TMI Blog2016 (5) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Accordingly, the claim of the assessee becomes untenable, and the claim was withdrawn during the course of assessment proceedings.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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods amounting to ₹ 37.07 crore was credited to sales account and debited to NPPL. Out of ₹ 37.07 crore ₹ 1.84 crore was - payable to Western India Oil Distributing Co.Ltd. sister concern of NPPL and the said amount was transferred to NPPL account. Accordingly, the balance amount of ₹ 35.23 crore was classified as doubtful debts, the copy of account, of sales and NPPL for A. Y. 97-98 and A. Y. 98-99 are enclosed. The company has filed the case against NPPL for recovery of the amount, the case is pending before City Court Ahmedabad. Therefore, the Board of Directors of the company thought it fit to provide ₹ 35.50 crore (Rs. 35.23 crores of NPPL and ₹ 0.27 crore other doubtful debts as provision for doubtful debts. Accordingly, the provision of ₹ 35.50 crore was made in the accounts for the F.Y. 98- 99 and the same was also claimed as deduction u/s. 36(l)(vii) on the basis of judicial decision. It may further be noted that Finance Act, 2001 has inserted explanation to Sec. 36(i)(vii) with retrospective effect from 1-4- 1989 providing that the bad debts will be allowed as deduction only if the amount if written off to P L account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of assessment, the claim for provision for bad and doubtful debt was withdrawn as can be seen from para No. 4 of assessment order. It may please be noted that claim for provision of bad and doubtful debts was not agitated on merits. It was withdrawn due to retrospective amendment. The A.O. made several additions while computing the income and issue the penalty notice u/s. 271(1)(c). However, the A.O. has not stated that the penalty notice u/s! 271(1)(c) is issued in respect of which particular addition. In fact, the penalty notice is issued in respect of addition on account of bogus purchases and other additions. Therefore, order levying the penalty for withdrawal of claim for provision for bad and doubtful debts is bad in law. The provisions is allowable u/s. 36(i)(vii); The SC in the case of Vijya Bank vs. CIT 323 ITR 168 has held that the provision for bad and doubtful debts is allowable as deduction in as much as what is necessary is to write off to P L A/c and it is not necessary to credit the debtors account. In the present case the assessee has written off to P L A/c. by making provision for bad and doubtful debts, therefore it is allowab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income. The assessee company has failed to substantiate the claim and assessee has not furnished any convincing explanation in connection with the default of furnishing inaccurate particulars of its income. I am satisfied that this a fit case for levy of penalty u/s. ,271(1)(c)of the Act. From the above it is seen that the penalty is levied for concealment of income and furnishing of inaccurate particulars of income. There has to be a specific charge. The AO has to hold that assessee either concealed the income or has furnished inaccurate particulars of income. In the absence of specific charges, the penalty order is bad in law as held by Gujarat High Court in following cases. (i) New Sorathia Engg. Co. vs. CIT 282 ITR 642 (Guj) (ii) CIT vs. Manu Engg. 122 ITR 506 (Guj) (iii) A.M.Shah vs: CIT 238TTR 415 (Guj) - The ld. AO relied on Explanation-1 to Section 271(1)(c) and certain case law. The reliance is misplaced due to the facts and legal position stated herein above. Therefore, the penalty levied is liable to quashed. 5.1. During the course of appeal proceedings, the A. R. further written submissions dated 02-08-2010. The relevant paras of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2), the amount of (any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year) It therefore follows that the claim of the assessee was as per law. However, Finance Act, 2001 which was assented to by the President of India in May, 2001 inserted the following Explanation with restrospective effect from 01-04-1989. Explanation- For the purpose of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the accounts of the assessee. From the above, it is seen that the Explanation provides that the provision for bad and doubtful debt is not allowable as deduction with restrospective effect from 01-04-1989. Accordingly, the claim was voluntarily withdrawn by writing a letter to the AO . When there is restrospective amendment, the interest cannot be charged as held by ITAT Ahmedabad, Bench-D in the case of Sun Petrochemicals Pvt. Ltd. Vs. ITO - ITA No.1010/Ahd/2009 dated 05-06-2009. If no interest can be charged when there is restrospective amendment, the question of levy of penalty does not arise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onths from the date of ITAT order received by the CIT(A). As per section 275A, the AO was required to pass penalty order within six months. The ld.CIT-DR pointed out that jurisdiction over the assessee rests with the CIT-III, Ahmedabad. Order was served on CIT-II, Ahmedabad. 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. 10. For the second fold of submissions, the ld.counsel for the assessee reiterated the contentions as were raised before the ld.CIT(A). In order to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this section is deeming provisions regarding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation-1 to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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