MAINI SHIPPING P. LTD, MUMBAI V. ACIT 5(2), MUMBAI

ITA 6403/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48684 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 03-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Business income; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH: MUMBAI BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.6403/MUM/2009 (ASSESSMENT YEAR: 2004-05) MAINI SHIPPING PRIVATE LTD., C/O. RAMESH VORA & CO, CHARTERED ACCOUNTS, 11, HEENA MADHU PARK SOCIETY, PLOT NO.128, 1ST ROAD, OPP. C.C.D., KHAR (WEST), MUMBAI -400 052 ..........ASSESSEE VS ACIT -5(2), MUMBAI ..... REVENUE PAN: AAACM 3713 F ASSESSEE BY: SHRI SANJIV M. SHAH REVENUE BY: SHRI SURENDRA KUMAR O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A)-IX, MUMBAI DATED 04.11.2009 FOR THE A.Y. 2004-05. THIS APPEAL IS ARISING OUT OF THE PENALTY LEVIED BY THE A.O. U/S.271(1)(C) OF THE ACT, WHICH WAS CONFIRMED BY THE LD. CIT (A). THE ASSESSEE HAS TAKEN THE MULTIPLE GROUNDS. THE ISSUE ARISES FOR O UR CONSIDERATION IS WHETHER THE A.O. WAS JUSTIFIED IN LEVYING THE PENAL TY OF ` 9,41,718/- U/S.271(1)(C) OF THE ACT ON THE ADDITION MADE TOWAR DS THE DISALLOWANCE OF THE BAD DEBT CLAIM OF ` 26,25,000/-. 2. BRIEFLY STATED, THE FACTS ARE AS UNDER. THE ASS ESSEE-COMPANY DECLARED THE INCOME OF ` 4,51,57,010/- FOR THE A.Y. 2004-05. THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUT INY AND ASSESSMENT ITA 6403/M/2009 MAINI SHIPPING PRIVATE LTD. 2 WAS COMPLETED U/S.143(3) OF THE ACT. THE ASSESSEE- COMPANYS PRINCIPAL BUSINESS IS THE SHIPPING. IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS CLAIMED THE DEDUCTION OF ` 26,25,000/- AS A BAD DEBTS WRITTEN OFF. THE A.O. SOUGHT THE EXPLANATION OF THE ASSESSEE. T HE ASSESSEE STATED THAT IT HAD GIVEN ADVANCE OF ` 26.25 LAKHS ON INTEREST BASIS TO MS. BRITA MAINI ON 23.6.2003 AND THE SAID PARTY EXPIRED ON 15 .1.2004. THERE WAS NO POSSIBILITY OF RECOVERING THE SAID LOAN AMOU NT AND HENCE, THE SAME WAS WRITTEN OFF AND ALSO CLAIMED AS BAD DEBTS IN HIS BOOKS OF ACCOUNT. THE ASSESSEE ALSO CONTENDED THAT THE SAID LOAN WAS GIVEN IN THE COURSE OF THE ITS FINANCE THE BUSINESS. THE A .O. WAS OF THE VIEW THAT THE SAID CLAIM CANNOT BE ALLOWED U/S.36(1)(VII ) R.W.S. 36(2). THE A.O. ALSO OBSERVED THAT THE ASSESSEE IS NOT A BANKI NG COMPANY BUT IT IS BASICALLY A SHIPPING-COMPANY. THE A.O. ALSO CONSID ERED THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE-COMPANY. MOREOVER, AS PER THE TAX AUDIT REPORT, THE PRINCIPAL BUSINESS OF THE ASSESSEE WAS SHOWN AS THE SHIPPING BUSINESS. THE A.O., THEREF ORE, MADE THE ADDITION OF ` 26,25,000/- BY DISALLOWING THE CLAIM OF BAD DEBT AND ALSO LEVIED THE PENALTY U/S.271(1)(C) ON THE SAID AMOUNT . THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD. CIT (A) BY TAKING THE CONTENTION THAT THE ASSESSEE HAS MADE THE BONA FIDE CLAIM AND IT COULD NOT BE STATED AS FURNISHING OF INACCURATE PARTICULA RS OF INCOME. THE ASSESSEE ALSO CONTENDED THAT THE LOAN GIVEN TO MS. BRITA MAINI WAS IN THE COURSE OF THE FINANCE ACTIVITY. THE ASSESSEE C OULD NOT IMPRESS THE LD. CIT (A) AND LD. CIT (A) CONFIRMED THE PENALTY L EVIED BY THE A.O. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND ALSO PERUSED THE RECORDS. IN THIS CASE, THE QUANTUM IS CONFIRMED AND THAT IS NOT DISPUTED. THE MAIN CONTENTION OF THE LD. COUNS EL FOR THE ASSESSEE IS THAT THE ASSESSEE HAS DECLARED THE INTEREST-INCO ME UNDER THE HEAD BUSINESS INCOME AND ASSESSEES CASE IS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETRO PRODUCTS LTD. 322 ITR 158. HE FURTHER CONTENDS THAT IT IS BONA FIDE CLAIM. THE LD. COUNSEL REFERRED TO THE PAPER BOOK AND SUBMITS THAT THERE IS ONE OF THE OBJECTS IN THE MEMORANDUM OF ASSOCIATION, WHICH SAYS THAT THE ITA 6403/M/2009 MAINI SHIPPING PRIVATE LTD. 3 ASSESSEE CAN DO THE MONEY LENDING BUSINESS. THE AS SESSEE ADVANCED THE LOAN TO ONE MS. BRITA MAINI ON 23.6.2003. IT I S CONTENDED THAT SHE WAS NOT OTHERWISE HAVING ANY RELATION WITH THE ASSE SSEE-COMPANY. IT IS NOT ONLY A SOLITARY TRANSACTION OF ADVANCE OR LOAN GIVEN TO MS. BRITA MAINI. IT IS CLAIMED THAT THE SAID LOAN WAS GIVEN BY CHARGING THE INTEREST. NOW, THE QUESTION BEFORE US IS WHETHER T HE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF B AD DEBT CLAIM. ON THE PERUSAL OF THE COPY OF THE ANNUAL REPORT AS WELL AS AUDITED STATEMENTS OF ACCOUNTS, IT IS SEEN THAT, THE ASSESSEE HAS DECL ARED THE INCOME FROM THE FINANCE ACTIVITY TO THE EXTENT OF ` 30,78,000/-. AS PER SCHEDULE 10 TO THE AUDITED STATEMENT OF ACCOUNTS, THE INTEREST RECEIVED (OTHERS) IS DECLARED TO THE EXTENT OF ` 40,76,659/- AND THE SAID INCOME IS DECLARED UNDER THE HEAD BUSINESS INCOME. IN OUR OPINION, THE CLAIM OF THE ASSESSEE IS A BONA FIDE AS THE ASSESSEE IS DECLARING THE INTEREST INCOME UNDER THE HEAD BUSINESS INCOME. IN THE CASE OF RE LIANCE PETRO PRODUCTS LTD (SUPRA) IT IS HELD THAT MERELY BECAUSE THE CLAIM OF THE ASSESSEE IS DISALLOWED AND IF IT IS A BONA FIDE CLAIM THEN THE SAME CANNOT BE SUBJECTED TO THE PENAL CONSEQUENCES. WE, THEREFORE, HOLD THAT THERE IS NO JUSTIFICATION TO LEVY PENALTY. WE , ACCORDINGLY, DELETE THE PENALTY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 7TH APRIL 2011. SD/- SD/- ( T.R. SOOD) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 27TH APRIL 2011 COPY TO:- 1) THE APPLICANT. 2) THE RESPONDENT. 3) THE CIT (A) 9, MUMBAI. 4) THE CIT -5, MUMBAI. ITA 6403/M/2009 MAINI SHIPPING PRIVATE LTD. 4 5) THE D.R. J BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 6403/M/2009 MAINI SHIPPING PRIVATE LTD. 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 19.04.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 20.04.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER