ITO 2(3)(4), MUMBAI V. WESTERN OUTDOOR MEDIA TECHNOLGOES LTD, MUMBAI

ITA 6639/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2423 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 16-11-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 13-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Revised return
• Section: 143(3)

Judgement Text

M/S WESTERN OUTDOOR MEDIA TECHNOLOGIES LTD. ITA NO. 6639 /MUM/20 1 3 1 G IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G , MUMBAI , , BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER ITA NO. : 6639 /MUM/20 1 3 ( ASSESSMENT YEAR: 200 3 - 04 ) INCOME TAX OFFICER - 2(3)(4), ROOM NO. 555, AAYAKAR BHAVAN, 2 ND FLOOR, M K ROAD, MUMBAI - 400 020 VS M/S WESTERN OUTDOOR MEDIA TECHNOLOGIES LTD. , 7 TH & 8 TH FLOOR, BUILDING NO. 11, SOLITAIRE CORP ORATE PARK, GURU HARGOVIND MARG, CHAKALA, ANDHERI (EAST), MUMBAI - 400 003 .: PAN: A AACW 0334 N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ABANI KANTA NAYAK RESPONDENT BY : NONE /DATE OF HEARING : 16 - 11 - 201 5 / DATE OF PRONOUNCEMENT : 16 - 11 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE AFORESAID APPEAL HA S BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 2 6 .0 8 .2013 , PASSED BY CIT(A) - 6 , MUMBAI IN RELATION TO THE PENALTY PROCEE DINGS U/S 271(1)(C) FOR THE AY 2003 - 2004. IN THE GROUNDS OF APPEAL, FOLLOWING GROUNDS HAVE BEEN RAISED: - 1. ON THE FACTS AD IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY U/S 271(1)(C) OF THE IT ACT ON ACCOU NT OF PROVISION FOR BAD DEBT DEBITED IN P & L ACCOUNT WITHOUT APPRECIATING THAT THE ASSESSEE COULD NOT FURNISH ANY DETAILS REGARDING THE DEBTORS AND COULD NOT ESTABLISH THAT THE DEBT HAS ACTUALLY BECOME BAD WHICH IS THE PRIOR CONDITION OF THE DEDUCTION U /S 36(1)(VII) THE IT ACT AS HELD IN THE CASE OF INDIA THERMIT CORPN LTD 56 ITD 307 (DELHI) AND IN THE CASE OF DUNLOP INDIA LIMITED 209 ITR 221(CAL.). M/S WESTERN OUTDOOR MEDIA TECHNOLOGIES LTD. ITA NO. 6639 /MUM/20 1 3 2 2. ON THE FACTS AD IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY U/S 271(1)(C) OF THE IT ACT ON ACCOUNT OF OTHER EXPENSES VIZ TRAVELLING EXPENSES AND TELEPHONE EXPENSES WITHOUT APPRECIATING THAT THE ASSESSEE FAILED TO ESTABLISH THAT THE SAID EXPENDITURE WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUS INESS ACTIVITY. 2. BRIEF FACTS OF THE CASE ARE THAT, ASSESSEE IN HIS REVISED RETURN OF INCOME HAD DECLARED LOSS OF RS. 4,54,31,981/ - , SUCH RETURN OF INCOME WAS SUBJECTED TO SCRUTINY AND ORDER U/S 143(3) DATED 30.12.2005 WAS PASSED DETERMINING LOSS OF RS. 3,79,89,042/ - . AFTER SAID ASSESSMENT ORDER WAS CHALLENGED BEFORE THE CIT(A) , PART RELIEF WAS ALLOWED AND AFTER GIVING EFFECT TO THE ORDER OF THE CIT(A), THE FOLLOWING DISALLOWANCES WERE SUSTAINED : - ( AMT. IN RS. ) (I) PROVISION FOR DOUBTFUL D EBTS 48,69,561 (II) TRAVELLING EXPENSES 5,77,573 (III) TELEPHONE EXPENSES 33,913 54,81,047 ON THESE DISALLOWANCES, THE AO HAS LEVIED THE PENALTY U/S 271(1)(C) FOR RS. 20,54,570/ - . 