DCIT 8(2), MUMBAI V. PRASAD FILM LABS ( MUMBAI) P.LTD, MUMBAI

ITA 6631/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75191 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 01-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Bad and doubtful debts; Capital expenditure

Judgement Text

, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL C CC C BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO. 6631/M/2012 6631/M/2012 6631/M/2012 6631/M/2012 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2004-05) DY. COMMISSIONER OF INCOME TAX-8(2), ROOM NO. 209/216A, 2 ND FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 % % % % / VS. M/S PRASAD FILM LABS (MUMBAI) PVT. LTD., PLOT NO. 99/100, ROAD NO. 16, MIDC INDL. AREA, MAROL, ANDHERI (E) MUMBAI-93 #' ! ./ ( ./ PAN/GIR NO. :AAACO3078R ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $% $%$% $% ,- ,- ,- ,- . / . / . / . / /ASSESSEE BY : SHRI PRITESH MEHTA # # # # . / . / . / . / / REVENUE BY : SHRI RAVI PRAKASH % % % % . .. . -! -! -! -! / DATE OF HEARING : 6 TH JANUARY 2014 01& 01& 01& 01& . .. .-! -! -! -! /DATE OF PRONOUNCEMENT: 10 TH JANUARY 2014 ' 2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 8.8.2012 OF COMMISSIONER OF INCOME TAX(APPEALS) ARI SING FROM THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE INCOME TA X ACT FOR THE ASSESSMENT YEAR 2004-05. 2. THE REVENUE HAS RAISED THE ONLY GROUND AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY OF ` 8 ,00,000/- LEVIED U/S 271(1)(C) OF THE ACT WITHOUT APPRECIATING THAT THE ADDITIONS/DISALLOWANCES WERE MADE ON THE BASIS OF W RONG CLAIMS MADE IN THE RETURN AND CONFIRMED BY CIT(A) AND THE ASSESSEE HAD FAILED TO EXPLAIN AND SUBSTANTIATE WITH EVIDENC E SUCH CLAIMS ITA NO.6631/M/2012 PRASAD FILM LABS (MUMBAI) PVT. LTD. 2 BY IT IN THE RETURN OF THE INCOME IN TERMS OF THE P ROVISIONS OF EXPLANATION 1 OF SECTION 271(1)(C) OF THE ACT. 3. WE HAVE HEARD THE LD. D.R AS WELL AS LD. A.R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. D.R HAS RELIED UPON THE IMPUGNED PENALTY ORDER PASSED U/S 271(1)(C). ON THE OTHER HA ND, THE LD. A.R HAS SUBMITTED THAT THE DISALLOWANCE CONFIRMED BY THE CI T(A) IN THE QUANTUM APPEAL AGAINST WHICH THE A.O HAS LEVIED THE PENALTY RELATES TO CLAIM OF BAD DEBTS, REPAIRS AND MAINTENANCE AND EXPENDITURE ON TAKING WORKING CAPITAL LOAN FROM BANK. HE HAS FURTHER SUBMITTED TH AT ALL THESE CLAIMS OF THE ASSESSEE ARE BONAFIDE. THE PENALTY IS NOT LEVIA BLE MERELY BECAUSE THE CLAIM OF THE ASSESSEE WAS DISALLOWED BY THE A.O. HE HAS POINTED OUT THAT THOUGH THE ASSESSEE DID NOT CHALLENGE THE ORDER OF THE CIT(A) IN QUANTUM HOWEVER THERE ARE VARIOUS DECISIONS OF THIS TRIBUNA L AS WELL AS HIGH COURT ON THIS POINT WHEREIN IT HAS BEEN HELD THAT THESE A RE ALLOWABLE BUSINESS EXPENDITURE. HE HAS RELIED UPON THE FOLLOWING DECIS IONS AS MENTIONED IN PARA 3.1.2 OF CIT(A): I. CIT VS ABDULLABHAI ADDULKADAR (1961) 41 ITR 545 (SC ) II. ROOP NARAIN RAM CHANDRA VS ADDL. CIT (1978) 112 ITR 890 (ALL.) III. CIT VS HARJASMAL MEHRA (1971) 79 ITR 213 (PUNJ. & H AR.) IV. CIT VS S. R. SUBRAMANYA PILLAI (1950) 18 ITR 85 (MA D.) V. CIT VS JWALA PD. RADHA KISHAN (1977) 107 ITR 0540 ( ALL.) VI. CIT VS ABDUL RAZAK & CO. (1982) 136 ITR 825 (GUJ.) 4. THE LD. A.R HAS THUS, CONTENDED THAT WHEN THE CL AIM OF THE ASSESSEE WAS BONAFIDE AND RATHER ALLOWABLE IN VIEW OF THE VARIOUS DECISIONS THEN PENALTY IS NOT LEVIABLE. ITA NO.6631/M/2012 PRASAD FILM LABS (MUMBAI) PVT. LTD. 3 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FUL PERUSAL ON RECORD WE NOTE THAT THE ASSESSING OFFICER INTER ALI A DISALLOWED THE FOLLOWING CLAIMS: I. BAD DEBTS OF ` 23,72,876/- II. REPAIRS AND MAINTENANCE EXPENSES OF ` 4,49,478/- III. LOAN PROCESSING AND STAMP DUTY CHARGES (TREATED AS CAPITAL EXPENDITURE) OF ` 1,15,240/- 6. ON APPEAL, THE CIT(A) FOUND THAT THE BAD DEBTS C LAIMS OF THE ASSESSEE COMPRISING OF THREE CATEGORIES OF DEBTS. O UT OF TOTAL AMOUNT OF ` 23,72,876/- A SUM OF ` 7,55,636/- WAS THE AMOUNT OU TSTANDING AGAINST THE DEBTERS ON SALE AND ACCORDINGLY THE CIT(A) DELETED THE ADDITION MADE BY THE A.O ON THIS ACCOUNT. THE SECOND CATEGORY OF BAD DEBTS IS THE ADVANCE OF ` 6,84,450/- GIVEN TO THE SUPPLIER FOR PURCHASE OF MATERIAL, WHEREAS A SUM OF ` 9,32,790/- RELATES TO THE ADVANCE GIVEN FO R PURCHASE OF CARS AND PREMISES (ASSETS). THE CIT(A) CONFIRMED THE DISALLO WANCE WITH RESPECT TO THE BAD DEBTS CLAIMS OF THE BALANCE AMOUNT OF ` 16, 17,240/- COMPRISING SECOND AND THIRD CATEGORY OF THE BAD DEBTS. AS REGA RDS, THE DISALLOWANCE OF EXPENSES CLAIMED UNDER REPAIR AND MAINTENANCE OF ` 4,49,478/- THE CIT(A) HAS DELETED THE ADDITION TO THE EXTENT OF ` 2,12,890/- AND CONFIRM AN ADDITION OF ` 2,00,980/- ON THIS ACCOUNT. THE LA ST ADDITION ON ACCOUNT OF PROCESSING FEE AND STAMP DUTY WAS DELETED BY THE CI T(A) IN QUANTUM APPEAL. THUS, THE A.O INITIATED THE PENALTY PROCEED ING WITH RESPECT TO THE DISALLOWANCE CONFIRM BY THE CIT(A) ON ACCOUNT OF BA D DEBTS TO THE EXTENT OF ` 16,17,240/- AND ON ACCOUNT OF REPAIR AND MAINT ENANCE EXPENDITURE TO ITA NO.6631/M/2012 PRASAD FILM LABS (MUMBAI) PVT. LTD. 4 THE EXTENT OF ` 2,00,980/-. THE A.O LEVIED THE PENA LTY OF ` 8,00,000/- WHILE PASSING THE IMPUGNED ORDER U/S 271(1)(C). ON APPEAL , THE CIT(A) DELETED THE PENALTY LEVIED BY THE A.O BY HOLDING THAT THE C LAIM OF THE ASSESSEE WAS BONAFIDE AS WELL AS HIGHLY CONTENTIOUS ISSUE. 7. WE FIND THAT AS REGARDS THE CLAIM OF BAD DEBTS I NVOLVING THE AMOUNT GIVEN TO THE SUPPLIERS IN NORMAL COURSE OF BUSINESS THE SAME IS AN ALLOWABLE CLAIM AND THEREFORE, MERELY BECAUSE THE C LAIM OF THE ASSESSEE WAS DISALLOWED WOULD NOT AUTOMATICALLY LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME OR CONCEAL THE PARTICULARS OF INCOME. THE ASSESSEE HAS EXPLAINED A ND GIVEN THE COMPLETE DETAILS OF THE ADVANCE GIVEN TO THE SUPPLIERS THERE FORE, EVEN IF THE CLAIM OF THE ASSESSEE HAS NOT BEEN ACCEPTED BY THE A.O THE S AME WOULD NOT AUTOMATICALLY ATTRACT THE PROVISIONS OF SECTION 271 (1)(C). THEREFORE, WE FIND THAT THE CLAIM OF THE ASSESSEE IS A BONAFIDE C LAIM AND THE DISALLOWANCE OF THE SAME WOULD NOT AMOUNT TO CONCEA LMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. AS REG ARDS, THE BAD DEBTS PERTAINS TO THE ADVANCE GIVEN FOR PURCHASE OF CAR A ND PREMISES IT IS TO BE NOTED THAT WHEN THE CLAIM OF THE ASSESSEE WAS NOT F OUND AS BOGUS THEN THE NON-RECOVERY OF THE SAID AMOUNT CONSTITUTES A B ONAFIDE CLAIM OF BUSINESS LOSS. THOUGH THE SAID AMOUNT WAS NOT ALLOW ABLE AS PER THE PROVISIONS OF ACT IN THE OPINION OF THE A.O HOWEVER WHEN THE ASSESSEE HAS FURNISHED THE COMPLETE DETAIL AND EXPLANATION ABOUT THE CLAIM AND ADVANCE GIVEN THEN IT CANNOT BE SAID THAT THE ASSES SEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. THIS ISSUE IS ALSO A ITA NO.6631/M/2012 PRASAD FILM LABS (MUMBAI) PVT. LTD. 5 DEBATABLE ISSUE AND THEREFORE DOES NOT FALL IN THE CATEGORY OF A BOGUS OR ABSOLUTE INCORRECT CLAIM. AS FAR AS THE DISALLOWANC E OF EXPENSES UNDER REPAIR AND MAINTENANCE TO THE EXTENT OF ` 2,00,980/ - WE FIND THAT THE ASSESSEE CLAIMED TOTAL EXPENDITURE OF ` 4,49,478/- UNDER THIS ACT WHICH WAS DISALLOWED BY THE A.O BY TREATING THE SAME AS C APITAL IN NATURE. PART OF THE CLAIM HAS BEEN ALLOWED BY THE CIT(A) AS REVE NUE EXPENDITURE AND REST WAS DISALLOWED WHEN THE ASSESSEE WITHDRAWN THE SAME. THOUGH THE CLAIM OF THE EXPENSES TO THE EXTENT OF ` 2,00,980/- ON ACCOUNT OF REPAIR AND MAINTENANCE WAS DISALLOWED BY THE CIT(A) ON CON CESSION GIVEN BY THE ASSESSEE HOWEVER THIS ISSUE OF TREATMENT OF THE EXP ENDITURE AS REVENUE OR CAPITAL IS A HIGHLY DEBATABLE AND CONTENTIOUS IS SUE. WE FIND THAT THE ASSESSEE HAS GIVEN THE FULL DETAILS OF THE EXPENDIT URE INCURRED ON THE REPAIR AND MAINTENANCE AND, THEREFORE, WHEN NO FIND ING BY THE AUTHORITIES THAT ANY NEW ASSET CAME TO EXISTENCE AS A RESULT OF THIS EXPENDITURE THEN THE CLAIM OF THE ASSESSEE CANNOT BE TERMED AS BOGUS OR INHERENTLY NOT PERMISSIBLE. WE FIND THAT THE CLAIM IS A HIGHLY DEB ATABLE ISSUE AS WELL AS A BONAFIDE CLAIM OF THE ASSESSEE AND DISALLOWANCE OF THE SAME WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEA LED INCOME OR FURNISHED INACCURATE PARTICULARS OF THE INCOME ON T HIS ACCOUNT. 8. IN VIEW OF THE ABOVE DISCUSSION AS WELL AS IN T HE LIGHT OF VARIOUS DECISIONS RELIED UPON BY THE ASSESSEE WE DO NOT FIN D ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CIT(A) IN DELETING THE PENALTY. ACCORDINGLY, WE UPHOLD THE IMPUGNED ORDER OF THE CIT(A). ITA NO.6631/M/2012 PRASAD FILM LABS (MUMBAI) PVT. LTD. 6 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF JANUARY 2014 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 10 TH JANUARY 2014 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI