Commissioner Of Income Tax v. M/S Bata Steels Pvt. Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. Commissioner of Income Tax. Vs. M/s Bata Steels Pvt. Ltd. I.T.A. No.474 of 2010 Date of decision: 1.11.2010 -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE RAKESH KUMAR JAIN Present:-Mr. Rajesh Katoch, Advocatefor the appellant. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue underSection 260-A of the Income Tax Act, 1961 (for short, “the Act”)against the order dated 9.9.2009 of the Income Tax AppellateTribunal, Chandigarh in I.T.A. No.465/CHANDI/2009 for theassessment year 2005-06 proposing to raise following substantialquestions of law:- “Whether on the facts and circumstances of the case,the Hon’ble ITAT is justified in law in deleting thepenalty imposed u/s 271(1)(c) of the Income Tax Act,1961 amounting to Rs.5,79,673/- ignoring the fact thatthe assessee had furnished inaccurate particulars ofits income and had failed to substantiate its claim ofbad debts written off.? 2. The Assessing Officer made addition to the declaredincome of the assessee by not accepting the entry of writing off of bad debts. It was observed that the assessee could not furnishjustification for writing off the bad debts. Apart from the additionon that account, the penalty was also imposed. On appeal, thepenalty was set aside with the observations that writing off of baddebt was not to evade tax. Full particulars of the bad debts weredisclosed by the assessee. The said finding has been affirmedby the Tribunal. It was observed:- “9......... It is a case where a claim made by theassessee has been rejected and we may further saythat the claim made by the assessee cannot betermed as patently erroneous or in completeignorance of the relevant provisions of law. Theassessee had made a claim in terms of Section 36(1)(vii) and this Section, as understood by the SpecialBench of the Tribunal in the case of OmanInternational Bank (supra), provides that in order toclaim deduction, it would be sufficient if assesseechooses to write off the date as irrecoverable in thebook of account. It is further observed by the SpecialBench that the requirement of proving the debt havingbecome bad to the hilt, has been done away by theamended provisions of Section 36(1)(vii) w.e.f.01.04.1989. Notably, the said decision of the Tribunalstands affirmed by the Hon’ble Bombay High Court inthe case reported at 223 CTR 382 (Bom). Therefore,testing the claim of the assessee on the anvil of suchposition of law, in so far as it is relevant for ourpresent purpose, it is safe to deduce that the claim ofthe assessee cannot be said to be patently erroneousin the eyes of law. In fact, no falsity in claim of theassessee has been found even during the assessment proceedings. The disallowance is basedon a mere view adopted by the Assessing Officer.The claim made in the return cannot be said to bebereft of bonafides. Considering the entire facts andcircumstances of the case, we find ample force in theconclusion drawn by the CIT(Appeals) that theAssessing Officer was not justified in imposing penaltyu/s 271(1)(c) of the Act.” 3. We have heard learned counsel for the revenue. 4. It is not disputed that in view of judgment of theHon’ble Supreme Court inT.R.F. Ltd.v. CIT[2010] 323 ITR 397,it is not necessary for the assessee to establish that the debt hadalready become irrecoverable. If the assessee takes a bonafidedecision that it was necessary to write off the bad debts, thewriting off may be justified. In any case, for levy of penalty, it hasto be shown that the assessee had made concealment or hadgiven wrong information to evade tax. 5. In view of concurrent finding of the CIT(A) and theTribunal that there was no intention to evade tax, we are unableto hold that any substantial question of law arises. 6. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE November 01, 2010ashwani 3. We have heard learned counsel for the revenue. 4. It is not disputed that in view of judgment of theHon’ble Supreme Court inT.R.F. Ltd.v. CIT[2010] 323 ITR 397,it is not necessary for the assessee to establish that the debt hadalready become irrecoverable. If the assessee takes a bonafidedecision that it was necessary to write off the bad debts, thewriting off may be justified. In any case, for levy of penalty, it hasto be shown that the assessee had made concealment or hadgiven wrong information to evade tax. 5. In view of concurrent finding of the CIT(A) and theTribunal that there was no intention to evade tax, we are unableto hold that any substantial question of law arises. 6. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE November 01, 2010ashwani (RAKESH KUMAR JAIN) JUDGE