Sodium Metal Pvt.Ltd., Baroda vs Assessee

आयकर अपील सं./I.T.A. No.2263/Ahd/2011 ( नधा रण वष / Assessment Year : 2004-05) Sodium Metal Private Limited बनाम/ The ACIT 21, GIDC Estate Vs. Circle-4 Nandesari Baroda Baroda (Guj.) - 391 340 थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AACCS 5499 J (अपीलाथ# /Appellant) .. ($%यथ# / Respondent)

अपीलाथ# ओर से / Appellant by : Shri S.N.Soparkar, AR $%यथ# क' ओर से/Respondent by : Shri Nimesh Yadav, Sr.DR

ु वाई क' तार*ख / सन Date of Hearing 26/03/2015 घोषणा क' तार*ख /Date of Pronounce ment 30/04/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-III, Baroda ('CIT(A)' in short) dated 11/07/2011 pertaining to Assessment Year (AY) 2004-05. The has raised the following grounds of appeal:-

(1) The Learned CIT(A) has erred in law and on facts in confirming the levy penalty u/s.271(1)(c) of the Act in the sum of Rs.16,79,452/-

ITA No.2263/Ahd/2011 Sodium Metal Private Limited vs. ACIT Asst.Year - 2004-05 -2-

which is wholly unsustainable in law and on facts and as such the appellant could

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 18.11.2006, thereby the Assessing Officer (AO in short) disallowed the claim of bad debts amounting to Rs.46,81,402/- and also made disallowance on the basis of undervaluation of closing stock of Rs.13,33,754/- and the AO initiated the penalty proceedings u/s.271(1)(c) of the Act. Subsequently, the AO levied a penalty of Rs.16,79,452/- on the addition of Rs.46,81,402/-. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions dismissed the appeal.

3. Ground Nos.1 & 2 are inter-connected and, therefore, the same are decided together. The ld.Sr.counsel for the assessee submitted that admittedly the assessee had made a claim of bad debt which was disallowed by the AO. He submitted that the issue of bad debts is now covered by the judgement of Hon'ble Apex Court rendered in the case of TRF Ltd. vs. CIT reported at (2010) 323 ITR 397 (SC). He further submitted that merely a claim has been rejected would not attract the penalty proceedings. In support this contention, he relied on the judgement of Hon'ble Apex Court rendered in the case of CIT vs. ITA No.2263/Ahd/2011 Sodium Metal Private Limited vs. ACIT Asst.Year - 2004-05 -3-

Reliance Petroproducts Pvt.Ltd. reported at (2010) 322 ITR 158 (SC). He further submitted that the undisputed facts remains that the AO had made disallowance of bad debt on the basis that the advance of Rs.46,81,202/- was not taken into account while computing the income of any previous year. He submitted that it is not the case where the AO doubted the bad debt. The ld.counsel for the assessee also placed reliance on the decision of the Coordinate Bench (ITAT 'B' Bench Ahmedabad) rendered in the case of M/s.Luthra Dyeing & Printing Mills vs. DCIT in ITA No.2114/Ahd/2011 for AY 2005-06, dated 13/03/2015.

3.1. The ld.Sr.DR supported the orders of the authorities below and submitted that there is no illegality in the order passed by the ld.CIT(A) in sustaining the penalty. He submitted that the assessee has not challenged the disallowance in further appeal. This fact goes to show that the claim of the assessee is not allowable.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO made disallowance of the bad debt on the basis that the advance of Rs.46,81,202/- given to New Pharm Industries Pvt.Ltd. written off during the year under consideration was not taken into account in computing the income of the assessee of any previous year. The AO was of the view that since the amount had not been taken into ITA No.2263/Ahd/2011 Sodium Metal Private Limited vs. ACIT Asst.Year - 2004-05 -4-

account by the assessee in any of the earlier years, the assessee could not write off it as bad debt. However, the contention of the assessee is that the order passed by the ld.CIT(A) is without appreciating the facts of the case that the penalty u/s.271(1)(c) was imposed with regard to furnishing of inaccurate particulars of income qua claim of bad debt written off which is a debatable issue. It was contended before the AO that no penalty can be imposed since the issue is debatable and the issue is also a legal one i.e. whether the same is allowable u/s.36 of the Act or u/s.37 of the Act. The ld.counsel for the assessee has placed reliance on the judgement of Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at (2010) 322 ITR 158 (SC), wherein the Hon'ble Apex Court has held as under:-

"9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as :

"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript."

We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under s. 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to ITA No.2263/Ahd/2011 Sodium Metal Private Limited vs. ACIT Asst.Year - 2004-05 -5-

furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars."

4.1. In the instant case, the assessee had made claim of bad debt which in the opinion of the AO was not allowable as the assessee has not taken into account the sum in computing the income of the assessee in previous year. It is not in dispute that the assessee had disclosed all material particular related to bad debt. We find force in the contention of the ld.counsel for the assessee that in the case in hand, the assessee had disclosed all materials particularly the claim regarding allowability of bad debt was rejected by the AO and this should not be only ground for imposition of penalty in the light of the judgement of the Hon'ble Supreme Court rendered in the case of CIT vs. Reliance Petroproducts Pvt.Ltd.(supra). Therefore we are of the considered view that the ld.CIT(A) was not justified in sustaining the penalty under the peculiar facts and circumstances of the present case. We, respectfully following the ratio laid down by the Hon'ble Apex Court in the case of CIT vs. Reliance Petroproducts Pvt.Ltd.(supra), set aside the order of the ld.CIT(A) and direct the AO to delete penalty. Thus, ground Nos.1 & 2 of assessee's appeal are allowed.

5. Ground No.3 is general in nature which require no independent adjudication.

ITA No.2263/Ahd/2011 Sodium Metal Private Limited vs. ACIT Asst.Year - 2004-05 -6-

6. In the result, the appeal of the Assessee is allowed.

Order pronounced in the Court on Thursday, the 30th day of April, 2015 at Ahmedabad.

Sd/- Sd/- (एन.एस.सैनी) (कुल भारत) लेखा सद य या यक सद य ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 30/04/2015 ट*.सी.नायर, व. न.स./T.C. NAIR, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ# / The Appellant

2. $%यथ# / The Respondent.

3. संबं4धत आयकर आयु6त / Concerned CIT

4. आयकर आयु6त(अपील) / The CIT(A)-III, Baroda

5. 7वभागीय $ त न4ध, आयकर अपील*य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड; फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स%या7पत $ त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 74.15 (dictation-pad 9+pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ..15.4.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......30.4.15

7. Date on which the file goes to the Bench Clerk.....................30.4.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................