DCIT 2(1), MUMBAI V. DUPONT SPORTSEAR LTD, MUMBAI

ITA 1107/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78706 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-02-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 15-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 43B; 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , !' #$%& , !' () ! BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO. 1107/MUM/2012 ( * * * * / ASSESSMENT YEAR :2003-04 THE ACIT-2(1), AAYAKAR BHAVAN, MUMBAI-400 020 M/S. DUPONT SPORTSEAR LTD., KAMANI CHAMBERS, 32, K. KAMANI MARG, BALLARD ESTATE, MUMBAI-400 001 )+ !' ./ ,- ./PAN/GIR NO. : AAACD 1389L ( +. /APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ! / APPELLANT BY : ` SHRI SANJEEV JAIN /0+. 2 1 ! /RESPONDENT BY : SHRI BHUPENDRA KARKHANIS 2 3' / DATE OF HEARING :15.4.2014 45* 2 3' / DATE OF PRONOUNCEMENT : 16.4.2014 (!6 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)-4, MUMBAI DT. 9.11.2011 PERTAINING TO ASSESS MENT YEAR 2003-04. 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD . CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S. 271(1)(C) OF THE A CT. 3. IN THIS CASE, THE ASSESSMENT WAS FRAMED U/S/ 143 (3) R.W.S 144 OF THE ACT. THE RETURNED LOSS OF RS 1,95,44,622/- WAS ASS ESSED AT A POSITIVE ITA NO.1107/M/2012 2 FIGURE OF RS. 2,50,35,215/-. THE FOLLOWING ADDITIO 9NS WERE MADE WHILE COMPLETING THE ASSESSMENT. 1) ON ACCOUNT OF UNSECURED LOANS U/S. 68 RS. 68, 91,721/- 2) ON ACCOUNT OF CURRENT LIABILITIES U/S. 41 RS. 1,3 1,14,839/- 3) ON ACCOUNT OF INTEREST TREATED AS INCOME RS. 54, 61,000/- 4) ON ACCOUNT OF EXPENSES DEBITED RS. 8,06,640 /- 5) ON ACCOUNT OF INTEREST DEBITED RS. 1,83,05,637/ - THE AO PROCEEDED TO LEVY PENALTY U/S. 271(1)(C) OF THE ACT IN RESPECT OF THE AFORESTATED DISALLOWANCES. 3.1. DURING THE COURSE OF THE PENALTY PROCEEDINGS, THE ASSESSEE SOUGHT ADJOURNMENT. SUBSEQUENTLY, IT WAS REQUESTED TO KEE P THE PENALTY PROCEEDINGS IN ABEYANCE TILL DISPOSAL OF FIRST APPE AL. THE LD. CIT(A) CONFIRMED THE ADDITIONS MADE TO THE TOTAL INCOME. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE AO WAS CONVINCED THAT THE AS SESSEE HAS COMMITTED DEFAULT U/S. 271(1)(C) OF THE ACT AND WEN T ON TO LEVY PENALTY AT THE RATE OF 100% OF THE TAX SOUGHT TO BE EVADED AND COMPUTED THE PENALTY AT RS. 1,63,83,000/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). IN SO FAR AS DISALLOWANCE U/S. 68 ON ACCOUNT OF UNSECURED LOANS, THE LD. CIT(A) AT PARA-7 OF HIS ORDER OBSERVED THAT THE LOAN PERTAINS TO EARLIER YEARS. ACCORDING TO THE LD. CIT(A), IT WAS NOT CORRECT TO CONSIDER SUCH BROUGHT FORWARD LOANS FROM EARLIER YEARS FOR PENALTY IN THE YEAR UNDER CONSIDERATION. TO THE EXTENT OF UNSECURED LOANS, T HE PENALTY WAS DELETED. 4.1. IN SO FAR AS ADDITION ON ACCOUNT OF OUTSTANDI NG CURRENT LIABILITIES OF RS. 1,31,14,839/-, THE LD. CIT(A) AT PARA-10 OF HIS ORDER OBSERVED THAT ITA NO.1107/M/2012 3 THE CREDITORS ARE OLD AND COMPANY IS NOT IN A POSIT ION TO PAY THEM BUT THEIR CLAIMS WILL BE SETTLED WHENEVER THE COMPANY H AS FUNDS TO CLEAR OFF THEIR DUES AND THEREFORE, IT IS CLEAR THAT COMPANY HAS NOT WRITTEN OFF THESE LIABILITIES. THE LD. CIT(A) FURTHER OBSERVED THAT THOUGH THE ADDITIONS WERE CONFIRMED BY THE FIRST APPELLATE AUTHORITY TRE ATING THE SAME AS INCOME U/S. 41 OF THE ACT, PENALTY CANNOT BE LEVIED BECAUSE THE ASSESSMENT OF SUCH LIABILITY AS INCOME ITSELF IS IN DOUBT AND ACCORDINGLY DELETED THE PENALTY TO THE EXTENT OF ADDITION ON AC COUNT OF OUTSTANDING CREDIT LIABILITY. 4.2. IN SO FAR AS THE LEVY OF PENALTY ON ACCOUNT OF INTEREST ACCRUED BUT NOT OFFERED FOR TAX, THE LD. CIT(A) AT PARA-11 OF HIS ORDER OBSERVED THAT THE INTEREST OF RS. 54.61 LAKHS HAS ALREADY BEEN A CCOUNTED FOR IN EARLIER YEARS AND HENCE IT IS SHOWN AS RECEIVABLE. THE PE NALTY WAS ALSO DELETED ON THIS ADDITION. 4.3. LEVY OF PENALTY ON ACCOUNT OF EXPENSES OF RS. 8,06,640/-, THE LD. CIT(A) AT PARA-12 OF HIS ORDER OBSERVED THAT THE A O HAS ALLOWED 70% OF THE EXPENSES CLAIMED AND 30% OF THE EXPENSES WERE D ISALLOWED ON ADHOC BASIS. THE LD. CIT(A) WAS OF THE OPINION THAT MEREL Y DISALLOWANCE DOES NOT LEAD TO ANY CONCLUSION THAT THE EXPENSES ARE BO GUS OR ANY PARTICULAR RELATING TO INCOME HAS BEEN CONCEALED. PENALTY LEV IED ON THIS ACCOUNT WAS ALSO DELETED. 4.4. ANOTHER ITEM FOR THE LEVY OF PENALTY WAS INTER EST EXPENSES OF RS. 1,83,05,637/-. AFTER CONSIDERING THE PROFIT AND LO SS ACCOUNT R.W. SCHEDULE-14, THE LD. CIT(A) OBSERVED THAT INTEREST ON FIXED TERM LOANS WAS AT RS. 48,68,387/- AND ON OTHER LOANS WAS RS . 1,34,37,250/-. THE LD. CIT(A) WAS OF THE OPINION THAT INTEREST ON OTHE R LOANS , OTHER THAN FIXED TERM LOAN , IS NOT DISALLOWABLE U/S. 43B OF T HE ACT AND THE ONLY ITA NO.1107/M/2012 4 DISALLOWANCE WHICH COULD BE CONSIDERED FOR THE LEV Y OF PENALTY IS INTEREST TO THE EXTENT OF RS. 48,68,387/-. THE LD. CIT(A) F URTHER NOTICED THAT THE ASSESSEE HAS GIVEN ALL THE PARTICULARS AS REQUIRED IN SCHEDULE-14 AND THERE IS NO CASE OF CONCEALMENT OF ANY PARTICULARS. PEN ALTY LEVIED ON THIS ACCOUNT WAS ALSO DELETED. 4.5. IN SHORT, THE LD. CIT(A) DELETED THE PENALTY L EVIED ON ALL 5 COUNTS. 5. AGGRIEVED BY THIS, REVENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE PENALTY ORDER. IT IS THE SAY OF THE LD. DR THAT SI NCE THE QUANTUM ADDITIONS HAVE BEEN CONFIRMED, THE AO HAS RIGHTLY LEVIED THE PENALTY U/S. 271(1)(C) OF THE ACT. 7. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPOR TED THE ORDER OF THE LD. CIT(A). 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES. FINDINGS OF THE LD. CIT(A) HAS BEEN ELABORATELY DIS CUSSED BY US HEREINABOVE. WE FIND THAT THE LD. CIT(A) HAS RIGHT LY DELETED THE PENALTY GIVING SPECIFIC FINDING ON EACH COUNT AS DISCUSSED BY US HEREINABOVE. WHEN THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR F ALSE, THERE IS NO QUESTION OF INVITING THE PENALTY U/S. 271(1)(C) OF THE ACT. SECTION 68 ADDITIONS HAVE BEEN MADE ON BROUGHT FORWARD LOANS, SEC. 41- A DDITION HAS BEEN MADE ON ACCOUNT OF LIABILITIES WHICH WERE VERY MUCH EXISTING AND COULD NOT BE DISCHARGED BECAUSE OF THE PAUCITY OF FUNDS. THE ADDITION ON ACCOUNT OF ACCRUED INTEREST IS MISPLACED AS THE SAM E HAS BEEN SHOWN AS INCOME IN THE EARLIER YEARS. DISALLOWANCES OF EXPE NSES HAVE BEEN MADE ITA NO.1107/M/2012 5 ON ADHOC BASIS AND THE DISALLOWANCE OF INTEREST IS PARTLY MISPLACED. A MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LA W BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCT S 322 ITR 158. FINDINGS OF THE LD. CIT(A) ARE CONFIRMED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.4.2014 (!6 2 5* '! 7 8( 9 16.4.2014 5 2 : SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) / PRESIDENT !' () / ACCOUNTANT MEMBER MUMBAI; 8( DATED 16.4.2014 . . ./ RJ , SR. PS (!6 (!6 (!6 (!6 2 22 2 /3# /3# /3# /3# ;!#*3 ;!#*3 ;!#*3 ;!#*3 / COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. < ( ) / THE CIT(A)- 4. < / CIT 5. #=: /3 , , / DR, ITAT, MUMBAI 6. : > / GUARD FILE. (!6 (!6 (!6 (!6 / BY ORDER, 0#3 /3 //TRUE COPY// ? ?? ? / @ @ @ @ , , , , (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI