TMI Blog2014 (5) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... g claim as the income over the years has remained at Nil- Full particulars were filed and no inaccurate particulars were provided - penalty proceedings and quantum proceedings are separate and distinct - explanation offered in the penalty proceedings has to be considered by the authorities independently in the matrix of the requirements of Section 271(1)(c) - even on merits the bad debt claim could have been allowed as a trading loss – the advances to the creditors have not been held to be sham transactions as they are coming from the earlier years - explanation offered by the assessee in the penalty proceedings is bonafide and deserves to be accepted as it is neither a case of filing of inaccurate particulars and nor is it a case of concealment - Relying upon Reliance Petro Products Ltd. [2010 (3) TMI 80 - SUPREME COURT] - the explanation being bonafide deserves to be accepted and the order is set aside – Decided in favour of Assessee. - I.T.A .No.-2894/Del/2013 - - - Dated:- 24-4-2014 - SMT DIVA SINGH AND SHRI B.C.MEENA, JJ. For the Appellant : Sh. Ashwani Taneja, Adv. Mr. Somil Agarwal, CA For the Respondent : Sh. Gagan Soot, Sr. DR ORDER Per: Diva Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Hten Brothers 3120 13. Kryfs Lamination 9186 14. Mehra Electronics 27500 15. Swami Co. 7544 16. TCI Seaways 18929 17. Spares India 1000 18. Other Credit balance written off 364291 19 -do- 14810 20 -do- 78878 Total 1098944 The assessee has not filed any reason or justification of claim of creditors balances as Bad debts written off . It was not established by the assessee as to how conditions prescribed under section 36(i)(vii) read with section 36(2) are fulfilled in respect of above parties. After considering the facts of the case and the details filed by the assessee, it is found that the claim of bad debts in respect of the amounts m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was a bonafide claim as there was no motive whatsoever for the assessee to make an incorrect claim. Notwithstanding that even on merits it was argued that had the assessee been correctly advised the assessee could have got necessary relief in the quantum proceedings itself as the expenditure could have been claimed u/s 37 as a business expenditure and would have been allowed. It was argued that simply because the claim was made under bad debts it has been disallowed the fact remains that these were advances given to the creditors for supplies and since they were continuing over the years the assessee as per its understanding made a claim for bad debts. In the circumstances the explanation offered before the AO evident from the assessment order itself and contended before the CIT(A) in the penalty proceedings should have been considered. It was submitted that the case laws available in the public domain on this issue supports such a view. Inviting attention to the written submissions filed before the CIT(A) available at page 65-71, it was his submission that the assessee has neither concealed any particulars of income nor has the assessee furnished inaccurate particulars of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, he might have even succeeded in getting the said deduction allowed. Be as it may, in such a case, the assessee cannot be fastened with penalty also. 4.1 Reliance was also placed upon the order of the Co-ordinate Bench in the case of ITO Bata Steel (P.) Ltd. (2010) 33 DTR (Chd.) (Trib) 219; CIT vs Mahavir Irrigation P. Ltd. 61 DTR 218 (Del.); Amruta Orghanics P. Ltd. Vs ITO (Pune) rendered by Pune Bench of the Tribunal on 22.03.2013 in ITA No-1121/PN/2011. 4.2 Addressing the reasons for not being present before the AO during the penalty proceedings attention was invited to the written submissions placed before the CIT(A) so as to contend that the notice was issued to the assessee at the wrong address. It was submitted that the assessee had changed his address for correspondence and duly intimated the same to the department in 2009 itself and despite this fact notices were sent to the wrong address. 5. The Ld. Sr. DR on the other hand places heavy reliance upon orders of the authorities orders below. It was his submission that the assessee has cared to offer no explanation before the AO and the explanation has been offered only before the CIT(A) which has not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere written off during the year showing that they were parties with whom assessee was having business transaction and advances made for these business transactions were written off during the relevant assessment year. The ledger account also demonstration the fact that the amounts were outstanding for a long period and hence were written off when they became irrecoverable. 2. Copy of assessment order wherein A.O. has stated as a matter of fact that the nature of the impugned amount outstanding was balance in creditors account. Reliance is placed on the following decisions wherein it was held that advances made in the course of business becoming irrecoverable are allowable as deduction u/s 37. 6.2. It is also seen that in the context of the above arguments reliance has been placed before the CIT(A) on the following decisions:- (i) CIT Vs. Mysore Sugar Co. Ltd (1962) 46 ITR 649 (SC)' (ii) Chenab Forest Co. Ltd. Vs. CIT (1974) 96 ITR 568 (J K); and (iii) Mohan Meakin Vs. CIT (Delhi HC) ITA No. 405/07 dated 11/5/2011 6.3. A perusal of page 5 of the impugned order further shows that supporting the arguments that even on facts the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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