TaxTMI 
TaxTMI 
2017 (11) TMI 1540
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....f facts of the case are that the assessee had filed return of income declaring loss of Rs. 99,94,040/- against which assessment under section 143 (3) of the Act was completed at an income of nil after setting off of brought forward losses of Rs. 3,45,39,589/-. The additions included an amount of Rs. 2,07,07,549/- being disallowance of bad debts for which penalty proceedings under section 271 (1)(c) of the Act were also initiated for making wrong and incorrect claim. The assessee had made a claim of bad debts amounting to Rs. 2,26,88,162/- in the profit and loss account. The AO noticed that out of the opening balances of debtors, part of the payments were received during the year, part amount was claimed as bad debts and the balance amount h....
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....ee which is on record and, therefore, we proceed to hear the appeal of the Department ex parte qua the assessee. 4. The Ld. Departmental Representative read out extensively from the assessment order and submitted that in view of the detailed observations of the AO that the assessee had claimed certain amounts as bad debts from running accounts wherein part payments had been received during the year and part amounts had been claimed as bad debts and balance amounts had been carried forward to subsequent years, the claim that the amounts written off had become bad debts was unsubstantiated. It was submitted that the assessee's appeal on the quantum addition had been dismissed by the Ld. CIT (Appeals) also and therefore the facts warranted th....
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....it is seen that the AO has not indicated in the penalty order as to how the disallowance made on account of bad debts tantamounted to furnishing of inaccurate particulars. The only ground on which the AO has imposed penalty is that the assessee could not substantiate with cogent evidence that the debts had actually become bad. As per the AO, mere writing off of the debts as bad was not enough for the purpose of section 36 (vii) of the Act. Apparently, the AO has failed to consider the amendment to section 36 in 1989. Now it is well settled that to claim the amount as bad debts, it must be claimed by the assessee by debiting to the profit and loss account and there is no scope for the AO to disbelieve the claim of the assessee unless it is p....
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.... not permissible under the amended provision of section 36(vii). Moreover, it is not a case of dispute in quantum of disallowance but a dispute relating to the sustenance of penalty. The AO has imposed penalty for furnishing inaccurate particulars. In the instant case, it cannot be said that the assessee had withheld any relevant information regarding bad debts written off from the AO. With regard to the provisions of section 271 (1) (c) of the Act pertaining to penalty, the Hon'ble Apex court has laid down that making of a claim by the assessee which is not sustainable will not amount to furnishing inaccurate particulars. In the case of CIT versus Reliance Petroproducts (P) Ltd reported in 322 ITR 158 (SC), the Hon'ble Apex Court held as f....