ACIT, CHENNAI V. Deccan Estates and Constructions Ltd., CHENNAI

ITA 227/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7846 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 08-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Keywords: Business expenditure; Bad and doubtful debts; Bonafide mistake
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' # . $ , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.227/MDS/2016 ( / ASSESSMENT YEAR:2008-09) THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(4), CHENNAI-34. VS M/S. DECCAN ESTATES AND CONSTRUCTIONS LTD., 24/46, DR.B.N.ROAD, T.NAGAR, CHENNAI-600 017. PAN:AAACD2068C ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SUPRIYO PAL, JCIT /RESPONDENT BY : MR. SAROJ KUMAR PARIDA, ADVOCATE /DATE OF HEARING : 27 TH OCTOBER,, 2016 /DATE OF PRONOUNCEMENT : 15 TH DECEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- 19, CHENNAI DATED 20.11.2015 IN ITA NO.235/14-15 FOR THE ASSESSMENT YEAR 2008-09 PASSED UNDER SECTION 271 (1)(C) R.W.S 250(6) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL, HOWEVER, THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DIRECTING THE LEARNED ASSESSING OFFICER TO DELETE THE MINIMUM PENALTY OF RS.21,33,143/- LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 2 ITA NO. 227/MDS/2016 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PROMOTION & CONSTRUCTION OF BUILDING FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 26.09.2008 DECLARING TOT AL INCOME OF RS.2,03,17,353/-. THE CASE WAS SELECTED F OR SCRUTINY AND NOTICE UNDER SECTION 143(3) WAS ISSUED TO THE ASSESSEE ON 24.08.2010. SUBSEQUENTLY, THE ASSESSMEN T WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 21.12. 2010 WHEREIN THE LEARNED ASSESSING OFFICER MADE CERTAIN ADDITIONS / DISALLOWANCES AMONGST WHICH ONE OF THE DISALLOWAN CE WAS BAD DEBTS CLAIMED BY THE ASSESSEE AMOUNTING TO RS.50,00,000/- BECAUSE IT WAS A BUSINESS LOSS IN T HE CAPITAL FIELD AND THEREFORE NOT ALLOWABLE AS DEDUCTION UNDE R SECTION 36(1)(VII) R.W.S. 37(1)(VIIA) & 36(2)(I) OF THE ACT . IT WAS EXPLAINED BEFORE THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAD ADVANCED A REFUNDABLE DEPOSIT OF RS.50 .00 LAKHS TO MR. K.PONNUSAMY, THE LAND OWNER OF THE PRO JECT DECCAN ENCLAVE WITH WHOM THE ASSESSEE WAS IN JOIN T VENTURE FOR PROMOTING THE PROJECT. DUE TO DISPUTE B ETWEEN THE ASSESSEE AND LAND OWNER, THE AMOUNT OF RS.50.00 LAK HS WAS FORFEITED AND FINALLY SETTLEMENT WAS MADE OUT OF CO URT 3 ITA NO. 227/MDS/2016 COMPROMISING WITH SUCH FORFEITURE IN LIEU OF REGIST ERING THE BALANCE FLAT TO THE BENEFIT OF THE ASSESSEE. THEREF ORE, IT WAS EXPLAINED BY THE ASSESSEE THAT THE AMOUNT OF RS.50. 00 LAKHS IF NOT ALLOWABLE AS DEDUCTION AS BAD DEBTS IT HAS T O BE ALLOWED AS BUSINESS EXPENDITURE. HOWEVER, THE LEARN ED ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E AND MADE ADDITION OF RS.50.00 LAKHS BY DISALLOWING THE CLAIM OF BAD DEBT AND FURTHER INITIATED PENALTY PROCEEDINGS AND LEVIED MINIMUM PENALTY OF RS.21,33,143/-. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) DELETED THE PENALTY BY OBSERVING AS UNDER :- 4.2 ON PERUSAL OF THE ASSESSMENT ORDER, PENALTY ORDER, GROUNDS OF APPEAL AND WRITTEN SUBMISSIONS MA DE BY LEARNED AUTHORIZED REPRESENTATIVE THIS IS THE CASE OF BAD DEBTS CLAIM MADE BY THE APPELLANT. IN THE COURSE OF BUSINESS, THE APPELLANT HAD MADE REFUNDABLE ADVANCE TO THE LAND OWNER. DUE TO DELAY, THE AMOUNT WAS TO BE FORFEITED WHICH RESULTED IN LOSS TO THE APPELLANT. THE APPELLANT CLAIMED IT AS BAD DEBT WHICH WAS DISALLOW ED BY THE AO AND LEVIED PENALTY FOR CONCEALMENT / FILING INACCURATE PARTICULARS. IN THIS CONNECTION, HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DCM LTD. 359 ITR 101 (DEL) OBSERVED AS UNDER:- LAW DOES NOT BAR OR PROHIBIT AN ASSESSEE FOR MAKING A CLAIM WHICH HE BELIEVES MAY BE ACCEPTED OR IS PLAUSIBLE. WHEN SUCH A CLAIM IS MADE DURING THE COURSE OF REGULAR OR SCRUTINY ASSESSMENT, LIBERAL VIEW IS REQUIRED TO BE TAKEN AS NECESSARILY THE CLAIM IS BOUND TO BE CAREFULLY SCRUTINIZED BOTH ON FACTS AND 4 ITA NO. 227/MDS/2016 IN LAW. FULL PROBE AND APPRAISAL IS NATURAL AND NORMAL. THREAT OF PENALTY CANNOT BECOME A GAG AND / OR HAUNT AN ASSESSEE FOR MAKING A CLAIM WHICH MAY BE ERRONEOUS OR WRONG WHEN IT IS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. NORMALLY PENALTY PROCEEDINGS IN SUCH CASES SHOULD NOT BE INITIATED UNLESS THERE ARE VALID OR GOOD GROUNDS TO SHOW THAT FACTUAL CONCEALMENT HAS BEEN MADE OR INACCURATE PARTICULARS ON FACTS WERE PROVIDED IN THE COMPUTATION. LAW DOES NOT BAR OR PROHIBIT A PERSON FROM MAKING A CLAIM WHEN HE KNOWS THE MATTER IS GOING TO BE EXAMINED BY THE AO. NO PENALTY FOR CONCEALMENT CAN BE IMPOSED IN THE PR ESENT CASE. CASE IS COMPLETELY COVERED BY EXPLANATION I. THUS IN THIS CASE NO CONCEALMENT OR INACCURATE PARTICULARS HAS BEEN ESTABLISHED BY THE AO. RESPECT FULLY RELYING ON THE ABOVE JUDGEMENT, I AM OF THE VIEW TH AT THE PRESENT CASE IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. AO IS DIRECTED TO DEL ETE THE ADDITION MADE. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE VEHEMENTLY ARGUED IN SUPPORT OF THE ORDER OF THE LE ARNED ASSESSING OFFICER WHILE AS THE LEARNED AUTHORIZED REPRESENTATIVE ARGUED IN SUPPORT OF THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) REITERATING HI S SUBMISSIONS MADE ON THE EARLIER OCCASIONS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, 5 ITA NO. 227/MDS/2016 IT IS APPARENT THAT THE ASSESSEE HAD INCURRED EITHE R BUSINESS LOSS OR INCURRED ADDITIONAL EXPENDITURE ON THE COST OF THE PROJECT FOR RS.50.00 LAKHS. SINCE THERE WAS AN OUT OF COURT SETTLEMENT BY THE ASSESSEE WITH THE LAND OWNER AN D THE ASSESSEE HAD AGREED FOR THE LANDLORD TO FORFEIT THE AMOUNT OF RS.50.00 LAKHS, THE EXPENDITURE INCURRED BY THE AS SESSEE WOULD BE LIABLE TO BE ADDED TO THE COST OF THE PROJ ECT. CONVERSELY, THE ASSESSEE HAD TREATED THE SAME AS BU SINESS LOSS INCURRED DURING THE RELEVANT ASSESSMENT YEAR O R AS BAD DEBTS AND CLAIMED DEDUCTION ACCORDINGLY. THIS ONLY AMOUNTS TO A BONAFIDE MISTAKE COMMITTED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. IN THESE CIRCUMSTANCES, WE ARE ALSO RE MINDED OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE CIT VS. RELIANCE PETRO PVT. LTD. REPORTED IN 322 ITR 158, WHEREIN IT WAS HELD THAT A MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BE ITSELF, WILL NOT AMOUNT TO F URNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FU RNISHING OF INACCURATE PARTICULARS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO ANALYZED THE ISSUE IN AN APPROPRIATE MANNER AND RELYING IN THE DECISION OF T HE HONBLE 6 ITA NO. 227/MDS/2016 DELHI HIGH COURT DELETED THE PENALTY. IN THESE CIRC UMSTANCES, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 15 TH DECEMBER, 2016 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 15 TH DECEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF