TaxTMI 
TaxTMI 
2026 (2) TMI 1475
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.... for scrutiny under CASS and assessment was completed under section 143(3) on 28.12.2017 accepting the returned loss. 3. Subsequently, the case was reopened by issuance of notice under section 148 dated 29.07.2022. In response thereto, the assessee filed return of income on 26.08.2022 disallowing the claim of bad debts amounting to Rs. 1.18 crores. From a perusal of the assessment order and the consequential penalty order, it emerges that the assessee is engaged in the business of commission agency and is also earning interest on fixed deposits and capital gains on sale of investments. During the financial year 2014-15 relevant to the assessment year under consideration, the assessee had claimed bad debts aggregating to Rs. 1.18 crores. The said amount comprised a loan of Rs. 1.13 crores given to M/s Karnavati Securities Pvt. Ltd. and an advance of Rs. 5 lakhs paid towards purchase of a flat. 4. The Assessing Officer was of the view that the assessee was not engaged in the business of money lending and that the aforesaid amounts did not constitute trading debts arising in the ordinary course of business. According to the Assessing Officer, the amounts were in the nature of ca....
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....hing inaccurate particulars of income, and therefore the notice suffered from jurisdictional defect. 9. In support of the above contentions, reliance was placed on several judgments of the Hon'ble Supreme Court including Principal Commissioner of Income Tax (Central) v. Golden Peace Hotels and Resorts (P.) Ltd.[2021] 124 taxmann.com 249, Commissioner of Income-tax (LTU) v. State Bank of India[2024] 169taxmann.com 305, Commissioner of Income-tax v. SSA's Emerald Meadows[2016] 73taxmann.com 248, and Commissioner of Income-tax v. Suresh Chandra Mittal [2001] 119Taxman 433. 10. The learned CIT(A) reproducing Explanation 1 to section 271(1)(c) in extensor proceeded to examine the applicability of the said Explanation to the facts of the case. The learned CIT(A) held that the assessee had not disclosed the expenditure correctly in the return of income and had not furnished any bona fide explanation with regard to the disallowance of Rs. 1,14,95,901/-. It was further observed that the revision of the return occurred only after departmental enquiry and therefore the conduct of the assessee attracted the deeming fiction under Explanation 1 to section 271(1)(c). The learned CIT(A) also....
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....otice u/s. 271(1)( c ) of the Income-tax Act and order passed u/s. 271(1)( c ) of the I.T. Act, 1961 issued pursuant to such an order was bad in law as no such notice can be issued for passing order u/s. 143(3) read with Sec. 147 of the Act itself passed beyond the time limit prescribed under the Act. 4. Without prejudice to the above ground of appeal, the penalty levied u/s. 271(1)( c ) of the Act is bad in law as it levied though the return of income filed upon re-opening of the assessment no claim for bad debt was made and that there was no disallowance or concealment of income made while passing Order u/s. 147 r.w.s. 144B of the I.T. Act, 1961. 5. The Learned Commissioner of Income-tax (Appeals) National Faceless Appeal Centre, Delhi has erred in confirming the order u/s. 271(1)(c) of the Act, on the ground of expression of opinion on whether the claim for bad debt is admissible or not. 6. On the facts and in the circumstances of the case and in Law, the Learned Assessing Officer erred in confirming the Penalty levied u/s. 271(1)(c) of the I.T. Act, 1961 for Rs. 37,29,845/- and that too without appreciating fully and properly the facts of the case. ....
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....t. It was thus submitted that the impugned penalty deserved to be deleted on this preliminary legal ground itself. 17. Per contra, the learned Departmental Representative supported the orders of the Assessing Officer as well as the learned CIT(A). It was submitted that the assessee had originally claimed bad debts amounting to Rs. 1.18 crores in the return filed under section 139(1) and the same had resulted in substantial reduction of taxable income by way of loss. According to the learned DR, the assessee withdrew the claim only after issuance of notice under section 148 and not suo motu prior thereto. The learned DR contended that but for the reopening proceedings initiated by the Assessing Officer, the assessee would not have disallowed the bad debts. It was thus argued that the voluntary withdrawal of the claim in the return filed in response to notice under section 148 does not absolve the assessee from the rigours of section 271(1)(c), since the revised computation was prompted by detection and departmental action. 18. The learned Authorised Representative further submitted that even assuming without admitting that the claim of bad debts was not allowable, the resultan....
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....dated 29.07.2022 was issued. In response thereto, the assessee filed return on 26.08.2022 disallowing the bad debts of Rs. 1.18 crores and consequently returned a loss of Rs. (-) 30,057/-. The reassessment order dated 02.05.2023 passed under section 143(3) read with sections 147 and 144B accepted the returned figure without making any further addition. Thus, there is no dispute that no addition was made by the Assessing Officer over and above the income declared in the return filed pursuant to notice under section 148. 22. In this factual background, the ratio laid down by the Co ordinate Bench in Archana Achyut Sail v. ITO (supra) becomes directly applicable. In the said decision, the Tribunal, after following the judgment of the Hon'ble Calcutta High Court in CIT v. Brijendra Gupta[2015] 61 taxmann.com 180, categorically held that where there is no disallowance or addition made by the Assessing Officer in the income disclosed in pursuance of notice under section 148, no penalty can be levied under section 271(1)(c). The relevant finding in para 15 records that in such circumstances, penalty under section 271(1)(c) "could not have been levied". 23. Applying the above princip....