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2016 (5) TMI 1142 - AT - Income TaxPenalty levied under section 271(1)(c) - provision for bad and doubtful debts created - whether penalty order was time-barred? - Held that:- The assessee has raised this plea on the ground that the orders served upon the CIT-II is to be construed as sufficient service, because, taking of the order is an internal mechanism between different officials of the Department. As far as this proposition is concerned, we do not find any merit in the contentions of the ld.counsel for the assessee. The order of the ITAT ought to have been served on CIT-III who has jurisdiction over the AO having jurisdiction over the assessee. If the order was served to a different CIT, who did not have the jurisdiction over the assessee, then it could not be assumed that service was effected properly, and the limitation commence from the service of that order. The ld.CIT(A) has rightly rejected this contention of the assessee. The assessee had created provision for bad and doubtful debts. This provision was created on the strength of Hon’ble Gujarat High Court’s decision in the case of Sarangpura Cotton Mfg. Co. Ltd.Vs. CIT, (1982 (6) TMI 23 - GUJARAT High Court ). It has filed its return on 31.12.1999. The amendment was applied with retrospective effect. By operation of this amended law, the claim of the bad debts cannot be made by creating a provision for bad and doubtful debts. Accordingly, the claim of the assessee becomes untenable, and the claim was withdrawn during the course of assessment proceedings. In such situation, there cannot be any allegation against the assessee that it has furnished inaccurate particulars. The AO has not specified charge against the assessee either in the assessment order or in the penalty order, whether the assessee has furnished inaccurate particulars or concealed the income. For the purpose of reference, we have drawn an inference that impliedly it is furnishing of inaccurate particulars, otherwise, the AO has not charged he assessee with specific allegation. The assessee has taken a specific plea to this effect before the ld.CIT(A). The ld.CIT(A) has recorded a finding that the claim of the assessee became untenable by virtue of retrospective operation of law, otherwise, the assessee could have demonstrated the allowance of its claim. According to us, the assessee has not furnished any inaccurate particulars, which can expose it to the penalty proceedings under section 271(1)(c) of the Act. The ld.CIT(A) has rightly deleted the penalty - Decided in favour of assessee.
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