B. MELARAM & SONS,MUMBAI vs. ADDL CIT RG 14(3), MUMBAI

During hearing, the ld. counsel for the assessee, Shri Dhirendra M. Shah, contended that the disallowance was made purely on technical ground and even if a wrong claim is made with respect to bad debt still no penalty is leviable. Alternatively, it was contended that the parties were absconding, therefore, at best, it should have been allowed as business loss. On the other hand, the ld. DR, Shri Randhir Gupta, defended imposition as well as confirmation of penalty.

2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee claimed deduction as bad debts u/s 36(2) of the Act, which was disallowed by the Assessing Officer on the ground that the claim has not been satisfactorily explained by the assessee. Penalty u/s 271(1)(c) amounting to Rs.17,496/- was levied. On appeal, before the ld. Commissioner of Income Tax (Appeals), it was affirmed. The assessee is in further appeal, before this Tribunal. In the present appeal, the assessee declared total income of M/s B. Melaram & Sons Rs.1,36,56,264/- on 26/09/2008 and the assessment was completed on 22/12/2010 u/s 143(3) of the Act, determining the income at Rs.1,38,11,260/-. While doing so, the ld. Assessing Officer made disallowance of bad debts of Rs.52,621/- with respect to M/s Arabian Pioneer (Rs.4,000/- ) and M/s Steelmets Ltd. (Rs.52,621/-). The Assessing Officer observed that the balances, shown by the assessee, do not qualify to be treated as bad debt, hence, he disallowed the same. It is not the case that the assessee hides something. Even if, it is presumed that a wrong claim was made, still, it cannot be concluded that the assessee furnished inaccurate particulars or concealed its income. The decision from Hon’ble Apex Court in Reliance Petro Products Ltd. (322 ITR 158) (SC), holding that mere making a wrong claim itself does not tantamount to furnishing inaccurate particulars or concealing of income, clearly comes to the rescue of the assessee. Respectfully, following the same, the penalty of Rs.17,496/- imposed u/s 271(1)(c) of the Act, is directed to be deleted, thus, the appeal of the assessee is allowed. Finally, the appeal of the assessee is allowed. This order was pronounced in the open court in the presence of ld. representative from both sides at the conclusion of the hearing on 25/02/2016.