Income-tax Officer, Ward-1(1), Aurangabad V. M/s. Shoba Engineering Co.Pvt. Ltd., Aurangabad

ITA 1141/PUN/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4326 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: N O N E
• Keywords: Depreciation; Tax effect; Capital receipt; Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1141/PN/2011 ASSESSMENT YEAR : 2007 - 08 INCOME-TAX OFFICER, WARD-1(1) JEEVAN SUMAN, 2 ND FLOOR, LIC BUILDING, N-5, CIDCO, AURANGABAD VS. SHOBA ENGINEERING CO. PVT. LTD., K-204, MIDC INDUSTRIAL AREA, WALUJ, AURANGABAD (APPELLANT) (RESPONDENT) PAN NO. AAGCS4093L APPELLANT BY: MS. ANN KAPTHUAMA RESPONDENT BY: N O N E DATE OF HEARING : 03-04-2013 DATE OF PRONOUNCEMENT : 22-04-2013 ORDER PER R.S. PADVEKAR, JM:- THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNE D ORDER OF THE LD.CIT(A), AURANGABAD DATED 30-06-2011 FOR THE A.Y. 2007- 08. THE REVENUE HAS TAKEN THE MULTIPLE GROUNDS IN THE A PPEAL. SAVE THE GROUNDS NO. 1 AND 2, OTHER GROUNDS ARE ARGUMENTATIVE. GROUNDS NO. 1 AND 2 READS AS UNDER: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE H ONOURABLE CIT(A), AURANGABAD ERRED IN NOT APPRECIATING THE FACT TH AT DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHEN THE COMPANY W AS ASKED TO FILE CONFIRMATIONS IN RESPECT OF UNSECURED LOANS OF RS.56,28,9 07/- AS WERE APPEARING IN THE BALANCE SHEET IT FILED CONFIRMA TION IN RESPECT OF RS.22,00,000/- AND AS REGARDS THE LOANS AT RS.34,28,907/- IN THE NAMES OF SHRI R.R. KATRE AND SMT. SHOBHA R. KATRE THE ASSESSEE STATED THAT THE SAID LOANS WERE TO BE ADJUSTED AGAIN ST THE UNABSORBED ACCUMULATED LOSSES OF THE ASSESSEE COMPAN Y AS PER THE UNREGISTERED M.O.U. DATED 13-02-2007. FURTHER, THE ASSESS EE HAD FILED REVISED COMPUTATION OF TOTAL INCOME ALONG WITH CO VERING LETTER DATED 23-12-2009 AND ADMITTED FOR ADDITION TO THE EXTEN T OF RS.34,28,907/- AND SETTING OFF THE SAME AGAINST THE BRO UGHT FORWARD DEPRECATION LOSSES AND BUSINESS LOSSES. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE H ONOURABLE CIT(A), AURANGABAD ERRED IN NOT APPRECIATING THE FACT THAT, FOR THE REASONS STATED ABOVE, IT IS TO SUBMIT THAT THE ASSESS EE HAD FILED INACCURATE PARTICULARS IN AS MUCH AS EFFECT TO THE M.O.U. DATED 13- 02-2007 WAS NOT GIVEN EFFECT IN ITS REGULAR BOOKS OF A CCOUNTS OR ADJUSTED WHILE PREPARING THE BALANCE SHEET OF THE CO MPANY AS ON 31-03-2007, BUT HAD ADMITTED THE SAME BY FILING REVISED 2 ITA NO.1141/PN/2011, SHOBA ENGINEERING CO. PVT. LTD ., AURANGABAD COMPUTATION IN RESPONSE TO SPECIFIC ENQUIRIES MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE FACTS REVEALED FROM THE RECORD ARE AS UNDER. TH E ASSESSEE COMPANY FILED THE RETURN OF INCOME DECLARING THE TOTAL LOSS AT RS.2,98,952/- FOR THE A.Y. 2007-08. THE ASSESSMENT OF THE ASSESSEE IS COMPLETED U/S.143(3) OF THE INCOME-TAX ACT ON 24-12-2009 DETERMINING THE TOTAL INCOME AT RS.2,23,583/-. AS OBSERVED BY THE AS SESSING OFFICER THE ASSESSEE HAS SHOWN UNSECURED LOANS TO THE EXTENT OF RS.56,28,907/- IN THE NAME OF FOLLOWING FIRM AND ERSTWHILE DIRECTORS OF THE COMPANY: SL. NO. NAME OF THE CREDITOR AMOUNT 1 M/S. MAHAVEER ENGINEERING WORKS RS.22,00,000/ - 2 SHRI RADHAKISHAN RAMESH KATRE RS.29,16,085/ - 3 SMT. SHOBA RADHAKRISHNA KATRE RS.5,12,822/ - 3. THE ASSESSEE FURNISHED A CONFIRMATION IN RESPECT OF M/S. MAHAVEER ENGINEERING WORKS FOR RS.22,00,000/- BUT THERE WAS NO CON FIRMATION IN RESPECT OF SHRI RADHAKISHAN RAMESH KATRE AND SMT. SHOBA RADHAKRISHNA KATRE FOR UNSECURED LOANS SHOWN TO THE E XTENT OF RS.29,16,085/- AND RS.5,12,822/- I.E. TOTAL RS.34,28,907/- WHICH WERE REFLECTED IN THE BALANCE SHEET. THE ASSESSEE STATED THA T THE SAID UNSECURED LOANS WOULD BE ADJUSTED AGAINST THE UNABSORB ED ACCUMULATED LOSSES OF THE COMPANY AS PER THE MEMORANDU M OF UNDERSTANDING DATED 13-02-2007 ENTERED INTO BY THE ER STWHILE TWO DIRECTORS AND PRESENT FOUR DIRECTORS OF THE COMPANY. T HE ASSESSEE FURTHER STATED THAT THE UNSECURED LOANS WAIVED OFF BY TH E DIRECTORS WERE REMAINED TO BE ADJUSTED AGAINST THE LOSSES. THE ASSESS ING OFFICER HAS MADE THE ADDITION TO THE EXTENT OF RS.34,28,907/- AND ALS O LEVIED THE PENALTY U/S.271(1)(C) OF THE ACT. 4. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD.CIT(A). TH E LD.CIT(A) HAS OBSERVED THAT DURING THE YEAR UNDER APPEAL, THE M ANAGEMENT, 3 ITA NO.1141/PN/2011, SHOBA ENGINEERING CO. PVT. LTD ., AURANGABAD DIRECTORS AND SHARE HOLDING PATTERN OF THE COMPANY HAS CHANGED. SHRI KISHORILA RAMRAIKA, MRS. KUSUMLATA KISHORILA RAMRIKA, MR. DIVYA KISHORILA RAMRAIKA AND AJAY SITARAM AGRAWAL HAVE TAKEN OV ER THE MANAGEMENT OF THE COMPANY BY SUBSCRIBING TO 4900 UNSUB SCRIBED EQUITY SHARES OF RS.100/- EACH FROM ERSTWHILE DIRECTORS S HRI R.R. KATRE AND SMT. SHOBHA R. KATRE. HE HAS FURTHER OBSERVED THAT AS PER UNREGISTERED M.O.U. DATED 13-02-2007 ENTERED INTO BETWEE N ABOVE MENTIONED NEWLY INDUCTED SHAREHOLDERS AND ERSTWHILE DIREC TORS CREDIT BALANCES UNDER THE HEAD UNSECURED LOANS AMOUNTING TO RS.29,17,425/- AND RS.5,12,822/- IN THE NAMES OF MR.R.R. KATRE AND MRS.S.R. KATRE APPEARING IN THE BALANCE SHEET OF THE COMPA NY AS ON 12- 02-2007 IS TO BE WAIVED AND ADJUSTED AGAINST UNABSORBE D ACCUMULATED LOSSES OF THE COMPANY AT RS.38,47,487. THE ASSESSEE COMP ANY HAS NOT ROUTED THE SAID WAIVER OF LOAN THROUGH PROFIT AND LOSS ACC OUNT AND HAS NOT REDUCED THE SAME FROM THE BALANCE SHEET AS ON 31- 03-2007. BEFORE THE LD.CIT(A) THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS: (1) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAS PROVIDED ALL THE DETAILS ASKED FOR BY THE A.O. AND H AS NOT CONCEALED ANY EVIDENCE OR MATERIAL AND AFTER NOTING TH E ALLEGED MISTAKE HAS FILED REVISED COMPUTATION OFFERING THE S AID AMOUNT OF LOAN WAIVED RS.34,28,907/- AS INCOME. THE TAX LIABILITY O N ACCOUNT OF THE ADDITION HAS BEEN IMMEDIATELY PAID. FROM THE FA CTS OF THE CASE AND CONDUCT OF THE APPELLANT, IT IS EVIDENT THAT THE MISTAKE, IF ANY, IS INADVERTENT AND NOT DELIBERATE AND HENCE PEN ALTY CANNOT BE IMPOSED IN VIEW OF THE RATIO LAID DOWN BY THE DECISI ONS IN THE CASES OF CIT VS. BENGAL IRON GALVANIZING WORKS (1987) 165 ITR 249 (CAL.) AND CIT VS. UNION ELECTRIC CORPORATION (2006) 281 ITR 266 (GUJ. ). (2) THE ADJUSTMENT MADE BY THE APPELLANT BY FILING RE VISED COMPUTATION ON THE BASIS OF M.O.U. WHICH WAS REMAINED TO BE CONSIDERED HAS RESULTED INTO MEAGER TAXABLE INCOME O F RS.2,23,583/- COMPARED TO THE AMOUNTS OF LOANS WAIVED. THE SAID M.O.U. CLEARLY LAID DOWN THAT (I) THE LOANS OF RS.34,28,907 /- HAVE TO BE WAIVED AND (II) THE SAME ARE TO BE ADJUSTED AGAIN ST UNABSORBED LOSSES AS PER BOOKS AMOUNTING TO RS.38,47,487/-. BOTH TH E CONDITIONS ARE TO BE GIVEN EFFECT TO SIMULTANEOUSLY AND THE EFFECT OF THE SAME IS ADDITION OF RS.4,67,420/- I.E. TO THE EXTENT OF DIFFERENCE BETWEEN AMOUNT OF LOAN WAIVED RS.34,28,907/- AND ALLOWABLE DEPRECIATION AND BUSINESS LOSS AS PER INCOME TAX ACT , 1961 OF RS.29,61,487/-. (3) IN THE PRESENT JUDGMENT DATED 30/09/2010 IN THE CASES OF EMPLOYEES OF DAIMLER CHRYESLER A.G., GERMANY, HON'BLE ITAT, PUNE 4 ITA NO.1141/PN/2011, SHOBA ENGINEERING CO. PVT. LTD ., AURANGABAD A BENCH (AIT-2010-433-ITAT) IT HAS BEEN LAID DOWN THAT AS THE ASSESSEE HAS FILED REVISED COMPUTATION OF INCOME PRI OR TO REASSESSMENT PROCEEDINGS INITIATED BY THE REVENUE, THE PENALTY IS NOT LEVIABLE. THE HON'BLE ITAT HAS FURTHER STATED THAT THE OVERALL CONDUCT OF THE ASSESSEE SHOWS THAT THIS IS NOT A FI T CASE FOR LEVY OF PENALTY AND ACCORDINGLY, THE PENALTY WAS CANCELLED. THE FACTS OF THE CASE OF THE APPELLANT ARE MORE OR LESS SIMILAR TO THE FACTS OF THE CASE DECIDED BY HON'BLE ITAT, PUNE. (4) IN FACT, THE LOAN OF RS.34,28,907/- WAIVED BY ERSTWHILE DIRECTORS MR. & MRS. KATRE IS A CAPITAL RECEIPT AND NOT TAXABLE IN VIEW OF THE RATIO LAID DOWN BY FOLLOWING DECISIONS, HOW EVER, THE AMOUNT HAS BEEN OFFERED TO TAX ONLY TO COOPERATE WIT H THE DEPARTMENT AND AVOID PROTRACTED LITIGATION IN VIEW O F MEAGER TAX EFFECT. 5. THE LD.CIT(A) DELETED THE PENALTY, REASONING AND FINDINGS O F THE LD.CIT(A) ARE AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS OF THE APPELLANT AND THE A.O. ON PERUSAL OF THE SAME, IT HAS BEEN NOTICED THAT THE APPELLANT HAS SU BMITTED ALL THE INFORMATION REQUIRED BY THE A.O. DURING THE ASSESSM ENT PROCEEDINGS AND HAS NOT CONCEALED ANY INFORMATION O R EVIDENCE FROM THE A.O. DURING THE ASSESSMENT PROCEEDINGS. T HE APPELLANT HAS ALSO FILED REVISED COMPUTATION OF INCOME DURING THE ASSESSMENT PROCEEDINGS AND HAS IMMEDIATELY PAID TAX ON REVISED INCOME OFFERED TO TAX ON ACCOUNT OF WAIVER OF UNSEC URED LOANS. IT IS ALSO A FACT THAT THE A.O. HAS LEVIED THE PENALTY ST ATING THAT THE APPELLANT HAS FAILED TO EXPLAIN AS TO WHY IT HAS TR EATED THE WAIVER OF LOAN AS CAPITAL RECEIPT. IN FACT DURING THE APPE LLATE PROCEEDINGS, THE APPELLANT HAS EXPLAINED WITH THE HELP OF THE DECI SIONS OF HON'BLE GUJARAT & B OMBAY HIGH COURT THAT THE WAIVER OF LOAN IS A CAPITAL RECEIPT THEREFORE, THE APPELLANT HAS CORRECTLY CLAIMED THAT IT HAS OFFERED THE SAID LOANS WAIVED TO TAX ONLY TO AVOI D PROTRACTED LITIGATION AND ALSO IN VIEW OF MEAGER TAX EFFECT. THE ISSUE ABOUT TAXABILITY OF THE SAID CAPITAL RECEIPT ON ACCOUNT O WAIVER OF LOANS IS CERTAINLY A DEBATABLE ISSUE ON WHICH TWO VIEWS ARE PO SSIBLE. IT IS ALSO SETTLED LAW THAT IN RESPECT OF ADDITIONS MADE ON DEBATABLE ISSUES WHERE TWO VIEWS ARE POSSIBLE AND ALSO WHERE DECISIONS ARE AVAILABLE IN FAVOUR AND AGAINST THE ASSESSEE, PENALTY U/S.271(C) IS NOT LEVIABLE. THE ABOVE PROPOSITION OF LAW IS ALSO SU PPORTED BY THE DECISIONS RELIED ON BY THE APPELLANT. IN VIEW OF THE ABOVE FACTS OF THE CASE AND OVERALL CONDUCT OF THE APPELLANT, I AM OF THE CONSI DERED VIEW THAT THIS IS NOT A FIT CASE FOR LEVYING PENALTY U/S. 271(C) OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION AND VARIOUS DECISIONS RELIED ON BY THE APPELLANT, THE PENALTY OF RS.11,54,170/- LEVIED BY THE A.O . U/S.271(C) IS CANCELLED. THE A.O. IS DIRECTED ACCORDINGLY. 6. THE REVENUE IS IN APPEAL BEFORE US. WE HAVE HEARD THE LD. DR. NONE WAS PRESENT FOR THE ASSESSEE. WE FIND THAT THE AS SESSING OFFICER LEVIED THE PENALTY ON THE AMOUNT SHOWN AS OUTSTANDING IN THE BALANCE SHEET OF THE ASSESSEE COMPANY WHICH WAS ADMITTEDLY PER TAINING TO THE 5 ITA NO.1141/PN/2011, SHOBA ENGINEERING CO. PVT. LTD ., AURANGABAD ERSTWHILE TWO DIRECTORS OF THE ASSESSEE. THERE IS THE CH ANGE IN THE MANAGEMENT AS WELL AS SHARE HOLDING PATTERN AND THE ER STWHILE TWO DIRECTORS. MR.R.R. KATRE AND MRS.S.R. KATRE ARE NO MORE TH E SHARE HOLDERS. AS RIGHTLY OBSERVED BY THE LD.CIT(A) EVEN IF THE ADDITION IS MADE TO THE TOTAL INCOME OF THE ASSESSEE WHICH HAS BEEN ALSO ADMITTED BY THE ASSESSEE BY TREATING THE WAIVER OF THE LOANS AS A INCOME AND BUT IT IS DEBATABLE ISSUE WHETHER IT IS CAPITAL OR REVENUE IN NAT URE AS THE SAME WAS ON ACCOUNT OF CHANGE IN THE PATTERN OF SHARE HOLDING . THE PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS THAN THE ASSE SSMENT PROCEEDINGS AND EVEN THOUGH THE ASSESSMENT PROCEEDING S CAN BE TAKEN INTO CONSIDERATION IN THE PENALTY PROCEEDINGS BUT IF ISSUE IS DEBATABLE AND EVEN IF THE ADDITION IS ACCEPTED BY THE ASSESSEE AS IN PRESENT CASE, IN OUR OPINION THERE IS NO JUSTIFICATION TO PENALIZE THE ASSES SEE AS IS DONE IN THE PRESENT CASE. IN OUR OPINION, NO INTERFERENCE IS C ALLED FOR IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 22-04-2013 SD/- SD/- (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER RK/PS PUNE, DATED: 22 ND APRIL, 2013 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A), AURANGABAD 4 THE CIT, AURANGABAD 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE