Calcom Electronics Ltd., New Delhi V. ACIT, New Delhi

ITA 3703/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65494 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 17-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRITHI LAL
• Assessee Lawyers: SANJIV JAIN
• Keywords: Bonafide belief; Bad and doubtful debts
• Section: 80HHC; 14A; 10

Judgement Text

ITA NO. 3703/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3703/DEL/2012 A.Y. : 2003-04 CALCOM ELECTRONICS LTD., C-41, DEFENCE COLONY, NEW DELHI (PAN : AAACC1998A) VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 3(1), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. SANJIV JAIN, CA DEPARTMENT BY : SH. PRITHI LAL, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-VIII, NEW D ELHI DATED 28.6.2012 PERTAINING TO ASSESSMENT YEAR 2003-04. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF I NCOME TAX (A) ERRED IN UPHOLDING THE LEVY OF PENALTY AMOUNTING T O ` 2,21,105/- IMPOSED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE ACT. 3. IN THIS CASE WHILE COMPUTING THE ASSESSMENT, ASS ESSING OFFICER MADE THE ADDITION OF ` 772527/- ON ACCOUNT OF DISALL OWANCE OF ADVANCE WRITTEN OFF AS BAD DEBT RELATING TO INCENTIVE BY WA Y OF DUTY DRAW BACK AND ADVANCE LICENSE FEE FROM EXPORT. ON THIS ADDI TION PENALTY PROCEEDINGS WERE INITIATED. ASSESSING OFFICER A LSO IMPOSED PENALTY OF ` 221105/-. ITA NO. 3703/DEL/2012 2 4. UPON ASSESSEES APPEAL BEFORE THE LD. COMMISSIONE R OF INCOME TAX (A), LD. COMMISSIONER OF INCOME TAX (A) ALLOWED T HE RELIEF OF ` 170877/-. LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT A PERUSAL OF THE IMPUGNED PENALTY ORDER WOULD SHOW THAT THE AS SESSING OFFICER HAS LEVIED THE PENALTY FOR CONCEALMENT AND FOR FILIN G OF INACCURATE PARTICULARS IN RESPECT OF DEDUCTION CLAIMED BY THE ASSESSEE AT ` 6,01,650/- WHICH IS IN RESPECT OF BAD DEBTS WRITTEN OFF BY IT. THE SAID AMOUNT OF ` 6,01,650/- REPRESENTED EXPORT INCENTIVES RECEIVABLE BY THE ASSESSEE, BROUGHT FORWARD FROM EARLIER YEARS WHICH W ERE NOT RECEIVED BY IT AND WERE THEREFORE WRITTEN OFF DURING THE INS TANT YEAR. THE APPELLATE AUTHORITIES DID NOT PROVIDE RELIEF TO ASS ESSEE ON THE REASONING THAT SINCE THE ASSESSEE HAD ALREADY BEEN ALLOWED DEDUCTION U/S. 80HHC OF THE ACT IN RESPECT OF SUCH EXPORT INC OME, THEREFORE THE SAME COULD NOT BE ALLOWED AGAIN AS IT WOULD LEAD TO DEDUCTION OF SAME AMOUNT TWICE. 4.1 BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) AS SESSEE SUBMITTED THAT ASSESSEE HAS DISCLOSED ALL THE PARTI CULARS IN A BONAFIDE MANNER AND THERE IS NO FALSITY IN ITS CLAIM. THE DIS ALLOWANCE HAS BEEN MADE MERELY ON REJECTION OF THE BONAFIDE CLAIM OF THE ASSESSEE. NO FALSITY IN THE FACTS DISCLOSED BY THE ASSESSEE HAS BEEN FOUND. FURTHER, IT WAS SUBMITTED THAT HONBLE PUNJAB AND HAR YANA HIGH COURT DECISION IN THE CASE OF C.I.T. VS. KING EXPORTS REP ORTED IN 318 ITR 100, WHEREIN IT WAS HELD THAT UNRECOVERED EXPORT REALI SABLES, WHEN WRITTEN OFF ARE ELIGIBLE FOR DEDUCTION U/S. 36(1)(VII) OF T HE ACT AND THAT SUCH A CLAIM COULD NOT BE DISALLOWED MERELY BECAUSE DEDUCTIO N U/S. 80HHC HAD BEEN ALLOWED THEREON. IT WAS SUBMITTED THAT THE FACTS OF THE ASSESSEES CASE ARE ABSOLUTELY SIMILAR TO THE AB OVE CASE. EXPORT INCENTIVES HAVE BEEN SHOWN AS INCOME IN THE EARLIER YEARS AND BEING ITA NO. 3703/DEL/2012 3 UNREALIZED WERE WRITTEN OFF DURING THE INSTANT YEAR AND A CLAIM WAS MADE FOR BAD DEBTS WRITTEN OFF U/S. 36(1)(VII) OF T HE ACT. IT WAS SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS A FULLY BONAFIDE CLAIM AND MERELY BECAUSE THE CLAIM OF THE ASSESSEE HAS BEEN REJE CTED BY THE APPELLATE AUTHORITIES, IT WOULD NOT MEAN THAT THE A SSESSEE HAS FILED ANY INACCURATE PARTICULARS OR HAS CONCEALED ITS INCOME. HOWEVER, LD. COMMISSIONER OF INCOME TAX (A) DID NOT ACCEPT THE AB OVE CONTENTIONS AND CONFIRMED THE LEVY OF PENALTY. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT IN THIS CASE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF BAD DEB T WRITTEN OFF AT ` 6,01,650/- RELATING TO INCENTIVE BY WAY OF DUTY D RAWBACK AND ADVANCED LICENSE FEES FROM EXPORT. THE ASSESSEE H AD CLAMED DEDUCTION U/S. 80HHC ON THE ABOVE AMOUNT AND HAD ALSO CLAIMED IT IN THE P&L A/C, ON ACCOUNT OF BAD DEBTS WRITTEN OFF. THE ABOVE CLAIM WHICH WAS DISALLOWED BY THE ASSESSING OFFICER WAS UPHELD BY THE LD. COMMISSIONER OF INCOME TAX (A) WHO HELD THAT BY WRIT ING OFF THE AMOUNT OF ` 6,01,650/- AS BAD DEBTS THE ASSESSEE WAS CLAIMING DOUBLE DEDUCTION WHICH WAS NOT ALLOWABLE. UPON ASSESSEE S APPEAL ITAT HAS UPHELD THE APPEAL OF THE LD. COMMISSIONER OF INCOME TAX (A). IN THESE CIRCUMSTANCES, ON THE ABOVE DISALLOWANCE PENALTY WA S IMPOSED ON THE ASSESSEE. 6.1 LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT NO PE NALTY IS LEVIABLE IN THIS CASE. HE SUBMITTED THAT THE PERSUAL OF THE IMPUGNED PENALTY ORDER WOULD SHOW THAT THE ASSESSING OFFICER HAS LE VIED PENALTY FOR CONCEALMENT & ALLEGED FILING OF INACCURATE PARTICUL ARS IN RESPECT OF ITA NO. 3703/DEL/2012 4 DEDUCTION CLAIMED BY THE ASSESSEE AT ` 6,01,650/- W HICH IS IN RESPECT OF BAD DEBT WRITTEN OFF BY IT. THE AMOUNT OF ` 6,01 ,650/- REPRESENTED EXPORT INCENTIVES RECEIVABLE BY THE ASSESSEE, BROUG HT FORWARD FROM EARLIER YEARS WHICH WERE NOT RECEIVED BY IT AND WER E THEREFORE WRITTEN OFF DURING THE INSTANT YEAR. LD. COUNSEL OF THE A SSESSEE FURTHER SUBMITTED THAT THERE IS NO DISPUTE REGARDING THE FA CT THAT AMOUNT WRITTEN OFF REPRESENTED EXPORT INCENTIVES RECEIVABL E WHICH HAVE BEEN SHOWED AS INCOME IN THE EARLIER YEARS AND SINCE THE SAME WERE NOT RECEIVED, WERE WRITTEN OFF DURING THE INSTANT YEAR. HE FURTHER SUBMITTED THAT THE ADDITION IN THIS REGARD WAS UPH ELD BY THE APPELLATE AUTHORITIES BECAUSE IN THE OPINION OF APPELLATE AUT HORITIES, SINCE THE ASSESSEE HAS ALREADY BEEN ALLOWED DEDUCTION U/S. 80HHC IN RESPECT OF SUCH EXPORT INCOME, THEREFORE, THE SAME COULD NO T BE ALLOWED AGAIN, AS IT WOULD LEAD TO DEDUCTION OF SAME AMOUN T TWICE. IN THESE CIRCUMSTANCES, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THERE IS NO FURNISHING OF INACCURATE PARTICULARS OR THE CONCEA LMENT OF INCOME BY THE ASSESSEE. IT WAS ONLY A MATTER OF LEGAL OPIN ION, THE ASSESSEES CLAIM WAS NOT FOUND JUSTIFIED. IN THESE CIRCUMSTANC ES, LD. COUNSEL OF THE ASSESSEE CLAIMED THAT ASSESSEE SHOULD NOT BE H ELD LIABLE FOR PENALTY UNDER PROVISION OF SECTION 271(1)(C). LD. COUNSEL OF THE ASSESSEE FURTHER RELIED UPON THE DECISION OF THE PU NJAB AND HARYANA HIGH COURT IN THE CASE OF C.I.T. VS. KING EXPORTS R EPORTED IN 318 ITR 100 AND ALSO HONBLE APEX COURT DECISION IN THE CASE O F RELIANCE PETRO 322 ITR 158. 6.2 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D RELIED UPON THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (A). ITA NO. 3703/DEL/2012 5 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT SECTION 271(1)(C) POSTULAT ES THAT POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE P ARTICULARS AND CONCEALMENT OF INCOME. WE FIND THAT IN THIS CASE AS SESSING OFFICER HAS LEVIED PENALTY FOR FILING OF INACCURATE PARTI CULARS IN RESPECT OF DEDUCTION CLAIMED BY THE ASSESSEE AT ` 6,01,650/- WH ICH IS IN RESPECT OF BAD DEBT WRITTEN OFF BY IT. IN THIS REGARD, T HERE IS CONSIDERABLE COGENCY IN THE SUBMISSIONS OF THE LD. COUNSEL OF TH E ASSESSEE THAT ONLY IT IS A MATTER OF DIFFERENT LEGAL OPINION, T HAT THE ADDITION WAS SUSTAINED. IN FACT THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF C.I.T. VS. KING EXPORTS REPORTED IN 318 ITR 100 HAS DELETED THE ADDITION ON SIMILAR FACTS. IN THIS CASE IT WAS HE LD THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURE AND EXPORT OF ENGINEERING GOODS. THE ASSESSING OFFICER DISALLOWED THE ASSESSEES CLAIM FOR BAD DEBTS UNDER SECTION 36(1)(VII) OF THE INCOME TAX ACT, 1961, ON THE GROUND THAT THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80HHC A ND THE CLAIM FOR BAD DEBTS WOULD BE HIT BY SECTION 14A OF THE A CT. THE COMMISSIONER (APPEALS) PARTLY UPHELD THE CLAIM OF TH E ASSESSEE WITH THE FOLLOWING OBSERVATIONS THAT THIS AMOUNT WAS NOT RELATABLE TO ANY INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE FOR THE RESPECTIVE ASSESSMENT YEARS, AND NO PART OF IT COULD BE DISALLOWED UNDER THE PROVISIONS OF SECTION 14A OF THE ACT, AND THAT THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER COULD NO T BE SUSTAINED. THE TRIBUNAL AFFIRMED THE VIEW. ON APPEAL : HELD, THAT UNDER 80HHC AND SECTION 14A, THE EXPE NDITURE INCURRED FROM EXPORT INCOME COULD NOT BE HELD TO BE FOR EARNIN G INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, WHICH CONCEPT WA S DEALT WITH UNDER SECTION 10 OF THE ACT. SECTION 80HHC DEALS WITH DED UCTION OF THE ITA NO. 3703/DEL/2012 6 ELEMENT OF PROFIT FROM EXPORT FROM TAXABLE INCOME. THEREFORE, THE CLAIM OF BAD DEBT COULD NOT BE DISALLOWED. 8. THUS, WE FIND THAT ASSESSEES CLAIM CANNOT BE SA ID TO BE CONTUMACIOUS SO AS TO INVITE THE LEVY OF PENALTY U/ S. 271(1)(C). 9. IN THIS REGARD, WE PLACE RELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF T HEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMIN AL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PA RTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY B ECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAI LURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF T HE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL T HE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBE D, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. 10. WE WOULD ALSO LIKE TO REFER TO THE HONBLE AP EX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3.2 010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE C ONTINUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDE R TEXTILE CASE ITA NO. 3703/DEL/2012 7 WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WA S HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C ). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CL AIM IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSE SSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INT ENDMENT OF LEGISLATURE. 11. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE ASIDE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE PENALTY. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/9/2012. SD/- SD/- [ [[ [JOGINDER SINGH] JOGINDER SINGH] JOGINDER SINGH] JOGINDER SINGH] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 21/9/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES