M/s. Bhaskar Plastics Pvt.Ltd., Ahmedabad V. The ACIT.,Circle-8, Ahmedabad

ITA 1093/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5717 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-06-2010
• Assessment Year: 1994-1995
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: M G PATEL
• Keywords: Depreciation; Business expenditure; Bad and doubtful debts
• Section: 271(1)(c); 14A; 36 (1) (iii)

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M M/S BHASKAR PLASTICS (P) LTD., 604, ANIKET, C.G. ROAD, NAVRANGPURA, AHMEDABAD. PAN AAACZ 1017 D VS . ASSTT. CIT, CIR.8, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANTS BY :- SHRI M. G. PATEL, AR RESPONDENT BY:- SMT. NEETA SHAH, SR.DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS APPEAL HAS BEEN FILED BY THE ASSESSEE RAISING THE FOLLOWING GROUND :- (1) THE LD. CIT(A)-XIV, AHMEDABAD HAS ERRED IN LAW AS W ELL AS ON FACTS OF THE CASE BY CONFIRMING PENALTY OF RS.5, 19,650/- LEVIED U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 BY THE AO. 2. THUS ONLY ISSUE INVOLVED IN THIS APPEAL IS ABOUT CONFIRMATION OF PENALTY LEVIED BY THE AO U/S 271(1)(C). THE PENALTY HAS BEEN LEVIED IN RESPECT OF FOLLOWING EXPENSES AND BAD DEBTS :- (1) CLAIM OF EXPENSES (I) ASHRA ENTERPRISES RS.6,17 ,765/- AND (II) M/S JAY CORPORATION RS.1,59,170/-; AND (2) DISALLOWANCE ON ACCOUNT OF BAD DEBTS EXPENS ES OF RS.3,52,740/-. ITA NO.1093/AHD/2010 ASST. YEAR: 1994-95 2 THESE ADDITIONS WERE CONFIRMED BY THE TRIBUNAL VIDE ITS ORDER DATED 4.1.2008 IN ITA NO.3859/AHD/2002 PRONOUNCED ON 4.1. 2008. IN RESPONSE TO SHOW CAUSE NOTICE ISSUED BY THE AO THE ASSESSEE FURNISHED DETAILED REPLY WHICH IS REPRODUCED BY LD. AO AND LD. CIT(A) IN THEIR ORDERS. FOR THE SAKE OF CONVENIENCE WE TAKE UP EACH ADDITION SE PARATELY AND DECIDE WHETHER PENALTY CAN BE LEVIED ON SUCH ADDITIONS:- (I) EXPENDITURE IN RELATION TO M/S ASHA ENTERPRISES RS.6,17,765/- 2. THIS EXPENDITURE WAS CLAIMED IN ASST. YEAR 1994- 95 BUT IT WAS HELD THAT IT PERTAINED TO F.Y.1989-90. THE TRIBUNAL CONFIRMED THE ADDITION BY OBSERVING AS UNDER :- THE FIRST DISALLOWANCE AS REGARDS ASHA ENTERPRISES AS THE GOODS SUPPLIED BY THE ASSESSEE WERE OF POOR QUALITY. M/S ASHA ENTERPRISES VIDE LETTER DATED 25.4.89 REJECTED THE GOODS ON THE GROU ND POOR QUALITY AND ASKED THE ASSESSEE TO COLLECT THE GOODS. THE AO REJ ECTED THE CLAIM OF THE ASSESSEE BY GIVING REASONING FOR THIS EXPENDITURE P ERTAINS TO THE FINANCIAL YEAR 1989-90 NOT FOR THE YEAR UNDER CONSIDERATION I .E. 1994-95. CIT(A) SIMPLY ALLOWED THE CLAIM BY HOLDING THAT IN VIEW OF THE VOLUMINOUS EVIDENCES IN FAVOUR OF APPELLANT, IT WAS JUSTIFIED IN WRITING OFF ABOVE DUE ON THE BASIS OF CORRESPONDENCE ENTERED WITH THE SAI D PERIOD AND ALSO ON THE BASIS OF JUDICIAL PRONOUNCEMENTS IN FAVOUR OF T HE ASSESSEE. THEREFORE, HE DELETED THE DISALLOWANCE. BEFORE US, THE LD. COU NSEL OF THE ASSESSEE SHOWN US THE CORRESPONDENCE IN THE ASSESSEES PAPER BOOK I.E. ONLY LETTER DATED 25.4.1989 AND 4.5.89 REGARDING REJECTION OF G OODS BY M/S ASHA ENTERPRISES AND SOME CORRESPONDENCE CARRIED ON TILL 21.12.93 WHERE ASHA ENTERPRISES HAS NOT ACCEPTED THE ASSESSEE CLAI M IN OUTSTANDING DUES AS THEY HAVE ALREADY INFORMED VIDE LETTER DATED 25 TH APRIL, 1989 REGARDING REJECTION OF GOODS SUPPLIED BY THE ASSESSEE. WE FEE L THAT PARTY ASHA ENTERPRISES REJECTED THE GOODS SUPPLIED ON 25.4.89 AND AT BEST THE ASSESSEE COULD HAVE CLAIMED THIS EXPENDITURE IN 199 0-91 AND NOT IN THE PRESENT ASSESSMENT YEAR. WE FEEL THAT THE AO WAS QU ITE REASONABLE IN REJECTING THE CLAIM OF THE ASSESSEE. CIT(A) HAS ERR ED IN DELETING THE DISALLOWANCE. IN VIEW OF THESE FACTS WE CONFIRM THE DISALLOWANCE AND REVERSE THE ORDER OF CIT(A). 3 IN BRIEF THE ASSESSEE SUPPLIED GOODS TO ASHA ENTERP RISES WHICH REJECTED THE GOODS VIDE ITS LETTER DATED 25.4.89 ON THE GROU ND THAT THEY ARE OF POOR QUALITY. THE AMOUNT REMAINED AS DEBT IN THE BOOKS O F ASSESSEE WHICH WERE WRITTEN OFF IN ASST. YEAR 1994-95 AND CLAIMED AS BAD DEBT. THE AO HAD REJECTED THE CLAIM. THE LD. CIT(A) ALLOWED THE SAME. THE TRIBUNAL REVERSED THE ORDER OF LD. CIT(A). THE ASSESSEE EXPL AINED THAT ASSESSEE INSISTED FOR RECEIVING PAYMENT IN RESPECT OF GOODS SUPPLIED BUT AMOUNTS WERE FOUND IRRECOVERABLE AS FOUND FROM THE LAST LET TER OF THAT PARTY 21.12.1993. 3. THE LD. CIT(A) CONFIRMED THE PENALTY IN RESPECT OF THIS AMOUNT ON THE GROUND THAT ASSESSEE HAD MADE INCORRECT DEDUCTI ON. THE LD. AR SUBMITTED THAT IT WAS A DEBT WHICH WAS FINALLY CONS IDERED AS BAD DEBT ON THE BASIS OF LAST LETTER OF THAT PARTY RECEIVED ON 21.12.93. THEREFORE, THE CLAIM WAS JUSTIFIED AND FURTHER THE ASSESSEE HAS WR ITTEN OFF THE SAME IN ITS BOOKS. THEREFORE, AS PER THE DECISION OF HON. SUPRE ME COURT IN THE CASE OF TRF LTD. CASE 323 ITR 397(SC) THE CLAIM SHOULD H AVE BEEN ALLOWED. IN ANY CASE ASSESSEE HAD A GOOD CASE BUT IT LOST BE FORE THE TRIBUNAL BUT FOR THAT MATTER PENALTY COULD NOT BE LEVIED. IT HAS BEE N HELD BY HON. SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCT S (SC)322 ITR 158 (SC) THAT PENALTY CANNOT BE LEVIED IF CLAIM MADE BY THE ASSESSEE IS DISALLOWED. 4. THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORDE RS OF AUTHORITIES BELOW. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO CASE FOR LEVY OF PENALTY. FIR STLY THE CLAIM OF THE 4 ASSESSEE WOULD BE CONSIDERED AS ALLOWABLE IN VIEW O F THE DECISION OF HON. SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA) AND SECONDLY MERELY ON THE GROUND THAT CLAIM IS DISALLOWED PENALTY CANN OT BE LEVIED UPON THE ASSESSEE AS HELD BY HON. SUPREME COURT IN CIT VS. R ELIANCE PETRO PRODUCTS (SUPRA). HON. SUPREME COURT IN RELIANCE PE TRO PRODUCTS HAD MADE THE FOLLOWING OBSERVATIONS :- THE ASSESSEE CLAIMED DEDUCTION U/S 36 (1) (III) FO R INTEREST PAID ON LOAN TAKEN FOR PURCHASE OF SHARES. THE AO DISALLOWED THE INTEREST U/S 14A AND LEVIED PENALTY U/S 271 (1) (C) ON THE GROUND THAT T HE CLAIM WAS UNSUSTAINABLE. THE PENALTY WAS DELETED BY THE APPEL LATE AUTHORITIES. ON APPEAL BY THE DEPARTMENT TO THE SUPREME COURT, HELD DISMISSING THE APPEAL: (I) S. 271 (1) (C) APPLIES WHERE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THE PRESENT WAS NOT A CASE OF CONCEALMENT OF THE INCOME. AS REGARDS THE FURNISHING OF INACCURATE PARTICULARS, N O INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. THE WORDS INACCURATE PARTICULARS MEAN THAT THE DETAILS SUPP LIED IN THE RETURN ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDI NG TO TRUTH OR ERRONEOUS . IN THE ABSENCE OF A FINDING BY THE AO THAT ANY DE TAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCO RRECT OR ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF INVITING PENAL TY U/S 271(1)(C). (II) THE ARGUMENT OF THE REVENUE THAT SUBMITTING AN INCORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCURATE PARTI CULARS OF SUCH INCOME IS NOT CORRECT. BY NO STRETCH OF IMAGINATIO N CAN THE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INA CCURATE PARTICULARS. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE . IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTE D BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY U/S 271(1) (C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. (III) THE LAW LAID DOWN IN DILIP SHROFF 291 ITR 519 (SC) AS TO THE MEANINGS OF THE WORDS CONCEAL AND INACCURATE CONTINUES TO BE GOOD LAW BECAUSE WHAT WAS OVERRULED IN DHARMENDRA TEXTILE P ROCESSORS 306 5 ITR 277 (SC) WAS ONLY THAT PART IN DILIP SHROFF WHERE IT WAS HELD THAT MENS REA WAS AN ESSENTIAL REQUIREMENT FOR PENALTY U /S 271 (1)(C). AND IN CIT VS. SIVANANDA STEEL LTD. (2002) 256 ITR 683 (MAD) IT WAS HELD THAT - CLAIM FOR DEPRECIATION AND INVESTMENT ALLOWANCE WAS MADE BY THE ASSESSEE ON THE BASIS OF TEST RUN OF THE MACHINE. T HIS CLAIM WAS BASED ON A DECISION OF THE JURISDICTIONAL HIGH COURT. IT WAS HELD THAT THE CLAIM WAS BONA FIDE, THOUGH SU BSEQUENTLY WITHDRAWN. THERE WAS NO JUSTIFICATION FOR LEVY OF PENALTY U/S 271(1)(C) ON THE GROUND THAT THE PARTICULARS GIVEN BY ASSESSEE WERE IN CORRECT. WE FIND THAT AN ALTERNATIVE VIEW WAS AVAILABLE WHER EIN THE CLAIM OF ASSESSEE WOULD HAVE BEEN ALLOWED IN ITS FAVOUR. THA T VIEW IS SUBSEQUENTLY UPHELD BY HON. SUPREME COURT IN TRF LT D. (SUPRA). THUS THERE IS JUSTIFICATION FOR MAKING A CLAIM BY THE AS SESSEE AS THE CLAIM OF BAD DEBT OR OF EXPENSES WAS NOT A BAD CLAIM OR WAS NOT WITHOUT ANY BASIS OR WAS NOT MALA FIDE. IT COULD NOT BE HELD THAT ASS ESSEE IS GUILTY OF ANY CONTUMACIOUS CONDUCT. A CLAIM WHICH IS NOT BONA FID E OR IS NOT SUPPORTED BY SATISFACTORY REASONS MAY BE VISITED BY A PENALTY BUT NOT THE CASE OF A CLAIM WHICH IS SUPPORTED BY AUTHORITIES ON THE SUBJ ECT AS UPHELD BY HON. APEX COURT SUBSEQUENTLY. THUS WE CANCEL THE PENALTY IN RESPECT OF THIS ADDITION. (II) CLAIM OF RS.1,59,170/- IN RESPECT OF M/S JAY C ORPORATION 6. THE FACTS ARE THAT ASSESSEE PAID CERTAIN MONEY T O M/S JAY CORPORATION AS ADVANCE AGAINST SERVICES TO BE RENDE RED BY THAT PARTY BUT 6 SUBSEQUENTLY IT WAS FOUND THAT AMOUNT HAS BECOME IR RECOVERABLE SINCE THAT PARTY FAILED TO FULFILL ITS COMMITMENT. SATISF ACTORY SERVICES WERE NOT PROVIDED AND THE MONEY REMAINED OUTSTANDING IN THE BOOKS OF ASSESSEE. IT WAS FINALLY FOUND THAT THAT PARTY WOULD NOT RENDER ANY SERVICE. THE OUTSTANDING SUM OF RS.1,59,170/- STANDING AS DEBIT BALANCE IN THE ACCOUNTING PERIOD WAS CLAIMED AS EXPENDITURE. EVEN THOUGH THAT PARTY HAD CONFIRMED THAT SERVICES WERE RENDERED VIDE ITS LETTER DATED 21.9.91 BUT THE SERVICES WERE NOT FOUND SATISFACTORY, FURTHER IT WAS DECIDED THAT ADVANCE PAYMENT OF RS.1,59,170/- MADE TO THAT PARTY WOULD BE THE PAYMENT FOR WHATEVER SERVICES THAT PARTY HAS RENDER ED. THIS AMOUNT WAS ACCORDINGLY CLAIMED AS BUSINESS EXPENDITURE IN ASST . YEAR 1994-95. THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BUT TH E TRIBUNAL RESTORED THE ADDITION BY OBSERVING AS UNDER :- 3. AS REGARDS TOE CLAIM ON ACCOUNT OF M/S JAY CORP ORATION AMOUNTING TO RS.1,59,170/-, THE CONTENTION OF THE A SSESSEE BEFORE THE AO WAS THAT M/S JAY CORPORATION HAS CONFIRMED THE SERV ICES RENDERED VIDE THEIR LETTER DATED 21.09.91 AND HAS ALSO GIVEN THE DETAILS OF SERVICES RENDERED AND THE CORRESPONDING PAYMENT MADE BY THE ASSESSEE FROM THE LETTER OF M/S JAY CORPORATION WHICH IS EVIDENT THAT TOTAL SERVICES CHARGES LEVIABLE FROM M/S JAY CORPORATION AS ON 21.9.91 WAS AT RS.1,77,375/- OUT OF WHICH M/S JAY CORPORATION RECEIVED PAYMENT TO TH E TUNE OF RS.1,59,170/- BEFORE 21.9.91 AND THE BALANCE PAYMEN T RECEIVABLE WAS AT RS.18,205/-. THE ASSESSEE HAS ALREADY PAYMENT OF RS .1,59,170/- AND THE DISPUTE WAS PERTAINING TO THE BALANCE AMOUNT OF RS. 18,205/- AND THAT IS PERCENTAGE OF PAYMENT. NO DOUBT THE DISPUTE FOR THE BALANCE AMOUNT WAS SOLVED DURING THE RELEVANT ASSESSMENT YEAR 1994-95 AND TO THE EXTENT OF ITS SUM I.E. 18,205/- THE ASSESSEE WAS ENTITLED FOR CLAIM OF DEDUCTION. FOR THE BALANCE THE ASSESSEE HAS ALREADY MADE PAYMENT A S ON 21.9.91 AMOUNTING TO RS.1,59,170/-. THE ASSESSEE WAS NOT AT ALL ENTITLED FOR THIS DEDUCTION. ACCORDINGLY, WE FEEL THAT THE AO HAS RIG HTLY MADE THIS ADDITION AND THE CIT(A) HAS ERRED IN ALLOWING THE C LAIM OF THE ASSESSEE. THIS ISSUE OF THE REVENUES APPEAL IS ALLOWED. 7 THE BASIS FOR DISALLOWING THE CLAIM WAS THAT IT WAS ALREADY MADE AS ON 21.9.91 AND, THEREFORE, IT COULD NOT BE ALLOWED IN 1994-95. 7. IN PENALTY PROCEEDINGS THE LD. AO CONSIDERED THA T THIS EXPENDITURE IS NOT DEBITABLE AND, THEREFORE, PENALTY IS LEVIABL E IN RESPECT OF THIS ADDITION. THE ASSESSEE EXPLAINED THAT IT WAS A GENU INE BUSINESS EXPENDITURE AND ALTERNATIVELY A BAD DEBT WHICH WAS WRITTEN OFF THIS YEAR AND SHOULD HAVE BEEN ALLOWED BUT THE TRIBUNAL CONSI DERED IT AS DISALLOWABLE AND CONFIRMED THE ADDITION. 8. THE LD. CIT(A) CONFIRMED THE PENALTY BY HOLDING THAT CLAIM WAS NOT ALLOWABLE IN THE CURRENT YEAR. 9. THE LD. AR SUBMITTED THAT ASSESSEE HAS WRITTEN O FF THE CLAIM, THEREFORE, IT SHOULD HAVE BEEN ALLOWED. 10. ON THE OTHER HAND, LD. DR SUBMITTED THAT IT COU LD NOT BE CONSIDERED AS BAD DEBT AS IT WAS NOT TAKEN INTO ACCOUNT IN COM PUTING INCOME. IT WAS ONLY AN ADVANCE AND THE TRIBUNAL HAS STRONGLY CONFI RMED THE ADDITION. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW PENALTY CANNOT BE LEVIED EVEN ON THIS AMOUNT FOR THE REASONS THAT THE DEBT IS BAD FOR AN ASSESSEE IF IT IS FOUND NOT RECOVERABLE. LIKE ANY OTHER AMOUNT WHETHER CONS IDERED IN THE PROFIT AND LOSS ACCOUNT OR NOT A DEBIT BALANCE OUTSTANDING AGAINST THE PARTY AND IS FOUND NOT RECOVERABLE WOULD BE A BAD DEBT AND AS SESSEE CHOSE TO WRITE IT OFF IN ITS BOOKS OF ACCOUNT. THOUGH THE CLAIM WO ULD NOT BE ALLOWABLE BECAUSE IT HAS NOT BEEN TAKEN INTO ACCOUNT WHILE CO MPUTING INCOME OF THE CURRENT YEAR OR OF AN EARLIER YEAR. BUT FOR THAT RE ASON IT CANNOT BE SAID THAT 8 THERE WAS NO BASIS FOR MAKING THE CLAIM. WHERE A BU SINESSMAN MAINTAINS THE RECORD ON COMMERCIAL PRINCIPLES HE INCLUDES THE CLAIM OF EXPENDITURE, WHICH IS INCURRED LIKE IN THE PRESENT CASE WHERE A DVANCE IS MADE IN AN EARLIER YEAR TO A PARTY FOR RENDERING SERVICES AND SERVICES ARE NOT RENDERED SATISFACTORILY. DISPUTE CONTINUED FOR SOME PERIOD A ND FINALLY WAS TREATED AS PAYMENT FOR WHATEVER SERVICES OTHER PARTY HAS RE NDERED. THE CLAIM THUS COULD NOT BE HELD TO BE BASELESS OR MALA FIDE AND, THEREFORE, ATTRACTING PENALTY. FOR THE PURPOSE OF INCOME-TAX