P.M. Jagtap, A.M.

1. This appeal is preferred by Revenue against the order of the learned CIT(A) IV, Mumbai dated 14.02.2007 and the same is being disposed off alongwith the cross objection filed by the Assessee being CO No. 216/Mum/2007.

2. We have heard the arguments of both sides and also perused the relevant material on record. As agreed by the learned representatives of both sides, the solitary issue involved in the appeal of Revenue relating to the claim of Assessee, who is a share broker, for deduction on account of bad debt written off amounting to Rs. 10,11,793/- is squarely covered in favour of the Assessee by the decision of the Mumbai Special Bench of the ITAT in the case of DCIT v. Shreyas S. Morakhia (Mum) (SB) 40 SOT 432 wherein it was held that the amount receivable by the Assessee, who is a share broker, from his clients against transactions of purchase of shares on their behalf constituted a debt, which is a trading debt. It was held that the brokerage income/ commission income arising from such transactions very much formed part of the debt and when the amount of such brokerage/commission had been taken into account in computation of income of the Assessee of the relevant previous year or any earlier year, it satisfied the condition stipulated in Section 36(2)(i) and the Assessee was entitled to deduction under Section 36(1)(vii) by way of bad debts, after having written off the said debts from his books of account as irrecoverable As further submitted by the learned D.R., the issue involved in the present case relating to Assessees claim for bad debt thus need to be sent back to the A.O. for the limited purpose of quantification of the amount of bad debt after having taken into account the margin money or shares held as security, if any, as held by the Mumbai Special Bench of ITAT in the case of Shreyas S. Morakhia (supra).

3. In the cross objection, a new ground, however, has been raised on behalf of the Assessee claiming that the Assessee having already expired on 29.11.2004, i.e. well before the date of passing of the assessment order by the A.O. on 30.11.2005, the assessment made by the A.O. in the name of a dead person is a nullity and the same is liable to be quashed. In support of this stand, the learned Counsel for the Assessee has relied on the decision by the Coordinate Bench of this Tribunal passed in Assessees own case for A.Y. 2004-06 vide order dated 19th March 2010 in ITA No. 7131/Mum/2008 wherein the assessment made by the A.O. vide order dated 11.12.2007 in the name of the Assessee who had already expired on 29.11.2004 was quashed by the Tribunal holding the same to be a nullity. It is observed that in the case of Dalumal Shyamumal, the order of assessment made by the A.O. against a dead person was similarly quashed by the Tribunal treating the same to be a nullity and when the matter reached the Honble M.P. High Court, their Lordships by judgment reported in : 276 ITR 62 upheld the decision of the Tribunal treating the assessment framed by the A.O. against a dead person to be a nullity. The Honble M.P. High Court, however, held that the Tribunal, after having held the assessment to be a nullity, should have remitted the case to the A.O. for ensuring compliance of Section 159 and for passing proper orders of assessment after due notice to the legal representatives of the deceased Assessee. It was held that once the assessment order was held to be a nullity then in such an event consequential direction as contemplated under Section 159 of Act should have been given to the A.O. so that proper assessment order can be passed. Keeping in view the decision of the Honble M.P. High Court in the case of Dalumal Shyamumal (supra), we quash the order of assessment dated 30.11.2005 passed by the A.O. under Section 143(3) in the name of a deceased Assessee and remit the case to the A.O. for passing proper order of assessment after complying with the requirements of Section 159 of the Act.

4. In the result, cross objection filed by the Assessee is partly allowed whereas the appeal of Revenue is dismissed as the same has become infructuous in view of our decision quashing the assessment made by the A.O. while disposing off the cross objection of the Assessee.

Order pronounced in the open court on 30th June 2011.