2013 (2) TMI 580 - AT - Income Tax

Tribunal dismisses appeal for delay, upholds penalty deletion under section 271(1)(c)

M/s SMITH & SHARKS PROJECTS (I) PVT LTD. Versus INCOME TAX OFFICER, 9(3) (2), MUMBAI

The Tribunal dismissed the assessee's appeal due to the lack of sufficient grounds for condonation of delay in filing the appeal. The Tribunal upheld the ... Condoning the delay - delay of 98 days in filing appeal - rectification of appeal submitted - The case of the assessee is that the assessee sent the copy of the order of the CIT(A) in the month of July 2011 to the same CAs and they have not acted upon - Held that:- Assessee does not have evidence to suggest that the CAs accepted the allegation of negligence as CAs have not filed an affidavit owning the responsibility of the stated negligence. Similarly, there is no evidence placed to suggest that the CAs have given advice to exhaust first the remedy available u/s 154 of the Act. The assessee is not transparent in this case as it is not known why the assessee continued to rely on the CAs, who are declared negligent as evident from the experience with the appeal before CIT (A). In the condonation petition before the CIT(A), the assessee alleged that M/s Anil Thakarar & Co and M/s. K. Bharat & Co are negligent. In that case, why the assessee continued to depend on such negligent CAs or why assessee failed to pursue with the same CAs to file the present appeal before the Tribunal in time. The assessee is himself responsible for the delay in filing appeal, thus the explanation given by the assessee is not substantiated and the assessee does not have adequate/sufficient ground for condonation of delay in filing appeal before us as CAs-centric reasons given are not substantiated - against assessee. Penalty u/s 271(1)(c) - disallowed the claim bad debts stating that the assessee failed to fulfill the conditions envisaged u/s 36(1) - CIT(A) deleted the levy - Held that:- It is an undisputed fact that the assessee disclosed bad debts in the return filed before the Assessing Authority. The AO disallowed the claim hold that the said debts have not become bad and are not evidenced as irrecoverable debts. This line of argument is not sustainable in law in view of plethora of judgments in force as assessee is no longer under obligation to prove that the debts in question are bad and irrecoverable. Further, there is no bar on the assessee in writing off the bad debts of the year as allowable expenditure when the corresponding credits are showing in the accounts of the year. It is for the businessmen to manage his affairs and accounts in such a way which are suited to his business - the allegation of concealment does not have strength to stand - order of the CIT (A) deleing the penalty should not call any interference - in favour of assessee. Issues Involved:1. Non-admission of the appeal by CIT (A) due to delay.2. Claim for bad debts of Rs. 14.82 lakhs.3. Levy of penalty u/s 271(1)(c) of the Act.Issue-wise Detailed Analysis:1. Non-admission of the Appeal by CIT (A) due to Delay:The assessee's appeal was filed late by 13 months. The delay was attributed to the wrong advice from the Chartered Accountants (CAs) who suggested exhausting the remedy under section 154 before filing an appeal. The CIT (A) did not condone the delay, citing the legal maxim 'law favours the vigilant.' The assessee argued that the negligence of the CAs should constitute reasonable cause for the delay and submitted an affidavit in support. However, the Tribunal noted that there was no evidence to suggest that the CAs accepted the responsibility for the delay. The Tribunal concluded that the negligence was attributable to the assessee, who failed to pursue the appeal diligently. Consequently, the Tribunal dismissed the appeal due to the lack of sufficient grounds for condonation of the delay.2. Claim for Bad Debts of Rs. 14.82 Lakhs:The assessee's claim for bad debts of Rs. 14.82 lakhs was disallowed by the AO, leading to an increased assessed income. The CIT (A) did not adjudicate the merits of this issue due to the non-admission of the appeal. The Tribunal also did not address this issue on merits as the preliminary ground relating to the condonation of delay was dismissed, making the adjudication of other issues academic.3. Levy of Penalty u/s 271(1)(c) of the Act:The Revenue's appeal concerned the levy of penalty of Rs. 4,98,841/- for concealment of income. The AO disallowed the assessee's claim of doubtful debts, leading to the initiation of penalty proceedings. The CIT (A) deleted the penalty, holding that the assessee had disclosed all particulars and had not furnished inaccurate particulars. The CIT (A) relied on Supreme Court judgments in CIT vs. Atul Mohan Bindal and CIT vs. Reliance Petro Products Pvt. Ltd. The Tribunal upheld the CIT (A)'s decision, noting that the assessee disclosed the bad debts in the return and was no longer required to prove that the debts had become bad and irrecoverable. The Tribunal dismissed the Revenue's appeal, affirming that the deletion of the penalty was appropriate.Conclusion:The Tribunal dismissed the assessee's appeal due to the lack of sufficient grounds for condonation of delay and upheld the CIT (A)'s decision to delete the penalty, affirming that the assessee had disclosed all relevant particulars. The issue of bad debts was not adjudicated on merits due to the preliminary dismissal.