GEETA PRABHUDAS PAWANI, MUMBAI V. ITO WD 23(2)(3), MUMBAI

ITA 1579/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79169 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 18-06-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 24-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CAPT PRADEEP ARYA
• Assessee Lawyers: SUBODH RATNAPARAKHI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 1578, 1579 & 1580/MUM/2011 (ASSESSMENT YEARS: 2002-03, 2004-05 & 2005-06) MS. GEETA PRABHUDAS PAWANI INCOME TAX OFFICER - 23 (2)(3) PAWANI PLOT, NEAR VIPUL APARTMENT, BHAKTI MARG MULUND (W), MUMHAI 400080 VS. C-10, PRATYAKSHA KAR BHAVAN BANDRA-KURLA COMPLEX MUMBAI 400051 PAN - AAFPP8765Q APPELLANT RESPONDENT APPELLANT BY: SHRI SUBODH RATNAPARAKHI RESPONDENT BY: CAPT. PRADEEP ARYA DATE OF HEARING: 18.06.2014 DATE OF PRONOUNCEMENT: 18.06.2014 O R D E R PER D. MANMOHAN, V.P. THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER DATED 16.11.2010 PASSED BY THE CIT(A)-33, MUMBAI AN D THEY PERTAIN TO ASSESSMENT YEARS 2002-03, 2004-05 AND 2005-06. 2. EXCEPT FOR THE QUANTUM OF ADDITION THE GROUNDS URGE D IN ALL THESE APPEALS ARE IDENTICAL. THE GROUNDS URGED BEFORE US FOR A.Y. 2002-03 ARE REPRODUCED HERE: - 1A THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE A DDITION OF RS.63,87,752/- AS LIQUIDATED DAMAGES WORKED OUT @ 48% OF OUTSTANDING INTEREST LIABILITY BY HOLDING THAT THE SAID AMOUNT WAS THE INCOME OF THE APPELLANT. 1B THE LD. CIT (APPEALS) ERRED IN NOT APPRECIATING THAT THE TERMS OF THE ORIGINAL LOAN AGREEMENT WERE MODIFIED BY THE PA RTIES AND THE RIGHT TO LIQUIDATED DAMAGES WAS WAIVED BY THE APPEL LANT IN PURSUANCE THEREOF AND THAT IN ABSENCE OF REAL INCO ME ADDITION COULD NOT BE SUSTAINED. 3. IN SHORT, THE ADDITION IS WITH REFERENCE TO NOTIONA L LIQUIDATED DAMAGES WHICH WAS SOUGHT TO BE TREATED AS INCOME OF THE ASS ESSEE. THE CONTENTION OF THE ASSESSEE BEFORE THE AO WAS THAT THOUGH AN AMOUN T OF ` 6 CRORES WAS ITA NO. 1578, 1579 & 1580/MUM/2011 MS. GEETA PRABHUDAS PAWANI 2 ADVANCED TO M/S. ENTERPRISE TRADING CO. SUBJECT TO CERTAIN TERMS AND CONDITIONS, WHICH INCLUDES PAYMENT OF LIQUIDATED DA MAGES @48% PER ANNUM IN THE EVENT OF DEFAULT IN PAYMENT, BUT ON AC COUNT OF SUBSEQUENT EVENTS THE ASSESSEE REALISED THAT EVEN RECEIPT OF P RINCIPAL AMOUNT IS DIFFICULT SINCE THE OTHER PARTY IS PASSING THROUGH A SERIOUS FINANCIAL CRISIS AND THEREFORE THE TERMS OF AGREEMENT NEED TO BE SUITABL Y MODIFIED. ACCORDINGLY, VIDE LETTER DATED 31 ST MARCH, 1997, THE ASSESSEE AGREED TO CERTAIN CHANGE S IN THE AGREEMENT. ONE OF THE CHANGES WAS THAT NO LIQUI DATED DAMAGES SHALL BE CHARGED ON THE OUTSTANDING AMOUNT. THE SAID TERMS W ERE ACCEPTED BY THE BORROWER VIDE ITS LETTER DATED 5 TH APRIL, 1997. SINCE BOTH THE PARTIES AGREED NOT TO CHARGE ANY LIQUIDATED DAMAGES, THE CLAIM OF THE ASSESSEE WAS THAT NEITHER LIQUIDATED DAMAGES NOR INTEREST THEREON ACC RUES TO THE ASSESSEE IN SUBSEQUENT YEARS, INCLUDING THE YEARS UNDER CONSIDE RATION. THE AO REJECTED THE CONTENTION OF THE ASSESSEE AND THE CIT(A) AFFIR MED THE ORDER OF THE AO. AGGRIEVED, ASSESSEE IS APPEAL BEFORE US. 4. AT THE TIME OF HEARING BOTH THE PARTIES SUBMITTED T HAT THE ISSUE STANDS SQUARELY COVERED BY THE DECISION OF THE ITAT G BE NCH, MUMBAI IN ASSESSEES OWN CASE FOR A.Y. 2003-04 (ITA NO. 4633/MUM/2011 DA TED 16.11.2012) WHEREIN THE TRIBUNAL OBSERVED THAT AS PER THE REVIS ED TERMS AND CONDITIONS AGREED BETWEEN THE PARTIES THE ASSESSE E HAS FOREGO NE LIQUIDATED DAMAGES AND HENCE NO INCOME CAN BE SAID TO HAVE ACCRUED ON ACCOUNT OF LIQUIDATED DAMAGES FOR A.Y. 2003-04. IN FACT, THIS BENCH ALSO ALLOWED THE APPEALS OF THE ASSESSEE FOR A.Y. 2003-04 AND A.Y. 2006-07 IN ITA N O. 6535 & 6536/MUM/ 2012, ON IDENTICAL ISSUE, VIDE ORDER DATED 17.06.20 14. UNDER THESE CIRCUMSTANCES WE HOLD THAT THE LEARNED CIT(A) WAS N OT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO. THEREFORE, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JUNE, 2014. SD/- SD/- (N.K. BILLAIYA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 18 TH JUNE, 2014 ITA NO. 1578, 1579 & 1580/MUM/2011 MS. GEETA PRABHUDAS PAWANI 3 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 11, MUMBAI 4. THE CIT 23, MUMBAI CITY 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.