TMI Blog2016 (7) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... cial precedents as aforesaid discussed we are unable to agree with the findings of the authorities below on the imposition of penalty on the issue of provision for bad debts and loss sale of fixed assets not added back to the computation of income by the assessee. For allowability of the Write off of Bad Debts the assessee’s case gets a stronger footing from the decision of the Hon’ble Delhi High Court in its own case for AY 2002-03 wherein the Hon’ble Delhi High Court has upheld the assessee company’s policy of write offs thus supporting the assessee’s plea that the write off of bad debts has been in dispute in different assessment years and therefore, to term it as furnishing of inaccurate particulars of income for the purpose of levy of penalty will be inappropriate. Hence, we are unable to agree with the findings of the lower authorities on this issue also. Penalty deleted - Decided in favour of assessee. - ITA No.-989/Del/2013 - - - Dated:- 8-7-2016 - SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For The Assessee : Sh. Abhijit Roy, FCA For The Revenue : Sh. T.Vasanthan, Sr. DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 116.49 lakhs, the assessee had stated before the Ld. CIT (A) that it was a bonafide mistake which could be rectified and accordingly, the penalty was not imposable. However, the Ld. CIT(A) was of the opinion that the onus of establishing that there was a bonafide mistaken was on the assessee and that keeping in view the decisions of CIT vs. Zoom Communications P. Ltd. 191 Taxman 179 (Del) and CIT vs. Escorts Finance Ltd 328 ITR 44 (Del), it was clear that in this case the assessee had not provided true and complete particulars of income and that it was only after the case being examined under scrutiny that the assessee made an application for rectification and came forward with the submission that this amount had escaped the computation of income. Accordingly, the imposition of penalty on amount of ₹ 1,16,49,826/- was confirmed. With regard to penalty on addition of ₹ 63.96 lakhs, the Ld. CIT (A) opined that even at the time of assessment the assessee had not been in a position to provide documents and details of the bad debts claimed to have been written off during the year. The Ld. CIT (A) further opined that even though the assessee had relied upon the fact that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds of Appeal before the final hearing. 5. The Ld. AR submitted that the disputed penalty on the first issue relates to the omission in adding back the by provision for bad debts and loss on sale of fixed assets. It is a routine addition that ought to have been made the professionals entrusted with the work of preparing the Computation of Income. The mistake was sought to be suo moto rectified in Nov 2005 itself, even when the Assessment proceedings were at a very preliminary stage, the Asst. Order having been passed on 29.3.06. It was a bona fide mistake of oversight, not warranting the levy of penalty u/s 271(1) (c). As recently held by the Hon ble Apex Court in Price Waterhouse Coopers (P) Ltd. V CIT (2012) 25 Taxmann.com 400 (SC), that it would be unjustified to levy penalty for filing inaccurate particulars on such an apparent bona fide Computation error of this nature, of not adding back Provision for Gratuity in the case of the return of a reputed professional firm of C.A s. 6. On the issue of levy of penalty on unsubstantiated bad debts written off, it was submitted that both the A.O and the Ld. CIT (A) had disallowed the amounts pertaining to Sundry Balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bad debts written off does not warrant levy of penalty u/s 271(1)(c). The Ld. AR submitted that the justification furnished for the write-off to the tune of ₹ 210.20 lacs, for which details were readily available to the assessee at the time of assessment, was accepted by the AO. As regards the details for the balance ₹ 63.96 lacs, they could not be readily produced due to the antiquity of the transactions and the assessee not being able to recover all past documents and records from the archived records from its premises which had been shifted and split a few times. This did not mean that the transactions of Income resulting in these Debtors had not occurred in the past years with the present Company and the Firm and predecessor Company whose business it had taken over. It was further submitted that the Global writeoff policy uniformly adopted by the Company from year to year being consistently the same, and the genuineness of the write-offs for ₹ 210.20 lacs having been accepted, the same would apply to the balance of ₹ 63.96 lacs as well. The only inability to readily provide documents and details of the same for the above-stated reasons does not colou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be rectified only after detection, the bona fides of the assessee cannot be accepted. The entire case of the department on this issue is that the assessee had failed to substantiate its bona fides. It is also seen that the penalty order has been passed relying entirely upon the assessment order and there has been no discussion on how the bona fides of the assessee were being doubted without any finding to the effect. The Hon ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa 83 ITR 26 had laid down the position of law by holding that the Assessing Officer is not bound to levy penalty automatically simply because the quantum addition has been sustained. Also in case of CIT v. Khoday Eswara (83 ITR 369) (SC), incidentally reported in same ITR Volume, it is held that penalty cannot be levied solely on basis of reasons given in original order of assessment. The Hon ble Supreme Court has recently reiterated the law in case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519 by holding in Para 62 that finding in assessment proceedings cannot automatically be adopted in penalty proceedings and the authorities have to consider the matter afresh from different angle. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inct. Findings in Assessment proceedings don t operate as res judicata in penalty proceedings. For this proposition reliance is placed on the decision in CIT vs. Dharamchand L. Shah (1993) 204 ITR 462 (Bom). In Vijay Power Generators Ltd vs. ITO (2008)6 DTR 64 (Del) it was held that It is well settled that though they constitute good evidence do not constitute conclusive evidence in penalty proceedings. During penalty proceedings, there has to be reappraisal of the very same material on the basis of which the addition was made and if further material is adduced by the assessee in the course of the penalty proceedings, it is all the more necessary that such further material should also be examined in an attempt to ascertain whether the assessee concealed his income or furnished inaccurate particulars. Thus, under penalty proceedings assessee can discharge his burden by relying on the same material on the basis of which assessment is made by contending that all necessary disclosures were made and that on the basis of material disclosed there cannot be a case of concealment of income or furnishing inaccurate particulars of income. Further if there is any material or additional evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion originally claimed was on account of bona fide and inadvertent mistake on the part of the respondentassessee. The Tribunal rightly held that mistake should not be visited with penalty. During the assessment proceedings, the mistake was noticed and corrected by the respondentassessee. On the above facts, the Tribunal concluded the claim for deduction made by the respondent-assessee was on account of a bona fide mistake and in such circumstances the levying of penalty was not justified. 13. At this juncture it may be apposite to refer to the decision of the Hon ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322, wherein the court while interpreting the provisions of section 271(1)(c) of the Act, has held that a glance at the said provision would suggest that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate of his income. In the facts of that case, the court found that it was not a case of concealment of the particulars of the income, nor was it the case of the revenue either. However, the counsel for the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff of fixed assets were found out by the Assessing Officer only during the course of assessment proceedings and had not been disclosed by the assessee. He, accordingly, has formed the opinion that the assessee has furnished inaccurate particulars of income. However, as held by the Supreme Court in the above decision, merely submitting an incorrect claim in law for the expenditure would not amount to furnishing inaccurate particulars of income. It is undisputed that the impugned amounts were part of the schedules of the audited accounts and the AO noticed the omission from these accounts only. It is again undisputed that these accounts form a part and parcel of the return of income. The fact that the assessee immediately offered to rectify the mistake on detection is also undisputed. It is only that the claim of the bona fide of the assessee was not accepted by the department. It is also important to note that Explanation 1 to section 271(1)(c) cannot be applied where charge against the assessee is furnishing of inaccurate particulars of income since it provides a deeming fiction qua concealment of particulars of income only and consequently cannot be extended to a case where charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99 : 244 ITR 44 the Hon ble Kerala High Court referring to a judgment of the Hon ble Calcutta High Court held as follows: Calcutta High Court in Burmah Shell Oil Storage Distributing Co. of India Ltd. vs. ITO [1978] 112 ITR 592, wherein it was held that there could be no concealment in a case where on admitted facts the assessee disputed the liability to tax on legal contentions. It was also held in that case that the Explanation to sec. 271(1)(c) could not also apply because when legal contentions are bona fide raised, whether ultimately accepted or rejected, will not generally be an act of fraud or gross of willful negligence. Penalty under this section cannot be levied unless for all gross or willful negligence on the part of assessee is established. Legal contention bona fide raised, whether it is finally accepted or not, will not be an act of fraud or willful negligence. 16. The assessee s case gets a stronger footing from the decision of the Hon ble Delhi High Court in its own case for AY 2002-03 wherein the Hon ble Delhi High Court has upheld the assessee company s policy of write offs thus supporting the assessee s plea that the write off of bad debts has been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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