Mahipat Raichand Sharebroking Pvt.Ltd., Ahmedabad v. The Dy.CIT.,Cent.Circle-2(2),, Ahmedabad

ITSSA 323/AHD/2010 | 2001-2002
Pronouncement Date: 06-08-2010 | Result: Allowed

Appeal Details

RSA Number 32320516 RSA 2010
Assessee PAN AABCN0357Q
Bench Ahmedabad
Appeal Number ITSSA 323/AHD/2010
Duration Of Justice 3 month(s) 20 day(s)
Appellant Mahipat Raichand Sharebroking Pvt.Ltd., Ahmedabad
Respondent The Dy.CIT.,Cent.Circle-2(2),, Ahmedabad
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 06-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 06-08-2010
Date Of Final Hearing 05-07-2010
Next Hearing Date 05-07-2010
Assessment Year 2001-2002
Appeal Filed On 16-04-2010
Judgment Text
IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD BEFORE SHRI BHAVNESH SAINI AND SHRI_D.C. AGRAWA L IT(SS) A. NO. 323/AHD/2010 (ASSESSMENT YEAR: 2001 -02 ) MAHIPAT RAICHAND SHAREBROKING PRIVATE LTD. A-701 PREMIUM HOUSE NR. HANDLOOM HOUSE ASHRAM ROAD AHMEDABAD. VS THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 (2) AAYAKAR BHAVAN ASHRAM ROAD AHMEDABAD. (APPELLANT) (RESPONDENT) PAN: AABCN 0357 Q APPELLANT BY : SHRI.SANJAY SHAH RESPONDENT BY : SHRI SHELLY JINDAL CIT(DR) ( (( ( )/ )/)/ )/ ORDER PER SHR D.C. AGRAWAL A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. C.I.T. CENTRAL II AHMEDABAD PASSED UNDER SECTION 263 W HEREBY HE HAS RESTORED THE ISSUE OF ALLOWABILITY OF BAD DEBT TO THE FILE OF THE ASSESSING OFFICER FOR CARRYING OUT NECESSARY INQUIRIES AND VERIFICATION. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE ORDER PASSED BY THE LEARNED CIT U/S. 26 3 IS BAD IN LAW AND LIABLE TO BE QUASHED. IT IS SUBMITTED THAT IT BE SO HELD NOW. 1.1. THE LD. CIT ERRED IN LAW AND ON FACTS IN INVO KING THE PROVISIONS OF SECTION 263 IN RESPECT OF THE ISSUE OF BAD DEBTS WHICH HAD ALREADY MERGED INTO THE APPELLATE ORDER IN THE FIRS T ROUND OF LITIGATION MADE IN ORDER U/S. 143(3) AS ALSO IN THE SECOND ROUND OF LITIGATION IN THE ORDER U/S. 153A READ WITH SECT ION 143(3) PASSED BY THE LD. A.O. WHICH WERE CARRIED INTO FURT HER APPELLATE IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 2 PROCEEDINGS BEFORE THE LEARNED CIT(A) AND ITAT IN R ESPECTIVE PROCEEDINGS AND WERE ADJUDICATED UPON BY THEM BEFOR E LD. CIT PASSED ORDER U/S. 263 OF THE ACT. 1.2. THE LD. C.I.T. ERRED IN LAW AND ON FACTS IN WR ONGLY PASSING THE ORDER U/S. 263 QUA THE AMOUNT OF BAD DEBTS OF RS.71 08 600/- WHICH WERE ALLOWED IN THE ORIGINAL ASSESSMENT ORDER U/S. 143(3) DATED 18-03-2004 AND FOR WHICH THE TIME LIMIT OF 2 YEARS PRESCRIBED U/S. 263(2) WAS ALREADY OVER. THE LD. CI T WRONGLY ASSUMED JURISDICTION U/S. 263 FOR THE ABOVE SAME AM OUNT PRESUMING THAT THE SAME IS ALLOWED FOR THE FIRST TI ME IN THE ORDER PASSED U/S. 153A R. W. SECTION 143(3) DATED 31-12-2 007. THUS THE ORDER PASSED BY THE LD. C.I.T. BEING BEYOND TH E TIME LIMIT PRESCRIBED U/S. 263(2) IS BARRED BY LIMITATION AND BAD IN LAW. 1.3. THE LD. C.I.T. HAS WRONGLY ASSUMED JURISDICTIO N U/S. 263 IN RESPECT OF THE ISSUE OF BAD DEBTS ALLOWED BY THE LD . A.O. U/S. 153A R. W. SECTION 143(3) AS SUCH ISSUE WAS NOT FOR THE FIRST TIME CONSIDERED IN THE ORDER U/S. 153A R. W. SEC. 143(3) . THE LD. A.O. HAD ALREADY CONSIDERED THE SAME IN THE EARLIER ORDE R U/S. 143(3) DATED 18-03-2004 WHICH HAD NOT ABATED AND BECAME FI NAL AND WHICH HAD BEEN SIMPLY FOLLOWED WHILE PASSING ORDER U/S. 153A R. W. SEC. 143(3). THE LD. A.O. WRONGLY DISCUSSED THE SAME IN HIS ORDER U/S 153A R. W. SEC. 143(3) EVEN THOUGH IT WA S NOT ARISING OUT OF SEARCH MATERIAL AND LD. C.I.T. WRONGLY MADE IT A BASE FOR INITIATING ACTION U/S. 263 AS IF SUCH ISSUE IS ARIS ING FOR THE FIRST TIME IN PROCEEDINGS U/S. 153A R. W. SEC. 143(3) AND THUS WRONGLY DISTURBED THE FINALITY OF THE PROCEEDINGS WHICH WAS ALREADY ATTAINED IN ORDER U/S. 143(3) DATED 18-03-2004. 2.0 THE LD. CIT ERRED IN LAW AND ON FACTS IN HOLDIN G THAT THE ORDER PASSED BY THE LD. A.O. U/S. 153A R. W. SEC. 143(3) IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF R EVENUE. YOUR APPELLANT SUBMITS THAT THE LEARNED A.O. HAS RIGHTLY ALLOWED THE DEDUCTION OF BAD DEBTS OF RS. 71 08 600/- IN THE FI RST ROUND OF LITIGATION AND THERE ARE ENOUGH JUDICIAL PRONOUNCEM ENTS IN FAVOUR OF ALLOWING SUCH AMOUNT OF BAD DEBTS EVEN IN RESPEC T OF THE SHARE-BROKER. THUS THE LD. A.O. HAD DONE WHAT WAS PERMISSIBLE COURSE OF ACTION AND HENCE THE CASE OF THE APPELLAN T SQUARELY FALLS IN RATIO OF THE HONBLE SUPREME COURT IN CASE OF MALABAR INDUSTRIES CO. LTD. 243 ITR 363 AND FOLLOWING THE SAME ORDER PASSED BY LD. C.I.T. U/S. 263 BE QUASHED. 2.1 THE LD. C.I.T. FAILED TO APPRECIATE THAT THE LD . A.O. IN THE FIRST ROUND OF LITIGATION ALLOWED BAD DEBTS OF RS.71 08 6 00/- IN ORDER IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 3 U/S. 143(3) DATED 18-3-2004 WHICH HAS BEEN FOLLOWED IN THE ORDER U/S. 153A READ WITH SEC. 143(3). THE LD. A.O. MADE ELABORATE ENQUIRIES IN RESPECT OF SUCH CLAIM BY CAL LING RELEVANT DETAILS FROM THE APPELLANT INCLUDING THE AFFIDAVIT OF THE MAJOR BAD DEBTOR FOR A SUM OF RS. 69 05 107/- AND ALSO FOLLOW ED RELEVANT JUDICIAL PRONOUNCEMENTS AND UPHELD THE CONTENTIONS RAISED BY THE APPELLANT MADE FROM TIME TO TIME. YOUR APPELLAN T RESPECTFULLY SUBMITS THAT THE ORDER PASSED BY THE LD. A.O. THEN CANNOT BE CONSIDERED AS ERRONEOUS OR PREJUDICIAL TO THE INTER EST OF REVENUE SO AS TO CONFER JURISDICTION TO THE LD. C.I.T. U/S. 263 OF THE ACT. 3.0. WITHOUT PREJUDICE TO ABOVE THE LD. CIT HAS WR ONGLY ASSUMED JURISDICTION U/S. 263 EVEN ON MERITS OF THE CASE AF TER THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF T RF LTD. 230 CTR 14 AND BONANZA PORT FOLIO LTD. REPORTED AT 226 CTR-468. IT IS SUBMITTED THAT IT BE SO HELD NOW AND ORDER PA SSED U/S. 263 BY LD. CIT BE QUASHED. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A BRO KER DEALING IN SHARES BUSINESS. THE RETURN OF INCOME WAS FILED AT A LOSS OF RS. 1 52 980/- ON 30-10- 2001 FOR THE ASSESSMENT YEAR 2001-02 AND THE ASSESS MENT THEREOF U/S. 143(3) WAS COMPLETED ON 18-3-2004 AT A TOTAL INCOME OF RS.52 76 440/-. IN THAT CASE AN ADDITION OF RS.21 22 560/- WAS MADE I N RESPECT OF BAD DEBTS DISALLOWED. THE ASSESSEE WENT IN APPEAL BEFORE THE LD. C.I.T.(A) WHO VIDE HIS ORDER DATED 8-11-2004 CONFIRMED THE ORDER OF THE LD . A.O. IN NOT ALLOWING CLAIM OF BAD DEBTS AS WELL AS NOT ALLOWING THE CLAI M AS TRADING LOSS U/S. 28(1). IN THIS REGARD WE REFER TO PARAGRAPH 6.2 TO 6.4. FR OM THAT AS UNDER :- 6.2. I HAVE CAREFULLY CONSIDERED THE ISSUE. IT IS SEEN THAT THE APPELLANT IS CARRYING ON BUSINESS OF BUYING AND SELLING SHARE S ON BEHALF OF ITS CLIENTS AND IN THAT PROCESS IT EARNS INCOME BY WAY OF BROKERAGE. THUS THE TRANSACTIONS ARE CARRIED OUT IN THE COURSE OF B USINESS OF THE APPELLANT. HOWEVER APPARENTLY THIS IS A CASE WHERE SALE AND PURCHASE IS NOT OF THE APPELLANT BUT HE IS WORKING AS AN AGE NT AND THESE AMOUNTS HAVE NEVER BEEN TAKEN TO THE PROFIT AND LOSS ACCOUN T OF THE APPELLANT. THEREFORE THESE ITEMS IN NO CASE CAN BE ALLOWED AS A BAD DEBT U/S. 36 AS HELD BY ITAT AHMEDABAD IN THE CASE REPORTED AT 53 ITD PAGE-326. IN THIS CASE OF ASHOK KUMAR LALITKUMAR THE HONBLE I.T.A.T. HAS HELD THAT THE CLAIM MAY BE CONSIDERED AS A TRADING LOSS IF IT CAN BE PROVED IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 4 THAT THE AMOUNT HAS BECOME IRRECOVERABLE. IN VIEW O F THIS . THE A. OS FINDING THAT THE CLAIM CANNOT BE ALLOWED AS BAD DEB T IS AS PER LAW. 6.3. COMING TO THE CLAIM OF THE AMOUNT AS TRADING L OSS IT HAS TO BE ESTABLISHED BY THE APPELLANT BY ADDUCING SUFFICIENT EVIDENCE THAT THE AMOUNT HAS BECOME IRRECOVERABLE AND THAT TOO IN THE YEAR WHICH IT IS CLAIMED THAT THE AMOUNT HAS BECOME IRRECOVERABLE. M ERELY WRITING OFF THE AMOUNT IN THE PROFIT AND LOSS ACCOUNT IS NO PRO OF THAT IT HAS BECOME IRRECOVERABLE. THERE MAY BE A CASE WHERE THE AMOUNT MAY BE RECOVERED IN FUTURE OR MAY BECOME BAD AFTER PASSAGE OF SOME MORE TIME. MERELY BECAUSE THE ASSESSEE CHOOSES TO WRITE IT OFF WOULD NOT MEAN THAT THE AMOUNT HAS BECOME IRRECOVERABLE. PER USAL OF THE ASSESSMENT ORDER SHOWS THAT THE APPELLANT HAD CLAIM ED BAD DEBT / TRADING LOSS OF RS. 92 31 610/- AND EXCEPT FOR THRE E ITEMS REFERRED TO EARLIER REMAINING WERE ALLOWED AS TRADING LOSS. PER USAL OF ACCOUNT OF SNEHA SECURITIES (P) LTD. AND AMIT ARUN BHARGAVA S HOWS THAT TRANSACTIONS HAVE BEEN GOING ON UP TO JULY 2000. T HE AMOUNT HAS BEEN WRITTEN OFF BY THE APPELLANT BUT THERE IS NO E VIDENCE TO SHOW WHETHER ANY STEPS FOR RECOVERY WAS TAKEN OR NOT. IT HAS NOT BEEN SHOWN BY WAY OF ANY EVIDENCE THAT THESE PARTIES WERE NOT IN A POSITION TO PAY THE AMOUNT. UNLESS SOMETHING IS SHOWN TO PROVE THAT THE AMOUNT HAS BECOME IRRECOVERABLE THE CLAIM OF TRADING LOSS CAN NOT BE ALLOWED EVEN IF THE APPELLANT CHOOSES TO WRITE IF OFF ON ITS OWN . THERE SHOULD BE REASONABLE REASONS TO SHOW THAT THERE IS NO HOPE OF RECOVERY OF THIS AMOUNT. 6.4. IN THE CASE OF PRIMA SHARE AND STOCK (P) LTD. IT IS SEEN THAT FOR THE RELEVANT YEAR UNDER CONSIDERATION THAT PARTY W AS DOING BUSINESS AND WAS EARNING INCOME A PART OF WHICH WAS BY WAY OF SUB-BROKERAGE RECEIVED FROM THE APPELLANT ITSELF. THE COMPANY AS WELL AS ITS DIRECTORS WERE HAVING INCOME AND BALANCE SHEET FOR A.Y. 2001- 02 SHOWS THAT THEY HAD SUFFICIENT ASSETS FROM WHICH RECOVERY WAS POSSIBLE. NO EVIDENCE HAS BEEN PRODUCED TO SHOW THAT ANY STEPS W ERE TAKEN FOR RECOVERY OF THIS AMOUNT. IT IS CLEAR THAT IN THE YE AR UNDER CONSIDERATION THE AMOUNT CANNOT BE SAID TO BE IRRECOVERABLE AS TH E PARTY IN QUESTION HAD SUFFICIENT ASSETS AND NO STEPS WERE TAKEN TO RE COVER THIS AMOUNT. IN VIEW OF THE ABOVE THE CLAIM OF THE APPELLANT CA NNOT BE ALLOWED AND THE A. OS ACTION IS UPHELD. 