TaxTMI 
TaxTMI 
TaxTMI 
2012 (1) TMI 24
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....fter selected for scrutiny and notice under Section 143(2) was issued. The assessee participated in the enquiry and submitted the details called for. In the course of the assessment proceedings, the assessing officer noticed that an amount of Rs.2,38,32,392/- was claimed by way of bad debts as a deduction. He, therefore, called upon the assessee to explain why the claim should not be disallowed as was done in the assessment year 1990-2000 wherein bad debts of Rs.75 lacs had been disallowed. The assessee explained that in the assessment year 1999-2000 there were no documents to substantiate that the debts had become irrecoverable and bad, whereas in the year under appeal the assessee was in possession of all the documents to substantiate the claim. It was submitted that out of the total amount of bad debts claimed as a deduction, a sum of Rs.2,10,34,000/- represented the principal amount and Rs.22,65,867/- represented interest offered for taxation in various years and another sum of Rs.5,32,325/- represented lease rent which was offered for taxation in various years. In support of the claim for deduction, it was further pointed out by the assessee that it was in the business of mone....
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....ssessing Officer, it would appear that the assessing officer raised a query as to how the amount can be allowed as a bad debt when DISL did not even acknowledge the debt. In fact, he appears to have taken the view that the loss of share application money amounted simply to a loss of investment, in other words, a capital loss. At this juncture, the assessee put forth an alternative plea by letter dated 21st January, 2003 that if the claim of bad debt was not allowable, the deduction may be allowed under Section 28 itself or as a capital loss, presumably under Section 45 of the Act, as the assessee was not allotted shares against the application money. 7. The assessing officer rejected the main claim as well as the alternative claim. According to him the assessee was not in the business of buying and selling shares and the shares were acquired only as an investment. Therefore, the loss of investment was not a revenue loss. He also did not accept the assessee's alternative plea that the loss was allowable as a capital loss under Section 45. According to him, Section 45 required that there should be a capital asset and the same should have been transferred by the assessee. In h....
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....f the amount which was accepted by the assessee-company on 25th March, 2000. (d) The director's report reveals that the assessee was entertaining the hope that the shares would be allotted and listed in premier stock exchanges and would fetch a high price on their sale. Right from 1997, the motive of the assessee was to earn profits on the investment, once the shares were listed in the stock exchange. (e) Though initially the investment was on capital account, it got converted in to a loan from 23rd February, 1998. It is a case of a business transaction having turned sour and a case of loss of money advanced in the course of business. (f) The assessing officer had not disagreed with the assessee's claim that it was engaged in the money lending business and the profits from such business have earlier been returned for taxation. (g) In the earlier year, the CIT(Appeals) allowed the assessee's claim of bad debt. 10. On the basis of the above findings, the CIT(Appeals) allowed the assessee's claim and directed the assessing officer to allow the claim of bad debts. He observed further that as and when the assessee makes recoveries in the subsequent years....
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....visions of Section 36(1)(vii) of the Act, it must be held that the assessee knowingly claimed a capital loss as expenditure of revenue nature and thus furnished inaccurate particulars of income. Accordingly, by order dated 26th September, 2008 he imposed a penalty of Rs.19.25 lacs on the assessee. 14. The assessee carried the matter in appeal to the CIT(Appeals). The CIT(Appeals) cancelled the penalty by observing that regarding the allowability of the assessee's claim for deduction of the bad debt, there was a difference of opinion at different levels. The Assessing Officer had disallowed the claim, but the CIT(Appeals) allowed the same. However, the Tribunal on revenue's appeal reversed the decision of the CIT(Appeals). The assessee merely made an incorrect claim which does not amount to furnishing of inaccurate particulars. It had filed all relevant details along with the return of income in the course of the assessment proceedings and the claim was also made on a bonafide belief that it was allowable. The assessing officer, it was observed, did not bring on record any material which could establish that the assessee had made a false or inflated claim for deduction. There was o....
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....0 3. CIT v. International Audio Visual (2007) 288 ITR 570 18. In CIT v Reliance Petroproducts P. Ltd (2010) 322 ITR 158, the Supreme Court explained the meaning of the term "furnishing of inaccurate particulars". It was observed that "inaccurate particulars" means the details supplied in the return which are not accurate, not exact or correct, not according to truth, or erroneous. It was held that making a claim which is not sustainable in law, cannot, by itself, amount to furnishing of inaccurate particulars. It was further held that by no stretch of imagination can it be held that making an incorrect claim in law would tantamount to furnishing of inaccurate particulars, provided the statement or details supplied by the assessee had not been found to be factually incorrect. 19. Explaining the above decision, a Division Bench of this Court in CIT v Zoom Communication P. Ltd. (2010) 327 ITR 510 held as follows: "The proposition of law which emerges from this case, when considered in the backdrop of the facts of the case before the Court, is that so long as the assessee has not concealed any material fact or the factual information given by him has not been found to....
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.... 20. In the above case before this Court the assessee claimed deduction of income-tax paid even though such deduction was statutorily prohibited. The assessee also claimed write off of equipment as revenue loss. Both the claims were found to be so untenable as to fall within the mischief of the expression "furnishing of inaccurate particulars". A line of distinction thus appears to have been drawn in Zoom Communication (supra) so as to prevent misinterpretation of the view taken by the Supreme Court in Reliance Petroproducts (supra). In our view, the present case falls within the ratio of the judgment of this court in Zoom Communications (supra) and not under that of Reliance Petroproducts (supra), as the following discussion would show. 21. The applicability of the well settled legal position stated as above is however, conditioned by the particular facts of each case. Keeping in view the legal position, if we look at the conduct of the assessee before us, there can be no doubt that it had submitted some of the details with regard to the claim of bad debt of Rs.50 lacs. It did furnish the Memorandum of Article of Association, the copy of the letter dated 6th July, 1998 wri....
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....so find that the amount has also not been taken into account in computing the income of the assessee of the previous year relevant to the assessment year (under) consideration of an earlier previous year." It was open to the assessee to show that the debt had been taken into account in computing the income of the earlier year or years or of the year under consideration, even in the penalty proceedings. However, no material was brought by the assessee in the course of the penalty proceedings or even in the course of the hearing of the appeal before us to show that the debt had been taken into account in the manner required by Section 36(2)(i) of the Act. When one of the important conditions for the allowability of bad debt was not satisfied and the same was within the knowledge of the assessee, it was duty bound to disclose the same in order to show its bonafide. The particulars furnished by the assessee were thus not complete, and were, therefore, inaccurate. 23. In the course of its order dated 4th January, 2008 in the quantum proceedings, the Tribunal has observed that the amount of Rs. 50 lacs paid as share application money, which was subsequently converted into....