TMI Blog2016 (11) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 271(1)(c) of the Act was not exigible in the case on hand on the issue of the assessee’s claim regarding non-compete fee paid to ex-Directors and cancel the penalty levied thereon. - Decided in favour of assessee Penalty on income from bad debts recovered - Held that:- The reason put forward by the assessee for its action; that since bad debts claimed in this regard had been disallowed by the AO, therefore the assessee had not offered the recovery thereof for tax, in our considered view, is not acceptable as the aforesaid action of the assessee, in not offering the recovery of bad debts to tax, is not in conformity with the mandate of the provisions of section 36 of the Act. It is not the case of the assessee that a legal claim made was disallowed, which is a debatable issue. In respect of recovery on bad debts written off by the assessee, the position in law is clear and unambiguous; the assessee has to offer the same to tax in the year in which the recovery is made. Since the assessee has failed to do, in violation of the mandated provisions of law, we are of the view that action of the authorities below in levying penalty under section 271(1)(c) of the Act, in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al ought to have been filed on or before 05.10.2013, but was filed only on 13.12.2013, thereby leading to a delay of 69 days. In this regard, the petitioner has filed a petition dated 20.12.2013 for condonation of the said delay, accompanied by an affidavit of even date sworn to by the petitioner. According to the learned A.R. for the petitioner, after receipt of the impugned order, the same was forwarded to their tax consultants for advice, but due to inadvertent oversight by them, the appeal could not be filed. On noticing this mistake, the appeal was immediately prepared and filed on 13.12.2013. It is submitted that the delay of 69 days in filing the appeal was caused due to inadvertent oversight by the tax consultants and the mistake being not intentional but a bonafide mistake of oversight, it is prayed that a liberal approach be taken and the delay be condoned and the appeal be disposed on merits as the assessee has a good case on merits. In support of this proposition, the learned A.R., inter alia, placed reliance on the following judicial pronouncements: - (i) Collector, Land Acquisition vs. MST Katiji and Others (167 ITR 471) (SC). (ii) CIT vs. West Bengal Infrastruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturing of yarn, engineering goods and shipping, filed its return of income for A.Y. 2002-03 on 31.10.2002 declaring taxable income of ₹ 32,47,744/- on account of long term capital gains (LTCG) and loss from business. A revised return was filed on 16.12.2002 in which the total income of ₹ 32,47,744/- was from LTCG, but the business loss was increased by ₹ 8,36,91,997/- being provisions for diminution in investments no longer required written back which was stated to be inadvertently omitted to be excluded from the total income. The case was taken up for scrutiny and the assessment was concluded under section 143(3) of the Act vide order dated 03.02.2005 wherein the income of the assessee was determined at ₹ 32,74,774/- under the normal provisions and book profits under section 115JB of the Act was computed at (-)Rs. 4,87,49,500/-. The AO also allowed carry forward of business losses to the extent of ₹ 6,38,72,710/- . Penalty proceedings under section 271(1)(c) of the Act were simultaneously initiated in respect of disallowances made in the order of assessment, i.e. under section 14A of the Act, non-compete fee of ₹ 6,41,600/-, income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant s various claims made by the AO. 3. The learned CIT(A) failed to appreciate and ought to have held that: a) The Appellant has given complete disclosure in the Return of income and/or in the accompanying documents/audited accounts. b) Mere confirmation of the additions is not, by itself, a valid ground for levy of penalty 4. The appellant prays that the penalty levied under section 271(1)(c) of the Act in respect of the addition/disallowance should be deleted. We shall consider the grounds raised together and deal with each item in respect of which penalty under section 271(1)(c) of the Act has been levied in seriatim. 4.2 According to the learned A.R. for the assessee, in the grounds raised, the assessee contends that the impugned order of the learned CIT(A) upholding the levy of penalty under section 271(1)(c) of the Act is erroneous since the assessee has given complete disclosure of all facts in the return of income for A.Y. 2002-03 and accompany financial statements and that merely because addition have been confirmed by itself should not necessarily result in the levy of penalty for furnishing of inaccurate particulars of income leading t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008, the Bench deleted the said penalty holding as under at para 3 thereof: - 3. We have heard rival submissions and considered them carefully. After considering the submissions and perusing the material on record, we find that the arguments advanced by the ld AR mentioned above are correct. There were no provisions on the statute on the date of filing the return, therefore, the assessee, as in past, claimed expenditure on account of interest. The provisions of section 14A came on statute in 2001, through with retrospective effect. Therefore, it cannot be held that the assessee had concealed any particulars of income by claiming higher interest expenditure. We have further seen that the AO made a disallowance of ₹ 56 lacs and the CIT(A) restricted the same to ₹ 30 lacs or odd and on re-examination of the case on the directions of the Tribunal, the disallowances were confirmed only of ₹ 7.61 lacs. Therefore, the issue is highly debatable one and it cannot be said that the assessee has concealed any particulars of income or has furnished inaccurate particulars of income. In view of the above facts and circumstances, we hold that on the facts of the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty under section 271(1)(c) of the Act cannot be levied, merely because it has been held against it in quantum proceedings, particularly when all facts and details in this regard were before the authorities below. It is contended that no penalty could be levied under section 271(1)(c) of the Act on this issue as the question of allowability of non-compete fee paid to ex-Directors, whether revenue or capital is a debatable issue. According to the learned A.R. for the assessee even after the decision of the Special Bench of the ITAT Delhi in the case of Tecumseh India (P.) Ltd. (127 ITD 1) (Del), certain subsequent decisions have held that non-compete fee is revenue in nature like, CIT vs. Eicher Ltd. (2008) 302 ITR 249 (Del), etc. It was prayed that merely because the assessee s contentions and claims are not accepted, penalty cannot be levied. In support of this proposition, the learned A.R., inter alia, placed reliance on the decision of the Hon'ble Apex Court in CIT vs. Reliance Petroproducts Ltd. (2010) 322 ITR 158 (SC). 6.2 Per contra, the learned D.R. supported the impugned order of the learned CIT(A). 6.3.1 We have heard the rival contentions of both the parties and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration and did not file any further appeal to the Tribunal. According to the learned AR since all the details were on record before the authorities below, penalty under section 271(1)(c) of the Act was not leviable on this issue. 7.2 In our view, once the assessee had claimed write off of bad debts in its books of accounts in any year, the correct treatment, as per the provisions of section 36 of the Act, was to have offered the recovery of bad debts written off for tax in the year of recovery. The assessee, in the case on hand, in clear violation of the aforesaid provisions of section 36 of the Act, did not comply with them knowingly and in violation thereof proceeded to not offer to tax the recovery of bad debts earlier written off by it to the extent of ₹ 12,94,948/-. The reason put forward by the assessee for its action; that since bad debts claimed in this regard had been disallowed by the AO, therefore the assessee had not offered the recovery thereof for tax, in our considered view, is not acceptable as the aforesaid action of the assessee, in not offering the recovery of bad debts to tax, is not in conformity with the mandate of the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees contribution to PF/ESIC are covered under the amendment to section 43B of the Act with retrospective effect. In the case on hand, the employees contribution to PF/ESCI of ₹ 6,852/- having been admittedly paid before the due date for filing its return under section 139(1) of the Act, the disallowance made by the authorities below was not called for, as the issue in the case on hand would be covered by the proviso to section 43B of the Act. In this view of the matter, we cancel the penalty levied under section 271(1)(c) on employees contribution to PF/ESIC amounting to ₹ 6,852/-. The assessee s appeal on this issue is allowed. 9. Penalty on disallowance of donation : ₹ 1,589/- 9.1 We have heard the rival contentions of both the parties and perused and carefully considered the material on record. Admittedly, the assessee has not disallowed this ineligible expenditure while computing its income for the year under consideration. In our view this is a clear case of furnishing of inaccurate particulars of income and therefore uphold the penalty levied under section 271(1)(c) of the Act in this regard. The assessee s appeal on this issue is rejected. 10. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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