TMI Blog2013 (3) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... aid that the assessee has filed any inaccurate particulars or concealed particulars of income. In our opinion, the assessee’s claim of bad debt cannot be treated as a mala fide claim. This is not fit case for levying the penalty u/s.271(1)(c). - No penalty - Decided in favor of assessee. - ITA No.2572/Mum/2011 - - - Dated:- 31-1-2012 - SHRI R.S. SYAL AND SHRI R.S. PADVEKAR, JJ. Appellant by: Shri Neetin M. Shah Respondent by: Shri N.K. Mehta ORDER PER R.S. PADVEKAR, JM In this appeal the assessee has challenged the impugned order of the Ld. CIT (A)-13, Mumbai dated 13.11.2010 for the A.Y. 2001-02 confirming the penalty levied by the A.O. u/s.271(1)(c) of the Act. The assessee has taken multiple grounds but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and the earlier years were demanded / taken out from the said HRS in the last week of March, 2001 but the said company expressed its inability to pay any amount. Accordingly, the entire amount was written off. The assessee tried to justify the claim. The A.O. rejected the claim of the assessee by giving the following reasons: 6. The above contentions of the assessee company are not acceptable. In view of the following facts: i) HRS Insight Financial Services is just an intermediary. The money which has been deployed in the market has earned interest from the persons in the share market and not from HRS Insight Financial Services. In a normal money lending activity if money is advanced by A to B then interest would be payable by B to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed herein that on perusal of the earlier records it is seen that the assessee company was in the business of trading in shares. During the year there has been no trading activity and the assessee company has received Income from other sources such as dividend and interest on 10% relief bond which is exempt u/s.10. He also has received badla interest of Rs.3,40,725/-. Now the nature of such badla activity is such that the money given to the share broker is deployed by him in the share market and after passing or the badla interest to the person who has advanced the money the broker earns brokerage at a fixed percentage out of the same. Such activity is akin to keeping a surplus fund in the bank and earning interest thereon and in case of def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company is not very sure about his stance as regards the treatment of vyaj badla activity. As regards the assessee s claim to allow the income component amounting to Rs.9,99,947/- out of the total bad debts claimed it is seen on perusal of the case records that HRS Insight Financial Intermediaries accept money on behalf of the assessee company in the share badla business. The share broker effects purchases and sales of shares on behalf of the assessee company and on the settlement dates he is expected to repatriate the entire balance monies advanced and income loss/earned. However, the assessee company has chosen not to withdraw the principal amount given to HRS. It is seen from the copy of ledger account submitted by the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the financing made to HRS was having nexus with Badla transactions engaged into by the assessee as per the Bombay Stock Exchange scheme. The reservation of the A.O. for not allowing the bad debs is that as Badla interest is assessed under the head Income from other sources then the bad debts cannot be allowed as there is no income assessable under the head business . On the basis of disallowance of the claim of the bad debts the A.O. treated the same amount as concealment of income or filing inaccurate particulars of income. We find from the orders of the authorities below that it is a legal interpretation adopted for allowing or not allowing claim of the assessee. Once the legal interpretation is to put into process but otherwise all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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