M/s. FORBES GOKAK LTD., MUMBAI V. JT. CIT OSD Rg.- 1(1), MUMBAI

ITA 6721/MUM/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1714 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 07-06-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 11-12-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A P SINGH
• Assessee Lawyers: R R VORA
• Keywords: Opportunity of being heard; Bad and doubtful debts
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SMT.ASHA VIJAYARAGHAVAN , JM ITA NO.6721/MUM/2006 : ASST.YEAR 2001-2002 M/S.FORBES GOKAK LIMITED FORBES BUILDING, CHARAJEET RAI MARG FORT, MUMBAI 400 001. PA NO.AAACF1765A. VS. THE JOINT COMMISSIONER OF INCOME - TAX OSD RANGE 1(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.R.VORA RESPONDENT BY : SHRI A.P.SINGH O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 10.10.2006 DISMISSING THE ASSESSEES APPEAL AGAINST THE PENALTY ORDER PASSED BY THE ASSE SSING OFFICER U/S.271(1)(C) IN RELATION TO THE ASSESSMENT YEAR 2001-2002. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ORIGINAL ASSESSMENT WAS COMPLETED ON 19.3.2004 MAKING CERTAIN ADDITIONS. WH EN THE MATTER CAME UP FINALLY BEFORE THE TRIBUNAL, TWO GROUNDS WERE RESTORED BY IT TO THE FILE OF CIT(A) AND TWO TO THE FILE OF A.O. FOR FRESH DECISION. ONE GROUND WAS ALLOWED AND THE OTHER THREE WERE DISMISSED AS UNDER:- PARTICULARS ADDITION (RS.) OUTCOME SECTION 14A 3,00,05,382 SET ASIDE TO THE FILE OF CIT(A) INTEREST DISALLOWED ON INTEREST FREE LOANS TO SUBSIDIARY CO. 12,43,355 SET ASIDE TO THE FILE OF CIT(A) PRIOR PERIOD EXPENSES 5,33,604 SET ASIDE TO THE FILE OF AO ADDITION ON ACCOUNT OF SHORT TERM CAPITAL GAINS 3,45,28,127 SET ASIDE TO THE FILE OF AO BAD DEBTS 34,23,217 FAVOUR BAD DEBTS RECOVERED 10,00,000 AGAINST DONATION 11,841 AGAINST NON COMPETE FEES 43,20,00 AGAINST ITA NO.6721/MUM/2006 M/S.FORBES GOKAK LIMITED. 2 THE ASSESSING OFFICER PASSED PENALTY ORDER ON 28.3. 2006 BY CONSIDERING THE VIEW TAKEN BY THE CIT(A) IN QUANTUM PROCEEDINGS. THIS LE D TO THE IMPOSITION OF PENALTY OF RS.7,50,65,526. IN ITS APPEAL AGAINST THE PENALT Y ORDER, THE ASSESSEE BROUGHT THE FACT OF ITS HAVING FILED APPEAL BEFORE THE TRIBUNAL AGAINST THE QUANTUM ORDER OF THE FIRST APPELLATE AUTHORITY TO THE NOTICE OF THE LD. CIT(A) AND ALSO INTIMATED THAT THE HEARING WAS COMPLETED BY THE TRIBUNAL ON SEPTEMBER 4, 2006 AND THE ORDER WAS AWAITED. IN PARA 14 OF THE IMPUGNED ORDER, THE LEA RNED CIT(A) TOOK NOTE OF THE ORDER PASSED BY THE TRIBUNAL AND OBSERVED THAT THER E WERE FIVE ITEMS ON WHICH PENALTY WAS JUSTIFIABLE. THE FIRST ITEM TAKEN NOTE OF BY THE LEARNED CIT(A) WAS DISALLOWANCE OF INTEREST ON BORROWINGS IN RESPECT O F EXEMPTED INCOME AMOUNTING TO RS.2.80 CRORE AND THE SECOND ITEM WAS DISALLOWAN CE OF INTEREST ON LOAN GIVEN TO SUBSIDIARY AT RS.12,43,355. THE IMPUGNED ORDER WAS PASSED ON 10.10.2006 I.E. AFTER THE NOTICE OF THE TRIBUNALS ORDER IN QUANTU M PROCEEDINGS RESTORING TWO ADDITIONS TO CIT(A)S FILE AND TWO TO ASSESSING OFF ICER. HOWEVER WITHOUT FIRST GIVING EFFECT TO THE TRIBUNAL ORDER IN QUANTUM PROC EEDINGS, THE LEARNED CIT(A) VENTURED TO UPHOLD THE PENALTY ORDER. IT WAS ONLY O N 18 TH JULY, 2008 THAT HE GAVE EFFECT TO THE TRIBUNAL ORDER IN QUANTUM PROCEEDINGS GRANTING SUBSTANTIAL RELIEF IN RESPECT OF BOTH THE ADDITIONS. THUS IT IS SEEN THAT THE LEARNED CIT(A), WHO HAD NOTICED THAT CERTAIN ISSUES WERE SENT BY THE TRIBUN AL TO HIM FOR FRESH DISPOSAL, PROCEEDED FIRST TO DEAL WITH THE PENALTY MATTER WHI CH INVOLVED THOSE TWO ISSUES ALSO. THE COURSE OF ACTION ADOPTED BY THE LEARNED C IT(A) IS PATENTLY INCORRECT AND UNSUSTAINABLE IN LAW. IN VIEW OF THE FACT THAT CER TAIN ADDITIONS WERE ALSO RESTORED BY THE TRIBUNAL TO THE FILE OF A.O., WE ARE OF THE CONSIDERED OPINION THAT IT WILL BE IN THE FITNESS OF THE THINGS IF THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF A.O. WE ORDER ACCORDINGLY AND DIRECT HIM TO PASS PENALTY ORDER AFRESH IN THE LIGHT OF LATER DEVELOPMENT TAKING PLACE PURS UANT TO THE TRIBUNAL ORDER. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED REASO NABLE OPPORTUNITY OF BEING HEARD. ITA NO.6721/MUM/2006 M/S.FORBES GOKAK LIMITED. 3 3. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THIS 11 TH DAY OF JUNE, 2010 . SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 11 TH JUNE, 2010 . DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A)-I, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.