2016 (2) TMI 915 - AT - Income Tax

Penalty u/s 271(1)(c) - bad debts deduction u/s 36(2) disallowed by AO on the ground that the claim has not been satisfactorily explained by the assessee - Held that - 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. (2010 (3) TMI 80 - SUPREME COURT ) 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 17, 496/- imposed u/s 271(1)(c) of the Act is directed to be deleted - Decided in favour of assessee

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for disallowance of bad debts claimed by the assessee.

Analysis:
The case involved an appeal against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, amounting to Rs. 17,496/- for disallowance of bad debts claimed by the assessee. The Assessing Officer disallowed the claim as the assessee failed to satisfactorily explain it. The assessee contended that even if a wrong claim was made regarding bad debts, no penalty should be levied. It was also argued that since the parties were absconding, the claim should have been allowed as a business loss. On the other hand, the Revenue defended the imposition and confirmation of the penalty.

Upon considering the submissions and evidence on record, it was noted that the assessee had declared total income and the assessment was completed with a disallowance of bad debts related to two parties. The Assessing Officer disallowed the claim stating that the balances shown did not qualify as bad debts. However, it was observed that there was no intention to hide information, and even if a wrong claim was made, it did not amount to furnishing inaccurate particulars or concealing income. Citing the decision of the Hon'ble Apex Court in Reliance Petro Products Ltd., it was concluded that making a wrong claim does not automatically imply concealment of income. Therefore, the penalty imposed under section 271(1)(c) was directed to be deleted, and the appeal of the assessee was allowed.

In the final judgment, it was stated that the appeal of the assessee was allowed, and the penalty under section 271(1)(c) of the Income Tax Act, 1961 was deleted. The order was pronounced in the presence of representatives from both sides at the conclusion of the hearing.