M/s. Aspy Litho Works, CHENNAI V. DCIT, CHENNAI

ITA 490/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1047 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-01-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 19-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJAKUMAR SHRI B SRINIVAS
• Keywords: Income from undisclosed sources; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI BEFORE SHRI U.B.S. BEDI, J.M. & SHRI ABRAHAM P. GEORGE, A.M. I.T.A. NO.490/MDS/2010 ASSESSMENT YEAR: 2003-04 ASPY LITHO WORKS, C/O SHRI B.P. BYRAMSHAH (PARTNER), 9/19, WEST MADA STREET, ROYAPURAM, CHENNAI 600 013. [PAN: AAAFA1065F] VS. THE DY. COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE VI, CHENNAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJAKUMAR REVENUE BY : SHRI B. SRINIVAS O R D E R PER U.B.S. BEDI, J.M. THIS APPEAL OF THE ASSESSEE IS DIRECT ED AGAINST THE ORDER PASSED BY THE LD. CIT(A) IX, CHENNAI DATED 29. 01.2010 RELEVANT TO THE ASSESSMENT YEAR 2003-04, WHEREBY CONFIRMATION OF THE PENALTY OF ` .7,05,500/- IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT HAS BEEN CHALLENGED. 2. FACTS INDICATE THAT THE ASSESSEE FIRM HAS FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 22. 10.2003 DECLARING A LOSS OF ` .19,21,105/-. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF BAD DEBTS OF ` .19,19,828/- ON THE GROUND THAT THE ASSESSEE HAD NOT CREDITED SIMILAR AMOUNTS TO THE RESPECTIVE DEBTORS ACCOUNT AND INCOME FROM UNDISCLOSED SOURCES OF ` .60,000/-. THE ASSESSEE WENT IN APPEAL FOR THE ABOVE ADDITIONS. THE LD. CIT(A) - IV, CHENNAI UPHELD THE ADDITION OF ` .19,19,828/- MADE BY THE ASSESSING OFFICER REGARDING BAD DEBTS AND DELETED THE OTHER ADDITION. ITA NO. 490/MDS/10 2 THE ASSESSING OFFICER INITIATED PENALTY PR OCEEDINGS UNDER SECTION 271(1)(C) OF THE I.T. ACT. SUBSEQUENTLY, THE ASSESSING OFFICER HAS LEVIED PENALTY OF ` .7,05,500/- UNDER SECTION 271(1)(C) OF THE ACT AS THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS. 3. ASSESSEE TOOK UP THE MATTER IN APPEA L AND FILED WRITTEN SUBMISSIONS DATED 11.01.2010 BEFORE THE FIRST APPELLATE AUTHORIT Y, RELEVANT PORTION OF THE SAME WERE REPRODUCED BY THE LD . CIT(A) AS UNDER: 1. THE CLAIM FOR BAD DEBTS WAS WITHDRAWN BEFORE THE CIT(A) ONLY BECAUSE OF THE FOLLOWING REASONS: I. OUR BUSINESS HAD COME TO A STAND STILL AND NO BUSINESS OPERATIONS WAS CARRIED OUT. II. NO AMOUNTS WAS RECEIVED FROM SUNDRY DEBTORS. III. FURTHER THE RETURN OF INCOME FOR THE ASST.YEAR 2003-04 WAS FILED BEYOND THE DUE DATE AND HENCE THE LOSS INCU RRED IN THE A.Y. 2003-04 WAS NOT ENTITLED TO BE CARRIED FORWARD. IV. THE INCOME EVEN AFTER DISALLOWING THE CLAIMS FOR BAD DEBTS IS NIL. V. THE MANAGING PARTNER IS SUFFERI NG FROM CANCER AND IS UNDERGOING INTENSIVE TREATMENT. THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THE FACT THAT EVEN AFTER DISALLOWANCE OF BAD DEBTS THE FIRM IS NOT LIA BLE TO TAX. HENCE THERE IS NO LOSS TO THE REVENUE. ALSO IT WAS A BELATED RETURN; AND CARRY FORWARD OF THIS LOSS IS NOT POSSIBLE; HENCE THIS BAD DEBT CLAIM HAS NO IMPACT ON REVENUE EITHER FOR THE CURRENT YEAR OR IN THE FUTURE. 