IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 9th DAY OF JANUARY 2015 PRESENT HON BLE MR. JUSTICE N.KUMAR AND HON BLE MR. JUSTICE B.VEERAPPA I.T.A. NO.187/2014 BETWEEN: 1. Commissioner of Income Tax, Mangalore. 2. Assistant Commissioner Of Income, Circle 1(1), Mangalore. ...APPELLANTS (By Sri.E.R.Indrakumar, Sr. Adv. for Sri.E.I.Sanmathi, Adv.) AND: M/s.Sanu Palace, International Pvt. Ltd., 4-9-776/46, Sanu Palace, M.G.Road, Kodialbail, Mangalore. RESPONDENT (By Sriyuts A.Shankar & Lava, Advs.) . . . . -2- This I.T.A. is filed under Section 260A of Income Tax Act, 1961, arising out of order dated 03.01.2014 passed in I.T.A. No.1360/Bang/2012 for Assessment Year 2008-2009 praying to : (i) Decide foregoing question of law and or such other questions of law as may be formulated by Hon ble Court as deemed fit. (ii) Set-aside appellate order dated 03.01.2014 passed by ITAT, `A Bench, Bangalore in appeal proceedings No.I.T.A. No.1360(BNG)/2012 for Assessment Year 2008-2009. This I.T.A. coming on for admission, this day, N.Kumar J., delivered following: JUDGMENT Revenue has preferred this appeal against concurrent findings recorded by two Appellate Authorities, setting-aside order imposing penalty by Assessing Authority. 2. Assessee-Company is engaged in business of promoting building and developing -3- properties. Assessee had declared loss under head `income from other sources of Rs.79,66,169/-. In computing aforesaid loss, assessee had claimed deduction of sum of Rs.79,87,193/-, on account of bad debts written off. Assessing Authority, while concluding assessment proceedings, dis-allowed claim of assessee. It is in respect of said dis- allowance, penalty proceedings were initiated under Section 271(1)(c) of Income-tax Act, 1961 (for short `the Act ). It is to be noticed that assessee did not dispute said addition and said order has become final. In penalty proceedings, assessee pointed out that assessee had incurred loss, which is not in dispute. It was not allowed under head `income from other sources as only expenses under Section 57 of Act was allowable. Thus, assessee has neither furnished inaccurate particulars of income nor was there any concealment of particulars of income. -4- said contention was not accepted by Income-tax authority. Therefore, it proceeded to impose penalty. 3. First Appellate Authority after considering rival contentions held that where certain claim was made under bonafide intention but same was not allowed, that by itself would not amount to furnishing of inaccurate particulars. Therefore, said penalty was set-aside. Aggrieved by said order, Revenue preferred appeal to Tribunal. Tribunal was of view that if assessee had been more diligent in declaring its income in form of interest under head `income from business , it would have legitimately got its claim for deduction on account of deduction as bad debts and therefore, dismissed appeal. Aggrieved by said order, present appeal is filed. -5- 4. substantial question of law raised in this appeal is as under: Whether, on facts and circumstances of case, assessee s claim of deduction on account of bad debts written off under income from other sources constitutes `furnishing of inaccurate particulars of income as per Section 271(1)(c) of Income Tax Act and therefore, is fit case for levy of penalty? 5. From aforesaid facts, it is clear that assessee sustained loss to extent of deduction claimed on account of bad debts, is not in dispute. assessee had claimed portion under business and balance under other sources. claim under business was allowed. dispute is in relation to claim under other sources. Tribunal has verified return and came to conclusion that penalty is not to be levied. -6- When two fact finding authorities have held that it would not amount to furnishing of inaccurate particulars as nothing was concealed from Department, it cannot be said that case for imposing penalty under Section 271(1)(c) of Act, would arise. Accordingly, we do not see any merit in this appeal. Appeal is dismissed. Sd/- JUDGE Sd/- JUDGE SPS Commissioner of Income-tax, Mangalore / Assistant Commissioner of Income-tax, Circle-1(1), Mangalore v. Sanu Palace