LATE SHRI DAULATRAM BHERUMAL PAHLAJANI, MUMBAI V. ADDL CIT RG 14(1), MUMBAI

ITA 5470/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3474 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 28-08-2014
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Bad and doubtful debts
• Section: 37(1)

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A. NO.5470/M/2014 (ASSESSMENT YEAR: 2009 - 2010 ) LATE SHRI DAULATRAM BHERUMAL PAHLAJANI, BHERUMAL BHAVAN, MOGAL LANE, MAHIM (W), MUMBAI 400021. / VS. THE ADDL. CIT, RANGE - 14(1), EARNEST HOUSE, 5 TH FLOOR, NARIMAN POINT, MUMBAI - 21. ./ PAN : A AEPP3637Q ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NISHIT GANDHI / RESPONDENT BY : SHRI B.S. BIST, SR. DR / DATE OF HEARING : 22.03 .2016 / DATE OF PRONOUNCEMENT : 22 .03.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 28.8.2014 IS AGAINST THE ORDER OF THE CIT (A) - 25, MUMBAI DATED 1.7.2014 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1.1. THE LD CIT (A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF THE AO LEVYING PENALTY OF RS. 2,46,575/ - U/S 271(1)(C) OF THE ACT ON UNJUSTIFIABLE AND UNTENABLE GROUNDS. 1.2. THE LD CIT (A) FAILED TO APPRECIATE THAT THE APPELLANT DID NOT COMMIT ANY DEFAULT IN TERMS OF SECTION 271(1)(C) OF THE ACT AND HENCE, THE LEVY OF PENALTY BY THE ASSESSING OFFICER WAS UNJUSTIFIED. 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS A CASE WHERE THE AO LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT AND THE SAME WAS CONFIRMED BY THE CIT (A). DRAWING OUR ATTENTION TO THE FACTS OF THE CASE, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT IN THIS CASE THE PENALTY LEVIED RELATES TO THE DISALLOWANCE OF BAD DEBTS OF RS. 7,25,432/ - . HE FURTHER SUBMITTED THAT A SSESSEE DECIDED NOT TO CONTEST AGAINST THE AOS DECISION IN DISALLOWING THE SAID AMOUNT OF BAD DEBTS BEFORE THE TRIBUNAL DESPITE THE DISMISSAL OF ASSESSEES APPEAL BY THE CIT (A). IN THIS 2 REGARD, IT IS BROUGHT TO OUR NOTICE THAT THERE IS A DISPUTE ABOUT T HE ASSESSEES NATURE OF BUSINESS ACTIVITY. IT IS THE CLAIM OF THE ASSESSEE THAT HE IS ENGAGED IN THE BUSINESS OF BILL DISCOUNTING AND THE SAID BAD DEBTS AROSE DURING THE COURSE OF THE BUSINESS ACTIVITY. HOWEVER, AO DID NOT APPRECIATE THE ABOVE AND DENIED THE CLAIM OF BAD DEBTS U/S 37(1) OF THE ACT. ON THIS DEBATABLE ISSUE, PENALTY WAS LEVIED. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. AFTER HEARING BOTH THE PARTI ES, WE FIND, THE ALLOWABILITY OF BAD DEBTS GOES BACK TO THE NATURE THE BUSINESS ACTIVITY OF THE ASSESSEE. HAD THE AO BEEN ACCEPTED THE ASSESSEES CLAIM REGARDING THE NATURE OF THE ASSESSEES BUSINESS ACTIVITY, THE CLAIM WOULD HAVE BEEN RIGHTLY ALLOWED. I N THAT CASE, THE QUESTION OF LEVY OF PENALTY SHOULD NOT HAVE ARISEN. IN OUR OPINION, THE REVENUE OFFICERS FOUND THE FULL DISCLOSURE OF THE FACTS BY THE ASSESSEE IN THE RETURN OF INCOME. CONSIDERING THE DEBATABILITY ON THE NATURE OF THE BUSINESS ACTIVITY OF THE ASSESSEE, WE ARE OF THE OPINION, THIS IS NOT A FIT CASE FOR LEVY OF PENALTY. IN ANY CASE, ASSESSING OFFICER FAILED TO GIVE CATEGORICAL FINDING AS EVIDENT FROM THE NOTICE ISSUED U/S 274 DATED 23.12.2011. ON THE SAID NOTICE, THE COLUMNS MEANT FOR M ENTIONING CLEAR DEFAULT OF THE ASSESSEE IE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. AO IS UNDER OBLIGATION TO STRIKE OFF INAPPLICABLE LIMB OF CLAUSE (C) OF NOTICE U/S 271(1)(C) OF THE ACT, WHICH HE HAS NOT DONE ON THE SAID NOTICE . THE PROPOSITION LAID DOWN IN THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY [2013] 359 ITR 565 (KARN.) WILL ALSO HELP THE ASSESSEE. FOR ALL THE ABOVE REASONS, WE FIND, THE PENALTY LEVIED BY T HE AO AND CONFIRMED BY THE CIT (A) IS NOT LEGALLY SUSTAINABLE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 22 ND MARCH, 2016. SD/ - SD/ - ( PAWAN SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 22 .3.2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 3 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI