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TMI Blog2011 (11) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ot fall within the purview of Section 36(1)(vii) of the Act, but may well be regarded as one eligible for deduction - Held that It was a bona fide claim preferred by the assessee, who had also disclosed all the facts relating to and material to the computation of his income - assessee fulfilled both the conditions to be outside the purview of Explanation (1) to Section 271(1)(c) of the Act - had the assessee pressed his claim in a proper manner during the assessment proceedings, he might have even succeeded in getting the said deduction allowed - cannot be fastened with penalty - Decided in favour of assessee - ITA No. 174 of 211 - - - Dated:- 18-11-2011 - MR. JUSTICE SIDDHARTH MRIDUL J. Mr. Sanjeev Sabharwal, Sr. Standing Counsel. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, there was no question of treating is as bad debts under provision of Section 36(1)(vii) and Section 36(2) of the Act. The assessee had not challenged the order of the AO. 3. In the penalty proceedings, the AO held that the aforesaid finding had become final and conclusive and it clearly reflected the falsity of claim preferred by the assessee. 4. The CIT(A) dismissed the appeal of the assessee by holding that undetection of the said claim, as 97% of the returns are not subjected to scrutiny, would have rendered such false claim to be untaxed. The claim on bad debts to be patently wrong and erroneous in law is manifest in the conduct of the assessee in admitting the falsity of the claim and not preferring any further appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppliers have been shown in the books of account, therefore, the correct proposition was the allowability of claim of the assessee in respect of business advances written off will fall u/s 29 read with Section 37(1). AO, however, proposed the addition on the ground that the same was not allowable as 'bad debt' since these advances were not included in income as income in earlier years. Assessee on the proposition of AO realized that they were not included as income in earlier years and were not allowable a bad debt, therefore, the same was offer to tax specifically on this ground. In our view, the decision of Hon‟ble Delhi High Court in the case of Escort Finance (supra) is not applicable to assessee's case as the same is applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and of the assessee that the advances to the extent of Rs. 2,05,86,262.75/- had become irrecoverable was also not disputed by the AO. However, the assessee had shown the same in Profit and Loss Account under the head bad and doubtful advances written off and did not use the words bad debts written off . During the assessment proceedings, the AO treated the same as bad debts written off and for that reason applied the provisions of Section 36(1)(vii) of the Act and claiming that the conditions stipulated therein were not satisfied, viz., when it was not shown as income in the previous year, how it could be shown as debt written off. 7. It is trite law that during the penalty proceedings, it is open to the Tribunal to look into the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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