G K N Sinter Metals Ltd., Pune V. Assistant Commissioner of Income-tax,

ITA 1297/PUN/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6955 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-03-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 17-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Assessee Lawyers: ABHIJIT KULKARNI; FAROOQ V IRANI
• Keywords: Additional evidence; Question of law; Bad and doubtful debts; Revenue expenditure
• Section: 143(3); 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1297 /P U N/201 4 / ASSESSMENT YEAR: 20 0 3 - 0 4 GKN SINTER METALS LTD., 146, MUMBAI - PUNE ROAD, NEAR DR. BECK, PIMPRI, PUNE 4110 18 . / APPELLANT PAN: AA ACM4432H VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCL E 9 , PUNE . / RESPONDENT ASSESSEE BY : S /S HRI FAROOQ V. IRANI & ABHIJIT KULKARNI REVENUE BY : SHRI ANIL CHAWARE / DATE OF HEARING : 2 9 . 0 3 .201 7 / DATE OF PRONOUNCEMENT: 31 . 0 3 .201 7 / ORDER / ORDER PER SUSHMA CHOWLA, JM: TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT( A ) - V , PUNE , DATED 14 . 0 3 .201 4 RELATING TO ASSESSMENT YEAR 200 3 - 0 4 AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT T HE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 2 1) THE ASSESSING OFFICER HOLDING AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THAT THE APPELLANT COMPANY HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE LEVY OF PENALTY FOR FURNISHING INACCURATE PARTICULARS OF THE INCOME IN RESPECT OF DISALLOWANCE OF LOSS ARISING ON ACCOUNT OF ASSIGNMENT OF BAD DEBTS. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEVY OF PENALTY IS UNJUSTIFIED AND UNWARRANTED AND THE APPELLANT SUBMITS THAT THE SAME BE DELETED. 3) WITHOUT PREJUDICE TO THE APPELLANTS CONTENTION THAT NO PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICUL ARS OF INCOME IS LEVIABLE IN THE PRESENT CASE, THE PENALTY LEVIED IS HIGHLY EXCESSIVE AND ARBITRARY AND THE SAME REQUIRES TO BE REDUCED SUBSTANTIALLY. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF DISALLOWANCE OF LOSS ARISING ON ACCOUNT OF ASSIGNMENT OF BAD DEBTS. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SINTERED BEARI NGS AND PARTS, SINTERED AUTOMOTIVE COMPONENTS, SINTERED FILTERS AND METAL POWDERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THE FOLLOWING NOTINGS IN NOTE 3(A) & (B) OF SCHEDULE XV OF AUDITED ACCOUNTS: - A. THE COMPANY MAH INDRA & MAHINDRA LTD. (M&M) AND GKN SINTER METALS HOLDING LTD. (GKN) ENTERED INTO A SHARE SALE & PURCHASE AGREEMENT ON 28 TH MARCH, 2002, INTERMS OF WHICH M&M SOLD 11,50,508 EQUITY SHARES IN THE COMPANY TO GKN. PURSUANT TO THIS, GKN TOGETHER WITH ITS NOMIN EES, HOLDS THE ENTIRE EQUITY SHARES OF THE COMPANY. PURSUANT TO THE CHANGE IN SHAREHOLDING, THE NAME OF THE COMPANY HAS BEEN CHANGED TO GKN SINTER METALS LTD., EFFECTIVE FROM 2 ND AUGUST, 2002. B. EXTRAORDINARY ITEMS : PURSUANT TO THE SHARE SALE & PURCH ASE AGREEMENT REFERRED ABOVE. (I) THE COMPANY HAS ASSIGNED DEBTS AGGREGATING TO RS.1,35,00,000/ - TO M&M FOR A CONSIDERATION OF RS.1. ACCORDINGLY, THE LOSS ON ASSIGNMENT HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. RS.1,34,99,999 (II) THE COMPANY HAS ENTERED INTO A NAME LICENSE AGREEMENT WITH M&M FOR USE OF TRADEMARKS FOR A ONE TIME FREE RS.75,00,000 TOTAL RS.2,09,99,999 ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 3 5. THE ASSESSEE IN REPLY EXPLAINED THAT AN AGREEMENT WAS ENTERED INTO ON 28.03.2002 BETWEEN MAHINDRA & MAHINDRA AN D GKN SINTER METALS HOLDINGS LTD., UK FOR SHARE S SALE AND PURCHASE. THE ASSESSEE FURTHER CLAIMED THAT DEBTS DUE FROM VARIOUS CUSTOMERS IN THE NORMAL COURSE OF BUSINESS WERE ASSIGNED TO MAHINDRA & MAHINDRA IN TERMS OF AGREEMENT DATED 18.07.2002 . THE SAID DEBTS WERE IDENTIFIED ON THE BASIS OF FAIR ESTIMATE OF CHANCES OF RECOVERY OF THE SAID DEBTS. THE DEBTS WERE ASSIGNED AT RS.1/ - TO MAHINDRA & MAHINDRA AND THE REMAINING AMOUNT OF RS. 1,34,99,999/ - WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT AS BAD DEBTS BY CRE DITING THE ACCOUNTS OF RESPECTIVE PARTIES. THE ASSESSEE CLAIMED THE SAID AMOUNT AS BAD DEBTS UNDER SECTION 36(1)(VII) OF THE ACT. THE ASSESSEE FURTHER STATED THAT THE AMOUNTS WERE WRITTE N OFF ON THE BASIS OF REPORT OF ERNST & YOUNG AS THE SAME WERE CONSI DERED DOUBTFUL. THE ASSESSING OFFICER OBSERVED THAT IN RESPECT OF MOST OF THE CHARGES, THERE WERE REGULAR TRANSACTIONS THROUGHOUT THE YEAR AND THE PAYMENTS WERE RECEIVED REGULARLY AND PERIODICALLY AND THEREFORE, THE YEAR AND THE PAYMENTS WERE RECEIVED REGULARLY AND PERIODICALLY AND THEREFORE, IT WAS NOT FACTUALLY CORRECT THAT THE AMOUN T WAS BAD DEBT. FURTHER, THE ASSESSING OFFICER OBSERVED THAT AS PER PLAIN READING OF THE TERMS OF THE SHARE SALE & PURCHASE AGREEMENT ASSIGNMENT OF BOOK DEBTS OF RS.1.35 CRORES AT RS.1 WAS AN INTRINSIC PART OF THE CONSIDERATION PAYABLE TO MAHINDRA & MAHIN DRA FOR RELINQUISHING ITS SHARE HOLDING IN THE ASSESSEE COMPANY WHICH WAS 51% AND WAS SOLD TO GKN SINTER METAL HOLDINGS LTD., THE PURCHASER HAVING 49% SHARES VIDE AGREEMENT DATED 28.03.2002 FOR A CONSIDERATION OF RS.65 CRORES. SINCE ASSIGNMENT OF DEBT WAS DONE THROUGH SUPPLEMENTARY AGREEMENT DATED 18.07.2002, THE ASSESSING OFFICER HELD THAT THE ASSIGNMENT WAS INTRINSIC PART OF SALE CONSIDERATION AND CLAIM OF THE DIFFERENCE OF RS.1.35 CRORES AND RS.1 WAS NOTHING BUT A COLOURABLE DEVICE ADOPTED BY THE ASSESS EE COMPANY , AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF MC DOWELL & CO. LTD., REPORTED IN 154 ITR 148. THE ASSESSING OFFICER ACCORDINGLY, DISALLOWED THE SAME AND INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF INCOME - TAX ACT IN RESPECT OF THE SAID ADDITION. THE ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 4 CIT(A) CONFIRMED THE SAID ADDITION. CONSEQUENT THERETO, THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THE QUANTUM APPEAL, THE TRIBUNAL UPHOLDING THE ADDITION, HELD AS UNDER: - 20.4 WE HAVE CONSIDERED THE RIV AL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE ONLY QUESTION TO BE DECIDED HERE IS AS TO WHETHER THE AMOUNT OF RS.1,34,99,999/ - IS ALLOWABLE AS BAD DEBT OR BUSINESS LOSS AS CLAIMED BY THE ASSESSEE OR THE SAME IS NOT ALLOWABLE U/S.36(I)(VII) R.W.S. 36(2) OR U/S.37(1) AS HELD BY THE AO AND UPHELD BY THE CIT(A). FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE W E FIND THE ASSESSEE HAS ASSIGNED THE DEBTS TO MAHINDRA & MAHINDRA LTD. FOR RS.1/ - . THE COPY OF THE ASSIGNMENT OF DEBT FILED IN PAPER BOOK AT PAGES 63 & 64 IS UNDATED. WE FIND THE FIRST SENTENCE OF THE AGREEMENT READS AS UNDER : THIS DEED OF ASSIGNMENT I S MADE AT MUMBAI ON THIS ________DAY OF SEPTEMBER 2002. 20.5 THE FIRST PROPOSITION MADE BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE SAME SHOULD BE ALLOWED AS BAD DEBT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. HOWEVER, WE FIND NO FORCE IN THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE SINCE THE ASSESSEE HAS NOT WRITTEN OFF THE AMOUNT AS BAD DEBT BUT HAS CLAIMED LOSS ON ASSIGNMENT DUE TO TRANSFER OF THE DEBTORS BY A DEED OF ASSIGNMENT FOR A CONSIDERATION OF RS.1 / - . IN OUR OPINION, FOR CLAIMING THE BAD DEBT AS ALLOWABLE UNDER THE PROVISIONS OF THE INCOME TAX ACT THE SAME MUST BE WRITTEN OFF IN CONFORMITY WITH THE PROVISIONS OF THE INCOME TAX ACT. BY TRANSFERRING THE DEBT OF RS.1.35 CRORES TO MAHINDRA & MAHINDRA LT D. FOR RS.1/ - , BY TRANSFERRING THE DEBT OF RS.1.35 CRORES TO MAHINDRA & MAHINDRA LT D. FOR RS.1/ - , THE ASSESSEE HAS LOST THE OWNERSHIP OVER THE DEBTS. THEREFORE, BY DOING THIS THE ASSESSEE HAS MADE THE PROVISIONS OF SECTION 41(4) REDUNDANT. AS PER THE SAID PROVISIONS IF ANY AMOUNT IS RECOVERED IN FUTURE ON ACCOUNT DEDUCTION ALLOWED IN RES PECT OF BAD DEBTS OR PART THEREOF THEN THE SAME SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION IN THAT YEAR AND ACCORDINGLY CHARGEABLE TO TAX. HOWEVER, IN THE INSTANT CASE THE ASSESSEE HAS NOT SHOWN ANY INCOME ON ACCOUNT OF RECOVERY OF PART OF SUCH DEBT SINCE THE ASSESSEE HAS ASSIGNED THE DEBTS TO MAHINDRA & MAHINDRA AND AS PER SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE MAHINDRA & MAHINDRA HAS OFFERED THE SAME TO TAX. THEREFORE, THE FIRST PROPOSITION ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE BEING WITHOUT ANY MERIT IS DISMISSED. 20.6 NOW COMING TO THE SECOND PROPOSITION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAME SHOULD BE ALLOWED AS BUSINESS LOSS SINCE THE ASSESSEE HAS SOLD THE DEBTS OF RS.1.35 CRORES FOR RS.1/ - WE FIND TH E SAME IS ALSO WITHOUT ANY MERIT. FIRST OF ALL IT IS NOT THE BUSINESS OF THE ASSESSEE TO ASSIGN DEBTS. FURTHER, THE ASSESSEE IN THE INSTANT CASE HAS ASSIGNED THE DEBTS TO M/S. MAHINDRA & MAHINDRA LTD. THEREFORE, THE ASSESSEE BECOMES THE ASSIGNOR AND M/S. M AHINDRA & MAHINDRA LTD. BECOMES THE ASSIGNEE. IN A CASE LIKE THIS THE ASSIGNEE IS SUPPOSED TO COLLECT ON BEHALF OF THE ASSIGNOR FOR WHICH THE ASSIGNOR SHALL GIVE SOME COMMISSION TO THE ASSIGNEE. HOWEVER, IN THE INSTANT CASE THE ASSESSEE, I.E. THE ASSIGNOR HAS UNDERTAKEN TO COLLECT THE DEBTS ON BEHALF OF THE ASSIGNEE AND HAS REMITTED THE SAME PERIODICALLY. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT M/S. MAHINDRA & MAHINDRA LTD. HAS PAID TAX ON THE DEBTS SO RECOVERED AND THEREFORE TAXING THE SAME IN THE HANDS OF THE ASSESSEE AMOUNT TO DOUBLE TAXATION IN OUR OPINION IS OF NO MERIT. WE, THEREFORE, FIND NO MERIT IN THE ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE THAT AMOUNT OF RS.1,34,99,999/ - SHOULD BE ALLOWED EITHER AS A BAD DEBT OR A BU SINESS LOSS. RATHER, WE FIND FORCE IN THE ARGUMENT OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSEE HAS ADOPTED A COLOURABLE DEVICE TO COMPENSATE MAHINDRA & MAHINDRA FOR THE SURRENDER OF THEIR ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 5 51% SHAREHOLDING AND THEREFORE THIS IS A CAPITAL EXPEND ITURE. WE ACCORDINGLY DISMISS THE GROUND RAISED BY THE ASSESSEE. 6. THE CIT(A) WHILE DECIDING THE APPEAL OF ASSESSEE AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, CONSIDERED THE SUBMISSIONS OF THE ASSESSEE WHICH ARE REPRODUCED AT PAGES 7 TO 17 OF THE APPELLATE ORDER AND HELD AS UNDER: - 15. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AS WELL AS REPLY OF THE APPELLANT. IN THIS CASE, IT IS SEEN THAT M/S. MAHINDRA & MAHINDRA & GKN SINTER METALS HOLDINGS LTD., UK WERE HOLDING THE SHARES OF APPELLANT COMPANY IN THE RATIO OF 51% AND 49%. BY VIRTUE OF AGREEMENT DATED 28.03.2002, THE SHARE HOLDING OF MAHINDRA & MAHINDRA WAS ACQUIRED BY GKN SINTER METALS HOLDINGS LTD., FOR THE CONSIDERATION OF RS.65 CRORES. THE APPELLANT COMPANY WAS PREVIOUSLY R UN BY MAHINDRA & MAHINDRA LTD., AND THEREFORE GKN SINTER METALS HOLDINGS LTD WANTED TO GET RID OF OLD DEBTS IN THE BOOKS OF THE APPELLANT COMPANY. THEREFORE, BY VIRTUE OF SUPPLEMENTARY AGREEMENT DATED 18.07.2002, DEBTS OF APPELLANT COMPANY OF RS.1,35,00,00 0/ - WERE ASSIGNED TO MAHINDRA & MAHINDRA LTD., FOR RS.1. THE DIFFERENCE OF RS.1,34,99,999/ - WAS CLAIMED AS BAD DEBTS BY THE APPELLANT COMPANY. THIS CLAIM WAS NOT ALLOWABLE AS THE SAME WAS NOT BAD DEBTS. THE STAND OF THE ASSESSING OFFICER HAS BEEN CONFIRMED AT THE LEVEL OF CIT(A) AS WELL AS TRIBUNAL. FROM THE FACTS OF THE CASE, IT IS CLEAR THAT THE APPELLANT COMPANY HAS TRIED TO CAMOUFLAGE THE ASSIGNMENT OF DEBT TO MAHINDRA & MAHINDRA LTD., AS BAD DEBTS DELIBERATELY TO CLAIM DEDUCTION KNOWING FULLY WELL THAT THE SAME DOES NOT QUALIFY TO BE BAD DEBTS. FOR DOING SO THE APPELLANT COMPANY TRIED TO LEAN ON THE REPORT OF ERNST & YOUNG WHICH WAS NOTHING BUT COLLUSIVE ARRANGEMENT TO GIVE A COLOUR OF BAD DEBTS TO THE BOOK DEBTS ASSIGNED BY THE APPELLANT COMPANY. THIS CLAIM OF BAD DEBTS TO THE BOOK DEBTS ASSIGNED BY THE APPELLANT COMPANY. THIS CLAIM OF THE APPELLANT WHICH WAS MADE ON THE BASIS OF REPORT OF ERNST & YOUNG, HAS BEEN NAILED BY THE ASSESSING OFFICER WHEREIN THE ASSESSING OFFICER NOTICED THAT 53.40% OF THE DEBTS WERE RECOVERED BY MAHINDRA & MAHINDRA LTD., IN THE SAME FINANCIAL YEAR. THUS, FROM THE ABOVE FACTS, IT IS CLEAR THAT THE APPELLANT COMPANY HAS FILED INACCURATE PARTICULARS OF INCOME BY CAMOUFLAGING THE NATURE OF DEBTS WHICH WAS ASSIGNED TO MAHINDRA & MAHINDRA ON EXTRANEOUS CONSIDERATIONS. ACCORDINGLY, THE ACTION OF THE ASSESSI NG OFFICER IN LEVYING PENALTY U/S. 271(1)(C) OF INCOME - TAX ACT IN RESPECT OF THIS DISALLOWANCE IS UPHELD AND THE GROUND NO. 3 IS DISMISSED. 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 8. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE RAISED VARIOUS PROPOSITIONS AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE FIRST PROPOSITION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT DISALLOWANCE OF BAD DEBTS AT ABOUT RS.1.35 CRORES WAS ERRONEOUS ON M ERITS. THE SECOND PROPOSITION WAS THAT LEVY OF PENALTY WAS ILLEGAL AND WITHOUT JURISDICTION AS NO PROPER SATISFACTION HAD BEEN REACHED BY THE ASSESSING OFFICER. THE THIRD AND FOURTH PROPOSITION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSE SSEE WAS THAT SINCE THERE WAS FULL AND COMPLETE DISCLOSURE BY THE ASSESSEE ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 6 OF ALL PARTICULARS OF INCOME, THE ISSUE AT VERY LEAST, BEING DEBATABLE AND HENCE, NO JUSTIFICATION IN LEVY OF PENALTY. THE FIFTH PROPOSITION RAISED BY THE ASSESSEE WAS THAT SINCE A SSESSEES QUANTUM APPEAL WAS ADMITTED IN THE HONBLE HIGH COURT, THAT FACT ITSELF INDICATES THAT LEVY OF PENALTY WAS NOT JUSTIFIED. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: - 1 . COMMISSIONER OF INCOME TAX VS. M/S. ADVAITA ESTATE DEVELOPMENT PVT. LTD. , ITA NO. 1498/2014 (BOMBAY HIGH COURT). 2 . COMMISSIONER OF INCOME TAX VS. M/S. ADITYA BIRLA POWER CO. LTD. , ITA NO. 851/2014 (BOMBAY HIGH COURT). 3 . COMMISSIONER OF INCOME TAX VS. NAYAN BUILDERS AND DEVELOPERS , 368 ITR 722 (BOM ). 4 . COMMISSIONER OF INCOME TAX VS. L IQUID INVESTMENT AND TRADING CO. , ITA 240/2009 (DELHI HIGH COURT) . 5 . ASSISTANT COMMISSIONER OF INCOME TAX VS. DHARIWAL INDUSTRIES LTD. , ITA NO. 582/PN/2009 (PUNE TRIBUNAL). 6 . DEPUTY COMMISSIONER OF INCOME TAX VS. C.G. LUCY SWITCHGEAR LTD. , ITA NO. 881/PN/2014 (PUNE TRIBUNAL). 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ELABORATELY ARGUED IN RESPECT OF EACH OF THE PROPOSITIONS AND POINTED OUT THAT THERE IS NO MERIT IN LEVY OF PENALTY. FURTHER, IT WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE THAT THE PENALTY HAS BEEN LEVIED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH EXPRESSION HAS BEEN EXPLAINED BY THE HONBLE SUPREME COURT IN CIT VS RELIANCE PETRO PRODUCTS (P) LTD. (2010) 189 TAXMAN 322 (SC). IT WAS STRES SED BY HIM THAT APPLYING THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS RELIANCE PETROPRODUCTS (P) LTD. (SUPRA) , WHEREIN IT WAS HELD THAT IF THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHIC H DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS CONCEALMENT OF INCOME ON ITS PART AND MERELY BECAUSE THE CLAIM OF ASSESSEE WAS NOT ACCEPTED BY THE REVENUE, THAT ITSELF WOULD NOT ATTRACT PENALTY UNDER SECTION 271(1)(C) OF TH E ACT. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF ASSESSING OFFICER AND CIT(A). HE FURTHER ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 7 STRESSED THAT WHERE THE EXPENDITURE HAS BEEN FOUND TO BE NOT ALLOWABLE IN THE HANDS OF ASSESSE E, THEN THERE IS MERIT IN LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCO ME IN RESPECT OF DISALLOWANCE OF LOSS ARISING ON ACCOUNT OF ASSIGNMENT OF BAD DEBTS AMOUNTING TO ABOUT RS.1.35 CRORES. PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS ATTRACTED WHERE THE ASSESSEE HAS EITHER CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. EITHER OF THE LIMBS IS REQUIRED TO BE FULFILLED BEFORE THE ASSESSEE CAN BE HELD TO BE EXIGIBLE TO LEVY OF PENALTY. IN THE CASE OF THE ASSESSEE BEFORE US, THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER UNDER SECTION 143(3) OF T HE ACT HAD DISALLOWED SUM OF RS.1,34,99,999/ - WHICH WAS CLAIMED AS BAD DEBTS BY THE ASSESSEE UNDER OF RS.1,34,99,999/ - WHICH WAS CLAIMED AS BAD DEBTS BY THE ASSESSEE UNDER SECTION 36(1)(VII) OF THE ACT. THE ASSESSING OFFICER HELD THAT THE ASSIGNMENT OF BOOK DEBT OF RS.1.35 CRORES AT VALUE OF RS.1/ - AND CLAIMING THE DIFFERENCE AS REVENUE EXPENSES WAS NOTHING BUT A COLOURABLE DEVICE ADOPTED BY THE ASSESSEE COMPANY FOR COMPENSATING MAHINDRA & MAHINDRA FOR SURRENDER OF THEIR 51% SHAREHOLDING IN THE ASSESSEE COMPANY. THE ASSESSING OFFICER RELYING ON THE DECISION OF MC DOWELL & CO. LTD. VS. CTO (1985) 154 ITR 148 (SC), DISALLOWED THE ASSESSEES CLAIM OF EXPENSES AMOUNTING TO RS.1,34,99,999/ - , HOLDING THE SAME TO BE EXPENSE OF CAPITAL IN NATURE. IN THE ASSESSMENT ORDER AT PAGE 6 ITSELF AFTER MAKING THE AFORESAID ADDITION, THE ASSESSI NG OFFICER HELD THAT PENALTY PROCEEDINGS ON THIS ISSUE ARE INITIATED SEPARATELY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WHILE ARGUING THE PRESENT APPEAL HAS RAISED VARIOUS PROPOSITIONS AS TO WHY LEVY OF PENALTY OUGHT TO BE DELETED IN THE HANDS OF ASSESSEE. ONE OF THE PROPOSITIONS WAS THAT NO PROPER SATISFACTION HAS BEEN REACHED BY THE ASSESSING OFFICER. WE ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 8 FIND NO MERIT IN THE SAID PLEA OF THE ASSESSEE WHERE THE ASSESSING OFFICER HAS RECO RDED SATISFACTION AFTER MAKING THE AFORESAID ADDITION IN THE HANDS OF ASSESSEE, TO THE EFFECT THAT PENALTY NEED TO BE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, WE FIND NO MERIT IN THE SAID PROPOSITION MADE BY THE LEARNED AUTH ORIZED REPRESENTATIVE FOR THE ASSESSEE. ANOTHER PROPOSITION IS AGAINST THE DISALLOWANCE OF BAD DEBTS WRITTEN OFF BEING ERRONEOUS ON MERITS. HOWEVER, WHILE DECIDING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, NO DOUBT, THE PENALTY PROCEEDINGS ARE INDEPENDENT FROM THE QUANTUM PROCEEDINGS BUT THE ISSUE WHICH NEEDS TO BE ADJUDICATED IS WHETHER IN THE GIVEN CIRCUMSTANCES , WHERE THE ADDITION HAS BEEN MADE IN THE HANDS OF ASSESSEE, IS IT JUSTIFIABLE TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE MERITS OF THE DISALLOWANCE CANNOT BE GONE INTO WHILE DECIDING THE PENALTY PROCEEDINGS. 12. NOW, COMING TO THE NEXT PROPOSITION RAISED BY THE LEARNED AUTHORIZED 12. NOW, COMING TO THE NEXT PROPOSITION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AS TO WHERE IT HAD MADE FULL AND COMPLETE DISCLOSURE OF I TS PARTICULARS OF INCOME AND MERELY BECAUSE AN ADDITION HAS BEEN MADE IN THE HANDS OF ASSESSEE THAT DOES NOT JUSTIFY THE LEVY OF PENALTY. FURTHER, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO CLAIMED THAT AT VERY LEAST, THE ADDITION MADE IN THE CASE WAS DEBATABLE AND THEREFORE, LEVY OF PENALTY WAS NOT JUSTIFIED. TRAVERSING THE FACTUAL ASPECTS OF THE CASE, THE AUDITOR IN THE AUDIT REPORT ITSELF HAD MADE A DECLARATION OF EXTRAORDINARY ITEMS BY WAY OF NOTINGS IN NOTE 3(A) AND (B) OF SCHEDULE X V OF THE AUDITED ACCOUNTS. IT WAS REPORTED BY THE AUDITOR ITSELF THAT THE ASSESSEE HAD ASSIGNED DEBTS AGGREGATING TO RS.1.35 CRORES TO MAHINDRA & MAHINDRA FOR CONSIDERATION OF RS.1/ - . ACCORDINGLY, THE LOSS ON ASSIGNMENT HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT AT RS.1,34,99,999/ - . THE ASSESSEE CLAIMS THAT ON THE BASIS OF REPORT PREPARED BY THE PROFESSIONALS, THESE DEBTS WERE CONSIDERED AS DOUBTFUL , WHERE THE ASSESSEE WAS NOT HOPEFUL OF RECOVERY OF AMOUNT AND CONSEQUENTLY AS PER THE UNDERSTANDING BETW EEN THE ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 9 PARTIES, DEBTS WERE ASSIGNED AT RS.1/ - TO MAHINDRA & MAHINDRA AND THE REMAINING AMOUNT WAS WRITTEN OFF IN ITS BOOKS OF ACCOUNT. THE ASSESSING OFFICER ON THE ANALYSIS HELD THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS OF CAPITAL IN NATURE AND WA S NOT TO BE ALLOWED AS REVENUE EXPENSES. THE TRIBUNAL HAS UPHELD THE DISALLOWANCE OF EXPENDITURE VIDE ITS ORDER DATED 06.05.2013 . HOWEVER, WHERE THE ASSESSEE HAD FILED FULL AND COMPLETE PARTICULARS IN THE AUDIT REPORT ITSELF AND HAD TRIED TO JUSTIFY THE ADMISSIBILITY OF THE SAID EXPENDITURE BEING REVENUE , BUT MERELY BECAUSE THE SAID EXPENDITURE HAS NOT BE ALLOWED IN THE HANDS OF ASSESSEE, DOES NOT WARRANT THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THERE ARE TWO ASPECTS TO THE SAME ; FIRST THE ASSESSEE HAS MADE FULL AND COMPLETE DISCLOSURE , BUT THE REVENUE EXPENDITURE CLAIMED BY THE ASSESSEE HAS NOT BEEN ALLOWED. FURTHER, THE ISSUE IS DEBATABLE ISSUE AND THE DISALLOWANCE OF SUCH DEBATABLE ISSUE DOES NOT WARRANT LEVY OF PENALTY. FURTHER, THE H ONBLE SUPREME COURT IN CIT VS RELIANCE PETROPRODUCTS (P) LTD. (SUPRA) HAD HELD AS UNDER: - COURT IN CIT VS RELIANCE PETROPRODUCTS (P) LTD. (SUPRA) HAD HELD AS UNDER: - 8. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271(1)(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. IN DILIP N. SHROFF V. JOINT CIT [20 07] 6 SCC 329 , THIS COURT EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND 'FURNISHING INACCURATE PARTICULARS'. ....................... 9. WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA. HOWEVER, WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE, AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS. IN WEBSTER'S DICTIONARY, THE WORD 'INACCURATE' HAS BEEN DEFINED AS : 'NOT ACCURATE, NOT EXACT OR CORRECT ; NOT ACCORDING TO TRUTH ; ERRONEOUS ; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT .' WE HAVE ALREADY SEEN THE MEANING OF THE WORD 'PARTICULARS' IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENA LTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE IN ACCURATE PARTICULARS. ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 10 10. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF THE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT . IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THEREFORE, REITERATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CONCLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORRECT ; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TWO FORMS ; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY ; (II) AN ITEM OF EXPENDIT URE MAY BE FALSELY (OR IN AN EXAGGERATED AMOUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONE'S INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE DO N OT AGREE, AS THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORI TIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271(1)(C) . IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGI SLATURE. 13. THE HONBLE SUPREME COURT IN CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (SUPRA) HAVE LAID DOWN THE PRINCIPLE THAT MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS. THE HONBLE SUPREME COURT FURTHER HEL D THE WORD PARTICULARS MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS . 14. APPLYING THE SAID PRINCIPLE TO THE FACTS OF THE PRESENT CASE, IT IS NOT THE CASE OF REVENUE THAT THE DETAILS WHICH WERE SUPPLIED BY THE ASSESSEE IN THE RETURN OF INCOME, ARE NOT ACCURATE, NOT EXACT OR CORRECT OR NOT ACCORDING TO THE TRUTH OR ERRONEOUS. IN THE PRESENT SET OF FACTS ALSO, THE ASSESSEE HAD FURNISHED THE PARTICULARS OF ITS INCOME AND HAD ALSO MADE A DECLARATION WITH REGARD TO ITS CLAIM OF EXPENDITURE WHICH WAS FOUND TO BE NOT ADMISSIBLE AND THE EXPENDITURE CLAIMED WAS DISALLOWED IN THE HANDS OF ASSESSEE. HOWEVER, SUCH DISALLOWANCE OF EXPENSES CANNOT TANTAMOUNT TO FURNISHING OF INACCURA TE PARTICULARS OF INCOME. ACCORDINGLY, WE HOLD SO. IN THE ABSENCE OF THE SAME, NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT COULD BE LEVIED. ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 11 15. NOW, COMING TO THE LAST PROPOSITION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE I.E. TH E APPEAL AGAINST THE QUANTUM ADDITION HAS BEEN ADMITTED BY THE HONBLE HIGH COURT, THEN THE ASSESSEE IS NOT LIABLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE HAS FILED ON RECORD THE ORDER OF HONBLE BOMBAY HIGH COURT DATED 07.06.2 016 , WHEREIN THE APPEAL OF ASSESSEE HAS BEEN ADMITTED ON THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: - (II) WHETHER THE TRIBUNAL OUGHT TO HAVE UPHELD THE APPELLANTS CLAIM FOR A DEDUCTION OF RS.1,34,99,999/ - AS A BAD DEBT UNDER SECTION 36(I)(VII) OF THE ACT OR, WITHOUT PREJUDICE AS A BUSINESS LOSS UNDER SECTION 28/SECTION 29 OF THE ACT? 1 6 . IN THIS BACKGROUND, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS RELIED ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. ADV A ITA ES TATE DEVELOPMENT PVT. LTD. VIDE JUDGMENT DATED 17.02.2017. THE HONBLE HIGH COURT HELD AS UNDER: - 3. THE IMPUGNED ORDER OF THE TRIBUNAL ALLOWED THE RESPONDENT - ASSESSEE'S APPEAL AND DELETED THE PENALTY IMPOSED. THIS ON THE GROUND THAT THE ORDER OF THE TRI BUNAL IN THE QUANTUM PROCEEDING WHICH WAS AGAINST RESPONDENT - ASSESSEE HAD BEEN IN THE QUANTUM PROCEEDING WHICH WAS AGAINST RESPONDENT - ASSESSEE HAD BEEN CHALLENGED IN APPEAL BEFORE THIS COURT AND THE APPEAL HAS BEEN ADMITTED ON 12TH MARCH, 2013 BEING INCOME TAX APPEAL NO. 2582 OF 2011 ON THE FOLLOWING SUBSTANTIAL QUESTIONS OF LA W : (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND IN LAW, IS THE ORDER OF THE TRIBUNAL PERVERSE INASMUCH AS IT IGNORED THE BASIC DOCUMENTS LIKE STATEMENT OF CONFIRMATION OF ACCOUNT, BANK STATEMENT SHOWING RECEIPT OF MONEY FROM AND PAYMENT OF MONEY TO M/S.KUBER DEVELOPERS CORPORATION AND CONFIRMATION FROM THE SAID PARTY OF HAVING GIVEN AND RECEIPT OF THE ADVANCE WHICH WERE PRODUCED BEFORE THE CIT(A) AND THE TRIBUNAL WHILE CONFIRMING THE ADDITION OF RS.2.73 CRORES UNDER SECTION 68 OF THE ACT IN THE HANDS OF THE APPELLANT ? (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WAS THE TRIBUNAL JUSTIFIED IN NOT ADMITTING THE ADDITIONAL EVIDENCE OF LOAN CREDITOR. MR. MAHENDRA MANSINGH ARORA IN THE FORM OF RETURN OF INCOME, BALANCE SHEET AND PROFIT & LOSS ACCOUNT FOR ASSESSMENT YEAR 2006 - 07 FILED BEFORE THE I.T. DEPARTMENT ON THE GROUND THAT THE SAME WERE NOT FILED BEFORE THE RESPONDENT NO.2 EARLIER WITHOUT APPRECIATING THAT THE APPELLANT CANNOT BE PENALIZED FOR THE DEFAULT OF LOAN CREDITOR ? 4. IN THE ABOVE VIEW, THE IMPUGNED ORDER FOLLOWED ITS DECISION IN NAYAN BUILDERS AND DEVELOPERS PVT.LTD. VS. THE INCOME TAX OFFICER IN INCOME TAX APPEAL NO. 2379/MUM/2009 RENDERED ON 18TH MARCH, 2011 AND THE DECISION OF THE DELHI HIGH COURT IN CIT VS LIQUID INVESTMENT AND TRADING CO (ITA NO.240/2009) RENDERED ON 5TH OCTOBER, 2010 TO HOLD THAT WHEN AN APPEAL HAS BEEN ADMITTED IN QUANTUM PROCEEDINGS BY THE HIGH COURT, THEN THAT ITSELF IS AN EVIDENCE OF THE ISSUE BEING DEBATABLE, NOT WARR ANTING ANY PENALTY. 5. THE REVENUE HAD FILED AN APPEAL FROM THE ORDER OF THE TRIBUNAL IN NAYAN BUILDERS AND DEVELOPERS PVT. LTD. (SUPRA) DELETING THE PENALTY. THIS APPEAL BEING ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 12 CIT VS. NAYAN BUILDERS AND DEVELOPERS [(2014) 368 ITR 722] WAS NOT ENTERTAINE D BY THIS COURT. IT UPHELD THE VIEW OF THE TRIBUNAL THAT THE IMPOSITION OF PENALTY WAS NOT JUSTIFIED AS ADMISSION OF APPEAL IN QUANTUM PROCEEDING ON THIS ISSUE AS SUBSTANTIAL QUESTION OF LAW WAS PROOF ENOUGH OF THE ISSUE BEING DEBATABLE. THE AFORESAID DECI SION IN NAYAN BUILDERS AND DEVELOPERS PVT.LTD (SUPRA) WAS ALSO FOLLOWED BY THIS COURT IN CIT - 8 VS. ADITYA BIRLA POWER CO. LTD. IN INCOME TAX APPEAL NO. 851 OF 2014 RENDERED ON 2ND DECEMBER, 2015 . 6. HOWEVER, MR. TEJVEER SINGH, LEARNED COUNSEL APPEARING FOR THE APPELLANT REVENUE SEEKS TO DISTINGUISH THE DECISION OF THIS COURT IN NAYAN BUILDERS AND DEVELOPERS PVT. LTD. (SUPRA) ON THE GROUND THAT THIS COURT HAD AFTER RECORDING THE FACT THAT WHERE APPEALS FROM ORDERS IN QUANTUM PROCEEDINGS OF THIS COURT HAVE BEEN ADMITTED AS GIVING RISE TO SUBSTANTIAL QUESTION OF LAW THEN THAT ITSELF DISCLOSES THAT THE ISSUE IS DEBATABLE. HOWEVER, MR. SINGH POINTS OUT THAT IT ALSO FURTHER RECORDS IN OUR VIEW THERE WAS NO CASE MADE OUT FOR IMPOSITION OF PENALTY AND THE SAME W AS RIGHTLY SET ASIDE.. ON THE BASIS OF THE ABOVE OBSERVATION, IT IS CONTENTION OF MR. TEJVEER SINGH THAT THE APPEAL FROM PENALTY PROCEEDING WAS NOT ADMITTED BY THIS COURT AS ON MERITS NO CASE FOR IMPOSITION OF PENALTY WAS MADE OUT. 7. MR. DALAL, THE LEA RNED COUNSEL FOR THE RESPONDENT - ASSESSEE INVITED OUR ATTENTION TO THE ORDER OF THE TRIBUNAL DATED 18TH MARCH, 2011 IN THE CASE OF NAYAN BUILDERS AND DEVELOPERS PVT. LTD (SUPRA). ON PERUSAL OF THE TRIBUNAL ORDER DATED 18TH MARCH, 2011 WE NOTE THAT THE TRIBU NAL IN NAYAN BUILDERS AND DEVELOPERS PVT. LTD (SUPRA) HAD DELETED THE PENALTY ONLY ON THE GROUND THAT AS SUBSTANTIAL QUESTION OF LAW HAD BEEN ADMITTED BY THIS COURT IN QUANTUM PROCEEDINGS THE ISSUE IS DEBATABLE. IT WAS ON THE BASIS OF THE AFORESAID REASONI NG OF THE TRIBUNAL IN NAYAN BUILDERS AND DEVELOPERS PVT.LTD. (SUPRA), THAT THIS COURT HELD THAT NO PENALTY IS IMPOSABLE. THUS THE DISTINCTION SOUGHT TO BE MADE BY MR. TEJVEER SINGH DOES NOT ASSIST THE REVENUE, AS IT DOES NOT EXIST. ASSIST THE REVENUE, AS IT DOES NOT EXIST. 8. IN VIEW OF THE DECI SION TAKEN BY THIS COURT IN NAYAN BUILDERS AND DEVELOPERS PVT. LTD (SUPRA) AS WELL AS IN ADITYA BIRLA POWER CO. LTD. (SUPRA) THE PROPOSED QUESTION DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERTAINED. 1 7 . SIMILAR VIEW HAS ALSO BEEN LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. ADITYA BIRLA POWER CO. LTD. IN INCOME TAX APPEAL NO.851 OF 2014, JUDGMENT DATED 02.12.2015 . 1 8 . THE ASSESSEE HAS ALSO PLACED RELIANCE ON VARIOUS OTHER DECISIONS ON THE SAME PROPOSITION OF HONBLE BOMBAY AND DELHI HIGH COURTS AND THE PUNE BENCH OF TRIBUNAL. APPLYING THE SAID PRINCIPLES LAID DOWN BY THE JURISDICTIONAL HIGH COURT, WE HOLD THAT NO PENALTY IS LEVIABLE UNDER SECTION 271(1)(C) OF THE ACT ON THE GROUND THAT THE QUANTUM APPEAL FILED BY TH E ASSESSEE IS ADMITTED BY THE HONBLE HIGH COURT ON SUBSTANTIAL QUESTION OF LAW. SINCE THE APPEAL ON SUBSTANTIAL QUESTION OF LAW IS ADMITTED AND PENDING BEFORE THE HONBLE HIGH COURT, THE ISSUE IS DEBATABLE ITA NO . 1297 / P U N /201 4 GKN SINTER METALS LTD. 13 AND ON DISALLOWANCE OF SUCH DEBATABLE ISSUE, THE RE IS NO MERIT IN LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, WE DELETE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF DISALLOWANCE OF RS.1,34,99,999/ - . THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 1 9 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH , 2017 SD/ - SD/ - ( ANIL CHATURVEDI ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 31 ST M ARCH , 201 7 . / PUNE ; D ATED : 31 M ARCH , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE C I T (A) - V , PUNE ; 4. / THE C I T - V , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER, // TRUE COPY // / ASSISTANT REGISTRAR, , / ITAT, PUNE