DCIT 3(3)(1), MUMBAI, MUMBAI vs. WORLD SERIES HOCKEY PRIVATE LIMITED, MUMBAI

Date of Hearing 25.09.2025 Date of Pronouncement 06.10.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :-

This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 12.09.2023 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2012-13.

“(i) Whether on the facts and under the circumstances of the case, and in Law, the Ld. CIT(A) was justified in deleting the penalty u/s. 271(1)(c) of the Income tax Act, 1961 by relying on the case of CIT v Reliance Petroproducts P Ltd-322 ITR 158 (SC), whereas the facts and circumstances of the present case are different" (ii) "Whether on the facts and under the circumstances of the case, and in Law. the Ld. CIT(A) was justified in deleting the penalty u/s. 271(1)(c) of the Income tax Act, 1961 ignoring the fact that it was the first year of business operation of the company and thus bad debts could not have been claimed (ii) "Whether on the facts and under the circumstances of the case, and in Law, the Ld. CIT(A) was justified in deleting the penalty u/s. 271(1)(c) of the Income tax Act, 1961 ignoring the fact that the quantum addition has been confirmed by the Ld. CIT(A) and thus the claim of bad debts of the assessee company is a clear case of furnishing inaccurate particulars of income" The Appellant craves leave to add, amend and/or vary the grounds of Appeal before or during the course of hearing.”

3. Brief fact of the case are that the assessee company filed its original return declaring loss of Rs. 1,04,35,310/-. Assessment was completed u/s. 143(3) assessing the total at Rs. 5,31,58,050/- after making a disallowance of Rs. 6,95,93,364/- on account of Bad debts written off. Penalty proceedings u/s. 271(1)(c) in respect of the disallowance were also initiated.

As no submissions were made during the penalty proceedings by the assessee, ld. AO levied penalty of Rs. 2,30,00,000/- after holding that the assessee had furnished inaccurate particulars of income in respect of the bad debts claimed as written off.

Against the penalty order dated 28.09.2015, the assessee filed an appeal before the ld. CIT(A). Vide order dated 12.09.2023, ld. CIT(A) has deleted the penalty with the following observations:

“7.1 The submission of the appellant is considered and it is seen that this the first year of filing the ITR and bad debts has been claimed. It is seen that appellant has recorded the bad debts in books of account as well as in computation of income. However, AO has not agreed to it and disallowed these bad debts. As per various judicial pronouncements, disagreeing of AO can not be reason for levy of penalty. In this regard, the reliance is placed on CIT v Reliance Petroproducts P Ltd - 322 ITR 158 (SC) and CIT vs. Bennett Coleman & Co Ltd, (2013) 259 CTR 383 (Bom). Hence, in view of the discussion made in above paras, I delete the penalty levied by AO.” Aggrieved, the revenue has preferred an appeal before the Tribunal against deletion of the penalty by the ld. CIT(A).

It is seen that the assessee filed first return of income for A.Y. 2012-13 wherein it made the impugned claim of bad debts. The assessee furnished requisite details relating to these bad debts but the disallowance was made by ld. AO as he wan not satisfied with the response filed by the assessee.

The assessee could not file the appeal against the assessment order in time as the company went into liquidation due to orders passed by the Hon’ble Bombay High Court on 10.02.2015 and 05.02.2016. Subsequently, appeal is stated to have been filed against the assessment order also. However, in the meanwhile, penalty u/s. 271(1)(c) has been imposed by ld. AO for furnishing inaccurate particulars of income by claiming bad debts written off.

We find that just because the assessee could not produce adequate supporting evidence with regard to the bad debts and efforts made to recover these debts before the write off, the ld. AO had disallowed the claim. Due to liquidation process being underway, no appeal could be filed against the assessment order within the prescribed time period and, therefore, ld. AO levied the penalty u/s. 271(1) of the Act. Ld. CIT(A), for deleting the penalty, has relied on in the decision of the Hon’ble Supreme Court in the case of CIT V. Reliance Petroproducts Pvt. Ltd. 322 ITR 588 (SC) and CIT Vs Bennett Coleman & Co. Ltd. [2013] 259ITR(Bom) to hold that disagreeing of the AO with the claim of assessee cannot be the reason for levy of penalty.

Order Pronounced in Open Court on 06.10.2025