The DCIT, Circle-1, Surat V. M/s. Anupam Rasayan India Ltd., Surat

ITA 493/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60214 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR SRDR
• Assessee Lawyers: R N VEPARI
• Keywords: Bad and doubtful debts; Difference of opinion
• Section: 27

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH . .. . . .. . , !'# !'# !'# !'#, , , , $ $ $ $ %&'( %&'( %&'( %&'(, , , , )* + ) # )* + ) # )* + ) # )* + ) # BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.504 AND 505/AHD/2010 [ASSTT.YEAR : 2005-2006] ANUPAM RASAYAN INDIA LTD. 1/1661, SUTHAR STREET NANPURA, SURAT. PAN : AAECA 4575 D /VS. DCIT, CIR.1 SURAT. ITA NO.493/AHD/2010 [ASSTT.YEAR : 2005-2006] DCIT, CIR.1 SURAT. /VS. ANUPAM RASAYAN INDIA LTD. 1/1661, SUTHAR STREET NANPURA, SURAT. ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 )/ ASSESSEE BY : SHRI R.N. VEPARI + 2 3 )/ REVENUE BY : SHRI RAHUL KUMAR, SR.DR 5 2 &(*/ DATE OF HEARING : 5 TH MARCH, 2012 678 2 &(*/ DATE OF PRONOUNCEMENT : 04-04-2012 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE ARE TWO ASSESSEES APPEALS AND ONE REVENUES APPEAL FOR ASSESSMENT YEA R 2005-2006 DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TA X (APPEALS)-I, SURAT. THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.504, 505 AND 493/AHD/2010 -2- ITA NO.504/AHD/2011 (ASSESSEES APPEAL) 2. THE ONLY GROUND OF THE APPEAL OF THE ASSESSEE RE ADS AS UNDER: 1. THE LD.CIT(A) ERRED IN CONFIRMING LEVY OF PENAL TY U/S.271(1)(C) OF THE ACT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE PENALTY HAS BEEN IMPOSED ON THE AMOUNT DISALLOWED ON BAD DEBTS. HE SUBMITTED THAT THE PENALTY IMPOSED ON OTHER DISALLOWANCE/ADDITION HAVE BEEN DELETED BY THE CIT(A) AND THE REVENUE HAS NOT PREFERRED ANY AP PEAL AGAINST THE SAME. REGARDING THE CLAIM OF THE BAD DEBTS, HE SUBMITTED THAT THE ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS AT THE TIME OF ASS ESSMENT ITSELF AND IT IS A CASE OF HONEST DIFFERENCE OF OPINION BETWEEN THE AS SESSEE AND THE REVENUE REGARDING THE ALLOWANCE OF CERTAIN CLAIM MADE BY TH E ASSESSEE. THE LEARNED DR OPPOSED THE SUBMISSIONS OF THE LEARNED C OUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT THE AMOUNT IN FACT REP RESENTS LATE PAYMENT CHARGES AND THE PAYMENTS WERE MADE IN THE PRIOR PE RIOD AND NOT IN THE RELEVANT PERIOD UNDER CONSIDERATION, AND THEREFORE, THE EXPENDITURE WAS NOT ALLOWABLE DURING THE RELEVANT YEAR. HE REFERRED TO PARA-7 OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVENUE. HE R ELIED ON THE ORDERS OF THE AO AND THE CIT(A). 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT ALL THE MAT ERIAL FACTS REGARDING THE CLAIM OF THE ASSESSEE WERE FILED BY THE ASSESSEE AT THE TIME OF ASSESSMENT ITSELF. THE DISALLOWANCE HAS BEEN MADE BY OBSERVIN G IN PARA 7.5 OF THE ASSESSMENT ORDER THAT THE TREATMENT GIVEN BY THE AS SESSEE TO THE TRANSACTION WAS NOT CORRECT AS THE EXPENDITURE WAS ALREADY INCU RRED AND ALSO PAID IN THE PRIOR PERIOD AND WAS LATE PAYMENT CHARGES AND DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION, AND THEREFORE, SUCH EXPENDITUR E CANNOT BE ALLOWED IN ITA NO.504, 505 AND 493/AHD/2010 -3- THE YEAR UNDER CONSIDERATION. WE FIND THAT THERE I S NO FINDING OF THE AO THAT THE ASSESSEE HAS NOT INCURRED THE EXPENDITURE IN QUESTION. THE BUSINESS PURPOSE OF THE EXPENDITURE OF RS.2,95,643/- COULD N OT BE DOUBTED BY THE REVENUE. MERELY BECAUSE SUCH EXPENDITURE COULD NOT BE ALLOWED IN THE YEAR UNDER CONSIDERATION AND THERE WAS HONEST DIFFE RENCE OF OPINION BETWEEN THE ASSESSEE AND THE DEPARTMENT REGARDING T HE ALLOWABILITY OF CERTAIN CLAIMS OF EXPENDITURE MADE BY THE ASSESSEE, IT COULD NOT BE SAID THAT THE ASSESSEE WAS GUILTY OF CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS OF INCOME. IN THESE FACTS OF THE CASE, WE HOLD THAT IT WAS NOT A FIT CASE FOR IMPOSITION OF PENALTY UNDER SECTION 27 1(1)(C) OF THE ACT, WHICH IS ACCORDINGLY CANCELLED. THE GROUNDS OF THE ASSES SEES APPEAL ARE ALLOWED. ITA NO.505/AHD/2011 (ASSESSEES APPEAL) 5. THE ONLY GROUND RAISED IN THIS APPEAL OF ASSESSE E READS AS UNDER: 1. THE LD.CIT(A) ERRED IN CONFIRMING LEVY OF PENAL TY U/S.271(1)(C) OF THE ACT. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT PENALTY OF RS.1,13,046/- WAS IMPOSED UNDER SECTION 271(1)(C) O F THE ACT ON ACCOUNT OF UNDER VALUATION OF THE CLOSING STOCK OF RAW-MATE RIAL. HE SUBMITTED THAT DIFFERENCE IN VALUATION OF CLOSING STOCK ON RAW-MAT ERIAL AROSE DUE TO NON- CONSIDERATION OF COST OF TRANSPORTATION AND OCTROI EXPENSES OF THE RAW- MATERIAL. HE SUBMITTED THAT IT IS A CASE OF ESTIMA TION OF INCOME AND DIFFERENCE OF OPINION REGARDING CONSIDERATION OF CO ST OF TRANSPORTATION AND OCTROI EXPENSES AS A PART OF VALUATION OF RAW-MATER IAL. HE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIO NER OF INCOME-TAX VS J. H. PARABIA (TRANSPORT) P. LTD. (GUJ), 284 ITR 3 61. THE LEARNED DR OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE WAS DUTY BOUND TO INCLU DE THE COST OF ITA NO.504, 505 AND 493/AHD/2010 -4- TRANSPORTATION AND OCTROI EXPENSES WHILE VALUING IT S CLOSING STOCK. HE RELIED ON THE ORDER OF THE AO AND THE CIT(A). 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ASSESSEE HAS F ILED DETAILS OF VALUATION OF CLOSING STOCK OF RAW-MATERIAL AND ON GOING THROU GH THE SAME, THE AO NOTICED THAT THE ASSESSEE HAS OMITTED TO CONSIDER T HE COST OF TRANSPORTATION CHARGES AND OCTROI EXPENSES WHILE EVALUATING THE CO ST OF RAW-MATERIAL. THE FACT THAT THE ASSESSEE HAS FILED THE DETAILS OF VAL UATION OF CLOSING STOCK ITSELF TAKES OUT THE CASE OF THE ASSESSEE FROM THE CLUTCHE S OF PENALTY PROVISION OF SECTION 271(1)(C) OF THE ACT. THE ASSESSEE HAS QUA NTITY OF CLOSING STOCK VALUED AT RS.3,21,31,066/- AND DIFFERENCE IN THE VA LUE THEREOF AMOUNTS TO RS.3,69,433/- ONLY. WE FIND THAT THE ASSESSEE HAS FILED AN EXPLANATION IN THIS BEHALF AND THERE IS NO MATERIAL TO SUGGEST THA T THE EXPLANATION OF THE ASSESSEE WAS NOT BONA FIDE . IN THESE FACTS OF THE CASE, WE HOLD THAT IT IS N OT A CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, WHICH IS ACCORDINGLY CANCELLED AND THE GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.493/AHD/2010 (REVENUES APPEAL) 8. THE ONLY GROUND OF THE REVENUES APPEAL READS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED U/S.271(1)(C) OF THE ACT OF RS.7,44,232 FOR FURNISHING OF INACCURATE PAR TICULARS OF INCOME IN RESPECT OF NON-DEDUCTION OF TDS AND NOT MAKING D ISALLOWANCE IN THE COMPUTATION OF TOTAL INCOME OF AN AMOUNT OF RS. 20,33,976 U/S.40(A)(IA) OF THE ACT. 9. THE LEARNED DR SUBMITTED THAT THE DISALLOWANCE O F RS.20.33 LAKHS WAS MADE UNDER SECTION 40(A)(IA) OF THE ACT AND DIS ALLOWANCE MADE HAS BECOME FINAL. HE SUBMITTED THAT THE AUDITOR HAS PO INTED OUT THE NON-TDS ON THE PART OF THE ASSESSEE AND STILL THE ASSESSEE DID NOT ADD THE AMOUNT IN ITA NO.504, 505 AND 493/AHD/2010 -5- QUESTION AS INCOME IN ITS HANDS. HE RELIED ON THE ORDER OF THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NEC ESSARY PARTICULARS WERE FILED ALONG WITH RETURN OF INCOME BEFORE THE AO. T HE MATERIAL FACTS OF THE CASE AND PARTICULARS OF THE INCOME WERE FILED IN TH E AUDIT REPORT FILED BY THE ASSESSEE ALONG WITH ITS RETURN OF INCOME. HE SUBMI TTED THAT THE DISALLOWANCE WAS HIGHLY TECHNICAL IN NATURE AND THE RE IS NO MALA FIDE ON THE PART OF THE ASSESSEE. HE RELIED ON THE ORDER OF TH E CIT(A). 11. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE P ERUSED THE ORDERS OF THE AO AND THE CIT(A). THE ASSESSEE HAS FILED N ECESSARY PARTICULARS OF ITS INCOME IN ITS AUDIT REPORT ALONG WITH RETURN OF INCOME. THE FACT OF NON- TDS ON THE DISPUTED AMOUNT WAS SPECIFICALLY MENTION ED BY THE AUDITOR IN THE AUDIT REPORT FILED BY THE ASSESSEE. IT IS A CA SE OF HONEST DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE DEPARTMENT REG ARDING ALLOWABILITY OR OTHERWISE OF CERTAIN AMOUNT. THE CIT(A) HAS OBSERV ED THAT THE DISALLOWANCE WAS TECHNICAL AND ALL PARTICULARS OF I NCOME WERE AVAILABLE IN THE AUDIT REPORT PART OF THE RETURN OF INCOME. THE ASSESSEE HAS FILED EXPLANATION, WHICH COULD NOT BE SAID TO BE NOT BONA FIDE . IN THESE FACTS OF THE CASE, WE HOLD THAT SINCE NECESSARY PARTICULARS WERE FILED BY THE ASSESSEE BEFORE THE AO AND WERE PART OF THE AUDIT REPORT AND DISALLOWANCE WAS TECHNICAL IN NATURE AND THE EXPLANATION OF THE ASSE SSEE WAS BONA FIDE , THE CIT(A) WAS JUSTIFIED IN CANCELING THE PENALTY IMPOS ED UNDER SECTION 271(1)(C) OF THE ACT AND THE GROUND OF THE REVENUE IS DISMISSED. 12. IN RESULT, THE ASSESSEES APPEALS IN ITA NO.504 /AHD/2010 AND 505/AHD/2010 ARE ALLOWED THE REVENUES APPEAL IN IT A NO.493/AHD/2010 IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !'# !'# !'# !'# /VICE-PRESIDENT