Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI SANDEEP GOSAIN
O R D E R
PER SHAMIM YAHYA, Accountant Member:
This appeal by the assessee is directed against order of learned CIT-A dated 11.11.2011 and pertains to assessment year 2005-06. 2. The grounds of appal read as under:- A.) Grounds of Appeal 1.) The learned Commissioner of Appeals 9 has erred in confirming the Assessing Officer's order of penalty of Rs. 27,92,664/- being the penalty u/s 271(1)(c) without considering the factual position and the submission made by the Appellant.
M/s. N Vensimal Securities Ltd., 2.) The appellant craves leave to add, alter/ amend/ and modify the aforesaid ground of appeal at or any time before the hearing as they may be advised from time to time. B.) Relief Claimed 1.) The penalty levied u/s 271(1)(c) may please be deleted. 2.) Any other relief as may be deemed fit by the Authority.
3. In this case penalty u/s. 271(1)(c) was levied upon confirmation of the disallowances at the level of ITAT. We may gainfully refer to the penalty order for finding the facts leading to the levy of penalty as under:- 2. Bad debts of Rs. 74,54,700/- The assessee filed an appeal before the CIT (A). During the appellate proceedings, the Hon CIT (A) had asked for a remand report from the assessing officer. On the basis of the remand report, the CIT (A) has upheld the addition made by stating that the assesse has failed to establish the genuineness of the debts claimed and the relationship between the debtor and the creditor. The ITAT has confirmed the order of the CIT (A). During the penalty proceedings the assessee has stated as under "The assessee has claimed bad debts of Rs 7475600/- in AY2005-06. The assessee has offered as income in the AY 2003-04 and shown as receivable from Insurance company. In AY 2005-06 insurance company has rejected the claim and accordingly it was irrecoverable so we have debited the amount receivable as bad debts in the books of accounts. Assessee has submitted all particulars and details regarding loss by fire. Assessee has filed suit against the oriental insurance company and the case is still pending in the high Court. Assessee has submitted all information and document relating to loss by fire i.e. Fire brigade report, photos for damage stock by fire etc" The submission made by the assessee is considered. However it cannot be accepted for the reasons given below.
M/s. N Vensimal Securities Ltd., Although the assessee claims to have shown the amount of Rs 7475600/- as its income for AY 2003-04, as held by the AO, the CIT (A) and the ITAT, this amount could not have been its income. It would have been compensation for the loss incurred on account of fire. There could not have been any profit element. Further the insurance company has rejected the claim of the assessee stating that there was no fire in the premises. Hence there could not have been any loss by fire. When there is no loss by fire, the claim made by the assessee was a bogus claim. Hence there could not have been any bad debts on the rejection of claim. The genuineness of debt is doubtful and there is no debtor-creditor relationship between the assessee and the insurance company. Considering the above, it is held that the assessee has furnished inaccurate particulars for claim of Bad.
The addition of BMC taxes. The assessee had not reduced the BMC tax of Rs 592055/- from its lease rent on house property. It ad directly reduced it from the profit and loss account. It had claimed a standard deduction @ 30% on an amount of Rs 11542983/- instead of Rs 10950928/-. Hence it is seen that it had claimed an excess deduction of Rs 177616/- .The income from house property was reduced to the extent of Rs 177616/-. Considering the above, it is held that the assessee has furnished inaccurate particulars and has reduced its taxable income by an amount of Rs 177616/- .Hence penalty u/s 271(1) (c) is levied on the assessee.
Depreciation in respect of Euro Fashion The assessee has claimed depreciation of Rs 125701/- on the assets which it claimed were not damaged in the fire. Considering that the claim of the bad debts was disallowed and also considering that the assessee has contested their claim in the High Court, the depreciation claim has been disallowed and the addition of Rs 125701/- has been made on protective basis. Since the addition is made on protective basis and is subject to the decision of the High Court, the penalty proceedings on this issue are kept in abeyance till the decision of the high Court. The penalty is levied as under Concealed income on the issue of bad debts Rs.7454700/- Concealed income from House property Rs 177616/- M/s. N Vensimal Securities Ltd., Total concealed income Rs 7632316/- Tax on the above @ 36.59% ' Rs 2792664/- 100 % penalty u/s 271(1) (c) of the IT Act Rs 2792664/- 4. Against the above order assessee appealed before the learned CIT(A) . The learned CIT(A) a referred to the confirmation of the addition and thereafter referred to certain case laws and confirmed the penalty.
Against this order assessee is in appeal before us. We have heard both the counsel and perused the records.
At the outset we note that quantum proceedings and the penalty proceedings are separate proceedings. Confirmation of addition by itself doesn’t mean that penalty is to be levied u/s. 271(1)(c).
In the present case we note that the 1st addition related to disallowance of the claim of bad debt. The fact related to this was that in the earlier assessment year the assessee has accounted for claim for fire loss from the insurance company. During the present year the insurance company has rejected the claim of the assessee and hence the assessee has written off that amount by debiting it as bad debt written off. We note that the disallowance of this claim by no stretch of imagination can mean that there is any concealment or furnishing of inaccurate particulars by the assessee. Assessee has duly accounted for the insurance claim as receivable in the earlier years. Pursuant to the rejection of the claim by the insurance company the same has been written off. It is not denied that assessee has accordingly reversed the entry of claim accounted for earlier. In this view of the matter in our considered opinion the assessee should not be visited with the rigours of penalty u/s. 271(1)(c).
Similarly as regards of penalty levied for other issue of income for house property, where deduction of 30% is claimed before