COMMISSIONER OF INCOME TAX vs. M/S. SANU PALACE

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ITA/187/2014HC KarnatakaKAHC01021171201409 January 2015Bench: B.VEERAPPA,N.KUMAR6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the assessee's claim for deduction, even if disallowed, did not amount to furnishing inaccurate particulars or concealment of income, as the loss itself was not disputed and a portion was allowed under business income.

What were the facts?

The assessee claimed a deduction for bad debts written off under 'income from other sources', which was disallowed by the Assessing Authority. Penalty proceedings were initiated under Section 271(1)(c) for this disallowance.

What were the issues?

Whether the disallowance of a claim for bad debts under 'income from other sources' constitutes furnishing inaccurate particulars of income, warranting penalty under Section 271(1)(c).

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 57

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 9th DAY OF JANUARY 2015

PRESENT

THE HON’BLE MR. JUSTICE N.KUMAR AND THE HON’BLE MR. JUSTICE B.VEERAPPA

I.T.A. NO.187/2014

BETWEEN:

1.

Commissioner of Income Tax, Mangalore.

2.

Assistant Commissioner Of Income, Circle 1(1), Mangalore. ...APPELLANTS

(By Sri.E.R.Indrakumar, Sr. Adv. for Sri.E.I.Sanmathi, Adv.)

AND:

M/s.Sanu Palace, International Pvt. Ltd., 4-9-776/46, Sanu Palace, M.G.Road, Kodialbail, Mangalore. …RESPONDENT

(By Sriyuts A.Shankar & Lava, Advs.) . . . .

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This I.T.A. is filed under Section 260A of the Income Tax Act, 1961, arising out of order dated 03.01.2014 passed in I.T.A. No.1360/Bang/2012 for the Assessment Year 2008-2009 praying to :

(i) Decide the foregoing question of law and or such other questions of law as may be formulated by the Hon’ble Court as deemed fit.

(ii) Set-aside the appellate order dated 03.01.2014 passed by the ITAT, `A’ Bench, Bangalore in appeal proceedings No.I.T.A. No.1360(BNG)/2012 for Assessment Year 2008-2009.

This I.T.A. coming on for admission, this day, N.Kumar J., delivered the following:

JUDGMENT

The Revenue has preferred this appeal against the concurrent findings recorded by the two Appellate Authorities, setting-aside the order imposing the penalty by the Assessing Authority.

2.

The Assessee-Company is engaged in the business of promoting building and developing

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properties. The Assessee had declared loss under the head `income from other sources’ of Rs.79,66,169/-. In computing the aforesaid loss, the assessee had claimed deduction of a sum of Rs.79,87,193/-, on account of bad debts written off. The Assessing Authority, while concluding the assessment proceedings, dis-allowed the claim of the assessee. It is in respect of the said dis- allowance, the penalty proceedings were initiated under Section 271(1)(c) of the Income-tax Act, 1961 (for short `the Act’). It is to be noticed that the assessee did not dispute the said addition and the said order has become final. In the penalty proceedings, the assessee pointed out that the assessee had incurred a loss, which is not in dispute. It was not allowed under the head `income from other sources’ as only the expenses under Section 57 of the Act was allowable. Thus, the assessee has neither furnished inaccurate particulars of income nor was there any concealment of particulars of income.

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The said contention was not accepted by the Income-tax authority. Therefore, it proceeded to impose penalty.

3.

The First Appellate Authority after considering the rival contentions held that where a certain claim was made under bonafide intention but the same was not allowed, that by itself would not amount to furnishing of inaccurate particulars. Therefore, the said penalty was set-aside. Aggrieved by the said order, the Revenue preferred an appeal to the Tribunal. The Tribunal was of the view that if the assessee had been more diligent in declaring its income in the form of interest under the head `income from business’, it would have legitimately got its claim for deduction on account of deduction as bad debts and therefore, dismissed the appeal. Aggrieved by the said order, the present appeal is filed.

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4.

The substantial question of law raised in this appeal is as under: Whether, on the facts and circumstances of the case, the assessee’s claim of deduction on account of bad debts written off under the income from other sources constitutes `furnishing of inaccurate particulars of income’ as per Section 271(1)(c) of the Income Tax Act and therefore, is a fit case for levy of penalty?

5.

From the aforesaid facts, it is clear that the assessee sustained loss to the extent of the deduction claimed on account of bad debts, is not in dispute. The assessee had claimed a portion under business and balance under other sources. The claim under business was allowed. The dispute is in relation to claim under other sources. The Tribunal has verified the return and came to the conclusion that penalty is not to be levied.

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When two fact finding authorities have held that it would not amount to furnishing of inaccurate particulars as nothing was concealed from the Department, it cannot be said that the case for imposing penalty under Section 271(1)(c) of the Act, would arise. Accordingly, we do not see any merit in this appeal. Appeal is dismissed.

Sd/- JUDGE

Sd/- JUDGE

SPS

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