DCIT, New Delhi V. M/s. Wasan Exports Pvt. Ltd., New Delhi

ITA 5956/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2007 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Assessee Lawyers: BARUN KUMAR
• Section: 271(1)(c); 36 (1) (iii)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DLEHI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 5956/DEL/2015 ASSESSMENT YEAR: 2008-09 DY. CIT, CIRCLE-27(1), NEW DELHI VS. M/S WASAN EXPORTS PVT. LTD. 5, ARADHANA ENCLAVE, R.K. PURAM, RING ROAD, NEW DELHI-110066 PAN:AAACW 0159P (APPLICANT) (RESPONDENT) APPELLANT BY: SH . JAGDISH SINGH, SR. DR RESPONDENT BY: SH. B ARUN KUMAR, CA DATE OF HEARING: 12/3/2020 DATE OF ORDER : 20/3/2020 ORDER PER K. NARASIMHA CHARY, J.M. CHALLENGING THE ORDER DATED 20/08/2015 IN APPEA L NO. 93/14- 15/CIT(A)-22, NEW DELHI PASSED BY THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS)-22, NEW DELHI (CIT(A)), FOR ASSESSM ENT YEAR: 2008-09 IN THE CASE OF M/S WASON EXPORTS PRIVATE LIMITED (THE ASSESSEE), DELETING THE PENALTY LEVIED UNDER SECTION 271(1)( C ) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) IN RESPECT OF THE ADDITION TO THE TUNE OF RS.1,64, 2 ITA NO.5956/DEL/2015 ASST. YEAR:2008-09 57,825/- AS REMISSION OF LIABILITY UNDER SECTION 41 (1) OF THE ACT, REVENUE PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF EXPORT OF LEATHER, LEATHER SHOES , LEATHER SHOE UPPERS ETC AND WAS MAINLY EXPORTING THE LEATHER FOOTWEAR T O USSR, BUT WITH THE COLLAPSE OF USSR ITS BUSINESS AFFECTED SEVERELY AND THERE EXPORT RECEIVABLES GOT STUCK UP AND DUE TO NON-COOPERATION OF BANKS THEIR RECORDS BECAME NON-PERFORMING ASSETS IN 1996. IN RE SPECT OF TWO LIABILITIES EXISTED IN THEIR BALANCE SHEET AT THE B EGINNING OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR: 2008-09, NAME LY, RS.3,62,20, 030/- AS SECURED LOANS AND RS.72,14,801/-AS INTEREST PAYA BLE IN CURRENT LIBERTIES, THE ASSESSEE GOT ONE-TIME SETTLEMENT WIT H THE BANKER SET RS.200,00,000/-AGAINST BOTH THE LIABILITIES AND ACC ORDINGLY RS.72,14,801/- BEING TREATED AS INCOME AND ACCESS OF SECURED LOAN FOR RS. 1 64, 57, 837/- BEING REMISSION OF BEAUTY TRANSFER TO GENERAL RESER VES. LEARNED ASSESSING OFFICER HOWEVER, TREATED THE CAPITAL REMISSION OF L IABILITY AS REVENUE INCOME AND INCLUDED IT IN THE TAXABLE INCOME AND AL SO LEVIED PENALTY IN THAT RESPECT TO THE TUNE OF RS. 52, 99, 070/-UNDER SECTION 271(1)(C) OF THE ACT. 3. AGGRIEVED BY SUCH LEVY OF PENALTY, ASSESSEE PREF ERRED APPEAL BEFORE THE LD. CIT(A) AND CONTENDED THAT THERE HAS NOT BEEN ANY SUPPRESSION OF MATERIAL FACTS ON THE ISSUE AND THE ADDITION WAS MADE ON THE BASIS OF INFORMATION AVAILABLE IN THE AUDITED A CCOUNTS FILED AND 3 ITA NO.5956/DEL/2015 ASST. YEAR:2008-09 FURTHER THERE IS NO EVIDENCE OF JUDICIAL OPINION ON THE ISSUES INVOLVED IN THIS MATTER. IT WAS FURTHER CONTENDED THAT THAT IS NOT A CASE WHERE ANY MATERIAL FACT WAS NOT DISCLOSED BEFORE THE ASSESSIN G OFFICER, BUT INASMUCH AS THE ISSUE INVOLVED WAS A DEBATABLE ISSU E, THE BONA FIDES OF THE ASSESSEE CANNOT BE DOUBTED AND THEREFORE, THE P ENALTY CANNOT BE SUSTAINED. 4. ON A PERUSAL OF THE ENTIRE MATERIAL BEFORE HIM, IN THE LIGHT OF THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, LD. CIT (A) REACHED A CONCLUSION THAT THE FULL MATERIAL FACTS WERE DISCLO SED BEFORE THE ASSESSING OFFICER AND THE ISSUE INVOLVED WAS A DEBATABLE ISSU E AND, THEREFORE, THE BONA FIDES OF THE ASSESSEE CANNOT BE DOUBTED. LD. C IT(A), THEREFORE, DELETED THE PENALTY LEVIED IN RESPECT OF THE ADDITI ON OF RS.1, 64,57, 825/-. 5. IT IS THE SUBMISSION OF THE LD. DR THAT THE WRON G CLAIM MADE BY THE ASSESSEE AMOUNTS TO THE CONCEALMENT OF INCOME AND T HE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED IN RESPECT OF SUCH A N ACT OF THE ASSESSEE. HE MADE STRONG RELIANCE ON THE PENALTY ORDER. ACCOR DING TO THE LD. DR, THE ASSESSEE GOT SETTLEMENT FROM THE BANK IN WHICH BANK INTEREST OF RS.72,14,801/-WAS WAYWARD APART FROM FAVOUR OF THE PRINCIPAL TO THE TUNE OF RS. 1, 64, 57, 825/-AND THE ASSESSEE HAD DE CLARED ONLY INTEREST ABORTION AS REMISSION UNDER SECTION 41 (1) OF THE A CT AND NOT INCLUDED THE WAIVER OF LIABILITY OF BANK LOAN OF RS. 1, 64, 57, 825/-TOWARDS INCOME UNDER SECTION 41(1) OF THE ACT BUT DIRECTLY CREDITE D AMOUNT TO THE GENERAL RESERVES AND SINCE THERE IS NO SEGREGATION BETWEEN THE REVENUE 4 ITA NO.5956/DEL/2015 ASST. YEAR:2008-09 LIABLE TENDER CAPITAL LIABILITY, THE REMISSION OF L IBELLED IN RESPECT OF THE BANK LOAN AND BANK INTEREST ARE REQUIRED TO BE TREA TED AS INCOME UNDER SECTION 41(1) OF THE ACT. ON THIS PREMISE HE JUSTIF IED THE ORDER OF THE PENALTY AND SOUGHT TO THE FIRST APPELLATE ORDER TO BE SET-ASIDE. 6. PER CONTRA, IT IS THE SUBMISSION ON BEHALF OF TH E ASSESSEE THAT THERE IS NO SUPPRESSION OF ANY MATERIAL FACTS IN THIS RES PECT AND THE ADDITION WAS MADE INSOFAR AS THE SUM OF RS. 1, 64, 57, 825/- IS CONCERNED, ON THE BASIS OF INFORMATION AVAILABLE IN THE AUDITED ACCOU NTS AND THEREFORE, THE CASE ON THIS ASPECT IS NOT COVERED BY EITHER OF THE LIMBS OF SECTION 271(1)( C ) OF THE ACT OF THE ACT. HE PLACED RELIAN CE ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD (2010) 189 TAXMAN 322 (SC) AND ALSO THE ADDITION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR. CIT VS. CONTROL AND SWITCHGEAR CONTRACTORS LIMITED (2016) 66 TAXMANN.COM 345 (DELH I). 7. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. ISSUE, INSOFAR AS THE DELETION OF PENALTY AT ATTRIBUTABLE TO THE ADDITION TO THE TUNE OF RS.1,64 ,57, 835/-IS CONCERNED, SUCH AN ADDITION WAS CLAIMED AS A REMISSION OF CAPI TAL LIABILITY BY THE ASSESSEE AND, THEREFORE, WAS TRANSFERRED TO GENERAL RESERVE BY THE ASSESSEE. THE FACT REMAINS THAT THE ASSESSEE HAD OB TAINED WAR DRAFT FACILITY AND A PACKING CREDIT FROM STATE BANK OF BE CRORE AND REPORT; THAT THERE IS AN OUTSTANDING AMOUNT PAYABLE TO THE BANK IN RESPECT OF BOTH THESE ACCOUNTS; THAT AS A SETTLEMENT WITH THE BANK AND INTEREST OF 5 ITA NO.5956/DEL/2015 ASST. YEAR:2008-09 RS.72,14, 801/-WAS WE WOULDNT APART FROM THE WAIVE R OF THE PRINCE WILL AMOUNT OF RS. 1, 64, 57, 825/-; AND THAT THE ASSESS EE OFFERED THE AMOUNT OF RS. 72, 14, 801/-BEING THE REMISSION OF INTEREST LIABILITY AS A INCOME FOR TAX UNDER SECTION 41 (1) OF THE ACT, WHEREAS THE AM OUNT OF RS.1,64, 57, 825/- WAS TAKEN TO GENERAL RESERVE AND CLAIMED AS R EMISSION OF CAPITAL LIABILITY. 8. ON A CAREFUL CONSIDERATION OF THE SUBMISSIONS MA DE ON BEHALF OF THE ASSESSEE THAT THE ISSUE WAS A DEBATABLE ONE, BU T SET AT A REST BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAHINDRA AND MAHINDRA (2018) 404 ITR 1 , IN SUCH CASE THE HONBLE APEX COURT HELD THAT SEC TION 28(IV) OF THE IT ACT DOES NOT APPLY ON THE PRESENT CASE SINCE THE RECEIPTS OF RS 57,74,064/- ARE IN THE NATURE OF CASH OR MONE Y, AND THAT SECTION 41(1) OF THE IT ACT DOES NOT APPLY SINCE WAIVER OF LOAN DOES NOT AMOUNT TO CESSATION OF TRADING LIABILITY. IT IS A MATTER O F RECORD THAT THE RESPONDENT HAS NOT CLAIMED ANY DEDUCTION UNDER SECT ION 36 (1) (III) OF THE IT ACT QUA THE PAYMENT OF INTEREST IN ANY PREVIOUS YEAR.TO THI S SET OF FACTS, THE DECISION OF THE HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF CONTROL AND SWITCHGEAR CONTRACTORS LIMITED (SUPRA) IS APPLICABLE ON ITS FOURS, AND IN SUCH CASE THE HONBLE DELHI HIGH COUR T HELD THAT WHEN AN ISSUE IS DEBATABLE OBLIGATION OF 271(1)( C ) OF THE ACT IS IMPERMISSIBLE. 9. WE ARE, THEREFORE, IN AGREEMENT WITH THE FINDING S OF THE LD. CIT(A) THAT IN THIS MATTER NO MATERIAL FACT WAS CONCEALED BEFORE THE ASSESSING OFFICER AND SINCE THE ISSUE INVOLVED WAS A DEBATABL E ISSUE, THE BONA FIDES 6 ITA NO.5956/DEL/2015 ASST. YEAR:2008-09 OF THE ASSESSEE CANNOT BE DOUBTED. WHILE UPHOLDING THE FINDINGS OF THE LD. CIT(A) WE FIND THE APPEAL OF THE REVENUE IS DEV OID OF MERITS AND IS LIABLE TO BE DISMISSED. APPEAL OF THE REVENUE IS AC CORDINGLY DISMISSED. 10. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN OPEN COURT ON THIS THE 20 TH MARCH, 2020. SD/- SD/- (G.S. PANNU) (K. NARASIMHA CHARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 20/3/2020 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI