KANTI BEVERAGES P. LTD, MUMBAI V. DCIT 3(2), MUMBAI

ITA 1379/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7530 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 14-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Business income; Business expenditure; Wrong claim
• Section: 143(3); 10B

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , AM & SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO . 1379 /MUM/201 6 ( / ASSESSMENT YEAR: 2008 - 09 ) KANTI BEVERAGES PVT. LTD. A - 101, SAI DARSHANCOMPEX, 1 ST FLOOR, MAMLATDAR WADI RD, NO. 1, MALAD (W), MUMBAI - 400064 / VS. DCIT 3(2), AAYAKARBHAVAN MUMBAI , PIN - ./ ./ PAN/GIR NO. A A BCK7186K ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENTBY : SHRI RAJAT MITTAL , DR / DATE OF HEARING : 12 /0 4 /201 8 / DATE OF PRONOUNCEMENT : 24/04/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 8, MUMBAI, DATED 2 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. 30.12.15 FOR AY 2008 - 09 O N THE GROUNDS MENTIONED HEREIN BELOW: - 1. THE LD. CIT (A) FAILED TO APPRECIATE THAT THE AG HAD NOT RECORDED PROPER SATISFACTION IN THE ASSESSMENT ORDER BEF ORE INITIATION OF PENALTY. THEREFORE, PENALTY OF RS 13,55,928/ - IS LIABLE TO BE DELETED IN LIMINE. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT (A) FAILED TO APPRECIATE THAT THE AO HAD NOT CLEARLY SPELT OUT THE CHARGE IN RESPECT OF WHICH PENALTY HAD BEEN LEVIED. THEREFORE, THE PENALTY LEVIED IS UNSUSTAINABLE. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT (A) FAILED TO APPRECIATE THAT THE APPELLANT HAD NEITHER CONCEALED ITS INCOME NOR FURNISHED INACCURATE PARTICULARS THEREOF. THEREFORE, THE PENALTY IS LIA BLE TO BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDSOF APPEAL. 2 . AT THE VERY OUTSET, IT IS NOTICED THAT NONE HAS APPEARED ON BEHALF OF ASSESSEE IN SPITE OF SEVERAL CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED . ON THE OTHER HAND L D. DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. THEREFORE 3 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PA RTE WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD. 3. AS PER THE FACTS OF THE PRESENT CASE, ASSESSEE IS ENGAGED IN THE BUSINESS OF LEASING OF PREMISES . THE RETURN OF INCOME WAS FILED ON 29.09.08 DECLARING TOTAL LOSS OF RS. 64,49,551. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVIN G STATUTORY NOTICE AND SEEKING REPLY, ORDER OF ASSESSMENT U/S 143(3) WAS PASSED BY AO ON 30.11.10 DETERMINING TOTAL INCOME AT RS. 10,606 AS AGAINST LOSS OF RS. 64,49,551/ - DECLARED BY THE ASSESSEE. THE AO DISALLOWED EXPENSES OF RS. 43,88,119 CLAIMED BY THE ASSESSEE AS SUNDRY INTEREST RECEIVABL E. THE PROCEEDING U/S 271(1)(C) OF THE I.T. ACT WAS ISSUED AND AFTER RECEIVING REPLY FROM THE ASSESSEE, ORDER OF PENALTY WAS PASSED ON 31.03.14 THEREBY LEVY OF PENALTY OF RS. 13,55,928 UPON THE ASSESSEE ON THE GROUND T HAT ASSESSEE HAS FILED INACCURATE OF PARTICULARS OF INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES DISMISSED THE APPEAL OF THE ASSESSEE. 4 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE APPEAL BY RAISING THE ABOVE GROUNDS. GROUND NO. 1 TO 3 4 . SINCE ALL THE GROUNDS RAISED BY THE ASSESSEE ARE INTER - CONNECTED AND INTER RELATED AND RELATES TO CHALLENGING THE ORDER OF LD. CI T(A) THAT THE AO HAD NOT RECORDED PROPER SATISFACTION IN THE ASSESSMENT ORDER BEFORE INITIATION OF PENALTY , THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 5. WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROU NDS RAISE D BY THE ASSESSEE IN ITS DETAILED ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. CI T(A) IS CON T AINED IN PARA NO. 5 (5. 1 & 5.1.1 TO 5.1.7) OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 5 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. 5. DECISION I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE CONTENTIONS OF THE APPELLANT. IT IS SEEN THAT IN THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961, THE ASSESSING OFFICER HAD MADE ADDITIONS/DISALLOWANCE ON 2 ACCOUNTS: - SUNDRY INTEREST RECEIVABLE WRITTEN OFF DISALLOWED : RS. 43,88,119/ - - S UNDRY BALANCE WRITTEN OFF DISALLOWED : RS. 20,72,038/ - 5.1 GROUND NO. I GROUND 1 DEALS WITH IMPOSITION OF PENALTY U/S 271(1)(C) WHILE GROUND 2 IS GENERAL IN NATURE HENCE DEALT WITH TOGETHER. 5.1.1 I FIND THE FACTS AND CIRCUMSTANCES OF THE ABOVE TWO DISALLO WANCES HAVE BEEN DISCUSSED AT PARAS 2 AND 3 OF THE ASSESSMENT ORDER, AND AT PARA 5 OF THE APPELLATE ORDER OF LD. CIT(A) VIDE ORDER NO. CIT(A) - (A) - 4/IT - 184/DC 3(2)/2011 - 12 DATED 29.09.2012. AS REGARDS DISALLOWANCE OF INTEREST RECEIVABLE, THE LD. CIT(A) HAS OBSERVED, 'ASSESSEE HAS NOT FILED ANY DETAIL, ITEM - WISE AS TO HOW WAS IT INCURRED AND WHAT IS THE RELATION OF THESE BALANCES WITH THE ASSESSEE AND ITS BUSINESS. AT THE SAME TIME, ASSESSEE HAS SOLD ITS 6 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. BUSINESS AND WHAT WAS THE TERMS AND CONDITIONS FOR SALE OF ITS ASSETS HAS ALSO NNOT BEEN DISCLOSED. THEREFORE, MERE INTENTION OF THE ASSESSEE IS TO REDUCE ITS RENTAL INCOME AND INTEREST INCOME BY CLAIMING SUCH BUSINESS EXPENDITURE, BUT AO HAS RIGHTLY REJECTED THE CLAIM. THE ASSESSEE HAS FAILED TO ESTABLISH ITS CLAIM WITH OTHER DETAILS AND AGAINST INCOME FROM RENT AND INTEREST ETC. THEREFORE, THE GROUND OF APPEAL RELATING TO SUNDRY BALANCES WRITTED OFF IS REJECTED. 'SIMILARLY, ASSESSEE HAS CERTAIN INTEREST RECEIVABLE. ASSESSEE HAS FILED LOAN CONFIRMATIONS FROM T HESE PARTIES AND THEY ARE DIRECTORS OF THE ASSESSEE COMPANY, THEREFORE, IT IS DIFFICULT TO IMAGINE THAT ASSESSEE WOULD HAVE BEEN SERIOUSLY INTERESTED IN RECOVERING THE LOAN AND INTEREST, WHEREAS, WITH A VIEW TO REDUCE THE RENTAL AND INTEREST INCOME ASSESSE E HAS CLAIMED SUCH EXPENSES WITHOUT GIVING ANY OTHER DETAIL, WHEREAS, SUCH BUSINESS EXPENDITURE IS OTHERWISE NOT ALLOWABLE AGAINST RENTAL AND INTEREST INCOME AND AT THE SAME TIME IT IS VERY MUCH RECOVERABLE. THEREFORE, THE GROUND OF APPEAL RELATING TO INTE REST RECEIVABLE WRITTEN OFF IS ALSO REJECTED.' 5.1.2 CONTRARY TO THE CONTENTION OF THE APPELLANT, I FIND THAT THE AO IN PARA 2 AND 3 OF HER ASSESSMENT ORDER HAS CLEARLY EXPLAINED WHY THE PROCEEDINGS FOR 7 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 HAV E BEEN INITIATED. 5.1.3 I HAVE CONSIDERED THE VARIOUS CASE LAWS SUBMITTED IN SUPPORT OF ITS CONTENTION BY THE APPELLANT. I FIND THE SAME ARE NOT RELEVANT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. AS EVIDENT FROM THE OBSERVATION OF THE LD. CIT(A) EXTRACTE D ABOVE, THE APPELLANT HAD FAILED TO ESTABLISH ITS CLAIMS WITH OTHER DETAILS. ALSO, THE FACT THAT THE APPELLANT HAD CLOSED DOWN BUSINESS AND SOLD VARIOUS ASSETS AND PROPERTIES WAS ALSO REVEALED ONLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SIMILARLY, T HE FACT THAT THE SUNDRY BALANCE WRITTEN OFF WERE LOANS GIVEN TO THE DIRECTORS OF THE COMPANY ALSO CAME TO LIGHT ONLY DURING ASSESSMENT PROCEEDINGS. THE FACTS CLEARLY INDICATE THAT THE APPELLANT DID NOT DISCLOSE COMPETE PARTICULARS TILL THE CASE WAS TAKEN U P FOR SCRUTINY. 5.1.4 I REFER TO JCLT VS. CYBERTECH SYSTEMS & SOFTWARE P. LTD.,(ITAT MUMBAI) I.T.A. NOS. 3655, 3656 & 3657/MUM/2006. FACTS OF THE CASE THE ASSESSEE CLAIMED BENEFIT U/S 10B ON THE INTEREST INCOME EARNED ON DEPOSITS PLACED WITH THE 8 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. BANK/S FOR FIXED TERM/S (FDRS) AND INTER - CORPORATE DEPOSITS (ICDS). IT WAS FOUND THAT THE INTEREST INCOME HAS NO NEXUS WITH THE ASSESSEE'S BUSINESS ACTIVITY. THEREFORE ON RAISING FALSE CLAIM BY ASSESSE, AO PASSED PENALTY ORDER U/S 271 (1) (C). BEFORE TRIBUNAL, THE ASSESSE RELIED ON VARIOUS JUDGMENTS TO ITS CASE. THE TRIBUNAL FOUND THAT ASSESSE HAD NOT EVEN CHALLENGED REJECTION OF CLAIM IN APPEAL. MOREOVER, JUDGMENTS RELIED UPON BY ASSESSE FOR RAISING SUCH A CLAIM WERE FOUND DISTINGUISHED ON FACTS. CONTENTION OF REVE NUE THERE IS NOTHING ON RECORD TO SUGGEST OTHERWISE, I.E., OF THE INTEREST BEARING DEPOSITS AS OCCASIONED BY THE ASSESSEE'S BUSINESS REQUIREMENTS, OF A CLEAR NEXUS WITH BUSINESS, MUCH LESS AN INTIMATE RELATIONSHIP, DENOTING ONE OF FIRST DEGREE, AS CONTEMPLATED BY LAW, WHICH THUS IS WITH THE SAID DEPOSITS. HELD BY 1TAT THUS, IT WAS VIEWED THAT THERE WAS NO MERIT IN THE ASSESSEE'S CASE. SINCE ASSESSE, HAD NOT ADDUCED ANY EXPLANATION, MUCH LESS SUBSTANTIATED IT, EXCEPT FOR A 9 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. BALD ASSERTION (I.E., OF THE SAID INTEREST INCOME AS BEING A PART OF THE ASSESSEES BUSINESS INCOME). 5.1.5 FURTHER, IN CONTEXT OF THE APPELLANT'S ASSERTION THAT PENALTY U/S 271(1)(C) CANNOT BE LEVIED IN CASES WHERE LOSS HAS BEEN REDUCED, I FIND THE ISSUE WAS CONSIDERED BY THE BOM BAY HIGH COURT IN CITV .CHEMIEQUIP LTD. [20041 265 ITR 265/[2003] 129 TAXMAN 581. THE CASE RELATED TO THE ASSESSMENT YEAR 1989 - 90; UPHOLDING THE LEVY OF PENALTY IN THE LIGHT OF THE AMENDED LAW, THE BOMBAY HIGH COURT OBSERVED '...BY THE FINANCE BILL, 2002, SECTION 271 OF THE INCOME - TAX ACT HAS BEEN AMENDED VIDE CLAUSE 97 [SEE [2002] 254 ITR (.ST.) PAGES 174 AND 175 AND 176]. BY CLAUSE 97(F) OF THE FINANCE BILL, 2002, IT IS CLARIFIED THAT IN CASES WHERE THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAV E BEEN CONCEALED HAS THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN THEN THE AMOUNT OF TAX SOUGHT TO BE EVADED SHALL BE THE TAX THAT WOULD HAVE BEEN CHARGEABLE ON THE AMOUNT OF SUCH INCOME AS IF SUCH INCOME WAS THE TOTAL INCOME. THIS AMENDMENT IS C LARIFICATORY IN NATURE. IT IS SO STATED IN THE FINANCE BILL, 2002: NOTES ON CLAUSES [SEE [2002] 254 ITR (ST.) 175, 176]. THEREFORE, THE VIEW WHICH WE HAVE TAKEN IS ALSO SUPPORTED BY SUBSEQUENT AMENDMENT. IN THE CIRCUMSTANCES, THE TRIBUNAL ERRED 10 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. IN HOLDING THAT SECTION 271(1)(C) WAS NOT APPLICABLE AS THE FINAL ASSESSED INCOME WAS A REDUCED LOSS. THE TRIBUNAL HAS FAILED TO TAKE INTO ACCOUNT CLAUSE (A) OF EXPLANATION 4 AS IT STOOD AT THE RELEVANT TIME. . . .' (P. 270) 5.1.6 I ALSO FIND THAT THE KARNATAKA HIGH COURT IN THE CASE OF P.R. BASAVAPPA& SONS V. C/T [2000] 243 ITR 776/[2003] 128 TAXMAN 294 WHILE UPHOLDING THE LEVY OF PENALTY IN SUCH CASES, OBSERVED 'EARLIER THE PENALTY WAS WITH REFERENCE TO THE ACTUAL CONCEALED INCOME OR TAX THEREON. THE WORD 'INCOME' H AS BEEN DEFINED UNDER SECTION 2(24) OF THE ACT, WHICH IS AN INCLUSIVE DEFINITION. SECTION 4 IS THE CHARGING SECTION WHICH CREATES THE LIABILITY OF TAX ON TOTAL INCOME. THE WORD 'INCOME' INCLUDES LOSS ALSO - CIT V. HARPRASAD& CO. [1975] 99 ITR 118 (SC). IN ATUL KUMAR DEVORAT& CO. V. CIT[1987] 168 ITR 286, THE CALCUTTA HIGH COURT UPHELD THE LEVY OF PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF THE CLAIM FOR LOSS ON PURCHASE AND SALE OF SHARES WHICH WAS NOT ALLOWED IN THE ASSESSMENT PROCEEDINGS. IT IS CONTENDE D THAT INCOME IN SECTION 271(1)( C) SHOULD BE OF POSITIVE FIGURE. IN CIT V. PRITHIPAL SINGH & CO. [1990] 183 ITR 69, THE PUNJAB AND HARYANA HIGH 11 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. COURT HELD THAT THE INCOME AS ENVISAGED IN SECTION 271(1)(C) MEANS POSITIVE INCOME. IF THE LOSS DECLARED HAS BE EN REDUCED, PENALTY UNDER SECTION 271(1)(C) CANNOT BE LEVIED. THIS DECISION IS IN RESPECT OF THE ASSESSMENT YEAR 1970 - 71. I.E., BEFORE THE INSERTION OF THE ABOVE EXPLANATION AND HENCE CANNOT HELP THE CASE OF THE ASSESSEE. FOR THE SAME REASON THE DECISIONS GIVEN IN CIT V. INDIA SEA FOODS [1976] 105 ITR 708 (KER.), ASSESSMENT YEAR 1968 - 69; CIT V. NIRANJAN (CR.) [1991] 187 ITR 280 (MAD.), ASSESSMENT YEAR 1969 - 70; CIT V. JAORA OIL MILL [1981] 129 ITR 423 (MP), ASSESSMENT YEAR 1968 - 69, ARE NOT APPLICABLE.' (P. 7 79) 5.1.7 IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT THE ASSESSING OFFICER WAS JUSTIFIED IN LEVYING THE PENALTY. THESE GROUNDS OF APPEAL ARE, THEREFORE, DISMISSED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMISSIONS MADE BY LD. DR, WE FIND THAT LD. CIT (A) HAS CORRECTLY DISMISSED THESE GROUND S OF APPEAL RAISED BY THE ASSESSEE BY UPHOLDING THE DECISION OF AO . LD . CIT(A) HAS 12 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. CORRECTLY APPRECIATED THE JUDGMENTS OF DIFFERENT HONBLE HIGH COURT & TRIBUNAL WHILE REACHING TO THE CONCLUSION. MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD CIT (A) . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND S RAISED BY THE ASSESSEE STANDS DISMISSED . 6 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH APRIL, 2018. SD/ - SD/ - (R.C. SHARMA ) ( SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 24 . 04 .201 8 SR.PS . DHANANJAY 13 I.T.A. NO. 1379 /MUM/201 6 KANTI BEVERAGES PVT. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI