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2018 (10) TMI 1092 - AT - Income TaxDisallowance of depreciation - whether the assessee has put the asset to use for the purpose of its business? - Held that - It is the claim of the assessee that it has generated revenue in the impugned as well as subsequent assessment years by using the said asset. In our view the claim of the assessee that it has generated revenue by using the asset for the purpose of its business needs to be examined and the assessee deserves an opportunity to demonstrate such fact through proper documentary evidence. In view of the aforesaid we are inclined to restore the issue to the file of the Assessing Officer for denovo adjudication after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes. Disallowance of bad debt - reasoning on which the Assessing Officer has rejected the claim of bad debt is it is in the nature of provision - Held that - It appears from the impugned order of the learned Commissioner (Appeals) that the assessee created the entry for reducing the bad debt from the account of the debtor on 30th September 2007 i.e. after closure of the financial year relevant to the impugned assessment year. Further it requires verification whether the claim was allowed on actual write off. In view of the aforesaid we restore the issue to the Assessing Officer to examine whether the assessee has passed accounting entries with regard to the provision for bad debt in terms of the ratio laid down in M/S SOUTHERN TECHNOLOGIES LTD. VERSUS JOINT COMMNR. OF INCOME TAX COIMBATORE 2010 (1) TMI 5 - SUPREME COURT OF INDIA . Penalty proceedings u/s 271(1)(c) - Held that - The additions on the basis of which the penalty under section 271(1)(c) of the Act was imposed by the Assessing Officer in assessment year 2007 08 has been restored back to him for denovo adjudication while deciding assessee s appeal. Therefore in absence of such additions penalty under section 271(1)(c) of the Act will have no leg to stand.
Issues Involved:
1. Condonation of delay in filing appeals. 2. Disallowance of depreciation on "Intellectual Property Rights–IX Platform." 3. Disallowance of bad debt. 4. Penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. Detailed Analysis: 1. Condonation of Delay in Filing Appeals: The assessee faced a delay of 1005 days in filing the appeal before the Tribunal. The delay was attributed to the advice of the erstwhile Chartered Accountant and the death of the Executive Director, which caused disarray in the company's affairs. The Tribunal noted that the explanation for the delay was consistent and plausible, considering the circumstances such as the death of the Executive Director and the bankruptcy of the holding company. The Tribunal emphasized that condonation of delay is not automatic and depends on the facts of each case. The Tribunal found the reasons for the delay to be bona fide and sufficient, thus condoning the delay and admitting the appeal for hearing on merit. 2. Disallowance of Depreciation on "Intellectual Property Rights–IX Platform": The assessee claimed depreciation of ?79,63,943 on "Intellectual Property Rights–IX Platform," which was disallowed by the Assessing Officer on the grounds that the expenditure was capital in nature and not recoverable due to the bankruptcy of the holding company. The Commissioner (Appeals) sustained the disallowance, stating that the asset was not put to use during the relevant year. The Tribunal found that the assessee's claim of having put the asset to use needed verification. The issue was restored to the Assessing Officer to verify whether the asset was used for generating revenue and to decide the matter afresh. 3. Disallowance of Bad Debt: The assessee claimed a bad debt of ?48,99,744, which was disallowed by the Assessing Officer as it was considered a provision. The Commissioner (Appeals) upheld the disallowance, noting that the actual write-off occurred after the relevant financial year. The Tribunal referred to the Supreme Court's decisions in Southern Technologies Ltd. and Vijaya Bank, which clarified that a write-off of an actual debt is allowable. The Tribunal restored the issue to the Assessing Officer to verify if the accounting entries for the bad debt were in line with the Supreme Court's guidelines and to decide accordingly. 4. Penalty Proceedings Under Section 271(1)(c): Penalties were imposed based on the disallowances made by the Assessing Officer. The Commissioner (Appeals) condoned the delay for assessment years 2008–09 and 2010–11 but not for 2007–08. The Tribunal found the Commissioner (Appeals) inconsistent in condoning the delay based on the quantum of delay rather than the merits of the explanation. The Tribunal held that the penalties could not stand as the underlying additions were restored for fresh adjudication. Consequently, the penalties were deleted, and the appeals were allowed. Conclusion: The Tribunal condoned the delay in filing the appeals, restored the issues of depreciation and bad debt to the Assessing Officer for fresh adjudication, and deleted the penalties imposed under section 271(1)(c) due to the restoration of the underlying additions. The appeals were allowed for statistical purposes and on merits.
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