3. SO FAR AS LEVY OF PENALTY ON DISALLOWANCE OF W RITING OFF PROVISION FOR DOUBTFUL DEBTS OF RS. 48.69 LAKHS, THE SAID DISALLOWANCE HAS BEEN CONFIRMED ON THE GROUND THAT THE ASSESSEE COULD NOT BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT THE DEBTS REPRESENTS THE AMOUNT WHICH HAS BEEN ACTUALLY ACCOUNTED AS INCOME DURING ANY OF THE ACCOUNTING YEAR OR DURING THE PREVIOUS YEAR. THE ASSESSEES CASE DURING THE COURSE OF THE PENALTY PROCEEDINGS BEFORE THE LD. CIT(A) AND AO WAS THAT, OUT OF RS. 46.69 , A SUM OF RS. 24.38 LAKHS PERTAINED TO THE ASSESSMENT YEAR 2002 - 03 AND THE BALANCE AMOUNT PERTAINED TO ASSESSMENT YEAR 2001 - 02. THE ASSESSEE HAS GIVEN YEAR - WISE DETAILS WHEN THESE DEBTS WHERE ACCOUNTED FOR AS INCOME IN THE EARLIER YEARS, WHICH ARE AS UNDER: - M/S WESTERN OUTDOOR MEDIA TECHNOLOGIES LTD. ITA NO. 6639 /MUM/20 1 3 3 AY 2000 - 01 RS.11,16,916 AY 2001 - 02 RS.13,14,408 AY 2002 - 0 3 RS.24,38,237 RS.48,69,561 THE ASSESSEE FURTHER STATED THE PROVISION FOR DOUBTFUL DEBTS WERE DEBITED TO THE P&L A/C AND CREDITED TO THE DEBTORS ACCOUNT AND THEREBY IT WAS WRITTEN OFF AS BAD DEBTS AND, THEREFORE, THE CONDITIONS OF 36(1)(VII) IS FULLY C OMPLIED WITH . THE ASSESSEES DETAILED SUBMISSIONS ON THIS ASPECT ARE REPRODUCED HEREUNDER: - THE PROVISION FOR DOUBT DEBTS IS DEBITED TO P&L A/C AND CREDITED TO DEBTORS ACCOUNTS AND THEREBY WRITTEN OFF THE BAD DEBTS. THEREFORE SECTION 36(1)(VII) IS COMPLI ED WITH. THE PROVISION IS NOT CREDITED TO PROVISION FOR BAD DEBTS AND NOT SHOWN IN BALANCE SHEET AS LIABILITY UNDER THE HEAD PROVISION FOR DOUBTFUL DEBTS. THE CIT(A) STATED THAT IN PARA 4.2 OF HIS ORDER THAT ON THE CONTRARY, A PERUSAL OF PROFIT AND LOSS ACCOUNT CLEARLY BRINGS OUT THE FACT THAT ONLY PROVISION FOR DOUBTFUL DEBTS HAS BEEN CREATED BY DEBITING TO THE PROFIT AND LOSS ACCOUNT THE SAID SUM OF RS. 48,69,561=00. THIS IS INCORRECT, IN FACT THE ACCOUNTS HEAD WAS PROVISION FOR DOUBTFUL DEBTS BUT I T WAS BAD DEBTS WRITTEN OFF BY DEBITING PROFIT AND LOSS ACCOUNT AND CREDITING DEBTORS ACCOUNT. STATEMENT OF DEBTORS AND YEAR IN WHICH INCOME IS ACCOUNTED FOR IS ENCLOSED. THERE IS NO PROVISION ON LIABILITY SIDE OF THE BALANCE SHEET. WE ARE ENCLOSING HEREWI TH COPY OF ANNUAL ACCOUNTS IN SUPPORT OF OUR CLAIM. THE ASSESSING OFFICER HAS STATED IN THE ASSESSMENT ORDER THAT THE DEDUCTION OF RS. 48,69,561=00 MADE IN PROFIT AND LOSS ACCOUNT PERTAINS TO BAD DEBTS. THE ASSESSEE HAS FURTHER SUBMITTED A LIST OF NAMES OF THE PARTIES AGAINST WHOM BAD DEBTS WERE CLAIMED AND THE FINANCIAL YEAR IN WHICH THE DEBT WAS ACCOUNTED AS INCOME. SHE FURTHER STATES THAT ON PERUSAL OF THE SAME, IT IS NOTICED THAT OUT OF RS. 48.69 LACS, A SUM OF RS. 24.38 LACS PERTAINS TO THE PRECED ING YEAR I.E. AY 2002 - 03 AND THE REMAINING PERTAINED TO THE EARLIER YEAR I.E. AY 2001 - 02. HOWEVER, NO SUPPORTING WERE SUBMITTED BY THE ASSESSEE WITH REGARD TO THE SAID TRANSACTIONS ACCOUNTED IN THE PRECEDING YEARS. THE ASSESSEE WAS ALSO ASKED TO SUBMIT EVI DENCE IN RESPECT OF EFFORTS MADE TO REALIZE THE DEBTS AND JUSTIFY THE WRITING OFF OF THE DEBTS IN TOO SHORT A PERIOD. HOWEVER, THE ASSESSEE WAS UNABLE TO GIVE ANY PLAUSIBLE EXPLANATION AND FAILED TO JUSTIFY THE WRITE - OFF. THE CLAIM OF BAD - DEBTS DISALLOWE D ON THE GROUND THE DEBTS WRITTEN OFF IN TOO SHORT TIME. THE ASSESSEE HAS DISCLOSED FULL PARTICULARS OF BAD DEBTS WRITTEN OFF INCLUDING NAMES OF THE PARTIES AND YEAR IN WHICH THE DEBT WAS ACCOUNTED AS INCOME. FURTHER THE ASSESSING OFFICER HAS NOT STATED WHILE DISALLOWING THE CLAIM OF BAD DEBTS THAT SHE IS SATISFIED THAT THE ASSESSEE HAS CONCEALED THE INCOME OR FILED INACCURATE PARTICULARS OF SUCH INCOME AND THEREFORE PENALTY U/S 271(1)(C) IS INITIATED. WE FURTHER SUBMIT THAT THE ASSESSEE HAS SUBMITTED FU LL PARTICULARS OF CLAIM OF BAD DEBTS, THERE IS NO CONCEALMENT OF ANY INCOME OF FILING INACCURATE PARTICULARS OF SUCH INCOME. M/S WESTERN OUTDOOR MEDIA TECHNOLOGIES LTD. ITA NO. 6639 /MUM/20 1 3 4 4. FURTHER, REGARDING TRAVELLING EXPENSES ALSO, THE ASSESSEES EXPLANATION HAD BEEN INCORPORATED BY CIT(A) FROM PAGES 5 TO 12 OF THE APPELLATE ORDER. 5. AFTER CONSIDERING THE ENTIRE SUBMISSIONS AND ALSO VARIOUS JUDICIAL CITATIONS WHICH HAS BEEN DISCUSSED FROM PAGES 5 TO 12 OF THE APPELLATE ORDER, THE LD. CIT(A) HAS DELETED THE PENALTY ON THE GROUND THAT IT IS NOT A CASE WHERE PARTICULARS OF INCOME HAS BEEN CONCEALED AND CLAIM OF PROVISION FOR DOUBTFUL DEBTS WAS A BONA FIDE CLAIM WHICH HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS. HENCE, SUCH A DISALLOWANCE CANNOT ENTAIL LEVY OF PENALTY. ON THE ISSUE OF DISALLOWANCE OF TRAVELL ING EXPENSES AND TELEPHONE EXPENSES ALSO , THE LD. CIT(A) AFTER RELYING ON VARIOUS JUDICIAL CITATIONS HELD THAT THE DISALLOWANCE HAS ONLY BEEN MADE ON THE GROUND THAT THE ASSESSEE COULD NOT FURNISH SATISFACTORY DOCUMENTS, HOWEVER, THERE IS NO CONCEALMENT OF PARTICULARS OF INCOME, BECAUSE MONTH - WISE DETAILS WERE DULY PRODUCED. 6 . AFTER HEARING LD. DR AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT SO FAR AS LEVY OF PENALTY ON ACCOUNT OF BAD DEBTS WRITTEN OFF IS CONCERNED , WE FIND THAT ASSESSEE HA S ACTUALL Y WRITTEN OFF THE BAD DEBTS BY DEBITING THE SAID AMOUNT PERTAINING TO THE EARLIER YEARS IN THE P&L A/C AND CREDITING THE SAME IN THE DEBTORS ACCOUNT. THE STATEMENT OF DEBTOR ACCOUNT AND IN THE YEAR IN WHICH THE INCOME HAS BEEN ACCOUNTED FOR WERE DULY FILE D BEFORE THE AO AS WELL AS C IT (A). THERE IS NO PROVISION SHOWN IN THE LIABILITY SIDE OF THE BALANCE SHEET. THAT APART, THE ASSESSEE HAS SUBMITTED LIST OF NAMES OF PARTIES AGAINST WHOM THE BAD DEBTS WERE CLAIMED AND ALSO FINANCIAL YEAR IN WHICH THE SAID DEB T WAS ACCOUNTED AS INCOME. ONCE THAT IS SO, WE DO NOT FIND ANY REASON HOW A PENALTY CAN BE LEVIED ON SUCH A DISALLOWANCE. THUS, THE ORDER OF THE CIT(A) DELETING THE PENALTY ON SUCH A DISALLOWANCE IS AFFIRMED AND SO FAR AS LEVY OF PENALTY ON TRAVELLING EXPE NSES OF RS. 5,77,573/ - , WE FIND THAT ASSESSEE HAD GIVEN THE ENTIRE DETAILS OF TRAVELLING EXPENSES FOR M/S WESTERN OUTDOOR MEDIA TECHNOLOGIES LTD. ITA NO. 6639 /MUM/20 1 3 5 AIR - TICKETS AND THE REASON FOR THE TRAVELLING UNDERTAKEN BY THE VARIOUS EMPLOYEES FOR COMPAN YS WORK. SIMILARLY, WITH REGARD TO THE TELEPHONE EXPENSES ALS O, THE DETAILS OF THE SAID EXPENSES RECORDED IN THE BOOKS OF ACCOUNTS WERE DULY FURNISHED. HENCE, IT CANNOT BE THE CASE OF FURNISHING OF INACCURATE PARTICULARS. THUS, LD. CIT(A) HAS RIGHTLY DELETED THE PENALTY ON THESE DISALLOWANCE S ALSO . ACCORDINGLY, THE ORDER OF THE CIT(A) IS AFFIRMED AND GROUND RAISED BY THE REVENUE ARE DISMISSED. 7 . IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER , 2015. SD/ - SD/ - ( ) ( ) (RAMIT KOCHAR ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI, DATE: 1 6 TH NOVEMBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 6 , MUMBAI. 4 ) THE CIT II , MUMBAI. 5 ) G , , / THE D.R. G BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS