TMI Blog2016 (9) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... where the said amount of ₹ 515,000 has been shown as outstanding and in the year 2007, the same has been written off as bad debt and balance in the account has been reduced to Nil. The above facts shows clearly that the appellant had lent this money to Shri Rajeev Khattar and the same has been regularly been disclosed in the balance sheets right from the year the amount was lent to the year under consideration when the amount was finally written off. In light of this, it cannot be said that there is failure on the part of the appellant to disclose or conceal the true particulars of such transaction. It cannot be said that the claim of the appellant towards bad debt was patently wrong. Further, the Coordinate Bench while confirming the disallowance towards claim of bad debt has nowhere stated that the claim was patently wrong. Apparently, the Coordinate Bench was guided by the first limb of the two alternate conditions specified u/s 36(2)(i) of the Act whereas the appellant claim was largely under the second limb of 36(2)(i) of the Act. All it stated was that the appellant has failed to adduce appropriate evidence to show that such debt or part thereof has been taken into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee deliberately claimed the above bad debt to reduce his tax liability. Therefore, the cases relied upon by the assessee do not apply in this case and penalty was levied. 2.1 The relevant findings of ld CIT(A) are as under: iv) During the appellate proceedings, the appellant reiterated its submissions made before the AO. During the appellate proceedings, the appellant was required to show that the amount of bad debt claimed was taken into accounts as income either during the year under consideration or earlier year but of no avail. It is therefore, held that the claim of bad debt was patently wrong when the basic perquisite for claiming bad debts as required u/s 36(2)(i)of the Act was not even fulfilled. v) In the instant case under consideration, it has been held that the claim of bad debt amounting to ₹ 5,15,000/- was patently wrong or inadmissible, therefore respectfully following the decision of Hon ble Delhi High Court in the case of CIT vs. N.G.Technologies (supra), it is held that the appellant has concealed its income and thus is liable to penalty u/s 271(1)(c) of the Act and thus the AO was justified in imposing penalty of ₹ 1,73,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The holding of money lending licence is neither requirement of provision nor such licence is required for money lent out in ordinary course of business of lending money. The legal view is supported from the decision in case of Penisular Plantation Ltd. vs. ACIT(2014) 263 Taxman 258 (Ker)(Mag.) The order of CIT(A) rejecting quantum appeal of assessee was not by fully appreciating the above contention and said judgement of ITAT. In further appeal against the said order of CIT(A) the Hon ble ITAT while dismissing the appeal held that condition of section 36(2)(i) not complied by the assessee as there was no evidence on record to show that such debt or part thereof has been taken into account in computing income of assessee of the previous year but the provisions of section 36(2)(i) states that such debt or part has been taken into account in computing income of the assessee of the previous year in which such debt or part thereof is written off or of an earlier previous year or represents money lent in the ordinary course of business of bank or money lending which is carried on by assessee. It is submitted that assessee complies the condition as the money lent was out of current ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to principle of accountancy which is not the facts of present case as legal provision applied in quantum proceedings was capable of two interpretation and divergent views are plausible hence the claim of assessee and his explanation was bonafide and hence provision of section 271(1(c) are not applicable in the case. 2.6 The ld DR is heard who has relied upon the order of the lower authorities and submitted that the claim of the appellant has rightly been denied by the Hon ble ITAT, hence it was a clear case of levy of penalty which has rightly been levied by the AO. 2.7 We have heard the rival contentions and perused the material available on record. On perusal of records, it is noted that in P L account prepared for M/s Gopal Das Sonkia, assessee had claimed bad debts of ₹ 5,15,000/-. It consists of bad debt written off in books of accounts pertaining to amount advanced by way of loan to Shri Rajeev Khattar amounting to ₹ 5,00,000/- and interest thereon charged by assessee amounting to ₹ 15,000/-. In the balance sheet prepared for M/s Gopal Das Sonkia for immediately preceding financial year 2005-06 (AY 2006-07), an amount of ₹ 5,15,000 has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignoring the above facts which are apparent from record. Further, the appellant has demonstrated that the loan amount was outstanding since year 2000 and the same has been adequately and consistently reflected in its balance sheet for all these years. In light of above, it cannot be said that the claim of the appellant towards bad debt was patently wrong. Further, the Coordinate Bench while confirming the disallowance towards claim of bad debt has nowhere stated that the claim was patently wrong. Apparently, the Coordinate Bench was guided by the first limb of the two alternate conditions specified u/s 36(2)(i) of the Act whereas the appellant claim was largely under the second limb of 36(2)(i) of the Act. All it stated was that the appellant has failed to adduce appropriate evidence to show that such debt or part thereof has been taken into account in computing the income of the assessee of the previous year. During the course of subject proceedings, the appellant has ably demonstrated through appropriate documentation that he was engaged in the money lending business and has offered its interest income to tax. Accordingly, the claim of the appellant towards bad debts of loan tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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