Assessee has liberty to raise objections against the notice issued by the Assessing Officer: HC

Issue   

The appeal is filed before the Kerala HC against the order of the Income Tax Appellate Tribunal, Cochin Bench dated 27.09.2007. Following Questions has been raised before the law in this appeal: 

Whether the Tribunal is right in law and in fact in holding that valuation of unquoted securities adopted by the assessee is correct? 

Whether the claim of bad debts and doubtful debts is an allowable deduction? 

Facts  

• The Assessing Officer through the assessment order in Annexure-A, disallowed the claim of the assessee under Section 36(1) of the Income Tax Act. Consequently, the Assessing Officer disallowed the revaluation of unquoted securities adopted by the assessee.  
• The assessee filed appeal before the Commissioner of Income Tax under Section 260A of the Income Tax Act and the appeal was allowed in part.  

Findings  

The assessee treats the unquoted Government securities as current assets and, therefore, it has to work out the profit or loss in the end of the year for the purpose of payment of tax. The assessee adopted the RBI guidelines for valuation of unquoted Government securities and based on the same it claimed a substantial loss. The Assessing Officer, however, rejected the claim because according to him when shares are not quoted, the cost price has to be adopted and going by the cost price the assessee has not suffered the loss as claimed. 

Rural branch is defined under Explanation (ia) to section 36(1)(viia) as rural branch’ means a branch of a scheduled bank or a non-scheduled bank situated in a place which has a population of not more than ten thousand according to the last preceding which the relevant figures have been published before the first day of the previous year 

Supreme Court judgement in Vijaya Bank v Commissioner of Income Tax, the assessee has given liberty to raise the objections available by referring to the ratio laid down by the Court.  

Judgement   

Therefore, this Court held that the assessee is granted liberty to raise objections or file reply, as the case may be, as and when a notice is issued by the Assessing Officer upon remand. The objections are considered in accordance with law and the assessment orders are made. 

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