IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision:- 03.07.2025 Bharti Bhushan Jindal ….Appellant Vs.

Commissioner of Income Tax, Ludhiana (Punjab) ….Respondent CORAM:- HON’BLE MRS. JUSTICE LISA GILL HON’BLE MRS. JUSTICE SUDEEPTI SHARMA Present:- Mr. Divya Suri, Advocate for the appellant.

Mr. Ranvijay Singh, Senior Standing Counsel, for the respondent.

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SUDEEPTI SHARMA, J.

1. The present appeal under Section 260A of the Income Tax Act, 1961 (for short, ‘IT Act’), for Assessment Year 2004-2005 is preferred against order dated 13.07.2012 passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘B’, Chandigarh (for short, ‘the Tribunal’) in ITA No.459/Chd/2011.

BRIEF FACTS OF THE CASE

2. Brief facts of the case, as per pleadings, are that the appellant is engaged in the business of manufacturing of Electric Stabilizers and Rectifiers. In addition to business income declared by the appellant, he had also declared income from capital gains and income from other sources. Under the head ‘income from other sources’, in addition to bank interest, FDRs, interest on unsecured loans was shown against which, the appellant claimed Rs.10,50,000/- as “amount written off unrealizable”. The appellant filed its return of income for the Assessment Year 2004-05 on 26.10.2004 showing income of Rs.1,70,99,800/-. Subsequently the case was selected for scrutiny. Notice under Section 142(2) dated 02.08.2005 was issued and served upon the appellant regarding the aforesaid write off of Rs.10,50,000/- on 10.08.2005. Subsequently, notices under Section 143(2) and 142(1) dated 03.08.2006 along with detailed questionnaire were issued and served upon the appellant on 07.08.2006. Appellant filed its reply dated 28.11.2006. After considering the reply, Assistant Commissioner of Income Tax, Circle-I, Ludhiana, vide order dated 29.12.2006, disallowed the return of unrealized amount of Rs.10,50,000/- and added back the same to the income of the appellant and penalty proceedings under Section 271 (1)(c) of the IT Act were initiated for furnishing inaccurate particulars of account. The appellant filed appeal against order dated 29.12.2006 before the Commissioner of Income Tax (Appeals)-II, Ludhiana, who vide its order dated 07.04.2011, dismissed the appeal. The appellant further challenged the said order dated 07.04.2011 before the learned Tribunal and vide its order dated 13.07.2012, the learned Tribunal dismissed the appeal filed by the appellant. Hence, the present appeal.

SUBMISSIONS OF LEARNED COUNSEL FOR THE PARTIES

3. Learned counsel for the appellant contends that giving the loans and advances is a necessity of legitimate earning financing income which could not be ignored and can be taken into account as ‘commercial expediency’. He further contends that nature and object of business, modus operandi, intention, purpose for which the investment was made should have been taken into consideration. Therefore, he prays that since payments are part of the main income earning activity, hence, claim of the appellant to write off bad debts of Rs.10,50,000/- be allowed.

4. Per contra, learned counsel for the respondent submits that the appellant has at the third appellate stage before this Court conjured up a fresh claim stating that the said write off be treated as a capital loss, however, this claim has already been dealt with by learned Tribunal. He further submits that the appellant has offered the income under the head “Income from other sources” provisions for which are enshrined in Section 56 to 59 of the IT Act, the deduction whereof is contained in Section 57 of the IT Act and the said provisions expressly prohibit the allowance of capital expenditure. He, therefore, prays that the present appeal be dismissed.

5.. We have heard learned counsel for the parties and perused the whole record of this case.

6. This Court, vide order dated 15.12.2015, admitted the present appeal for determination of following substantial questions of law:-

(i) Wh