K. CHANDRASEKARAN Vs. COMMISSIONER OF INCOME TAX, COIMBATORE

JUDGEMENT

(1.) Calling in question the order dtd. 20/12/2007 passed by the Income Tax Appellate Tribunal, Madras 'D' Bench, in IT (SS) A.No.38/Mds/2003, relating to the block assessment period 1988-89 to 1998-99, the appellant / assessee has come up with this tax case appeal, raising the following substantial questions of law:

(2.) The appellant is a practising ophthalmic surgeon in Salem and also derives agricultural income from coffee grown in his lands at Yercaud. His family is also engaged in money lending business. While so, there was a search operation under Sec. 132 of the Income Tax Act in the business and residential premises of the appellant and other family members on 22/12/1997 which was completed on 23/12/1997. Pursuant thereto, notice under Sec. 158BC was issued on 27/4/1998, to which, the appellant filed his returns on 1/6/1998 for the block period commencing on 1/4/1987 and ending on 22/23/12/1997. He, in working out the net income from money lending, claimed set off of bad debts to the extent of Rs.25.55 lakhs. The assessing officer disallowed the entire claim of bad debts, inasmuch as the same were not written off in the books in terms of Sec. 36(1)(vii) and accordingly, passed the assessment order on 20/12/1999 under Sec. 158BC r/w Sec. 143(3) of the Income Tax Act.

(3.) On appeal, the appellant / assessee raised a fresh plea that the bad debts may be alternatively treated as trading loss. The Commissioner of Income Tax (Appeals) remanded the matter back to the assessing officer to examine the alternate plea. On remand, the assessing officer, while accepting the claim of trading loss with regard to the advance to four persons amounting to Rs.13.5 lakhs, rejected the claim of the assessee relating to one Mani for an advance of Rs.12.5 lakhs and accordingly, passed the fresh assessment order under Sec. 143(3) r/w Sec. 251 on 28/3/2002. The said assessment order of the assessing officer was confirmed by the Commissioner of Income Tax (Appeals), with the following observations: