AZOFEN P. LTD, MUMBAI V. DCIT (OSD) RG 8(1), MUMBAI

ITA 5493/MUM/2013

• Counselvise Citation: 549319914 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-06-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 16-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEEVANLAL LAVIDIYA
• Assessee Lawyers: D Z PATEL
• Keywords: Bad and doubtful debts; Bonafide mistake

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI . . , . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER . / ITA NO.5493/MUM/2013 / ASSESSMENT YEAR 2005-06 AZOFEN PVT. LTD., 37/38, L.K. ARCADE, MAROL NAKA, MAROL, ANDHERI (EAST), MUMBAI 400059. / VS. THE DCIT (OSD), RG.8(1), AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 ./ ./ PAN/GIR NO. : AAACA 5098F ( / APPELLANT ) .. ( / RESPONDENT ) . / ITA NO.5491/MUM/2013 / ASSESSMENT YEAR 2005-06 THE DCIT 8(1), AAYKAR BHAVAN, ROOM NO.260A, 2 ND FLOOR, MK ROAD, MUMBAI 400 020 / VS. AZOFEN PVT. LTD., 37/38, L.K. ARCADE, MAROL NAKA, MAROL, ANDHERI (EAST), MUMBAI 400059. ./ ./ PAN/GIR NO. : AAACA 5098F ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI D.Z.PATEL REVENUE BY SHRI JEEVANLAL LAVIDIYA ' # $ / DATE OF HEARING : 08/06/2015 ' # $ / DATE OF PRONOUNCEMENT : 08/06/2015 / O R D E R PER I.P.BANSAL, J.M: THESE ARE CROSS APPEALS AND ARE DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-16, MUMBAI DATED 30/05/2013 FOR ASSESSMENT YEAR 2005-06. GROUNDS OF APPEAL READ AS UNDER: . / ITA NO.5493&5491/MUM/2013 / ASSESSMENT YEAR 2005-06 2 GROUNDS OF ASSESSEES APPEAL: 1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING PENALTY U/S 271(1)(C) ON DONATION OF RS.4,000/- WHICH WAS INADVERTENTLY LEFT OUT FROM THE COMPUTATI ON OF TOTAL INCOME. 2) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (APPEAL) ERRED IN NOT ADJUDICATING THE GROUND NO.5 READ WITH PARA 4 OF STATEMENT OF FACTS TO THE EFFECT THAT THERE WAS NO SATISFACTION RECORD ED BY THE A.O. FOR INITIATING PROCEEDINGS U/S. 271(1)(C) IN RESPECT OF THE IMPUGN ED ADDITION OF DONATION OF RS.4,000/ - WHICH IS FIRST AND FOREMOST CONDITION P RECEDENT TO INITIATING AND LEVYING PENALTY U/S. 271(1)(C) AND THEREFORE IN NOT HOLDING THE IMPUGNED ORDER AS BAD IN LAW, AB-INITIO ON THIS COUNT ALONE. 3) WITHOUT PREJUDICE TO THE ABOVE THE LEARNED CIT (APPEAL) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD DULY AGREED FOR ADDING BACK THE IMPUGNED AMOUNT OF DONATION WHEN POINTED OUT BY THE A.O. AND THAT THE SAID OMISSION WAS A BONAFIDE MISTAKE ON THE PART OF THE APPELLANT NOT INTENDING TO CONCEAL ANY PARTICULARS THEREOF. GROUNDS OF REVENUES APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE PENALTY UNDER SECTION 271(1 )(C) OF THE ACT LEVIED ON DISALLOWANCE OF WRI TE OFF OF DEBIT BALANCE OF RS 14,01,768/ - IN GOVERNMENT AGENCIES WITHOUT APPRECI ATING THAT THE ASSESSEE HAD UNILATERALLY WRITTEN OFF THE SAID DEPOSITS AND CLAI MED DEDUCTION OF THE SAME EVEN THOUGH THE SAID DEPOSITS ARE NOT BAD DEBTS AS ENVIS AGED IN SECTION 36(1 )(VII) R.W.S. 36(2) OF THE ACT AND HENCE NOT ALLOWABLE AS DEDUCTION BY MERE UNILATERAL WRITE OFF'. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE PENALTY UNDER SECTION 271 (1 )(C) OF THE ACT LEVIED ON DISALLOWANCE OF WR ITE OFF OF DEBIT BALANCES OF RS 14,01,768/ - IN GOVERNMENT AGENCIES WITHOUT APPRECI ATING THAT THE ASSESSEE FAILED TO PROVE WITH EVIDENCE THAT (A) THE DEPOSITS WITH THE GOVERNMENT AGENCIES HAD BECOME IRRECOVERABLE DURING THE RELEVANT PREVIO US YEAR, (B) THE ASSESSEE'S CLAIM HAD BEEN REJECTED BY THE CONCERNED AUTHORITIE S AND (C) THE DEPOSITS ARE IMPOSSIBLE TO RECOVER AS OBSERVED BY THE HON' BLE I TAT IN PARA 10 OF ITS ORDER DATED 29-07-2011'. 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE PENALTY UNDER SECTION 271(1 )(C) OF THE ACT LEVIED ON DISALLOWANCE OF WRI TE OFF OF DEBIT BALANCES OF RS 14,01,768/- IN GOVERNMENT AGENCIES WITHOUT APPRECIA TING THAT IN THE ASSESSMENT PROCEEDINGS, APPELLATE PROCEEDINGS BEFORE THE CIT(A ) AND BEFORE THE ITAT AND IN THE PENALTY PROCEEDINGS, THE ASSESSEE FAILED TO PRO VE THAT THE SAID AMOUNTS ARE NOT RECOVERABLE AT ALL, THEREBY FAILING TO REBUT TH E PRESUMPTION IN EXPLANATION 1 OF SECTION 271(1 )(C) OF THE ACT.' . / ITA NO.5493&5491/MUM/2013 / ASSESSMENT YEAR 2005-06 3 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INVES TMENT AND DEVELOPMENT OF REAL ESTATE AND BUILDERS. THE ASSESSEE WRITTEN OFF THE FOLLOWING AMOUNTS AND CLAIMED THE SAME AS EXPENDITURE: I) MSEB DEPOSIT RS. 8,45,635/- II)THANE MUNICIPAL CORPORATION WATER DEPOSIT RS. 4,65,060/- III)THANE MUNICIPAL CORPORATION TREE CUTTING DEPOS IT RS. 25,500/- IV)THANE MUNICIPAL CORPORATION-RENT DEPOSIT RS. 5,700/- V) MIDC- SECURITY DEPOSIT RS. 60,800/- VI) BEST RS. 5,580/- VII) EXCESS PROVISION (-) RS. 6,507/- ------------------- RS. 14,01,768 /- 3. THE AO DID NOT ALLOW SUCH CLAIM OF THE ASSESSEE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE ADDITION WAS SUBJ ECT TO FURTHER APPEALS AND ULTIMATELY THE DISALLOWANCE WAS UPHELD BY THE TRIBU NAL AS PER ORDER DATED 29/07/2011 PASSED IN ITA NO.3810/MUM/2010, COPY OF THE SAID ORDER WAS PLACED ON OUR RECORD AND THE OBSERVATIONS OF THE TR IBUNAL WHILE UPHOLDING THE ADDITION AS FOUND IN PARA -10 ARE AS UNDER: 10. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNS EL FOR THE ASSESSEE, WHO SUBMITTED THAT THE LOSS IN QUESTION IS TRADING LOSS AND SHOULD BE ALLOWED AS A DEDUCTION. WE HAVE CONSIDERED HIS SUBMISSION AND A RE OF THE VIEW THAT THE LOSS IN QUESTION IS NO DOUBT A TRADING LOSS BECAUSE IT I S INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. BUT THE QUESTION IS WHETHER THE LOSS CAN BE SAID TO HAVE ACCRUED TO THE ASSESSEE. AS RIGHTLY HELD BY THE REVENUE AUTHO RITIES THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE CLAIM OF THE ASSESSEE HAS B EEN REJECTED BY THE VARIOUS AUTHORITIES. THE AMOUNTS WERE DUE FROM VARIOUS GOV ERNMENT BODIES. THE ASSESSEE CANNOT, THEREFORE, PLEAD IMPOSSIBILITY OF RECOVERY. THE ASSESSEE HAS ALSO NOT SUBSTANTIATED THAT THE AMOUNTS ARE NOT REC OVERABLE AT ALL. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE REVENUE A UTHORITIES ARE JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. WE MAY AL SO ADD THAT GROUND NO.3 RAISED BY ASSESSEE IS MISCONCEIVED BECAUSE THE AMOU NT IN QUESTION CANNOT BE SAID TO BE A DEBT OWED TO THE ASSESSEE AND IT DOES NOT ARISE OUT OF TRADING/BUSINESS TRANSACTION. GROUND NO.2 & 3 ARE ACCORDINGLY DISMISSED. 4. IT IS ON THIS ADDITION THE IMPUGNED PENALTY HAS BEEN LEVIED, THE DELETION OF WHICH IS CONTESTED BY THE REVENUE IN THE IMPUGNE D APPEAL. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY CONSIDERED. THE IMPUGNED PAYMENT WHICH HAVE BEEN D ISALLOWED ARE MADE BY . / ITA NO.5493&5491/MUM/2013 / ASSESSMENT YEAR 2005-06 4 THE ASSESSEE TO THE AUTHORITIES MENTIONED IN THE DE TAILS.. THE TRIBUNAL WHILE DECIDING THE QUANTUM HAS HELD THAT THE AMOUNT CLA IMED BY THE ASSESSEE IS NO DOUBT A TRADING LOSS BECAUSE IT IS INCIDENTAL TO TH E BUSINESS OF THE ASSESSEE, BUT ONLY ON THE GROUND THAT THIS LOSS DID NOT ACCRU E TO THE ASSESSEE IN THE RELEVANT YEAR, THE ADDITION WAS UPHELD. NEITHER TH E GENUINENESS OF THE PAYMENT BY THE ASSESSEE IS DOUBTED NOR THE WRITE O FF ACTION OF THE ASSESSEE IS DOUBTED. THESE AMOUNTS HAVE BEEN CLAIMED ON THE G ROUND THAT THESE WERE PAID LONG BACK AND IN THE ABSENCE OF ORIGINAL RECEIPTS, IT COULD NOT CLAIM REFUND OF THESE AMOUNTS. THIS MAY BE GOOD GROUND FOR UPHOLDING THE ADDITION BUT CANNOT BE A GOOD GROUND FOR UPHOLDING THE LEV Y OF CONCEALMENT PENALTY. THEREFORE, WE ARE OF THE OPINION THAT SUSTENANCE OF IMPUGNED PENALTY IS CONTRARY TO THE LAW AND HAS RIGHTLY BEEN DELETED BY LD. CIT(A). WE DECLINE TO INTERFERE IN THE RELIEF GRANTED BY THE LD. CIT(A) A ND REVENUES APPEAL IS DISMISSED. 6. COMING TO THE APPEAL FILED BY THE ASSESSEE, THE ASSESSEE CLAIMED AN AMOUNT OF RS.4000/- ON ACCOUNT OF DONATION, WHICH W AS DISALLOWED. FOR SUCH A SMALL DISALLOWANCE CONCEALMENT PENALTY CANN OT BE LEVIED. THIS MAY BE A CLAIM MADE BY THE ASSESSEE BY OVERSIGHT FOR WHICH CONCEALMENT PENALTY SHOULD NOT BE LEVIED. WE, THEREFORE, AFTER HEARING BOTH THE PARTIES DELETE THE PENALTY AND ALLOW THE APPEAL FILED BY THE ASSESSEE. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/06/201 5 ' )* + , 08/06/2015 ' SD/- SD/ - ( . / D.KARUNAKARA RAO ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ) MUMBAI; + DATED 08/06/2015 . / ITA NO.5493&5491/MUM/2013 / ASSESSMENT YEAR 2005-06 5 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. /# ( ) / THE CIT(A)- 4. /# / CIT 5. 01 #23 , $ 23 , ) / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, 0# # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ) / ITAT, MUMBAI . . ./ VM , SR. PS