The ITO, Ward-1 S.K. Range, Himatnagar V. M/s. Laxmi Shroff, Sabarkantha

ITA 2348/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0273 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-10-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 05-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: S N DIVATIA AN D B K PATEL
• Keywords: Income from undisclosed sources; Wrong claim; Bad and doubtful debts; Non compliance
• Section: 271(1)(c); 143(3); 133A; 133(6); 251; 207; 131

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI D.C. AGARWAL, A.M.) I.T.A. NO. 2348/AHD./2009 ASSESSMENT YEAR : 2005-2006 INCOME TAX OFFICER, WARD-1, HIMATNAGAR -VS.- M/S. LAXMI SHROFF, SABARKANTHA (P.A. NO. AAAFL 3455 A) (APPELLANT) (R ESPONDENT) APPELLANT BY : SMT. NEETA SHAH RESPONDENT BY : S/SHRI S.N. DIVATIA AN D B.K. PATEL O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER :- THIS APPEAL FILED BY THE DEPARTMENT IS AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) -X, AHMEDABAD DATED 29-04-2009 FOR THE ASSESSMENT YEAR 2005-2006 CANCELLING THE PENALT Y OF RS.15,43,564/- LEVIED BY THE A.O. UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN BILL/CHEQUE DISCOUNTING. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME FOR THE RELEVANT PERIOD DECLARING TOTAL INCOME AT RS.3,48,060/-. THE A.O. FRAMED THE ASSESSMENT UNDER SECTION 143(3) DETERMINING TOTAL INCOME AT RS.45,66,152/-. A SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSE E AND ITS SISTER CONCERN NAMELY M/S. LAXMI FINANCE ON 26.10.2004. AT THE TIME OF SURVEY IN THE ACCOUNTS OF BOTH THE FIRM, CERTAIN DISCREPANCIES WERE FOUND AS A RESULT OF WHICH BOTH THE FIRMS MADE A TOTAL DISCLOSURE OF UNACCOUNTED INCOME TO THE TUNE OF RS.75,71,322/-. 3. IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE CLAIMED BAD DEBTS AMOUNTING TO RS.42,18,092/- UNDER THE PROVISI ONS OF SECTION 36(1)(VII) OF THE ACT. BEFORE THE A.O., THE ASSESSEE FILED DETAILS IN SUPPORT OF ITS CLAIM ALONG WITH CORRESPONDENCES MADE BY IT WITH THE DEFAULTING PARTIES. THE ASSESSEE ALSO EXPL AINED THAT IT HAD FILED NECESSARY CRIMINAL PROCEEDINGS UNDER SECTION 138 OF INDIAN PENAL CODE IN THE OFFICE OF FIRST CLASS MAGISTRATE, KHEDBRAHMA. ON THE BASIS OF THIS INFORMATION, THE A .O. MADE ENQUIRIES WITH THE FIRST CLASS 2 MAGISTRATE, KHEDBRAHMA UNDER THE PROVISIONS OF SECT ION 133(6) OF THE ACT. IN REPLY, THE FIRST CLASS MAGISTRATE, KHEDBRAHMA INFORMED THAT THE ASSE SSEES SUIT AGAINST THE SEVEN DEFAULTERS HAVING OUTSTANDING BALANCE TO THE TUNE OF RS.40,12, 592/- WERE PENDING. THE A.O. FOUND THAT THE ASSESSEE HAD NOT FILED SUIT AGAINST THREE DEFAULTIN G PARTIES FOR OUTSTANDING BALANCE OF RS.2,05,500/-. THE A.O. ISSUED NOTICES UNDER SECTIO N 131 ON THE ADDRESSES TO THE DEFAULTING PARTIES. THERE WAS NO RESPONSE TO SAID NOTICES. IN VIEW OF THIS, THE A.O. CONCLUDED THAT THERE WERE CHANCES OF RECOVERY OF DEBT FROM SUCH PARTIES. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WITHDREW ITS CLAIM FOR BAD DEBTS BY FILING A LETTER DATED 10.12.2007. THE A.O. DISALLOWED THE BAD DEBTS CLAIM AND INITIATED PENALT Y PROCEEDINGS UNDER SECTION 271(1)(C). 4. IN REPLY TO SHOW-CAUSE NOTICES ISSUED UNDER SECT ION 271(1)(C), THE ASSESSEE VIDE LETTER DATED 12.05.2008 HAS STATED AS UNDER :- WE ARE IN RECEIPT OF YOUR OFFICE NOTICE U/S.274 R. W.S. 271(1)(C) DTD. 02/05/2008 FOR A.Y. 2005-06, RECEIVED ON 09/05/2008 REQUIRING TO APPEAR/EXPLAIN WITHIN WEEK TIME FROM THE DATE OF RE CEIPT OF THE SAID NOTICE AS TO WHY PENALTY U/S.271(1)(C) BE NOT IMPOSED. IN THIS CONNECTION, WE HAVE TO SUBMIT THAT: 1. WE HAVE NOT CONCEALED ANY PARTICULARS OF INCOME OR AVOIDED THE TAX FOR THE SAID A.Y. . 2. THE ASSESSMENT PROCEEDING U/S. 143(3) WERE IN PURSUANCE FOR THE SURVEY CONDUCTE D U/S. 133 AND DURING WHICH WE HAVE DISCLOSED THE INC OME AS PER THE NECESSARY PAYABLE TAX IS ALREADY PAID. APART FR OM THIS WE HAVE NOT CONCEALED ANY INFORMATION OR WE HAVE NOT FURNISHED ANY INCORRECT PARTICULAR. THEREFORE, VOLUNTARILY COMPLYING THE PROVISIONS BY WAY OF DISCLOSER AND PAYMENT DEMANDED CAN NOT BE TREATED A S NON COMPLIANCE OR OTHERWISE ISSUE FOR IMPOSITION OF PENALTY. ALSO BON AFIEDELY BELIEVING AND RELYING ON THE ASSURANCE AT VOLUNTARILY DISCLOSER A ND PAYMENT OF TAX WOULD NOT ATTRACT ANY LENT OR PENAL PROCEEDING AND ACCORD INGLY WE HAVE DISCLOSED MADE THE OF TAX AND CO-OPERATED DURING THE COURSE O F ASSESSMENT PROCEEDINGS. 3. UNDER THE ABOVE CIRCUMSTANCES THERE IS NOT REASON A S TO WHY THE PENALTY BE IMPOS ED. EVEN OTHERWISE THE NOTICE REFERRED ABOVE DOES NOT C ONTAIN ANY SPECIFIC REASON FOR IMPOSITION OF PENALTY. 4. WE HAVE VOLUNTARILY COMPLIED ALL THE PROVISIONS REL ATING TO DISCLOSER AND ALSO AGREEING TO THE ADDITIONS FOR AND IN RELATION TO DISCLOSURE MADE AND EVEN CO-OPERATING WITH THE ASSESSMENT PROCEEDING AN D THEREFORE, THERE IS NO 3 REASON FOR TREATING OUR CASE SUITABLE FOR IMPOSING THE PENALTY U/S. 271 (1) (C). WE, THEREFORE, REQUEST THAT THE PENALTY PROCEEDING U/S. 271(1)(C) EITHER BE DROPPED OR THE REASONS MAY BE SUPPLIED ON WHAT BASI S THE PENALTY PROCEEDINGS ARE TAKEN UP, IN THE CIRCUMSTANCES, FACTS AND THE P OSITION MENTIONED HEREINABOVE. THE A.O. FOUND THE AFORESAID EXPLANATION OF THE ASS ESSEE NOT CONVINCING AND LEVIED THE PENALTY TO THE TUNE OF RS.15,34,564/- UNDER SECTION 271(1)( C). 5. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), IT WAS CONTENDED THAT IT HAS FILED COMPLETE DETAILS REGARDING CRIMIN AL PROCEEDINGS BEING CARRIED OUT AGAINST THE AFORESAID PARTIES. IN RESPONSE TO QUERY RAISED BY T HE A.O., THE ASSESSEE SUBMITTED ALL THE RELEVANT CORRESPONDENCES AND ACTION TAKEN IN RESPECT OF SAME PARTIES, WHOSE BAD DEBTS WERE CLAIMED. IT WAS FURTHER CONTENDED THAT THE WITHDRAWAL OF CLAIM OF BAD DEBT WAS MADE ON ACCOUNT OF CONSTANT PURSUATION BY THE A.O. TO SHOW INCOME UPTO DISCLOSU RE AMOUNT WHICH WAS NOT EQUAL TO THAT ON ACCOUNT OF CLAIM FOR BAD DEBTS. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IT WAS ALSO CONTENDED THAT THE CLAIM FOR BAD DEBTS WAS WITHDRAWN VOLUNTARILY AND THREE WAS NO QUESTION OF MAKING ADDITION WHEN THE CLAIM WAS SUO MOTO WITHDRAWN. 6. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS), IT WAS ALSO SUBMITTED THAT THE A.O. MADE A WRONG CONCLUSION THAT THERE WERE AM PLE CHANCES OF RECOVERY OF BAD DEBTS WHILE RELYING ON THE DECISION OF DHALL ENTERPRISES AND EN GINEERING PVT. LTD. VS.- CIT REPORTED IN 207 CTR 729. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ALSO POINTED OUT AS UNDER :- '1. THE DETAILS OF EACH OF THE PARTIES ALONGWITH TH E ACTION TAKEN, MENTIONED IN WRITTEN SUBMISSION DTD.29-1-2009 (PAGE NO. 1 TO 56) CLEARLY STATES THAT THE BAD DEBTS CLAIMED HAS NOT BEEN RECOVERED TILL THE DATE. THE ASSESSEE HAS ALSO FILED SUITS IN MOST OF THE CASES AND HAS ALREADY TAKEN RE ASONABLE STEPS FOR RECOVERY INSPITE OF THIS THE AMOUNT HAS NOT BEEN RECOVERED. IT IS SURPRISING AS TO KNOW HOW A.O. CONCLUDES THAT THERE WERE AMPLE CHANCES OF REC OVERY. 2. THE PROVISION OF SECTION 36(1) (VII) DOES NOT RE QUIRE THE INITIATION OF LEGAL PROCEEDING (FILLING OF SUITS ETC.). THE ONLY REQUIR EMENT IS THAT WRITING OFF OF DEBTS AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT AND ALL OT HER CONDITIONS LAID DOWN IN THE SAID SECTION ARE COMPLIED SINCE THERE WAS A BONA FIDE CLAIM WHICH IS VOLUNTARILY WITHDRAWN. SUCH ACT BY ASSESSEE DOES NOT AMOUNT CON CEALMENT OF INCOME OR FURNISHING OF ANY INACCURATE PARTICULARS. 3. RELIANCE IS PLACE ON THE FOLLOWING LEGAL PRONOUN CEMENT 4 A) CIT VIS GIRISH BHAGAT PRASAD , 256 ITR 772 (GUJ) B) DY. CIT VIS PADIDAR GINNING OF PRESSING UP CO. - 157 ITR 177 (GUJ) C) CIT VIS MORGAN SECURITIES & CREDITS (P) LTD. - 2 92 ITR 339 (DELHI) D) CIT VIS AUTOMETERS LTD. - 292 ITR 345 (DELHI) E) CBDT CIRCULAR NO. 551 DTD. 23-01-1990 F)AR ENTERPRISES PVT. LTD. VIS CIT- 300 ITR 96 (RAJ ) G) CIT VIS MEHTA ENGINEERS LTD. - 300 ITR 308 (PH) 4. THE RELIANCE BY LEARNED ITO ON DHALL ENT ERPRISES & ENGINEERS PVT. LTD. VIS CIT CAN NOT BE THE REASONS FOR BAD DEBTS BEING CONSIDERED A S A WRONG CLAIM OR NON GENUINE* IN AS MUCH AS THE FACTS AND CIRCUMSTANCES ARE GROSS LY NOT APPLICABLE IN THE PRESENT FACTS\ AND CIRCUMSTANCES OF THE ASSESSEE'S CLAIM. THE FACTS ARE TOTALLY DIFFERENT IN BOTH THE CASE. IN TH E SAID CASE THE AMOUNT WAS NOT PAID BY THE DEBTORS DUE TO SOME MUTUAL DEFERENCE ON LY. THE ASSESSEE HAS ALSO FAILED TO ESTABLISH THAT THE DEBTS HAD BECOME BAD. THE HON'BLE COURT WAS CALLED UPON TO DECIDE AS TO WHETHER MERE WRITING OFF THE D EBT WAS SUFFICIENT TO ALLOW THE DEDUCTION. NOW, IN THE PRESENT CASE, THE APPELLANT HAS ALREADY TAKEN LEGAL STEPS IN MOST OF THE CASES. THAT THE DEBT HAS BECOME IRRE COVERABLE IS AMPLY ESTABLISHED FROM LEGAL SUITS FILED YET NOTHING REALIZED FROM TH EM AND CHEQUES BEING DISHONORED. UNDER THESE CIRCUMSTANCES ANY BUSINESSM AN OF PRUDENCE WOULD FW'M THE BELIEF THAT THE DEBT HAD BECOME BAD. AS HE LD BY HON'BLE GUJARAT HIGH COURT IN CASE OF SARANGPUR COTTON MILLS (143 ITR 16 6) AND AEC (262 ITR 97), IT IS THE DECISION OF THE BUSINESSMAN WHICH IS RELEVAN T TO DECIDE WHETHER DEBT HAS BECOME BAD OR NOT. THEREFORE, THE CLAIM OF BAD DEBT S MADE BY THE APPELLANT HAS NOT AT ALL BOGUS OR FALSE OR UNSUSTAINABLE IN LAW. BUT TO AVOID THE COSTLY AND LONG DRAWN PROCEEDING, IT VOLUNTARILY FORGO THE CLAIM. I T WILL BE APPRECIATED THAT MERE FORGOING THE CLAIM AT THE LATER STAGE OF THE ASSESS MENT PROCEEDINGS DOES NOT AMOUNT TO CONCEALMENT OR FURNISHING INACCURATE PART ICULARS OF INCOME. WHEREAS IN THE ASSESSEE'S CASE THE CLAIM OF BAD DEB T IS BONA FIDE AND OTHERWISE IS GENUINE AS STATED AGAINST IN EACH OF THE DEBTORS' N AME (AS MENTIONED IN EARLIER SUBMISSION DTD.29-01-2009). THE CLAIM WAS PRIOR TO THE PRONOUNCEMENT OF THE SAID JUDGMENT. THE SAID JUDGMENT WAS PRONOUNCED ON 10-11-2006 WHEREAS THE RETURN OF THE INCOME FILED BY THE ASSESSEE ON 3110- 2005. THERE ARE OTHER LEGAL PRONOUNCEMENT SUPPORTING THE GENUINENESS AND BONA F IDE OF THE ASSESSEE FOR CLAIMING THE BAD DEBT.' 7. .AFTER CONSIDERING THE AFORESAID SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CANCELLED THE PENALTY FOR THE DETAILED REASONING GIVEN IN PARA 5.8 TO 5.15, W HICH IS AS UNDER :- 5.8. I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE LD. A.R. CAREFULLY. THERE IS NO DENIAL OF FACT THAT THE APPE LLANT MADE A CLAIM OF BAD DEBT 5 AMOUNTING TO RS.42,18,092/- WHILE FILING THE RETURN OF INCOME FOR THE RELEVANT PERIOD. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS, HE WITH DREW THE CLAIM BY FILING A LETTER DATED 10.12.2007. THE A.O. HAS HELD THE APPELLANT G UILTY FOR FILING THE INACCURATE PARTICULARS WITHIN THE MEANING OF SEC.271(1)(C) OF THE ACT SO FAR AS CLAIM FOR BAD DEBT UNDER REFERENCE IS CONCERNED. 5.9. SECTION 271 (1)(C) OF THE ACT PROVIDES THAT I F THE ASSESSING OFFICER, IN THE COURSE OF THE PROCEEDINGS UNDER THE ACT IS SATISFIE D THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT O F TAX SOUGHT TO BE EVADED BY REASONS OF THE CONCEALMENT OF PARTICULARS OF HIS IN COME. EXPLANATION I. TO SECTION STATES THAT WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON UNDER THIS ACT, SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE A.O. FALSE OR SUC H PERSON OFFER AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO P ROVE THAT SUCH EXPLANATION IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAM E AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESU LT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REP RESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THE EFFECT O F THIS EXPLANATION IS THAT IF THE NECESSARY INGREDIENTS AS STATED HEREIN ARE SATISFIE D THEN THE AMOUNT DISALLOWED IN COMPUTING TOTAL INCOME SHALL FOR THE PURPOSES OF CL AUSE (C) OF THIS SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICU LARS HAVE BEEN CONCEALED. THE NECESSARY ELEMENTS FOR ATTRACTING THIS EXPLANATION ARE THREE FOLD:- A) THE PERSON FAILS TO OFFER HIS EXPLANATION, OR B) HE OFFERS THE EXPLANATION WHICH IS FOUND B Y THE A.O. TO BE FALSE, OR C) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND THAT ALL THE FACTS RELATING THE SAME HAVE BEEN DISCLOSED BY HIM. 5.10. IF THE CASE FALLS IN ANY THREE OF INGREDIENTS , THEN THE DEEMING PROVISION COMES INTO PLAY AND THE AMOUNT ADDED OR DISALLOWED IN COM PUTING THE TOTAL INCOME IS CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTIC ULARS HAVE BEEN CONCEALED FOR THE PURPOSES O CLAUSE (C) OF SECTION 271(1) AND THE PENALTY FOLLOWS. IF THE ASSESSEE SUCCESSFULLY COME? OUT OF THE ABOVE THREE CONSEQUEN TS THEN HE CANNOT BE DEEMED TO HAVE CONCEALED HIS PARTICULARS OF INCOME WITH REFER ENCE TO THE AMOUNT ADDED OR DISALLOWED IN COMPUTATION O TOTAL INCOME. 5.11. WITH THIS BACKGROUND IN MIND, IF WE TEST T HE FACTS OF THE CASE ON THE TOUCHSTONE OF THE ABOVE REFERRED THREE INGREDIENTS OF EXPLANATION 1 TO SEC.271(1)(C) OF THE ACT, WE FIN THAT THE DISALLOWANCE OF BAD DEB TS MADE BY THE A.O. DOES NOT HIT BY ANY ONE OF THEM THE A.O. WHILE MAKING A DISALLOW ANCE HAS HELD THAT SAME IS INADMISSIBLE IN THE GIVEN SE OF CIRCUMSTANCES, HOWE VER, THERE IS NOTHING IN THE ASSESSMENT ORDER AS WELL AS IN THE PENALTY ORDER TO SHOW THAT THE CLAIM FOR SUCH DEDUCTION WAS FABRICATED AND FALSE. FURTHER, IT IS TO BE SEEN THAT THE APPELLANT HIMSELF WITHDREW HIS CLAIM DURING THE ASSESSMENT PR OCEEDINGS. THE ENQUIRIES CARRIED OUT BY THE A.O. FROM THE OFFICE OF THE FIRS T CLASS MAGISTRATE, KHEDBHRAMA ESTABLISHED THE BONAFIDES OF THE APPELLANT THAT WAS PURSUING THE MATTER U/S.138 OF THE IPC TO RECOVER ITS DUE FROM THE DEFAULTING PART IES. IT IS ALTOGETHER A DIFFERENT 6 MATTER THAT THE APPELLANT WITHDREW ITS CLAIM TO AVO ID PROTRACTED LITIGATION WITH THE DEPARTMENT. HOWEVER, THE WITHDRAWAL IN THE GIVEN SE T OF CIRCUMSTANCES CANNOT LEAD TO CONCLUSION THAT THE APPELLANT MADE A FALSE OR FA BRICATED CLAIM UNDER SECTION 36(1)(VII) OF THE ACT WHILE FILING THE RETURN OF IN COME FOR THE RELEVANT PERIOD. FURTHER IT PROVIDED ALL THE DETAILS TO THE A.O. DUR ING THE ASSESSMENT PROCEEDINGS RELATING TO CLAIM FOR BAD DEBTS. 5.12. THE EXPRESSION 'FURNISHING OF INACCURATE PA RTICULARS OF INCOME' HAS NOT BEEN DEFINED IN THE ACT. THE EXPRESSION 'INACCURATE' REF ERS TO 'NOT IN CONFORMITY WITH THE FACT OR TRUTH' AND THAT IS THE MEANING WHICH, IS RE LEVANT IN THE CONTEXT OF 'FURNISHING OF INACCURATE PARTICULARS'. THE EXPRESSION 'PARTICULAR S' REFERS TO 'FACTS, DETAILS, SPECIFICS, OR INFORMATION ABOUT SOMEONE OR SOMETHING'. THE REFORE, THE PLAIN MEANING OF THE EXPRESSION 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' IMPLIES FURNISHING OF DETAILS OR INFORMATION ABOUT INCOME WHICH ARE NOT I N CONFORMITY WITH THE FACTS OR TRUTH. THE DETAILS OR INFORMATION ABOUT INCOME D EAL WITH THE FACTUAL DETAILS OF INCOME AND THIS CANNOT BE EXTENDED TO AREAS WHICH A RE SUBJECTIVE SUCH AS THE STATUS OF TAXABILITY OF AN INCOME, ADMISSIBILITY OF A DEDU CTION AND INTERPRETATION OF LAW. THE FURNISHING OF INACCURATE INFORMATION THUS RELAT ES TO FURNISHING OF FACTUALLY INCORRECT DETAILS AND INFORMATION ABOUT T INCOME. IN THE PRESENT CASE, HOWEVER, WHAT HAS BEEN TREATED AS FURNISHING OF INACCURATE -'* PA RTICULARS IS MAKING OF A CLAIM WHICH WAS NOT ADMITTED BY THE ASSESSING OFFICER AND THE APPELLANT HIMSELF WITHDREW IF. THE ADMISSION OR REJECTION OF A CLAIM IS A SU BJECTIVE EXERCISE AND WHETHER A CLAIM IS ACCEPTED OR REJECTED HAS NOTHING TO DO WIT H FURNISHING O1 INACCURATE PARTICULARS OF INCOME. THE A.O. HAS APPARENTLY PROC EEDED TO TREAT APPELLANT'S CLAIM FOR BAD DEBT AS FURNISHING OF INACCURATE PARTICULAR S. WHAT IS A CORRECT CLAIM AND WHAT IS AN INCORRECT CLAIM IS A MATTER OF PERCEPTIO N. IT IS A SETTLED POSITION OF LAW THAT RAISING A LEGAL CLAIM, EVEN IF IT IS ULTIMATEL Y FOUND TO BE LEGALLY UNACCEPTABLE, CANNOT AMOUNT OF FURNISHING OF INACCURATE PARTICULA RS OF INCOME. 'INACCURATE', AS NOTED ABOVE, IS SOMETHING FACTUALLY INCORRECT AND I NTERPRETATION OF LAW CAN NEVER BE A FACTUAL ASPECT. JUST BECAUSE AN ASSESSING OFFICER DOES NOT ACCEPT AN INTERPRETATION, SUCH AN INTERPRETATION IS NOT REN DERED INCORRECT. IN ANY EVENT, AS NOTED ABOVE, THE CONNOTATION OF EXPRESSION 'PARTICU LARS OF INCOME' DO NOT EXTEND TO THE ISSUES OF INTERPRETATION OF LA\ AND AS SUCH MAK ING A CLAIM, WHICH IS FOUND TO BE UNACCEPTABLE IN LAW, CANNOT BE TREATED AS FURNISHIN G OF INACCURATE PARTICULARS OF INCOME. IN THIS VIEW OF THE MATTER, THE CASE OF THE APPELLANT CANNOT BE SAID TO BE A CASE OF 'FURNISHING OF INACCURATE PARTICULARS OF IN COME', IN ITS NATURAL SENSE, EITHER. IN THIS REGARD RELIANCE IS PLACED ON THE DECISION OF H ON'BLE ITAT, PUNE 'A' BENCH IN THE CASE OF KANBAY SOFTWARE INDIA PVT. LTD VS. DCIT IN ITA NO.30.FJ/PN/07 - A.Y.2002- 03. 5.13. THEREFORE, IN THESE CIRCUMSTANCES THE LEVY O F PENALTY IN RESPECT DISALLOWANCE OF CLAIM FOR BAD DEBTS CANNOT BE SUSTAINED. HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SHIV LAL TAK VS. CIT REPORTED IN 251 ITR 373 HAS HELD THAT: ' THE STATUTE HAS CLEARLY DRAWN A DISTINCTION BETWEEN A DELIBERATE FALSE EXPLANATION FURNISHED BY THE ASSESSEE AND AN EXPLA NATION, WHICH MAY NOT BE FALSE BUT IS NOT ACCEPTED BECAUSE THE AS SESSEE WAS NOT ABLE TO SUBSTANTIATE IT. WHILE THERE IS NO RELAXATION IN TH E RIGOUR OF THE EXPLANATION IN RAISING A PRESUMPTION AGAINST THE AS SESSEE IN THE FORMER CASE, IN THE LATTER CLASS OF CASES, THE STATUTE ITS ELF RELAXES ITS RIGOUR BY DIRECTING THAT WHERE IN RESPECT OF ANY AMOUNT, ADDE D OR DISALLOWED AND 7 ANY EXPLANATION IS OFFERED BY SUCH PERSON WHICH NOT ACCEPTED BECAUSE THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SAME, B UT SUCH EXPLANATION IS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE EXPLANATION ' SHALL NOT APPLY'. 5.14. IN THIS REGARD RELIANCE IS ALSO PLACED ON TH E DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BACARDI MARTINI INDIA 288 ITR 585 WHEREIN THE HON'BLE COURT HELD THAT 'MERELY BECAUSE THERE IS A DIFFEREN CE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER, FOR ALLOWING OR DISALLOW ING AN EXPENDITURE, IT CANNOT IPSO FACTO BE SAID THAT THE ASSESSEE HAD INTENTION TO CO NCEAL ITS INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF ITS INCOME. IN THE INSTAN T CASE, WE FIND THAT THE ASSESSEE HAD MADE THE CLAIM ON THE BASIS OF A CREDIBLE MATERIAL AND ALSO FURNISHED NECESSARY EXPLANATIONS IN THE COURSE OF ASSESSMENT PROCEEDING S. THE REASONING ADVANCED BY THE ASSESSEE HAS BEEN FOUND TO BE UNSATISFACTORY AN D THUS REJECTED BY THE ASSESSING OFFICER. HOWEVER, THE EXPLANATIONS FURNISHED BY THE ASSESSEE WERE NEITHER FOUND TO BE FALSE AND NOR IS THERE ANY FINDING BY THE ASSESS ING OFFICER EITHER IN THE ORDER OF ASSESSMENT OR EVEN DURING THE PENALTY PROCEEDINGS T HAT THE ASSESSEE DID NOT OFFER COMPLETE PARTICULARS OR DETAILS OF THE EXPENDITURE WHENEVER CONSIDERED NECESSARY BY THE ASSESSING OFFICER. THEREFORE, CONSIDERING THE T OTALITY OF THE CIRCUMSTANCES AND THE FACT POSITION IN THE INSTANT CASE, WE DO NOT FIND I T A FIT CASE FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. HENCE, WE HEREB Y AFFIRM THE DECISION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ASPECT .' 5.15. THEREFORE, IN VIEW OF THE FOREGOING DISCUSSIO NS, THE LD. A.O.S ORDER FOR LEVY8ING THE PENALTY IS HEREBY CANCELLED 8. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER O F INCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 9. AT THE TIME OF HEARING ON BEHALF OF REVENUE SMT. NEETA SHAH APPEARED AND RELYING ON THE REASONING GIVEN BY THE A.O. IN THE ASSESSMENT ORDER CONTENDED THAT THE ASSESSEE MADE A WRONG CLAIM IN RESPECT OF BAD DEBTS AMOUNTING TO RS.42,18 ,092/-. WHEN THE ASSESSEE WAS CORNER, IT MADE A SURRENDER. THE SAID SURRENDER WAS NOT VOLUNT ARY. THEREFORE, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS WITHIN THE MEANING OF SECTIO N 271(1)(C) OF THE ACT. LOOKING TO THE TOTALITY OF THE FACTS, PENALTY WAS CORRECTLY LEVIED AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT JUSTIFIED IN CANCELLING THE SAM E. 10. ON THE OTHER HAND, SHRI B.K. PATEL, LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE MADE A BONAFIDE CLAIM IN RESPECT OF BAD DEBTS. BONA FIDE OF THE CLAIM IS PROVED FROM THE RELEVANT 8 CORRESPONDENCES AND ACTION TAKEN IN RESPECT OF 16 P ARTIES, WHOSE BAD DEBTS WERE CLAIMED, , WHICH WAS FURNISHED BEFORE THE A.O. THE BAD DEBTS CLAIM W AS WITHDRAWN VOLUNTARILY ASSUMING THAT NO PENALTY WOULD BE INITIATED AND ALSO RESERVING THE R IGHT TO CLAIM THE BAD DEBTS IN SUBSEQUENT YEARS. THE CLAIM WAS WITHDRAWN ON ACCOUNT OF CONSTANT PURS UATION BY THE A.O.. THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS LEGALLY AND FACTUALLY CORRECT IN CANCELLING THE PENALTY LEVIED BY THE A.O. UNDER SECTION 271(1)(C) OF THE I NCOME TAX ACT, 1961. 11. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. IN TH E IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ANALYSED THE PROVISIONS CONTAINED IN SECTION 271(1)(C). THEREAFTER HE HAS APPLIED THE VARIOUS TESTS TO THE FACTS OF TH E CASE ON THE TOUCHSTONE OF THE THREE INGREDIENTS OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS FOUND THAT DISALLOWANCE OF BAD DEBTS MADE BY THE A.O. DOES NOT HIT BY ANY ONE OF THEM. AFTER CAREFULLY GOING THROUGH T HE ORDERS OF THE AUTHORITIES BELOW, WE ARE CONVINCED THAT THE CLAIM OF BAD DEBTS MADE BY THE A SSESSEE-COMPANY WAS BONAFIDE. NEITHER IN THE ASSESSMENT PROCEEDINGS OR IN PENALTY PROCEEDING S, IT WAS NEITHER FOUND TO BE FALSE NOR THERE IS ANY FINDING BY THE A.O. THAT THE ASSESSEE DID NOT O FFER COMPLETE PARTICULARS OR DETAILS OF EXPENDITURE WHENEVER IF IT IS NECESSARY BY THE A.O. IT IS ALSO PERTINENT TO NOTE THAT VARIOUS HIGH COURTS HELD THAT AS PER AMENDED PROVISIONS OF SECTI ON 36(1)(VII), ONCE THE ASSESSEE HAS WRITTEN OFF BAD DEBTS IN HIS BOOKS OF ACCOUNTS, IT IS NOT R EQUIREMENT OF LAW THAT HE SHOULD ESTABLISH THAT THAT HAS, IN FACT, BECOME BAD. THE HON'BLE BOMBAY H IGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) VS.- OMAN INTERNATION AL BANK (2009) 313 ITR 128 (BOM.) HAS AFFIRMED THE DECISION OF ITAT, SPECIAL BENCH, MUMBA I IN THE CASE OF DCIT VS.- OMAN INTERNATIONAL BANK, SANG. IT IS TRUE THAT THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISED AND ENGINEERS P. LTD. [ (2007) 295 ITR 481] HAS HELD THAT DEBT MUST HAVE BECOME BAD AND MUST BE WRITTEN OFF IN THE RELEVANT ACCOUNT ING YEAR. WHEN THERE IS A DISPUTE REGARDING REPAYMENT OF DEBT, SUCH DEBT HAD NOT BECOME BAD. TH E SAID JUDGMENT WAS DELIVERED ON 10.11.2006. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL WAS FILED BY THE ASSESSEE ON 31.10.2005, WHICH IS MUCH PRIOR TO THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISED AND ENGINEERS P. LTD. (SU PRA). PRIOR TO THIS JUDGMENT, VARIOUS DECISIONS WERE IN FAVOUR OF THE ASSESSEE. IN VIEW O F THIS, IT CANNOT BE SAID THAT THE CLAIM OF BAD 9 DEBTS MADE BY THE ASSESSEE WAS FALSE. IN THESE CIRC UMSTANCES, IN OUR CONSIDERED OPINION, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS GIV EN COGENT REASON FOR CANCELLING THE PENALTY TO THE EXTENT OF RS.15,43,564/- LEVIED BY T HE A.O. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) AND UPHOLD THE SAME. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. THE ORDER PRONOUNCED IN THE COURT ON 16.10.2 009 SD/- SD/- (D.C. AGARWAL) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 16 / 10 / 2009 COPY OF THE ORDER IS FORWARDED TO : 1) M/S. LAXMI SHROFF, SARDAR PATEL CHOWK, KHEDBRAHMA, DIST. SABARKANTHA, (2) ITO, WARD-1, S.K. RANGE, HIMATNAGAR. 3) CIT(A)- ,AHMEDABAD (4) CIT- ,AHMEDA BAD.(5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.