M/s. Solutions Integrated Marketing Services (P) Ltd, New Delhi V. ITO, New Delhi

ITA 4173/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5609 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 18-03-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 23-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SHYMANA SEN
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI C.L.SETHI, JM AND SHRI R.C.SHARMA, AM ITA NO.4173/DEL/2009 ASSESSMENT YEAR : 2006-07 M/S SOLUTIONS INTEGRATED MARKETING SERVICES PVT.LTD., 3 RD FLOOR, CHANDRA BHAWAN, 67-68, NEHRU PLACE, NEW DELHI 110 019. PAN NO.AABCS2883D. VS. INCOME TAX OFFICER, WARD-9(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : NONE. RESPONDENT BY : MRS.SHYMANA SEN, SR.DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 30.6.2009 FOR THE AY 2006-07, IN THE MATTER OF LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT. 2. WE HAVE HEARD THE LEARNED DR AND GONE THROUGH TH E ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT ASSESSEE COMPANY H AD GIVEN IMPREST TO ITS EMPLOYEES FOR MEETING ITS ROUTINE BUSINESS EXPENSES . THE EMPLOYEES MISAPPROPRIATED THE FUNDS OF THE COMPANY. AS A RES ULT, THE ASSESSEE HAD LOST ITS CASH GIVEN IN THE FORM OF ADVANCE TO EMPLOYEES AND THE SAME WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT, BUT WAS DISALLOWED BY THE AO ON THE PLEA THAT IT WAS NOT A BAD DEBT ALLOWABLE U/S 36(1)(VII) OF THE IT ACT AND PENALTY WAS LEVIED FOR SUCH DISALLOWANCE OF CLAIM. WE FOUND THAT NEITHER GENUI NENESS OF THE ADVANCE GIVEN TO THE EMPLOYEES WAS DOUBTED NOR THE FACT THAT IT WAS EMBEZZLED BY THE STAFF. EVEN THOUGH THE AMOUNT MISAPPROPRIATED BY THE EMPLOYEES WHICH WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT AS BAD DEBTS EVEN THOUGH NOT ALLOW ABLE U/S 36(1)(VII) BUT IT IS A BUSINESS LOSS TO BE ALLOWED U/S 28 OF THE IT ACT. THUS, MERE DISALLOWANCE OF SUCH ITA-4173/DEL/2009 2 CLAIM AS BAD DEBTS U/S 36(1)(VII) WILL NOT AMOUNT T O CONCEALMENT OF ANY INCOME SO AS TO ATTRACT PENALTY U/S 271(1)(C). ACCORDINGLY, AO IS DIRECTED TO DELETE THE SAME. 3. THE ASSESSEE HAD ALSO GIVEN ADVANCE TO ITS VENDO R FOR MEETING EXPENSES ON ITS BEHALF. HOWEVER, THE VENDOR HAD NOT USED THE M ONEY FOR THE SPECIFIC PURPOSE BUT HAS FORFEITED THE MONEY AND THE ASSESSEE HAD ON LY INCURRED LOSS. SINCE ADVANCE WAS GIVEN IN THE NORMAL COURSE OF BUSINESS, DISALLOWANCE OF SUCH CLAIM WILL NOT WARRANT ANY PENALTY BY ALLEGING THE SAME A S CONCEALMENT OF INCOME. SIMILARLY, THERE WAS SOME DIFFERENCE IN THE RECONCI LIATION OF TDS CERTIFICATE ISSUED TO THE EFFECT THAT COMPANYS CUSTOMERS BOOKED THE C OMPANY BILL IN THE NEXT FINANCIAL YEAR AND DEPOSITED THE TAX ACCORDINGLY BU T THE COMPANY HAS BOOKED ITS INCOME FROM YEAR TO YEAR. THE AO TREATED SUCH DIFF ERENCE IN BOOKING THE INCOME AS CONCEALMENT AND LEVIED THE PENALTY. AS PER OUR CONSIDERED VIEW, THE ASSESSEE HAS FURNISHED FULL PARTICULARS, MERE DEDUCTION OF T AX BY COMPANYS CUSTOMER WILL NOT AMOUNT TO CONCEALMENT OF INCOME BY ASSESSEE FOR LEVY OF PENALTY U/S 271(1)(C). ACCORDINGLY, THERE IS NO MERIT IN THE A CTION OF THE AO FOR IMPOSING PENALTY WITH RESPECT TO THE ABOVE THREE DISALLOWANC ES MADE DURING THE COURSE OF QUANTUM ASSESSMENT. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2010. SD/- SD/- (C.L.SETHI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18.03.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-4173/DEL/2009 3