Capital Investment from Surplus Funds available out of Various Income Taxed under Different Heads without Precise Accounting: ITAT upholds Disallowance of Bad Debts [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has upheld the disallowance of bad debts as the capital investment from surplus funds was available out of various income taxed under different heads without precise accounting.

The assessee,Ajay Kumar filed appeal stating that the Commissioner of Income Tax Appeals (CIT(A)) had erred in confirming the order of the Assessing Officer and holding that the provisions of Section 154 of the Income Tax Act, 1961 were attracted in this case. The counsel further submitted that the first appellate authority had also erred in confirming the order of the AO and holding that the assessee was not involved in business or real estate activity therefore, not entitled to claim bad debt.

Atul Ninawat, on behalf of the assessee submitted that the computation of income of assessee for AY 2013-14 to show that the assessee had declared income from salary, income from house property, income from business and profession, income from capital gains, therefore, authorities below were not correct and justified in dismissing the claim of bad debts of assessee incurred to him on account of booking of flat which was never delivered to the assessee and the amount deposited by the assessee was also not returned by builder.

P. Praveen Sidharth,on behalf of the revenue submitted that the AO was well within its right in invoking of provision of Section 154 of the Income Tax Act because there was no material or documentary evidence on record to support the claim of allowance of deduction on account of bad debts as claimed by the assessee. He also submitted that from the copy of computation of income it was discernible that the assessee was receiving salary income from SB Township Ltd and had also declared income from capital gains on account of sale of property in Chandigarh.

He further submitted that from the said computation of income it was clearly discernible that the assessee had not declared any income from business and profession, of property, except the claim of loss due to bad debts which could not be allowed as the assessee was not in the business of sale and purchase of property.

The two-member Bench of C.M. Garg, (Judicial Member0 and Pradip Kumar Kedia, (Accountant Member) observed that the CIT(A) had considered the requirement of Section 36(1)(vii) read with Section 36(2) of the Income Tax Act and thereafter concluded that the appellant had not involved in any such business activity, he had not held any asset as stock-in-trade and never any income from such business had been offered for tax anytime.

The Bench dismissed the appeal filed by the assessee holding that the CIT(A) had rightly concluded that the appellant had made capital investment from surplus funds available out of various incomes taxed under their appropriate heads. There was no accounting of any such income thus claimed on account of bad debts was seriously misplaced accounting.

The Bench also held that the conclusion drawn by the CIT(A) that the impugned loss was a capital loss of personal in nature as the asset was held by the assessee as personal capital assets could not be agreed.

Capital investment from surplus funds available out of various income taxed under different heads without precise accounting: ITAT upholds disallowance of bad debts

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