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2012 (3) TMI 528 - AT - Income TaxDisallowance of business loss - Held that - It shall be in the interest of justice to set aside this issue to the file of the Assessing Officer with direction to verify the facts and allow the claim of the assessee in the assessment year 2000-2001 in appeal before the Tribunal, provided, any similar claim has not been made by the assessee in any of the subsequent assessment years and the claim of the Mekor has been allowed by the Hon ble Bombay High Court and the assessee has in fact complied with and has paid the compensation subsequently on account of loss for non-fulfillment of the contract for purchase of imported news print. Disallowance of bad debts - Held that - We find that the debts pertained to non-trade parties have not been allowed by the CIT(A) as bad debts. It is not necessary to take any legal steps in order to justify the claim of the bad debts. The amount has been written off in the books of accounts of the assessee and this fact has not been disputed by the Revenue. The CIT(A) has passed a well reasoned order while allowing the claim of the assessee. The CIT(A) has given a finding that the assessee is in the business of dealing in shares and securities and finance and in business various debts had arisen in the past. Method of valuation - Held that - We hold that there is no mistake in the order of the CIT(A) in holding that such non-existing assets cannot be considered in the valuation of the stock of the assessee and the assessee has justifiably revalued the stock in terms of the method of valuation adopted by it in the year under consideration. The CIT(A) has recorded that it is not the case of the AO that the value shown by the assessee on the basis of net realisable value is not correct. In these facts of the case, we hold that the third objection of the Revenue regarding method of valuation is also not sustainable and there is no mistake in the order of the CIT(A) in deleting the addition made by the AO on this issue Non accepting the assessee s claim of reduction from sales in this year - Held that - The assessee has filed its return of income on that basis alone. Even in the revised return of income filed subsequently by the assessee, the sale entries were not reversed by the assessee. The assessee has put forward its claim by filing a letter dated 21-3-2003. The assessee could not state that whether fresh sales were made of the same in the subsequent year or years and have found place in the books of accounts of the subsequent years. In these facts of the case, we are of the considered view that the amount has been rightly taxed in the year under appeal before us and there is no mistake in the order of the CIT(A) in holding that the AO has rightly taxed in the relevant assessment year. Penalty under section 271(1)(c) - disallowance of excess capital loss - Held that - We find that it is a case of bona fide mistake in calculating the long term capital loss in applying the cost of indexation by the accountant. The CIT(A) has given a finding that complete facts relating thereof were given by the assessee in its return of income filed with the department. In these facts, since the mistake was bona fide in calculation only and the material facts were disclosed at the time of assessment itself, we hold that there is no mistake in the order of the CIT(A) in holding that no penalty was leviable on this issue. Accordingly, the order of the CIT(A) in canceling the penalty is confirmed and this ground of the Revenue s appeal is dismissed. Penalty u/s 271(1)(c) - depreciation disallowance - Held that - The depreciation was claimed by the assessee on its business assets. Merely because the assessee was not entitled to double deduction of depreciation as well as deduction under Section 24 of the Act in accordance with the scheme of the IT Act, 1961, it cannot be said that the assessee was guilty of concealment of income or filing of inaccurate particulars of income. The conduct of the assessee was bona fide and it is a case of honest difference of opinion between the assessee and the department regarding the allowability of certain claim of deduction made by the assessee.The assessee has agitated the disallowance in the quantum appeal before the CIT(A) for the relevant year and the deduction being not allowable as per the law, was not allowed to the assessee. There is no material brought on record to suggest that the explanation of the assessee was not bona fide and since the assessee has disclosed all the material facts relating to the claim of the assessee, we hold that it is not a fit case for levy of penalty under Section 271(1)(c) of the Act which is accordingly cancelled and the ground of the assessee is allowed.
Issues Involved:
1. Deletion of disallowance of Rs. 48,62,405 claimed as business loss. 2. Deletion of disallowance of bad debts amounting to Rs. 54,59,000. 3. Deletion of disallowance of Rs. 3,61,22,730 on account of loss on Wind Mills and change in the method of valuation of stock. 4. Assessee's claim for deduction of Rs. 7,85,164 pertaining to bad and doubtful debts. 5. Deduction of Rs. 6,03,000 under Section 24 for computation of income from house property. 6. Deletion of addition of Rs. 75,097 reducing long-term capital loss. 7. Deduction of Rs. 7,51,125 for bad debts written off. 8. Reduction of Rs. 2,40,00,000 from sales. 9. Validity of penalty imposed under Section 271(1)(c) of the Act. Detailed Analysis: 1. Deletion of disallowance of Rs. 48,62,405 claimed as business loss: The Revenue argued that the assessee had not accepted the claim filed by M/s. Mekor International Consortium for non-fulfillment of a contract, and the matter was sub-judice before the Bombay High Court. The assessee claimed the deduction in the revised return without debiting it in the books. The Tribunal directed the Assessing Officer (AO) to verify if the claim was allowed in subsequent years and if the payment was made post the High Court's decision. The issue was set aside to the AO for verification. 2. Deletion of disallowance of bad debts amounting to Rs. 54,59,000: The Revenue contended that the assessee had not provided details of recovery actions. The Tribunal found that the debts related to trade debts were written off in the books. The CIT(A) had correctly allowed the deduction as the assessee was in the business of dealing in shares and securities. The Tribunal confirmed the CIT(A)'s decision and dismissed the Revenue's appeal. 3. Deletion of disallowance of Rs. 3,61,22,730 on account of loss on Wind Mills and change in the method of valuation of stock: The Revenue disallowed the loss on three grounds: it did not pertain to the relevant year, it was a capital loss, and the method of valuation was changed. The Tribunal found that the assessee decided to close its energy division due to policy issues and the wind mills were shown as stock-in-trade. The change in valuation to "net realizable value" was justified as the assets had no realizable value. The Tribunal confirmed the CIT(A)'s decision and dismissed the Revenue's appeal. 4. Assessee's claim for deduction of Rs. 7,85,164 pertaining to bad and doubtful debts: The assessee did not press this ground, and it was dismissed. 5. Deduction of Rs. 6,03,000 under Section 24 for computation of income from house property: The assessee did not press this ground, and it was dismissed. 6. Deletion of addition of Rs. 75,097 reducing long-term capital loss: The assessee did not press this ground, and it was dismissed. 7. Deduction of Rs. 7,51,125 for bad debts written off: The Tribunal found that the amount did not represent trade debts and was not allowable as bad debts. The CIT(A)'s decision was confirmed, and the ground was dismissed. 8. Reduction of Rs. 2,40,00,000 from sales: The assessee claimed that the sales were conditional and should be reduced. The Tribunal found that the sales were recorded in the relevant period and the claim was made through a letter rather than in the revised return. The Tribunal dismissed the ground, affirming the CIT(A)'s decision. 9. Validity of penalty imposed under Section 271(1)(c) of the Act: The Tribunal found that the penalty was imposed on disclosed facts and was a matter of honest difference of opinion. The CIT(A) had correctly canceled the penalty on the grounds of bad debts and excess capital loss. The Tribunal confirmed the CIT(A)'s decision, dismissing the Revenue's appeal. Conclusion: - The Revenue's appeal in ITA No.802/Ahd/2004 was partly allowed for statistical purposes. - The Revenue's appeal in ITA No.1209/Ahd/2006 was dismissed. - The assessee's CO No.148/Ahd/2007 was dismissed. - The assessee's appeal in ITA No.843/Ahd/2006 was allowed.
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