3. THE ASSESSEE THEN WENT IN APPEAL BEFORE THE TRIB UNAL WHICH VIDE THEIR ORDER DATED 27/2/2009 IN THE CASE OF 35 ASSESSEES I NCLUDING THIS ASSESSEE WHO WAS LISTED AT ITEM NO.19 AND 20 THEREIN RESTOR ED THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO VERIFY WHETHER ASSESSEE H AS WRITTEN OFF THE AMOUNTS IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 5 IN THE BOOKS OF ACCOUNTS AND IF YES THE DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE BUT WHERE ASSESSEE HAS MERELY MADE THE PRO VISION THEN DEDUCTION SHOULD NOT BE ALLOWED. IN THIS REGARD WE REFER TO P ARAGRAPH 64 OF THE ORDER OF THE TRIBUNAL AS UNDER :- 64. HOWEVER IN ITA NO.99/AHD/05 FOR A.Y. 2001-02 IT IS NOT CLEAR FROM THE RECORD WHETHER THE ASSESSEE HAS WRITTEN OF F THE AMOUNT IN ITS BOOKS OF ACCOUNT OR HAS MADE THE PROVISION. WE THE REFORE DIRECT THE A.O. TO VERIFY THE AUDITED BOOKS OF ACCOUNT AND IN CASE THE A.O. FINDS THAT THE ASSESSEE HAS WRITTEN OFF THE AMOUNT IN ITS BOOKS OF ACCOUNT THE DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE BUT IN CASE HE FINDS THAT THE ASSESSEE HAS MERELY MADE A PROVISION THE DEDUC TION SHOULD NOT BE ALLOWED TO THE ASSESSEE IN VIEW OF OUR AFORESAI D FINDINGS. THUS THE ONLY GROUND IN ITA NO.99/AHD/2005 FOR A.Y. 2001-02 IS ALLOWED FOR STATISTICAL PURPOSE. 4. IN THE MEANTIME ACTION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE AND PROCEEDINGS U/S. 1 53A WERE INITIATED ON 24- 2-2006. THE RETURN OF INCOME U/S. 153A WAS FILED ON AN INCOME OF RS.23 86 150/- ON 24-11-2006. IN THIS ORDER ALSO T HE ASSESSING OFFICER REPEATED THE ADDITION OF RS.21 22 560/- ON THE GROU ND THAT ASSESSEE HAD ONLY MADE A PROVISION FOR BAD DEBTS. IN THIS REGARD PARA GRAPH 3 FROM HIS ASSESSMENT ORDER U/S. 153A DATED 31-12-2007 READS A S UNDER :- 3. IN THE ORIGINAL ASSESSMENT ORDER DT . 18-3-2004 AN ADDITION OF RS.21 22 560/- WAS MADE ON ACCOUNT OF PROVISION FOR BAD DEBTS. THE ADDITION WAS CONFIRMED BY CIT(A) VIDE ORDER NO. CIT (A)VI/CIR.3/94/04- 05 DATED 08-11-2004. HENCE FOR THE DETAILED REASONS MADE IN THE ORIGINAL ASSESSMENT ORDER AND CIT(A)S ORDER ADDIT ION OF RS.21 22 560/- IS MADE. ASSESSEE HAS FURNISHED INAC CURATE PARTICULARS OF INCOME AND HENCE IS LIABLE FOR PENALTY U/S. 271( 1)(C). 5. THE ASSESSEE THEN APPEALED AGAINST THIS ORDER BE FORE THE LD. C.I.T.(A) WHO VIDE HIS ORDER DATED 11-12-2008 CONFIRMED THE ADDITION AS PER FOLLOWING PARAGRAPHS :- 7. THE APPELLANT HAS OBJECTED THE FRAMING OF THE A SSESSMENT ORDERS ON THE LEGAL GROUND THAT THE DISALLOWANCES MADE IN THE IMPUGNED ORDERS HAD ALSO BEEN MADE IN THE ORIGINAL ASSESSMENT IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 6 ORDERS WHICH WERE NOW BEFORE THE ITAT AHMEDABAD FO R ADJUDICATION. THE RELATED APPEALS HAVE NOT ABATED. MOREOVER IN TH E DECISION IN CASE OF L.M.J. INTERNATIONAL LTD. VS. DCIT 119 TTJ-214 IT HAD BEEN HELD THAT ITEMS OF REGULAR ASSESSMENT CANNOT BE ADDED BACK IN THE PROCEEDINGS U/S. 153C WHEN NO INCRIMINATING DOCUMENTS IN RESPE CT OF THE DISALLOWED AMOUNTS WERE FOUND IN THE SEARCH. HOWEV ER THE PLAIN READING OF THE RELEVANT SECTIONS OF THE ACT DO NOT SPECIFY THAT SUBJECT MATTER OF THE ORDERS U/S. 153A/153C RE QUIRES TO BE LIMITED TO SEARCH RELATED MATTERS/ISSUES ONLY. MOREOVER THE SECOND P ROVISO TO SECTION 153A SPECIFIES THAT ASSESSMENT OR RE-ASSESSMENT PEN DING ON THE DATE OF SEARCH/REQUISITION SHALL ABATE. THE ASSESSMENT F OR A.Y. 2000-01 AND 2001-02 WERE NOT PENDING ON THE DATE OF SEARCH/REQU ISITION. HENCE THE LEGAL OBJECTIONS OF THE APPELLANT ARE NOT ACCEPTABL E AND ARE THEREFORE REJECTED. 8. THE DISALLOWANCE MADE BY THE A./O. FOR SUB-BROKE RAGE AND THE PROVISIONS FOR BAD DEBT IS BASED ON THE REASONS IN THE ORIGINAL ASSESSMENTS. THE CIT (A) IN HIS ORDER DATED 8-11-20 04 FOR A.Y. 2000- 01 AND 2001-02 HAS DELETED THE DISALLOWANCE FOR THE SUB-BROKERAGE AS DISCUSSED IN HIS ORDER IN APPEAL NO. CIT (A)/CIR./9 4/04-05 DATED 8/11/2004. THE FACTS AND CIRCUMSTANCES BEING THE SA ME THE DISALLOWANCE OF SUB-BROKERAGE I.E. RS.98 720/- AND RS.3 46 286/- IN A.Y. 2000-01 AND 2001-02 IS THEREFORE DELETED. IN RESPECT OF THE DISALLOWANCE FOR PROVISION OF BAD DEBT IT IS SEEN T HAT THE DISALLOWANCE WAS CONFIRMED FOR BOTH THE ASSESSMENT YEARS IN THE APPELLATE ORDERS BY THE CS. IT(A). THE FACTS AND CIRCUMSTANCES CONTEN TIONS BEING THE SAME THE DISALLOWANCE FOR PROVISIONS OF BAD DEBT I US UPHELD. THE RELATED GROUND(S) OF APPEAL IS REJECTED. 6. THEREAFTER THE MATTER TRAVELED TO THE TRIBUNAL WHICH VIDE THEIR ORDER IN ITA NO.800 & 801/AHD/2009 PRONOUNCED ON 5-6-2009 DE LETED THE ADDITION OF BAD DEBTS ON THE GROUND THAT IF CERTAIN ISSUES ARE CONSIDERED IN AN ASSESSMENT FRAMED U/S. 143(3) THEN THE SAME CANNOT BE CONSIDERED IN THE ASSESSMENT MADE U/S. 153A. IN THIS REGARD WE REFER TO THE PARAGRAPHS 12 AND 13 FROM THE ORDER OF THE TRIBUNAL AS UNDER :- 12. IN THIS CASE WE NOTED THAT THE TRIBUNAL HAS CA TEGORICALLY HELD THAT THE APPEAL PENDING ON THE DATE OF SEARCH DID NOT AB ATE AND THEREFORE THE ORIGINAL ASSESSMENT REMAINED INTACT AND CANNOT BE REOPENED U/S. 153A. THE DECISION OF THE CO-ORDINATE BENCH IS BIND ING ON US. IN VIEW OF THE SAID DECISION WE HOLD THAT THE ORIGINAL ASSESSM ENTS COMPLETED IN THE CASE OF THE ASSESSEE WERE NOT ABATED AND THER EFORE THE A.O. WAS IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 7 NOT COMPETENT TO CONSIDER THE ISSUES WHICH HAVE AL READY BEEN CONSIDERED IN THE ORIGINAL ASSESSMENTS. THUS GROUN D NO.1 IS ALLOWED. 13. IN RESPECT OF GROUND NO.2 IN THE ASSESSMENT EAR 2000-01 AND 2001-02 WHICH RELATES TO THE DISALLOWANCE OF THE BA D DEBTS WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY CONS IDERED THE SAME. SINCE WE HAVE ALREADY HELD IN THE PRECEDING PARAGRA PHS THAT THE ISSUES WHICH HAVE BEEN CONSIDERED BY THE A.O. IN THE ORIGI NAL ASSESSMENTS CANNOT BE CONSIDERED IN THE ASSESSMENTS FRAMED U/S. 143(3) READ WITH SECTION 153A. THIS IS AN ADMITTED FACT THAT THE ISS UE RELATING TO BAD DEBTS HAS BEEN CONSIDERED BY THE A.O. IN THE ORIGIN AL ASSESSMENTS FRAMED U/S. 143(3) AND WHICH DID NOT GET ABATED. TH EREFORE IN OUR OPINION THE A O. WAS NOT COMPETENT TO CONSIDER THE ISSUE RELATING TO THE DISALLOWANCE OF BAD DEBTS IN THE ASSESSMENTS FR AMED U/S. 143(3) READ WITH SECTION 153A. WE ACCORDINGLY DELETE THE A DDITION. THUS GROUND NO.2 STANDS ALLOWED. 7. IN THE MEANTIME THE LD. C.I.T. ISSUED A NOTICE U NDER SECTION 263 TO THE ASSESSEE VIDE HIS NOTICE DATED 18-5-2009 ASKING THE ASSESSEE TO SHOW CAUSE AS TO WHY NOT THE ORDER PASSED U/S. 153A READ WITH SECTION 143(3) DATED 31- 12-2007 BE SET ASIDE FOR FRESH INQUIRY AS A.O. HAS WRONGLY ALLOWED THE BAD DEBTS OF RS.11 08 600/-. THE RELEVANT NOTICE OF THE C.I.T. CENTRAL II AHMEDABAD READS AS UNDER :- OFFICE OF THE COMMISSIONER OF INCOME TAX(CENTRAL)-II ROOM NO.301 3 RD FLOOR ANNEXE TO AAYAKAR BHAVAN ASHRAM ROAD AHMEDABAD PH.079-275 46649 FAX NO.27540462 --------------------------------------------- -------------------------------------------- NO.CIT(C)-II/TECH/SHOW-CAUSE/263/MAHIPAT/08-09 MARCH 18 2009. THE PRINCIPAL OFFICER MAHIPAT RAICHAND SHARE BROKING PVT. LTD. 701-702 PREMIUM BEHIND HANDLOOM HOUSE OFF. ASHRAM ROAD AHMEDABAD . SIR SUB:- SHOW CAUSE NOTICE FOR ACTION U/S. 263 OF THE I.T.ACT IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 8 A.Y. 2001-02 PAN AABCM 0357 Q REG. ---- THE ASSESSMENT FOR A.Y. 2001-02 WAS FINALIZED IN Y OUR CASE U/S. 153A R. W. S. 143(3) ON 31.12.2007 BY DCIT CENTRAL CIRCLE 2(2) AHMEDABAD WHICH WAS SUBSEQUENTLY MODIFIED BY ORDER U/S. 154 DATED 18.02.2009. THE ORDERS PASSED BY THE A.O. HAVE BEEN PERUSED BY ME. IT IS OBSERVED FROM THE ORDERS THAT: WHILE DETERMINING THE TOTAL INCOME AT RS.45 32 957 /- THE BAD DEBTS WRITTEN OFF INCORPORATED IN THE PROFIT AND LO SS ACCOUNT AMOUNTING TO RS.92 .31 160/- WAS OVERLOOKED AND ONL Y AN AMOUNT I.E. RS.21 22 560/- INCLUDED IN THE APPELLAT E ORDER WAS CONSIDERED FOR DISALLOWANCE. HENCE THE DIFFERENCE AMOUNT OF RS.71 08 600/- STANDS ALLOWED WRONGLY. SINCE YOU AR E ENGAGED IN SHARE BROKING BUSINESS AND SHOWN ONLY BROKERAGE INCOME ANY LOSS ON PURCHASE OF SHARE ON BEHALF OF THE CLIENT WHICH WERE NOT ROUTED THROUGH YOUR TRADING ACCOUNT IS NOT ELIGIBLE AS BAD DEBTS FOR YOUR BUSINESS. THE ABOVE FACT SHOWS THAT THE ASSESSMENT ORDER PASS ED BY THE ASSESSING OFFICER IN RESPECT OF A.Y. 2001-02 IS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THUS THE A SSESSMENT ORDER APPEARS TO HAVE BEEN PASSED WITHOUT MAKING PROPER A PPLICATION OF THE PROVISIONS IN THIS REGARD. THEREFORE I PROPOSE TO SET ASIDE THE ORDER PASSED BY ASSESSING OFFICER U/S. 153A R. W. S. 143( 2) OF THE ACT 1961 AND TO ISSUE NECESSARY INSTRUCTIONS FOR MAKING THE ORDER DE NOVO. BEFORE DOING SO YOU ARE GIVEN AN OPPORTUNITY OF BE ING HEARD IN THIS MATTER. THEREFORE PLEASE STATE AS TO WHY THE ORDER PASSED BY THE ASSESSING OFFICER IN YOUR CASE SHOULD NOT BE MODIFI ED AND/OR SET ASIDE DIRECTING THE ASSESSING OFFICER TO MAKE A FRESH ASS ESSMENT. INTHIS CONNECTION YOU ARE REQUESTED TO ATTEND MY O FFICE AT THE ABOVE STATED ADDRESS ON 25.03.2009 AT 12.30 P.M. IF YOU DO NOT WISH TO ATTEND IN PERSON PLEASE ADDRESS YOUR SUBMISSIONS I N WRITING SO AS TO REACH ME ON OR BEFORE THE ABOVE DATE. PLEASE NOTE T HAT THE FAILURE ON YOUR PART WILL ENTAIL TO PASSING ORDER U/S. 263 OF THE ACT AS STATED ABOVE. ROUND SEAL. YOURS FAITHFULLY SD/- (P.R. RAVIKUMAR) COMMISSIONER OF INCOME-TAX CENTRAL-II AHMEDABAD. IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 9 8. AFTER CONSIDERING THE REPLY OF THE ASSESSEE THE LD. C.I.T. PASSED ON 30-3-2010 THE IMPUGNED ORDER U/S. 263 DIRECTING THE ASSESSING OFFICER TO INQUIRE INTO THE CLAIM OF BAD DEBT BY TREATING LOSS IN RESPECT OF SUM OF RS.71 08 600/- AS THE SAME WAS NOT AT ALL CONSIDERE D IN THE IMPUGNED ORDER DATED 31-12-2007. IN THIS REGARD WE REFER TO THE P ARAGRAPH 7 FROM THE ORDER OF THE LD. C.I.T :- 7. THE ABOVE SUBMISSIONS ALONG WITH EARLIER SUBMIS SIONS DATED 27- 3-2009 AND 29-6-2009 OF THE ASSESSEE HAVE BEEN CONS IDERED CAREFULLY. THE FACTS OF THE CASE AS PER THE RECORDS SHOW THAT THE ASSESSEE HAD CLAIMED A TOTAL SUM OF RS.92 31 160/- AS BADE DEBTS AND ASSESSING OFFICER AFTER VERIFYING CERTAIN DETAILS CONCLUDED THAT A SUM OF RS.21 22 560/- AS NOT ELIGIBLE FOR DEDUCTION U/S. 3 6(1)(VII) OF THE ACT. REGARDING THE BALANCE AMOUNT OF RS.71 08 600/- EVE N THOUGH THE ASSESSING OFFICER CARRIED OUT SOME VERIFICATION TH E CLAIM AS BAD DEBTS WAS ACCEPTED. THE DISALLOWANCE MADE BY THE ASSESSIN G OFFICER WAS DELETED BY THE HONBLE ITAT WHEREIN IT WAS HELD THA T THE AMOUNT WAS ALLOWABLE AS BUSINESS LOSS U/S. 28(1) OF I.T. ACT. THIS WOULD SHOW THAT THE DEDUCTION ALLOWED BY THE ASSESSING OFFICER FOR RS.71 08 600/-WAS WITHOUT PROPER VERIFICATION AS TO THE NATURE AND CO RRECTNESS OF THE CLAIM BOTH ON FACTS AND IN LAW. IT IS THE CONTENTION OF T HE ASSESSEE THAT THE ISSUE OF ERRONEOUS DEDUCTION OF RS.71 08 600/- AS B AD DEBTS HAS MERGED WITH THE DECISION OF THE HONBLE ITAT ON THE ISSUE OF DEDUCTION OF RS.21 22 560/- AS ALLOWED. THE ARGUMENT IS INCOR RECT AS THE ISSUE IS DIFFERENT AND HONBLE ITAT HAD NO OCCASION TO CONSI DER THE ALLOWABILITY OF RS.71 08 600/- WHICH THE ASSESSING OFFICER HAD A LLOWED U/S. 36(1)(VII); WHEREAS THE AMOUNT OF RS.21 22 560/- H ELD BY THE HONBLE ITAT AS ALLOWABLE U/S. 28(1) OF THE I.T. ACT. AS TH E ISSUE WAS NEVER RAISED OR AGITATED IT IS TO BE HELD THAT THE ISSUE HAS NOT MERGED WITH THE HONBLE ITAT. RELIANCE IS PLACED ON HONBLE SUPREME COURT DECISION IN THE CASE OF 231 ITR 50 (SC) SHRI ARBUDA MILLS VS. C .I.T. THE ASSESSING OFFICER DID NOT EXAMINE THE ISSUE OF ALLOWANCE OF T HE CLAIM AS TRADING LOSS WHERE THE CONDITIONS OF ALLOWABILITY WERE TOTA LLY DIFFERENT COMPARED TO THE CONDITIONS TO BE SATISFIED FOR ALLOWING THE CLAIM AS BAD DEBT U/S. 36(1)(VII) OF THE I.T. ACT. THE ASSESSEE WAS LIABLE TO ESTABLISH THAT THE LOSS WAS INCURRED DURING THE NORMAL COURSE OF BUSIN ESS CARRIED OUT AND THE SAME WAS GENUINE. IN THE ABOVE CONTEXT THE ASS ESSING OFFICER FAILED TO CARRY OUT NECESSARY ENQUIRIES AND VERIFIC ATION BEFORE ALLOWING THE CLAIM. IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 10 9. FINALLY THE LEARNED C.I.T. HAS HELD AS UNDER :- 9. THE ASSESSEE HAS ARGUED THAT THE ASSESSING OFFI CER WAS NOT EMPOWERED TO EXAMINE ISSUE OF ALLOWANCES OF BAD DEB TS OR TRADING LOSS AS THERE WAS NO MATERIAL FOUND DURING SEARCH RELATI NG TO THE ABOVE ALLOWANCES. A PLAIN READING OF THE PROVISIONS OF SE CTION 153A OF THE I. T. ACT SHOWS THAT ONCE A SEARCH HAD TAKEN PLACE THE A SSESSING OFFICER IS EMPOWERED TO ISSUE NOTICES FOR THE ASSESSMENT YEARS OF THE PRESCRIBED PERIOD AND TO ASSESS OR RE-ASSESS INCOME FOR THESE ASSESSMENT YEARS. THE CONTRARY VIEW EXPRESSED BY THE HONBLE BENCHES OF THE ITAT IS NOT ACCEPTED BY THE DEPARTMENT AND THE ISSUE IS BEING A GITATED IN APPEALS FILED U/S. 260A OF THE I.T. ACT. IN VIEW OF THE ABO VE POSITION THE CONTENTIONS BY ASSESSEE ARE NOT ACCEPTED. 10. IN VIEW OF THE DETAILED DISCUSSIONS GIVEN ABOVE IT IS HELD THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE SAME IS THEREFORE SET ASIDE WITH A DIRECTION THAT THE GENUINENESS OF THE TRANSACTIONS SHOWN BY THE ASSESSEE IN RESPECT OF ITS CLAIM OF BAD DEBTS OR T RADING LOSS HAVE TO BE EXAMINED AND THE ISSUE MAY BE DECIDED AFRESH IN ACC ORDANCE WITH LAW. HOWEVER THE ASSESSING OFFICER IS DIRECTED TO GIVE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE FIRM BEFORE FINALIZI NG THE SET ASIDE ASSESSMENT ORDER. 10. AGAINST THE ABOVE ORDER LEARNED A.R. FOR THE AS SESSEE MADE DETAILED SUBMISSIONS AND REFERRED TO RELEVANT PAGES FROM THE ORDER OF ASSESSING OFFICER C.I.T.(A) AND TRIBUNAL. THE GIST OF HIS AR GUMENTS AGAINST THE ORDER UNDER SECTION 263 ARE AS UNDER :- 10.1 THE PROVISIONS OF SECTION 263 CANNOT BE INVOKE D IN RESPECT OF THE CLAIM OF BAD DEBTS WHICH WAS ALREADY CONSIDERED BY THE A. O. IN THE ORIGINAL ASSESSMENT ORDER PASSED ON 18-3-2004 WHICH WAS SUBS EQUENTLY MERGED IN TO THE ORDER OF APPELLATE AUTHORITIES LIKE CIT(A) AND TRIBUNAL IN THE FIRST ROUND OF ASSESSMENT ORDER PASSED U/S. 143(3). HE SUBMITTED T HAT A.O. HAD IN FACT CONSIDERED ENTIRE CLAIM OF BAD DEBTS OF RS.92 31 6 10/- AND OUT OF THEM HE HAD CONSIDERED FIT TO MAKE ADDITION IN RESPECT OF 3 ITEMS ONLY WHOSE AMOUNT TOTAL UP TO RS.21 22 560/-. HE REFERRED TO PAGE-6 O F THE ASSESSMENT ORDER IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 11 DATED 18-3-2004 WHEREIN ASSESSING OFFICER HAD CONSI DERED 7 ITEMS OF BAD DEBTS AS UNDER:- SR. NO. NAME OF THE PARTIES. AMOUNT.(RS.) 1. AMIT ARUN BHARGAV 11 310/- 2. CHANDRAKANT S.TRIVEDI 64 680/- 3. MUNDRA INVESTMENT 1 22 862/- 4. PRIME SHARE & STOCK PVT. LTD. 21 0 6 783/- 5. PEE SQUARE TRADING CO. 16 400/ - 6. SNEHA SECURITIES PVT. LTD. 4 465/- 7. TEJBAHADURSINGH DESHRAJSINGH RAJPUT. 69 05 107/- TOTAL. 92 31 610/- 10.2 THE LD. AR REFERRED TO PARAGRAPHS 14 18 AND 1 9 WHERE A.O. HAD DISCUSSED THE ISSUE OF BAD DEBTS IN RESPECT OF SNEH A SECURITIES AMIT ARUN BHARGAVA AND PRIME SHARE & STOCK PVT. LTD. HE CONS IDERED THESE ITEMS OF CLAIM OF BAD DEBTS AS NOT ALLOWABLE AND ACCORDINGLY RESORTED TO ADDITION IN RESPECT OF THESE THREE ITEMS ONLY WHICH TOTALED TO RS.21 22 560/-. IN RESPECT OF OTHERS HE WAS APPARENTLY SATISFIED AND DID NOT MAK E ANY ADDITION. THE LD. A.R. SUBMITTED THAT A.O. HAD CALLED SHRI TEJBAHADUR SINGH DESHRAJSINGH RAJPUT U/S131(1) AND HAD RECORDED HIS STATEMENT IN THE CAS E OF THE ASSESSEE ON 16/12/2003 IN RESPECT OF WHOM ASSESSEE HAD MADE A C LAIM OF BAD DEBTS AMOUNTING TO RS.69 05 107./- (BEING AT SR.NO.7 IN T HE ABOVE CHART) AND THUS AFTER CONSIDERING THE STATEMENT LD. A.O. HAD ACC EPTED THE CLAIM OF THE ASSESSEE AND DID NOT PROPOSE ANY ADDITION. THE LD. A.R. THEN REFERRED TO QUESTIONS AND ANSWERS AT SR.NO.NO.5 TO NO.10 BY HIG H-LIGHTING THE POINT THAT ISSUE REGARDING BAD DEBT IN RESPECT OF DEBTOR NAMLY SHRI TEJBAHADURSINGH DESHRAJSINGH RAJPUT WHICH COMPRISED THE MAJOR PORTI ON IN RS.71 08 600/- WAS CONSCIOUSLY CONSIDERED AND THEREAFTER ACCEPTED THE CLAIM. THE RELEVANT PORTION OF QUESTION AND ANSWERS ARE AS UNDER :- IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 12 Q.5. HOW DO YOU KNOW MAHIPAT RAICHAND SHAREBROKING PVT. LTD. AND WHAT IS YOUR RELATION WITH IT? A. 5. SHRI R.S. PANMCHAL WAS MY FRIEND AND THROUGH HIM I KNOW THE DIRECTOR OF THE ABOVE COMPANY SHRI MAHIPAT SHAH AND SHRI SHITALBHAI SHETH. I HAD BUSINESS RELATION FOR SHARE TRADING WITH THEM. Q.6. STATE WHETHER HAD YOU DONE ANY SHARE TRADING B USINESS WITH THE ABOVE COMPANY UP TO 31-03-2001? A.6. I WAS DOING SHARE TRADING BUSINESS WITH THEM DURING THAT YEAR. Q.7. STATE WHETHER HAD YOU DONE ANY SHARE TRADING T RANSACTIONS OF PARTICULAR AMOUNT WITH ABOVE PARTY? A.7. I HAVE GIVEN YOU A STATEMENT OF ACCOUNT OF ALL THE SHARE TRADING TRANSACTIONS ENTERED INTO BY ME WITH MAHIPAT RAICHA ND SHAREBROKING PVT. LTD. AND A COPY OF THE AFFIDAVIT TO THAT EFFECT EXECUTED BY ME ON 21-02-2003.FROM THE SAME YOU WILL COME TO KNOW THAT I HAD TO PAY RS.69 05 107-50 ON 31-03-200 1 FOR THE ABOVE STATED SHARE TRANSACTIONS. Q.8. FOR WHAT PURPOSE YOU HAD TO PAY THE ABOVE AMO UNT? A.8. I HAD TO PAY THE ABOVE AMOUNT FOR THE LOSS I S UFFERED IN SHARE TRADING BUSINESS DURING F.Y. 2000-01. Q.9. CAN YOU GIVE A COPY OF ACCOUNT OF ABOVE STATED LOSS FROM YOUR BOOKS OF ACCOUNT? A.9. YES I AM GIVING YOUR GOOD SELF THE ACCOUNT OF MAHIPAT RAICHAND SHAREBROKING PVT. LTD. FROM MY BOOKS OF ACCOUNTS UP TO 31-03- 2002 MOREOVER I AM ALSO SUBMITTING ACKNOWLEDGEMENT OF MY RETURN OF INCOME FILED FOR A.Y. 2002-03. Q.10. STATE WHETHER HAVE YOU PAID ANY OF THE AMOUNT OF THE ABOVE STATED AMOUNT IN QUESTION NO.8? A.10. NO I HAVE NOT PAID ANY OF THE ABOVE STATED A MOUNT DUE BY ME TILL TODAY BECAUSE OF MY BAD FINANCIAL POSITION. IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 13 10.3 THUS ONCE THE ISSUE IS CONSIDERED BY THE A.O. IN THE ORIGINAL ASSESSMENT AND WAS ACCEPTED AND NO MATERIAL IS FOUN D IN THE SEARCH AGAINST THIS CLAIM THEN THE SAME CANNOT BE CONSIDERED U/S. 153A AGAIN AND THEREFORE THE SAME CANNOT BE THE SUBJECT MATTER OF REVISION U NDER SECTION 263. 10.4 THE LD. A.R. THEN SUBMITTED THAT ISSUE REGARDI NG THE TRADING LOSS HAS ALSO BEEN CONSIDERED BY THE TRIBUNAL IN THEIR ORDER DATED 27-2-2009 IN PARA 62 63 AND 64 AND ALSO IN THEIR ORDER DATED 5-6-2009 . ONCE THIS BAD DEBT IS ALSO CONSIDERED AS TRADING LOSS BY THE TRIBUNAL THE N THE ORDER OF THE A.O. MERGED IN THE ORDER OF THE TRIBUNAL. THEN THE SAME CANNOT BE REVISED BY THE COMMISSIONER U/S. 263 BY VIRTUE OF CLAUSE (C) OF SE CTION 263(1). 10.5 IN ANY CASE LD. A .R. SUBMITTED THAT TRIBUNAL IN THEIR ORDER DATED 5-6- 2009 HAS HELD THAT ISSUES WHICH ARE ALREADY CONSIDE RED IN THE PROCEEDINGS U/S. 143(3) THE SAME CANNOT BE SUBJECT MATTER OF A SSESSMENT U/S. 153A FOR THE SAME YEAR. 10.6 ON MERITS LD. A.R. SUBMITTED THAT ASSESSEE HAD IN FACT IN WRITTEN OFF THE AMOUNTS IN THE BOOKS AND THEY ARE NOT MERE THE PROV ISIONS. THEREFORE THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE HONBLE SUPREME COURT IN TRFS LTD. CASE. 11. AGAINST THIS LD. D.R. SUBMITTED THAT ONCE PROCE EDINGS U/S. 153A ARE TAKEN UP AS A RESULT OF A SEARCH THEN ORDERS PASSED PRIOR TO THE SEARCH HAVE LOST THEIR SIGNIFICANCE AND ALL THE ISSUED WHETHER CONSIDERED IN ASSESSMENT U/S. 143(3) OR NOT CAN BE TAKEN UP IN THE ASSESSMEN T U/S. 1253A. 11.1 IN ANY CASE ISSUE OF CLAIM OF BAD DEBTS FOR R S.71 08 600/- WAS NOT AT ALL CONSIDERED BY THE A.O. IN THE ASSESSMENT FRAME D U/S. 153A AND THEREFORE HIS ORDER DATED 31-12-2007 CAN BE REVISED BY THE CO MMISSIONER FOR CARRYING IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 14 OUT INQUIRIES. THE LD. D.R. ALSO SUBMITTED THAT IN ANY CASE CLAIM OF TRADING LOSS WAS NOT AT ALL EXAMINED BY LD. A.O. AND THEREFORE THE C.I.T. CAN DIRECT U/S. 263 TO EXAMINE THE CLAIM OF TRADING LOSS NOT ORIGIN ALLY DISCUSSED BY THE AO. 12. IN THE REJOINDER LD. A.R. SUBMITTED CLAIM OF TR ADING LOSS IS AN ALTERNATIVE CLAIM AND IF THE CLAIM IS ALLOWED U/S. 36(1)(II) R. W.S. 36(2) THEN THERE IS NO NEED FOR GOING TO THE ALTERNATIVE CLAIM AS TRADING LOSS. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW WE ARE BOUND BY THE DECISION OF THE TRIBUNAL TAKEN BY THEM IN THEIR ORDER DATED 5-6-2009 IN THE ASSESSEES CASE AND AS REFERRED ABOVE. THE TRIBUNAL HAS CLEARLY HELD THAT ISSUES WHICH ARE CONSIDERED IN THE ORIGINAL ASSESSMENT CANNOT BE CONSIDERED IN THE ASSESSMENT FRAMED U/S. 143(3) R.W.S. 153A. THIS JUDGEMENT IS GIVEN IN THE ASSESSEES CASE AND THEREFORE HAS TO BE FOLLOWED BY THIS BENCH AS WELL. THE ISSUE OF CLAIM OF BAD DEBTS IN RESPECT OF ALL THE PARTIES WHERE MAJOR A MOUNT PERTAINED TO SHRI TEJBAHADURSINGH DESHRAJSINGH RAJPUT AMOUNTING TO R S.69 05 107 50 HAS BEEN CONSIDERED BY THE LD. A.O WHILE FRAMING ASSESS MENT U/S. 143(3) ON 18- 3-2004. HE HAD REFERRED THEREIN THE ENTIRE CLAIM OF BAD DEBT OF RS.92 31 610/-. HE HAD VERIFIED THE COPIES OF ACCOUNTS OF ALL OTHER PARTIES. IN THIS REGARD WE REFER TO PARAGRAPH 4 FROM HIS ORDER DATED 18-3-2004 WHICH READS AS UNDER :- 4. THE COPIES OF ACCOUNTS OF ABOVE SAID PARTIES WE RE VERIFIED AND FROM SUCH ACCOUNTS IT WAS SEEN THAT THE DEBIT BALAN CES OF THE ABOVE SAID PARTIES IN THE BOOKS OF ACCOUNTS OF THE ASSESS EE HAD ARISEN MAINLY ON ACCOUNT OF QUANTUM OF SUCH TRANSACTIONS ON WHICH THE ASSESSEE WAS EARNING ONLY BROKERAGE. IT WOULD BE IMPORTANT T O REPEAT HERE THAT ASSESSEE WAS EARNING ONLY BROKERAGE INCOME AND NOT ENGAGED INTO THE TRADING OF SHARES IN THESE ACCOUNTS. THE REVENUE IN COME TRANSACTIONS WITH THE ABOVE SAID PARTIES WERE LIMITED SOLELY AND EXCLUSIVELY TO BROKERAGE ON THE QUANTUM OF THE TRANSACTIONS. ONLY FOR THE PURPOSE OF ACCOUNTING OF LEDGER ACCOUNT WAS MAINTAINED IN THE BOOKS WHEREIN ALL PURCHASE AND SALES OF TRANSACTIONS OF THE ABOVE SAI D PARTIES MADE THROUGH THE ASSESSEE WERE RECORDED AND THE DIFFERE NCE OF SUCH AMOUNTS WAS THE DEBIT OR CREDIT BALANCE REFLECTED T HEREIN. IT IS ALSO IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 15 POSSIBLE THAT SUCH LEDGER ACCOUNTS OF THESE PARTIES CONSISTED OF CERTAIN LOANS/ADVANCES. HE ALSO RECORDED THE STATEMENT OF SHRI TEJBAHADURSI NGH DESHRAJSINGH RAJPUT AND HE WAS APPARENTLY SATISFIED THAT CLAIM OF BAD D EBTS IN RESPECT OF OTHER FOUR PARTIES WAS ACCEPTABLE AND HE ACCORDINGLY HAD PROPO SED ADDITION IN RESPECT OF ONLY THREE PARTIES VIZ. SNEHA SECURITIES SHRI AMI T ARUN BHARGAV AND PRIME SHARE AND STOCK PVT. LTD. BEING AT SR.NOS.1 4 AND 6 OF THE ABOVE TABLE. THEN IT CANNOT BE SAID THAT LD. A.O. HAD NOT EXAMINED AN D APPLIED HIS MIND IN RESPECT OF ALL THE SEVEN PARTIES. THUS ONCE THE I SSUE OF BAD DEBT IN RESPECT OF THESE FOUR PARTIES WAS CONSIDERED BY THE A.O. AND W AS ACCEPTED THEN AS PER THE DECISION OF THE TRIBUNAL DATED 5-6-2009 THOSE I SSUES CANNOT BE CONSIDERED IN THE ASSESSMENT FRAMED U/S. 153A. 14. IN ADDITION TO ABOVE WE ARE OF THE VIEW THAT I SSUE IS ALSO COVERED BY CLAUSE (C) OF EXPLANATION TO SUB SECTION (1) OF SEC TION 263 WHICH READS AS UNDER :- 263(1)(C) : WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AN D PASSED BY THE A.O. HAD BEEN THE SUBJECT MATTER OF ANY APPEAL [FILED ON OR BEFORE OR AFTER 1 ST DAY OF JUNE 1988] THE POWERS OF THE COMMISSIONER UNDER THIS SUB- SECTION SHALL EXTEND [AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED] TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL]. CLEARLY THE ISSUE OF BAD DEBT WAS CONSIDERED BY APP ELLATE AUTHORITIES IN BOTH THE INNINGS (I) ARISING FROM THE ORDER DATED 18-3-2 004 OF THE A.O. AND OTHER (II) ARISING FROM THE ORDER DATED 31-12-2007PASSED U/S. 153A. THEREFORE THE LD. C.I.T. CAN NOT CONSIDER THIS MATTER AGAIN IN THE RE VISION PROCEEDINGS U/S. 263. 15. THE ORDER OF LD. C.I.T. PASSED U/S. 263 IS ALSO NOT SUSTAINABLE ON ANOTHER GROUND. THE A.O. HAD CARRIED OUT NECESSARY INQUIRIES IN THE ORIGINAL ASSESSMENT PROCEEDINGS U/S. 143(3) AND ACCEPTED THE CLAIM OF THE ASSESSEE IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 16 IN RESPECT OF BAD DEBTS IN RESPECT OF 4 DEBTORS AS DISCUSSED ABOVE AND NO MATERIAL IS FOUND IN THE SEARCH TO SHOW THAT SUCH C LAIM WAS NOT GENUINE OR REQUIRED RE-INVESTIGATION. TTHE COMMISSIONER COULD NOT THEN DIRECT THE A.O. TO MAKE FURTHER INQUIRIES ON BAD DEBTS IN RESPECT OF FOUR PERSONS AMOUNTING TO RS.71 08 600/-. WHERE THE ISSUE IS ALREADY CONSIDER ED BY A.O. THE SAME CANNOT BE REVISED U/S. 263 ON THE PRETEXT THAT SOME MORE INQUIRIES ARE TO BE CARRIED OUT. 16. IN C.I.T. VS. SHASHI THEATRES PVT. LTD. (2001) 248 ITR-126 (GUJ.) IT WAS HELD THAT WHERE INVESTMENT ALLOWANCE IS GRANTED IN RESPECT OF CERTAIN ITEMS BY THE A.O. AND NOT GRANTED IN RESPECT OF SOM E ITEMS LD. CIT EXERCISED HIS POWERS U/S. 263 AND WITHDREW ORIGINAL GRANT OF ALLOWANCE. IT WAS HELD THAT SUBJECT MATTER OF GRANT OF INVESTMENT ALLOWANCE WAS CONSIDERED BY AO. THEREFORE IT WAS NECESSARY TO GO INTO THE QUESTION OF VALIDITY OF THE GROUND OF INVESTMENT ALLOWANCE FOR THE ITEMS ALREADY MADE ADM ISSIBLE BY THE A.O. SINCE THE GROUND OF INVESTMENT ALLOWANCE ON ALL THE ITEM S WERE MATTERS FOR CONSIDERATION BY THE APPELLATE AUTHORITIES CLAUSE ( C) OF THE EXPLANATION OF SECTION 263(1) WOULD BE ATTRACTED. THEREFORE THE C IT COULD NOT EXERCISE HIS REVISIONAL POWERS. 17. IN CIT VS. NIRMA CHEMICAL WORKS PVT. LTD. (20 09) 309 ITR- 67 (GUJ.) WHERE THE COMMISSIONER TOOK A DIFFERENT VIEW ON THE CLAIM OF DEDUCTION U/S. 80I WHICH WAS ALLOWED PARTIALLY BY THE A.O. AND D ISALLOWED PARTIALLY BY CIT(A) IT WAS HELD THAT IT IS NOT THE CASE OF AN ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 18. IN THE CASE OF JOHN WYETH & BROTHERS LTD. VS. C IT REPORTED AT 312 ITR- 80 (ITAT MUMBAI BENCH) IT WAS SIMILARLY HELD THAT IF THE ORDER OF A.O. IS MERGED IN THE ORDER OF CIT(A) THEN COMMISSIONER HA S NO POWER TO ASSUME JURISDICTION TO REVISE THE ORDER OF AO IN RESPECT O F THE AMOUNTS COVERED IN IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 17 APPEAL. BUT WHERE AN ISSUE IS NOT TAKEN UP IN APPEA L THE COMMISSIONER HAS JURISDICTION. 19. IN THE CASE OF C.I.T. VS. GANPAT RAM BISHNOI (2 008) 296 ITR-292 IT WAS HELD THAT THE JURISDICTION U/S. 263 CANNOT BE INVOKED FOR DIRECTING MORE INQUIRIES OR TO GO INTO THE PROCESS OF ASSESSMENT A GAIN MERELY ON THE BASIS THAT INQUIRIES AS THOUGHT BY THE CIT OUGHT TO HAVE BEEN CONDUCTED. THE A.O. HAD PASSED AN ASSESSMENT ORDER AFTER RELEVANT INQUI RIES AND IT IS NOT SHOWN BY THE LD. COMMISSIONER AS TO WHY THE INQUIRIES CO NDUCTED BY THE A.O. WAS NOT IN ACCORDANCE WITH LAW. 20. SIMILARLY IN C.I.T. VS. MANGILAL DIDWANIA (2006 ) 286 ITR 126 (RAJ.) IT WAS HELD THAT WHERE AO HAD INQUIRIED WITH DUE APPLI CATION OF MIND THEN C.I.T. CANNOT SET ASIDE THE ORDER U/S. 263 ON THE GROUND T HAT AO HAD NOT CARRIED OUT PROPER INVESTIGATION OR COMPLETED THE ASSESSMENT IN UNDUE HASTE. 21. HONBLE CALCUTTA HIGH COURT ALSO IN CIT VS. HAS TINGS PROPERTIES 253 ITR 124 (CAL.) HELD THAT WHERE ASSESSMENT ORDER WAS PASSED AFTER DUE VERIFICATION THEN REVISION U/S. 263 WOULD NOT BE JU STIFIED. 22. IN OUR CONSIDERED VIEW THE ISSUE REGARDING BAD DEBTS OF RS.71 08 600/- WAS EXAMINED BY THE A.O. IN ORIGINAL ASSESSMENT PRO CEEDINGS. HE HAD CARRIED OUT THE INQUIRIES AND RECORDED THE STATEMENT OF ONE OF THE DEBTORS AGAINST WHOM MAJOR AMOUNT OF RS.69 05 107/- WAS PENDING. TH EREFORE IT CANNOT BE SAID THAT A.O. HAD NOT CARRIED OUT ANY INQUIRIES ON THE ISSUE OF BAD DEBTS OF RS.71 08 600/-. 23. NOW THE QUESTION IS WHETHER ISSUES CONSIDERED I N ORIGINAL ASSESSMENT AND ACCEPTED BY THE A.O. CAN FURTHER BE CONSIDERED AGAIN IN AN ORDER TO BE PASSED U/S. 153A EVEN IF NO MATERIAL IS FOUND IN T HE SEARCH. IN OUR CONSIDERED VIEW ISSUE IS NOW COVERED AGAINST THE DEPARTMENT BY THE DECISION OF THE IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 18 TRIBUNAL IN ASSESSEES OWN CASE AND BY FURTHER SEVE RAL OTHER JUDGMENTS OF THE TRIBUNAL SUCH AS (1) IN LMJ INTERNATIONAL LTD. VS. DCIT 119 TTJ-214 (2) SANJAY BHATIA VS. ACIT (2010) 1 ITR (TRIBUNAL) 484 ITAT B-BENCH DELHI. IT IS HELD IN THE CASE OF LMJ INTERNATIONAL THAT WHERE NO THING INCRIMINATING IS FOUND IN THE COURSE OF THE SEARCH RELATING TO ANY ASSESSM ENT YEAR THE ASSESSMENT FOR SUCH YEARS CANNOT BE DISTURBED 153A. INTERPRETA TION OF FIRST PROVISO TO SECTION 153A WHICH IS CANVASSED BY THE REVENUE WOUL D LEAD TO SERIOUS HARDSHIP INCONVENIENCE INJUSTICE TO THE ASSESSEE. 24. THEREFORE IN OUR CONSIDERED VIEW A.O. CAN NOT INQUIRE INTO THE ISSUE OF BAD DEBTS OF RS.71 08 600/- IN THE PROCEEDINGS U/S. 153A AS THESE ISSUES WERE ACTIVELY CONSIDERED BY THE A.O. IN THE REGULAR ASSESSMENT CLOSED ON 8-3- 2004. AS NO INCRIMINATING MATERIAL IS FOUND IN THE SEARCH THIS ISSUE RELATING TO BAD DEBT OF RS.71 08 600/- HAS BECOME FINAL AND THE REFORE CANNOT BE AGITATED U/S. 153A AGAIN BY THE AO AND THEREFORE SAME CANNO T BE DIRECTED TO BE DONE BY THE C.I.T. BY EXERCISING HIS POWERS U/S. 263. IT WOULD HAVE BEEN DIFFERENT MATTER IF A.O. HAD NOT AT ALL CONSIDERED THE ISSUE OF BAD DEBTS OF RS.71 08 600/- IN THE REGULAR ASSESSMENT PROCEEDING S CLOSED ON 8-3-2004. IN OTHER WORDS WHERE AO HAS NOT TOUCHED AN ISSUE AT A LL IN REGULAR ASSESSMENT PROCEEDINGS AND ALSO HAS NOT DONE ANYTHING IN THE P ROCEEDINGS U/S 153A THEN CIT CAN EXERCISE HIS POWERS U/S 263 DIRECTING THE A O TO CARRY OUT ENQUIRIES ON THAT ISSUE EVEN IN THE ORDER U/S 153A. BUT HAVING I NQUIRED INTO THE ISSUE OF BAD DEBTS OF RS.71 08 600/ BY THE A.O. IN THE ORIGINAL ASSESSMENT PROCEEDINGS CLOSED ON 8-3-2004 THEN THERE REMAINS NOTHING FOR R ACKING UP THE ISSUE AGAIN IN THE PROCEEDINGS U/S. 153A. THEREFORE C.I.T. CAN NOT DIRECT THE A.O. TO DO SOMETHING WHICH A.O. COULD NOT DO IN THE PROCEEDING S U/S 153A AT HIS OWN. IT(SS) A.NO.323/AHD/2010 A.Y. 2001-02. 19 25. AS A RESULT WE HOLD THAT THE REVISION ORDER PA SSED BY THE LD. C.I.T. IS NOT VALID AND IS CANCELLED. ORDER PRONOUNCED IN OPEN COURT ON 6/8/2010. SD/- SD/- (BHAVNESH SAINI) (D. C . AGRAWAL) JUDICIAL MEMBER ACCOUNT ANT MEMBER. AHMEDABAD. DATED: 6/8/2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT. REGIST RAR ITAT AHMEDABAD .