DDIT, New Delhi V. M/s. RBM Pati Joint Venture, New Delhi

ITA 3471/DEL/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9845 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY TRIPATHI
• Keywords: Bad and doubtful debts; Difference of opinion; Tax effect; Revised return
• Section: 271(1)(c); 143(3); 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH G, NEW DELHI BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 3471/DEL/2015 ASSESSMENT YEAR: 2007-08 DDIT, CIRCLE 3(1)(1), NEW DELHI. (APPELLANT) VS. RBM PATI JOINT VENTURE, C/O VIJAY RAJ & CO., 305, 3 RD FLOOR, KANCHAN HOUSE, KARAMPURA COMMERCIAL COMPLEX, NEW DELHI. PAN- AAATR 3650D (RESPONDENT) APPELLANT BY SH. SANJAY TRIPATHI, SR. DR RESPONDENT BY SH. GAUTAM JAIN, ADVOCATE & SH. LALIT MOHAN, ADVOCATE ORDER PER L.P. SAHU, A.M.: THIS APPEAL IS DIRECTED BY THE REVENUE AGAINST THE ORDER OF LD.CIT(A)-43, NEW DELHI DATED 31.03.2015 FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING PENALTY OF RS.25,62,569/- U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT) IMPOSED BY THE ASSE SSING OFFICER. 1 (A). WHETHER THE LD CIT (A) HAS ERRED IN RELYING U PON, INTER ALIA, THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF M /S RELIANCE PETROPRODUCTS [(2010) 322 ITR 158] IN DELETING THE PENALTY, NOT AP PRECIATING THE FACT THAT THE RATIO OF THE SAID CASE IS APPLICABLE ONLY IN CA SES WHERE THERE IS A BONA DATE OF HEARING 01.11.2018 DATE OF PRONOUNCEMENT 03.12.2018 ITA NO. 3471/DEL/2015 2 FIDE DIFFERENCE OF OPINIONS WITH REGARD TO ADMISSIB ILITY OF A CLAIM AND NOT TO THE CASES WHERE THE CLAIM OF THE ASSESSEE IS PATENT LY UNTENABLE. 1(B). WHETHER THE LD CIT(A) HAS ERRED IN HOLDING THA T IT WAS A CASE OF A BONAFIDE ERROR NOT AMOUNTING TO FURNISHING OF INACC URATE PARTICULARS AND THAT CASE IS COVERED BY THE DECISION IN PRICE WATER HOUSE COOPERS VS CIT [348 ITR 306 (SC)], NOT APPRECIATING THE FACT THAT T HE SAID CASE DID NOT LAY DOWN ANY GENERAL PROPOSITION TO THE EFFECT THAT PEN ALTY IS NOT TO BE LEVIED IN ALL CASES OF SO-CALLED ERROR. 1(BA). THE LD CIT (A) ERRED IN NOT APPRECIATING THE F ACT THAT THE DECISION IN THE CASE OF PRICE WATER HOUSE COOPERS TURNED ON THE PECULIAR FACT SITUATION INVOLVED THEREIN, AS, A) THE FACTUM OF NON-ALLOWABI LITY OF THE ITEM WAS PROMINENTLY MENTIONED IN THE TAX AUDIT REPORT AND B) THE ASSESSEE FILED A REVISED RETURN IMMEDIATELY AFTER THE OMISSION CAME TO ITS NOTICE. AS AGAINST THIS, IN THE PRESENT CASE, THE ASSESSEE WAS APPAREN TLY AWARE OF THAT THE CLAIM OF LOSS WAS WRONG AND DID NOT TAKE ANY SUO MOTU ACT ION FOR CORRECTING THE ERROR EITHER AT THE TIME OF ORIGINAL ASSESSMENT PRO CEEDINGS OR AT THE TIME OF RE-ASSESSMENT. 1(C). WHETHER THE LD CIT(A) HAS ERRED IN IGNORING TH E RATIO OF THE DECISIONS IN THE CASES OF ZOOM COMMUNICATIONS [327 ITR 510 (DE L)] AND ESCORTS FINANCE [328 ITR 44] WHEREIN IT HAS BEEN HELD THAT T HE PLEA OF OVERSIGHT' WAS NOT ACCEPTABLE IN THE ERA OF NO-SCRUTINY ASSESS MENT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME AT A LOSS OF RS. 19,22,47,512/-. ASSESSMENT ORDER U/S 14 3(3) WAS COMPLETED ON 7.12.2009, WHEREBY THE DECLARED LOSS WAS REDUCED TO RS. 16,78,25,520/- BY MAKING ADDITION AMOUNTING TO RS. 24421992/- IN THE FOLLOWING HEADS : ITA NO. 3471/DEL/2015 3 BASED ON THE ABOVE ADDITIONS, THE AO INITIATED PENA LTY PROCEEDINGS U/S 271(1)(C) AND ISSUED NOTICE DATED 7.12.2009. PURSUA NT TO ASSESSEES SUBMISSION MADE VIDE LETTER DATED 5.1.2010, THE AO DROPPED THE PENALTY PROCEEDINGS VIDE HIS ORDER DATED 7.1.2010. THEREAFTER, THE ASSESSING OFFICER ON THE BASIS OF SOME INFORMATION IN HIS POSSESSION, REOPENED THE CASE VI DE NOTICE U/S 148 DATED 27.3.2012. THE AO RECORDED THE FOLLOWING REASONS: THE ASSESSEE IS A NON-RESIDENT. FOR THE YEAR UNDER REFERENCE, THE ASSESSMENT WAS DONE U/S 143(3) AT LOSS OF RS.16,78, 25,520/-. THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS 61,21, 337/ -ON ACCOUNT OF LOSS ON SALE OF FIXED ASSETS. AS THIS IS A CAPITAL LOSS TO THE COMPANY, IT SHOULD HAVE BEEN ADDED BACK TO THE INCOME OF THE ASSESSEE. THIS RESULTED IN OVER ASSESSMENT OF LOSS OF RS 61,21,337/- INVOLVING POTE NTIAL TAX EFFECT, OF RS 25,59,943/-. THE ASSESSEE HAS CLAIMED AN EXPENSE OF RS (21517294- 19480078=203722) ON ACCOUNT OF PROVISION FOR DOUBTFUL ADVANCE. AS TH IS IS A CAPITAL LOSS TO THE COMPANY, IT SHOULD BE DISALLOWED. THE ASSESSEE HAS CLAIMED RS 45,19,389/- ON ACCOUNT O F BANK GUARANTEE COMMISSION WHICH AS PER ACT IS NOT AN ADMISSIBLE EX PENDITURE. THIS SHOULD BE DISALLOWED. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T INCOME OF MORE THAN RS 1 SR. NO . PARTICULARS AMOUNT (RS.) I) DISALLOWANCE UNDER SECTION 40A(2)(B) OF THE ACT 43,18,590 II) DISALLOWANCE OF TAXES PAID TO EXPECTORATE EMPLOYEES 5,25,160 III) DISALLOWANCE OF PROVISION FOR DOUBTFUL ADVANCES MADE UNDER SECTION 36(L)(VII) OF THE ACT 1,94,80,078 IV) DISALLOWANCE OF DOUBTFUL DEBTS AND ADVANCES WRITTEN OFF 98,164 TOTAL 2,44,21,992 ITA NO. 3471/DEL/2015 4 LAKH OF THE ASSESSEE COMPANY FOR AY 2007-08, HAS ES CAPED ASSESSMENT. I AM THEREFORE SATISFIED THAT IT IS A SUITABLE CASE TO B E REOPENED FOR REASSESSMENT. BASED ON THE ABOVE REASONS, REASSESSMENT WAS COMPLE TED U/S. 147/148 ON 27.05.2013 MAKING AN ADDITION OF RS.61,21,337/- OBS ERVING AS UNDER : DURING THE COURSE OF ASSESSMENT THE ASSESSEE WAS I NFORMED -ABOUT THE PROVISION SECTION 50 OF THE INCOME TAX ACT 1961. WH EREIN IT IS PROVIDED THAT THE PROFIT OR LOSS OF DEPRECIABLE ASSET WILL BE ASS ESSED ONLY IN THE SITUATION IF THE WHOLE OF THE BLOCK OF ASSETS IS EXHAUSTED AND T HERE IS LOSS OR PROFIT WHICH IS TO BE ASSESSED AS SUCH. IN THE CASE OF ASSESSEE THE BLOCK OF ASSETS EXISTS AND AS PER THE PROVISION OF THE ACT THE LOSS IS NOT ALL OWABLE. THEREFORE THE LOSS CLAIM AT RS 61,21,337/- IS LIABLE TO BE DISALLOWED. THE COUNSEL OF ASSESSEE DID NOT MAKE AN OBJECTION TO IT THUS AN AMOUNT OF RS 61 ,21,337/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF ASSESSEE. BASED ON THIS ADDITION, THE ASSESSING OFFICER INITI ATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AND AFTER CONSIDERING THE EXPL ANATION OF THE ASSESSEE, A PENALTY OF RS.25,62,569/- WAS IMPOSED AGAINST THE A SSESSEE. IN APPEAL, THE LD. CIT(A) DELETED THE PENALTY VIDE IMPUGNED ORDER. AGG RIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE LEARNED DR REITERATING THE GROUNDS OF APPEAL SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY IG NORING THE FACT THAT THE DECISIONS RELIED ON BY FIRST APPELLATE AUTHORITY AR E DISTINGUISHABLE ON FACTS. IT WAS SUBMITTED THAT THERE WAS NO BONA FIDE ON THE PA RT OF ASSESSEE TO CLAIM A CAPITAL LOSS AS REVENUE LOSS. THEREFORE, THE ASSESS EE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND THEREFORE, THE ASSESSING OFFICER HAD RIGHTLY IMPOSED PENALTY WHICH HAS BEEN WRONGLY DELETED BY THE LD. C IT(A). 4. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE RE ITERATING THE DETAILED ITA NO. 3471/DEL/2015 5 SUBMISSIONS MADE BEFORE THE LD. CIT(A) SUPPORTED TH E IMPUGNED ORDER AND RELIED ON VARIOUS CASE LAWS AS ALSO RELIED BY THE L D. CIT(A). HE HAS MADE EXTENSIVE ARGUMENTS ON VARIOUS ASPECTS OF THE CASE, SUCH AS INVALIDITY OF NOTICE SPECIFYING NO PARTICULAR CHARGE AND THE BONA FIDE O F ASSESSEE IN MAKING THE CLAIM OF LOSS ETC. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. AN INSIGHT OVER THE P ENALTY ORDER, WE FIND THAT THE PENALTY WAS INITIATED ON ACCOUNT OF LOSS CLAIMED BY THE APPELLANT ON SALE OF ASSETS, EVEN THOUGH, THAT PARTICULAR BLOCK OF ASSET S HAD NOT BEEN EXHAUSTED. WE DO NOT FIND ANY JUSTIFICATION TO DISCARD THE FINDIN GS REACHED BY THE LD. CIT(A) THAT THE ASSESSEE HAD DULY DISCLOSED THE LOSS ON S ALE OF ASSETS AT RS. 61,21,337/-, BEING PART OF ADMINISTRATIVE EXPENSES AND THIS AMOU NT WAS DULY APPEARING IN THE SCHEDULES FORMING PART OF PROFIT AND LOSS ACCOU NT FOR THE YEAR UNDER CONSIDERATION. THE ACCOUNTS ARE AUDITED BY QUALIFIE D CHARTERED ACCOUNTANT. IN PRESENCE OF THESE FACTS, THE LD. CIT(A) HAS NOT FAL LEN IN ERROR WHILE HOLDING THAT THIS WAS NOT A CASE OF CONCEALMENT. HOWEVER, THE F ACT REMAINS THAT THE ASSESSEE HAD MADE INELIGIBLE CLAIM, FOR WHICH THE BONA FIDE OF THE ASSESSEE STANDS PROVED FROM THE FACT THAT AS PER FORM NO. 3CD, AT ITEM NO. 17(A), THE AUDITOR H AS REPORTED THAT THERE IS NO EXPENDITURE OF CAPITAL NA TURE WHICH HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. THEREFORE, IN OUR C ONSIDERED OPINION, THE CLAIM OF LOSS MADE ON THE BASIS OF TAX AUDIT REPORT CANNOT B E SAID TO BE NON-BONA FIDE. WE HAVE ALSO GONE THROUGH THE DECISIONS RELIED BY T HE LD. CIT(A) AND WE FIND THAT IN THE PRESENT SCENARIO, THE SAID DECISIONS AR E FOUND APPLICABLE TO THE CASE IN HAND AND THE DISTINGUISHING FEATURES GIVEN IN TH E GROUNDS OF APPEAL ARE NOT FOUND TENABLE IN THE EYES OF LAW. IT IS ALSO WORTH CONSIDERATION THAT AT THE INITIAL ITA NO. 3471/DEL/2015 6 STAGE OF ORIGINAL ASSESSMENT, THE ASSESSEE HAD CLAI M SIMILAR LOSS, WHICH WAS PARTLY ACCEPTED BY THE ASSESSING OFFICER AND PENALT Y PROCEEDINGS INITIATED AT THAT POINT OF TIME WERE ALSO DROPPED. THEREFORE, TH ERE APPEAR DIFFERENT OPINIONS OF REVENUE AUTHORITIES AT DIFFERENT POINTS OF TIME. IN SUCH CIRCUMSTANCES, THE LD. HAS RIGHTLY FOLLOWING THE DECISION IN CIT VS. RELIA NCE PETRO PRODUCTS PVT. LTD, 322 ITR 158), WHERE IT HAS BEEN HELD THAT MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. S UCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. MOREOVER, THOUGH THE ASSESSEE IS NEITHER IN APPEAL NOR IN CROSS OBJECTION, THE LD. D R COULD ALSO NOT REBUT THE CONTENTION OF THE ASSESSEE MADE BEFORE LD. CIT(A) A S WELL AS BEFORE US IN ITS SUBMISSIONS THAT THE PENALTY NOTICE ITSELF WAS DEFE CTIVE HAVING NOT SPECIFYING A PARTICULAR CHARGE WHETHER CONCEALMENT OF PARTICUL ARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS THEREOF. WE, THEREFORE, D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHILE DELETING THE IMPUGNED PENALTY. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.12.2018. SD/- SD/- (H.S. SIDHU) (L.P. SA HU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 03.12.2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI