By C. N. Vaze , Shailesh Kamdar, Jagdish T. Punjabi
Chartered Accountants
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7. (2010) 122 ITD 228 (Ahd.)
Matrix Logistics (P) Ltd. v. CIT
A.Ys. : 1999-2000 & 2000-2001. Dated : 4-1-2008
S. 36(1)(vii) read with S. 263 — Bad debts written off —
Assessing Officer allowed it after due verification of all facts and evidence —
CIT invoked S. 263. Held : CIT has no power to rectify assessment order u/s.263
when Assessing Officer has duly verified all facts and evidence.
Facts :
The assessee is a limited company engaged in providing
technical and management services. Other ancillary objects of the assessee
included carrying out financing and investment and trading in shares and
securities.
For the relevant assessment year, the assessee filed return
of income, which was processed u/s.143(1) of the Income-tax Act, 1961 (‘the
Act’). The Assessing Officer later on reopened the assessment u/s.147 of the Act
to verify the claim of bad debts written off in the return. The assessee
furnished all details and evidences to support its claim of bad debts. The bad
debts were in relation to loan advanced to some R during the financial years
1996-97 to 1998-99. Interest earned on this loan was offered to tax. The
Assessing Officer noted the fact that the loan was given in the normal course of
business of financing of the assessee in view of resolution passed by the Board
of Directors on 15-3-1999. After due verification and examination, the Assessing
Officer allowed the bad debts, stating that the conditions of S. 36(i)(vii) read
with S. 36(2) of the Act are fulfilled.
The CIT invoked S. 263 of the Act on the grounds that the
assessee is not engaged in the business of banking and money lending, changes in
the memorandum have been effected in violation of certain provisions of the
Companies Act and that provisions of S. 36(1)(vii) and S. 36(2) of the Act are
not satisfied.
Held :
The Ahmedabad Tribunal held as follows :
(1) The CIT has no jurisdiction to set aside the assessment
order merely to conduct another inquiry and reach the same result. The
Assessing Officer had considered all the facts and had taken a view which is a
possible view.
(2) There is no default committed by the assessee under the
Companies Act. Even if there was any irregularity committed under the
Companies Act, it will not affect the chargeability and computation under the
Income-tax Act.
(3) Since the assessee company had been lending money to
various parties right from its inception, it can be seen that it was carrying
on the business of money lending in its ordinary course though it may not be
the main business of the company. The income earned out of the monies lent was
offered as business income from time to time.
Even the treatment in the books of account were done
accordingly.
Accordingly the revision order passed u/s.263 was quashed.
