Dhanshree Agro Polyproducts, Ahmedabad V. The ACIT.,Circle-7, Ahmedabad

ITA 423/AHD/2010

• Counselvise Citation: 42320514 RSA 2010
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-05-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 09-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: U S BHATI
• Keywords: Wrong claim; Revenue expenditure
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI MUKUL KUMAR SHRAWAT, JM AND SHRI A. MO HAN ALANKAMONY, AM) ITA NO.423/AHD/2010 A. Y.: 2003-04 M/S. DHANSHREE AGRO POLYPRODUCTS, S/6, GOLD COIN COMPLEX, 2 ND FLOOR, SATELLITE ROAD, AHMEDABAD PA NO. AABFD 5070A VS THE A. C.I. T., CIRCLE-7, C. U. SHAH BUILDING, OFF ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY SHRI U. S. BHATI, AR RESPONDENT BY SHRI B. L. YADAV, SR. DR DATE OF HEARING: 29-05-2012 DATE OF PRONOUNCEMENT: 01-06-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED CIT( A)-XI, AHMEDABAD IN APPEAL NO. CIT(A)-XI/398/08-09 DATED 0 8-12-2009 PASSED U/S 271(1) ( C ) READ WITH SECTION 250 OF TH E IT ACT, FOR ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE HAS RAISED TWO GROUNDS IN ITS APPE AL WHEREIN GROUND NO.2 IS GENERAL IN NATURE AND DOES NOT SURVI VE FOR ADJUDICATION. THE LONE SURVIVING GROUND NO.1 IS REP RODUCED HEREIN BELOW: ITA NO.423/AHD/2010 (AY 2003-04) M/S. DHANSHREE AGRO POLYPRODUCTS VS ACIT, CIR-7, A HMEDABAD 2 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY IN RE SPECT OF FIXED DEPOSIT WRITTEN OFF AMOUNTING TO RS.3,25,186/ -. 3. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F MANUFACTURING OF PLASTIC ROLLS, SHEETS & CAPS COVER ETC., FILED ITS RETURN OF INCOME ON 29-10-2003 ALONG WITH STATEMENT OF AFF AIRS OF THE FIRM AND STATUTORY AUDITORS REPORT IN FORM NO.3 CB AND 3CD U/S 44AB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND ORD ER WAS PASSED U/S 143(3) OF THE ACT WHEREIN ONE OF THE ADDITIONS MADE WAS IN RESPECT OF CLAIM OF BAD DEBT OF RS.3,25,186/- WHICH WAS DEBITE D IN THE PROFIT & LOSS ACCOUNT OF THE FIRM. DURING THE COURSE OF ASS ESSMENT, THE ASSESSEE EXPLAINED THAT THE SUM OF RS.3,25,186/- WA S WRITTEN OFF SINCE IT PERTAINED TO FIXED DEPOSIT MADE IN GENERAL CO-OPERATIVE BANK AND THE BANK HAD CEASED TO FUNCTION. THE ASSESSEE H AD PLEADED BEFORE THE LEARNED AO THAT EVEN IF THE AMOUNT COULD NOT BE WRITTEN OFF AS BAD DEBT THE SAME WAS ALLOWABLE FOR DEDUCTION U/ S 28 OF THE ACT. HOWEVER, THE LEARNED AO MADE THE ADDITION ON THE PR EMISE THAT THE ASSESSEE IS NOT ENGAGED IN FINANCING BUSINESS AND T HE AMOUNT WRITTEN OFF IS A FIXED DEPOSIT KEPT IN THE BANK AND AT THE BEST IT REPRESENTS A CAPITAL LOSS AND IS NOT ADMISSIBLE AS REVENUE EXPENDITURE. THE LEARNED AO FURTHER INITIATED PENAL TY PROCEEDINGS. IN THE PENALTY PROCEEDINGS, THE LEARNED AO LEVIED A PE NALTY OF 100% OF TAX SOUGHT TO BE EVADED ON THIS ADDITION OF RS.3,25 ,186/- SINCE THE ASSESSEE HAD OPTED NOT TO PRESS THIS GROUND IN THE QUANTUM APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED AO FURTHER H ELD THAT ANY INADVERTENT MISTAKE AND WRONG CLAIM OF CAPITAL EXPE NDITURE UNDER THE ITA NO.423/AHD/2010 (AY 2003-04) M/S. DHANSHREE AGRO POLYPRODUCTS VS ACIT, CIR-7, A HMEDABAD 3 HEAD REVENUE EXPENDITURE TENTAMOUNTS TO FURNISHING OF INCORRECT PARTICULARS OF INCOME. 4. ON APPEAL BEFORE THE LEARNED CIT(A), PENALTY LEV IED ON THIS GROUND WAS CONFIRMED BY THE LEARNED CIT(A) WHO OBSE RVED AS UNDER: 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE, A.OS FINDINGS AND SUBMISSIONS OF THE APPELLANT. APPELLANT DEBITED FINANCIAL CHARGES OF RS.19,04,512.94 TO P & L A/C. AS SEEN FR OM SCHEDULE- 15 : FINANCIAL EXPENSES, THE BREAK OF THE SAID EXPENSES IS AS FOLLOWS: - SCHEDULE-15 FINANCIAL EXP. : BANK CHARGE 56,891.00 INTEREST TO FI, BANK & OTHER 4,62,143.00 INTEREST TO PARTNERS 10,60,292.94 FIXED DEPOSIT W/OFF. 3,25,186.00 19,04,512.94 OUT OF THE ABOVE FIXED DEPOSIT W/OFF OF RS.3,25,1 86/- IS THE AMOUNT WHICH WAS DISALLOWED BY THE A. O. WHEN QUEST IONED BY THE A. O., THE APPELLANT CLAIMED THAT THE AMOUNT WA S DEDUCTIBLE U/S. 28 AND U/S. 36(1) (III). APPEAL AGAINST THE DI SALLOWANCE WAS FILED, THOUGH NOT PRESSED BEFORE CIT(A). THUS THE A PPELLANT MADE A BLATANTLY WRONG CLAIM OF EXPENSES. THERE W AS NOTHING APPARENT FROM THE P & L A/C OR COMPUTATION OF INCOM E THAT SUCH A CLAIM WAS BEING MADE. ONLY ON ACCOUNT OF THE DILI GENCE OF THE A. O. THE ISSUE COME TO LIGHT. EVEN THEN THE AP PELLANT MADE ALTERNATE CLAIMS AND FURTHER FILED APPEAL. IN VIEW OF THE FACTS OF THE CASE, I AM UNABLE TO ACCEPT THE CONTENTION OF T HE APPELLANT THAT THIS IS AN INADVERTENT MISTAKE OR A BONAFIDE C LAIM. NONE OF THE CASE-LAWS RELIED ON BY THE APPELLANT ARE OF ANY HELP. THE FACTS OF THE CASE ARE CLEARLY DISTINGUISHABLE. 5. THE LEARNED AR ARGUED BEFORE US STATING THAT THE ISSUE WAS DEBATABLE AS TO WHETHER SUCH LOSS ON ACCOUNT OF UNR EALIZABLE FIXED DEPOSITS KEPT IN BANK IS CAPITAL OR REVENUE IN NATU RE. THE LEARNED AR FURTHER SUBMITTED THAT THE ASSESSEE HAD NOT APPEALE D BEFORE THE FIRST ITA NO.423/AHD/2010 (AY 2003-04) M/S. DHANSHREE AGRO POLYPRODUCTS VS ACIT, CIR-7, A HMEDABAD 4 APPELLATE AUTHORITY BECAUSE OF THE SMALLNESS OF AMO UNT AND TO AVOID LONG LITIGATION. THE LEARNED AR FURTHER RELIED ON T HE DECISION OF THE CASE CIT VS RELIANCE PETROPRODUCTS PVT. LTD. , 322 ITR 158 (SC) AND PRAYED THAT LEVY OF PENALTY BY THE REVENUE MAY BE DELETED. THE LEARNED DR ON THE OTHER HAND, STRONGLY RELIED ON TH E ORDER OF THE LEARNED AO AND THE FIRST APPELLATE AUTHORITY AND PR AYED THAT THE PENALTY LEVIED MAY BE CONFIRMED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD BEFORE US. IT IS ADMITTED FACT THAT THE ASSESSEE HAD GENUINELY SUFFERED LOSS OF RS.3,254,186/- DUE T O DEPOSIT KEPT IN BANK DURING THE COURSE OF ITS BUSINESS. DURING THE CONDUCT OF THE BUSINESS IT IS AN INHERENT NATURE FOR ANY BUSINESS HOUSE TO DEPOSIT ITS SURPLUS FUNDS IN THE BANK OR IN ANY FINANCIAL INSTI TUTIONS FOR PRESERVING ITS FUNDS. THESE KIND OF SHORT DEPOSITS ARE RECALL ED AS AND WHEN THE BUSINESS REQUIRES THE FUNDS. IN FACT, THE FUNDS ARE KEPT IN FIXED DEPOSIT IN BANKS/FINANCIAL INSTITUTIONS READY FOR U SE. THEREFORE, AS STATED BY THE ASSESSEE DEPENDING UPON EACH AND EVER Y TRANSACTION THE ISSUE BECOMES DEBATABLE WHETHER SUCH LOSS IS CA PITAL LOSS OR REVENUE LOSS. FURTHER, RELYING ON THE ORDER OF THE HONBLE APEX COURT CITED BY THE ASSESSEE IN THE CASE OF CIT VS RELIANC E PETROPRODUCTS PVT. LTD. WHEREIN IT HAS BEEN HELD THAT A MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WOULD N OT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING INCO ME OF THE ASSESSEE. SUCH A CLAIM MADE IN A RETURN NOT AMOUNTI NG TO FURNISHING OF INACCURATE PARTICULARS WE ARE OF THE CONSIDERED VIEW THAT IN SUCH CIRCUMSTANCES PENALTY IS NOT LEVIABLE ESPECIALLY WHEN THE ITA NO.423/AHD/2010 (AY 2003-04) M/S. DHANSHREE AGRO POLYPRODUCTS VS ACIT, CIR-7, A HMEDABAD 5 ISSUE IS DEBATABLE. MOREOVER, FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED ANY INACCURATE PARTICULARS. THEREFORE, WE HEREBY DELETE THE PENALTY LEVIED BY THE REVENUE ON THE ISSUE OF UNREA LIZABLE FIXED DEPOSIT KEPT IN BANK WRITTEN OFF AMOUNTING TO RS.3, 25,186/- DUE TO CESSATION OF THE FUNCTIONING OF THE BANK. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 01-06-2012 SD/- SD/- (MUKUL KUMAR SHRAWAT) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 29-05-12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 30-05-12 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: