TaxTMI 
TaxTMI 
2017 (4) TMI 296
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.... penalty is unjustified and unwarranted and the Appellant submits that the same be deleted. 3) Without prejudice to the Appellants contention that no penalty for concealment of Income or furnishing inaccurate particulars of income is leviable in the present case, the penalty levied is highly excessive and arbitrary and the same requires to be reduced substantially. 3. The only issue raised in the present appeal is against levy of penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income in respect of disallowance of loss arising on account of assignment of bad debts. 4. Briefly, in the facts of the case, the assessee was engaged in the business of manufacture and sale of sintered bearings and parts, sintered automotive components, sintered filters and metal powders. During the course of assessment proceedings, the Assessing Officer noticed the following notings in Note 3(a) & (b) of Schedule XV of audited accounts:- "a. The company Mahindra & Mahindra Ltd. (M&M) and GKN Sinter Metals Holding Ltd. (GKN) entered into a Share Sale & Purchase Agreement on 28th March, 2002, interms of which M&M sold 11,50,508 equity shares in the ....
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....h supplementary agreement dated 18.07.2002, the Assessing Officer held that the assignment was intrinsic part of sale consideration and claim of the difference of Rs. 1.35 crores and Rs. 1 was nothing but a colourable device adopted by the assessee company, as held by the Hon'ble Supreme Court in the case of Mc Dowell & Co. Ltd., reported in 154 ITR 148. The Assessing Officer accordingly, disallowed the same and initiated penalty proceedings u/s. 271(1)(c) of Income-tax Act in respect of the said addition. The CIT(A) confirmed the said addition. Consequent thereto, the Assessing Officer levied penalty under section 271(1)(c) of the Act. In the quantum appeal, the Tribunal upholding the addition, held as under:- "20.4 We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only question to be decided here is as to whether the amount of Rs. 1,34,99,999/- is allowable as bad debt or business loss as claimed by the assessee or the same is not allowable u/s.36(i)(vii) r.w.s. 36(2) or u/s.37(1) as held by the AO....
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..... Mahindra & Mahindra Ltd. becomes the assignee. In a case like this the assignee is supposed to collect on behalf of the assignor for which the assignor shall give some commission to the assignee. However, in the instant case the assessee, i.e. the assignor has undertaken to collect the debts on behalf of the assignee and has remitted the same periodically. The submission of the Ld. Counsel for the assessee that M/s. Mahindra & Mahindra Ltd. has paid tax on the debts so recovered and therefore taxing the same in the hands of the assessee amount to double taxation in our opinion is of no merit. We, therefore, find no merit in the arguments advanced by the Ld. Counsel for the assessee that amount of Rs. 1,34,99,999/- should be allowed either as a bad debt or a business loss. Rather, we find force in the argument of the Ld. Departmental Representative that the assessee has adopted a colourable device to compensate Mahindra & Mahindra for the surrender of their 51% shareholding and therefore this is a capital expenditure. We accordingly dismiss the ground raised by the assessee." 6. The CIT(A) while deciding the appeal of assessee against levy of penalty under section 271(1)(c) of ....
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....assessee raised various propositions against levy of penalty under section 271(1)(c) of the Act. The first proposition raised by the learned Authorized Representative for the assessee was that disallowance of bad debts at about Rs. 1.35 crores was erroneous on merits. The second proposition was that levy of penalty was illegal and without jurisdiction as no proper satisfaction had been reached by the Assessing Officer. The third and fourth proposition raised by the learned Authorized Representative for the assessee was that since there was full and complete disclosure by the assessee of all particulars of income, the issue at very least, being debatable and hence, no justification in levy of penalty. The fifth proposition raised by the assessee was that since assessee's quantum appeal was admitted in the Hon'ble High Court, that fact itself indicates that levy of penalty was not justified. Reliance was placed on the following decisions:- 1. Commissioner of Income Tax vs. M/s. Advaita Estate Development Pvt. Ltd. , ITA No. 1498/2014 (Bombay High Court). 2. Commissioner of Income Tax vs. M/s. Aditya Birla Power Co. Ltd., ITA No. 851/2014 (Bombay High Court). ....
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....hile passing the assessment order under section 143(3) of the Act had disallowed sum of Rs. 1,34,99,999/- which was claimed as bad debts by the assessee under section 36(1)(vii) of the Act. The Assessing Officer held that the assignment of book debt of Rs. 1.35 crores at value of Rs. 1/- and claiming the difference as revenue expenses was nothing but a colourable device adopted by the assessee company for compensating Mahindra & Mahindra for surrender of their 51% shareholding in the assessee company. The Assessing Officer relying on the decision of Mc Dowell & Co. Ltd. Vs. CTO (1985) 154 ITR 148 (SC), disallowed the assessee's claim of expenses amounting to Rs. 1,34,99,999/-, holding the same to be expense of capital in nature. In the assessment order at page 6 itself after making the aforesaid addition, the Assessing Officer held that penalty proceedings on this issue are initiated separately for furnishing of inaccurate particulars of income. The learned Authorized Representative for the assessee while arguing the present appeal has raised various propositions as to why levy of penalty ought to be deleted in the hands of assessee. One of the propositions was that no proper satis....
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....he assessee was of capital in nature and was not to be allowed as revenue expenses. The Tribunal has upheld the disallowance of expenditure vide its order dated 06.05.2013. However, where the assessee had filed full and complete particulars in the audit report itself and had tried to justify the admissibility of the said expenditure being revenue, but merely because the said expenditure has not be allowed in the hands of assessee, does not warrant the levy of penalty under section 271(1)(c) of the Act. There are two aspects to the same; first the assessee has made full and complete disclosure, but the revenue expenditure claimed by the assessee has not been allowed. Further, the issue is debatable issue and the disallowance of such debatable issue does not warrant levy of penalty. Further, the H on'ble Supreme Court in CIT Vs Reliance Petroproducts (P) Ltd. (supra) had held as under:- "8. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars....
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....s income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature." 13. The Hon'ble Supreme Court in CIT Vs. Reliance Petroproducts (P) Ltd. (supra) have laid down the principle that making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. The Hon'ble Supreme Court further held the word 'particulars' must mean the details supplied in the return, which are not accurate, not e....
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....ment of Confirmation of Account, Bank Statement showing receipt of money from and payment of money to M/s.Kuber Developers Corporation and Confirmation from the said party of having given and receipt of the advance which were produced before the CIT(A) and the Tribunal while confirming the addition of Rs. 2.73 crores under Section 68 of the Act in the hands of the Appellant ?" (b) Whether on the facts and in the circumstances of the case and in law, was the Tribunal justified in not admitting the additional evidence of loan creditor. Mr. Mahendra Mansingh Arora in the form of Return of Income, Balance Sheet and Profit & Loss Account for Assessment Year 2006 -07 filed before the I.T. Department on the ground that the same were not filed before the Respondent no.2 earlier without appreciating that the Appellant cannot be penalized for the default of loan creditor ?" 4. In the above view, the impugned order followed its decision in Nayan Builders and Developers Pvt.Ltd. vs. The Income Tax Officer in Income Tax Appeal No. 2379/Mum/2009 rendered on 18th March, 2011 and the decision of the Delhi High Court in CIT vs Liquid Investment and Trading Co (ITA No.240/2009) ren....