DCIT 8(1), MUMBAI V. AQUA LOGISTICS LTD, MUMBAI

ITA 1366/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3702 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MURLI
• Keywords: Bad and doubtful debts; Revenue expenditure

Judgement Text

M/S AQUA LOGISTICS LTD ITA 1366 /M/201 2 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI , , BEFORE SHRI RAJENDRA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMB ER ITA NO. : 1366 /MUM/20 1 2 (ASSESSMENT YEAR: 200 8 - 0 9 ) JT. /DY . COMMISSIONER OF INCOME - TAX - ( OSD ), RANGE - 8(1), MUMBAI VS M/S AQUA LOGISTICS LTD , 5 TH FLOOR, B WING, TRADE STAR, ANDHERI KURLA ROAD, J B NAGAR, ANDHERI (EAST), MUMBAI - 400 059 .: PAN: A A D CA 0603M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M MURLI RESPONDENT BY : NONE /DATE OF HEARING : 02 - 0 3 - 201 6 / DATE OF PRONOUNCEMENT : 04 - 03 - 201 6 ORDER : . . : PER AMIT SHUKLA , JM : THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 12 .12.201 1 , PASSED BY C OMMISSIONER OF I NCOME T AX (A PPEALS ) - 7, MUMBAI [CIT(A)] IN RELATION TO THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) FOR THE ASSESSMENT YEAR 2008 - 09 , VIDE WHICH FOLLOWING GROUNDS HAVE BEEN RAISED: - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ER RED IN DELETING THE PENALTY OF RS. 28,99,048/ - IMPOSED UNDER SECTION 271(1)(C) OF THE I.T. ACT. 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE I.T. ACT IN RESPECT OF BAD DEBTS OF RS. 85,19,123/ - WHICH THE ASSESSEE HAD DIRECTLY CLAIMED IN THE COMPUTATION OF THE TOTAL INCOME WITHOUT M/S AQUA LOGISTICS LTD ITA 1366 /M/201 2 2 FULFILLING THE CONDITIONS AS LID DOWN IN SECTION 36(1)(VII) OF THE ACT. 3 . ONE OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE I.T. ACT IN RESPECT OF BAD DEBTS OF RS. 85,19,123/ - WITHOUT APPRECIATING THAT THE ASSESSEE HAD FAILED TO ESTABLISH THAT THE SAID AMOUNT OF RS. 85,19,123/ - CLAIMED TO BE BAD DEBTS IS INCIDENTAL TO ITS BUSINESS AND HAS ARISING FROM THE BUSINESS CARRIED ON BY IT. 2. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE CATEGORICAL NOTING BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ON THE EARLIER D ATE OF HEARING , NOR ANY ADJOURNMENT APPLICATION HAVE BEEN FILED TODAY . ACCORDINGLY, WE ARE DECIDING THE APPEAL ON MERITS AFTER HEARING THE ARGUMENTS OF LD. DR. 3. THE SUBJECT MATTER OF LEVY OF PENALTY IS DISALLOWANCE OF CLAIM OF BAD DEBTS OF RS. 85, 19,123/ - . IN THE QUANTUM PROCEEDINGS, THE AO NOTED THAT IN THE STATEMENT OF INCOME THE ASSESSEE HAS CLAIMED A SUM OF RS. 85,19,123/ - AS BAD DEBTS, HOWEVER, THE SAID AMOUNT WAS NOT WRITTEN OFF IN THE BOOKS OF ACCOUNT AS REQUIRED UNDER THE ACT . IN RESPONSE T O THE SHOW CAUSE NOTICE, ASSESSEE GAVE FOLLOWING EXPLANATION / JUSTIFICATION : - DETAILS OF BAD DEBTS AND ADVANCES WRITTEN OFF. AS PER STATEMENT OF BAD DEBTS & ADVANCES WRITTEN OFF THE ITEMS 1, 4, 5, 6, 7 AND 9 ARE AMOUNTS DUE FROM STAFF WHO HAVE LEFT THE O RGANIZATION AND THE AMOUNT COULD NOT BE RECOVERED FROM THEM AND CONSEQUENTLY CLAIMED AS EXPENDITURE IN THE COMPUTATION OF TOTAL INCOME. ITEMS 2 IS REVENUE EXPENDITURE INCURRED FOR PROMOTION OF BUSINESS IN CANADA AND NOTHING MATERIALIZED ON THE SAME. CONSEQ UENTLY THE SAME HAS BEEN CLAIMED AS EXPENDITURE IN THE COMPUTATION OF TOTAL INCOME COPY OF AGREEMENT OF AQUA LOGISTICS NORTH AMERICA INC IS ENCLOSED HEREWITH. INSURANCE CLAIM RECEIVABLE FOR DAMAGED GOODS WAS NOT ALLOWED BY THE INSURANCE COMPANY AND TREATED AS IRRECOVERABLE IN THE STATEMENT OF TOTAL INCOME. DETAILS OF BAD DEBTS & ADVANCES WRITTEN OFF: M/S AQUA LOGISTICS LTD ITA 1366 /M/201 2 3 (RS.) 1 . AMBESH MEHNA 4,378.00 2 . AQUA CANADA (INVESTMENT0 67,18,862.14 3 . AQUA GLOBAL SCM PVT LTD 550.00 4 . ASHOK LAVANDE 63 ,772.63 5 . ASHOK PATWA 4,68,329.00 6 . ASHOK S BATTAPPADY 8,000.00 7 . GUNEET SINGH MALIK 8,994.00 8 . INSURANCE CLAIM RECEIVABLE 4,04,291.00 9 . RAKESH KUMAR SINGH 8,41,846.23 85,19,123.00 ============ HOWEVER, THE LD. AO HELD THAT BAD DEBT CAN ONLY ALLOWED IF IT HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE PREVIOUS YEAR IN WHICH CLAIM FOR DEDUCTION IS MADE. SINCE THE ASSESSEE HAS NOT WRIT TE N OFF AMOUNT IN THE BOOKS, THEREFORE, MERE CLAIM IN THE STATEME NT OF INCOME OF BAD DEBT S CANNOT BE ALLOWED. THE SAID FINDING OF THE AO HAS ATTAINED FINALITY , AS NO APPEAL W AS FILED BY THE ASSESSEE ON THIS ISSUE. 4. IN THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITTED THAT ALL THE CONDITIONS UNDER SECTION 36(1)(VII) ST ANDS FULFILLED, THAT IS, THE AMOUNT WAS IN THE NATURE OF DEBT WHICH HAD BECAME BAD IN THE PREVIOUS YEAR , WHICH WAS WRITTEN OFF DURING THE YEAR. THOUGH THE ASSESSEE BY MISTAKE DID NOT WRITE IT OFF IN THE BOOKS OF ACCOUNT, BUT, IT HAD DULY CLAIMED AS A BAD D EBT IN THE COMPUTATION OF INCOME FOR THE PURPOSE OF INCOME - TAX AND CLAIMED IT AS DEDUCTION. AO HAS REJECTED THE SAID EXPLANATION ONLY ON TECHNICAL GROUND THAT, THE BAD DEBTS WRITTEN OFF SHOULD HAVE BEEN CHARGED TO THE PROFIT & LOSS ACCOUNT AND NOT IN THE R ETURN OF INCOME. ACCORDINGLY HE LEVIED THE PENALTY FOR AN AMOUNT OF RS. 28,99,048/ - . 5 . BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT, IT IS NEITHER A CASE FOR ANY CONCEALMENT OF INCOME NOR FURNISHING OF ANY INACCURATE PARTICULARS. THE ASSESSEE HAS MADE THE CLAIM OF BAD DEBT S DIRECTLY IN THE COMPUTATION , RATHER THAN DEDUCTI NG IT IN THE M/S AQUA LOGISTICS LTD ITA 1366 /M/201 2 4 PROFIT AND LOSS ACCOUNT . THE EXPLANATION OF THE ASSESSEE WAS REJECTED ONLY FOR THE REASON THAT SUCH A WRITE OFF SHOULD HAVE BEEN MADE IN THE BOOKS OF ACCOUNT WHICH THE ASS ESSEE HAD EXPLAINED COULD NOT BE DONE DUE TO BONA FIDE MISTAKE . OTHERWISE SUCH A CLAIM HAS NOT BEEN FOUND TO BE BOGUS OR NON - GENUINE. THE LD. CIT(A), DELETED THE PENALTY AFTER ELABORATE DISCUSSION AND RELYING UPON VARIOUS CASE LAWS . 6 . AFTER CONSIDER ING THE SUBMISSION MADE BY THE DR AND ON PERUSAL OF THE FINDING GIVEN IN THE IMPUGNED ORDER, WE FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT THE BAD DEBT CLAIMED BY THE ASSESSEE WAS NOT GENUINE OR WAS BOGUS OR WAS NOT IN THE NATURE OF DEBT IN THE EARLI ER YEAR OR THIS YEAR. THE SAME HAS BEEN DISALLOWED ON THE GROUND THAT SAME HAS NOT BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT, A LBEIT IT HAS BEEN CLAIMED IN THE STATEMENT OF INCOME FILED ALONG WITH THE RETURN OF INCOME. THE CLAIM OTHERWISE IS LEGALLY AND FAC TUALLY MAINTAINABLE. IF FOR ANY TECHNICAL REASON THE CLAIM HAS BEEN DISALLOWED THEN THAT ITSELF DOES NOT LEAD TO INFERENCE THAT ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS OF INCOME. THERE IS NO CONCEALMENT OF INCOME ALSO WHILE CLAIMING SUCH DEDUCTIO N IN THE RETURN OF INCOME. ACCORDINGLY, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE CONCLUSION OF THE CIT(A) THAT NO PENALTY IS LEVIABLE ON SUCH A DISALLOWANCE . A CCORDINGLY, THE ORDER OF THE CIT(A) IS AFFIRMED AND GROUNDS RAISED BY THE REVENUE STANDS DIS MISSED. 7 . RESULTANTLY, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH , 2016 . SD/ - SD/ - ( ) ( ) ( RAJE NDRA ) ( AMIT SHUKLA ) ACCOU NTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 4 TH MARCH , 2016 M/S AQUA LOGISTICS LTD ITA 1366 /M/201 2 5 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 16 , MUMBAI . 4 ) THE COMMISSIONER OF INCOME TAX - 8 , MUMBAI . 5 ) , , / THE D.R. A BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS