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2013 (9) TMI 760 - HC - Income TaxPenalty for concealment of income u/s 271(1)(c) of the Income Tax Act - Claim of capital loss as bad debt - In the original return no claim on account of capital or business loss of Rs.98,55,254/- as bad debt written off on account of loan given to DCM International Limited was claimed - It is obvious and crystal clear that the assessee was aware that this claim would be examined by the Assessing Officer and the claim was put forward on the basis that DCM International Limited was a subsidiary company and the loan granted to them was for specific purpose and for the benefit of the holding company Held that - Loan in fact was granted and has been also written off. There was no concealment or furnishing of inaccurate facts - Loan unpaid and written off should be either treated as business loss or alternatively as capital loss was rejected No reason for penalty for concealment can be imposed in the present case. Law does not bar or prohibit an assessee for making a claim, which he believes may be accepted or is plausible. When such a claim is made during the course of regular or scrutiny assessment, liberal view is required to be taken as necessarily the claim is bound to be carefully scrutinized both on facts and in law. Full probe and appraisal is natural and normal. Threat of penalty cannot become a gag and/or haunt an assessee for making a claim which may be erroneous or wrong, when it is made during the course of the assessment proceedings - Law does not bar or prohibit a person from making a claim, when he knows the matter is going to be examined by the Assessing Officer Decided against the Revenue.
Issues:
1. Penalty for concealment under Section 271(1)(c) of the Income Tax Act. 2. Claim of loss on writing off loan as business expenditure or capital loss. 3. Validity of penalty imposition based on claim made during assessment proceedings. Analysis: 1. The case involves an appeal under Section 260A of the Income Tax Act regarding the imposition of a penalty for concealment under Section 271(1)(c). The appellant, Commissioner of Income Tax, Delhi-IV, contested that the penalty was rightly imposed due to a wrong claim made by the assessee during assessment proceedings. The claim in question pertained to a loss of Rs.98.55 lacs incurred on writing off a loan granted to a subsidiary company. The Assessing Officer disallowed the claim, leading to the imposition of the penalty. 2. The assessee, a limited company engaged in textile yarn manufacturing, initially filed returns showing substantial losses, subsequently revising the figures multiple times. The claim for the loss on the written-off loan was made during assessment proceedings, arguing it should be treated as business expenditure or capital loss. However, the Assessing Officer rejected the claim, emphasizing that the loan was not given for business purposes, and hence, the loss was not allowable. The subsequent appellate proceedings upheld this decision. 3. The penalty imposition under Section 271(1)(c) was challenged before the tribunal. The tribunal reversed the lower authorities' decision, citing a Supreme Court judgment that penalty should not be levied if the assessee makes a bona fide claim, even if it is not accepted. The tribunal emphasized that the claim was made during assessment proceedings and not in the original return, indicating no concealment of income. The court concurred with the tribunal's findings, stating that the claim was made with full disclosure of facts and legal position, and the rejection was based on legal grounds rather than concealment of facts. The court emphasized that penalty should not be imposed merely for making a claim, especially during scrutiny assessments. In conclusion, the High Court dismissed the appeal, highlighting that the claim made by the assessee during assessment proceedings was not a ground for penalty imposition under Section 271(1)(c). The court emphasized the importance of allowing taxpayers to make claims during assessments without the fear of unwarranted penalties, as long as there is no deliberate concealment of facts or inaccurate information provided.
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