M/S. SABRA IMPEX LTD, MUMBAI V. THE ITO WD 2(3)(2), MUMBAI

ITA 5344/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55331 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 11-07-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 25-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B JAYA KUMAR
• Keywords: Wrong claim

Judgement Text

ITA NO. 5344 / MUM/ 20 08 ASSESSMENT YEAR: 2002-03 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) AND SHRI VIJAY PAL RAO (JUDICIAL MEMBER) ITA NO. 5344/MUM/2008 ASSESSMENT YEAR: 2002-03 SABARA IMPEX LIMITED ....APPELLANT C/O G P MEHTA & CO 807 TULSIANI CHAMBERS 212, NARIMAN POINT, MUMBAI 400 021 [PAN : AACS6217L] VS. INCOME TAX OFFICER WARD 2 (3) (2), MUMBAI RESPONDENT APPEARANCES: G P MEHTA , FOR THE APPELLANT B JAYAKUMAR , FOR THE RESPONDENT ORDER RESERVED ON : JULY 11, 2011 ORDER PRONOUNCED ON : OCTOBER 5 , 2011 O R D E R PER PRAMOD KUMAR: 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER DATED 27 TH JUNE 2008 PASSED BY THE CIT(A) IN THE MATTER OF AS SESSMENT UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2002- 03. 2. LEARNED REPRESENTATIVES AGREE THAT, AFTER GIVING EFFECT TO THE ORDER PASSED BY A COORDINATE BENCH OF THIS TRIBUNAL IN RESPECT O F QUANTUM PROCEEDINGS OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR, THE PENALTY SURVIVES IN RESPECT OF (I) SUNDRY BALANCES WRITTEN OFF AMOUNTING TO RS 60,54,678, (II) INCOME TAX PAID AMOUNTING TO RS 5,446, AND (III) LONG TERM CAP ITAL GAIN AMOUNTING TO RS 2,37,29,563. ITA NO. 5344 / MUM/ 20 08 ASSESSMENT YEAR: 2002-03 PAGE 2 OF 5 3. BRIEFLY STATED, RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE WROTE BACK SUNDRY CREDI T BALANCES AMOUNTING TO RS 2,97,58,682 ON THE GROUND THAT, IN THE OPINION OF T HE MANAGEMENT, THESE AMOUNTS WERE NO LONGER PAYABLE BY THE ASSESSEE. THE ASSESSEE ALSO WROTE OFF S 3,58,13,541 DUE FROM VARIOUS PARTIES, AS THE SAID D EBIT BALANCES WERE SAID TO BE OUTSTANDING FOR MORE THAN 7 -8 YEARS. A NET DEB IT BALANCE OF RS 60,54,679 WAS CHARGED TO PROFIT AND LOSS ACCOUNT. WHEN AO RE QUISITIONED COMPLETE DETAILS IN RESPECT OF THIS CLAIM, THE ASSESSEE SUBM ITTED THAT THE ADDRESSES OF THE PARTIES ARE NOT AVAILABLE AS THESE AMOUNTS WERE ONL Y BROUGHT FORWARDS FOR LAST 7-8 YEARS AND THE RELATED OLD RECORDS WERE NOT AVAI LABLE. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAS NOT EVEN GOT HI S ACCOUNTS AUDITED AND AS SUCH GENUINENESS OF THE BOOKS OF ACCOUNTS PREPARED BY THE ASSESSEE ITSELF IS IN DOUBT. THE NET AMOUNT WAS THUS DISALLOWED AND ADDE D BACK TO INCOME. THIS ADDITION HAS BEEN SUSTAINED IN APPEALS BEFORE THE C OMMISSIONER AS ALSO THE TRIBUNAL, FOR WANT OF COMPLETE DETAILS. THE MATTER DID NOT REST WITH DISALLOWANCE. AS NOTED BY THE ASSESSING OFFICER IN THE IMPUGNED PENALTY ORDER, AS THIS ACT OF THE ASSESSEE AMOUNTS TO FILING OF I NACCURATE PARTICULARS OF INCOME, PENALTY PROCEEDINGS WERE INITIATED AND ASSE SSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE PENALTY SHOULD NOT BE IMPOSED. THE ASSESSEES REPLY WAS THAT THE AMOUNTS WERE OUTSTANDING FOR LONG TIME AND , THEREFORE, WRITTEN OFF, BUT THE ASSESSEE WAS NOT ABLE TO FURNISH THE COMPLETE P ARTICULARS FOR WRITE OFF. IT WAS EMPHASIZED BY THE ASSESSEE THAT THE AMOUNTS WER E BROUGHT FORWARD FROM EARLIER YEARS AND IT WAS NOT EVEN THE CASE OF THE R EVENUE THAT WRITE OFF WAS FALSE AND THAT THERE ARE NO INDEPENDENT FINDINGS OF THE ASSESSING OFFICER AGAINST THE ASSESSEE. THE ASSESSING OFFICER REJECTE D THE SAME AND IMPOSED THE PENALTY BY OBSERVING AS FOLLOWS: THE SUBMISSION OF THE ASSESSEE IS CONSIDERED CAREFU LLY. HOWEVER, THE ASSESSEE HAS NOT SUBMITTED ANY COGENT EXPLANATION S UBSTANTIATED BY PROOF THAT IS ACCEPTABLE AS PER THE LAW. FURTHER, T HE ASSESSEE HAS NOT EVEN GOT ITS ACCOUNTS AUDITED, HENCE GENUINENESS OF ACCOUNTS ITSELF IS IN DOUBT. HENCE I AM SATISFIED THAT IT IS A FIT CAS E FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, AND PENALTY IS LEVIED ITA NO. 5344 / MUM/ 20 08 ASSESSMENT YEAR: 2002-03 PAGE 3 OF 5 ON ACCOUNT OF WRONGFUL WRITE OFF OF SUNDRY BALANCES . THE TAX ON THIS DISALLOWANCE COMES TO RS 21,61,519. THE PENALTY, I .E. RS 21,61,519 UNDER SECTION 271(1)(C) @ 100% OF TAX IS LEVIED. 4. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) REJECTED THE SU BMISSIONS OF THE ASSESSEE AND CONCLUDED THAT EVIDENTLY, THE APPELLANT HAS THUS CLAIMED AN EXPENDITURE BY WAY OF A WRITE OFF, BUT GENUINENESS OF WHICH COULD NOT BE PROVED. TO THIS EXTENT, THEREFORE, THE APPELLANT HA S FURNISHED INACCURATE PARTICULARS OF INCOME BY WRONGFULLY CLAIMING A DEDU CTION WHICH IS OTHERWISE NOT ADMISSIBLE . THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 5. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE FIND THAT THE PENALTY HAS BEEN LEVIED BY THE ASSESSING OFFICER, AND UPHELD BY THE COMMISSIONER (APPEALS), ON THE SHORT GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME BY M AKING A WRONG CLAIM FOR WRITE OFF OF DUES, BUT THEN, AT THIS STAGE WE MUST TAKE NOTE OF HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS LTD (322 ITR 158), WHEREIN THEIR LORDSHIPS WERE IN SEISIN OF THE QUEST ION WHETHER 'IN THIS CASE, AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN INACCUR ATE PARTICULARS. UPON ANALYSING THE FACTS OF THE CASE AND THAT THE ASSESS EE HAS MADE A CLAIM WHICH WAS NOT ADMISSIBLE IN LAW, THEIR LORDSHIPS NOTED TH AT 'IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE I N ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE' AND ADDED THAT 'SU CH BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT' AND THAT 'A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING INCOME OF THE ASSESSEE'. KEEPING IN VIEW OF THE FACT THAT IN THE PRESENT CASE THE PENALTY IS LEVIED FOR FURNISHING OF INACCURATE PART ICULARS, AND THAT THERE IS NOTHING TO INDICATE INCORRECTNESS OF PARTICULARS BE YOND UNACCEPTABILITY OF ITA NO. 5344 / MUM/ 20 08 ASSESSMENT YEAR: 2002-03 PAGE 4 OF 5 CLAIM OF DEDUCTION ON THE FACTS OF THIS CASE, WE AR E OF THE CONSIDERED VIEW THAT THE IMPUGNED PENALTY, TO THE EXTENT RELATABLE TO WR ITE OFF OF RS 60,54,678, CANNOT BE SUSTAINED. WE, THEREFORE, DELETE THE IMPU GNED PENALTY FOR THIS SHORT REASON AND SEE NO NEED TO GO ANY DEEPER INTO THE FA CTS OF THIS CASE. 6. AS REGARDS THE PAYMENT OF INCOME TAX IS CONCERNE D, NO EXPLANATION IS OFFERED AND THE PENALTY MUST BE CONFIRMED TO THAT E XTENT. 7. THAT LEAVES US WITH THE PENALTY IN RESPECT OF LO NG TERM CAPITAL GAIN OF RS 2,37,29,563. SO FAR AS THIS ADDITION IS CONCERNED, THE RELATED MATERIAL FACTS ARE LIKE THIS. DURING THE RELEVANT PREVIOUS YEAR, THE A SSESSEE DISCLOSED RS 2,82,00,000 AS PROFIT ON SALE OF INVESTMENTS, AND, EVEN AFTER CONSIDERING THE SAME, RETURNED TOTAL LOSS OF RS 93,50,56,170. IN T HE COURSE OF THE ASSESSMENT PROCEEDINGS, IT APPEARS THAT THIS AMOUNT OF RS 2,82 ,00,000 WAS EXCLUDED FROM THE TOTAL INCOME, AND AN AMOUNT OF RS 2,37,29,563, BEING CAPITAL GAINS COMPUTED UNDER THE INCOME TAX ACT AND TAXABLE AT LO WER RATE OF 10%, WERE INCLUDED. THE ASSESSEES CONTENTION IS THAT, AS A RESULT OF THIS ADJUSTMENT, THE RETURNED LOSS WAS INFACT UNDERSTATED BY RS 44,70,4 37 VIS--VIS THE LOSS STATED ORIGINALLY. THIS ASPECT OF THE MATTER HAS NOT BEEN EXAMINED BY ANY OF THE AUTHORITIES BELOW BY WAY OF A SPEAKING ORDER, AND I T IS NOT CLEAR AS TO HOW SUCH AN ADJUSTMENT CAN BE VIEWED AS CONCEALMENT OF INCOM E. AN ADJUSTMENT ON ACCOUNT OF WHICH THE LOSS IS INFACT UNDERSTATED CAN NOT, AS IT APPEARS TO US, BE TREATED AS CONCEALMENT OF INCOME. 8. LEARNED DEPARTMENTAL REPRESENTATIVE HAS, HOWEVER , POINTED OUT THAT THE NEITHER THE ABOVE ASPECT OF THE MATTER HAS BEEN POI NTED BY THE ASSESSEE SPECIFICALLY AT ANY STAGE, NOR EXAMINED BY ANY OF T HE AUTHORITIES BELOW, AND, THEREFORE, THE MATTER CAN AT BEST BE REMITTED TO TH E FILE OF THE CIT(A) FOR FRESH EXAMINATION ON THIS ISSUE. 9. HAVING CONSIDERED RIVAL SUBMISSIONS AND HAVING P ERUSED THE MATERIAL ON ITA NO. 5344 / MUM/ 20 08 ASSESSMENT YEAR: 2002-03 PAGE 5 OF 5 RECORD, WE ARE OF THE CONSIDERED VIEW THAT SO FAR A S PENALTY RELATABLE TO LONG TERM CAPITAL GAIN OF RS 2,37,29,563 IS CONCERNED, T HE MATTER DESERVES TO BE REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR F RESH ADJUDICATION IN THE LIGHT OF OUR ABOVE OBSERVATIONS, IN ACCORDANCE WITH THE LAW AND BY WAY OF A SPEAKING ORDER. THE ASSESSING OFFICER IS DIRECTED TO GIVE A FAIR OPPORTUNITY OF HEARING TO THE ASSESSEE SO AS TO ENABLE HIM TO PLACE ALL THE R ELATED FACTS AND SUBMISSIONS FOR CONSIDERATIONS. IN CASE, AS A RESULT OF THE REL ATED ADJUSTMENT, THERE WAS NO CONCEALMENT OF INCOME, BUT ONLY CHANGE OF HEAD, CLE ARLY THERE CANNOT BE AN OCCASION TO IMPOSE CONCEALMENT PENALTY UNDER SECTIO N 271(1)(C). WITH THESE DIRECTIONS, THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION DE NOVO. 10. SO FAR AS PENALTY IN RESPECT OF LONG TERM CAPIT AL GAINS OF RS 2,37,29,563 IS CONCERNED, THE GRIEVANCE IS UPHELD FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 5 TH DAY OF OCTOBER, 2011. SD/- SD/- (VIJAY PAL RAO ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 5 TH DAY OF OCTOBER, 2011 . COPY FORWARDED 1. THE APPELLANT, 2. THE RESPONDENT 3. COMMISSIONER , MUMBAI 4. DEPARTMENTAL REPRESENTATIVE, A BENCH, MUMBAI 5. GUARD FILE TRUE COP Y BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI