AAKASH UNIVERSAL LTD ( FORMERLY AAKASH STONE INDUSTRIES LTD), MUMBAI V. ACIT RG 8(1), MUMBAI

ITA 1727/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49262 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 05-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Assessee Lawyers: K SHIVARAM
• Keywords: Opportunity of being heard; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A : MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI R.K.PANDA, ACCOUNTANT MEMBER ITA. NO. 1727/MUM/2010 ASSESSMENT YEAR 2003-2004 M/S. AAKASH UNIVERSAL LTD. MUMBAI 400 099 PAN AAACA9755H VS. ACIT, RANGE 8 (1) MUMBAI 400 020 (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI K. SHIVARAM FOR RESPONDENT : SHRI P.K.B. MENON ORDER PER D. MANMOHAN, V.P. 1. THIS APPEAL BY THE ASSESSEE-COMPANY IS DIRECTED AGAINST THE ORDER DATED 17-12-2009 OF THE CIT(A)-16, MUMBAI AND IT PERTAINS TO THE ASSESSMENT YEAR 2003-2004. PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271 (1) (C) OF THE ACT HAVING BEEN CONFIRMED BY THE LEARNED CIT(A), ASSESSEE IS IN APPEAL BEFORE US . 2. FACTS NECESSARY FOR THE DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. ASSESSEE IS A MANUFACTURER OF MARBLE SLAB S. FOR THE YEAR UNDER CONSIDERATION IT DECLARED TOTAL INCOME OF RS. 40,13,727/- AND THE RETURN WAS ACCOMPANIED BY AUDIT REPORT UNDER SE CTION 44AB OF THE ACT. ASSESSMENT WAS HOWEVER COMPLETED UNDER SEC TION 143 (3) OF THE ACT BY DETERMINING TOTAL INCOME OF RS.2.43 CROR ES. WE ARE CONCERNED HEREIN WITH THE FOLLOWING DISALLOWANCE WH ICH WAS THE BASIS FOR INITIATING PENALTY PROCEEDINGS. (A) COMMISSION OF RS.7,03,698/- (B) BAD DEBTS OF RS.13,54,277/- (C) CLUB MEMBERSHIP FEES OF RS.2,00,000/- (D) CLAIM OF EXPENSES OF RS.50 LAKHS 2 3. IN THE LIGHT OF EXPLANATION TO SECTION 271 (1) (C) OF THE ACT, ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS IN RESPONSE TO WHICH ASSESSEE CONTENDED THAT THE DISALLOWANCES PER SE WI LL NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME AND THUS, IT IS NOT A FIT CASE FOR LEVY OF P ENALTY. ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND IMPOSED A MINIMUM PENALTY OF RS.26,67,305/-. LEARNED CIT(A) A FFIRMED THE ACTION OF THE ASSESSING OFFICER AND THUS THE ASSESS EE IS IN APPEAL BEFORE US. 4. DURING THE COURSE OF HEARING, LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASSESSEE, PLACED BEFORE US A COPY OF THE ORDER OF THE ITAT (ITA. NO.1178/MUM/2008 AND 934/MUM/2008 DATED 6/10/09) TO SUBMIT THAT THE DISALLOWANCE ON ACCOUNT OF BAD D EBTS WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJU DICATION IN ACCORDANCE WITH LAW, IN THE LIGHT OF DECISION OF THE HONBLE B OMBAY HIGH COURT IN THE CASE OF OMEN INTERNATIONAL BANK 313 ITR 128. AS REGARDS THE DISALLOWANCE OF RS. 2 LAKHS, REFERABLE TO CLAIM OF DEDUCTION OF CLUB MEMBERSHIP FEES, LEARNED COUNSEL ADVERTED OUR ATTEN TION TO PAGE 17 OF THE PAPER BOOK (CIT(A) ORDER DATED 29-2-2007) WH EREIN SEPARATE DISALLOWANCE OF RS. 2 LAKHS WAS SET ASIDE ON THE GR OUND THAT IN THE EVENT OF CONFIRMING ADHOC DISALLOWANCE OF RS. 50 LA KHS THERE IS NO NEED FOR SEPARATE ADDITION ON THIS COUNT. IT WAS CO NTENDED THAT IN THE ABSENCE OF EXISTENCE OF SEPARATE DISALLOWANCE OF RS . 2 LAKHS, THERE CANNOT BE ANY PENALTY ON THAT COUNT. SIMILARLY, THO UGH ASSESSING OFFICER HAS DISALLOWED A SUM OF RS. 50 LAKHS ON ACC OUNT OF INCREASE IN VARIOUS EXPENSES WHICH WAS CONFIRMED BY THE ITAT, T HE HNBLE BOMBAY HIGH COURT IN I.T. APPEAL NO. 2264/2010 DATE D 21 ST MARCH, 2011 RESTORED THE MATTER TO THE FILE OF THE ASSESSI NG OFFICER TO RECONSIDER THE MATTER AFRESH. THUS THE VERY BASIS F OR LEVY OF PENALTY DOES NOT EXIST. LEARNED COUNSEL, THEREFORE, SUBMITT ED THAT THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE CIT(A) DESE RVES TO BE SET ASIDE WITH A DIRECTION TO RECONSIDER THE MATTER AFRESH AF TER GIVING THE 3 ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD, AFT ER MAKING A FRESH ASSESSMENT IN LINE WITH THE DIRECTIONS GIVEN BY THE CIT(A)/ITAT/HONBLE HIGH COURT OF BOMBAY. 5. LEARNED DR ON THE OTHER HAND SUBMITTED THAT IN SO FAR AS THE DISALLOWANCE REFERABLE TO THE CLAIM OF COMMISSI ON PAYMENT OF RS.7,03,698/- IS CONCERNED THE ASSESSEE FAILED TO P ROVE COMMISSION PAYMENT AND COULD NOT EVEN FURNISH THE NAMES AND AD DRESSES OF THE PARTIES TO WHOM COMMISSION WAS PAID. LEARNED CIT(A) AFFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT EVEN IN THE REMAND REPORT ASSESSEE HAD NOT PUTFORTH SATISFACTORY EVIDE NCE IN SUPPORT OF ITS CLAIM AND HENCE IT IS A FIT CASE FOR LEVY OF PENALT Y. 5.1. THOUGH THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE ITAT, IT DID NOT PRESS THIS GROUND AND EVEN IN THE PENALT Y PROCEEDINGS ASSESSEE COULD NOT SUBSTANTIATE ITS EXPLANATION AND HENCE, TAX AUTHORITIES WERE JUSTIFIED IN LEVYING PENALTY UNDER SECTION 271 (1) (C) OF THE ACT. 6. JOINING THE ISSUE, LEARNED COUNSEL SUBMITTED TH AT THE ASSESSING OFFICER AS WELL AS THE CIT(A) MERELY PROC EEDED ON THE FOOTING THAT IN THE LIGHT OF DECISION OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILES 295 ITR 294 PENALTY CAN BE LEVIED IN THE EVENT OF DISALLOWING CLAIM OF DEDUCTION WHEREAS IN THE LIGHT OF LATER DECISION OF THE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS 322 ITR 158 MERE DISALLOWANCE OF A CLAIM WOULD NOT BE SUFFICIENT TO PROVE THAT THERE WAS CONCEALMENT OF INCOME. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD. REGARDING DISALLOWANCE ON ACCOUNT OF BA D DEBTS, EXPENSES AND CLUB MEMBERSHIP FEES, THE QUANTUM - WHICH IS TH E BASIS FOR LEVY OF PENALTY - HAVING BEEN RESTORED TO THE FILE OF TH E ASSESSING OFFICER, WE HEREBY DIRECT THE ASSESSING OFFICER TO RECONSIDE R THE MATTER IN ACCORDANCE WITH LAW. NEEDLESS TO OBSERVE THAT THE A SSESSING OFFICER 4 SHALL GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE PROCEEDING WITH THE MATTER. 8. HOWEVER, WITH REGARD TO THE DISALLOWANCE OF RS. 7,03,698/- WE ARE OF THE CONSIDERED OPINION THAT IT IS A FIT C ASE FOR LEVY OF PENALTY. ADMITTEDLY, ASSESSEE COULD NOT FURNISH THE NAME AND ADDRESS OF THE PERSONS TO WHOM COMMISSION WAS PAID AND THUS THE AS SESSING OFFICER GAVE A CATEGORICAL FINDING THAT THE ASSESSEE FAILED TO ESTABLISH THAT THE CLAIM WAS A BONAFIDE CLAIM. EVEN BEFORE THE LEARNED CIT(A) THE ASSESSEE COULD NOT FURNISH ANY SATISFACTORY EXPLANA TION EXCEPT MERELY STATING THAT IN THIS LINE OF BUSINESS CERTAIN PAYME NTS HAVE TO BE MADE TO MIDDLEMEN. IN VIEW OF THE CONCURRENT FINDINGS OF THE TAX AUTHORITIES AND ALSO ON ACCOUNT OF THE FACT THAT ASSESSEE COULD NOT FURNISH SATISFACTORY EXPLANATION, WE AFFIRM THE ACTION OF T HE CIT(A) AND HOLD THAT THE PENALTY WAS CORRECTLY IMPOSED WITH REFEREN CE TO THE DISALLOWANCE OF RS.7,03,698/-. ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT, ON THIS THE 3 0 TH DAY OF JUNE, 2011. SD/- SD/- (R.K.PANDA) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 30 TH JUNE, 2011 VBP/- 5 COPY TO 1. M/S. AAKASH UNIVERSAL LTD. (FORMERLY AAKASH STON E INDUSTRIES LTD.) AAKASH MARBLE HOUSE, SANTACRUZ AIRPORT SI DE, MARBLE MARKET, W.E.HIGHWAY, VILE PARLE (E), MUMBAI 400 099 P AN AAACA9755H 2. ACIT, RANGE 8 (1), AAYAKAR BHAVAN, M.K. ROAD, MU MBAI 400 020 3. CIT(A)-16, MUMBAI 4. CIT-8, MUMBAI. 5. DR A BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.