DCIT RG 8(3), MUMBAI V. TAINWALA CHEMICALS & PLASTICS (I) LTD, MUMBAI

ITA 6401/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9520 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-11-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 16-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNA MURTHY
• Keywords: Earning of tax free income; Bad and doubtful debts; Provision of bad debts
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT (MZ) AND SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER I.T.A. NO. 6401/M/2011 ASSESSMENT YEAR:2004-2005 THE ASSTT. COMMISSIONER OF INCOME TAX-8(3), MUMBAI. VS. M/S. TAINWALA CHEMICALS & PLASTICS INDIA LIMITED, TAINWALA HOUSE, ROAD NO. 18, MIDC, MAROL, ANDHERI (EAST), MUMBAI 400 093. PAN: AAACT0212C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V. KRISHNAMURTHY, DR RESPONDENT BY : SHRI SASHI TULSIYAN, AR DATE OF HEARING: 29.11.2012 DATE OF OR DER:29.11.2012 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 16.9.2011 IS AG AINST THE ORDER OF THE CIT (A)-18, MUMBAI DATED 22.4.2009 FOR THE ASSESSMENT Y EAR 2004-2005. 2. THIS APPEAL RELATES TO LEVY OF PENALTY RS. 1,78, 77,960/- U/S 271(1)(C) IN RESPECT OF A COUPLE OF ADDITIONS NAMELY (I) PROVISI ON FOR DOUBTFUL LOAN OF RS. 1,90,51,000/- AND (II) LONG TERM CAPITAL LOSS OF RS .3,06,75,158/- AND (III) DISALLOWANCE OF AN EXPENDITURE U/S 14A IN RESPECT O F DIVIDEND, AN EXEMPT INCOME. 3. DURING THE PROCEEDINGS BEFORE US, SHRI V. KRISHN AMURTHY, LD DR RELIED ON THE ORDERS OF THE AO/ CIT (A). 4 . PER CONTRA, SHRI SASHI TULSIYAN, LD COUNSEL FOR THE ASSESSEE F AIRLY MENTIONED THAT THE ASSESSEE FILED AN APPEAL ON THE MERITS OF THE ABOVE ADDITIONS VIDE ITA NO.3338 & 3250/MUM/2008 FOR THE AY 2004-2005 AND TH E TRIBUNAL DECIDED THE ISSUES ON MERITS IN FAVOUR OF THE VIDE ITS ORDER DA TED 27.4.2011. REFERRING TO THE SAID ORDER, LD COUNSEL MENTIONED THAT VIDE THE PARA 22 ONWARDS OF THE ORDER, THE 2 M/S. TAINWALA CHEMICALS & PLASTICS INDIA LIMITED , ISSUE OF PROVISION OF BAD DEBTS OF RS. 1,90,51,000/ - WAS DEALT WITH AND ARRIVED AT THE CONCLUSION THAT THE ADDITION IS UNWARRANTED. TRIBUN AL HELD THAT THE ASSESSEE IS ENTITLED TO RELIEF CONSIDERING THE FACT THAT THE PR OVISION FOR BAD DEBTS WAS DEBITED IN THE P & L ACCOUNT AND CREDITED TO THE CONCERNED PRO VISION ACCOUNT REDUCING FROM THE DEBTORS AND ASSETS SIDE OF THE BALANCE SHEET. CONSIDERING THE FACT THAT ASSESSEE FOLLOWED A PROPER METHOD OF ACCOUNTING, ASSESSEES CLAIM OF BAD DEBTS WAS HELD ALLOWABLE. THEREFORE, THERE IS NO CASE FOR FURNISHI NG INACCURATE PARTICULARS AND PARA 37 IS RELEVANT IN THIS REGARD. LD COUNSEL ALSO FILE D A COPY OF THE ORDER OF THE AO GIVING EFFECT TO THE ORDER OF THE TRIBUNAL AND STAT ED THAT THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION ON ACCOUNT OF BAD DEBTS AND P ARA 14 OF THE ORDER OF THE AO DATED 14.9.2012 IS RELEVANT. THUS, AFTER THE ORDER OF THE TRIBUNAL, THE ADDITION ON ACCOUNT OF PROVISIONS FOR BAD DEBTS DID NOT EXIST. CONSEQUENTLY, IN OUR OPINION, THE PENALTY ON THE SAID ADDITION MUST BE DELETED. 