is no need for remanc. 5.On the other hand, learned counsel for the|aSSe@SS€2submittedtnat|Its|claimfor.allowing|expenditure in the year pricing itself and not carrying itfor the entire duration of the chits scheme stands'concluded by judgment of the Supreme Court in Taparia.Tools vs. JCIT, 372 ITR 605 (SC). It is also pointed outthat for Assessment Years 2010-11, 2011-12, 2012-13and 2013-14, the revenue has already accepted the method of accounting of claiming bid loss during theyear of pricing. It is also pointed out that in respect ofAssessment Year 2017-18, the Assessing Officer has_accepted the claim of bid loss and the matter standsconcluded by the decision of the Supreme Court andsince, no factual adjudication requires, therefore, there|is no need for remanc. 6.|We have considered the submissions made bylearned counsel for the parties and have perused therecord. The Commissioner of Income Tax (Appeals) hasplaced reliance on the decision of the tribunal in the caseof the assessee passed in I.T.A.No.601/Bang/200/7 forthe Assessment Year 2003-04. The tribunal had passedthe aforesaid order by placing reliance on decision ofMadras High Court in Bilahari Investments vs. CIT, 288.ITR 39. The aforesaid decision was affirmed by theSupreme Court in 299 ITR SC 1. In view of the aforesaiddecision of the Supreme Court, the Commissioner ofIncome Tax (Appeals) taking into account the fact that the tribunal itself has allowed the claim of the assessee|for.AssessmentYear2003-04hasacceptedtheassessee's claim for deduction on account of bid loss for|a sum of Rs./,41,35,/744/-. The aforesaid order hasbeen affirmed by the tribunal. The tribunal while dealingwith the claim of the assessee for bid loss has held as'follows: As regard ground No.2, we find that the|issue Is covered by tne decision of the ITAT in.the assessee'’s own case for the AssessmentYear 2003-04 and the department has followedits own case for the earlier year only to keep.the issue alive on the ground that an appealnas been filed before the Hon ble High Court ofKarnataka. Since, the issue is covered by tne.decision of the tribunal in the assessee's own|case and because an appeal is pending in the.higher forum, it will not lose its precendentialvalue. Therefore, we do not find any reason tointerfere with the order of the CIT(A). This—ground Is accordingly rejected. JThus, subsequently the very foundation of the order passed by the tribunal has disappeared asSubsequently the order, on which it has placed reliancehas been set aside by this court vide judgment dated09.01.2015 passed in I.T.A.No.920/2008 (CIT VS.SHRIRAM CHITS (Karn.) PVT. LTD., BANGALORE, 375.ITR 289). Admittedly, In the instant case, the Assessing|Officer has recorded a finding that the assessee has.failed to substantiate its claim by producing evidence.However, the aforesaid aspect of the matter has neitherbeen considered by the Commissioner of Income Tax(Appeals) nor the tribunal. The impugned order insofaras it pertains to allowing the claim of the assessee for.bid loss is quashed. The matter is remitted to theAssessing Officer and tne assessee is granted anOpportunity to substantiate its claim for deduction of bidloss by adducing cogent material. Needless to state thatthe Assessing Officer shall decide the aforesaid issue in.the lignt of decision of the Supreme Court in case ofTaparia Tools vs. JCIT, 372 ITR 605 (SC). ���'��5�������������������������������������������� �������������5�������������������$��������������5��������� ����������������������������������� ������������ ��� �����������