TMI Blog2009 (9) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... r s. 143(3) of the Act wherein vide order dt. 27th Oct., 2007, the final income was assessed at 'nil'. However, in the assessment so finalized, the claim of the assessee for bad debts written off amounting to ₹ 15,84,131 was disallowed. Such disallowance has become final. Subsequently the AO has held the assessee guilty of understating its income while claiming the write off of bad debts without any valid justification and levied penalty under s. 271(1)(c) of the Act equivalent to 100 per cent of the tax sought to be evaded on such income. Accordingly, penalty under s. 271(1)(c) of the Act amounting to ₹ 5,79,673 has been imposed by the AO vide order dt. 28th April, 2008. 3. The assessee challenged this levy in appeal before the CIT(A). Before the CIT(A), the assessee submitted that the disallowance of bad debts amounting to ₹ 15,84,131 made by the AO was unjustified in view of the requirement of s. 36(1)(vii) of the Act, since the assessee had actually written off the said amount in books of account. Reliance was placed on the following decisions : (i) Dy. CIT vs. Oman International Bank SAOG (2006) 102 TTJ (Mumbai)(SB) 207 : (2006) 286 ITR (Mumbai) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant and that, therefore there could not be any charge for concealment. Various decisions relied upon by the learned counsel, as discussed in the submissions reproduced above, would also help the case of the appellant because the deduction was claimed under bona fide belief that the same was allowable and that the appellant could not be said to have furnished inaccurate particulars of its income with an intent to mislead the Department. It is settled position of law in view of the ratio of various decisions including those cited by the learned counsel on this issue that mere disallowance of claim being not sustained with sufficient evidence does not automatically result in levy of penalty under s. 271(1)(c). From that angle also levy of penalty under the provisions of s. 271(1)(c) in this case cannot be held to be justified. Further, for the claim of bad debt by the appellant, it could best be said that there was difference of opinion in view of divergent views of various High Courts and different Benches of Tribunal and one such opinion was definitely in favour of the appellant. As per the settled position of law, penalty under s. 271(1)(c) is not leviable on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, reliance was placed on the decision of the Special Bench of the Tribunal in the case of Oman International Bank SAOG (supra) which has now been affirmed by the Hon'ble Bombay High Court in the case reported as Director of IT (International Taxation) vs. Oman International Bank SAOG (2009) 223 CTR (Bom) 382: (2009) 21 DTR (Bom) 193. The learned counsel further pointed out that there was no allegation of any concealment in as much as all the particulars were disclosed and no falsity in the claim has been found. The claim made by the assessee was on bona fide considerations and therefore, penalty imposed by the AO under s. 271(1)(c) has been rightly deleted by the CIT(A). In support, reliance was placed on the following decisions : (i) CIT vs. Mehta Engineers Ltd. (2008) 219 CTR (P H) 285 : (2008) 8 DTR (P H) 136 : (2008) 300 ITR 308 (P H); (ii) CIT vs. SSP (P) Ltd. (2008) 219 CTR (P ;H) 486 : (2008) 4 DTR (P H) 124 : (2008) 302 ITR 43(P H). 7. We have considered the rival submissions carefully and have also perused the orders of the lower authorities as well as the case laws cited at Bar. Sec. 271(1)(c) of the Act empowers an AO to levy penalty for concealment of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition in dispute relates to the claim of the assessee for writing off a debt due from one M/s B.L. Gupta Sons, Mandi Gobindgarh. Admittedly, the assessee had made certain sales to this party and the sale proceeds were outstanding for recovery. The assessee did not receive the amount of sale proceeds and it, therefore, chose to write off the said debt as irrecoverable in its books of account and claimed deduction under s. 36(1)(vii) of the Act. In the assessment proceedings, the said claim has been disallowed on the plea that the assessee has not furnished any documentary evidence to say that any efforts were made to know the whereabouts of the party to effect recoveries. Undisputably, the addition has become final. 9. In our considered opinion, in the order passed by the AO under s. 143(3) of the Act and subsequently in the order passed levying penalty under s. 271(1)(c) of the Act, there is no allegation, much less a finding that the assessee had failed to disclose any particulars of the disputed income. To put simply, it is a case where a claim made by the assessee has been rejected by the AO and not a case where any undeclared income has been detected or unearthed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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