Agarwal Developers (P) Ltd., New Delhi V. ITO, New Delhi

ITA 1166/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6859 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 28-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: SUMIT GOE L
• Keywords: Bad and doubtful debts
• Section: 143(3); 37(1)

Judgement Text

1 ITA NO. 1166/DEL/2013 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.-1166/DEL/2013 (ASSESS MENT YEAR-2008-09) AGARWAL DEVELOPERS (P) LTD. M-1, NDSE, PART II NEW DELHI AAACA2520N (APPELLANT) VS ITO WARD 1(2), NEW DELHI (RESPONDENT) APPELLANT BY SH. SUMIT GOEL, CA. RESPONDENT BY SH. K. K. JAISWAL, DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 11/1/2013 PASSED BY CIT(A)-IV, NEW DELHI. 2. THE GROUNDS OF APPEAL IS AS FOLLOWS:- 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, NO PENA LTY U/S 271(1)(C) SHOULD HAVE BEEN LEVIED ON FOLLOWING ADDI TIONS, IN LAW AS ON MERITS:- S.NO. ADDITION AMOUNT (RS.) 1 DISALLOWANCE OUT OF MISC. EXPENSES 39000.00 2 DISALLOWANCE OUT OF MAINTENANCE 12410.00 DATE OF HEARING 30.06.2016 DATE OF PRONOUNCEMENT 27.07.2016 2 ITA NO. 1166/DEL/2013 EXPENSES 3 BUSINESS ADVANCE FORFEITED, DISALLOWED. 415000.00 TOTAL 466410.00 3. THE ASSESSING OFFICER MADE ADDITION OF RS. 5,11, 410/- IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TA X ACT, 1961. THE ADDITION WAS MADE ON ACCOUNT OF LATE DEPOSIT OF TDS ON COMMISSION AMOUNTING TO RS. 45,000/-, DISALLOWANCE OF BUSINESS LOSS CLAIMED FOR FORFEITURE OF BUSINESS AMOUNTING T O RS. 4,15,000/-, DISALLOWANCE OF MISCELLANEOUS EXPENSES AMOUNTING TO RS. 39,000/- AND DISALLOWANCE OF MAINTENANCE EXPENSES PAID IN CA SH AMOUNTING TO RS.12,410/-. THE ASSESSEE COMPANY DID NOT PREFE R ANY APPEAL AGAINST THE ASSESSMENT ORDER PASSED BY THE ASSESSIN G OFFICER. THEREFORE, THE ASSESSING OFFICER PROCEEDED TO LEVY THE PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 AND AFTER CON SIDERING THE REPLY OF THE ASSESSEE COMPANY, LEVIED PENALTY OF RS .1,60,000/-. 4. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE FIL ED THE APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE AP PEAL OF THE ASSESSEE AND CONFIRMED THE PENALTY IN RESPECT OF TH REE ADDITIONS MENTIONED IN THE GROUND BEFORE THIS TRIBUNAL. 5. THE LD. AR SUBMITTED THAT THE INITIATION OF PENA LTY AND PENALTY NOTICES ARE DEFECTIVE. THE ASSESSMENT ORDER UNDER S ECTION 143(3) OF THE ACT WAS PASSED ON 01.12.2010. IN ASSESSMENT ORD ER, THE ASSESSING OFFICER HAS NOT SPECIFIED ANY SPECIFIC CH ARGE WHETHER IT IS A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF IN ACCURATE 3 ITA NO. 1166/DEL/2013 PARTICULARS OF INCOME. THE ASSESSING OFFICER SIMPLY MENTIONED AS PENALTY PROCEEDINGS U/S. 271(1)(C) ARE INITIATED F OR CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING INACCURATE PARTICU LARS OF INCOME.. THE LD. AR FURTHER SUBMITTED THAT NO SHOW CAUSE NOT ICES WERE MENTIONING THE SPECIFIC CHARGES I.E. WHETHER IT IS A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. AS PER PENALTY ORDER ALSO, IN PARA 6(IV), P AGE 5, THE ASSESSING OFFICER MENTIONED AS .THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME/FURNISHED INACC URATE PARTICULARS OF INCOME . THUS, INITIATION OF PENALTY IN ASSESSMENT ORDER UN DER SECTION 143(3) OF THE ACT AND SHOW CAUSE NOTICES AR E DEFECTIVE/INVALID IN LAW AND ARE NOT COMPETENT FOR ENABLING THE ASSESSING OFFICER TO LEVY PENALTY UNDER SECTION 271 (1)(C) FOR NOT SPECIFYING THE EXACT REASON FOR WHICH PENALTY IS IM POSED. THUS NO PENALTY CAN BE LEVIED AND THE PENALTY ORDER IS LIAB LE TO BE QUASHED. THE LD. AR RELIED UPON THE FOLLOWING AUTHORITIES: I. CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565 (KAR.) ETC. AS NOTED BY HONBLE DELHI ITAT IN FORTUNE POLYMERS INDUSTRIES (P) LTD. (ITA NO. 1036 / D / 20 13) (ORDER DTD. 16.01.2015, ON PG. 10, PARA - 8.11. (P) (Q) (R) (S) . II. SANGHAVI SAVLA COMMODITIES BROKERS (P) LTD. VS. ACIT (ITA NO. 1746/MUM/2011) HONBLE MUMBAI ITAT ORDER DTD. 22.12.2015. (PGS. 25 - 32 OF COMPILATION) (RP - 31) 4 ITA NO. 1166/DEL/2013 III. SUVAPRASANNA BHATACHARYA VS. ACIT (ITA NO. 1303 / KOL / 2010) HONBLE KOLKATTA ITAT ORDER DTD. 06.11.2015. (PGS. 33 - 52 OF COMPILATION) (RP - 52) IV. FORTUNE POLYMERS INDUSTRIES (P) LTD. VS. DCIT. (ITA NO. 1036/D/2013) HONBLE DELHI ITAT ORDER DTD. 16.0 1.2015. (PGS. 53 - 64 OF COMPILATION) (RP - 62 - 64) THUS, SINCE, THE SHOW CAUSE NOTICES ARE INVALID; A LL SUBSEQUENT PROCEEDINGS ARE ALSO UNSUSTAINABLE IN LA W. 6. THE LD. AR FURTHER SUBMITTED THAT THE PENALTY UN DER SECTION 271(1)(C) OF THE ACT CANNOT BE LEVIED ON MERITS ALS O AS ON DISALLOWANCES OF BUSINESS ADVANCE FORFEITED OF RS. 4,15,000/-. THE ASSESSEE HAS BEEN PURCHASING AGRICULTURAL LAND, CON SOLIDATING THE SAME, DIVIDING IT INTO DIFFERENT SIZES OF LANDS AND THEN TO SELL IT. IN THIS ACTIVITY, HE HAS TO NEGOTIATE THE VILLAGERS, T HE OCCUPIERS, THE CLAIMANTS OF OWNERSHIP AND OTHER SIMILAR PERSONS. H E HAS TO GIVE ADVANCES TO SUCH PERSONS. SOMETIMES SUCH ADVANCES S TAND FORFEITED BY THE RECIPIENTS FOR VARIOUS REASONS. SU CH FORFEITED ADVANCES ARE CLAIMED AS EXPENDITURE. DURING THE YEA R, SUCH FORFEITED ADVANCES CLAIMED WERE OF RS. 2,43,65,000/ -, OUT OF WHICH THE AO ACCEPTED ALL EXCEPT RS. 4,15,000/-. ALL ARE OPENING ADVANCES, THE GENUINENESS OF WHICH STANDS ACCEPTED, IN RESPECTIVE YEARS. DURING THE YEAR, THE ASSESSEE CLAIMED THE SA ME AS FORFEITED ADVANCES BEING UNRECOVERABLE. IT IS IN THE NATURE O F BAD DEBT WHICH HAS BEEN W/OFF IN THE BOOKS ALSO. THERE IS NO CONCE ALMENT OF INCOME IN RESPECT OF THESE FORFEITED ADVANCES. ALL FACTS STANDS 5 ITA NO. 1166/DEL/2013 DISCLOSED. NO INACCURATE PARTICULARS OF INCOME FURN ISHED. IT IS A CASE OF SIMPLE DISALLOWANCE OF EXPENSES UNDER THE H EAD IN WHICH MOST OF SIMILAR EXPENSES HAVE BEEN ALLOWED DURING T HE YEAR AS WELL AS IN EARLIER YEARS (EARLIER YEAR RS. 2.80 CRORES). THE LD. AR RELIED ON THE FOLLOWING AUTHORITIES: I. CIT VS. RELIANCE PETROPRODUCTS (P) LTD. 322ITR 1 58 (SC) HELD THAT MAKING INCORRECT CLAIM DOES NOT AMO UNT TO CONCEALMENT OF PARTICULARS II. CIT VS. KEVIN PROCESS TECHNOLOGIES (P) LTD. 40 TAXMANN.COM 249 (GUI.) (ITA NO. 537/2013, ORDER DTD . 01.07.2013) HELD THAT IN ABSENCE OF ANY FINDING OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, MER E REJECTION OF ASSESSEE'S CLAIMS UNDER SECTIONS 36(L)(VII) AND 37(1) RELATING TO BAD DEBTS AND PRIOR PERIOD EXPENSES WOULD NOT LEAD TO LEVY O F PENALTY UNDER SECTION 271(L)(C). III. CIT VS. DABWALI TRANSPORT CO. IN ITA NO. 872/ 2010, ORDER DTD. 15.03.2011 OF P&H HIGH COURT HELD THAT W HERE EXPENSES CLAIMED COULD NOT BE SUBSTANTIATED UPTO HI GH COURT, BUT THE MERE FACT THAT THE ASSESSEE COULD NOT FURNISH E VIDENCE IN SUPPORT OF EXPENSES CLAIMED WAS NOT BY ITSELF ENOUG H TO HOLD THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS O F INCOME. IV. DURGA KAMAL RICE MILLS VS. CIT 265 ITR 25 (CAL. ) V. CIT VS. BACARDI MARTINI LTD. 288 ITR 585 (DEL.) 6 ITA NO. 1166/DEL/2013 VI. BURMAH SHELL OIL STORAGE AND DISTRIBUTING CO. O F INDIA LTD. VS. ITO 112 ITR 592 (CAL.) VII. CIT. VS. AMAR NATH230 ITR 619 (ALL.) VIII. CIT. VS. CALCUTTA CREDIT CORPN. 166 ITR 29 (C AL.) IX. CIT VS. LOTUS TRANS TRA VELS (P) LTD.177 TAXMAN 37 (DEL.) THUS, THE DISALLOWANCE OF CLAIM OF DEDUCTION IS NOT SUFFICIENT FOR IMPOSITION OF PENALTY. 7. THE LD. AR FURTHER SUBMITTED IN RESPECT OF DISAL LOWANCE OF EXPENSES PAID IN CASH THAT OUT OF TOTAL MISC. EXPEN SES OF RS. 84,793/-, THE CASH EXPENSES OF RS. 39,000/- DISALLO WED ON THE GROUND THAT NO BILL, VOUCHERS PRODUCED. OUT OF TOTA L MAINTENANCE EXPENSES OF RS.8,08,027/-, DISALLOWED RS. 12,410/- FOR WANT OF VOUCHERS. THE VOUCHERS COULD NOT BE PRODUCED SINCE VOUCHER FILE BECAME UNTRACEABLE. AN ASSESSEE DECLARING INCOME OF RS. 48.12 LACS CANNOT BE EXPECTED TO CLAIM BOGUS EXPENSES OF RS. 3 9,000/-AND RS. 12,410/-. THERE IS NO CONCEALMENT OF INCOME. THUS, IT IS A CASE OF DISALLOWANCE OF EXPENSES INCURRED BONAFIDE. SUCH DI SALLOWANCE IS NOT IN THE NATURE OF CONCEALMENT. THE LD. AR RELIED ON THE FOLLOWING AUTHORITIES: I. CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (SUPRA) WHEREIN IT IS HELD THAT NO INFORMATION GIVEN IN RET URN FOUND TO BE 7 ITA NO. 1166/DEL/2013 INCORRECT AND MAKING INCORRECT CLAIM DOES NOT AMOUN T TO CONCEALMENT OF PARTICULARS. II. CIT VS. DABWALI TRANSPORT CO. (SUPRA) HELD THAT THE MERE FACT THAT THE ASSESSEE COULD NOT FURNISH EVIDE NCE IN SUPPORT OF EXPENSES CLAIMED WAS NOT BY ITSELF ENOUGH TO HOLD T HAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. 8. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND THE CIT(A). THE LD. DR COULD NOT DISTINGUISH THE CA SE LAWS CITED BY THE LD. AR. 9. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH T HE PARTIES. IN THE SHOW CAUSE NOTICE DATED 01/12/2010 THERE WAS NO SPECIFIC CHARGES AS RELATES TO CONCEALMENT OF INCOME OR FURN ISHING OF INACCURATE PARTICULARS OF INCOME AS RELATES TO BUSI NESS ADVANCE AS IT WAS FORFEITED AND THE SAME WERE ACCEPTED IN RESP ECTIVE YEARS. THEREFORE, THERE WAS NO CONCEALMENT ON THE PART OF THE ASSESSEE. THIS WAS A SIMPLE CASE OF DISALLOWANCE OF EXPENSES UNDER THE HEAD IN WHICH MOST OF SMALLER EXPENSES HAVE BEEN ALLOWED DURING THE YEAR AS WELL AS IN THE EARLIER YEARS. THUS, THE AU THORITIES CITED BY THE LD. AR ARE APPLICABLE IN THE PRESENT CASE. IN R ESPECT OF MISCELLANEOUS EXPENSES, THE FORFEITURES WERE NOT PR ODUCED SINCE THEY WERE UNTRACEABLE AND THE SAME WAS NOT CONCEALE D BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. THUS, THERE IS NO CONCEALMENT. THUS, SECTION 271(1)(C) OF THE ACT WA S NOT CORRECTLY INVOKED BY THE ASSESSING OFFICER. THE CIT(A) ALSO OVERLOOKED THE ACTUAL INTENTION OF THE PENALTY PROCEEDINGS WHICH C LEARLY SET OUT 8 ITA NO. 1166/DEL/2013 THAT WHEN THERE IS INACCURATE PARTICULARS OR CONCEA LMENT ON PART OF THE ASSESSEE, THEN THE SAME SHOULD BE PROCEEDED. BU T IN THE PRESENT CASE, THE ASSESSEE HAS DISCLOSED ALL THE FA CTUAL ASPECTS BEFORE THE ASSESSING OFFICER WHICH CANNOT BE STATED THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR THE ASSESSE E FURNISHED INACCURATE PARTICULARS OF INCOME. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 27 TH OF JULY, 2016. SD/- SD/- (S.V. MEHROTRA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27/07/2016 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR ITAT NEW DELHI 9 ITA NO. 1166/DEL/2013 DATE 1. DRAFT DICTATED ON 30.06 2016 PS 2. DRAFT PLACED BEFORE AUTHOR 30.06.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 07.2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 27.07.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 27.07.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.