CIT Vs. SUMANGAL OVERSEAS LTD.

JUDGEMENT

(1.) PENALTY of Rs.73,85,322/ - imposed upon the respondent assessee by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act (hereinafter referred to as "the Act") was affirmed by the CIT (A). However, the Income Tax Appellate Tribunal ("the Tribunal" for brevity) has reversed the view taken by the AO and the CIT (A) and deleted the said penalty. It is under these circumstances, present appeal is preferred by the Revenue questioning the wisdom of the Tribunal contained in its order dated 30.10.2009 and the appeal was admitted on the following substantial question of law:

(2.) The reason for initiating penalty proceedings was that the AO in the assessment order framed on 29.12.2006 in respect of assessment year 2004 -05 held the view that the assessee had falsely claimed bad debts of Rs.2,05,86,262.75/ - The assessee had given various advances to its suppliers which amounts to Rs.2,89,56,836.75/ -. Out of these amount, the aforesaid amount of Rs.2,05 Crores was written off as bad and doubtful advances. The AO took the view that the prerequisite conditions for writing off the amount as bad debts had not been satisfied, as it was included in the income of the previous year and therefore, there was no question of treating is as bad debts under provision of Section 36(1)(vii) and Section 36(2) of the Act. The assessee had not challenged the order of the AO.

(3.) IN the penalty proceedings, the AO held that the aforesaid finding had become final and conclusive and it clearly reflected the falsity of claim preferred by the assessee.