A CT SUCH CLAIM COULD NOT BE ALLOWED IN THE CURRENT ASST. YEAR AS IT DID NOT PERTAIN TO IT AS HELD BY THE TRIBUNAL AS REFERRED ABOVE. THUS DISALLOWANC E OF A CLAIM WAS ON THE PRINCIPLES OF LAW LAID DOWN UNDER THE INCOME-TA X ACT. BUT SUCH CLAIM CAN BE CONSIDERED BONA FIDE AS PER ITS COMMERCIAL P RACTICE AND CANNOT ATTRACT PENALTY AS HELD BY HON. SUPREME COURT IN RE LIANCE PETRO PRODUCTS (SUPRA). IT IS NECESSARY THAT AN ELEMENT OF BASELES SNESS OR NEGLIGENCE OR MALA FIDE HAS TO BE SHOWN WHILE MAKING A CLAIM OF E XPENDITURE OR ALLOWANCE FOR LEVYING PENALTY. WHERE ASSESSEE HAS J USTIFICATION FOR MAKING A CLAIM THOUGH CLAIM IS NOT ALLOWABLE AS PER THE PROVISIONS OF INCOME-TAX ACT, THEN PENALTY CANNOT BE LEVIED. 12. WHEN WE EXAMINE THIS CLAIM WITHIN THE MEANING O F EXPLANATION-1 TO SECTION 271(1)(C), WE FIND THAT CLAUSE (A) TO EX PLANATION-1 IS NOT ATTRACTED AS ASSESSEE HAS FURNISHED THE EXPLANATION AS REFERRED TO BY LD. AO IN THE PENALTY ORDER. THE CASE OF THE ASSESSEE C ANNOT BE BROUGHT IN WITHIN THE MEANING OF CLAUSE (B) TO EXPLANATION-1 B ECAUSE THERE IS NO ALLEGATION THAT ASSESSEE HAS NOT SUBSTANTIATED ITS EXPLANATION OR THAT IT HAS WITHHELD MATERIAL FACTS NECESSARY FOR COMPUTATION O R HIS EXPLANATION IS NOT BONA FIDE. IN OUR CONSIDERED VIEW FOR LEVYING P ENALTY WITHIN THE MEANING OF EXPLANATION 1(B) AO HAS TO SHOW THAT ALL THE THREE INGREDIENTS OF CLAUSE (B) ARE SATISFIED. AS WE HAVE HELD THAT EXPLANATION 9 FURNISHED BY THE ASSESSEE IS BONA FIDE AND THERE IS NO MATERIAL TO HOLD THAT ASSESSEE HAS NOT DISCLOSED ANY MATERIAL FACT NECESS ARY FOR MAKING THE CLAIM OF THIS AMOUNT, OR THAT HE HAS IN ANY WAY NOT SUBSTANTIATED HIS EXPLANATION, THE PENALTY IN RESPECT OF THIS ADDITIO N CAN ALSO NOT BE LEVIED UNDER EXPLANATION -1. THUS WE CANCEL THE PENALTY IN RESPECT OF THIS ADDITION ALSO. (III) DISALLOWANCE OF BAD DEBT OF RS.3,52,740/- 13. THE ASSESSEE HAS MADE A CLAIM OF BAD DEBT OF RS .3,52,740/- WHICH WAS DISALLOWED AND WAS CONFIRMED BY THE TRIBUNAL IN ITA NO.3859/AHD/2002 REFERRED ABOVE VIDE PARA 8 OF ITS ORDER DATED 4.1.2008 AS UNDER :- 8. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS DEL ETING THE DISALLOWANCE OF RS.3,52,740/- OUT OF BAD DEBTS. AFT ER HEARING RIVAL CONTENTIONS IT IS NOTICED FROM THE ASSESSMENT ORDER THAT THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION ON AMOUNT OF BAD DEBT S AT RS.4,58,606/-. THE AO OBSERVED FROM THE DETAILS THAT THE ASSESSEE COULD NOT FILE EVIDENCE OF BAD DEBTS AMOUNTING TO RS.3,52,740/- AND HE DISA LLOWED THE CLAIM OF THE ASSESSEE. THE CIT(A) ALLOWED THE CLAIM OF THE A SSESSEE BY CONSIDERING THE FACT THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF THESE IS DUE TO THE REASON THAT THE AMOUNTS DUE HAVE BECOME IRRECOVERAB LE AND THE ASSESSEE HAS MADE NECESSARY ENTRIES IN THE BOOKS OF ACCOUNTS AND CLAIMED. AT THE TIME OF HEARING BEFORE US THE LD. COUNSEL OF THE AS SESSEE FAIRLY CONCEDED THIS ISSUE AND STATED THAT HE COULD NOT PROVE THESE BAD DEBTS AND THIS IS MERELY A PROVISION MADE IN THE BOOKS OF ACCOUNT AND ON THE BASIS OF PROVISION THE CLAIM OF BAD AND DOUBTFUL DEBT WAS MA DE. THE LD. DR ALSO RELIED ON THE ASSESSMENT ORDER. AS THE LD. COUNSEL OF THE ASSESSEE FAIRLY CONCEDED AND THE FACTS EMANATING FROM THE ASSESSMEN T ORDER ARE CLEAR THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN RESPECT OF ITS CLAIM AND MOREOVER THIS IS A MERELY A PROVISION MADE IN T HE BOOKS OF ACCOUNTS. IN VIEW OF THESE FACTS WE ALLOW THIS ISSUE OF THE R EVENUES APPEAL AND THE ORDER OF CIT(A) ON THIS ISSUE IS REVERSED. 10 THIS CLAIM WAS ALLOWED BY LD. CIT(A) BUT WAS REVERS ED BY THE TRIBUNAL. THE TRIBUNAL UPHELD THE ADDITION ON THE GROUND THAT WHAT WAS CLAIMED WAS ONLY A PROVISION AND NOT A BAD DEBT. IN PENALTY PROCEEDINGS ASSESSEE EXPLAINED THAT CLAIM WAS BONA FIDE AND IT WAS MADE ON THE BASIS OF FOLLOWING JUDGMENTS :- I) VITHALDAS D. DHANJIBHAI BARDANWALA VS. CIT 130 ITR 95 (GUJ) II) SARANGPUR COTTON MFG. CO. LTD. VS. CIT 143 ITR 166 (GUJ) III) LORDS DAIRY FARM VS. CIT 27 ITR 700 (BOM) IV) CIT VS. GIRISH BHAGWATPRASAD 256 ITR 772 (GUJ) THE AO REJECTED THE EXPLANATION AND LEVIED THE PENA LTY ON THE GROUND THAT PROVISIONS FOR BAD AND DOUBTFUL DEBT IS NOT DEDUCTI BLE AND THE CLAIM WAS WRONG INASMUCH AS ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD. CIT(A) CONFIRMED THE LEVY OF PENALT Y ON THE SAME GROUND. 14. BEFORE US, THE LD. AR SUBMITTED THAT CLAIM WAS BONA FIDE. IT WAS WRITTEN OFF IN THE BOOKS AND, THEREFORE, IT SHOULD HAVE BEEN ALLOWED. MERELY BECAUSE CLAIM IS DISALLOWED PENALTY CANNOT B E LEVIED IN VIEW OF THE DECISION OF HON. SUPREME COURT IN THE CASE OF C IT VS. RELIANCE PETRO PRODUCTS (SUPRA). 15. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. FOR THE REASONS DISCUSSED BY US WHILE CA NCELING THE PENALTY IN RESPECT OF FIRST TWO ADDITIONS, WE ARE OF THE CONSI DERED VIEW THAT CLAIM OF THE ASSESSEE IS CLEARLY BONA FIDE AND SUPPORTED BY THE DECISIONS RELIED ON BY THE LD. AR BEFORE THE AO. IN VIEW OF THE DECISIO N OF HON. SUPREME 11 COURT IN CIT VS. RELIANCE PETRO PRODUCTS (SUPRA) WE CANCEL THE PENALTY IN RESPECT OF THIS ADDITION ALSO. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 02/07/2010 SD/- SD/- (BHAVNESH SAINI) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 02/07/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD