Case Note & Summary
The Revenue appealed against the Income Tax Appellate Tribunal's order dated 9 September 2011 for Assessment Year 2004-05. The Assessee, M/s Jamnadas Virji Shares and Stock Brokers Pvt. Ltd., had claimed a bad debt deduction of Rs.28,69,951/- under Section 36(2) of the Income Tax Act, 1961. The Assessing Officer disallowed the entire claim. On appeal, the Commissioner of Income Tax (Appeals) confirmed the disallowance to the extent of Rs.14,96,064/- but granted relief of Rs.13,73,887/-. Both the Revenue and the Assessee appealed to the Tribunal. The Assessee's appeal was barred by limitation (delay of 551 days) and was withdrawn during hearing. However, the Assessee sought to raise grounds under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963. The Tribunal, while allowing the Revenue's appeal in part, set aside the entire disallowance of Rs.28,69,951/- to the Assessing Officer for fresh adjudication. The Revenue challenged this, arguing that the disallowance of Rs.14,96,064/- had become final as the Assessee withdrew its appeal. The High Court framed a substantial question of law. The Court held that once the Assessee withdrew its appeal, the CIT(A)'s order confirming the disallowance of Rs.14,96,064/- attained finality. The Tribunal could not set aside that part while deciding the Revenue's appeal. The Court allowed the Revenue's appeal, set aside the Tribunal's order to the extent it set aside the disallowance of Rs.14,96,064/-, and restored the CIT(A)'s order on that part. The Tribunal's order regarding the remaining amount of Rs.13,73,887/- was not disturbed as the Revenue had not challenged that part.
Headnote
A) Income Tax - Bad Debts - Disallowance - Finality of Order - When an assessee withdraws its appeal against a part of the disallowance confirmed by the CIT(A), that part becomes final and cannot be reopened by the Tribunal while deciding the Revenue's appeal - The Tribunal erred in setting aside the entire disallowance of Rs.28,69,951/- to the file of the Assessing Officer when the assessee had withdrawn its appeal against the disallowance of Rs.14,96,064/- - Held that the Tribunal's order was contrary to law and the disallowance of Rs.14,96,064/- must stand (Paras 1-8).
Issue of Consideration
Whether the Tribunal was right in law in setting aside the entire matter of disallowance of Rs.28,69,951/- to the file of the Assessing Officer when the Assessee had withdrawn its appeal filed before the Tribunal against the order of the CIT (A) upholding disallowance of bad debts to the extent of Rs.14,96,064/- and this disallowance had therefore become final.
Final Decision
Appeal allowed. The order of the Tribunal dated 9 September 2011 is set aside to the extent it set aside the disallowance of Rs.14,96,064/-. The order of the CIT(A) dated 15 November 2007 confirming the disallowance of Rs.14,96,064/- is restored. The Tribunal's order regarding the remaining amount of Rs.13,73,887/- is not disturbed.
Law Points
- Tribunal cannot set aside entire disallowance when assessee withdraws appeal against part disallowance
- Rule 27 of ITAT Rules cannot be used to revive withdrawn appeal
- finality of CIT(A) order on unappealed part