5. REGARDING THE ADDITION ON ACCOUNT OF 14A, REFERR ING TO PARA 5 OF THE TRIBUNAL ORDER ON MERITS IN ASSESSEES OWN CASE FOR AY 2004- 2005, LD COUNSEL MENTIONED THAT THE MATTER WAS REMANDED BACK TO THE FILES OF T HE AO FOR A FRESH DECISION OF THE AO FOLLOWING THE BINDING JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT (43 DTR 171). ACCORDINGLY, THE ADDITION MADE BY THE AO U/S 14A OF THE ACT REMAINS DELETED. IN THE ORDER OF THE AO DATED 14.09.2012, GIVING EFFECT TO THE SAID ORDER OF THE TRIBUNAL, VIDE PARA 7, AO MADE LUMP SUM ADDITION OF RS 25,000/- ON AD HOC BASIS, W HICH IS NO GROUND FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. CONSEQUENTLY, IN OUR OPINION, IN VIEW OF THE ESTIMATIONS AND ADHOCISM INVOLVED, THERE IS NO CASE FOR LEVY OF PENALTY IN THIS REGARD. 6. FINALLY, REGARDING THE ADDITION OF RS.3,06,75,15 8/- ON ACCOUNT OF LONG TERM CAPITAL LOSS RELATED ISSUES, LD COUNSEL BROUGHT OUR ATTENTION TO PARA 6 OF THE ORDER OF THE TRIBUNAL AND DEMONSTRATED THAT THE LOAN WAS PRO PERLY WRITTEN OFF AGAINST THE TAINWALA HOLDINGS PVT. LTD AND THEREFORE THE CLAIM IS ALLOWABLE. REFERRING THE PARA 21 OF THE TRIBUNALS ORDER, LD COUNSEL MENTIONED TH AT THE LOSS CLAIMED BY THE 3 M/S. TAINWALA CHEMICALS & PLASTICS INDIA LIMITED , ASSESSEE IS HELD ALLOWABLE AND TRIBUNAL DIRECTED TH E AO TO ALLOW THE SAME. THUS, THE ADDITION OF RS. 3,06,75,158/- ALSO REMAINED DEL ETED AND THE AO GRANTED RELIEF WHILE COMPUTING THE TAXABLE INCOME OF THE ASSESSEE. PARA 14 OF THE ORDER OF THE AO DT 14. 09.2012 SUPPORT THE ABOVE. CONSEQUENTLY, IN OUR OPINION, THERE IS NO CASE OF LEVY OF PENALTY U/S 271(1)(C) ON THIS ACCOUNT. 7. THUS, IT IS EVIDENT THAT THE TRIBUNAL DELETED TH E ADDITIONS ON ACCOUNTS OF PROVISION FOR BAD DEBTS AND THE ISSUE OF LONG TE RM CAPITAL LOSS FULLY. THUS, THE QUANTUM ADDITIONS ON WHICH THE PENALTY IS LEVIED NO LONGER EXISTS. FURTHER, AD-HOC ADDITION OF RS 25,000/- FINALLY MADE BY THE AO ON ACCOUNTS OF PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE THE APPROVED BASIS FOR SUS TAINING THE PENALTY U/S 271(1)(C) OF THE ACT CONSIDERING THE AD-HOCISM ADOPTED TO BY THE AO AND THE SAME IS EVIDENT FROM HIS ORDER DATED 14.9.2012. ACCORDINGLY, GROUN DS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF NOVEMBER, 2012. SD/- SD/- (D. MANMOHAN) ( D. KARUNAKARA RAO) VICE PRESIDENT ACCOUNTANT MEMBER DATE : 29.11.2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR E, BENCH, ITAT, MUMBAI. 6. GUARD FILE. 4 M/S. TAINWALA CHEMICALS & PLASTICS INDIA LIMITED , // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI