2017 (3) TMI 1672 - AT - Income Tax

Penalty u/s 271(1)(c) - provision in bad debt and doubtful debt - Held that - As assessee has merely failed to provide the provision in bad debt and doubtful debt though the provision is made as per RBI guidelines in the earlier was excess. The assessee has directly claimed the deduction in computation of income instead of providing same in the books for debting in the P & L account as per the provisions of the Act. The assessee had neither concealed nor filed any inaccurate particulars of income. The assessee has duly disclosed the facts of income in its return of income filed before the department. Therefore, we are of the view that the issue in controversy is covered by the decision of Hon ble Supreme Court in the case of CIT vs. Reliance Petroproduct 2010 (3) TMI 80 - SUPREME COURT wherein it is held that a mere making claim which is not sustainable in law will not amount to furnishing inaccurate particulars regarding the income of the assessee - Decided in favour of assessee.

Summary

Issues Involved:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for claiming deduction u/s 36(1)(viia) without making provisions for bad and doubtful debts.

Detailed Analysis:

1. Issue of Penalty under Section 271(1)(c):
The appeal was against the order of the CIT(A) regarding the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer (AO) disallowed a deduction claimed by the assessee under section 36(1)(viia) as the assessee had not made any provision for bad and doubtful debts as required by law. The AO concluded that the claim was incorrect and imposed the penalty. The CIT(A) deleted the penalty, stating that the assessee had not concealed income or furnished inaccurate particulars. The CIT(A) observed that the assessee had disclosed the facts of income in the return filed before the department, and the mere making of a claim not sustainable in law does not amount to furnishing inaccurate particulars.

2. Claim of Deduction without Provision for Bad Debts:
The assessee, engaged in banking business, had filed a return declaring income and claimed a deduction under section 36(1)(viia) without making any provision for bad and doubtful debts as required. The AO disallowed the claim and imposed the penalty under section 271(1)(c) for allegedly making an incorrect, erroneous, and false claim of expenditure. The CIT(A) noted that the provision for bad debts was not made in the year under consideration, although it was done in excess in the previous year as per RBI guidelines. The CIT(A) held that the failure to provide the provision did not amount to concealing income or furnishing inaccurate particulars.

3. Applicability of Legal Precedents:
The CIT(A) based the decision on relevant case laws and cited the Hon'ble Supreme Court's ruling in a specific case to support the deletion of the penalty. The CIT(A) emphasized that the assessee had not concealed any income and had disclosed all relevant facts in the income tax return. The CIT(A) concluded that the penalty was not justified as the mere claiming of a deduction, even if not sustainable in law, does not constitute furnishing inaccurate particulars regarding income.

4. Confirmation of CIT(A) Decision:
The Tribunal confirmed the CIT(A)'s decision to delete the penalty imposed under section 271(1)(c). The Tribunal agreed that the assessee had not concealed income or provided inaccurate particulars, as the claim made in the return, even if not legally sustainable, did not amount to furnishing inaccurate particulars. The Tribunal dismissed the departmental appeal, upholding the CIT(A)'s decision.

In conclusion, the judgment focused on the issue of penalty under section 271(1)(c) for claiming a deduction without making provisions for bad and doubtful debts. The decision emphasized that the mere claiming of a deduction not sustainable in law does not constitute furnishing inaccurate particulars, leading to the deletion of the penalty by the CIT(A) and subsequent confirmation by the Tribunal.