4. THE LD. CIT(A) FURTHER NOTED THAT IN THE PENALTY ORDER, THE ASSESSING OFFICER ASSERTED THAT IF THIS CASE WAS NOT SCR UTINIZED UNDER SECTION 143(3), THE ASSESSEE WOULD HAVE COOLLY CLAIMED THIS AS EXPENDITU RE. TO THIS EXTENT THE ASSESSEE WOULD HAVE SAVED THE TAX. SO, IT IS CLEAR T HAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS WITH A VIEW TO DEFRAUD THE REVENUE. THEREF ORE, HE IMPOSED PENALTY. 5. THE LD. CIT(A), WHILE CONSIDER ING THE ARGUMENTS AS ADVANCED BY THE ASSESSEE, IN APPEAL PROCEEDINGS HAS SPECIFIC ALLY MENTIONED THAT THE VIEW IN ITA NO. 490/MDS/10 3 HARIPRASAD & CO (P) LTD.S CA SE WOULD LEAD TO THE IRRESIST IBLE CONCLUSION THAT INCOME ALSO INCLUDES LOSSES, CIT VS. GOLD COIN HEALTH FOOD (P) LT D. 172 TAXMAN 386 SC DATED 18.08.2008 AND HE REJECTED THE PLEA OF THE ASSESSEE T HAT THERE IS NO REVENUE LOSS IN THIS CASE. SO, COMING TO THE MERI TS OF THE CASE, HE NARRATED DEFINITION OF CONCEALMENT, OMISSION, ETC. WHETHER BONA FIDE OR INADVERTENT AND MEANING OF INACCURATE PARTICULARS, HE CAME TO CONF IRM THE PENALTY IMPOSED BY THE ASSESSING OFFICER AS PER PARA 5 OF HIS ORDER TO DISM ISS THE APPEAL OF THE A SSESSEE, WHICH READS AS UNDER: 5. I HAVE CAREFULLY GONE THROU GH THE PENALTY ORDER, WRITTEN SUBMISSIONS BY THE L EARNED AR AND THE ABOVE EXTRACTS OF HONBLE SUPREME COURTS JUDGEMENTS. ALSO RES PECTFULLY FOLLOWING THE DECISIONS OF SUPREME COURTS JUDGMENTS, I HAVE COME TO A CONCLUSION THAT THERE IS CONCEALMENT OF PARTICULARS AND THE APPELLANT FIRM HAS FURNISHED INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, I AM OF THE OPINION THAT THE LEARNED AO HAS RIGHTLY LEVIED PENALTY OF ` .7,05,500/- U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 AND THE PENALTY IS CONFIRMED. 6. STILL AGGRIEVED, THE A SSESSEE IS IN FURTHER APPEAL AND WHILE REITERATING THE SUBMISSIONS AS MADE BEF ORE THE LOWER AUTHORITIES, IT WA S PLEADED FOR DELETION OF THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) BECAUSE NEITHER THERE IS ANY WILLFUL CONCEALMENT NOR THE ASSESSEE HAS ADMITTED TO FURNISH ANY INACCURATE PARTICULARS. THE CLAIM OF THE BAD DEBTS EVEN WITHDRAWN BY WAY OF COMPRISE ENTERED INTO BY THE ASSESSEE AND T HE LD. CIT(A) WHEN, IN FACT, THE ASSESSEE CLAIMED SUCH BAD DEBTS IN THE PROFIT AND LOSS ACCOUNT, BUT DID NOT CREDIT SIMILAR AMOUNT TO THE DEBTORS ACCOUNT. IT WAS ALSO SUBMITTED THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE STRONGLY PLEADED THAT BUSINESS OF THE ASSESSEE HAD COME TO A STAND STILL AND NO BUSINESS O PERATION WAS CARRIED OUT, NO AMOUNT WAS RECEIVED FROM ITA NO. 490/MDS/10 4 SUNDRY DEBTORS. FURTHER, THE INCOME FO R THE ASSESSMENT YEAR 2003-04 WAS FILED BEYOND THE DUE DATE AND HENCE THE LOSS INCU RRED IN THE ASSESSMENT YEAR 2003-04 ARE NOT ENTITLED TO CARRY FORWARD AND INCOME EVEN AFTER DISALLOWING THE CLAIMS FOR BAD DEBTS WAS NIL. MOREOVER, T HE MANAGING PARTNER WAS SUFFERING FROM CANCER AND UNDERGOING INTENSIVE TREATMENT. CONSIDERING ALL THESE FACT ORS, HE SUBMITTED BEFORE THE ASSESSING OFFICER NOT TO IMPOSE PENALT Y AND SIMILAR PLEA WAS ALSO RAISED BEFORE THE LD. CIT(A), BOTH OF THEM REJECTED THE SAME AND WH ILE REITERATING ALL THESE SUBMISSION AS MADE BEFORE LO WER AUTHORITIES, THE ASSESSEE S COUNSEL SUBMITTED THAT IN VIEW OF THE DECISION OF H ONBLE SUPREME COURT IN THE CA SE OF VIJAYA BANK V. CIT AND ANOTHER 323 ITR 166 AND OTHER CASE OF CI T V. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC), THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS, IT WAS PLEADED FOR DELETION OF PENALTY IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). 7. THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND PLEADED FOR CONFIRMATION OF THE SAME, SINCE PENALTY CAN BE IMPOSED EVEN ON RETURNED DECLARED LOSS, THEREFORE, IT WA S SUBMITTED THAT PENALTY IS EXIGIBLE IN THIS CASE, WHICH HAS RIGHTLY BEEN IMPOSED AND JUSTIFIABLY BEEN C ONFIRMED BY THE LD. CIT(A). 8. WE HAVE HEARD BOTH THE SIDES, CONSI DERED THE MATERIAL ON RECORD AND FIND THAT THE ASSESSEE BY MEANS OF BELAT ED RETURN HAS CLAIMED LOSS OF ` .19,21,105/- AND THE ASSESSING OFFICER HAS EXAMINED THE LEDGER BOOK WITH REGARD TO SUNDRY DEBTORS OF ` .19,19,828/- IN WHOSE CASES, THE ASSE SSEE HAS WRITTEN OFF AS BAD DEBT. THE ASSESSING OFFICER STATED THAT LEDGER ENTRIES WERE MADE ONLY ON 31.03.2001 AND THERE WAS NO FURTHER ENTRY AND AS PER PROVISION OF INCOME TAX ACT, THE ASSESSEE FIRM OUGHT ITA NO. 490/MDS/10 5 TO HAVE CREDITED THE SUNDRY DEBTORS ACCOUNT WIT H THE AMOUNT WRITTEN OFF IN RESPECT OF EACH SUNDRY DEBTOR. SO, THE CLAIM OF THE ASSESSEE CAME TO BE DISALLOWED AND ACTION OF THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE LD. CIT(A) BEFORE WHOM THE ASSESSEE IS STATED TO HAVE ENTERED INTO A CO MPRISE, BUT IN PENALTY PROCEEDING, THE ASSESSING OFFICER IMPOSED THE PENALTY UNDER SECTION 271(1)(C) AND HIS ACTION HAS BEEN CONFIRMED BY THE LD. CIT(A). NOW, IT HAS TO BE SEEN WHETHER PENALTY COULD BE IMPOSED IN VIEW OF THE FACTS, CIRCUMSTANCES AND CASE LAW CI TED OR NOT. IN THE CASE OF VIJAYA BANK V. CIT AND ANOTHER (SUPRA) , THE HONBLE SUPREME COURT HAS HELD AS UNDER: AFTER APRIL 1, 1989, A MERE PROVISION FOR BAD DEBT WILL NOT BE ENTITLED TO DEDUCTION UNDER SECTION 36(1)(VII). IF AN ASSESSEE DEBITS AN AMOUNT OF DOUBTFUL DEBT TO THE PROFIT AND LOSS ACCOUNT AND CR EDITS THE ASSETS ACCOUNT LIKE SUNDRY DEBTORS ACCOUNT THAT WOULD CONSTITUTE A WRITE OFF OF AN ACTUAL DEBT. . TO ARRIVE AT THE ABOVE C ONCLUSION, THE HONBLE SUPREME COURT HAS RELIED UPON SOUTHERN TECHNOLOGIES LTD. V. JC IT [2010] 320 ITR 577 (SC) - THOUGH A MERE DEBIT TO THE PROFIT AND LOSS ACCOUNT WOULD CONSTITUTE A PROVISION FOR A BAD AND DOUBTFUL DEBT, YET T HAT WOULD NOT CONSTITUTE ACTUAL WRITE OFF. BUT WHERE BESIDES DEBITING THE PROFIT AND LOSS ACCOUNT AND CREATING A PROVISION FOR BAD AND DOUBTFUL DEBT, THE ASSESSEE HAS CORRESPONDINGLY/ SIMULTANEOUSLY OBLITERATED TH E SAID PROVISION FROM ITS ACCOUNTS BY REDUCING THE CORRESPONDING AMOUNT FROM LOANS AND ADVANCES /DEBTORS ON THE ASSETS SIDE OF THE BALANCE-SHEET, AND, CONSEQUENTLY AT THE E ND OF THE YEAR, THE FIGURE IN THE LOANS AND ADVANCES OR THE DEBTORS ON THE ASSETS SI DE OF THE BALANCE-S HEET IS SHOWN AS NET OF THE PROVISION FOR IMPUGNED BAD DEBT , THE ASSESSEE WILL BE ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SE CTION 36(1)(VII), AS THERE IS AN ACTUAL WRITE OFF BY THE ASSESSEE IN HIS BOOKS. DISALLOWAN CE CANNOT BE MADE ON AN APPREHENSION THAT IF THE ASSESSEE FAILED TO CLOSE EACH AND EVERY INDIVIDUAL ACCOUNT OF ITS DEBTOR, IT MAY RESULT IN THE ASSE SSEE CLAIMING DEDUCTI ON TWICE OVER. 8.1 SIMILARLY, WITH REGARD TO THE MEANING OF THE PHRASE P ARTICULARS AS CONTAINED IN SECTION 271(1)(C), THE HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD [2010] 322 ITR 158 HAS OPINED AS UNDER: ITA NO. 490/MDS/10 6 A GLANCE AT THE PROVISIONS OF SECT ION 271 (1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE A SSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 271 (1) (C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE C ANNOT BE HELD GUILTY OF FURN ISHING INACCURATE PARTI- CULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PR OVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE , THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DE TAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERR ONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SEC TION 271 (1)(C). A MERE MAKI NG OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, W ILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CL AIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFFIRMED. 8.2 FROM THE FACTS AS OBTAINED IN THE CASE IN HAND, IT IS CLEARLY MENTIONED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS WRITTEN OFF THE AMOUNT AS BAD DEBT BY CLAIMING IT IN THE PROFIT AND LOSS ACCOUNT AND AS PER THE HONBLE SUPREME COURTS OPINION AS REPRODUCED IN EARLIER PARAGRAPHS T HAT WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE IS NO QUESTI ON OF IMPOSING PENALTY AND IT HAS FURTHER BEEN HELD THAT MERE MAKING A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE AND SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS AND THE ITA NO. 490/MDS/10 7 ASSESSEE HAS IN THIS CASE ALSO GIVEN RE ASONS FOR NOT CONTESTING THE CLAIM IN FIRST APPEAL. 8.3 THEREFORE, IN VIEW OF THE FACTS AND MATERIALS ON RECO RD AND IN THE LIGHT OF THE ABOVE PRECEDENTS, WE ARE OF THE CONSIDERED VIEW THAT PENALTY IS NOT ATTRACTED IN THIS CASE SO NEITHER THE ACTION OF THE ASSESSING OFFI CER NOR OF THE LD. CIT(A) IS CORRECT IN IMPOSING/CONFIRMING THE IMPUGNED PENALTY. THER EFORE, WHILE ACCEPTING THE APPEAL OF THE ASSESSEE WE DELETE THE IMPUGNED PENALTY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 04.03.2011. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI, DATED, THE 04.03.2011 VM/- COPY TO : APPELLANT/RES PONDENT/CIT(A)- /CIT, /DR