M/S. SASHAK NOBLE METALS LTD, MUMBAI V. THE ITO WD 2(3)(2), MUMBAI

ITA 2732/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8238 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 09-02-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 21-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANT LAL
• Assessee Lawyers: C P MEHTA
• Keywords: Wrong claim; Bad and doubtful debts; Bonafide mistake
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 2732/MUM/2008 (ASSESSMENT YEAR 2002-03) SASHAK NOBLE METALS LTD C/O G P MEHTA AND CO.CAS 807, TULSIANI CHAMBERS 212, NARIMAN POINT, MUMBIA-400021 PAN: AAACS4439C . APPELLANT VS INCOME TAX OFFICER WARD 2(3)(2), R NO.581, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 .. RESPONDENT APPELLANT BY : SHRI C P MEHTA RESPONDENT BY : SHRI HEMANT LAL O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29.2.2008 OF CIT(A) ARISING FROM THE P ENALTY ORDER PASSED U/S 271(1)( C ) OF THE ACT FOR THE ASSESSME NT YEAR 2002-03. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN THIS APPEAL, HOWEVER THE ONLY ISSUE ARISES FOR OUR CONSIDERATIO N IS WHETHER ITA NO. 2732/MUM/2008 (ASSESSMENT YEAR 2002-03) 2 IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) IS JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY O F RS.24,56,08,409/- LEVIED U/S 271(1)( C ) OF THE ACT . 3. FIRST WE WILL TAKE UP THE ISSUE OF LESS FEES PAI D BY THE ASSESSEE. 3.1 THE ASSESSEE PAID ONLY RS.500/- AND THE REGISTR Y HAS RAISED THE OBJECTION REGARDING THE LESS FEES PAID B Y THE ASSESSEE. 3.2 WE HAVE HEARD THE LEARNED AR AS WELL AS THE LEA RNED DR AND CONSIDERED THE RELEVANT RECORD. AS POINTED OUT BY THE LEARNED AR, THE ISSUE HAS BEEN CONSIDERED AND DECI DED BY THE HON. PATNA HIGH COURT IN THE CASE OF DR.AJITH KUMAR PANDEY V/S ITAT REPORTED IN (2009) 210 ITR (PATNA) 103. IN VIEW OF THE DECISION OF THE HON. PATNA HIGH COURT, THE FEE FOR FILING OF THE APPEAL ARISING FROM THE ORDER PASSE D U/S 271(1)( C) IS PAYABLE FOR THE CATEGORY OF APPEALS AS COVER ED U/S CLAUSE (D) OF SECTION 253(6). ACCORDINGLY, THERE I S NO DEFICIENCY IN THE FEES PAID BY THE ASSESSEE. 4. WITH REGARD TO THE PENALTY, THE FACTS ARE THAT T HE ASSESSEE DECLARED IN THE RETURN OF INCOME THE TOTA L LOSS OF ITA NO. 2732/MUM/2008 (ASSESSMENT YEAR 2002-03) 3 RS.45,95,55,829/-. THE AO ASSESSED THE TOTAL INCO ME OF THE ASSESSEE AT RS.21,59,94,313/- WHILE PASSING THE ASS ESSMENT ORDER AFTER MAKING THE VARIOUS DISALLOWANCES AND ADDITIONS. SUBSEQUENTLY, THE PENALTY PROCEEDINGS WERE INITI ATED IN RESPECT OF DISALLOWANCE AS UNDER : I) CESSATION OF LIABILITY : THE ASSESSEE HAS SHOWN CREDIT BALANCES STANDING IN THE NAME OF M/S FILTRONA LTD RS.20,50,00,000/- AND M/S SPINDER IMPEX LTD RS.18, 21,770/-, II) SUNDRY BALANCES WRITTEN OF : A) M/S MANAV INT RS.8,80,882 /- B) MRS. LAXMI NARAYANAN RS.4,10,000/- . C) SHRI S R NARAYANAN RS.3,00,000/- RS.15,90,882/- (III) BAD DEBTS : RS.47,94,08,790/- (IV) ADDITION ON ACCOUNT OF REPAIRS RS. 1,5 7,300/- AND MACHINERY 4.1 THE AO LEVIED THE PENALTY OF RS.24,56,08,409/ - UNDER THE PROVISIONS OF SECTION 271(1)( C ) OF THE ACT. 4.2. ON APPEAL, THE LEARNED CIT(A) HAS CONFIRMED TH E ACTION OF THE AO. 4.3 BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS F ILE A COPY OF THE ORDER DATED 25.08.2010 IN QUANTUM APPE AL OF THE ITA NO. 2732/MUM/2008 (ASSESSMENT YEAR 2002-03) 4 ASSESSEE WHEREBY THIS TRIBUNAL HAS DELETED THE ADD ITION IN RESPECT OF CESSATION OF LIABILITY OF RS.20,50,00, 000/- RELATES TO M/S FILTRONA LTD AND RS.47,94,08,790/- ON ACCOUNT OF BAD DEBTS. ACCORDINGLY, THIS TRIBUNAL HAS CONFIRMED THE ADDITIONS OF RS.18,21,770/- TOWARDS CESSATIONS OF LIABILITY RELATES TO M/S SPINDER IMPEX LTD AND RS.15,90,882/- ON ACCOUNT OF SUNDRY BALANCES WRITTEN OFF. SINCE THE ASSESSEE ADMITTED THE DISALLOWANCE O F RS.1,57,300/- IN RE SPECT OF REPAIRS AND MAINTENANCE OF MACHINERY THE SAME WAS NOT CHALLENGED IN QUANTUM BEFORE THE TRIBUNAL. HENCE, THE ISSUE BEFORE US IS ONLY WITH RESPECT TO THE PENALTY ON T HE ITEMS OF DISALLOWANCE CONFIRMED BY THIS TRIBUNAL AND THE DI SALLOWANCE OF RS.1,57,300/- AS ADMITTED BY THE ASSESSEE. 4.4 WE HAVE HEARD THE LEARNED AR AS WELL AS THE LEA RNED DR AND CONSIDERED THE RELEVANT RECORD. AS REGARDS, T HE DISALLOWANCE OF RS.18,21,770/- REPRESENTING THE AM OUNT PAYABLE TO M/S SPIDER IMPEX LTD, AS THE SAID AMO UNT WAS OUTSTANDING FOR LAST MANY YEARS AND THE ADDITION WA S MADE BY THE AO BY TREATING THE SAME AS CESSATION OF LIABILI TY BECAUSE THE LIABILITY IS STILL OUTSTANDING AND THE ASSESSEE HAS NOT PAID DESPITE OF LAPSE OF A CONSIDERABLE TIME. THE ISSU E WAS FINALLY BY THIS TRIBUNAL DECIDED IN PARAGRAPHS 5 OF THE ORDER DATED 25.8.2010 (SUPRA) AS UNDER :, ITA NO. 2732/MUM/2008 (ASSESSMENT YEAR 2002-03) 5 5. COMING TO THE SECOND ITEM OF RS.18,21,770 WHICH IS REPRESENTING AMOUNT PAYABLE TO M/S.SPIDER IMPEX LIM ITED. COPY OF ACCOUNT OF THIS PARTY IS AVAILABLE ON PAGES 36 AND 37 OF THE PAPER BOOK. IN THE YEAR ENDING 31.3.1996 THE SA ID AMOUNT OF RS.18.21 LAKHS WAS OUTSTANDING AS PAYABLE AS OPENIN G BALANCE, WHICH POSITION CONTINUED TILL NEXT YEAR AND UP TO T HE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDER ATION. THE LEARNED A.R. COULD NOT PLACE ON RECORD ANY EVIDENCE TO SHOW THAT IT WAS IN THE NATURE OF A LOAN. ON A SPECIFIC QUERY, THE LEARNED A.R. ADMITTED THAT THE SAID AMOUNT OF RS.18 .21 LAKHS WAS STILL UNPAID. IN VIEW OF THESE FACTS IT BECOMES APPARENT THAT THE SAID OUTSTANDING BALANCE OF RS.18.21 LAKHS WAS PAYABLE DUE TO TRADING TRANSACTIONS WHICH SUBSEQUENTLY BECA ME NON- PAYABLE. IN SUCH A SITUATION THE PROVISIONS OF SECT ION 41(1) GET FULLY ATTRACTED. WE, THEREFORE, UPHOLD THE ADDITION . THIS GROUND IS PARTLY ALLOWED. 4.5 IT IS CLEAR FROM THE RECORD THAT THE CLAIM OF E XISTENCE OF LIABILITY WAS NOT FOUND AS BOGUS CLAIM OF THE ASSES SEE. THE AO TREATED IT AS CESSATION OF LIABILITY DUE TO LONG PE RIOD WAS LAPSED SINCE THE LIABILITY HAS BEEN SHOWN AS OUTSTA NDING. WHEN THIS LIABILITY WAS NOT FOR THE FIRST TIME SHO WN BY THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N IT CANNOT BE TREATED AS FURNISHING OF INACCURATE PARTI CULARS OF INCOME OR CONCEALMENT OF INCOME AT LEAST FOR THE YE AR UNDER CONSIDERATION. THIS IS A BROUGHT FORWARD LIABILITY SINCE 1996, THEREFORE, MERELY BECAUSE THERE IS AN ADDITION BY TREATING THE LIABILITY HAS CEASED TO EXISTS DUE TO LAPS OF TIME DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF I NCOME AND CONCEALMENT OF PARTICULARS OF INCOME. IN VIEW OF T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/ S RELIANCE PETROPRODUCTS PVT.LTD REPORTED IN 322 ITR 158(SC ), THE ITA NO. 2732/MUM/2008 (ASSESSMENT YEAR 2002-03) 6 PENALTY, QUA THE ADDITION IN RESPECT OF CESSATION OF LIABILITY OF RS.20.50 CRORES IS NOT SUSTAINABLE. 5. THE SECOND ISSUE IS REGARDING THE ADDITION OF RS.15,90,882/- ON ACCOUNT OF SUNDRY BALANCES WRITTE N OFF, THE ASSESSEE WRITTEN OFF BALANCES DURING THE YEAR. T HE SAID AMOUNT REPRESENTS THE THREE PERSONS AS REFERRED I N PARAGRAPH 4(II) ABOVE. THIS TRIBUNAL HAS ADJUDICA TED THIS ISSUE IN PARAGRAPHS 7. THE ONLY DISPUTE WAS WHETH ER THESE ADVANCES WERE MADE FOR PURCHASES OF GOODS OR WER E THE ADVANCES IN THE NAME OF LOAN NOT IN THE COURSE OF B USINESS. THE DISALLOWANCE WAS MADE AS THE ASSESSEE COULD NO T ESTABLISHED THAT THE ADVANCES WERE GIVEN IN THE COU RSE OF BUSINESS. THEREFORE, WHEN THE ASSESSEE FAILED TO F URNISH THE RELEVANT DETAILS AND EVIDENCE TO PROVE THE CLAIM TH AT THE ADVANCES WERE GIVEN FOR PURCHASE OF GOODS IN THE CO URSE OF BUSINESS, THE ADDITION WAS SUSTAINED. 5.1 AFTER CONSIDERING THE RIVAL CONTENTIONS AND REL EVANT RECORD, WE ARE OF THE VIEW THAT WHEN THIS CLAIM O F THE ASSESSEE WAS NOT FOUND AS BOGUS OR ABSOLUTELY FALSE THEN THE DISALLOWANCE OF THE CLAIM FOR WANT OF SUFFICIENT E VIDENCE DOES NOT AMOUNT TO CONCEALMENT OF PARTICULARS OF INACC URATE PARTICULARS OF INCOME . IN VIEW OF THE DECISION OF THE HONBLE ITA NO. 2732/MUM/2008 (ASSESSMENT YEAR 2002-03) 7 SUPREME COURT IN THE CASE OF CIT V/S RELIANCE PETR OPRODUCTS PVT.LTD (SUPRA), WE ARE OF THE OPINION THAT THE ASS ESSEE HAS NOT SUPPRESSED ANY PARTICULARS OF INCOME OR ANY MA TERIAL FACT. THEREFORE, WE DELETE THE PENALTY. 5.2 GROUNDS OF APPEAL NO.2 IS ALLOWED. 6. AS REGARDS THE DISALLOWANCE IN RESPECT OF REPAI RS AND MAINTENANCE OF THE BUILDING. THE ASSESSEE BEFORE US HAS ADMITTED THAT THIS CLAIM HAS WRONGLY BEEN MADE BY T HE ASSESSEE AND IT IS A BONAFIDE MISTAKE ON THE PART O F THE ASSESSEE. 6.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND RELEVAN T RECORD. BEFORE THE AO, THE ASSESSEE HAS EXPLAINED THAT T HE ASSESSEE COMPANY HAD SHOWN IN THE PROFIT AND LOSS A CCOUNT EXPENDITURE AT RS.1,57,300/- FOR REPAIRS AND MAINTE NANCE OF THE OFFICE PREMISES AT SONAWALA BUILDING WHICH WAS LET OUT TO A BANK. WHILE MAKING THE COMPUTATION OF INCOME UNDE R THE HEAD INCOME FROM BUSINESS THE AFORESAID AMOUNT OF EXPENDITURE REMAINED TO BE EXCLUDED DUE TO INADVER TENCE. WHEN THE ASSESSEE REALIZED THIS MISTAKE, THE SAME W AS WILLINGLY ACCEPTED WITHOUT RAISING ANY FALSE CONTEN TIONS. THE MISTAKE WAS A BONAFIDE MISTAKE WITHOUT ANY INTENTIO N TO ITA NO. 2732/MUM/2008 (ASSESSMENT YEAR 2002-03) 8 CONCEAL THE PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME, INASMUCH AS THE CLAIM OF THE EXPENDITURE WAS SHOWN IN THE PROFIT AND LOSS ACCOUN T FILED ALONG WITH THE RETURN OF INCOME AND ALL RELEVANT DE TAILS WERE SUBMITTED DURING THE COURSE OF THE ASSESSMENT PROCE EDINGS. THE ASSESSEE SUBMITTED THAT THOUGH THE CLAIM OF THE ASSESSEE WAS WRONG, BUT THE SAME WAS AN HONEST AND BONAFIDE MISTAKE WITHOUT ANY MENSREA HENCE THE PENAL PROVISIONS ARE NOT ATTRACTED. 6.3 IT IS CLEAR FROM THE EXPLANATION OF THE ASSESS EE THAT THE CLAIM WAS A BONAFIDE MISTAKE AND THE ASSESSEE HAS ACCEPTED WHEN IT WAS FIRST POINTED OUT AND THEREFORE, WE ARE OF THE VIEW THAT THE EXPLANATION OF THE ASSESSEE IS BONAFIDE O NE. ACCORDINGLY, WHEN THE ASSESSEE HAS DISCLOSED ALL TH E PRIMARY AND MATERIAL FACTS DURING THE ASSESSMENT PROCEEDING S AND EVEN IN THE RETURN OF INCOME ANY CLAIM WHICH IS FO UND AS INCORRECT AND NOT SUSTAINABLE DOES NOT IPSO FACTO R ESULT IN INVOKING THE PENALTY PROCEEDINGS. THE AO HAS NOT GI VEN ANY FINDING THAT THE EXPLANATION OF THE ASSESSEE IS NOT BONAFIDE AND NOT INADVERTENT THEN THE PENALTY LEVIED ON T HIS ADDITION IS NOT JUSTIFIED. 6.4 ACCORDINGLY, IN VIEW OF THE ABOVE DISCUSSION, W E DELETE THE PENALTY IN RESPECT OF THE ABOVE ADDITIONS WHI CH HAVE ITA NO. 2732/MUM/2008 (ASSESSMENT YEAR 2002-03) 9 BEEN SUSTAINED BY THE TRIBUNAL AND ACCEPTED BY THE ASSESSEE.. 6.4 AS REGARDS THE PENALTY ON THE ADDITION WHICH WE RE ALREADY DELETED BY THIS TRIBUNAL IN THE QUANTUM AP PEAL, THE SAME WOULD NOT SUSTAIN. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 MARC H.2011 SD SD (T.R.SOOD) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI, DATED 11 TH MARCH 2011 SRL:3311 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI