M/s. Alpa Labs (India) Ltd., Indore V. The A.C.I.T., Indore

ITA 225/IND/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9590 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-12-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 21-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA
• Keywords: Business income; Onus to prove

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.225/IND/2010 A.Y.2004-05 ALPA LABS (INDIA) LIMITED INDORE PAN AABCA4843M APPELLANT VS ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 1(2), INDORE RESPONDENT APPELLANT BY : SHRI SUDHIR PADLIYA RESPONDENT BY : SHRI PRADEEP KUMAR MITRA O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 2.3.2010 ON THE SOLE GROUND THAT THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIF IED IN CONFIRMING THE PENALTY OF RS. 100000/-IMPOSED U/S 271(1)(C) OF THE ACT. 2. DURING HEARING OF THIS, WE HAVE HEARD SHRI SUDHI R PADLIYA, LD. COUNSEL FOR THE ASSESSEE AND SHRI PRADEEP KUMAR MIT RA, LEARNED SENIOR 2 DEPARTMENTAL REPRESENTATIVE. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE NEITHER CONCEALED ITS INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME AS THE D EBTS WERE WRITTEN OFF, BEING IRRECOVERABLE, AS PER PROVISIONS OF THE ACT. ON THE OTHER HAND, THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE DEFENDED THE IMPUGNED ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS DOING TRADING IN PHARM ACEUTICAL PRODUCTS, TECHNICAL TESTING AND ANALYSIS OF PHARMACEUTICAL PR ODUCTS AND DEBITED RS.20,58,903/- TO THE PROFIT AND LOSS ACCOUNT ON AC COUNT OF DEBTS WRITTEN OFF. ON A QUERY FROM THE ASSESSING OFFICER REGARDIN G FURNISHING OF DETAILS OF EFFORTS MADE FOR RECOVERY OF DEBTS, IT WAS EXPLA INED BY THE ASSESSEE THAT THE AMOUNT OF RS.17,86,547/- RELATES TO OUTSTA NDING DEBTS IN THE NAME OF MANAGING DIRECTOR, TAMIL NADU MEDICAL SERVI CES CORPORATION LIMITED. THE DETAILS OF SALES MADE TO THE ABOVE PE RSON, DURING THE FINANCIAL YEAR 1996-97 TO 1998-99, WERE FILED AS PE R WHICH THE TOTAL SALES OF RS.3,31,97,867/- AGAINST WHICH THE PAYMENT TO TH E TUNE OF RS.3,14,11,320/- WAS RECEIVED. THE REMAINING AMOUN T I.E. RS.17,86,547/- WAS DEDUCTED BY TAMIL NADU MEDICAL S ERVICES CORPORATION. THE ASSESSEE ALSO FURNISHED THE COPY OF CORRESPONDENCE MADE ON VARIOUS DATES ALONG WITH THE PROOF OF BALAN CES WRITTEN OFF. AS 3 PER THE REVENUE, NO EXPLANATION WAS FURNISHED BY TH E ASSESSEE FOR WRITING OFF THE DEBTS APPEARING IN THE NAMES OF 11 PARTIES (DETAILS OF WHICH ARE AVAILABLE AT PAGE 2 OF THE ASSESSMENT ORD ER) TOTALING TO RS.2,72,356/-. THE LEARNED ASSESSING OFFICER WAS O F THE VIEW THAT ONUS OF PROVING THAT THE DEBTS WERE IRRECOVERABLE LIES O N THE ASSESSEE, THEREFORE, HE MADE THE IMPUGNED ADDITION OF RS.2,72 ,356/-. HE ALSO IMPOSED PENALTY OF RS.1 LAC U/S 271(1) WHICH WAS C ONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND IS FURTHER IN APPEAL BEFORE THE TRIBUNAL. IN VIEW OF THESE FACTS, NOW T HE QUESTION ARISES WHETHER THE PENALTY IS LEVIABLE ? 4. IF THE TOTALITY OF FACTS AS NARRATED ABOVE IS AN ALYSED, WE ARE OF THE CONSIDERED OPINION THAT AS PER SECTION 36(1)(VII) O F THE ACT THE BURDEN OF PROOF IS ON THE ASSESSEE BUT THE DEMONSTRATIVE AND INFALLIBLE PROOF THAT THE DEBT HAS BECOME BAD CANNOT BE INSISTED UPON BY THE REVENUE. THE WORD BAD USED IN CONJUNCTION WITH THE WORD DEBT IN SECTION 36(1)(VII) MEANS WORTHLESS DEBT. HONESTY OF ASSESSEES JUDG MENT IS MORE RELEVANT. BEFORE A DEBT CAN BECOME DEBT OR DOUBTFU L DEBT, IT MUST FIRST BE A DEBT. A DEBT IS AN OUTSTANDING WHICH IF RECOV ERED WOULD HAVE SWELLED THE PROFIT. AT THE SAME TIME, A DEBT IS AL LOWABLE ONLY WHEN IT IS A DEBT AND ARISES OUT OF AND IS AN INCIDENT TO THE TR ADE MEANING THEREBY THE DEBT MUST BE ARISEN AS AN INCIDENT OF BUSINESS OF THE ASSESSEE. IT IS WELL SETTLED THAT A BUSINESS OR TRADING DEBT SHOULD SPRING DIRECTLY FROM 4 THE CARRYING ON OF A BUSINESS OR TRADE AND SHOULD B E INCIDENTAL TO IT AND IT CANNOT BE JUST ANY LOSS SUSTAINED BY THE ASSESSEE E VEN IF IT HAS SOME CONNECTION WITH THE BUSINESS. IN THE PRESENT APPEAL , EVEN THE ASSESSEE PRODUCED THE EVIDENCE/CORRESPONDENCE REGARDING MAKI NG EFFORTS FOR RECOVERY OF THE OUTSTANDING DEBT. ON THE ISSUE OF B URDEN OF PROOF, OUR VIEW FINDS SUPPORT FROM THE DECISION IN JADAVJI NUR SIDAS & COMPANY; 47 ITR 411 (BOM), CIT V. KHEMCHAND BAHADURCHAND; 134 I TR 65 (P&H) AND NANDLAL VITHALDAS; 180 ITR 609 (BOM). AS FAR AS THE PROOF AND WRITING OFF IS CONCERNED, OUR VIEW FINDS SUPPORT FR OM THE DECISION IN KAMLA COTTON COMPANY; 226 ITR 605 (GUJ) AND DEVI FI LMS LIMITED; 49 ITR 874, CIT V. COATES INDIA LIMITED; 232 ITR 324 ( CAL), CIT V. S.R. SUBRAMANIUM PILLAI; 18 ITR 85 (MAD). HOWEVER, SINC E THE QUANTUM APPEAL IS NOT BEFORE US, THEREFORE, WE ARE REFRAINI NG OURSELVES FROM COMMENTING UPON THE ALLOWABILITY OF BAD DEBT. IN TH E PRESENT APPEAL, THE ISSUE BEFORE US IS ONLY JUSTIFICATION OF IMPOSITION OF PENALTY U/S 271(1). UNDER THE AFOREMENTIONED FACTS, WE ARE OF THE CONSI DERED OPINION THAT NO PENALTY IS LEVIABLE U/S 271(1) OF THE ACT AS TH E ASSESSEE NEITHER CONCEALED ITS PARTICULARS OF INCOME NOR FURNISHED I NACCURATE PARTICULARS. OUR VIEW IS FORTIFIED BY THE RATIO LAID DOWN IN THE DECISION FROM THE HONBLE APEX COURT IN CIT V. RELIANCE PETRO PRODUCT S PRIVATE LIMITED (2010) 322 ITR 158 (SC), DILIP N SHROFF VS. JCIT; 2 91 ITR 519 (SC), SHRIKRISHNA ELECTRICALS VS. STATE OF TAMIL NADU (20 09) 23 VST 249 (SC), 5 CIT V. ATUL MOHAN BINDAL; 317 ITR 1 (SC), UNION OF INDIA VS. DHARMENDRA TEXTILES PROCESSORS; 306 ITR 277 (PARAS 8 AND 9) AND UNION OF INDIA VS. RAJASTHAN SPINNING & WEAVING MIL LS (2010) 1 GSTR 66 (PARA 8) (SC). IN VIEW OF THE FACTS AND JUDICIA L PRONOUNCEMENTS NARRATED ABOVE, WE ARE OF THE CONSIDERED OPINION TH AT NO PENALTY IS LEVIABLE U/S 271(1) OF THE ACT. THEREFORE, THE AP PEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES OF BOTH THE SIDES ON 24 TH FEBRUARY, 2011. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 TH FEBRUARY, 2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE DN/- 6