SEA LINK (INDIA) LTD, RAJKOT V. DCIT CIR 3(3), MUMBAI

ITA 3454/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0833 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 19-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 15-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VISHWAS MUNDHE LD
• Assessee Lawyers: KALPESH S DOSHI LD
• Keywords: Depreciation; Wrong claim
• Section: 43B; 143(3); 32

Judgement Text

ITA NO.3454/M/2014 SEA LINK (INDIA) LIMITED ASSESSMENT YEAR-2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.3454/MUM/2014 ( ASSESSMENT YEAR: 2006-07) SEA LINK (INDIA) LIMITED C/O KALPESH S. DOSHI & CO. CHARTERED ACCOUNTANTS 411, COSMO COMPLEX MAHILA COLLEGE CIRCLE, RAJKOT 360001 VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(3) MUMBAI !' # PAN/GIR NO. AABCS-4542-D ( '$ APPELLANT ) : ( %&'$ RESPONDENT ) '$ ' APPELLANT BY : SHRI. KALPESH S.DOSHI, LD.AR %&'$ ' / RESPONDENT BY : SHRI VISHWAS MUNDHE, LD. DR DATE OF HEARING : 26/04/2017 ()* / DATE OF PRONOUNCEMENT : 02/05/2017 ITA NO.3454/M/2014 SEA LINK (INDIA) LIMITED ASSESSMENT YEAR-2006-07 2 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2006-07 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-20 [CIT(A)], MUMBAI DATED 06/12/2012 QUA CONFIRMATION OF PENALTY U/S 271(1)(C) FOR RS.12,50,056/-. THE ASSESSEE HAS RAISED ADDITIONAL GROUND OF APPEAL WHICH ASSAILS THE IMPOSITION OF PENALTY ON LEGAL GROUNDS. THE REVENUE HAS NOT RAISED ANY SERIOUS OBJECTIONS AGAINST THE SAME AND SINCE T HE GROUNDS ARE PURELY LEGAL IN NATURE AND DO NOT REQUIRE APPRECIATION OF NEW FACTS, THE SAME IS ADMITTED. WITH THIS BACKGROUND, WE PROCEED WITH THE ASSESSEES APPEAL. 2. FACTS LEADING TO THE DISPUTE ARE THAT THE ASSESS EE, BEING RESIDENT CORPORATE ASSESSEE, WAS ASSESSED U/S 143(3) WHEREIN THE ASSESSEE SUFFERED CERTAIN DEPRECIATION & INTEREST DISALLOWANCES U/S 3 2 & 43B VIDE ASSESSING OFFICER [AO] ORDER DATED 12/12/2008 WHICH LED TO IN ITIATION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY ISSUANCE OF NOTICE U/S 274 READ WITH SECTION 271(1)(C). FINALLY, THE ASSESSEE WAS SADDLE D WITH A PENALTY OF RS.12,50,056/- AGAINST WRONG CLAIM OF RS.37,88,0 46/- VIDE PENALTY ORDER DATED 29/06/2009 WHICH WAS CONTESTED WITHOUT ANY SU CCESS BEFORE LD. CIT(A) VIDE ORDER DATED 24/03/2014. AGGRIEVED, THE ASSESSE E IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR ASSESSEE [AR], WHILE DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN THE PAPER BOOK, ASSAILED THE PE NALTY PROCEEDINGS ON LEGAL GROUND BY CONTENDING THAT THE NOTICE ISSUED U /S 274 WAS DEFECTIVE AS ONLY A TICK-MARK WAS PLACED AGAINST THE CLAUSE HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME WITHOUT DELETING THE APPROPRIATE WORDS WHICH VITIAT ES THE PENALTY PROCEEDINGS. RELIANCE WAS PLACED ON THE JUDGMENTS OF APEX COURT IN THE CASE OF CIT VS. ITA NO.3454/M/2014 SEA LINK (INDIA) LIMITED ASSESSMENT YEAR-2006-07 3 SSAS EMERALD MEADOWS [73 TAXMANN.COM 248] & HONBLE KARNATAKA HIGH COURT IN CIT VS. MANJUNATHA COTTON & GINNING FACTORY [359 IT R 565]. 4. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE DR PLACED RELIA NCE ON SECTION 292B TO CONTEND THAT MERE DEFECT IN THE NOT ICE DO NOT VITIATES THE PENALTY PROCEEDINGS AND NO PREJUDICE WAS CAUSED TO THE ASSESSEE BY NON- DELETION OF FEW WORDS. THE ASSESSEE VERY WELL KNEW THE GROUNDS FOR WHICH HE WAS BEING PENALIZED AND THE LD. AO WITH DUE APPLICA TION OF MIND INITIATED PENALTY PROCEEDINGS IN QUANTUM ASSESSMENT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND FINALLY LEVIED THE PENALTY ON THE SAME GROUND. MOREOVER, THE ASSESSEE ACTIVELY CONTESTED THE PENAL TY PROCEEDINGS BEFORE AO AND THEREFORE, THE LEGAL GROUNDS, BEING ONLY HYPER-TECHNICAL IN NATURE, DO NOT CARRY MUCH WEIGHT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD INCLUDING CITED CASE LAWS. SO FAR AS THE LEGAL GROUNDS ARE CONCERNED, A PERUSAL OF QUANTUM ORDER REVEALS THAT THE PENALTY WAS INITIATED FOR FURNISHING OF INACCURATE PARTICULARS AND FINALLY THE SAME WAS LEVIED ON THE SAME GROUND. UNDOUBTEDLY, NOTICE U/S 274 WAS DULY S ERVED ON THE ASSESSEE AND THE RELEVANT CLAUSE OF THE STANDARD PRINTED FOR M WAS DULY TICKED BY THE LD. AO WHICH SHOWS DUE APPLICATION OF MIND QUA PENALTY PROCEEDINGS. MERE NON-DELETION OF FEW WORDS, IN OUR OPINION, ON THE F ACTS OF THE CASE, HAS NOT CAUSED ANY PREJUDICED TO THE ASSESSEE PARTICULARLY WHEN THE PENALTY PROCEEDINGS WERE ACTIVELY CONTESTED BY HIM BEFORE T HE LD. AO. THE ASSESSEE, AT ALL TIMES, WAS AWARE OF THE GROUNDS FOR WHICH HE WAS BEING PENALIZED. OUR CONCLUSION DRAW SUPPORT FROM THE PROVISIONS OF SECT ION 292B ALSO WHICH CURES MINOR DEFECT IN THE NOTICE PROVIDED SUCH NOTICE IN SUBSTANCE AND EFFECT WAS IN CONFORMITY WITH THE INTENT AND PURPOSE OF THE ACT. ON OVERALL FACTS AND CIRCUMSTANCES, WE FIND THAT SUCH CONDITION WAS FULF ILLED IN THE INSTANT CASE. WE ITA NO.3454/M/2014 SEA LINK (INDIA) LIMITED ASSESSMENT YEAR-2006-07 4 FIND THAT THE REVENUES SPECIAL LEAVE PETITION [SLP ] DISMISSED BY THE APEX COURT IN THE CITED CASE LAW CONFIRMED THE DECISION OF HONBLE HIGH COURT, WHICH IN TURN, RELIED UPON THE JUDGMENT RENDERED IN CIT VS. MANJUNATHA COTTON & GINNING FACTORY [359 ITR 565]. AFTER PERUSING THE RATIO OF THE JUDGMENT RENDERED IN CIT VS. MANJUNATHA COTTON & GINNING FACTORY [SUPRA] , WE FIND THAT THE ASSESSEES APPEAL WAS ALLOWED BY HONBLE H IGH COURT AFTER CONSIDERING THE MULTIPLE FACTORS AND NOT SOLELY ON THE BASIS OF DEFECT IN NOTICE U/S 274. THEREFORE, WE ARE OF THE OPINION THAT THE PENALTY COULD NOT BE DELETED MERELY ON THE BASIS OF DEFECT POINTED BY THE LD. AR IN THE NOTICE AND THEREFORE, THE LEGAL GROUNDS RAISED ARE REJECTED. 6. ON MERITS, LD. AR HAS CONTENDED THAT THE ASSESS EE WAS ENGAGED IN THE BUSINESS OF SHIPMENT AND EXPORT OF AGRICULTURE PRODUCE THROUGH BARGES AND TUGS AND DUE TO ADVERSE BUSINESS CONDITIONS AT THE PORT, THE BUSINESS OF THE ASSESSEE WAS ADVERSELY AFFECTED AND THEREFORE, NO S IGNIFICANT BUSINESS OPERATIONS COULD BE CARRIED OUT DURING THE IMPUGNED AY. NEVERTHELESS, THE SUSPENSION OF BUSINESS WAS ONLY TEMPORARY IN NATURE AS NOTED BY THE BOARD OF DIRECTORS OF THE COMPANY. FURTHER, THE ASSESSEE HAS BEEN IMPOSED PENALTY AGAINST DISALLOWANCE OF DEPRECATION U/S 32 ON THE P REMISES THAT NO BUSINESS OPERATIONS WERE CARRIED ON BY THE ASSESSEE DURING T HE YEAR, NEVERTHELESS, THE BLOCK OF ASSETS DID NOT CEASE IN THE BOOKS OF ACCOU NTS AND AS THE SUSPENSION IN BUSINESS WAS TEMPORARY, DEPRECIATION THEREOF WAS ALLOWABLE TO THE ASSESSEE AS PER VARIOUS JUDICIAL PRONOUNCEMENTS. FU RTHER, THE ASSESSEE SUFFERED ANOTHER DISALLOWANCE U/S 43B ONLY DUE TO N ON-PAYMENT THEREOF WITHIN THE STIPULATED TIME PERIOD. HOWEVER, THE NATURE OR QUANTUM OF THE SAME WAS NEVER IN DISPUTE AND THE ASSESSEE, FOLLOWING MERCAN TILE SYSTEM OF ACCOUNTING, WAS QUITE ELIGIBLE TO DEBIT THE SAME IN THE PROFIT & LOSS ACCOUNT AND THEREFORE, NO PENALTY AGAINST SUCH DISALLOWANCE COU LD BE IMPOSED AS PER THE ITA NO.3454/M/2014 SEA LINK (INDIA) LIMITED ASSESSMENT YEAR-2006-07 5 DECISION OF HONBLE MADRAS HIGH COURT IN CIT VS. MSK CONSTRUCTIONS (P) LTD. [296 ITR 18]. OUR ATTENTION WAS FURTHER DRAWN TO THE FACT THAT T HE ASSESSEE INCURRED HUGE LOSSES DURING THE IMPUGNED AY BUT THE SAME COULD NOT BE CARRIED FORWARD BY HIM IN THE NEXT AY IN VIEW OF TH E FACT THAT THE RETURN OF INCOME WAS FILED BELATEDLY WHICH MADE ASSESSEE INEL IGIBLE TO CARRY FORWARD THE SAID BUSINESS LOSSES AND THEREFORE, THE ASSESSE E STOOD TO GAIN NOTHING BY MAKING INACCURATE CLAIM. 7. PER CONTRA, LD. DR SUPPORTED THE LEVY OF PENALTY BY CONTENDING THAT THE ASSESSEE DID NOT CARRY ON ANY BUSINESS DURING THE Y EAR BUT STILL CLAIMED THE SAID EXPENDITURE FULLY KNOWING THAT THE SAME WERE N OT ADMISSIBLE. UPON BEING CAUGHT BY THE DEPARTMENT IN SCRUTINY PROCEEDINGS, T HE ASSESSEE ACCEPTED THE QUANTUM ADDITIONS AND DID NOT CONTESTED THE SAME AN Y FURTHER WHICH, IN ITSELF, CAST A DOUBT UPON THE CONDUCT OF THE ASSESSE AND TH EREFORE THE PENALTY WAS RIGHTLY IMPOSED. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS SUFFERED DISALLOWANCE U/S 32 AGAINST DEPRECIATION & U/S 43B DUE TO NON-PAYMENT O F CERTAIN INTEREST EXPENSES WITHIN STIPULATED PERIOD OF TIME. IT IS NO T IN DISPUTE THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITY DURING THE YEAR. IT IS FURTHER NOTED THAT THE BLOCK OF ASSET IN THE BOOKS OF ACCOUNTS DID NOT CEASE TO EXIST AND THE ASSESSEE HAS DULY EXPLAINED THAT THE SUSPENSION IN BUSINESS WAS TEMPORARY WHICH COULD NOT BE CONTROVERTED BY THE REVENUE. ALL THESE FACTORS GIVES STRENGTH TO THE VARIOUS ARGUMENTS OF LD. AR. SO FAR AS ADDITION U/S 43B IS CONCERNED, WE FIND THAT THE NATURE OR QUANTUM THERE OF IS NOT IN DISPUTE AND THE ASSESSE, FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING COULD DEBIT THE SAME IN HIS PROFIT & LOSS ACCOUNT. IT WAS ONLY DUE TO TH E SPECIFIC PROVISIONS OF SECTION 43B THAT IT HAS SUFFERED THE SAID DISALLOWA NCE. THEREFORE, ON THE BASIS ITA NO.3454/M/2014 SEA LINK (INDIA) LIMITED ASSESSMENT YEAR-2006-07 6 OF THESE FACTORS, WE FIND THAT THERE WERE NO FURNIS HING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE AND THE PENALTY DESERVES TO BE DELETED. OUR CONCLUSION GETS SUPPORT FROM THE CITED CASE LAW REN DERED BY THE HONBLE MADRAS HIGH COURT. THEREFORE, BY DELETING IMPUGNED PENALTY, WE ALLOW ASSESSEES APPEAL ON MERITS. 9. IN NUTSHELL, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND MAY, 2017. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + MUMBAI; DATED : 02.05.2017 SR.PS:- THIRUMALESH COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. / THE CIT(A) 4. / CIT CONCERNED 5. , - % . .* + / DR, ITAT, MUMBAI 6. - /0 1 GUARD FILE ! / BY ORDER, ' !# $ (DY./ASSTT. REGISTRAR) + / ITAT, MUMBAI