2011 (11) TMI 821 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(Appeals)-II, Chennai in ITA No. 4/08-09 dated 21-02-2011 for assessment year 2001-02.

Grounds raised by Revenue:
1. CIT(A) erred in deleting penalty u/s 271(1)(c) of `6,29,160.
2. CIT(A) failed to recognize debts written off as falling outside section 36(2) provisions.

Summary of Judgment:
The appeal was filed by the Revenue against the order of the CIT(A) for the assessment year 2001-02. The Revenue contended that the bad debts written off by the assessee were not in line with the provisions of section 36(2) of the Income Tax Act, 1961. The Tribunal noted that the assessee, engaged in lottery agency and financing, had written off a loan of `16,05,000 to a sister concern, M/s. Deccan Pictures, Telugu, which suffered losses. The Assessing Officer treated the write off as a capital loss, but the CIT(A) allowed the deduction under section 36(1)(vii). The Tribunal reversed the CIT(A)'s decision, leading to the levy of penalty u/s 271(1)(c) on the assessee.

The Tribunal observed that the bad debt was disclosed in the assessee's return and there was no concealment of facts. The issue revolved around whether the bad debt was a revenue loss or a capital loss. The Tribunal held that the assessee had not furnished inaccurate particulars of income or concealed any details, as the facts were clear and available. The Tribunal concluded that it was an interpretation of the law that led to the disallowance, not any deliberate act by the assessee. Therefore, the Tribunal upheld the CIT(A)'s decision to cancel the penalty, dismissing the Revenue's appeal.

The order was pronounced on 29/11/2011.