1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 508 OF 2005 Magnum Equity Service Limited).......Appellant versus The Dy.Commissioner of Income Tax Circle -4(2) Mumbai )........ Respondant. Mr. Vipul Joshi i/b S.G. Dalal for the Appellant. Mr. Vimal Gupta for the respondent. CORAM: SWATANTER KUMAR, C.J., & A.P. DESHPANDE, J. DATED: 02nd SEPTEMBER, 2008. P.C.: 1. We have heard the learned counsel appearing for the parties. The challenge in the present appeal is to the order of the Income Tax Appellate Tribunal dated 31-12-2004 mainly on the ground that the Tribunal erred in reversing the findings recorded by the CIT(A). Further the Tribunal erred in not appreciating the fact, that neither on facts nor in law the action of respondent allowing the claim of bad debt to the extent of brokerage income was permissible. According to the learned counsel for the appellant, the bad debt has to be fully allowable as the business 2 loss under the Act. 2. The Assessing Officer while dealing with the return for the assessment year 1996-97 noticed that the claim of the petitioner in relation to bad debt of two persons namely M/s. Raj Investment and the other of Mr. N.V. Soni is not tenable. After recording various facts leading to this situation, it also noticed that during the course of assessment proceeding, the assessee had furnished copies of the legal notice issued to the other parties demanding the amount. As the relations between the parties are said to have deteriorated they were not able to produce the pass book. However, after issuing notice under section 132 and by examining Mr. Raj Mamania, it came to the conclusion that it was not clear as to why the payments were made to him when there was a debit balance. The following findings recorded by the assessing officer are useful at this stage. “It is also evident that while Shri Raj Mamania conducted his business from the premises of the assessee company and carried on transaction to the extent of Rs. 47 crores even though his financial standing is not commensurate with the volume of transaction carried by him. It is therefore clear that this transaction does not appear to be that which any prudent business man would enter into. The fact that Shri Narendra Ganatra functioned from the office of the assessee and that his financial standing was not 3 commensurate with the extent of transaction carried on by him was known to the assessee. These point to the fact that transaction do not appear genuine. Further it appears incredible that a person who is carrying on transaction worth Rs. 41 crores has not paid even one rupee on account of transaction. Therefore, it appears that these transaction do not deny ordinary business produence. The extent of brokerage shown from this a/c. Is Rs. 7,39,449/- while the bad debts written off is Rs. 18,69,772/-. In the circumstances the amount of bad debts is restricted to the amount of brokerage. The balance of Rs. 11,30,323/- is added back to the income of the assessee. Penalty proceedings u/s. 271(1) (c) are initiated. “ 3. The above finding of facts were neither interfered with by the Commissioner income Tax, Appeals, or the Tribunal. The Tribunal in fact under the impugned order, not only affirmed the finding but also concurred with the arguments taken up that 7.40 lacs the assessee company had earned as brokerage and the same was treated as bad debt. While coming to this conclusion the Tribunal had relied upon various decisions including the decision of this court and we see no reason to interfere with the question of law, more so substantial question of law. Appeal is thus dismissed. 4 CHIEF JUSTICE A.P. DESHPANDE, J.