9911796707
TMI Blog2016 (7) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable income, these amounts were not added back by the assessee. During the course of assessment proceedings, the assessee applied for rectification by filing a letter dated 06-12- 2005. The A.O. held that this attempt by the assessee company to rectify the mistake was not acceptable as the prescribed conditions for revising the return of income were not complied by the assessee and the amount of Rs. 116.49 lakhs was added to the income of the assessee. Subsequently penalty u/s 271(1)(c) of the Act was imposed on this addition. (ii) The A.O. has further pointed out that the assessee itself has accepted that there was no evidence or grounds to substantiate the debtors written off amounting to Rs. 63.96 lakhs (out of a total of Rs. 274.16 lakhs) and claimed as bad debts. The A.O. held that in view of the Board's Circular and various judicial pronouncements, an amount of Rs. 63.96 lakhs had been disallowed u/s 143(3) of the Act and subsequently penalty u/s 271(1)(c) of the Act was imposed on this addition. (iii) The A.O. further pointed out that an amount of Rs. 23,22,957/- was booked under the head legal and professional expenses for purchase and up-gradation of software, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses as being capital in nature was a matter attracting different legal opinions. Accordingly, under the circumstances the benefit of doubt had to be given to the assessee with regard to this disallowance and that it could not be held that the assessee had deliberately and willfully evaded tax and that since different views were possible, the assessing officer was not justified in imposing the penalty and accordingly, the penalty was directed to be deleted on this particular addition. 4. Aggrieved, the assessee is now in appeal before the Tribunal and has raised the following grounds of appeal - 1. The Learned CIT(A) erred in ignoring the voluntary revision of the computation by the appellant, and upholding the levy of penalty on two items of bona fide mistake of oversight in earlier inadvertently not adding back in the Computation of Income 'Provision for Doubtful Debts:Rs.1,06,09,212/-' and 'Profit on Sale of Fixed Assets:Rs.10,40,614/-'. 2. The Learned CIT(A) also erred in confirming the levy of penalty on the disallowance of Rs. 63.96 lakhs made in "Sundry Balances Written off, failing to appreciate that there was no unanimity of opinion within the Department itself fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi wherein it was found that old Balances relating to erstwhile customers to whom Pagers had been sold were no longer identifiable/ traceable, and had been written off as Bad Debts by the assessee. The Court held that inspite of the non-identifiability of the debtors, "the writing off of the bad debt was prima facie evidence on the part of the assesse and it was sufficient compliance with the amended provisions". It was further submitted that in the assessee's cases for different assessment years, there is no unanimity of views for disallowing the Sundry Balances written off between the A.O, the learned CIT (A) and the ITAT itself inter se and from year to year. The Ld. AR also placed a Chart showing that there is no conclusive finding by any authority (except the Hon'ble High Court for the A.Y 2002-03), as to the amount was disallowable and even if so, for what reason. The Ld. AR placed reliance on CIT v Bacardi Martini India Ltd (2007)288 ITR 585(Delhi), and read out para15 thereof which reads as under; "There are cases where expenditure is disallowed by the Assessing Officer and it is allowed by the CIT (A). It is again disallowed by the ITAT and in appeal allowed by the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing improper or incomplete particulars of income raised by the AO or the Ld. CIT (A). 9. In response, the Ld. DR submitted that the penalty has been imposed purely on facts and that no legal issues are involved. It was also submitted that the case laws relied upon by the assessee were distinguishable on facts. It was submitted that the ITAT had also confirmed the disallowance pertaining to the write off of debts in the quantum appeal and hence the penalty was rightly imposed. It was further submitted that the assessee had failed to prove its bona fides after repeated opportunities and therefore the penalty had been rightly imposed. It was also submitted that the revised computation submitted by the assessee cannot be taken as a substitute for revised return and that even the offer for revision was made during the course of assessment proceedings when the same was detected by the A.O. 10. We have heard the rival contentions and perused the material on record. It is undisputed that the assessee had omitted to add back Rs. 106.09 lacs being provision for bad debts and Rs. 10.40 lacs being loss on sale of fixed assets to the taxable income in the computation sheet. The assessee's cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that he has not disclosed all the facts, which were material to the computation of his income. The explanation must be preceded by a finding as to how and in what manner he furnished the particulars of his income. It is beyond any doubt or dispute that for the said purpose the Assessing Officer must arrive at a satisfaction in this behalf. The primary burden of proof is on the Revenue. The statute requires a satisfaction on the part of the Assessing Officer: he is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had concealed the amount or furnished inaccurate particulars and this onus is to be discharged by the Department. While considering whether the assessee has been able to discharge his burden the Assessing Officer should not begin with the presumption that he is guilty. Since the burden of proof in penalty proceedings varies from that in the assessment proceedings, a finding in the assessment proceedings that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceedings constitutes good evidence in the penalty proceedings. In the penalty proceedings the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport. A provision towards payment of gratuity was claimed as a deduction which was not allowable, thereby leading to underassessment of income. The Assessing Officer imposed a penalty under section 271(1)(c). The CIT (A) upheld the levy of the penalty; ITAT partially reduced it, taking a view that the assessee had made a mistake which could be described as a silly mistake. 11. The order of the Tribunal was upheld by the Hon'ble High Court. On further appeal, the Hon'ble Apex Court observed as follows: "The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the return, which are not accurate, not exact or correct, not according to truth or erroneous. The court noted that it was an admitted position that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect and accordingly, held that, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The court repelled the contention raised by the counsel for the revenue that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". The court held that in order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. The court further observed that there can be no dispute that everything would depend upon the return filed because that is the only docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire question of allowability of the Write off of Bad Debts has hinged upon in interpreting the legal nuances regarding the test of application of section 36(1)(vii) read with sec. 36(2) of the Act. There is no dispute regarding the facts, nor is anywhere in the relevant orders the question of filing improper or incomplete particulars of income raised by the AO or the Ld. CIT (A). It is undisputed that the assessee has been claiming bad debts every year and every year the issue was being examined and the question regarding their allowability was being decided every year depending on the facts of the case every year. In the year under consideration, a co-ordinate Bench of the ITAT has given a finding that the assessee has not been able to establish as to whether these debts were capital debts or trade debts and has held that the amounts claimed were not deductible. However, it is our considered opinion that the addition/disallowance has not arisen on account of any actual, blatant, proven furnishing of inaccurate particulars of income on the part of the assessee. The Hon'ble High Court of Punjab & Haryana in CIT vs. Prem Das (No. 1) 1999 248 ITR 234 (11/5/1999) & CIT vs. Prem Das (N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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