Reassessment valid for non-disclosure of advance camouflaged as purchase; forfeited advance not deductible as bad debt without prior income credit and proper write-off, nor as business expenditure.

आदेश/ORDER

PER VINAY BHAMORE, JM:

This appeal filed by the assessee is directed against the order dated 27.08.2025 passed by Ld. CIT(A)/NFAC for the assessment year 2012-13.

2. The appellant has raised the following grounds of appeal :-

“1) On the facts and in the circumstance of the case and in law the ld. CIT(A) erred in confirming the action of the AO in initiating the reassessment proceedings u/s.147 purely on the basis of original assessment record and without any new tangible material available with the AO after completion of original assessment proceedings and accordingly the reassessment order is liable to be quashed.

2) On the facts and in the circumstance of the case and in law the ld. CIT(A) erred in confirming the action of the AO in initiating the reassessment proceedings u/s.147 for the issue which was considered in original assessment proceedings, and accordingly the reassessment order passed on the basis of change of opinion is liable to be quashed.

3) On the facts and in the circumstance of the case and in law, the ld. CIT(A) erred in confirming the action of AO in making the disallowance of Rs.2,85,00,000/-, i.e. advance paid and claimed as expenditure, by solely relying on decision of supreme Court in Pr. CIT v. Khyati Realtors (P.) Ltd. [2022] 141 taxmann.com 461 and by disregarding the fact that the amount claimed was forfeited by payee on non-fulfilment of contract during the normal course of business.

4) The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.”

3. Facts of the case, in brief, are that the assessee is a private limited company deriving income from real estate and infrastructure activity and has furnished its return of income on 21.09.2012 declaring an income of Rs. Nil. The return was processed u/s 143(1) of the IT Act. The case was selected for scrutiny under CASS. Notice u/s 143(2) and 142(1) of the IT Act were issued to the assessee. After considering the submissions of the assessee, the assessment order u/s 143(3) of the IT Act was passed on 30-03-2015 by determining loss at Rs.11,02,390/- as against Nil income returned by the assessee. The above assessed loss includes addition of Rs.3 lakh being disallowed out of expenses claimed in profit and loss account.

4. Subsequently, the case was reopened u/s 147 of the IT Act by issuing notice u/s 148 of the IT Act on 31-03-2017 and reasons for reopening were provided to the assessee, according to which, the expenditure of Rs.2,85,00,000/- debited to the profit and loss account was not for purchase of stock but was only an advance, therefore was required to be shown in the balance sheet & not in the profit & loss account. The expenditure of advance paid cannot be claimed in the profit and loss account since it was not an allowable expenditure either u/s 36 or u/s 37(1) of the IT Act. Accordingly, notices were issued u/s 148, 143(2) and 142(1) of the IT Act respectively. The assessee in response to above notices submitted that the above amount of Rs. 2,85,00,000/- in all was paid between 31st  of January 2012 to 17th of February 2012 to Shri Praveen Chand Jain & his wife Ambuj Jain as an advance for purchase of property under construction at Delhi in connection with business, however the above advance amount was forfeited by Shri Praveen Chand Jain & his wife Ambuj Jain, the sellers, in the same assessment year on the basis of an unregistered agreement which was entered into on 27-01-2012 since the assessee company could not pay