The case number ITA 733/DEL/2019 involves the appellant, Ajay Kumar from Chandigarh, and the respondent, ACIT, Central Circle-20, New Delhi. This case pertains to the assessment year 2013-14, with the final tribunal order pronounced on August 23, 2023. The appeal was filed on February 1, 2019.
Ajay Kumar, the appellant, filed his return of income for the assessment year 2013-14, declaring income from various sources including salary, house property, business and profession, and capital gains. He also claimed a deduction of Rs. 40,50,346/- as bad debts, which was disallowed by the Assessing Officer (AO). The AO’s decision was later upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], leading to the present appeal before the Income Tax Appellate Tribunal (ITAT).
The primary issue in this case was whether Ajay Kumar was entitled to claim the deduction of Rs. 40,50,346/- as bad debts under Section 36(1)(vii) read with Section 36(2) of the Income Tax Act, 1961. The appellant argued that the loss incurred due to the non-receipt of a booked flat should be allowed as a bad debt.
The appellant’s representative submitted that the CIT(A) erred in confirming the AO’s order and holding that the provisions of Section 154 of the Income Tax Act were applicable in this case. They argued that the appellant was involved in the business of real estate activities and the bad debts claimed were legitimate business losses incurred due to the non-delivery of a booked flat.
The appellant further provided a computation of income for the assessment year 2013-14, showing various sources of income including business and profession, to support his claim. He contended that the authorities below were incorrect in dismissing the bad debt claim as it was a genuine business expense.
The Revenue argued that the AO was justified in invoking Section 154 of the Act and that the CIT(A) was correct in upholding the AO’s decision. The Revenue pointed out that the appellant had not declared any income from business and profession related to real estate activities, except for the claimed bad debts. They contended that the appellant’s claim lacked supporting evidence and the bad debt was not related to any business activity.
The tribunal carefully considered the submissions of both parties and the material available on record. The CIT(A) had upheld the disallowance of the bad debts, noting that the appellant had not maintained any books of accounts or shown any income from real estate trading activities. The CIT(A) observed that the appellant’s investment in the flat was a personal investment and not a business activity.
The tribunal found that the appellant failed to meet the conditions under Section 36(1)(vii) read with Section 36(2) of the Income Tax Act, as there was no evidence to prove that the flat booking was part of a regular business activity. The tribunal noted that the appellant’s claim of bad debts was misplaced as the investment was personal in nature and any loss incurred was a capital loss.
The tribunal upheld the findings of the CIT(A) and dismissed the appeal of Ajay Kumar. The tribunal concluded that the appellant’s claim of bad debts was not allowable under the provisions of the Income Tax Act as it was a personal investment and not related to any business activity.
In the result, the appeal of the Assessee is dismissed.
Order pronounced in the open court on August 23, 2023.
(Pradip Kumar Kedia) ACCOUNTANT MEMBER (C. M. GARG) JUDICIAL MEMBER
Dated: August 23, 2023
A K Keot
Copy forwarded to:
ASSISTANT REGISTRAR
ITAT, New Delhi
Ajay Kumar vs ACIT: Disallowance of Bad Debts Claimed in Real Estate Business
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