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Income Tax Appellate Tribunal, “H” Bench, Mumbai
Before: Shri Shamim Yahya (AM) & Shri Pawan Singh (JM)
Per Shamim Yahya (AM) :- This appeal by the assessee is directed against order of learned CIT-A dated 30.12.2015 and pertains to assessment year 2008-09.
The grounds of appeal read as under :-
1. Learned CIT(A) failed to appreciate that the Assessing Officer had not recorded proper satisfaction in the assessment order before initiation of penalty. Therefore penalty of Rs. 13,55,928/- is liable to be deleted in limine.
2. Without prejudice to the above, learned CIT(A) failed to appreciate that the Assessing Officer had not clearly spelt out the charge in respect of which penalty had been levied. Therefore the penalty levied is unsustainable.
3. Without prejudice to the above learned CIT(A) failed to appreciate that the appellant had neither concealed its income nor furnished inaccurate particulars thereof. Therefore, the penalty is liable to be deleted.
2 Kanti Beverages Pvt. Ltd.
Brief facts of the case leading to the levy of penalty in this case is that there was a disallowance of bad debt in the return of income amounting to Rs. 43,88,119/- by the assessing officer. The said bad debt related to interest receivable from the directors of the company. The addition was also upheld in appellate proceedings on the ground that write-off of receivables due from the directors cannot be allowed.
On this addition penalty under section 271(1)(c) of the Act amounting to Rs. 13,55,928/- was also levied and confirmed.
Against this order assessee is in appeal before us. We have heard both the counsel and perused the records. Learned counsel of the assessee pleaded that quantum proceedings and penalty proceedings are different. He submitted that just because addition has been confirmed in quantum proceedings it will not lead to the conclusion that the assessee should be levied penalty under section 271(1)(c) of the Act. The learned counsel also submitted that as per the provision of the act and the decision of honourable Supreme Court in the case of TRF Ltd. (CIVIL APPEAL NO.5293 OF 2003), the only requirement for the claim of bad debt was that the said amount should be written off. He submitted that it is not in the dispute said amount has not been written off. Hence, learned Counsel of the assessee pleaded that the assessee should not be visited with the rigours of penalty.
Per contra, learned Departmental Representative supported the orders of the authorities below. He submitted that the assessee has written off receivables from the directors. He submitted that the said amount cannot be allowed as written off. Hence he pleaded that penalty should be upheld.
Upon careful consideration, we find considerable cogency in the submission of learned Counsel of the assessee. There is no doubt that bad debts claimed has been written off in the books of account. In view of the Hon'ble Supreme Court decision and the provisions of Act, it cannot be said
3 Kanti Beverages Pvt. Ltd. that the act of the assessee was not bonafide. In this view of the matter in our considered opinion the assessee’s issue cannot be visited with the rigours of the penalty u/s. 271(1)(c) of the Act. This view is supported by Hon'ble Supreme Court decision in the case of Hindustan Steel Ltd Vs. State of Orissa (83 ITR 26) (Supreme Court), wherein it was held that the penalty need not be levied if the assessee’s conduct is not found to be contumacious. In the facts of the present case we are of the opinion that the assessee’s conduct is bonafide and assessee should not be visited with the rigours of penalty.
In the result, appeal filed by the assessee stands allowed. Order has been pronounced in the Court on 3.9.2019.