KISHORE M. NAGRECHA, MUMBAI V. DCIT 12(2), MUMBAI

ITA 1217/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3580 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MURLI
• Assessee Lawyers: R N VASANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI , , BEFORE SHRI RA J ENDR A , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 1217 /MUM/201 4 (ASSESSMENT YEAR: 200 6 - 07 ) KISHORE M NAGRECHA, C/O RAJSI BROS, FE R N HOUSE, COLABA BAUSWAY, SAHAID BHAGAT SINGH ROAD, OPP ELECTRIC HOUSE, MUMBAI - 400 039 . PAN: AA APN 7273 L VS DCIT - 12 ( 2 ) , AAY AKAR BHAVAN, M K ROAD, MUMBAI 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH S SHETTY & SHRI R N VASANI RESPONDENT BY : SHRI M MURLI /DATE OF HEARING : 02 - 0 3 - 201 6 / DATE OF PRONOUNCEMENT : 31 - 05 - 2016 ORDER , : PER AMIT SHUKLA , J M: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 06 .12.2013, PASSED BY CIT(A) - 23, MUMBAI IN RELATION TO THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C). 2 KISHORE M NAGRECHA ITA 1217 /MUM/201 4 2. THE ASSESSEE IS MAINLY AGGRIEVED BY LEVY OF PENALTY OF RS.33,57,791/ - ON ACCOUNT OF DISALLOWANCE CLAIM OF LOSS BY THE ASSESSEE ON GOODS LOST IN TRANSI T. 3. BRIEFLY STATED, THE RELEVANT FACTS AS CULLED OUT FROM THE ORDER OF THE CIT(A) ARE THAT, THE ASSESSEE IN ITS PROPRIETARY CONCERN, M/S SANDHEERE EXPORTS HAD CLAIMED EXPENSES OF RS.99,75,614/ - WHICH WAS DEBITED TO THE PROFIT & LOSS ACCOUNT TOWARD S GOODS LOST IN TRANSIT . THE ASSESSEE IN HIS BALANCE SHEET HAD CLASSIFIED THIS AMOUNT UNDER THE HEAD SUNDRY CREDITORS IN THE NAME OF ICICI LOMBARD GENERAL INSURANCE CO. LTD. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT HE HAS EFFECTED AN EXPORTS SALES OF CEMENT FROM KAKINADA PORT IN WHICH ASSESSEES CONSIGNMENT TO THE 3 CUSTOMERS ABROAD TO MORANI , THE DETAILS OF WHICH ARE AS UNDER: - SR. N DT/INVOICE NO. PARTYS NAME QUANTITY SHIPPIN G BILLS NO. AMOUNT (EURO) 1 21/01/2006 SE/006/2005 - 06 M V ABASSE SIC HACHIM FRERES 1500 MT/ 30000 BAGS 6100069/ 25.01.2006 121050 2 21/01/2006 SE/004/2005 - 06 ETS AMIT MINIHADJI MBECHEZI 1500 MT/ 30000 BAGS 6100067/ 25.01.2006 121050 3 21/01/2006 SE/0 09/2005 - 06 MAGASIN CHARJJ HOUSSEN 2500 MT/ 50000 BAGS 6100100/ 31.01.2006 201750 AS PER THE ASSESSEE, SUCH CONSIGNMENTS WHICH WERE DISPATCHED, REACHED THE PORT OF DESTINATION EITHER PARTLY IN DAMAGED CONDITION OR IN SHORT - SHIPMENT. THE VALUE OF THE GO ODS LOST IN TRANSIT AMOUNTING TO RS.99,75,614/ - WAS DEBITED TO THE P & L A/C. WHICH WAS MAINLY ON ACCOUNT OF SHORT SHIPMENT OF CEMENT. THE ASSESSEE FURTHER STATED THAT THE LOSS IN SHIPMENT WAS ASSESSED ABROAD BY INSURANCE AGENT AND ON RECEIVING THE SAID I NFORMATION; HE LODGED HIS CLAIM FOR INSURANCE MONEY WITH ICICI LOMBARD GENERAL INSURANCE CO. LTD. THE ORIGINAL CLAIM MADE BY THE ASSESSEE WITH ICICI LOMBARD VIDE CLAIM BILL DT. 10.05.2006 WAS FOR 3 KISHORE M NAGRECHA ITA 1217 /MUM/201 4 RS.1,61,49,525/ - WHICH WAS SUBSEQUENTLY REDUCED TO RS.1,03,8 0,245/ - IN HIS CLAIM DT.12.06.2006. THE ASSESSEE FURTHER REDUCED THE CLAIM FOR INSURANCE TO RS.99,75,614/ - WHICH IS THE FIGURE APPEARING IN THE P & L A/C. 4. FROM THE PERUSAL OF THE DOCUMENTS, AO NOTED VARIOUS FACTS WHICH HAS BEEN DISCUSSED IN PARA 3.3 OF HIS ORDER AND OBSERVED THAT THOUGH AMOUNT WAS DEBITED TO THE TRADING AND PROFIT AND LOSS ACCOUNT, HOWEVER, THIS WAS ONLY THE BOOK LOSS RECORDED BY THE ASSESSEE AND THERE WAS NO ACTUAL MONETARY LOSS WHICH HAS CAUSED TO THE ASSESSEE DUE TO THE SHORT SHIPPIN G OF EXPORTS UP TILL NOW. THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM OF THE CUSTOMERS THAT THERE WAS SHORT SHIPMENT OF GOODS. IT HAS ONLY LODGED HIS CLAIM FOR INSURANCE MONEY FOR GOODS LOST WITH THE ICICI LOMB A RD BASED ON THE LOSS ASSESSMENT REPORT OF AN INSURANCE AGENT ABOARD. THE ICICI LOMBARD HOWEVER APPEARS TO HAVE REJECTED THE ASSESSEES CLAIM ON TECHNICAL GROUND AND EVEN BEFORE THE C ONSUMER FORUM ALSO TH E MATTER WAS DECIDED AGAINST THE ASSESSEE ON TECHNICAL REASONS ONLY. AFTER REPRODUCING THE ASSESSEES SUBMISSION OF PARA 3.4 OF THE ASSESSMENT ORDER, HE FINALLY HELD THAT GENUINENESS OF THE ASSESSEES CLAIM HAS NOT BEEN PROVED AND ACCORDINGLY HE DISALLOWED THE CLAIM OF RS.99,25,614/ - AFTER DETAILED DISCUSSION. THIS DISALLOWANCE AS STATED BY THE ASSESSEE STANDS CONFIRMED FROM THE STAGE OF THE TRIBUNAL. 5. DURING THE COURSE OF THE PENALTY PROCEEDINGS, ASSESSEE AGAIN FURNISHED DETAIL EXPLANATION STATING THAT , HE HAS NOT SUBMITTED ANY INACCURATE PARTICULARS BECAUSE THE LOSS CLA IMED WAS BASED ON ACTUAL EVENTS WHICH WERE SUPPORTED BY SURVEYOR CERTIFICATE AND OTHER DOCUMENTS FILED WITH THE AO. THE ASSESSEES EXPLANATION IN THIS REGARD IS REPRODUCED HEREUNDER: 4 KISHORE M NAGRECHA ITA 1217 /MUM/201 4 DURING THE YEAR UNDER REVIEW THE APPELLANT EXPORTED GOODS W ORTH RS.13,54,07,441/ - . OUT OF THESE CERTAIN GOODS WERE LOST IN TRANSIT AND PARTLY REACHED THE DESTINATION IN DAMAGED CONDITION. DUE TO SHORT SUPPLY AND DAMAGED CONDITION, THE CONCERNED CUSTOMERS DID NOT ACCEPT THE CONSIGNMENT, CONSEQUENTLY THE APPELLANT S UFFERED A LOSS, WHICH WAS ASSESSED BY THE APPROVED VALUER AT THE PORT OF DESTINATION AND ACCORDINGLY THE APPELLANT WRITTEN OFF THE LOSS OF RS.99,75,614/ - IN HIS BOOKS OF ACCOUNT. THESE FACTS AND SUPPORTING DOCUMENTS WERE FILED ON THE RECORDS OF ASSESSING O FFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE AFORESAID LOSS HAS BEEN DISALLOWED BY THE AO, THE SAID DISALLOWANCE HAS BEEN CONFIRMED BY CIT(A) AND HON. ITAT. APPELLANTS APPEAL IS PENDING BEFORE THE HON. BOMBAY HIGH COURT. 6 . THE AO RELYING UPON TH E FINDING GIVEN ON THE QUANTUM SIDE LEVIED THE PENALTY OF RS.33,57,791/ - . AGAIN BEFORE THE CIT(A), DETAILED SUBMISSIONS HAVE BEEN MADE WHICH HAS BEEN INCORPORATED BY THE CIT(A) FROM PAGES 5 TO 9 OF THE APPELLATE ORDER , BUT LD CIT(A) TOO HAS CONFIRMED THE P ENALTY ON THE GROUND THAT CLAIM MADE BY THE ASSESSEE HAS NOT BEEN SUBSTANTIATED AND ALSO HAS FAILED TO PROVE THAT SUCH AN EXPLANATION IS BONA FIDE . 7 . AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RELEVANT FACTS AND MATERIAL BEFORE US, WE FIND THAT , THE 5 KISHORE M NAGRECHA ITA 1217 /MUM/201 4 ASSESSEE HAD CLAIMED THE LOSS/EXPENDITURE OF RS.99,75,614/ - WHICH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT TOWARDS GOODS LOST IN TRANSIT. THE OBSERVATION IN THE IMPUGNED APPELLATE ORDER IN THIS REGARD IS REPRODUCED HERE UNDER: - THE ASSESSEE IN HIS EXPLANATION FOR THE DEBIT ENTRY OF RS.99,75,614/ - IN THE TRADING, PROFIT A LOSS A/C. TOWARDS GOODS LOST IN TRANSIT, CONFIRMED IN HIS LETTER DT. 08.09.2008 THAT HE HAD RECEIVED THE FULL PAYMENT FROM THE CUSTOMERS TOWARDS THE CEMENT EXPORTED, S INCE THESE WERE ADVANCE PAYMENTS MADE BY THEM. HENCE, THOUGH THE AMOUNT WAS DEBITED TO THE TRADING PROFIT A LOSS A/C, THIS WAS ONLY THE BOOK LOSS RECORDED BY THE ASSESSEE AND NO SHORT SHIPPING OF EXPORTS UP TILL NOW. ACCORDING TO THE A.O., THE ASSESSEE COU LD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE CLAIM OF THE CUSTOMERS OF THE ASSESSEE FOR SHORT SHIPMENT OF GOODS. THE ASSESSEE APPEARED TO HAVE LODGED HIS CLAIM FOR INSURANCE MONEY FOR GOODS LOST WITH THE ICICI LOMBARD BASED ON THE LOSS ASSESSMENT REPORT O F AN INSURANCE AGENT ABROAD. THE ICICI LOMBARD HAD, HOWEVER, REJECTED THE ASSESSEES CLAIM ON TECHNICAL GROUNDS. THE A.O. OBSERVED FROM THE COPIES OF THE DOCUMENTS PRODUCED THAT THE ASSESSEE HAD FILED A COMPLAINT AGAINST THE DECISION OF ICICI LOMBARD WITH T HE 'MAHARASHTRA STATE CONSUMER DISPUTE REDRESSAL COMMISSION'. THE RESULT OF THIS COMPLAINT WAS STILL AWAITED. TAKING INTO ACCOUNT ALL THESE FACTS, THE A.O. 6 KISHORE M NAGRECHA ITA 1217 /MUM/201 4 OBSERVED THAT THE CLAIM OF THE ASSESSEE FOR EXPENSES DEBITED TO THE TRADING PROFIT A LOSS A/C. WAS I NCORRECT. THE ASSESSING OFFICER, THEREFORE, ISSUED SHOW - CAUSE NOTICE CALLING FOR THE ASSESSEE'S EXPLANATION IN THE MATTER. 2.1.5 THE ASSESSEE EXPLAINED THAT HE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE LOSS ON ACCOUNT OF GOODS LOST IN TRANSIT N EEDED TO BE CLAIMED AND ALLOWED IN THE RELEVANT PREVIOUS YEAR ITSELF. ACCORDING TO THE A.O., THE ASSESSEE HAD RECEIVED THE FULL PAYMENT FROM THE CUSTOMERS AND HE HAD NEITHER ACKNOWLEDGED THE LIABILITY IN HIS BOOKS TOWARDS THE CUSTOMERS NOR PAID THEM THE AM OUNT. THE ASSESSEE HAD ALSO NOT FOREGONE HIS INSURANCE CLAIM AND THE MATTER WAS STILL TO BE DECIDED. THE AMOUNT DEBITED TO THE TRADING, PROFIT A LOSS A/C. WAS EQUAL TO THE AMOUNT OF INSURANCE CLAIMED. NO LIABILITY ACCRUED TO THE ASSESSEE DURING THE PREVIO US Y EAR BUT MIGHT ARISE IN FUTURE WHICH WOULD BE A CONTINGENT LIABILITY'. THE AMOUNT DEBITED TO THE P & L A/C WAS NOT AN ACTUAL EXPENDITURE INCURRED AND IT COULD AT BEST BE CALLED ONLY A RESERVE MADE IN ANTICIPATION OF A CONTINGENT LIABILITY. EVEN FOR SETT LEMENT OF THE CONTINGENT LIABILITY, THE INSURANCE CLAIM OUTSTANDING WOULD HAVE TO BE TAKEN INTO ACCOUNT. THE ASSESSE S CLAIM FOR INSURANCE HAD NOT BEEN REJECTED SO FAR BY THE MAHARASHTRA STATE CONSUMER DISPUTES REDRESSAL COMMISSION. THE AO ACCORDINGLY DISA LLOWED THE AMOUNT 7 KISHORE M NAGRECHA ITA 1217 /MUM/201 4 OF RS.99,75,614// - . 8 . FROM THE ABOVE IT IS SEEN THAT T HE ASSESSEES CLAIM HAS BEEN DENIED MAINLY ON THE GROUND THAT , FIRSTLY, THAT THE ASSESSEE HAD RECEIVED FULL PAYMENT F ROM THE CUSTOMERS TOWARDS THE CEMENT EXPORTED AS ADVANCE PAYMENT AND NO MONETARY LOSS HAD BEEN CAUSED TO THE ASSESSEE AND SECONDLY , THE ASSESSEE LODGED A CLAIM WITH AN INSURANCE COMPANY WHICH HAS BEEN REJECTED. THE ASSESSEE BEFORE THE AUTHORITIES HAVE SUBMITTED THE LETTERS STATING THAT CUSTOMERS HAD PRESSED FOR THEIR P ENDING AMOUNT AND ASSESSEE HAS NOT FORGONE HIS INSURANCE CLAIM . T HIS FACT HAS BEEN NOTED BY THE FIRST APPELLATE AUTHORITY IN PARA 2.1.6. THUS, ON THE FACTS OF THE CASE, AND IN THE LIGHT OF VARIOUS EVIDENCES AND DOCUMENTS, THE PREPONDERANCE OF PROBABILITY L IES IN FAVOUR OF THE ASSESSEE INDICATING THAT THE CLAIM MADE BY THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE BY THE AO EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR DURING THE COURSE OF PENALTY PROCEEDINGS . R EJECTION OF A CLAIM ON TECHNICAL GROUNDS BY THE INSURANCE COMPANY OR BY CONSUMER FORUM, CANNOT BE HELD AGAINST THE ASSESSEE. T HE EXPLANATION GIVEN BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW HAS NOT BEEN FOUND TO BE FALSE OR ERRONEOUS BY BRINGING ANY COGENT MATERIAL ON RECORD AND, THEREFORE, T HE PRIMARY ONUS OF THE CLAIM MADE IN THE PROFIT AND LOSS ACCOUNT HAS BEEN DISCHARGED . MOREOVER ASSESSEE HAS PRODUCED EVIDENCES IN SUPPORT WHICH HAS 8 KISHORE M NAGRECHA ITA 1217 /MUM/201 4 NOT BEEN HELD TO FALSE. MERELY BECAUSE IN QUANTUM PROCEEDINGS THIS MATTER HAS BEEN DECIDED AGAINST THAT DOES NOT MEAN THAT IN PENALTY PROCEEDINGS IT CAN BE HELD THAT ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM, B ECAUSE, NONE OF THE EXPLANATIONS AND EVIDENCES FILED BY THE ASSESSEE HAVE BEEN FOUND TO BE FALSE. THEREFORE, IT CANNOT BE HELD THAT ASSESSEE HA S FURNISHED ANY INACCURATE PARTICULARS OF INCOME OR HAS CONCEALED THE PARTICULARS OF HIS INCOME. ACCORDINGLY, PENALTY LEVIED BY THE AO AND CONFIRMED BY THE CIT(A) STANDS DELETED. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY , 201 6 SD/ - SD/ - ( ) ( ) ( RA J ENDR A ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDIC IAL MEMBER MUMBAI, DATE: 31 ST MAY , 201 6 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3 ) THE CIT(A) - 23 , MUMBAI. 4 ) THE C IT - 12 , MUMBAI. 5 ) , , / THE D.R. A BENCH, MUMBAI. 9 KISHORE M NAGRECHA ITA 1217 /MUM/201 4 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS