IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "J", MUMBAI
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND
DR. S.T.M. PAVALAN, JUDICIAL MEMBER
ITA No. 2410/Mum/2012
Assessment Year: 2004-05
M/s. JM Financial Services DCIT 4(3)
Pvt. Ltd. Aayakar Bhavan
141, Maker Chambers III Mumbai.
Vs.
Nariman Point,
Mumbai-. 400 021
PAN :AAACJ 5977 A
(Appellant) (Respondent)
Appellant by : Dr. K. Shivaram
Respondent by : Shri Shekhar L. Gajbhiye
Date of hearing : 31.10.2013
Date of Pronouncement : 19.11.2013
ORDER
PER DR. S.T.M. PAVALAN, JM:
This appeal filed by the assessee is directed against the order of the
Ld.CIT(A)-8 Mumbai dated 19.01.2012 confirming the penalty of Rs.4,25,868/-
levied by the AO u/s 271(1)(c) of the Income Tax Act on account of the assessee's
claim of deduction on provision for doubtful debts of Rs.11,87,089/- for the
assessment year 2004-05.
2. Briefly stated, the assessee, a company engaged in the business of share and
stock broking, during the year under consideration made a provision for bad and
doubtful debts amounting to Rs.11,87,089/- and thereby debited the same to the
Profit and Loss account. The deduction claimed by the assessee was disallowed by
the AO on the ground that creation of mere provision was not enough and the
amount should have been actually written off by crediting the same to the individual
accounts of the debtors in the books of account in order to satisfy the requirements
ITA No. 2410/Mum/2012
2 M/s. JM Financial Services Pvt. Ltd.
Assessment Year: 2004-05
of section 36(i) (vii) read with section 37(2) of the Act. In the quantum appeal, the
Ld.CIT(A) confirmed the said disallowance reiterating the same reasoning of the AO
that the provision for doubtful debts could not be allowed under section 36(i)(vii) of
the Act. The assessee had not preferred further appeal against the said order of the
Ld.CIT(A). Consequently, the AO levied the penalty of Rs.4,25,868/- by invoking
section 271(1)(c) of the Act for furnishing inaccurate particulars. On appeal, the
Ld.CIT(A) by relying on the decision of the Hon'ble Apex Court in the case of Union
of India Vs. Dharmendra Textiles Processors [306 ITR 277 (SC)], confirmed the
penalty levied by the AO. According to the Ld.CIT(A), the assessee has offered and
explanation which was both false and not bona fide. Aggrieved by the impugned
order, the assessee is in appeal before us.
3. Before us, the Ld.Counsel for the assessee has stated that the assessee has
neither concealed nor filed any inaccurate particulars which are evident from the
annual accounts and the computation of income filed by the assessee and since the
basis of claim has been explained before the AO the levy of penalty is not justified.
Further, merely because the claim of the assessee has been disallowed by the AO
and upheld by the Ld.CIT(A), would not mean that the assessee has furnished
inaccurate particulars of income. Also, the Ld.Counsel has placed reliance on various
decisions including the decision of the Hon'ble Apex Court in the case of Vijaya Bank
Vs CIT [232 ITR 166 (SC)] which has been followed by the Tribunal in Addl. CIT Vs.
Nicholas Piramal India Ltd. [27 ITR (Trib) 182 (Mum)] to substantiate that the claim
of the assessee is justified. On the other hand, the Ld.DR has relied on the decision
of the Delhi High Court in the case of CIT Vs. Escorts Finance Ltd. (328 ITR 44) in
support of the proposition that if claim made in the return of income appears to be
ex facie bogus, it should be treated as a case of concealment or furnishing of
inaccurate particulars and penalty proceeding would be justified.
4. We have heard both the parties and perused the material on record. It is
pertinent to mention that the Hon'ble Apex Court in the case of Vijaya Bank Vs CIT
(supra) has held that where assessee has written off impugned bad debt in its books
by way of a debit to profit and loss account, simultaneously reducing corresponding
amount from loans and advances to debtors depicted on assets side in balance sheet
ITA No. 2410/Mum/2012
3 M/s. JM Financial Services Pvt. Ltd.
Assessment Year: 2004-05
at close of year, the assessee is entitled to deduction under section 36(1)(vii) and for
that purpose, it is not necessary for it to close individual account of each of its
debtors in its books of account. The said proposition has also been followed by the
Tribunal in the case of Addl. CIT Vs. Nicholas Piramal India Ltd (supra), the order to
which the present AM is also a party. Noting the proposition of law which has been
laid down by the Hon'ble Apex Court in the case of Vijaya Bank and the same
followed by the Tribunal in the case of Nicholas Piramal India Ltd as aforementioned,
we are of the considered view that merely because the assessee's claim which has
been disallowed by the AO and upheld by the Ld.CIT(A), would not mean that the
assessee has furnished inaccurate particulars of income. Also, we are not inclined to
accept the contention of the Revenue that the return of income appears to be ex
facie bogus and it should be treated as a case of concealment or furnishing of
inaccurate particulars for the reason that the claim of the assessee does not fall
under the purview of `bogus' claim merely because the assessee has not proved that
the bad/doubtful debt has not been actually written off by crediting the same to the
individual accounts of the debtors in the books. Hence, the proposition of the
decision of the Delhi High Court in the case of CIT Vs. Escorts Finance Ltd (supra)
relied by the Ld.DR has no application in the case of the assessee. In view of the
aforementioned discussion, we hold that the Ld.CIT(A) is not justified in confirming
the impugned penalty levied by the AO and therefore the same is deleted.
5 In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on this 19th day of November, 2013.
Sd/- Sd/-
(P.M. JAGTAP) (Dr. S.T.M. PAVALAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 19.11.2013.
*Srivastava
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR "J" Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
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