ACIT CC 38, MUMBAI V. K. SERA SERA PRODUCTIONS LTD, MUMBAI

ITA 6962/MUM/2013

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6790 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHADRA RAJORE
• Keywords: Unexplained expenditure; Loose papers; Opportunity of being heard; Principle of natural justice; Period of limitation; Proportionate interest; Additional evidence; Initiation of penalty proceedings; Bad and doubtful debts; Commercial expediency; Time period of passing order; TDS
• Section: 271(1)(c); 143(3); 115JB; 274; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H', MUMBAI BEFORE SHRI C.N. PRASAD, HONBLE JUDICIAL MEMBER AND SHRI N.K. PRADHAN, HONBLE ACCOUNTANT MEMBER ITA. NO S . 5056 , 5057 /MUM/2011 (A.Y S : 2007 - 08 & 2008 - 09 ) M/S. K SERA SERA PRODUCTIONS LTD., [FORMERLY KNOWN AS GARNET PAPER MILLS LTD,] 18, 4 TH FLOOR, MOHID HEIGHTS, ABOVE MASALA MANTRA RESTAURANT, LOKHANDWALA ROAD, ANDHERI (W), MUMBAI 400 053 PAN: AAACG 5103 D V. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 38, MUMBAI ( APPELLANT ) ( RESPONDENT ) ITA. NOS. 5559, 5560/MUM/2011 (A.YS: 2008 - 09 & 2007 - 08) ASST . COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 38, ROOM NO. 32(1), GROUND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 V . M/S. K SERA SERA PRODUCTIONS LTD., [FORMERLY KNOWN AS GARNET PAPER MILLS LTD,] 18, 4 TH FLOOR, MOHID HEIGHTS, ABOVE MASALA MANTRA RESTAURANT, LOKHANDWALA ROAD, ANDHERI (W), MUMBAI 400 053 PAN: AAACG 5103 D ( APPELLANT ) ( RESPONDENT ) ITA. NO. 6962/MUM/2013 (A.Y: 2007 - 08) ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 38 R.NO. 32(1) , GROUND FLOOR AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 V. M/S. K SERA SERA PRODUCTIONS LTD., [FORMERLY KNOWN AS GARNET PAPER MILLS LTD,] 18, 4 TH FLOOR, MOHID HEIGHTS, ABOVE MASALA MANTRA RESTAURANT, LOKHANDWALA ROAD, ANDHERI (W), MUMBAI 400 053 PAN: AAACG 5103 D ( APPELLANT ) ( RESPONDENT ) 2 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} ITA. NO. 7553/MUM/2013 (A.Y: 2007 - 08) M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} UNIT NO. 101A & 102, PLOT B - 17, MORYA LANDMARK - 2, ANDHERI LINK ROAD, ANDHERI (W), MUMBAI - 400053 PAN: AAACG 5103 D V. ASST . COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 38, MUMBAI (APPELLANT) (RESPONDENT) ITA. NO. 1288/MUM/2014 (A.Y: 2006 - 07 ) M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} UNIT NO. 101A & 102, PLOT B - 17, MORYA LANDMARK - 2, ANDHERI LINK ROAD, ANDHERI (W), MUMBAI - 400053 PAN: AAACG 5103 D V. ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 38, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SATISH MODY REVENUE BY : SHRI SATISH CHADRA RAJORE DATE OF HEARING : 14.12.2018 DATE OF PRONOUNCEMENT : 28 .02.2019 3 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} O R D E R PER C.N. PRASAD (JM) ITA.NOS. 7553/MUM/2013, 1288/MUM/2014 & 6962/MUM/2013 1. THESE THREE APPEALS ARE FILED BY THE ASSESSEE AND REVENUE FOR THE A .YS. 2006 - 07, 2007 - 08 AGAINST DIFFERENT ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER IN SHORT LD.CIT(A)] DATED 29.11.2013 & 20.09.2013 RESPECTIVELY , IN SUSTAINING T HE PENALTY LEV IED U/S. 271(1)(C) OF THE ACT. 2. THE ASSESSEE CHAL LENGED THE ORDER OF THE LD. CIT(A) IN SUS TAINING LEVY OF PENALTY ON MERITS AS WELL AS ON TECHNICAL GROUNDS. ADDITIONAL GROUNDS WERE ALSO RAISED BY THE ASSESSEE RAISING TECHNICAL GROUND STATING THAT PENALTY U/S. 271(1)(C) OF THE ACT WAS LEVIED WITHOUT SPECIFYING SPECIFIC LIMB OF SECTION . 271(1)(C) FOR VIOLATION OF WHICH ASSESSING OFFICER INTENTS TO IMPOSE PENALTY BY STRIKING OFF THE INAPPROPRIATE WORDS IN THE SHOW CAUSE NOTICE. SINCE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS PURELY A LEGAL GROUND THE SAME IS ADMITTED. 3. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE NOTICE ISSUED U/S. 2 74 R.W.S 271(1)(C) OF THE ACT SUBMITTED THAT THE ASSESSING OFFICER IS NOT CLEAR AS TO THE CHARGE FOR WHICH THE PE NALTY IS INITIATED I.E. EITHER FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS. REFERRING TO THE NOTICE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE 4 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} INAPPROPRIATE LIMB IN THE NOTICE WAS NOT STRIKE OFF. LD. COUNSEL FOR THE ASSESSEE R EFERRING TO THE ASSESSMENT O RDER SUBMITTED THAT THE ASSESSING OFFICER MERELY STATED THAT PENALTY PROCEEDINGS WERE INITIATED SEPARATELY. REFERRING TO THE NOTICE AND PENALTY ORDER , LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER DID NOT SPECIFY CHARGE FOR WHI CH THE PENALTY PROCEEDINGS WERE INITIATED BUT PENALTY WAS LEVIED STATING THAT HE IS SATISFIED THAT ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS WITHIN THE MEANING OF THE SECTION . 271(1)(C) OF THE AC T AND T HEREFORE, THE INITIATION OF PENALTY PROCEEDINGS ITSELF IS IMPROPER AND NOT VALID. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS COMPLETE NON - APPLICATION OF MIND BY THE ASSESSING OFFICER IN INITIATI NG PENALTY PROCEEDINGS AND T HEREFORE , LEVY O F PENALTY IS ILLEGAL , VOID, BAD IN LAW, INITIATED BY NON - APPLICATION OF MIND AND IS WITHOUT JURISDICTION AS THE PENALTY NOTICE ISSUED BY THE ASSESSING OFFICER DOES NOT STRIKE OFF THE IR RELEVANT PORTION THEREON. 4. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS OF THE COORDINATE BENCH ES : - A. DCIT V. M/S. PENNZOIL QUAKER STATE INDIA LTD., I N ITA.NO. 7386 & 7503 / MUM/20 14 DATED 12.01.2018 B. DCIT V. SHRI DAVAL D. SHAH IN ITA.NO. 1337/MUM/2016 & C.O.NO.08/MUM/2018 DATED 16.05.2018. 5. LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 5 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW, NOT ICE ISSUED U/S. 274 R.W.S 271(1)( C) OF THE ACT FOR INITIATION OF PENALTY PROCEEDINGS . WE OBSERVE THAT ASSESSING OFFICER DID NOT ST RIKE OFF AND SPECIFY THE CHARGE/ LIMB FOR WHICH HE IS PROPOSING TO INITIATE TH E PENALTY PROCEEDINGS. IN THE ASSESSMENT O RDER A .O. RECORDS THAT THE PENALTY PROCEEDINGS ARE INITIAT ED SEPARATELY. HOWEVER, IN THE P ENALTY O RDER PASSED U/S. 271(1)(C) OF THE ACT THE ASSESSIN G OFFICER RECORDS THAT HE IS SATISFIED THAT ASSESSEE HAS CONCEALED PARTICULARS OF INCOME AND / OR FURNISHED INACCURATE PARTICULARS WITHIN THE MEANING OF THE SECTI ON 271(1)(C) OF THE ACT. 7. AN IDENTICAL SITUATION HAS BEEN CONSIDERED BY THE COORDINATE BENCH IN M EHERJEE CASSINATH HOLDINGS V. ACIT IN ITA.NO. 2555/MUM/2012 DATED 28.04.2017 AS TO WHETHER THE ACTION OF THE ASSESSING OFFICER IN INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT WITHOUT STRIKING OFF ONE OF THE LIMBS AND WITHOUT SPECIFYING THE SPECIFIC CHARGE IN THE NOTICE INITIATING PENALTY PROCEEDINGS FOR INACCURATE PART ICULARS OF INCOME IN THE ASSESSMENT O RDER AND THE COORDINATE BENCH CONSIDERING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SAMSON PERINCHERY [39 2 ITR 4] AND ALSO VARIOUS DECISIONS HELD THAT ACTION OF THE ASSESSING OFFICER IN NON - S TRIKING OFF RELEVANT CLAUSE IN THE NOTICE SHOWS THAT T HE CHARGE BEING MADE AGAINST 6 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} THE ASSESSEE IS NOT FIRM THEREFORE PROCEEDINGS SUFFER F ROM NON - COMPLIANCE WITH PRINCIPL ES OF NATURAL JUSTI C E IN AS MUCH AS THE ASSESSING OFFICER HIMSELF IS NOT SURE OF THE CHARGE AND THE ASSESSEE IS NOT MADE A WARE AS TO WHICH OF THE TWO LIMBS OF SECTION 271(1)(C) OF THE ACT HE HAS TO RESPOND. 8. FOLLOWING THE ABOVE DECISION, SIMILAR VIEW HAS BE EN TAKEN BY THE COORDINATE BENCH IN THE CASE OF ORBIT ENTERPRISES V. ITO [60 ITR(TRIB . ) 252] . IN THE CASE OF DCIT V. SHRI DHAVAL D. SHAH (SUPRA) THE COORDINATE BENCH CONSIDERED SIMILAR AND IDENTICAL ISSUE AND FOLLOWING THE RATIO LAID DOWN IN THE DILIP N. SHROFF [210 CTR 228 ( SC )] AND THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SAMSON PERINCHERY (SUPRA) HELD THAT THE PENALTY PROCEEDINGS INITIATED BY THE ASSESSING OFFICER IS BAD IN LAW. WHILE HOLDING SO THE COORDINATE BENCH HELD AS UNDER: 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. WE BEGIN WITH THE DECISIONS RELIED ON BY THE LD. DR. IN THE CASE OF SMT. KAUSHALYA & ORS. (SUPRA), THE HONBLE BOMBAY HIGH COURT HELD: 9. WE WILL FIRST TAKE UP THE SHOW - CAUSE NOTICE DATED MARCH 29, 1972, PERTAINING TO THE ASSESSMENT YEARS 1968 - 69 AND 1969 - 70. THE ASSESSMENT ORDERS WERE ALREADY MADE AND THE REASONS FOR ISSUING THE NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C) WERE RECORDED BY THE INCOME - TAX OFFICER. THE ASSESSEE FULLY KNEW IN DETAIL THE EXACT CHARGE OF THE DEPARTMENT AGAINST HIM. IN THIS BACKGROUND, IT COULD NOT BE SAID THAT EITHER THERE WAS NON - APPLICATION OF MIND BY THE INCOME - TAX OFFICER OR THE SO - CALLED AMBIGUOUS WORDING IN THE NOTICE IMPAIRED OR PREJUDICED THE RIGHT OF THE ASSESSEE TO REASONABLE OPPORTUNITY OF BE ING HEARD. AFTER ALL, SECTION 274 OR ANY OTHER PROVISION IN THE ACT OR THE RULES, DOES NOT EITHER MANDATE THE GIVING OF NOTICE OR ITS ISSUANCE IN A PARTICULAR FORM. PENALTY PROCEEDINGS ARE QUASI - CRIMINAL IN NATURE. 7 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} SECTION 274 CONTAINS THE PRINCIPLE OF NAT URAL JUSTICE OF THE ASSESSEE BEING HEARD BEFORE LEVYING PENALTY. RULES OF NATURAL JUSTICE CANNOT BE IMPRISONED IN ANY STRAIGHT - JACKET FORMULA. FOR SUSTAINING A COMPLAINT OF FAILURE OF THE PRINCIPLES OF NATURAL JUSTICE ON THE GROUND OF ABSENCE OF OPPORTUNIT Y, IT HAS TO BE ESTABLISHED THAT PREJUDICE IS CAUSED TO THE CONCERNED PERSON BY THE PROCEDURE FOLLOWED. THE ISSUANCE OF NOTICE IS AN ADMINISTRATIVE DEVICE FOR INFORMING THE ASSESSEE ABOUT THE PROPOSAL TO LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DONE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON - STRIKING OF THE INACCURATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE. THE ENTIRE FACTUAL BACKGROUND WOULD FALL FOR CONSIDERATION IN THE MATTER AND NO ONE ASPECT WOULD BE DECISIV E. IN THIS CONTEXT, USEFUL REFERENCE MAY BE MADE TO THE FOLLOWING OBSERVATION IN THE CASE OF CIT V. MITHILA MOTOR'S (P.) LTD. [1984] 149 ITR 751 (PATNA) (HEAD NOTE): UNDER SECTION 274 OF THE INCOME - TAX ACT, 1961, ALL THAT IS REQUIRED IS THAT THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY TO SHOW CAUSE. NO STATUTORY NOTICE HAS BEEN PRESCRIBED IN THIS BEHALF. HENCE, IT IS SUFFICIENT IF THE ASSESSEE WAS AWARE OF THE CHARGES HE HAD TO MEET AND WAS GIVEN AN OPPORTUNITY OF BEING HEARD. A MISTAKE IN THE NOTICE WOULD NOT INVALIDATE PENALTY PROCEEDINGS. IN M/S MAHARAJ GARAGE & CO. (SUPRA), THE HONBLE BOMBAY HIGH COURT AT PARA 15 HELD: THE REQUIREMENT OF SECTION 274 OF THE INCOME TAX ACT FOR GRANTING REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER CANNOT BE STRET CHED TO THE EXTENT OF FRAMING A SPECIFIC CHARGE OF ASKING THE ASSESSEE AN EXPLANATION IN RESPECT OF THE QUANTUM OF PENALTY PROPOSED TO BE IMPOSED, AS HAS BEEN URGED. THE ASSESSEE WAS SUPPLIED WITH THE FINDINGS RECORDED IN THE ORDER OF RE - ASSESSMENT, WHICH WAS PASSED ON THE SAME DATE ON WHICH THE NOTICE U/S 271(1)(C) WAS ISSUED, INITIATING THE PROCEEDINGS OF IMPOSING THE PENALTY. THE ASSESSEE HAD SUFFICIENT NOTICE OF THE ACTION OF IMPOSING PENALTY. WE, THEREFORE, DO NOT FIND EITHER ANY JURISDICTION ERROR OR UNJUST EXERCISE OF POWER BY THE AUTHORITY. IN SKY LIGHT HOSPITALITY LLP (SUPRA), THE ASSESSEE (SKY LIGHT HOSPITALITY LLP) WHO HAD TAKEN OVER ON 13.05.2016 AND ACQUIRED RIGHTS AND LIABILITIES OF M/S SKY LIGHT HOSPITALITY PVT. LTD. UPON CONVERSION UNDER THE LIMITED LIABILITY PARTNERSHIP ACT, 2008, FILED A WRIT PETITION IMPUGNING NOTICE DATED 30.03.2017 ISSUED BY THE AO U/S 147/148 FOR THE AY 2010 - 11. THE CONTENTION OF THE ASSESSEE BEFORE THE HONBLE HIGH COURT WAS THAT NOTICE U/S 147/148 OF THE ACT DATED 30. 03.2017 WAS ADDRESSED AND ISSUED TO M/S SKY LIGHT HOSPITALITY PVT. LTD., PAN NO. AALCS3800N, A COMPANY WHICH HAD CEASED TO EXIST AND WAS DISSOLVED ON 13.05.2016. IT WAS STATED THAT THE SAID NOTICE ISSUED TO A DEAD JURISTIC PERSON IS INVALID AND VOID IN THE EYES OF LAW. ALSO CONTENTIONS WERE RAISED STATING THAT SECTION 292B WAS INAPPLICABLE. THE HONBLE DELHI HIGH COURT HELD AS UNDER: 21. OUR ATTENTION WAS DRAWN TO PARASHURAM POTTERY WORKS CO. LTD. V. ITO, CIRCLE I, WARD A, RAJKOT, (1977) 106 ITR 1 (SC) WHI CH RECORDS THAT THE ASSESSING OFFICER ENTRUSTED WITH THE TASK OF CALCULATING AND REALIZING TAX SHOULD FAMILIARIZE THEMSELVES WITH THE RELEVANT PROVISIONS AND BECOME WELL VERSED WITH THE LAW ON THE SUBJECT. THIS IS A SALUTARY ADVICE. INDEED, THERE HAVE BEEN LAPSES AND FAULTS RESULTING IN THE PRESENT LITIGATION. NOTICE UNDER SECTION 147/148 OF THE ACT WAS ISSUED AT THE END OF THE LIMITATION PERIOD. NOTICEABLY, ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2013 - 2014 WAS PASSED ON 31.03.20I6, ONE YEAR EARLIER . 8 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} SECO ND LAPSE IS ALSO APPARENT. DESPITE CORRECTLY NOTING THE BACKGROUND, NOTICE UNDER SECTION 147/148 OF THE ACT WAS NOT ADDRESSED IN THE CORRECT NAME AND EVEN THE PAN NUMBER MENTIONED WAS INCORRECT. NEVERTHELESS, HUMAN ERRORS AND MISTAKES CANNOT AND SHOULD NOT NULLIFY PROCEEDINGS WHICH ARE OTHERWISE VALID AND NO PREJUDICE HAD BEEN CAUSED. THIS IS THE EFFECT AND MANDATE OF SECTION 292B OF THE ACT. IN SMT. SHANTIDEVI MAHAVIR PRASAD GUPTA (SUPRA), THE TRIBUNAL HELD AS UNDER: 10. THE QUESTION BEFORE US IS NOT WHE THER THE INCOME IS OF THE NATURE OF NOTIONAL INCOME BUT THE QUESTION IS WHETHER THE ASSESSEE HAS FILED INACCURATE PARTICULARS OR CONCEALED THE TRUE FACTS. AS STATED HEREINABOVE, IN OUR HUMBLE OPINION, THE ASSESSEE HAS CONCEALED THE TRUE FACTS THEREBY FIL ED INACCURATE PARTICULARS. THEREFORE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). THE PENALTY U/S. 271(1)(C) IS LEVIABLE ON THE FACTS OF THE CASE. THE RELIANCE ON THE DECISION OF THE TRIBUNAL IS CLEARLY DISTINGUISHABLE ON THE F ACTS. WE, ACCORDINGLY CONFIRM THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. IN MS. LAUDRES AUSTIN (SUPRA), THE TRIBUNAL HELD THE FOLLOWING : IN THE INSTANT CASE ALSO WE HOLD THAT PENALTY PROCEEDINGS WERE INITIATED PROPERLY AS THERE IS NO DEFECT IN THE R ECORDING OF SATISFACTION BY THE AO AS WELL THERE IS NO DEFECT IN THE NOTICE ISSUED U/S 271 R.W.S. 274 OF THE 1961 ACT. THE DECISION OF HONBLE BOMBAY HIGH COURT IN SAMSON PERINCHERRY (SUPRA) IS CONCERNING THE ISSUANCE OF PENALTY PROCEEDINGS UNDER ONE LIMB WHILE LEVYING OF PENALTY UNDER ANOTHER LIMB OF SECTION 271(1)(C) WHICH IS NO PERMISSIBLE AS PER RATIO OF THIS DECISION. THE HONBLE SUPREME COURT IN SSAS EMERALD MEADOWS (SUPRA) WHILE DISMISSING SLP RECORDED FINDING THAT THE HONBLE LORDSHIPS DID NOT FIND ANY MERIT IN THIS PETITION WHICH MEANS RATIO OF DECISION OF HONBLE KARNATAKA HIGH COURT IN SSAS EMERALD MEADOWS IN ITA NO. 380 OF 2015 STOOD CONFIRMED. THE HONBLE KARNATAKA HIGH COURT IN SSAS EMERALD MEADOWS HAS AFFIRMED THE RATIO OF JUDGMENT OF MANJU NATHA COTTON AND GINNING FACTORY (SUPRA). WE HAVE ALREADY SEEN THAT HONBLE KARNATAKA HIGH COURT IN MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS AFFIRMED THAT ALTERNATE CHARGE IS POSSIBLE UNDER BOTH THE LIMBS SIMULTANEOUSLY. 9.1 IN THE INSTANT CASE, THE AO VIDE HIS ORDER U/S 143(3) DATED 28.12.2011 HAS INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. IN THE DRAFT PENALTY ORDER U/S 271(1)(C) DATED 24.03.2014, THE AO HAS IMPOSED PE NALTY OF RS.46,59,047/ - FOR CONCEALMENT OF INCOME. ALSO WE FIND THAT THERE IS NO PROVISION IN THE INCOME TAX ACT, 1961 FOR A DRAFT PENALTY ORDER U/S 271(1)(C) OF THE ACT. 9.2 IT WOULD BE APPOSITE TO REFER HERE TO THE DECISION IN DILIP N. SHROFF V. JCIT (2007) 210 CTR (SC) 228, WHEREIN IT HAS BEEN HELD : 83. IT IS OF SOME SIGNIFICANCE THAT IN THE STANDARD PROFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE THE FA CT THAT THE SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAGRAPHS WERE TO BE DELETED, BUT THE SAME HAD NOT BEEN DONE. THUS, THE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHER HE HAD PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD CONCEALED HIS INCOME OR HE HAD FURNISHED INACCURATE PARTICULARS. EVEN BEFORE US, THE LEARNED ADDITIONAL SOLICITOR GENERAL WHILE PLACING THE ORDER OF ASSESSMENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUATIONS. 84. THE IMPUGNED ORDER, THEREFORE, SUFFERS FROM NON - APPLICA TION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPLES OF 9 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} NATURAL JUSTICE. [SEE MALABAR INDUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME TAX, KERALA STATE, (2000) 2 SCC 718] IN CIT VS. SAMSON PERINCHERRY (ITA NO. 953, 1097, 1154 & 1226 OF 2014), THE H ONBLE BOMBAY HIGH COURT HELD: THEREFORE, THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SECTION 271(1)(C) OF THE ACT, FOR INITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT/PERMIT PENALTY BEING IMPOS ED FOR THE ORDER BREACH. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPOND TO THE GROUND ON WHICH THE PENALTY HAS BEEN INITIATED/NOTICE ISSUED. IT MUST, THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND OF WHICH THE PENALTY PR OCEEDINGS HAS BEEN INITIATED, AND IT CANNOT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAS NO NOTICE. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN DILIP N. SHROFF (SUPRA) AND SAMSON PERINCHERRY (SUPRA), WE HOLD THAT THE PENALTY PROCEEDINGS INITIATED BY T HE AO IS BAD IN LAW. WE MAY HEREIN OBSERVE THAT SINCE THE ORDER OF THE AO HAS BEEN HELD AS BAD IN LAW ON THE PRELIMINARY GROUND, THE OTHER GROUNDS RAISED BY THE REVENUE ON MERITS BEFORE US HAVING BEEN RENDERED AS ACADEMIC, ARE THUS NOT BEING DEALT WITH. 9. RESPECTFULLY FOLLOWING THE ABOVE SAID DECISION , WE HOLD THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S. 274 R.W.S 271(1)(C) OF THE ACT IS O N ACCOUNT OF NON - APPLICATION OF MIND AND T HEREFORE THE PENALTY PROCEEDINGS INITIATED ARE BAD IN LAW. THUS, WE D IRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEV IED U/S. 271(1)(C) OF THE ACT. 10. AS WE HAVE HELD THAT THE PENALTY BE DELETED ON THE PRELIMINARY POINT , THE OTHER ARGUMENTS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE ARE NOT BEING DEALT WITH AS THEY BECOME ONLY ACADEMIC. 11. FACTS AND CIRCUMSTANCES BEING IDENTICAL THE DECISION RENDERED FOR THE A .Y. 2006 - 07 IS APPLICABLE MUTATIS - MUTANDIS TO THE APPEAL FOR THE A .Y. 2007 - 08. THUS , THE ASSESSING OFFICER IS DIRECTED TO DELETE THE PENALTY LEV IED U/S. 271(1)(C) OF THE ACT FOR THE A.Y. 2007 - 08 . 10 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} 12. SINCE WE HAVE HELD THAT INITIATION OF PENALTY PROCEEDINGS ITSELF IS BAD IN LAW AND DIRECTED THE ASSESSING OFFICER TO DELETE THE PENALTY THE REVENUES APPEAL IN ITA.NO. 6962/ MUM/ 2013 FOR THE A .Y. 2007 - 08 C HALLENGING THE ORDER OF THE LD. CIT(A) IN PARTLY DELETING THE PENALTY ON CERTAIN ADDITION/ DISALLOWANCES BECOMES INFRUCTUOUS AND THE SAME IS DISMISSED. 13. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED ON PRELIMINARY POINT AND A PPE AL OF THE REVENUE IS DIS MISSED. ITA. NO. 5056/MUM/ 2011 (A.Y. 2007 - 08) 14. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS IN RESPECT OF SUSTAINING THE DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS. 57,79,240/ - WHICH WAS TREATED BY THE ASSESSING OFFICER AS UNEXPLAINED EXPENDITURE. 15. BRIEF LY STATED THE FACTS ARE THAT, DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ON PERUSAL OF THE ANNEXURE A 3 OF SEIZED MATERIAL NOTICED THAT AN AMOUNT OF RS. 3.5 CRORES IS STATED TO HAVE BEEN SPENT FOR THE PROJECT AIRPORT. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE ENTRIES IN VARIOUS LOOSE PAPERS SEIZED/ IMPOUNDED DURING THE COURSE OF SEARCH. ASSESSEE F ILED REPLY DATED 26.10.2009 STATING THAT THE COST OF PRODUCTION IS MENTIONED ON PAGE NO. 81 AND THE SEIZED PAPERS OF THE PICTURE AIRPORT WAS 11 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} ESTIMATED COST OF PROJECT AND THIS PROJECT COULD NOT SEE THE LIGHT OF THE DAY AND THERE IS NO PROGRESS ON THE FIL M AND FURNISH ED THE DETAILS OF THE EXPENDITURE TO THE EXTENT OF RS. 3,11,61, 7 4 9/ - . THUS, THE ASSESSING OFFICER DISALLOWED THE BALANCE AMOUNT OF RS. 57,79,240/ - OBSERVING THAT PAYMENTS TO OTHER PARTIES HAVE NOT BEEN CONCLUSIVE PROVED. 16. ON APPEAL THE LD. CIT (A) SUSTAINED THE ADDITION. 17. BEFORE US, THE LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE CAPTIONED A SSESSMENT YEAR, THE COMPANY WAS ASKED TO EXPLAIN CONTENTS OF VARIOUS LOOSE PAPERS FILES SEIZED/IMPOUNDED DURING THE COURSE OF SEARCH U/S. 132 OF THE ACT . THE COMPANY VIDE LETTER DATED 26.10.2009 & 29.12.2009 STATED THAT THE COST OF PRODUCTION AS MENTIONED ON PAGE NO. 81 OF ANNEXURE A3 RELATES E STIMATED COST OF PROJECT AIRPORT. UPTO 31.03.2007, ONLY RS. 19.18 LAKHS WERE SPENT ON THE PROJECT AIRPORT. THE PROJECT COULD NOT SEE THE LIGHT OF THE DAY AS IT NEVER COMPLETED AND THUS THERE WAS NO PROGRESS ON THE FILM. TOTAL AMOUNT OF RS. 3,11,61,749/ - WAS INCURRED FOR THE SAID PROJECT. THE AMOUNT MENTIONED O N PAGE NO . 26, 27 & 28 OF THE PAPER BOOK OF RS. 3.50 CORES IS AN APPROXIMATE ROUNDED FIGURE. THE LOOSE PAPER WAS A LETTER BY THE V.P. FINANCE TO THE YES BANK FOR THE P ROPOSAL FOR RAISING FUND FOR THE PRODUCTION OF THE SAID PROJECT. DETAILS IN 12 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} THE GIVEN L ETTER WERE APPROXIMATE COST IN ROUNDED FIGURES TO APPRAISE BANK ABOUT THE APPROXIMATE EXPENSES TO BE INCURRED BY THE COMPANY FOR THE PROJECT. THE WORD APPROXIMATE CLEARLY INDICATE THE FIGURE WRITTEN IS A MERE ESTIMATED FIGURE AND NOT AN ACTUAL EXPENSE I NCURRED DURING THE YEAR. NO ADDITION CAN BE MADE MERELY ON THE BASIS OF SURMISE AND CONJECTURE. FURTHER IT MAY BE NOTED THAT THE SAID PAGES PERTAIN TO SUBSEQUENT A SSESSMENT YEAR HENCE NO ADDITION CAN BE MADE DURING THE YEAR. THE COMPANY HAS FURTHER SUBM ITTED DETAILS OF EXPENDITURE INCURRED FOR THE PROJECT AIRPORT TILL DATE AS A DDITIONAL EVIDENCES UNDER RULE 29 OF I.T. RULES DATED 29.10.2013. WHEREIN IT CONSISTS OF LEDGERS OF TUSHAR HIRANDANI, SUNIEL SHETTY, SHEREVEER S. VAKIL ALONG WITH THEIR FORM 16A AND ENTIRE LEDGER ACCOUNT OF PROJECT AIRPORT. IT IS CLEARLY EVIDENT THAT ALL THE PAYMENTS ARE DONE THROUGH BANKING CHANNELS AND BY DEDUCTING TDS AS PER THE PROVISIONS OF THE ACT. ACCORDINGLY, LD. COUNSEL FOR THE ASSESSEE REQUESTED TO DELETE SUCH ADDIT ION AND ALLOW RELIEF TO THE COMPANY. 18. L D. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND ALSO OPPOSED FOR ADMI SSION OF A DDITIONAL EVIDENCES. 19. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ASSESSEE B EFORE US FURNISHED COPY OF LEDGER ACCOUNT 13 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} OF TUSHAR HIRANDANI ALONG WITH COPY OF BANK STATEMENTS AND FORM 16A. SIMILARLY COPY OF LEDGER ACCOUNT OF SUNIL SHETTY ALONG WITH BANK STATEMENTS, COPY OF LEDGER ACCOUNT OF AIRPORT PROJECT FROM 01.04.20 0 8 TO 31.03.20009 AND COPY OF FORM 16A OF SHEREVEER S. VAKIL FOR THE A .Y. 2007 - 08 HAVE BEEN PRODUCED AS A DDITIONAL EVIDENCES B EFORE US. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THESE A DDITIONAL EVIDENCES HAVE BEEN OBTAINED FROM THE PARTIES , ASSESSEE COULD OBTAIN THESE EVIDENCES FROM THE PARTIES WITH SOME DIFFICULTY IN THE PROCESS THE SAME COULD NOT BE FILED BEFORE THE LOWER AUTHORITIES. HE SUBMITTED THAT SINCE THESE EVIDENCES GO TO THE ROOT OF THE MATTER THE SAME MAY BE ADMITTED. ON A PERUSAL OF THESE EVIDENCES , WE ARE OF THE VIEW THAT THESE EVIDENCES SHALL GO TO THE ROOT OF THE MATTER AND T HEREFORE THESE EVIDENCES ARE ADMITTED. THESE EVIDENCES HAVE TO BE EXAMINED BY THE ASSESSING OFFICER AS THE ASSESSEE FURNISHED THESE EVIDENCES ONLY BEFORE THIS TRIBUNAL. THU S , WE RESTORE THIS ISSUE TO THE FILE OF THE ASS ESSING OFFICER TO CONSIDER THE A DDITIONAL EVIDENCES FURNISHED BY THE ASSESSEE AND TO ADJUDICATE AFRESH IN ACCORDANCE WITH LAW, AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. 20. IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 14 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} ITA.NO. 5560/MUM/ 2011 (A.Y. 2007 - 08) 21. THIS APPEAL IS FILED BY THE REVENUE AND THE ONLY ISSUE IS IN RESPECT OF DELE TION OF PROPORTIONATE DISALLOWANCE OF INTEREST AND THE INTEREST FREE ADVA NCES GIVEN TO SISTER CONCERN. 22. BRIEFLY STATED THE FACTS ARE THAT, DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO JUSTIFY THE CLAIM OF EXPENDITURE WITH REFERENCE TO BORROWING S VIS - - VIS ADVANCES GIVEN TO VARIOUS PAR TIES. THE ASSESSEE CONTENDED THAT , IT HAS SUFFICIENT INTEREST FREE FUNDS TO ADVANCE TO PARTIES AND NO PART OF INTEREST BO RROW ED FUNDS WERE UTILIZED FOR GIVING INTEREST FREE FUNDS. IT IS ALSO SUBMITTED THAT FUNDS WERE GIVEN TO WHOLLY OWN ED SUBSIDIARY COMPANY AND IS VERY MUCH BUSINESS PURPOSE AND IS A COMMERCIAL EXPEDIENCY. IT IS ALSO SUBMITTED THAT THE ADVANCES TO OTHER PARTIES WERE GIVEN IN THE ORDINARY COURSE O F BUSINESS TO THE PARTIES WITH WHOM ASSESSEE HAD BUSINESS RELATION AND THE PART IES ARE WORKING FOR ASSESSEES PROJECTS OF FILM PRODUCTIONS. THEREFORE, IT WAS CONTENDED THAT THE ADVANCES GIVEN ARE FO R THE PURPOSES OF BUSINESS AND T HEREFORE NON - CHARGING OF INTEREST IS FULLY JUSTIFIED. NOT CONVINCED WITH TH E SUBMISSIONS OF THE ASSESSE E, THE ASSESSING OFFICER DISALLOWED THE PROPORTIONATE INTEREST HOLDING THAT ASSESSEE DI D NOT INCUR EXPENDITURE WHOLLY AND EXCLUSIVEL Y FOR THE 15 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} PURPOSE OF BUSINESS. ON APPEAL THE LD. CIT(A) DELE TED THE INTEREST DISALLOWANCE. 23. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. FURTHER , REFERRING TO PARA 6.3 OF THE ASSESSMENT O RDER THE L D. DR SUBMITTED THAT THE ASSESSEE HAS NOT ES TABLISHED ONE TO ONE NEXUS AND T HEREFORE, THE ASSESSING OFFICER HAS RIGHTY DISALLOW ED THE PROPORTIONATE INTEREST. 24. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE DISALLOWANCE OF PROPORTIONATE INTEREST EXPENSES OF RS. 1,41,81,486/ - U/S. 37 OF THE ACT WAS MADE ON THE BASIS THAT THE COMPANY HAD BORROWED FUNDS AND PART OF IT W AS GIVEN AS INTEREST FREE LOANS. THE COMPANY CONTENDED THAT IT HAD ITS OWN FUNDS AND NO PART OF THE BORROWED FUNDS WERE UTILIZED FOR ADVANCE FREE LOANS. THE COMPANY HAD GIVEN ADVANCES FOR THE PURPOSE OF BUSINESS. THE FUNDS WERE TRA NSFERRED TO SUBSIDIARIES FOR THE RUNNING OF BUSINESS . THEREFORE, TH E DELETION DONE BY THE LD. CIT(A) IS CORRECT AND SHOULD BE UPHELD. LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. RELIANCE UTILITIES AND POWER LTD., [313 ITR NO. 340] WHERE IN IT WAS HELD THAT , WHERE THE ASSESSEE HAD ITS OWN FUNDS AS WELL AS BORROWED FUNDS AND IT ADVANCED FUNDS TO ITS SISTER CONCERNS FOR ALLEGEDLY NON - BUSINESS 16 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} PURPOSES AND THE QUESTION AROSE WHETHER THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE INTEREST ON THE BORROWED FUNDS O N THE GROUND THAT THEY HAD BEEN USED FOR NON - BUSINESS PURPOSES, A PRESUMPTION CAN BE MADE THAT THE ADVANCES FOR NON - BUSINESS PURPOSES HAVE BEEN MADE OUT OF THE OWN FUNDS AND THAT THE BORROWED FUNDS HAVE NOT BEEN USED FOR THIS PURPOSES. ACCORDINGLY, THE DI SALLOWANCE OF THE INTEREST ON THE BORROWED FUNDS IS NOT JUSTIFIED. ACCORDINGLY, IT IS REQUESTED TO UPHELD THE ORDER OF THE LD.CIT(A). 25. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD. C IT(A) , WE OBSERVE THAT THE LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE THAT ASSESSEE HAS SUFFICIENT OWN FUNDS AND THE LOANS RECEIVED FROM THE BANKS WERE USED FOR THE BUSINESS PURPOSES AND NO PART OF THESE FUNDS WERE UTILIZED FOR GIVING INTEREST FREE ADVANCES. HE ALSO OBSERVED THAT RS. 29.97 CRORES WAS GIVEN TO VARIOUS PARTIES IN THE ORDINARY COURSE OF BUSINESS AS THESE PARTIES HAD BUSINESS RELATIONS WITH THE ASSESSEE. WIT H THESE FINDINGS AND PLACING RELIANCE ON THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. RELIANCE UTILITIES AND POWER LTD., [313 ITR 340] AND THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SA BUILDERS V. CIT [288 ITR 1] LD. CIT(A) HELD THAT THE ASSESSEE COMPANY HAS SUFFICIENT FUNDS TO ADVA NCE LOAN OF RS. 29.97 CRORES TO 17 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} M/S. MFSE D TOWARDS STAGE SHOW AND TO DISTRIBUTOR OF FILM PROJECTS WHICH WAS EXCLUSIVELY USED FOR BUSINESS PURPOSE OF THE ASSESSEE. NONE OF THESE FINDINGS HAVE BEEN REBUTTED WITH EVIDENCES BY THE REVENUE . THUS, WE SUSTAIN THE ORDER OF THE LD. CIT(A) AND REJECT T HE GROUNDS RAISED BY THE REVENUE. 26. IN THE RESULT, A PPEAL OF THE REVENUE IS DISMISSED . ITA.NO. 5559/MUM/2011 (A.Y. 2008 - 09) 27. THIS APPEAL IS FILED BY THE REVENUE FOR THE A.Y. 2008 - 09 AND THE ONLY GRIEVANCE IS THAT THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE PROPORTIONATE DISALLOWANCE OF INTEREST ON THE INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE. 28. THIS ISSUE IS IDENTICAL TO THE ISSUE RAISED BY THE REVENUE IN ITA.NO. 5560/MUM/2011 FOR THE A.Y. 2007 - 08. FACTS BEING I DENTICAL THE DECISION TAKEN THEREON APPLIES MUTATIS - MUTANDIS TO THIS ASSESSMENT YEAR ALSO. THUS FOLLOWING THE SAID DECISION, WE REJECT THE GROUNDS RAISED BY THE REVENUE. 29. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 18 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} ITA.NO. 5057 /MUM/2011 (A.Y. 2008 - 09) 30. THIS APPEAL IS FILED BY THE ASSESSEE RAIS ING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND IN LAW THE LD. ASSESSING OFFICER ERRED IN MAKING ADDITION OF ALLEGED PROVISION FOR BAD DEBTS AMOUNTING TO RS. 2,67, 12,500/ - FOR THE PURPOSE OF CALCULATING BOOK PROFIT U/S. 115JB OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND IN LAW THE LD. ASSESSING OFFICER ERRED IN MAKING ADDITION OF ALLEGED BAD DEBTS WRITTEN OFF IN THE PROF IT AND LOSS ACCOUNT AMOUNTING TO RS. 1,20,42,635/ - AS PER PARA 6.2 OF THE IMPUGNED ORDER. 31. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT NOTICED THAT ASSESSEE HAD DEBITED PROFIT AND LOSS ACCOUNT WITH THE FOLLOWING: A. PROVISION FOR DOUBTFUL ADVANCES RS.2,67,12,500/ - B. BAD DEBTS RS . 1,20, 42,635/ - 32. ASSESSEE WAS ASKED TO FURNISH THE DETAILS AND JUSTIFICATION FOR ITS CLAIM. ASSESSEE VIDE LETTER DATED 24.12.2009 STATED AS UNDER: - IN THE COMPUTATIONS OF INCOME SUBMITTED ON RECORD A SUM OF RS. 267.13 LACKS ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS, INTEREST ON INCOME TAX RS. 26.85 LACKS REMAINED TO BE DISALLOWED INADVERTENTLY. THE SAME NEEDS TO BE DISALLOWED AND WE HEREBY ENCLOSE THE REV ISED COMPUTATION OF TOTAL INCOME AND TO THE EXTENT THE RETURN MAY PLEASE BE TREATED S REVISED. 33. IN VIEW OF THE ABOVE SUBMISSIONS OF THE ASSESSEE , THE ASSESSING OFFICER ADDED BACK PROVISION FOR DOUBTFUL DEBT WHILE COMPUTING THE INCOME UNDER NORMAL PROVISION S OF THE ACT AND ALSO WHILE COMPUTING THE BOOK PROFITS U/S. 115JB OF THE ACT. 19 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} 34. WITH REGARD TO THE CLAIM FOR BAD DEBTS THE ASSESSEE CONTENDED THAT AS UNDER: THE REQUIREMENT OF JUSTIFYING THE WRITE OFF OF BAD DEBTS NO LONGER EXISTS. AS PER THE PROVISIONS OF LAW, THE WRITTEN OFF BAD DEBTS IN THE BOOKS OF ACCOUNT IS A SUFFICIENT COMPLIES FOR CLAIMING THE DEDUCTION. HOWEVER, WE SUBMIT THAT THE DEBTS WRITTEN OFF WERE NO LONGER RECOVERABLE AND HAVE BEEN ON THE BALANCE SHEET FOR MORE THAN TWO YEARS. THERE WAS NO HOPE OF ANY RECOVERY AND EVEN TILL DATE, NOT SINGLE PENNY HAS BEEN RECOVERED FROM THESE PARTIES. THEREFORE, THE CLAIM IS PERFECTLY IN ORDER. THE COPY OF LEDGER ACCOUNT IS ENCLOSED HEREWITH. 35. HOWEVER, ASSESSING OFFICER OBSERVING THAT THE ASSESSEE HAD NOT PROVED THAT T HE AMOUNT WRITTEN OFF WAS ALREADY SHOWN AS INCOME IN THE EARLIER ASSESSMENT YEAR WHICH IS A PRE - REQUISITE FOR ALLOWING THE CLAIM OF BAD DEBTS AS PER SECTION 36(2) OF THE ACT, H E DISALLOWED THE SAME U/S. 36(1)( VII ) OF THE ACT . 36. ON APPEAL TH E LD. CIT(A) TAKING NOTE OF THE FACT T HAT IN THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS AGREED THAT IT HAD WRONGLY DEBITED THE PROVISION OF DOUBTFUL DEBTS AND FILED A REVISED COMPUTATION OF INCOME ADDING BACK THE SAID PROVISION TO INCOME RETURNED , SUSTAIN ED THE ADDITION. LD. CIT(A) ALSO REFERR ED TO THE DECISION OF THE HONBLE MADRAS HIGH COURT I N THE CASE OF DCIT V. BEARDSCELL LTD [244 ITR 256] WHEREIN IT HAS BEEN HELD THAT PROVISIONS FOR BAD AND DOUBTFUL DEBTS WHICH WAS WRITTEN OF F IN PROFIT AND LOSS ACCOUNT IS INCLUDABLE IN BOOK PROFITS. 37. SIMILARLY, THE CLAIM FOR BAD DEBTS WRITTEN OFF OF RS. 1,20,42,635/ - , WAS REJECTED ON THE GROUND THAT NO EVIDENCES TO PROVE THAT THESE 20 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} AMOUNT S WERE WRITTEN OFF IN THE BOOK S WERE SHOWN AS INCOME IN TH E EARLIER YEAR WAS FURNISHED BEFORE HIM. 38. BEFORE US , IN SO FAR AS THE PROVISION MADE FOR DOUBTFUL DEBTS ARE CONCERNED, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESS EE NOT ONLY DEBITED PROFIT AND LOSS ACCOUNT WITH THE PROVISION BUT ALSO REDUCED FROM DEBTORS AND T HEREFORE IT AMOUNTS TO WRITE OFF AS PER THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VIJAY A BANK . HE ALSO SUBMITS THAT PROVISION WILL NOT FALL UNDER CLAUSE ( C ) OF EXPLANATION OF SECTION 115JB OF THE ACT. RELIANCE IS PLACED O N THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. SALGAONKAR MINING INDUSTRIES PVT. LTD., [ 235 TAMXMANN.COM 96] AND THE FULL BENCH DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. VODAFONE ESSAR GUJARAT LTD., [397 ITR NO . 55] . 39. IN SO FAR AS THE CLAIM FOR BAD DEBTS IS CONCERNED , IT IS SUBMITTED THAT ASSESSEE HAS DEBITED PROFIT AND LOSS ACCOUNT WITH BAD DEBTS AND WRITTEN OFF IN THE BOOKS. IT IS SUBMITTED THAT THE REASON FOR DISALLOWANCE BY THE ASSESSING OFFICER IS THAT THE SAID AMOUNTS WER E NOT SHOWN TO BE OFFERED AS INCOME IN THE EARLIER ASSESSMENT YEARS. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE A DDITIONAL EVIDENCES FILED IN THE FORM OF LEDGER OF DEBTORS FOR EARLIER YEARS SUBMITTED THAT ASSESSEE HAS ACCOUNTED FOR 21 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} THES E DEBTS WRITTEN OFF AS INCOME IN EARLIER YEAR S . THEREFORE, THERE IS NO JUSTIFICATION IN REJECTING THE CLAIM. IT IS PRAY ED THAT THE A DDITIONAL EVIDENCES GO TO THE ROOT OF THE MATTER TO PROVE THAT THE ASSESSEE HAD OFFERED TO TAX THE INCOME FROM DEBTORS IN EARLIER ASSESSMENT YEAR S THE SAME MAY BE ADMITTED. 40. LD. DR STRO NGLY OBJECTED FOR ADMISSION OF ADDITIONAL EVIDENCES AND STRONGLY PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW IN REJE CTING THE CLAIM S OF THE ASSESSEE . LD. DR FURTHER PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS . A. WHIRLPOOL OF INDIA LTD., V. UNION OF INDIA (355 ITR NO. 51 (DEL.)] B. PEERLESS GENERAL FINANCE & INVESTMENT COMPANY LTD., V. DCIT [396 ITR NO. 236 (CULCUTTA)] C. LUSTURE MANUFACTURES (P.) LTD. V. ITO [73 TAXMANN.COM 203 (AHMEDABAD - TRIB.) 41. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE A UTHORITIES BELOW AND THE C ASE LAWS. ON A PERUSAL OF THE ASSESSMENT O RDER , WE FIND THAT IN SO FAR AS THE PROVISION FOR DOUBTFUL ADVANCES IS CONCERNED THE ASS ESSEE VIDE LETTER DATED 29.12.2009 SUBMITTED THAT THIS AMOUNTS NEEDS TO BE DISALLOWED AND INADVERTENTLY THIS WAS NOT DONE SO AND THEREBY A REVISED PETITION OF TOTAL INCOME WA S FURNISHED AND REQUESTED THAT THE RETURN BE TREATED AS REVISED. IN VIEW OF THE A DMISSION OF THE ASSESSEE THE ASSESSING OFFICER ADDED BACK THE PROVISION FOR BAD DEBTS. IN OUR VIEW, WHEN ONCE THE ASSESSEE HIMSELF ADMITS AND AGREED 22 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} FOR THE DISALLOWANCE OF PROVISION FOR DOUBTFUL D EBT S AND FILED REVISED COMPUTATION THERE IS NO GRIEVANCE FOR THE ASSESSEE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RAMESHCHANDRA AND COMPANY V. CIT [168 ITR 375] HELD AS UNDER: - 14. WITH GREAT RESPECT TO THE LEARNED JUDGES OF THE PUNJAB AND HARYANA HIGH COURT WHO DECIDED CHHAT MULL AGGARWALS CASE [1979] 116 ITR NO. 694, WE ARE UNABLE TO AGREE. WHERE AN ASSESSEE HAS MADE A STATEMENT OF FACTS, HE CAN HAVE NO GRIEVANCE IF THE TAXING AUTHORITY TAXES HIM IN ACCORDANCE WITH THAT STATEMENT. IF HE CAN HAVE NO GRIEVANCE, HE CAN FILE NO APPEAL. THEREFORE, IT IS IMPERATIVE , IF THE ASSESSEES CASE IS THAT HIS STATEMENT HAS BEEN WRONGLY RECORDED OR THAT HE MADE IT UNDER A MISTAKEN BELIEF OF FACT OR LAW, THAT HE SHOULD MAKE AN APPLICATION FOR RECTIFICATION TO THE AUTHORITY WHICH PASSED THE ORDER BASED UPON THE STATEMENT. UNTIL RECTIFICATION IS MADE, AN APPEAL IS NOT COMPETENT. 42. THEREFORE, RESPECTFULLY FOLLOWING THE SAID DECISION , WE UPHOLD THE ORDER OF THE LD.CIT(A) IN REJECTING THE CLAIM OF THE ASSESSEE. THIS GROUND IS DISMISSED. 43. WI TH REGARD TO GROUN D NO. 2. I.E. CLAIM FOR BAD DEBTS WRITTEN OFF OF RS. 1,20,42,635/ - IS CONCERNED , WE OBSERVE THAT THIS DISALLOWANCE WAS MADE ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THAT THESE DEBTS WRITTEN OFF WERE CONSIDERED AS INCOME FOR TAXATION IN EARLIER YEAR S. ASSESSEE HAS NO W SUBMITTED A DDITIONAL EVIDENCES TO PROVE THAT THE SAID DEBTS WERE PART OF INCOME OFFERED TO TAX IN EARLIER YEARS. SINCE THESE A DDITIONAL EVIDENCES GO TO THE ROOT OF THE MATTER , WE ADMIT THE SAME . AS THESE EVIDENCES WER E NOT AVAILABLE BEFORE THE ASSESSING OFFICER, WE RESTORE THIS ISSUE TO THE FIL E OF THE ASSESSING OFFICER WHO SHALL EXAMINE 23 ITA. NOS. 5056, 5057, 5559, 5560/MUM/2011 ITA. NO. 6962, 7553/MUM/2013 ITA. NO. 1288/MUM/2014 M/S. KSS LIMITED {FORMERLY KNOWN AS M/S. K SERA SERA PRODUCTIONS LTD.} THE A DDITIONAL EVIDENCES AND ADJUDICATE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER PROVIDING ADEQUATE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE. 44. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 2 8 TH FEBRUARY, 2019 SD/ - SD/ - ( N.K. PRADHAN) (C.N. PRASAD) ACCOU NTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 28 / 02/2019 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM