TANDON HOLDING PVT. LTD., MUMBAI V. DCIT 8(3), MUMBAI

ITA 479/MUM/2011

• Counselvise Citation: 47919914 RSA 2011
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 31-07-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 18-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH RAJHANS
• Assessee Lawyers: DR K SHIVRAM RAHUL HAKANI; NEELAM JADHAV
• Keywords: Wrong claim; Bad and doubtful debts; Difference of opinion

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - H BENCH. . .. . . .. . , ,, , !'#$ !'#$ !'#$ !'#$ , ' ' ' ' %& %& %& %& BEFORE S/SH.H.L.KARVA,PRESIDENT & RAJENDRA,ACCOUNTA NT MEMBER ./ ITA NO. 479/MUM/2011 , ' ' ' ' ( ( ( ( / ASSESSMENT YEAR-2003-04 TANDON HOLDING PVT. LTD. C-1, UDYOG SADAN NO.3, MIDC, ANDHERI (E), MUMBAI- 400093 VS. DCIT 8(3) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI- 400020 PAN:AAACT2200L ( )* / APPELLANT ) ( +,)* / RESPONDENT ) )* )* )* )* - - - - ' '' ' / APPELLANT BY : DR. K. SHIVRAM, RAHUL HAKANI & NEELAM JADHAV +,)* . - ' / RESPONDENT BY : ASHUTOSH RAJHANS ' ' ' ' . .. . /0 /0 /0 /0 / DATE OF HEARING : 31 -07-2013 12( . /0 / DATE OF PRONOUNCEMENT : 07-08-2013 PER RAJENDRA, A.M. CHALLENGING THE ORDER DATED 02.12.2010 OF THE CIT(A )-18,MUMBAI,ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN LEVYING PENALTY OF RS. 5,58,065/- U/S. 271 (1) (C) OF INCOME TAX ACT. 2. THE LEARNED CIT(A) ERRED IN OBSERVING THAT ASSES SEE COULD NOT SUBMIT ANY EVIDENCE OF FOREIGN TRAVEL UNDER TAKEN FOR PURPOSE OF THE BUSINESS. 3. THE LEARNED CIT(A) ERRED IN OBSERVING THAT ASSES SEE DID NOT SUBMIT ANY EVIDENCE FOR BAD DEBT OF RS. 29,671/- 4.EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOU T PREJUDICE TO THE OTHER. 5.THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER OR AMEND EACH ONE OF THE ABOVE GROUNDS OF APPEAL. FACT OF THE CASE : DURING THE ASSESSMENT PROCEEDINGS AO HAD MADE DISAL LOWANCES UNDER THE TWO HEAD- FOREIGN TRAVEL EXPENSES (RS.14,88,873/-) AND BAD DEBTS (RS. 29,67 3/-).AO DISALLOWED FOREIGN TRAVEL EXPENSE FOR THE FOLLOWING REASONS: (A)THE ASSESSEE EXPORTED COMPUTER PARTS TO THE TUNE OF RS.26,52,885/- TO SRI LANKA, SINGAPORE AND USA.THE SALES MADE TO USA ARE ONLY TO THE TUNE OF R S.6,989/-. (B)THE VISIT MADE BY THE DIRECTOR MRS.V.K. TANDON, WAS PURELY PERSONAL IN NATURE AND EXPENDITURE WAS NOT SPENT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE, O F BUSINESS. (C)THE DIRECTOR VISITED USA AND MALAYSIA WHERE THE COMPANY HAD NO BUSINESS ACTIVITY OR VERY NOMINAL BUSINESS.IN THE APPELLATE PROCEEDINGS FIRST APPELLA TE AUTHORITY(FAA) CONFIRMED THE DISALLOWANCES MADE BY AO VIDE HIS ORDER DATED 19.05.2006.ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL. VIDE ORDER DATED 24.04.2007 ITAT UPHELD THE ORDER OF FAA ON TH E GROUND THAT THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE WITH REFERENCE TO CONTACTS MADE WITH F OREIGN PARTIES EITHER IN MALAYSIA OR IN USA FOR THE PURPOSE OF BUSINESS.THE BAD DEBTS DISALLOWED BY AO CONSISTED OF RS.29, 176/- AND WAS GIVEN TO M/S. KNELL CONTROL SYSTEMS. FAA IN HIS ORDER DATED 19.05 .2006 CONFIRMED THE DISALLOWANCE ON THE GROUND 2 ITA NO. 479/MUM/2011 MS TANDON HOLDING PVT. LTD. THAT, NO DETAILS REGARDING AS TO WHEN THE ORIGINAL ORDER WAS PLACED ON M/S. KNELL CONTROL SYSTEMS, WHEN THEY WERE CANCELLED AND WHAT WAS THE TERMS AND CONDITIONS ? THE ORDER OF THE FAA WAS CONFIRMED BY THE TRIBUNAL. 2. AO ISSUED NOTICE U/S.271(1)(C) R.W.S.274 OF THE ACT AND ASKED THE ASSESSEE AS WHY PENALTY SHOULD NOT BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE LEVIED PENALTY OF RS. 5,58,065/-,VIDE HIS ORDER DATED 28.11.2007 U/S.271(1)(C). 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFRER CONSIDERING THE PENALTY ORDER AND THE SUBMISSIONS OF THE ASSESSEE,H E HELD THAT MRS. V.K. TONDON HAD STAYED IN MALAYSIA FOR 6 DAYS AND STAYED IN-USA FOR 21 DAYS D URING RELEVANT PREVIOUS YEAR,THAT THE ASSESSEES EXPORTS DURING THE PREVIOUS YEAR WERE TO THE TUNE OF RS. 26,52,885 /- ,THAT FOREIGNN TRAVEL EXPENSES WERE RS. 14,88,873/- WHICH WAS VERY MUCH ON THE HIG HER SIDE,THAT THE FOREIGN EXCHANGE PURCHASED ON USA TRIP WAS RS. 12,05,600/-,THAT EXPORTS MADE TO U SA WERE RS.6,989/-DURING RELEVANT PREVIOUS YEAR.THAT THE ASSESSEE COULD NOT SUBMIT ANY EVIDENC E THAT THE FOREIGN TRAVEL WAS NOT UNDERTAKEN FOR TH E PURPOSE OF BUSINESS EITHER DURING THE ASSESSMENT PR OCEEDINGS OR DURING APPELLATE PROCEEDINGS DESPITE THE FACT THAT THE TRIBUNAL HAD SPECIFICALLY ASKED T HE APPELLANT TO PROVIDE THE DETAILS OF BUSINESS CON TACTS MADE BY HER. FINALLY,HE HELD THAT THE APPELLANT HAD NOT SUBSTANTIATED ITS CLAIM OF EXPENDITURE WITH SUPPORTING DOCUMENTS,THAT THE AO HAD CORRECTLY LEV IED PENALTY U/S.271(1)(C).HE ALSO HELD THAT PENALTY LEVIED UNDER THE HEAD BAD DEBTS WAS AS PER LAW, AS THE ASSESSEE HAD NOT FURNISHED THE REQUIRED DETAILS .IN SHORT,HE CONFIRMED THE PENALTY ORDER PASSED BY THE AO. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR) SUBMITTED THAT THE AO LEVIED PENALTY IN A AUTOMATIC FASHION BECAUSE THE ADDITIONS WERE CONFIRMED BY THE TRIBUNAL AND NOT BECAUSE FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS, THA T, THERE WAS NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS,THAT THE ASSESSEE HAD MADE A LL BONAFIDE DISCLOSURES IN THE RETURN OF INCOME, IN P&L ACCOUNT AND DURING ASSESSMENT PROCEEDINGS,THAT THERE WAS NO MALA FIDE INTENTION TO CONCEAL THE INCOME OR TO FURNISH INACCURATE PARTICULARS THAT IN THE PRESENT CASE EXPLANATION SUBMITTED BY THE ASSESSEE WAS NOT PROVED FALSE BY AO,THAT THE AO DID NOT DISPUTE THE GENUINENESS OF THE EXPENDITURE, THAT HE HELD THE EXPENDITURE OF PERSONAL IN NATURE, THAT THE ASSESSEE BEING THE COMPANY THERE COULD NOT BE ANY PERSONAL EXPENDITURE FOR THE COMPANY.THAT, W ITH REFERENCE TO PENALTY ON BAD DEBTS FAA HAD HELD THAT AGREED IT COULD HAVE BEEN ALLOWED AS TRA DING LOSS HOWEVER, THE YEAR IN WHICH IT WAS TO BE ALLOWED WAS NOT DECIDED.HE RELIED UPON THE CASES OF RELIANCE PETROPRODUCTS PVT. LTD.(322 ITR 158- SC)DHARAMCHAND L. SHAH(204 ITR 462-BOM HC).DR SUPP ORTED THE ORDER OF THE AO AND THE FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.IT IS AN UNDISPUTED FACT THAT CERTAIN ADDITIONS WERE MADE BY THE AO AND SAME WERE CONFIRMED BY THE FAA AND THE TRIBUNAL. BUT, ONLY ON THIS BASIS NO PENALTY FOR CONCEALING I NCOME OR FURNISHING INACCURATE PARTICULARS CAN BE LEVIED.BOTH THE AUTHORITIES-AO AND FAA- HAVE HELD T HAT THE ASSESSEE HAD INCURRED THE EXPENDITURE UNDER THE HEAD FOREIGN TRAVEL. GENUINENESS OF THE I NCURRING OF THE EXPENDITURE IS NOT IN DOUBT,THE I SSUE WAS WHETHER THE EXPENDITURE WAS WHOLLY AND EXCLUSIV ELY FOR THE BUSINESS AND WHAT WAS THE NATURE OF THE SAID EXPENDITURE.FAA AND THE TRIBUNAL HELD THAT ASSESSEE HAD FAILED TO PROVE THAT FOREIGN TRAVEL EXPENDITURE WAS FOR THE BUSINESS CARRIED OUT BY THE ASSESSEE. NOWHERE ANY FINDING HAD BEEN GIVEN THAT CLAIM WAS BOGUS.DISALLOWING A CLAIM DURING ASSESSME NT PROCEEDINGS AND LEVYING PENALTY ARE TWO DIFFERENT ASPECTS OF A TRANSACTION. WE ARE OF THE O PINION THAT NO PENALTY CAN BE IMPOSED FOR DISALLOWANCE OF A WRONG CLAIM AND THERE IS CLEAR CU T DISTINCTION BETWEEN A WRONG CLAIM AND FALSE CLAIM.IN THE CASE UNDER CONSIDERATION CLAIM, MADE B Y THE ASSESSEE, WAS FOUND TO BE NOT ALLOWABLE,BUT FOR THAT IT CANNOT BE VISITED BY PROVISIONS OF SECT ION 271(1)(C) OF THE ACT.BESIDES,CONCEALMENT PENALT Y CANNOT BE LEVIED ON DEBATABLE LEGAL ISSUES.WE FIND THAT AS FAR AS BAD DEBTS ARE CONCERNED,FAA HAD HELD THAT SAME COULD BE ALLOWED AS A TRADING LOSS, HOWEV ER THE ISSUE WAS THE YEAR IN WHICH THE SAME WAS TO BE ALLOWED. THUS,THERE WAS A DIFFERENCE OF OPINION WITH REGARD TO THE ALLOWANCE OF BAD DEBTS.WE FURTHER FIND THAT AS PER THE AO, TRAVELLING EXPENSE S, CLAIMED BY THE ASSESSEE, WERE CAPITAL IN NATURE WHEREAS AS PER ASSESSEE SAME WERE REVENUE IN NATURE .THUS,BOTH THE ISSUES FALL UNDER THE CATEGORY OF 3 ITA NO. 479/MUM/2011 MS TANDON HOLDING PVT. LTD. DEBATABLE ISSUE.CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCE OF THE CASE WE ARE OF THE OPINION THAT THE ORDER OF THE FAA CANNOT BE ENDORSED.THEREFORE,R EVERSING HIS ORDER WE DECIDE ALL THE THREE EFFECTIV E GROUNDS OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALL OWED. 3 &4 ' 3/ . !5 . ! / 67. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH AUGUST,2013 . %'8 . 12( ' # 9 :%' 7 VXLR VXLR VXLR VXLR , 2013 2 . ;. SD/- SD/- ( . . - H.L.KARWA) ( !'#$ !'#$ !'#$ !'#$ / RAJENDRA) / PRESIDENT ' ' ' ' %& %& %& %& /ACCOUNTANT MEMBER / MUMBAI, :%' /DATE: 07 TH AUGUST,2013 SK %'8 %'8 %'8 %'8 . .. . +/< +/< +/< +/< ='<(/ ='<(/ ='<(/ ='<(/ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / )* 2. RESPONDENT / +,)* 3. THE CONCERNED CIT (A) / > ? , 4. THE CONCERNED CIT / > ? 5. DR H BENCH, ITAT, MUMBAI / <@; +/' ,P ,P,P ,P , . . # . 6. GUARD FILE/ ; A ,