ACIT 9(3), MUMBAI V. SHAMAK INTERNATIONAL P. LTD, MUMBAI

ITA 1286/MUM/2012

• Counselvise Citation: 128619914 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 20-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 24-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: G L PURSNANY
• Keywords: Question of law; Bad and doubtful debts

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI R.C.SHARMA , ACCOUNTANT MEMBER ITA NO.1286/MUM/2012 (A.Y.2006-07) DY. COMMISSIONER OF INCOME TAX, CIR. 9(3), ROOM NO.229, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 (APPELLANT ) VS. M/S.S.H.A.M.K INTERNATIONAL PVT. LTD., SUITE 101, GOLDEN WALLS, 18 TH ROAD, KHAR (W), MUMBAI 400020 PAN:AABCM 9688A (RESPONDENT) C.O. NO.32/MUM/2013 (ARISING OUT OF ITA NO.1286/MUM/2012,A.Y. 2006-07) M/S.SHAMK INTERNATIONAL PVT. LTD., SUITE 101, GOLDEN WALLS, 18 TH ROAD, KHAR (W), MUMBAI 400020 PAN:AABCM 9688A (CROSS OBJECTOR ) VS. DY. COMMISSIONER OF INCOME TAX, CIR. 9(3), ROOM NO.229, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 (APPELLANT IN APPEAL) REVENUE BY : SHRI NEIL PHILIP ASSESSEE BY : SHRI G.L.P URSNANY DATE OF HEARING : 20/10/2014 DATE OF PRONOUNCEMENT : 20 /10/2014 ORDER PER I.P.BANSAL, J.M: THE APPEAL IS FILED BY THE REVENUE AND CROSS OBJECT ION IS FIELD BY THE ASSESSEE. BOTH ARE DIRECTED AGAINST ORDER PASSED BY LD. CIT(A) DATED 14/12/2011 FOR ASSESSMENT YEAR 2006-07. GROUNDS OF APPEAL READ AS UNDER: GROUNDS OF APPEAL OF THE REVENUE: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED OF RS.48,18,98 3/- U/S. 271(1)(C) OF THE I.T. ACT, 1961 IGNORING THE FACT THAT THE ASSESSEE FAILE D TO SUBSTANTIATE AND PROVE THAT ITA NO.1286/MUM/2012 (A.Y.2006-07) 2 THE EXPLANATION OFFERED WAS BONAFIDE AND NOT FALSE AS ENVISAGED IN THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX A CT. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. GROUNDS OF CROSS OBJECTION OF THE ASSESSEE: LEARNED ACIT -9(3) HAS ERRED IN MATTER OF FACT AS W ELL LAW IN LEVYING PENALTY OF RS.48,18,193/- U/S. 271(1)(C) OF INCOME TAX ACT 196 1 IGNORING THAT 1. ALL MATERIAL FACTS ARE FURNISHED WITH RETURN OF INCOME AND THAT NO FRESH EVIDENCE IS GATHERED TO RELY UPON BEFORE LEVYING TH E PENALTY. 2. AN EXPLANATION SUBMITTED U/S 271(1)(C), 1-B, DUL Y SUBSTANTIATED, HAS NOT BEEN PROVED TO BE FALSE. 3. ON THE SAME ISSUES, THOUGH ADDITIONS MADE U/S 14 3(3) ARE SUSTAINED FOR AY. 2000-01, 2001-02, 2002-03 & 2004-05:- I.FOR A.Y. 2004-05, I.T.A.T. BENCH F ORDER NO. I. T.A. NO. 2337/MUM/2010 DATED OF THE DEPARTMENT HAS BEEN DISMISSED. II. FOR A.Y. 2000-01, 2001 02 & 2002-03, PENALTY IS CANCELLED BY CIT(A) AND DEPARTMENT HAS NOT APPEALED AGAINST SUCH ORDERS. 4. FOR A.Y. 2005-06 ADDITIONS MADE ON SAME ISSUES A ND UNDER SAME CIRCUMSTANCES, BUT THE PENALTY U/S 271(1)(C) IS NOT ORDERED TO BE LEVIED. 5. RESPONDENT CRAVES LEAVE TO ADD, OMIT OR ALTER OB JECTIONS WHICH MAY BE NECESSARY. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPOR TER AND DISTRIBUTOR OF PERFUMES. ITS INCOME WAS ASSESSED AT RS.4,11,43,33 3/- AGAINST TOTAL INCOME OF RS.2,45,52,620/- AS PER RETURN OF INCOME FILED BY T HE ASSESSEE. FOLLOWING ADDITIONS WERE MADE TO THE RETURN OF INCOME FILED BY THE ASSESSEE. SR.NO. NATURE OF DISALLOWANCES /ADDITIONS AMOUNT INVOLVED (IN RS.) 01. DISALLOWANCE OF CLAIM OF BAD DEBT 1,37,69,989 02. DISALLOWANCE U/S. 36(1)(VA) 4,86,495 03. DISALLOWANCE OF PRELIMINARY & PRE-OPERATIVE EXP ENSES 1,04,473 04. DISALLOWANCE OF SOCIETY CHARGE & PROPERTY TAX 14,55,316 05. DISALLOWANCE U/S. 40(A)(IA)- CONTRACT CHARGES 4,12,000 06. DISALLOWANCE U/S.40(A)(IA)-COMMISSION 5,46,6 58 OUT OF AFOREMENTIONED ADDITIONS FOLLOWING ADDITIONS WERE SUSTAINED: ITA NO.1286/MUM/2012 (A.Y.2006-07) 3 SR.NO. NATURE OF DISALLOWANCES /ADDITIONS AMOUNT IN VOLVED (IN RS.) 01. DISALLOWANCE OF CLAIM OF BAD DEBT 1,37,69,989 02. DISALLOWANCE U/S.40(A)(IA) - COMMISSION 5, 46,658 ON THE AFOREMENTIONED ADDITIONS 100% PENALTY HAS BE EN IMPOSED ON THE TAX SOUGHT TO BE EVADED WHICH IS CALCULATED AT RS.48,18 ,983/-. THE CONCEALMENT PENALTY HAS BEEN DELETED BY LD. CIT(A) FOLLOWING H IS EARLIER ORDER RENDERED IN RESPECT OF A.Y 2000-01 2001-02, 2002-03, 2004-05 ON THE GROUND THAT THE FACTS OF THE PRESENT CASE ARE SAME AND IN EARLIER Y EARS PENALTY HAS BEEN DELETED. 3. LD. DR AFTER NARRATING THE FACTS RELYING ON PENA LTY ORDER PLEADED THAT AO WAS RIGHT IN IMPOSING THE PENALTY AND LD. CIT(A) W ITHOUT PROPERLY APPRECIATING THE FACTS AND REFERRING TO EARLIER YE ARS HAS WRONGLY DELETED THE PENALTY. HE SUBMITTED THAT FACTS OF PRESENT CASE ARE ENTIRELY DIFFERENT FROM THE EARLIER YEARS. THUS, IT WAS PLEADED BY LD. DR THAT PENALTY HAS WRONGLY BEEN DELETED BY LD. CIT(A) AND HIS ORDER SHOULD BE SET ASIDE AND THAT OF AO SHOULD BE RESTORED. 4. ON THE OTHER HAND, LD. AR REFERRED TO PAGE-1 O F THE PAPER BOOK VIDE WHICH COPY OF ORDER OF HONBLE BOMBAY HIGH COURT D ATED 25/2/2013 IN INCOME TAX APPEAL NO.2163 OF 2011 IS FILED, WHEREIN THEIR LORDSHIPS HAVE ADMITTED FOLLOWING QUESTION OF LAW IN THE QUANTUM A PPEAL FILED BY THE ASSESSEE. THE SAID ORDER READ AS UNDER: IN THE HIGH COUR OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2162 OF 2011 M/S. S.H.A.M.K INTERNATIONAL PVT. LTD. -- APPELLANT V. DY. COMMISSIONER OF INCOME TAX --- RESPONDENT MR. K.B.BHUJLE FOR THE APPELLANT MR. SURESH KUMAR FOR THE RESPONDENT ITA NO.1286/MUM/2012 (A.Y.2006-07) 4 CORAM : J.. DEVADHAR & M.S. SANKLECHA, JJ DATE: 25 TH FEBRUARY, 2013 P.C. HEARD. ADMIT ON THE FOLLOWING SUBSTANTIAL QUESTION OF LAW. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE TRIBUNAL ERRED IN CONFIRMING THE ADDITION OF RS.1,37,69,989/ - MADE BY THE RESPONDENT BY WAY OF DISALLOWANCE OF BAD DEBTS/BUSINESS LOSS WRIT TEN OFF IN THE RELEVANT YEAR? (M.S. SANKLECHA, J) (J.P.DEVDHAR,J) 4.1 REFERRING TO THE AFOREMENTIONED ORDER IT WAS SU BMITTED BY LD. AR THAT IN THE CASE OF NAYAN DEVELOPERS PVT. LTD. VS. ITO VID E ORDER DATED 18/3/2011 PASSED IN ITA NO.2379/MUM/2009 THE PENALTY WAS DELE TED ON THE GROUND THAT WHEN THE QUESTION OF LAW IS ADMITTED BY HONBLE HIG H COURT THE ISSUE REGARDING ADDITION WOULD BECOME DEBATABLE AND NO PENALTY WOUL D BE EXIGIBLE. HE REFERRED TO THE COPY OF THIS DECISION FILED AT PAGE S 2 TO 4 OF THE PAPER BOOK. IT WAS FURTHER SUBMITTED THAT THE SAID DECISIONS OF TH E TRIBUNAL WAS UPHELD BY HONBLE HIGH COURT VIDE ORDER DATED 08/07/2014 REND ERED IN INCOME TAX APPEAL NO.415 OF 2012 AND REFERENCE WAS MADE TO THE FOLLOWING OBSERVATIONS: IN THE HIGH COUR OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.415 OF 2012 THE COMMISSIONER OF INCOME TAX -7 - APPELLANT V/S. M/S. NAYAN BUILDERS AND DEVELOPERS - RESPONDENT MR.ABHAY AHUJA FOR APPELLANT. MR. SANJIV M. SHAH FOR RESPONDENT CORAM : S.C. DHARMADHIKARI AND B.P.COLABAWALLA JJ. DATE : 8 TH JULY 2014 P.C.: ITA NO.1286/MUM/2012 (A.Y.2006-07) 5 1. HAVING HEARD MR. AHUJA, LEARNED COUNSEL APPEARIN G ON BEHALF OF THE APPELLANT, WE FIND THAT THIS APPEAL CANNOT BE ENTER TAINED AS IT DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. THE IMPOSITION OF PEN ALTY WAS FOUND NOT TO BE JUSTIFIED AND THE APPEAL WAS ALLOWED. AS A PROOF T HAT THE PENALTY WAS DEBATABLE AND ARGUABLE ISSUE, THE TRIBUNAL REFERRED TO THE OR DER ON ASSESSEES APPEAL IN QUANTUM PROCEEDINGS AND THE SUBSTANTIAL QUESTIONS O F LAW WHICH HAVE BEEN FRAMED THEREIN. WE HAVE ALSO PERUSED THAT ORDER DA TED 27 TH SEPTEMBER 2010 ADMITTING INCOME TAX APPEAL NO.2368 OF 2009. IN OU R VIEW, THERE WAS NO CASE MADE OUT FOR IMPOSITION OF PENALTY AND THE SAME WAS RIGHTLY SET ASIDE. THE APPEAL RAISES NO SUBSTANTIAL QUESTION OF LAW, IT IS DISMISSED. NO COST. (B.P.COLABAWALLA J.) (S.C.DHARMADHIKARI J.) 4.2 THUS, IT WAS PLEADED BY LD. AR THAT ON THE ADDI TION OF RS.1, 37,69,989/- NO PENALTY WOULD BE EXIGIBLE AND THE ORDER PASSED B Y LD. CIT(A) SHOULD BE UPHELD. 3.3 ON THE SECOND DISALLOWANCE, IT WAS SUBMITTED BY LD. AR THAT THIS RELATES TO THE ADDITION MADE BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT) AS TAX DEDUCTED WAS NOT PAID IN TIME. HE SUBMITTED THAT THE TDS WAS PAID IN IMMEDIATE PROCED ING YEAR BEFORE THE DUE DATE OF FILING THE RETURN AND AS THE SAME WAS ALLOW ABLE IN NEXT YEAR THE ADDITION WAS NOT AGITATED. HE SUBMITTED THAT IT IS NOT A CASE WHERE ANY PARTICULARS HAVE BEEN CONCEALED BY THE ASSESSEE, TH EREFORE, PENALTY HAS RIGHTLY BEEN DELETED BY LD. CIT(A). 4. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THE ORDER PASSED BY LD. CIT(A) IS NOT A SPEAKING ORDER AND LD. CIT(A) HAS RELIED UPON THE EARLIER YEARS ORDERS. T HE FACTS RELATING TO PRESENT YEAR ARE ENTIRELY DIFFERENT FROM THE FACTS OF EARLI ER YEARS. IT HAS ALREADY BEEN MENTIONED THAT PENALTY HAS BEEN SUSTAINED ONLY ON TWO ADDITIONS WHICH HAVE BEEN LISTED IN THE ABOVE PART OF THIS ORDER. SO FA R AS IT RELATES TO FIRST ADDITION OF RS.1,37,69,989/-, WE DECLINE TO INTERFERE IN THE DELETION OF PENALTY ON THE GROUND THAT QUESTION OF LAW HAS ALREADY BEEN ADMITT ED BY HONBLE HIGH COURT ITA NO.1286/MUM/2012 (A.Y.2006-07) 6 AND FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. NAYAN BUILDERS & DEVELOPERS (SUPRA) WE DECLINE TO I NTERFERE IN THE DELETION OF PENALTY ON THE SAID AMOUNT. 4.1 SO FAR AS IT RELATES TO PENALTY LEVIED ON DISA LLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT, ON THIS DISALLOWANCE ALSO PEN ALTY CANNOT BE LEVIED AS THERE IS NO FURNISHING OF INACCURATE PARTICULARS. THE AM OUNT WAS DEPOSITED BY THE ASSESSEE BEFORE THE DUE DATE OF FILING THE RETURN. IN THIS VIEW OF THE SITUATION WE DECLINE TO INTERFERE IN DELETION OF PENALTY ON T HIS DISALLOWANCE ALSO. IN VIEW OF ABOVE DISCUSSION WE DECLINE TO INTERFERE IN DELE TION OF CONCEALMENT PENALTY THOUGH FOR THE REASONS DIFFERENT FROM THE REASONS G IVEN BY LD. CIT(A). THEREFORE, THE APPEAL FILED BY THE REVENUE IS DISMI SSED. 5. IN THE CROSS OBJECTION ASSESSEE HAS MAINLY SUPPO RTED BY THE ORDER PASSED BY LD. CIT(A). SINCE THE APPEAL FILED BY THE REVENU E IS DISMISSED, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME ACADEMIC AND IS DISMISSED. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE AS WE LL AS CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/10/201 4 !' # $%& 20/10/2014 ! ' SD/- SD/- ( . . /R.C.SHARMA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; $% DATED 20/10/2014 ITA NO.1286/MUM/2012 (A.Y.2006-07) 7 ()* ()* ()* ()* +*') +*') +*') +*') / COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. (.,- / THE RESPONDENT. 3. / ( ) / THE CIT(A)- 4. / / CIT 5. *0' ()% , , / DR, ITAT, MUMBAI 6. '1 2 / GUARD FILE. % % % % / BY ORDER, .*) () //TRUE COPY// 3 33 3 / 4 4 4 4 5 5 5 5 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . % . ./ VM , SR. PS