DR. AMIN AUPERINTEDENTS & SURVEYORS P. LTD, MUMBAI V. DCIT CIR 2(1), MUMBAI

ITA 2421/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7776 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 29-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAVA
• Assessee Lawyers: PRANIT P GANDHI
• Keywords: Wrong claim; Bad and doubtful debts; Revenue expenditure
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI P.M. JAGTAP, AM AND SMT. ASHA VIJAYA RAGHAVAN, JM I.T.A.NO. 2421/MUM/2010 ASSESSMENT YEAR : 2003-04 DR. AMIN SUPERINTENDENTS SURVEYORS PRIVATE LIMITED, OFFICE NO.17/18, MAHINDER CHAMBERS, W.T. PATIL MARG, CHEMBUR, MUMBAI 400 071. PAN: AAACA 3912 A VS. THE ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 2(1), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRANIT P. GANDHI RESPONDENT BY : SHRI R.S. SRIVASTAVA O R D E R PER P.M. JAGTAP, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-4, MUMBAI, DAT ED 04.02.2010, WHEREBY HE PARTLY SUSTAINED THE PENALTY IMPOSED BY THE ASSESSI NG OFFICER UNDER SECTION 271(1)(C) OF THE ACT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF CARGO SUPERINTENDENTS, SURVEYORS AND AS SESSORS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 25.11.2003 DECLARING TOTAL INCOME OF RS. 2,35,19,990/-. IN THE PROFIT & LOSS A CCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS. 20,47,554/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBT WAS EXAMINED BY TH E ASSESSING OFFICER AND ON SUCH EXAMINATION, HE FOUND THAT THE DEBT WRITTEN OF F WAS NOT A TRADE DEBT OF THE ASSESSEE AND THE SAME REPRESENTED INTER CORPORATE D EPOSIT GIVEN BY THE ASSESSEE TO M/S. S.D.C. POLYURETHANE PVT. LTD. IN THIS REGA RD, EXPLANATION OFFERED BY THE ASSESSEE WAS THAT THE RECOVERY OF THE SAID INTER CO RPORATE DEPOSIT HAD BECOME ITA NO. 2421/M/2010 DR. AMIN SUPERINTENDENTS & SURVEYORS P. LTD. 2 DOUBTFUL AND THE MATTER HAD GONE BEFORE DEBT RECOVE RY TRIBUNAL. IT WAS CONTENDED THAT THE AMOUNT OF THE SAID DEPOSIT THUS WAS TREATED AS BAD DEBT AND DEBITED TO THE PROFIT & LOSS ACCOUNT. THIS EXPLANA TION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. ACCORDI NG TO HIM, THE AMOUNT OF DEPOSIT HAVING NOT BEEN INCLUDED IN THE INCOME OF T HE ASSESSEE FOR ANY OF THE EARLIER YEARS, THE CONDITION STIPULATED IN SECTION 36(2) WAS NOT SATISFIED AND SINCE THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF BAN KING OR MONEY LENDING, IT WAS NOT ENTITLED TO CLAIM DEDUCTION OF THE AMOUNT OF IN TER CORPORATE DEPOSIT AS BAD DEBT EVEN THOUGH THE SAID AMOUNT HAD BECOME IRRECOV ERABLE. HE, THEREFORE, DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBT AND ADDED THE AMOUNT OF RS.20,47,554/- TO THE TOTAL INC OME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN O RDER DATED 30.01.2006. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE SAID ADDIT ION MADE BY THE ASSESSING OFFICER. 3. AFTER THE CONFIRMATION OF THE ADDITION MADE BY T HE LEARNED CIT(A) ON ACCOUNT OF DISALLOWANCE OF BAD DEBT IN THE QUANTUM PROCEEDINGS, A NOTICE WAS ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY UNDER SECTION 271(1)(C) SHOULD NOT BE IMPOSED IN RE SPECT OF THE ADDITION MADE TO ITS TOTAL INCOME ON ACCOUNT OF DISALLOWANCE OF BAD DEBT. IN REPLY, THE SUBMISSIONS MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMEN T PROCEEDINGS WERE REITERATED ON ITS BEHALF. IT WAS ALSO SUBMITTED TH AT THERE WAS NO WILLFUL DISTORTION OR CONCEALMENT OF FACTS AS WELL AS FURNISHING OF AN Y INACCURATE PARTICULARS RELATING TO THE CLAIM OF BAD DEBTS. THE SUBMISSION OF THE A SSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER AND HE PROCEEDE D TO IMPOSE PENALTY OF RS. 20,47,554/- UNDER SECTION 271(1)(C) BEING100% OF TH E TAX SOUGHT TO BE EVADED BY THE ASSESSEE BY MAKING WRONG CLAIM ON ACCOUNT OF B AD DEBTS HOLDING THAT BY ITA NO. 2421/M/2010 DR. AMIN SUPERINTENDENTS & SURVEYORS P. LTD. 3 MAKING SUCH A WRONG CLAIM THE ASSESSEE HAD FURNISHE D INACCURATE PARTICULARS OF ITS INCOME. 4. THE PENALTY IMPOSED BY THE ASSESSING OFFICER UND ER SECTION 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFOR E THE LEARNED CIT(A) AND THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER WERE REITERATED ON ITS BEHALF BEFORE THE LEARNED CIT(A). IT WAS ALSO SUBMITTED BY THE AS SESSEE THAT THE ASSESSING OFFICER HAS WORKED OUT THE PENALTY OF RS. 20,47,554 /- BEING 100% OF THE TAX SOUGHT TO BE EVADED WHICH IS ACTUALLY THE AMOUNT OF ADDITION AND NOT THE AMOUNT OF TAX. THE LEARNED CIT(A) DID NOT FIND MERIT IN T HE SUBMISSIONS OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH 5 OF HIS IMPUGNED ORDER: I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE AUTH ORIZED REPRESENTATIVE. IT IS EVIDENTLY CLEAR THAT THE ASSE SSEE HAS CLAIMED BAD DEBT WHICH IS NOT ALLOWABLE. IN FACT THE CLAIM OF LOSSES OF ICD IS TO BE TREATED AS CAPITAL LOSS. HENCE THE SAME IS N OT DEDUCTIBLE AS REVENUE EXPENDITURE U/S.36(2). AS SUCH THE A.O. IS JUSTIFIED IN DISALLOWING THE CLAIM AND LEVYING THE PENALTY. PEN ALTY CAN BE LEVIED IF THE ASSESSEE HAS CONCEALED THE PARTICULARS OF IN COME OR IF THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME. IN THIS CASE THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OF INCOME BY CLAIMING CAPITAL LOSS AS DEDUCTIBLE EXPENDITURE FRO M REVENUE INCOME. HENCE THE LOSS WAS DISALLOWED AND THE ADDITION WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. IN THE CASE OF K.P. M ADHUSUDANAN (251 ITR 99) IT WAS HELD THAT FAILURE TO FILE CORRE CT RETURN OF INCOME WOULD ATTRACT PENALTY U/S.271(1)(C). 5. THE LEARNED CIT(A) THUS UPHELD THE ACTION OF THE ASSESSING OFFICER IN IMPOSING PENALTY U/S.271(1)(C). HE, HOWEVER, AGREE D WITH THE ASSESSEE THAT PENALTY WAS WRONGLY WORKED OUT BY THE ASSESSING OFF ICER AT RS.20,47,554/- WHICH WAS ACTUALLY THE AMOUNT OF ADDITION MADE TO THE TOT AL INCOME OF THE ASSESSEE AND NOT THE TAX WHICH WAS SOUGHT TO BE EVADED IN RESPEC T OF THE SAID ADDITION. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO RECOMP UTE THE PENALTY UNDER SECTION ITA NO. 2421/M/2010 DR. AMIN SUPERINTENDENTS & SURVEYORS P. LTD. 4 271(1)(C) AND ALLOWED PARTLY THE APPEAL OF THE ASSE SSEE. STILL AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE HAS PREFE RRED THIS APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT TH E CLAIM MADE BY THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WAS FOUND TO BE W RONG IN THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER AS THE DEBT WRIT TEN OFF BY THE ASSESSEE AS BAD DID NOT REPRESENT ITS TRADE DEBT AND THE SAME CONST ITUTED INTER CORPORATE DEPOSIT GIVEN ON CAPITAL ACCOUNT. THE CONDITION STIPULATED IN SECTION 36(2) THUS WAS CLEARLY NOT SATISFIED BY THE ASSESSEE SO AS TO MAKE IT ELIG IBLE TO CLAIM DEDUCTION ON ACCOUNT OF BAD DEBTS AND THIS POSITION COULD NOT BE DISPUTED SUCCESSFULLY BY THE ASSESSEE EITHER DURING THE COURSE OF QUANTUM PROCEE DINGS OR EVEN DURING THE COURSE OF PENALTY PROCEEDINGS. BEFORE THE AUTHORITI ES BELOW AS WELL AS BEFORE US, THE ASSESSEE HAS ALSO NOT BEEN ABLE TO SHOW HOW ITS CLAIM FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WAS MADE BONA FIDE AND WHAT EX ACTLY WAS THE BASIS ON WHICH THE SAID CLAIM WAS MADE. SINCE THE SAID CLAI M WAS FOUND WRONGLY MADE IN THE QUANTUM PROCEEDINGS, IT WAS FOR THE ASSESSEE TO SHOW AS TO HOW THE SAID CLAIM WAS MADE BONAFIDE AND ON WHAT BASIS A BELIEF WAS EN TERTAINED BY THE ASSESSEE THAT IT WAS ENTITLED OR ELIGIBLE TO MAKE THE SAID C LAIM. THERE IS ALSO NOTHING BROUGHT ON RECORD TO SHOW THAT ALL THE MATERIAL PAR TICULARS RELEVANT TO THE SAID CLAIM WERE FULLY AND TRULY FURNISHED BY THE ASSESSE E ALONG WITH ITS RETURN OF INCOME. A PERUSAL OF THE ASSESSMENT ORDER, ON THE OTHER HAND, SHOWS THAT IT WAS ONLY AS A RESULT OF ENQUIRY MADE BY THE ASSESSING O FFICER THAT THE CLAIM MADE BY THE ASSESSEE WAS FOUND TO BE WRONG. HAVING REGARD T O ALL THESE FACTS, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS FULLY JUSTIFIE D IN SUSTAINING THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271( 1)(C) AND NEITHER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANC E PETRO PRODUCTS LTD. (322 ITR ITA NO. 2421/M/2010 DR. AMIN SUPERINTENDENTS & SURVEYORS P. LTD. 5 158)(SC) NOR ANY OTHER JUDICIAL PRONOUNCEMENTS CITE D ON BEHALF OF THE ASSESSEE CAN SUPPORT THE CASE OF THE ASSESSEE BEING DISTINGU ISHABLE ON FACTS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MARCH, 2011. SD. SD. (ASHA VIJAYARAGHAVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 31 ST MARCH, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE ACIT, CIRCLE 2(1), MUMBAI 3. THE CIT-II, MUMBAI 4. THE CIT(A)-4, MUMBAI 5. THE DR A BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI