2015 (3) TMI 1274 - HC - Income Tax

Penalty u/s 271(1)(c) - claim made on account of bad debt not allowed - Held that - It is not in dispute that the amount of debt had duly been written off by the assessee; why was the same not allowed is however a mystery to us but be that as it may, the fact remains that the claim for bad debt after the debt had been written off could never be a ground for initiating penal proceedings. Before initiating the penal proceedings the Assessing Officer is required to be satisfied as to whether any income has been concealed or any inadequate particulars have been furnished. As the appellant submitted that the order under challenge passed by the Assessing Officer does not show any such satisfaction nor the learned Tribunal had considered the matter in that perspective. The order of the CIT has been passed mechanically and without applying mind. The learned Advocate appearing for the respondent did not seriously try to support the order under challenge. We have no doubt in our mind that the order suffers from perversity of the highest order. The order under challenge is set aside. The question as framed is answered in the affirmative.

Summary

Issues:
Challenge to Income Tax Appellate Tribunal's judgment on penalty imposition for bad debt claim.

Analysis:
The High Court of Calcutta addressed the challenge to a judgment and order by the Income Tax Appellate Tribunal regarding penalty imposition for a bad debt claim for the Assessment Year 1991-92. The appellant raised the question of law concerning the Tribunal's order being considered perverse due to the absence of findings on the genuineness of debts, falsity of explanations, or failure to furnish necessary material for income computation. The penalty proceedings were initiated based on the disallowance of the bad debt claim. The Court noted that while the debt had been written off by the assessee, the reason for disallowance remained unclear. It emphasized that a claim for bad debt post write-off cannot be a basis for penal proceedings without establishing concealment of income or inadequate particulars. The Assessing Officer must be satisfied before initiating penal actions.

The appellant's advocate argued that the Assessing Officer's order lacked the necessary satisfaction required for penalty imposition, and the Tribunal failed to consider this aspect. It was contended that the CIT's order was mechanical and lacked proper consideration. The respondent's advocate did not strongly support the challenged order. The Court, after careful consideration, found the order to be severely perverse. Consequently, the impugned order was set aside, and the question posed was answered in the affirmative. The appeal was thereby disposed of, favoring the appellant.