Asstt. Commissioner of Income Tax-4, Kanpur V. M/s Lohia Starlinger Ltd., Kanpur

ITA 41/LKW/2014

• Counselvise Citation: 4123714 RSA 2014
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-05-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 20-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK MISHRA
• Assessee Lawyers: S K JAIN
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 41/LKW/2014 ASSESSMENT YEAR: 2005 - 06 ACIT - 4 KANPUR V. M/S LOHIA STARLINGER LTD. D - 3/ A, PANKI INDUSTRIAL ESTATE KANPUR PAN: AAACL2470J (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. V IVEK MISHRA, CIT (DR) RESPONDENT BY: SHRI. S. K. JAIN, DATE OF HEARING: 01.05.2014 DATE OF PRONOUNCEMENT: 07 .0 5 .2014 O R D E R PER SUNIL KUMAR Y ADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY OF RS.5 LAKHS LEVIED UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). 2 . WE HAVE CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES AND WE FIND THAT PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVIED FOR THE ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE OF BAD DEBT OF RS. 4,13,564.00, WHICH WERE NOT PRESSED BY THE ASSESSEE , AND OTHER AD HOC ADDITIONS. 3 . DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE HAS CANDIDLY ADMITTED THAT IT HAS GIVEN AN ADVANCE OF RS.4,13,564/ - TO TWO PARTIES, NAMELY M/S QUALITY MACHINES TRADERS AND M/S ESKO DYE CASTING PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : (P) LTD. WHEN THE ASSESSEE COULD NOT REALIZE THE SAID AMOUNT , IT HAS WRITTEN OFF THE AMOUNT IN ITS BOOKS OF ACCOUNT INSTEAD OF CLAIMING IT TO BE A BUSINESS LOSS UNDER SECTION 37 OF THE ACT. HAVING REALIZED THIS MISTAKE, THE ASSESSEE AGRE ED FOR DISALLOWANCE AND DID NOT PRESS IT BEFORE THE LD. CIT(A). THE OTHER ADDITIONS WERE MADE ON AD HOC BASIS. THE ASSESSING OFFICER HAS LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR THE SE DISALLOWANCES . IN APPEAL, IT WAS DELETED BY THE LD. CIT( A). 4 . NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED RELIANCE UPON THE ASSESSMENT ORDER. 5 . THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS SUBMITTED THAT THE ASSESSEE HAS NEITHER FURNISHED INACCURATE PARTICULARS NOR RAISED ANY WRONG C LAIM. BY MISTAKE , IT HAS RAISED THE CLAIM AS BAD DEBT INSTEAD OF CLAIMING IT TO BE A BUSINESS LOSS UNDER SECTION 37 OF THE ACT. THEREFORE, PENALTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD NOT BE LEVIED FOR THE SAME. THE OTHER ADDITIONS ARE MADE ON AD H OC BASIS, FOR WHICH PENALTY IS ALSO NOT SUSTAINABLE IN THE EYES OF LAW. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE FOLLOWING JUDGMENTS: - 1 . CIT VS. SANGRUR VANASPATI MILLS LTD [2008] 216 CTR 92. 2 . CIT VS. DHILLO N RICE MILLS [2002] 256 ITR 447. 3 . INCOME - TAX OFFICER VS. SMT. PURNIMA DEVI GUPTA, [2004] 3 SOT 753 (JODH.) 4 . CIT VS. DCM LTD. [2013] 262 CTR (DEL) 295 6 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, WE FI ND THAT THE ASSESSEE HAS WRITTEN OFF A SUM OF RS.2 LAKHS GIVEN AS ADVACE TO M/S QUALITY MACHINES TRADERS AND RS.2,13,564/ - TO M/S ESKO DYE CASTING (P) LTD. FOR PURCHASE SOME ITEMS. WHEN THIS AMOUNT COULD NOT BE RECOVERED, THE ASSESSEE HAS WRITTEN PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : OFF TH E SAME AMOUNT AS BAD DEBT WHICH WAS DISALLOWED BY THE ASSESSING OFFICER. DURING THE COURSE OF HEARING BEFORE THE LD. CIT(A) , THE ASSESSEE CONTENDED THAT THOUGH HE IS ENTITLED TO CLAIM IT TO BE BUSINESS LOSS, BUT INADVERTENTLY HE HAS WRITTEN OFF THE SAME AS BAD DEBT . H E ACCORDINGLY DID NOT PRESS THE GROUND RELATING TO THIS ISSUE BEFORE THE LD. CIT(A). T HE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE . NOW IT HAS BEEN CONTENDED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE COULD HAVE CLAIMED THIS AMOUNT AS BUSINE SS LOSS UNDER SECTION 37 OF THE ACT BUT INADVERTENTLY HE HAS WRITTEN IT OFF AS BAD DEBT. 7 . HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES, WE FIND FORCE IN THE CONTENTIONS OF THE ASSESSEE. NOW THE QUESTION ARISES THAT FOR THE MISTAKE OF THE ASSESSEE , WHETHER PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS WARRANTED OR NOT. UNDISPUTEDLY , THE ASSESSEE HAS GIVEN CERTAIN ADVANCES TO THE AFORESAID PARTIES TO PURCHASE CERTAIN ITEMS BUT THE ASSESSEE DID NOT RECEIVE THE SAID ITEMS NOR DID HE RECOVER T HE ADVANCES GIVEN TO THESE PARTIES. UNDISPUTEDLY PROVISIONS OF SECTION 36(1) ( III) OF THE ACT READ WITH SUB - SECTION (2) OF SECTION 36 OF THE ACT CANNOT BE APPLIED , AS THESE AMOUNTS WERE GIVEN AS ADVANCE TO PURCHASE CAPITAL GOODS, BUT CERTAINLY THIS IS A BU SINESS LOSS WHICH CAN BE CLAIMED BY THE ASSESSEE. H AVING REALIZED THIS MISTAKE , HE DID NOT PRESS TH E GROUND RELATING TO THIS ISSUE BEFORE THE LD. CIT(A). THER EFORE , THE MISTAKE COMMITTED BY THE ASSESSEE FOR CLAIMING IT TO BE A BAD DEBT IS A BONA FIDE MIS TAKE, FOR WHICH PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS NOT LEVIABLE. THE OTHER ADDITIONS, ON WHICH PENALTY WAS LEVIED , WERE MADE ON AD HOC BASIS. THEREFORE, WE DO NOT FIND MERIT IN THE PENALTY LEVIED BY THE ASSESSING OFFICER FOR AD HOC ADDITIONS. 8 . WE HAVE ALSO PERUSED THE JUDGMENT REFERRED TO BY THE ASSESSEE AND WE FIND THAT IN THE CASE OF CIT VS. DHILLON RICE MILLS (SUPRA), IT HAS BEEN HELD THAT THE ADDITION MADE ON ESTIMATE BASIS WOULD NOT AUTOMATICALLY PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : LEAD TO CONCLUSION THAT THERE WAS FAILURE TO RETURN CORRECT INCOME BY MEANS OF FRAUD OR GROSS OR WILLFUL NEGLECT. 9 . IN THE CASE OF CIT VS. DCM LTD. (SUPRA), IT HAS BEEN HELD THAT LAW DOES NOT BAR OR PROHIBIT AN ASSESSEE FOR MAKING A CLAIM, WHICH HE BELIEVES MAY BE ACCEPTED OR IS PLAUSIBLE. WHEN SUCH A CLAIM IS MADE DURING THE COURSE OF REGULAR OR SCRUTINY ASSESSMENT, LIBERAL VIEW IS REQUIRED TO BE TAKEN AS NECESSARILY THE CLAIM IS BOUND TO BE CAREFULLY SCRUTINIZED BOTH ON FACTS AND IN LAW AND IN SUCH TYPE OF CASES PENALTY UNDER SECTION 271(1)(C) OF TH E ACT SHOULD NOT BE LEVIED. 10 . IN THE LIGHT OF THE ABOVE JUDICIAL PRONOUNCEMENTS, WE ARE OF THE CONSIDERED VIEW THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS NOT LEVIABLE . WE, THEREFORE, DO NOT FIND A NY INFIRMITY IN THE ORDER OF THE LD. CIT(A) , WHO HAS RIGHTLY DELETED THE PENALTY. 11 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7.5.2014. S D/ - S D/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER D ATED: 7 TH MAY , 2014 JJ: 0105 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )