MAHINDRA FIRST CHOICE WHEELS LTD, MUMBAI V. ITO 2(1)(1), MUMBAI

ITA 1801/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1587 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 14-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHWAS JADHAV

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.1801/ MUM/2014 ( / ASSESSMENT YEAR : 2006-07) MAHINDRA FIRST CHOICE WHEELS LTD., (FORMERLY AUTOMART INDIA LIMITED), 1006, 10 TH FLOOR, DLH PARK, S.V. ROAD, NEAR GOREGAON TELEPHONE EXCHANGE, GOREGAON, MUMBAI 400 062. / V. INCOME TAX OFFICER- RANGE 2(1)(1), AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 400 020. ./ PAN :AACCM0794N ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI BHAVIN SHAH REVENUE BY : SHRI VISHWAS JADHAV ,DR / DATE OF HEARING : 07-11-2016 / DATE OF PRONOUNCEMENT : 19-12-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 1801/MUM/2014, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 12 TH DECEMBER, 2013 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 5, MU MBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2006-07, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE PENALTY ORDER DATED 30 TH MARCH, 2012 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFT ER CALLED THE AO) U/S 271(1)(C) OF THE INCOME-TAX ACT,1961 (HEREINAFTER C ALLED THE ACT). ITA 1801/MUM/2014 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- BEING AGGRIEVED BY THE ORDER PASSED BY THE COMMISS IONER OF INCOME TAX (APPEALS) 5, MUMBAI THE APPELLANT SUBMITS THE FOLL OWING GROUNDS OF APPEAL FOR YOUR SYMPATHETIC CONSIDERATION. 1. THE LEARNED CIT(A) ERRED IN NOT ACCEPTING THE CONTE NTION OF THE APPELLANT THAT SINCE THE QUANTUM APPEAL WAS PENDING BEF ORE THE TRIBUNAL DISPOSAL OF THE APPEAL AGAINST IMPUGNED OR DER LEVYING PENALTY BE SUITABLY POSTPONED; 2. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT( A) ERRED IN CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICE R U/S 271(1)(C) OF THE ACT LEVYING PENALTY OF RS. 48,06,751. THE REASONS AD DUCED BY THE LEARNED CIT(A) WHILE CONFIRMING THE PENALTY ARE NOT W ARRANTED BOTH ON FACTS AND IN LAW. THE ORDER LEVYING PENALTY BE CANCELED 3. FURTHER, WITHOUT PREJUDICE TO THE ABOVE, THE HONOR ABLE TRIBUNAL VIDE ITS ORDER DATED 21/2/2014 HAVING SET ASIDE FOR F RESH ADJUDICATION THE ISSUE OF ALLOWABILITY OF SAID EXPENSES IN THE QUA NTUM APPEAL (ITA NO. 1143/MUM/2011, THE ORDER LEVYING PENALTY NEEDS TO BE ALSO SET ASIDE FOR FRESH ADJUDICATION. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IN THIS CASE IS AGGRIEVED BY THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT WHI CH WAS IMPOSED BY THE A.O. VIDE PENALTY ORDER DATED 30 TH MARCH, 2012 , WHEREIN THE ISSUE INVOLVED WAS REGARDING PROVISIONS MADE BY THE ASSESSEE AMOUNTING TO RS. 1,60,22,503/- FOR VARIOUS EXPENSES BY FOLLOWING ACCRUAL SYSTEM OF ACCOUNTING. THE ASSESSEE CONTENDED THAT THE ASSESSEE IS FOLLOWING ACCRUAL SY STEM OF ACCOUNTING AND THE ASSESSEE HAD MADE PROVISIONS FOR EXPENSES ACTUALLY INCURRED BUT FOR WHICH BILLS/VOUCHERS WERE NOT RECEIVED BY THE YEAR END. THE ASSESSEE HAS PRODUCED THE LEDGER ACCOUNTS OF THE NEXT FINANCIAL YEAR TO P ROVE THAT THE PAYMENTS WERE ITA 1801/MUM/2014 3 IN-FACT MADE AGAINST THE SAID PROVISIONS FOR EXPENS ES TO THE TUNE OF RS. 1,60,22,503/- MADE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. THE ASSESSEE CONTENDED THAT AS PER ACCOUNTING STANDARD-1 (AS-1) WHICH IS NOTIFIED BY CBDT, THE PROVISIONS ARE TO BE MADE FOR ALL KNOWN L OSSES AND LIABILITIES EVEN IF THEIR AMOUNTS COULD NOT BE DETERMINED WITH CERTA INTY AND COULD BE DETERMINED ONLY ON ESTIMATED BASIS. THE CONTENTION RAISED BY THE ASSESSEE WAS NOT ACCEPTABLE TO THE A.O. AND THE AO IN PENALT Y PROCEEDINGS HELD AS UNDER:- THE ASSESSEES SUBMISSION IS CONSIDERED CAREFULLY. THE ASSESSEE HAS REITERATED HIS PREVIOUS SUBMISSION AND HAS NOT BROUG HT ANY NEW FACTS IN THEIR SUPPORT. THE ASSESSEE HAS DEBATED ON UNASCE RTAINED LIABILITY WHICH IS NOT ALLOWABLE. THEREFORE, ON THE ASSESSEE S CONTENTION THAT DISALLOWANCE/ADDITIONS DOES NOT AMOUNT TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS, I AM CONVINCED THAT THE DEC ISION OF DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION (P) LTD. 40 DTR 249 (2010) IS APTLY APPLICABLE IN THIS CASE WHEREBY THE H ON'BLE HIGH COURT HAS CLEARLY STATED THAT THE 'ASSESSEE CLAIMED THAT DUE TO OVERSIGHT, THESE AMOUNT WERE NOT ADDED BACK IN THE COMPUTATION OF IN COME - IF ONE TAKES THE VIEW THAT A CLAIM WHICH IS WHOLLY UNTENA BLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE M ADE, THE ASSESSEE WOULD BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENSE TO UNSCRUPULOUS ASSESSES TO MAKE WHOLLY UNTENABLE AND U NSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM - ASSESSEE DID NOT EXPLAIN EITHER TO THE IT AUTHORITIES OR TO THE TRIBU NAL AS TO IN WHAT CIRCUMSTANCES AND ON ACCOUNT OF WHOSE MISTAKE, THE AMO UNTS CLAIMED AS DEDUCTIONS WERE NOT ADDED WHILE COMPUTING THE INCOM E OF THE ASSESSEE COMPANY - IF THE CLAIM BESIDES BEING INCORR ECT IN LAW IS MALA FIDE, EXPLN. 1 TO S. 271 (1) WOULD COME INTO PLAY', A ND FURTHER THE DELHI HC HAS ALSO DISTINGUISHED THE VERDICT GIVEN IN CIT V S. RELIANCE PETRO PRODUCTS (P) LTD. (20 I 0 322 ITR 158 (SC). 4. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT THE ASSE SSEE IS NOT ENTITLED TO CLAIM LOAN AND ADVANCES IN THE P&L ACCOUNT. THEREFORE, I AM SATISFIED THAT THIS IS A FIT CASE FOR IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE I.T. ACT, 1961. THUS, THE AMOUNT OF P ENALTY IS QUANTIFIED AS UNDER: AMOUNT OF ADDITION CONFIRMED: RS. 1 ,60,22,503/- TAX SOUGHT TO BE AVOIDED: RS. 48,06,751/- MINIMUM PENALTY @100% THEREOF: RS. 48,06,751/- MAXIMUM PENALTY @300% THEREOF: RS. 1,44,20,253/- ITA 1801/MUM/2014 4 CONSIDERING THE FACTS OF THE CASE, I CONSIDER IT FIT TO I MPOSE PENALTY OF RS. 48,06,7511- (RUPEES FORTY EIGHTY LAC S SIX THOUSAND SEVEN HUNDRED FIFTY ONE) IN THIS CASE, WHICH REPRESENTS THE MINIMUM PENALTY IMPOSABLE AS PER LAW. THE A.O. ACCORDINGLY LEVIED PENALTY OF RS. 48,06,75 1/- U/S 271(1)(C) OF THE ACT VIDE ORDERS DATED 30-03-2012 AND ON FIRST APPEAL FI LED BY THE ASSESSEE WITH LEARNED CIT(A), THE SAID PENALTY WAS CONFIRMED BY T HE LD. CIT(A) VIDE HIS APPELLATE ORDER DATED 12 TH DECEMBER, 2013. 4. AGGRIEVED BY THE APPELLATE ORDERS DATED 12.12.20 13 PASSED BY THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 5. THE LD. COUNSEL FOR THE ASSESSEE, AT THE VERY OU TSET, SUBMITTED THAT THE APPEAL IN QUANTUM ASSESSMENT FILED BY THE ASSESSEE HAS BEEN DECIDED BY THE TRIBUNAL , WHEREIN THE ADDITIONS OF 1,60,22,503/- M ADE BY THE A.O. WITH RESPECT TO THE PROVISION OF VARIOUS EXPENDITURE ON ESTIMATED BASIS CLAIMED IN THE PROFIT AND LOSS ACCOUNT WERE CHALLENGED BY THE ASSESSEE , AND THE TRIBUNAL VIDE ITS ORDER IN ITA NO. 1143/MUM/2011 FO R THE IMPUGNED ASSESSMENT YEAR 2006-07 VIDE ITS ORDERS DATED 21 ST FEBRUARY, 2014 HAS SET ASIDE AND RESTORED THE MATTER BACK TO THE FILE OF A .O. FOR DE NOVO DETERMINATION OF THE ISSUE ON MERITS. THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ABOVE SCENARIO, PENALTY ORDER U/S 271(1)(C) OF THE ACT CANNOT BE SUSTAINED AND NEEDS TO BE SET ASIDE AND R ESTORED TO THE FILE OF THE AO FOR DE-NOVO ADJUDICATION OF THE PENALTY U/S 271( 1)(C) OF THE ACT AFTER THE QUANTUM ASSESSMENT IS FINALIZED BY THE AO IN DE-NOV O PROCEEDINGS IN SECOND ROUND OF LITIGATION AS DIRECTED BY THE TRIBUNAL VID E AFORE-STATED ORDERS DATED 21-02-2014 IN ITA NO 1143/MUM/2011. 6. THE LD. D.R. SUPPORTED THE ORDER OF THE LD. CIT( A) AND STATED THAT IN VIEW OF THE ORDER OF THE TRIBUNAL IN QUANTUM ASSESS MENT IN ITA NO ITA 1801/MUM/2014 5 1143/MUM/2011, THIS MATTER CAN ALSO BE RESTORED TO THE FILE OF THE AO FOR DENOVO ADJUDICATION OF THE PENALTY BY THE AO ON MER ITS AFTER FINALIZATION OF QUANTUM ASSESSMENT IN DE-NOVO PROCEEDINGS BY THE AO IN SECOND ROUND OF LITIGATION AS DIRECTED BY THE TRIBUNAL VIDE ITS ORD ERS DATED 21-02-2014. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND AL SO PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE AFORE-ST ATED TRIBUNAL ORDER. WE FIND THAT QUANTUM ADDITIONS OF RS.1,60,22,503/- TOW ARDS PROVISIONS FOR EXPENDITURE AS PROVIDED ON ESTIMATED BASIS BY THE A SSESSEE IN ITS BOOKS OF ACCOUNTS BY FOLLOWING ACCRUAL SYSTEM OF ACCOUNTING, WHICH WERE MADE BY THE A.O. IN THE ASSESSMENT ORDER AND WAS LATER CONFIRME D BY LEARNED CIT(A) IN FIRST APPEAL , WAS CHALLENGED BY THE ASSESSEE BEFOR E THE TRIBUNAL AND THE TRIBUNAL IN ITA NO. 1143/MUM/2011 FOR THE ASSESSMEN T YEAR 2006-07 VIDE ORDERS DATED 21 ST FEBRUARY, 2014 HAS SET ASIDE AND RESTORED THE MATT ER BACK TO THE FILE OF A.O. FOR DE NOVO DETERMINATION OF TH E ISSUE ON MERITS. THE ORDER OF THE TRIBUNAL DATED 21-02-2014 IS PLACED IN THE F ILE. SINCE THE QUANTUM ADDITION HAS BEEN SET ASIDE AND RESTORED BY THE TRI BUNAL TO THE FILE OF THE A.O. FOR DE NOVO DETERMINATION OF THE ISSUE AFRESH ON ME RITS IN QUANTUM ASSESSMENT, THE PENALTY LEVIED BY THE A.O. U/S 271( 1)(C) OF THE ACT CANNOT BE SUSTAINED UNDER THE ABOVE STATED CIRCUMSTANCES. TH US, WE REMIT AND RESTORE THE ISSUE OF PENALTY U/S 271(1)(C) OF THE ACT TO TH E FILE OF THE A.O. FOR FRESH DETERMINATION OF THE ISSUE OF LEVYING OF PENALTY U/ S 271(1)(C) OF THE ACT ON MERITS AFTER ADJUDICATION OF QUANTUM ASSESSMENT IN DE-NOVO PROCEEDINGS BY THE AO AS DIRECTED BY THE TRIBUNAL IN ITA NO 1143/M UM/2011 VIDE ITS ORDERS DATED 21-02-2014. HENCE, THE PENALTY SO LEVIED U/S 271(1)(C) OF THE ACT IS HEREBY DELETED AS INDICATED ABOVE.WE ORDER ACCORDIN GLY. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 1801/MUM/2014 FOR ASSESSMENT YEAR 2006-07 IS ALLOWED FOR STATISTI CAL PURPOSES. ITA 1801/MUM/2014 6 ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DECEMBER, 2016. # $% &' 19-12-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 19-12-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI