YKM Holdings Pvt. Ltd., Gurgaon V. ITO, New Delhi

ITA 2174/DEL/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4118 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 21-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Question of law; Bad and doubtful debts; Assessment record
• Section: 143(3)

Judgement Text

1 ITA NO. 2174/DEL/2016 IN THE INCOME TAX APPELLA TE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 2174/DEL/2 016 (A.Y 2009-10) YKM HOLDINGS PVT. LTD. SIGNATURE TOWER-A, 14 TH FLOOR, SOUTH CITY GURGAON AAACY0460B (APPELLANT) VS ITO WARD-18(4) NEW DELHI (RESPONDENT) APPELLANT BY SH. A. T. PANDA, ADV RESPONDENT BY SMT. NAINA SOIN KAPIL, SR. DR ORDER PER SUCHITRA KAMBLE, JM THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER DATED 25/02/2016 PASSED BY CIT(A)-9, NEW DELHI FOR ASSESSMENT YEAR 2009- 10. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS)-9 [BRIEFLY TH E CIT(A)] HAS ERRED IN UPHOLDING LEVY OF PENALTY OF RS.4,29,361/- UNDER SE CTION 271(L)(C) OF THE INCOME TAX ACT, 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT DURING THE RELEV ANT YEAR, THE APPELLANT DATE OF HEARING 10.10.2018 DATE OF PRONOUNCEMENT 12.10.2018 2 ITA NO. 2174/DEL/2016 WAS NBFC DULY RECOGNIZED BY RBI AND WAS ENGAGED IN THE BUSINESS OF MONEY LENDING AND THAT THE ICD TO MODI CONNECT PVT. LTD. WAS IN THE ORDINARY COURSE OF BUSINESS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE BAD D EBTS HAVING BEEN TAKEN AS INCOME OF THE PREVIOUS YEAR IS NOT APPLICABLE TO DEBT ADVANCE IN THE COURSE OF MONEY LENDING BUSINESS. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT NEITHER A NY INCOME WAS CONCEALED NOR PARTICULARS OF INCOME WERE INCORRECTLY FURNISHE D. IT WAS ALSO NOT APPRECIATED THAT NO SATISFACTION WAS RECORDED BY TH E ASSESSING OFFICER. 3. ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) ON 28/11/2011 BY MAKING AN ADDITION OF RS.12,63,200/- ON ACCOUNT OF BAD DEBTS AS CONDITIONS LAID DOWN IN SECTION 36(2) AND SECTION 36(I)(VII) W ERE NOT FULFILLED IN THIS CASE. THE ASSESSING OFFICER IMPOSED PENALTY OF RS.4,29,36 1/- U/S 271(1)(C) FOR CONCEALMENT OF PARTICULARS OF INCOME AND FILING INA CCURATE PARTICULARS OF INCOME. 4. BEING AGGRIEVED BY THE PENALTY ORDER, THE ASSESS EE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) DISMISSED THE APPEAL OF THE A SSESSEE. 5. THE LD. AR SUBMITTED THAT NOTICE U/S 274 R.W.S. 271 WAS ISSUED ON 28.11.2011 AND THE INAPPROPRIATE WORDS IN THE SAID NOTICE HAVE NOT BEEN STRUCK OFF. THEREFORE IT IS NOT UNDERSTOOD AS TO U NDER WHICH LIMB OF PROVISIONS OF SECTION 271(1)(C) OF THE ACT, THE ASSESSING OFFI CER HAS LEVIED PENALTY. SICNE THE SAID SHOW CAUSE NOTICE ISSUED U/S 274 DID NOT S PECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT WAS FOR CONCEALING TH E PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREF ORE, THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT IN PURSUA NCE TO THE SAID NOTICE DESERVES TO BE SET ASIDE. THE LD. AR FURTHER SUBMIT TED THAT THE ASSESSEE HAS 3 ITA NO. 2174/DEL/2016 RIGHTLY WRITTEN OFF THE DUES FROM ONE MODI CONNECT AND THE SAME WAS REFLECTED IN SCHEDULE 13 OF BALANCE SHEET. THUS, THE ASSESSE E HAS PROPERLY CLAIMED BAD DEBT IN THE ASSESSMENT RECORD. BUT THE VIEW OF THE ASSESSING OFFICER WAS DIFFERENT AND THE SAME DOES NOT AMOUNT TO FILING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. THE LD. AR RELIED UPON THE DECISION OF THE HONBLE APEX COURT IN CASE OF CIT VS. SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 248 AS WELL AS VARIOUS DECISIONS OF THE TRIBUNAL. 6. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). REFERRING TO THE DECISION OF THE HONBLE MADRAS HIG H COURT IN CASE OF SUNDARAM FINANCE LTD. VS. CIT 403 ITR 407 WHEREIN I T IS HELD THAT WHERE NOTICE DID NOT SHOW NATURE OF DEFAULT, IT WAS A QUE STION OF FACT. THE ASSESSEE HAD UNDERSTOOD THE PURPORT AND IMPORT OF NOTICE AND HENCE NO PREJUDICE WAS CAUSED TO THE ASSESSEE. THE HONBLE HIGH COURT IN T HE ABOVE DECISION HAS CONSIDERED THE DECISION OF THE HONBLE KARNATAKA HI GH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY REPORTED IN 359 ITR 565. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SMT. KAUSHALYA REPORTED IN 216 ITR 660 THE LD. DR SUBMIT TED THAT THE HON'BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT MERE MISTA KE IN LANGUAGE USED OR MERE NON-STRIKING OFF OF INACCURATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE U/S 274 OF THE ACT. IT WAS ACCORDINGLY HELD THAT T HE PENALTY ORDERS PASSED BY THE ITO FOR ASSESSMENT YEARS 1968-69 TO 1969-70 WER E PERFECTLY VALID AND THERE WAS NO JUSTIFICATION FOR QUASHING THE SAME ON GROUND OF ABSENCE OF JURISDICTION. THE LD. DR ALSO RELIED ON VARIOUS OT HER DECISIONS TO THE PROPOSITION THAT MERE NON-STRIKING OFF OF INAPPROPR IATE WORDS DOES NOT INVALIDATE THE PENALTY PROCEEDINGS. 7. THE LD. AR IN REJOINDER SUBMITTED THAT IF TWO VI EWS ARE POSSIBLE ON AN ISSUE, THE VIEW WHICH IS FAVOURABLE TO THE ASSESSEE HAS TO BE FOLLOWED. FOR THE ABOVE PREPOSITION, HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN 4 ITA NO. 2174/DEL/2016 THE CASE OF VEGETABLE PRODUCTS LIMITED REPORTED IN 88 ITR 192. REFERRING TO FOLLOWING DECISIONS, HE SUBMITTED THAT SECTION 292B B WOULD NOT COME TO THE RESCUE OF THE REVENUE WHEN THE NOTICE WAS NOT IN SU BSTANCE AND IN CONFORMITY WITH OR ACCORDING TO THE INTENT OF THE I.T. ACT :- I. SHRI SACHIN ARORA, ITA NO.118/AGRA/2015 DATED 1 9.12.2017. II. DR. SARITA MILIND DAVARE, 184 TTJ 9. III. SHRI K. PRAKASH SHETTY, ITA NO.265 TO 267/ 2014 DATED 05.06.2014. THE LD. AR ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET- ASIDE AND THE PENALTY LEVIED U/S 271(1)(C) BE DELET ED. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CONSIDERED THE VARIOUS DECISI ONS CITED BEFORE US. WE FIND THE ONLY ISSUE TO BE DECIDED IN THE GROUNDS OF APPE AL IS REGARDING THE SUSTAINABLE OF PENALTY LEVIED U/S 271(1)(C) WHEN TH E INAPPROPRIATE WORDS IN THE NOTICE ISSUED U/S 274 R.W.S. 271 OF THE ACT HAVE NO T BEEN STRUCK OFF. A PERUSAL OF THE NOTICE ISSUED U/S 274 R.W.S. 271 DATED 28.11 .2011 SHOWS THAT THE INAPPROPRIATE WORDS IN THE SAID NOTICE HAVE NOT BEE N STRUCK OFF AND IT IS A PRINTED NOTICE. EVEN THE LAST LINE OF THE SAID NOT ICE ONLY SPEAKS OF SECTION 271 AND DOES NOT EVEN MENTION OF SECTION 271(1)(C) OF T HE I.T. ACT. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SAHIWAL INVESTMENT & TRADING CO. VS. IT O VIDE ITA NO.4913/DEL/2015 FOR ASSESSMENT YEAR 2006-07 ORDER DATED 18.07.2018 TO WHICH BOTH OF US PARTIES. WE FIND THE TRIBUNAL IN THE SAID DECISION WHILE ALLOWING THE ADDITIONAL GROUND FILED BY THE ASSESSE E HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER :- 12. ADDITIONAL GROUND NO. (II) IS RELATING TO ABSE NCE OF SPECIFIC CHARGE POINTING OUT IN THE NOTICE. IT IS PERTINENT TO NOTE HERE THAT THE PENALTY ORDER IS BASED ON FURNISHING OF INACCURATE PARTICULARS BUT T HE NOTICE IS NOT SPECIFYING 5 ITA NO. 2174/DEL/2016 EXACTLY ON WHICH LIMB THE PENALTY U/S 271(1)(C) HAS BEEN INITIATED. FROM THE NOTICE DATED 30.06.2013 PRODUCED BY THE LD. AR DURI NG THE HEARING, IT CAN BE SEEN THAT THE ASSESSING OFFICER WAS NOT SURE UNDER WHICH LIMB OF PROVISIONS OF SECTION 271 OF THE INCOME TAX ACT, 1961, THE ASS ESSEE IS LIABLE FOR PENALTY. THE ISSUE IS SQUARELY COVERED BY THE DECIS ION OF THE HON'BLE SUPREME COURT IN CASE OF M/S SSA' EMERALD MEADOWS. THE EXTR ACT OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN M/S. SSA' EMERA LD MEADOWS ARE AS UNDER WHICH WAS CONFIRMED BY THE HON'BLE APEX COURT : '3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY TH E ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTIO N 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'T HE ACT') TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE ITA NO. 4913/DEL/2015 DECISION OF THE DIVISION BENCH OF THI S COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. 4. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDG MENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIA L QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE AP PEAL IS ACCORDINGLY DISMISSED.' THUS, ADDITIONAL GROUND NO. (II) OF THE ASSESSEE'S APPEAL IS ALLOWED. SINCE THE INCEPTION OF THE NOTICE ISSUED U/S 271(1)(C) HAS BE COME NULL AND VOID, THERE IS NO NEED TO COMMENT ON MERIT OF THE CASE. THE PENALT Y U/S 271(1)(C) OF THE ACT IS QUASHED. SINCE IN THE INSTANT CASE ALSO THE INAPPROPRIATE W ORDS IN THE PENALTY NOTICE HAS NOT BEEN STRUCK OFF AND THE NOTICE DOES NOT SPECIFY AS TO UNDER WHICH LIMB OF THE PROVISIONS, THE PENALTY U/S 271(1 )(C) HAS BEEN INITIATED, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH E PENALTY LEVIED U/S 271(1)(C) IS NOT SUSTAINABLE AND HAS TO BE DELETED. ALTHOUGH THE LD. DR HAS RELIED ON VARIOUS DECISIONS TO THE PROPOSITION THAT MERE NON- STRIKING OFF OF THE INAPPROPRIATE WORDS WILL NOT INVALIDATE THE PENALTY PROCEEDINGS, HOWEVER, ALL THESE DECISIONS ARE OF NON-JURISDICTIONAL HIGH COUR T DECISIONS. THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL RELIED ON BY THE LD . DR IS PRIOR TO THE DECISION 6 ITA NO. 2174/DEL/2016 OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA) WHERE THE SLP FILED BY THE REVENUE HAS BEEN DISMISSED. SINCE THERE IS NO DECISION OF THE JURISDICTIONAL HIGH COURT ON THI S ISSUE, THEREFORE, WE FIND MERIT IN THE ARGUMENT OF THE LD. AR THAT IF TWO VIE WS ARE AVAILABLE ON A PARTICULAR ISSUE, THE VIEW WHICH IS FAVOURABLE TO T HE ASSESSEE HAS TO BE FOLLOWED IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LIMITED (SUPRA). WE, THEREFORE, SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL T HE PENALTY SO LEVIED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH OCTOBER, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 12/10/2018 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 7 ITA NO. 2174/DEL/2016 DATE OF DICTATION 10 .10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 11 .10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 2 .10.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 2 .10.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 2 .10.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER