2013 (6) TMI 787 - AT - Income Tax

Summary

Issues involved: Penalty order u/s 271(1)(c) for disallowance of bad debts claim.

Summary:
The appeal was against a penalty order u/s 271(1)(c) for disallowance of a bad debts claim. The Assessing Officer disallowed a bad debts claim of Rs. 6,65,360 and imposed a penalty, which was confirmed by CIT(A). The appellant argued that the claim was based on legal fiction and cited judicial precedents. However, CIT(A) held that the claim did not fall under section 36(1)(vii) of the IT Act and was inaccurate. The appellant's arguments were deemed unconvincing and lacking evidence. The penalty was upheld by CIT(A). The appellant contended that the claim was made in good faith and relied on legal decisions to support their case. After considering the submissions, the Tribunal found that the claim was bona fide and all relevant facts were disclosed. It was held that the disallowance of the claim did not warrant a penalty u/s 271(1)(c). The penalty imposed by the AO was canceled, and the appeal of the Assessee was allowed.

This judgment highlights the importance of disclosing all material facts and establishing the bona fide nature of a claim to avoid penalties under section 271(1)(c) of the IT Act.