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Income Tax Appellate Tribunal, DELHI BENCH ‘H’ : NEW DELHI
Before: SHRI S.V. MEHROTRA & SHRI KULDIP SINGH
ASSESSEE BY : Shri Shailendra Bajaj, CA REVENUE BY : Shri V.R. Sonbhadra, Senior DR Date of Hearing : 24.02.2016 Date of Order : 25.04.2016
O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : Appellant, Mrs. Vinita Pahwa (hereinafter referred to as ‘the assessee’), by filing the present appeal sought to set aside the impugned order dated 11.09.2013 passed by the ld. Commissioner of Income-tax (Appeals)-VI, New Delhi confirming the order passed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter ‘the Act’) qua the assessment year 2009-10 on the grounds inter alia that :-
“1.a That the Ld. CIT (A) – VI erred both in facts and in law while sustaining the penalty of Rs.1,56,154/- under section 271 (1)(c) levied by the assessing officer for alleged concealment of income of Rs.4,59,714/-. 1.b That while imposing penalty under section 271(1)(c) the Ld. CIT (A)-VI erred in concluding that the assessee had concealed the income. 1.c That the ld. CIT (A) – VI failed to appreciate that the omission was inadvertent and bonafide and levy of penalty under such circumstances is patently void and illegal.
That the order passed by the Ld. CIT (A) is bad in law and against the facts of the case.
3. That the appellant craves leave to add, delete or amend any of the ground of appeal on or before the disposal of the present appeal.”
2. Briefly stated, the facts of this case are : the assessment of the assessee was completed at Rs.1,19,49,400/- u/s 143(3) of the Act by disallowing the provision for doubtful debts to the tune of Rs.4,59,714/-. Consequently, the AO initiated the penalty proceedings u/s 271(1)(c) of the Act and assessee was called upon to explain, who has filed comprehensive submissions. The AO on the basis of material on record came to the conclusion that since concealment of income and furnishing of inaccurate particulars of income were disclosed by the assessee during scrutiny proceedings, she is not entitled to enjoy fruits of filing of inaccurate particulars of income and as such is liable to be penalized. The AO further invoked the Explanation 1 to section 271(1)(c) and observed that the onus is placed on the assessee to prove that there was no concealment of income which he was failed to discharge and the explanation furnished by her was found unsatisfactory and unacceptable and thereby imposed a penalty of Rs.1,56,154/- u/s 271(1)(c) of the Act.
Assessee carried the matter before the ld. CIT (A) who has dismissed the appeal vide impugned order. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
The ld. AR for the assessee challenging the impugned order contended inter alia that due to inadvertent mistake in the audited account, the assessee has disclosed provision for bad debts of Rs.4,59,714/-, which were not disallowed by her accountant while computing the taxable income; that during the assessment proceedings vide letter dated 30.11.2011, the assessee admitted that there was bonafide mistake and then revised the income by adding the provision of bad debts to its taxable income along with necessary details; that though the amount was written off during the financial year 2009-10, the assessee has not claimed the deduction in the relevant AY 2010-11 u/s 36(vii) and as such, the assessee has no intention of claiming any benefit twice. However, on the other hand, the ld. DR for the revenue relied upon the penalty order passed by the AO as well as order passed by the ld. CIT (A).
Undisputedly, the assessee claimed deduction for provision for doubtful debts amounting to Rs.4,59,714/- and the same has been written off in the books of account in previous year 2009-10 relevant for AY 2010-11. It is also not disputed that the assessee has not claimed same benefit of the provision for bad debts in the subsequent years. The assessee has made this categoric submission before the AO during assessment proceedings.
In the backdrop of the aforesaid facts and circumstances of the case, now the question arises for determination in this case is, “as to whether the assessee has furnished inaccurate particulars of income and thereby concealed the income during the AY 2009-10?”
The assessee has taken a consistent stand that she has inadvertently claimed deduction for provision for doubtful debts to the tune of Rs.4,59,714/- due to bonafide mistake of her accountant, which has not been believed by the AO and has made an addition of Rs.4,59,714/- by returning findings to the following effect :-
“DISALLOWANCE OF PROVISION FOR DOUBTFUL DEBTS During the year under consideration the assessee company claimed provisions for doubtful debts amounting to Rs.459714/- in Profit and loss accounts under the head Administration and other expenses. The provisions are not allowable as per act being an unascertained liability. Accordingly the assessee company vide order sheet entry dated 17.11.2011 dated show caused as to why the disallowance on account of provisions for doubtful debts should not be disallowed. In response the assessee company vide letter dated 30.11.2011 submitted as under:- "it is submitted that the assessee has .filed its income tax return for the AY 2009-10 at taxable income of Rs.11489690/-. The assessee while filing the income tax return has inadvertently claimed deduction for provision for doubtful debts amounting to Rs.459714/-. It is submitted that the mistake was bonafide and genuine and it was made by the accountant of her proprietorship concern. Further we submit that the debts in respect of which the above said provision was made has been written off in the books of account in previous year 2009- 10 relevant for assessment year 2010-11 and the assessee has not claimed the deduction for debts written off in the income tax return filed for assessment year 2010-11. Thus the assessee has not claimed double benefit of the provision made. It is requested that the above said provisions be added to the taxable income of the assessee for assessment year 2009-10 and it is submitted that to this extent the income tax return of the assessee be treated as revised. Further, we request that the deduction for debts written off be allowed to the assessee from taxable income of assessment year 2010-11." During the course of asstt. proceedings, assessee has filed a revised computation of total income. The reason for filing of revised computation of income is stated that wrong claim of provision for doubtful debts. The revised computation of income cannot be accepted as per the Hon'ble Supreme Court's decision in the case of Goetze (India) Ltd. v. CIT [2006] 157 Taxman 1 (SC) wherein it has been stated as under:- "Entertaining a claim after original return is filed - Assessing authority has no power to entertain a claim made by assessee after filing original return otherwise than by filing revised return." Assessment is, therefore, to be computed on the basis of original computation of income. In view of the submission of the assessee offering provision for doubtful debts amounting to Rs.459714/- and provisions of act whereby provisions are not allowable being unascertained liability. Hence amount of Rs.459714/- is hereby disallowed and added back to the income of the assessee company.”
The plea of inadvertent mistake raised by the assessee has also not been accepted by the CIT (A) who has affirmed the findings returned by the AO.
A perusal of the balance sheet for AY 2008-09, lying at pages 5 to 10 of the paper book, schedule VI apparently shows that the assessee claimed an amount of Rs.4,59,714/- on account of provision for doubtful debts and when this fact is examined in the light of the computation of income-tax return filed by the assessee for the AY 2010-11, lying at pages 18 to 20 of the paper book, it is apparently clear that the assessee has written off the aforesaid provision in the books of account in the previous year 2009-10, meaning thereby the assessee has not claimed the deduction for debts written off in the income-tax return filed for the AY 2010-11 twice. This fact goes to prove that the provision for doubtful debts amounting to Rs.4,59,714/- has been claimed by the assessee during the year under consideration due to inadvertent and bonafide mistake. So, we are of the considered view that candid admission made by the assessee during assessment proceedings and the fact that he has not claimed any such deduction during the AY 2010-11 go to prove that it is merely an inadvertent and bonafide mistake and does not amount to furnishing of inaccurate particulars of income to further conceal the income. Moreover, the AO has never disputed the audited balance sheet and books of account relied upon by the assessee.
Hon’ble Supreme Court in judgment cited as Price Waterhouse Coopers Pvt. Ltd. vs. CIT – 348 ITR 306 (SC) dealt with the identical issue and returned findings as under :-
“Held, allowing the appeal, that the facts of the case were peculiar and somewhat unique. Notwithstanding that the assessee was a reputed firm and had great expertise available with it, it was possible that even the assessee could make a "silly" mistake. The fact that the tax audit report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicated that the assessee made a computation error in its return of income. The contents of the tax audit report suggested that there was no question of the assessee concealing its income or of the assessee furnishing any inaccurate particulars. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. All that had happened was that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. The assessee should have been careful but the absence of due care, in a case such as the present, did not mean that the assessee was guilty of either furnishing inaccurate particulars or attempting to conceal its income. On the peculiar facts of this case, the imposition of penalty on the assessee was not justified.”
Following the law laid down by the Hon’ble Apex Court in (supra) and in view of the facts discussed in the preceding paras, we are of the considered view that the impugned order passed by the CIT (A) confirming the penalty order is not sustainable in the eyes of law as the assessee has claimed provision for bad and doubtful debts due to inadvertent and bonafide mistake and voluntarily revised the income by offering the said amount of Rs.4,59,714/- for taxation. Consequently, the impugned order passed by CIT (A) is hereby set aside.
In view of what has been discussed above, the present appeal filed by the assessee is hereby allowed. Order pronounced in open court on this 25th day of April, 2016.