LEXICON FINANCE LTD, MUMBAI V. JCIT RG 2(2), MUMBAI

ITA 1521/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9225 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 02-12-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 25-02-2013
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA
• Assessee Lawyers: NISHIT GANDHI LA
• Keywords: Period of limitation; Bad and doubtful debts; Time period of passing order
• Section: 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI . . , , BEFORE : SHRI R.C.SHARMA, AM & SHRI SANJAY GARG , JM ./ ITA NO. 1521 / MUM/20 1 3 ( / ASSESSMENT YEAR : 200 4 - 05 ) LEXICON FINANCE LTD., 124, ANDHERI UNIVERSAL INDL. PREMISES, J.P.ROAD, ANDHERI (W), MUMBAI - 400058 VS. JCIT(OSD), RANGE - 2(2), MUMBAI - 400020 ./ ./ PAN/GIR NO. : A A ACL 0914 H ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI NISHIT GANDHI LA /REVENUE BY : SHRI VIVEK PERAMPURNA / DATE OF HEARING : 20/03/2015 / DATE OF PRON OUNCEMENT : 25/03 /2015 / O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), DATED 24 - 12 - 2012 FOR THE ASSESSMENT YEAR 2004 - 05, IN THE MATTER OF IMPOSITION OF PENALTY OF RS. 3,18,5 00/ - U/S.271(1)(C) OF THE I.T.ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE AO IMPOSED PENALTY U/S.271(1)(C) OF THE ACT WITH RESPECT TO THE DISALLOWANCE ON ACCOUNT OF PRELIMINARY EXPENSES WRITTEN OFF AMOUNTING TO RS.1,10,000/ - AND ON AC COUNT OF BAD DEBTS WRITING OFF AMOUNTING TO RS.8 LAKHS. AS PER THE AO ASSESSEE HAS NOT FILED ACCURATE PARTICULARS, THEREFORE, DISALLOWANCE AMOUNTS TO CONCEALMENT OF INCOME. ACCORDINGLY, HE LEVIED ITA NO.1521/2013 2 PENALTY U/S.271(1)(C) AND THE SAME WAS CONFIRMED BY THE CIT( A). AGAINST WHICH, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. DURING THE COURSE OF HEARING BEFORE US LD. AR RAISED ADDITIONAL GROUNDS TO THE EFFECT THAT THE ORDER PASSED BY THE AO IMPOSING PENALTY U/S.271(1)(C) IS BARRED BY LIMITATION AS PROVIDED U/S. 275 OF THE ACT. HE CONTENDED THAT AS PER PROVISO TO SECTION 275(1)(A), THE ORDER IMPOSING PENALTY SHOULD BE PASSED BEFORE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, OR WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE CIT(A) IS RECEIVED BY THE CHIEF COMMISSIONER OF INCOME TAX , WHICHEVER IS LATTER. 4. AS PER LD. AR IN THIS CASE, THE AO HAS NOT PASSED ORDER U/S.271(1)(C) WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF CIT(A) WAS RECEIVED BY THE COMMISSIONER. ACCORDINGLY, THE ORDER PASSED BEYOND THE LIMITATION PERIOD, HAS NO LEGS TO STAND. 5. ON THE OTHER HAND, LD. DR MR. ASGHAR ZAIN CONTENDED THAT ASSESSEE S CASE IS COVERED BY THE MAIN PROVISIONS OF SECTION 275(1)(A), INSOFAR AS ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF CIT(A) AND FOR THIS PURPOSE HE RELIED ON THE DECISION OF DELHI HIGH COURT IN CASE OF MOHAIR INVESTMENT & TRADIN G CO. (P) LTD., 345 ITR 51 . 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THIS CASE, AGAINST THE ADDITION SUSTAINED BY THE CIT(A), THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL, THEREFORE, AS PER OUR CONSIDERED VIEW THE TIME LIMIT FOR IM POSITION OF PENALTY IS GOVERNED BY THE MAIN PROVISIONS OF ITA NO.1521/2013 3 SECTION 275(1)(A) AND NO BY THE PROVISO TO SECTION 275(1)(A). SINCE THE PENALTY ORDER WAS PASSED WELL WITHIN THE PERIOD OF SIX MONTHS FROM THE END OF THE MONTH, ORDER OF ITAT WAS RECEIVED BY CHIEF COMMISSIONER, WE DO NOT FIND ANY MERIT IN THE CONTENTION OF LD. AR THAT ORDER SO PASSED WAS BARRED BY LIMITATION. ACCORDINGLY, THE ADDITION AL GROUND RAISED BY THE ASSESSEE IS DISMISSED. 7. NOW, COMING TO THE MERIT OF THE PENALTY IMPOSED U/S.271(1)(C) , WE F OUND THAT ASSESSEE WAS PROPORTIONATELY CLAIMING PRELIMINARY EXPENSES EVERY YEAR. DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS ALSO CLAIMED RS.1,10,000/ - , WHICH WAS DISALLOWED BY THE AO. WE FOUND THAT SIMILAR EXPENSES WAS ALLOWED BY THE AO IN THE SCRUTI NY ASSESSMENT FRAMED U/S.143(3) FOR IMMEDIATELY PRECEDING YEAR I.E. A.Y.2003 - 04. SINCE THE DEPARTMENT ITSELF HAS ACCEPTED ASSESSEES CLAIM FOR SUCH WRITING OFF OF PRELIMINARY EXPENSES IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, DISALLOWANCE OF SIMILAR CL AIM IN SUBSEQUENT YEAR WILL NOT MAKE IT A FIT CASE FOR LEVY OF PENALTY. ACCORDINGLY, WE DO NOT FIND ANY JUSTIFICATION FOR LEVY OF PENALTY IN RESPECT OF DISALLOWANCE OF PRELIMINARY EXPENSES OF RS.1,10,000/ - WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION. 8 . NOW, COMING TO THE DISALLOWANCE ON ACCOUNT OF BAD DEBTS AMOUNTING TO RS.8 LAKHS, WE FOUND THAT ADVANCES WERE GIVEN BY ASSESSEE COMPANY TO ITS EMPLOYEES IN EARLIER YEARS IN THE COURSE OF ITS BUSINESS. HOWEVER, SINCE THE ADVANCES WERE NOT RECOVERED THE SAM E WAS WRITTEN OFF AS EMPLOYEES HAVE LEFT THE JOB, WHICH IS CLEAR FROM THE PA GE NO.3 OF THE ASSESSMENT ORDER . H OWEVER, THE AO HAS DISALLOWED ASSESSEES CLAIM OF BAD DEBTS U/S.36(1)(VIII) OF THE I.T.ACT AND LEVIED PENALTY/S.271(1)(C) ITA NO.1521/2013 4 WITH REFERENCE TO SUCH D ISALLOWANCE . SIMILAR ISSUE HAS BEEN DEALT BY THE HONBLE DELHI HIGH COURT IN THE CASE OF DCM LTD., 359 ITR 101, WHEREIN IT WAS HELD THAT MERE DISALLOWANCE OF LOSS CLAIMED IN RESPECT OF ADVANCES GIVEN TO SUBSIDIARIES WHICH IS DISALLOWED IN THE COURSE OF REG ULAR ASSESSMENT, WILL NOT ENTITLE THE AO TO LEVY PENALTY FOR SUCH DISALLOWANCE. IT WAS OBSERVED THAT LAW DOES NOT BAR OR PROHIBIT AN ASSESSEE FOR MAKING A CLAIM, WHICH HE BELIEVES MAY BE ACCEPTED OR IS PLAUSIBLE. WHEN SUCH A CLAIM IS MADE DURING THE COURSE OF REGULAR OR SCRUTINY ASSESSMENT, PENALTY CANNOT BE IMPOSED AS NECESSARILY THE CLAIM WAS BOUND TO BE CAREFULLY SCRUTINIZED BOTH ON FACTS AND IN LAW . BY RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS LTD., 322 ITR 1 58, THE HONBLE DELHI HIGH COURT CONFIRMED THE DELETION OF PENALTY FOR SUCH DISALLOWANCE OF BAD DEBTS WRITTEN OFF ON ACCOUNT OF LOAN GIVEN TO ITS SUBSIDIARY. 9 . RESPECTFULLY FOLLOWING THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT, WE DO NOT FIND ANY MERIT FOR LEVY OF PENALTY IN RESPECT OF WRITING OFF ADVANCES GIVEN TO THE EMPLOYEES WHICH COULD NOT BE RECOVERED DUE TO THE FACT THAT THEY HAD LEFT THE JOB 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART, IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH MARCH, . 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACC OUNTANT MEMBER MUMBAI ; DATED 25 / 0 3 /201 5 . . /PKM , . / PS ITA NO.1521/2013 5 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUM BAI 6. / GUARD FILE. //TRUE COPY//