2018 (6) TMI 756 - AT - Income Tax

Initiation of penalty u/s 271(l)(c) - provision for bad and doubtful debts disallowed as assessee failed to provide the same in their accounts and only claimed the same in the computation of income - Held that - Assessee cannot be held to have committed any contumacious conduct so as to warrant levy of penalty - there is no furnishing of inaccurate particulars of income nor there is any concealment - therefore we set aside the order s of authorities below and delete the levy of penalty - reliance is placed on decision of Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P.) Ltd. 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 Decision in favor of assessee

Summary

Issues:
Levy of penalty under section 271(1)(c) based on disallowance of deduction claimed by the assessee.

Analysis:
The case involved an appeal against the order of the ld. Commissioner of Income Tax (Appeals) regarding the levy of penalty under section 271(1)(c) for the assessment year 2008-09. The primary issue was the disallowance of a deduction claimed by the assessee amounting to ?3,79,05,255 on account of provision for bad and doubtful debts, allowable under section 36 of the Income Tax Act. The Assessing Officer disallowed the deduction as the assessee failed to provide the same in their accounts. The Commissioner of Income Tax (Appeals) upheld the addition, leading to the imposition of the penalty.

The ITAT, in its order, granted partial relief to the assessee by allowing a deduction of ?1.25 crores. The ITAT analyzed the provisions of section 36(vii) and (viia) concerning deductions for bad and doubtful debts for banking companies. It noted that the assessee had actually written off ?1.25 crores in its books, which was added back while computing the income. The ITAT directed the Assessing Officer to allow the claim for bad and doubtful debts to the extent of ?1.25 crores only.

During the appeal before the ITAT, the counsel for the assessee argued that the disallowance leading to the penalty was solely due to the amount claimed not being debited in the accounts, citing RBI Prudential norms. On the other hand, the departmental representative supported the lower authorities' orders, contending that the assessee had not substantiated the claimed amount. The ITAT observed that the addition was made solely due to the lack of provision in the accounts, and the assessee's conduct did not warrant a penalty under section 271(1)(c).

The ITAT relied on the decision of the Hon'ble Supreme Court in the case of Reliance Petroproducts (P.) Ltd. and a previous tribunal ruling to conclude that the assessee had not furnished inaccurate particulars of income or concealed any information. The ITAT held that the disallowance based on the claimed amount not being debited in the accounts did not amount to a penalty-worthy offense. Therefore, the ITAT set aside the lower authorities' orders and deleted the levy of penalty under section 271(1)(c).

In conclusion, the ITAT allowed the appeal by the assessee, emphasizing that the mere claiming of an amount not debited in the accounts did not constitute inaccurate particulars of income or concealment, in line with legal precedents and the specific facts of the case.