The Income Tax Appellate Tribunal (ITAT), Bangalore recently dismissed the addition of Rs.10 Crore to the Income Tax of an Assessee under Section 271(1)(c) of the Income Tax Act, 1961, upon observation that the Revenue failed to specify whether the addition is being made alleging concealment of income or for furnishing inaccurate particulars of income.
The decision was given by the ITAT while adjudicating an Income Tax Appeal filed by The Deputy Commissioner of Income Tax, Central Circle 1(1), Bengaluru against Smt. Vankadara Padmavathi, proprietor of M/s. Mineral Embassy, which is engaged in the procurement and export of iron ore.
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The Respondent Assessee filed their return of income on 31.10.2012 declaring a total income of Rs.1,71,350 while declaring a business loss of Rs.68,47,444. It was submitted that during the business activity conducted by the Assessee during the Financial Year (F.Y.) 2010-11, the Assessee had written off two amounts as bad debt – the first, an advance amount of Rs.10,32,39,139 paid to Associated Mining Corporation for the supply of iron ore and transportation; second, an amount of Rs.2,73,36,715 that was not receivable from BST (HK) Ltd. due to dispute between the parties.
The jurisdictional Assessing Officer conducted Assessment under Section 143(3) read with Section 153C of the Income Tax Act, 1961 and disallowed the amount of Rs.10,32,39,139 relating to claim of bad debt written off by the appellant. Subsequently, the AO passed a penalty of Rs.3,30,00,000 observing that the assessunder Section 271(1)(c) read with Section 274 of the Act.
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During Appeal before the Commissioner of Income Taxes (Appeals ( CIT(A) ), the Tribunal allowed the submissions of the Assessee in light of the judgment of the Karnataka High Court in CIT v. Manjunatha Cotton Ginning Mills (2013)
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Departmental Representative (DR), Sridhar E. submitted that a penalty may be purported on both limbs, either for filing inaccurate particulars of income or concealment of income. The DR further submitted that the penalty order mentioned the penalty imposition was for filing inaccurate particulars of income.
Tangentially, T. Srinivasa Rao, CA appearing for the Assessee contended that the Revenue failed to point out the limb under which the penalty is imposed while issuing notice under Section 271(1)(c) read with Section 274 of the Income Tax Act, 1961.
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The two-member Bench of the Bangalore ITAT comprising George George K., Vice President and Shri Laxmi Prasad Sahu, Accountant Member, echoed the observations of the preceding CIT(A), which referred to the judgment of the Gujarat High Court in CIT v. Whiteford India Ltd. (2013) which held that “In absence of clear finding of Assessing Officer whether assessee is guilty of concealment of income or furnishing incorrect particulars of income. penalty levied under section 271(1)(c) cannot be sustained”.
Finding no infirmity in the preceding order by the CIT(A), ITAT dismissed the present appeal by the Revenue. Since the appeal was dismissed, the Cross-Objection by the Assessee became infructuous and was accordingly dismissed.
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