The DCIT, Circle-8, Ahmedabad V. Shree Krishna Keshav Laboratories Ltd., Ahmedabad

ITA 700/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6194 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-04-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Initiation of penalty proceedings; Bad and doubtful debts; Difference of opinion; Capital expenditure
• Section: 27

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.700/AHD/2014 ( / ASSESSMENT YEAR : 2003-04) DY. COMMISSIONER OF INCOME-TAX, CIRCLE-8, AHMEDABAD. / VS. SHREE KRISHNA KESHAV LABORATORIES LTD. DEVASHISH, 3 RD FLOOR, NR. HOTEL CLASSIC GOLD, OFF. C.G. ROAD, NAVRANGPURA, AHMEDABAD - 380009 ./ ./ PAN/GIR NO. : AADCS 0519 G ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI JAMES KURIAN, SR.D.R. / RESPONDENT BY : --NONE-- / DATE OF HEARING 19/04/2017 !'# / DATE OF PRONOUNCEMENT 21/04/2017 $% / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XIV, AHMEDABAD, DATED 23/12/2013 FOR THE ASSESSMENT YEAR (AY) 2003-04. ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 2 - 2. DEPARTMENT HAS BEEN TAKEN FOLLOWING GROUNDS OF A PPEALS: (I) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS )-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.46,67,536/- LEVIED U/S.271(1)(C) OF THE ACT. (II) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S)-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS TO IGNORE E XPLANATION 1 OF PROVISION OF SECTION 271(1)(C) OF THE ACT, WHI CH LAYS DOWN THAT WHERE ASSESSEES EXPLANATION IN RESPECT OF ANY MATTER WAS NOT FOUND SATISFACTORY, PROVISION OF SECTION 271( 1)(C) OF THE ACT, WERE ATTRACTED FOR FURNISHING INACCURATE PARTICULAR S OF INCOME. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- IN THIS CASE, THE RETURN OF INCOME FOR THE ASSESSME NT YEAR 2003-04 WAS FILED ON 28/11/2003 DECLARING LOSS OF RS.1,42,91,51 0/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS FINALI ZED ON 28/02/2006 ON TOTAL LOSS OF RS.4,24,070/-. 4. IN THIS SAID ORDER, THE AO HAS AMONG OTHER THING S, DISALLOWED AN AMOUNT OF RS.1,33,35,818/- BEING ADVANCES WRITTEN O FF AND ANOTHER SUM OF RS.1,46,345/- BEING LOANS TO THE STAFF MEMBERS W RITTEN OFF. DISALLOWANCE OF THESE ITEMS HAD BEEN A SUBJECT MATT ER OF APPEAL FILED BY THE ASSESSEE BEFORE THE ITAT. THE HONBLE ITAT, AHM EDABAD BENCH A IN ITA NO.1980/AHD/2006 DATED 21/05/2010 HAD DELETE D THE DISALLOWANCE OF RS.146345/- BEING LOANS TO STAFF ME MBERS WRITTEN OFF. AS REGARDS DISALLOWANCE OF RS.1,33,35,818/-, THE HONB LE ITAT HAS SET-ASIDE THE MATTER TO THE FILE OF THE AO. WHILE SETTING ASI DE THE MATTER, THE ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 3 - HONBLE ITAT DELIVERED FOLLOWING SPECIFIC DIRECTION TO THE AO, WHICH IS REPRODUCED BELOW: BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE O F THE ASSESSEE ARGUED THAT AS THE ADVANCE DID NOT RESULT IN ACQUIS ITION OF ANY CAPITAL ASSET OF ENDURING NATURE AND THEREFORE, THE SAME OU GHT TO HAVE BEEN ALLOWED AS REVENUE DEDUCTION TO THE ASSESSEE. FOR T HE ABOVE PROPOSITION, HE RELIED UPON THE DECISION IN THE CAS E OF PATNAIK & CO. LTD. VS. CIT[1986] 1611TR 365 (SC) WHEREIN IT WAS H ELD AS UNDER. I) THAT, SINCE THE QUESTION REFERRED TO THE HIGH CO URT WAS FARMED ON THE ASSUMPTION THAT IT HAD TO BE DECIDED IN THE FACTUAL MATRIX DELINEATED BY THE TRIBUNAL, THE HIGH COURT WAS WRON G IN RE- APPRECIATING THE EVIDENCE: ITS FINDING HAD TO BE VA CATED; II) THAT, ON THE FACTS, NO ENDURING BENEFIT WAS DER IVED BY THE APPELLANT BY THE INVESTMENT; III) THAT THE TRIBUNAL WAS RIGHT IN ITS CONCLUSION THAT THE LOSS SUFFERED BY THE APPELLANT ON THE SALE OF THE INVEST MENT WAS A REVENUE LOSS . WHERE GOVERNMENT BONDS OR SECURITIES ARE PURCHASED BY AN ASSESSEE WITH A VIEW TO INCREASING HIS BUSINESS WITH THE GOV ERNMENT OR WITH THE OBJECT OF RETAINING THE GOODWILL OF THE AUTHORITIES FOR THE PURPOSE OF HIS BUSINESS, THE LOSS INCURRED ON THE SALE OF SUCH BON DS OR SECURITIES IS ALLOWABLE AS A BUSINESS LOSS' THUS, FROM THE ABOVE, IT WAS OBSERVED THAT ADVANCE WAS GIVEN TO BOOST UP THE EXISTING BUSINESS OF THE ASSESSEE AND AS SUC H ADVANCE HAD NOT RESULTED IN ACQUISITION OF ASSET OF A CAPITAL NATUR E, THE LOSS SUFFERED BY THE ASSESSEE WAS HELD ALLOWABLE AS A REVENUE LOSS B Y THE HON'BLE SUPREME COURT. IN THE INSTANT CASE, WE FIND THAT TH E ADVANCES WERE GIVEN FOR SETTING UP OF NEW PROJECTS SUCH AS RS.31, 95,961/- WERE GIVEN TO SHRI BIOGUARD LABORATORIES FOR SETTING UP OF A N EW UNIT IN U.P., RS.34,59,684/- WERE GIVEN TO ETEXIR PHARMACEUTICALS FOR MACHINERY, RAW MATERIALS, PACKING MATERIALS, ETC. TO SET UP T HE NEW UNIT, ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 4 - RS.8,85,355/- WERE GIVEN TO CHANDRA AGRO PVT. LTD. FOR SETTING UP A MANUFACTURING UNIT, WHICH DID NOT MATERIALIZE, SIMI LARLY OTHER ADVANCES WERE MADE FOR ACQUIRING CAPITAL ASSETS AND NEW UNIT S OF PLANTS. NO MATERIAL WAS BROUGHT ON RECORD BY EITHER OF THE PAR TIES OR THE LOWER AUTHORITIES TO SHOW THAT WHETHER THESE PROJECTS WER E FOR THE BENEFIT OF EXISTING BUSINESS OR WERE FOR EXPANSION OF THE EXIS TING BUSINESS OR WAS FOR COMMENCEMENT OF A NEW AND INDEPENDENT BUSINESS. IN OUR CONSIDERED VIEW, FINDING OF THE ABOVE FACT IS ESSEN TIAL TO ADJUDICATE THE ISSUE UNDER CONSIDERATION IN LIGHT OF THE ABOVE DEC ISION OF THE HON'BLE SUPREME COURT THUS. THUS, WE HAVE NO OPTION BUT TO RESTORE THE MATTER BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER F OR PROPER VERIFICATION OF THE FACTS OF THE INSTANT CASE AND THEREAFTER, DE CIDING THE ISSUE AFRESH IN LIGHT OF THE ABOVE DECISION OF THE HON'BLE SUPRE ME COURT. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE H AS ALSO CITED CERTAIN OTHER DECISIONS BEFORE US. AS WE HAVE RESTO RED THE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR RECON SIDERING HIS FINDING ON THE ABOVE RELEVANT FACT, WE CONSIDERED IT FIT THAT THE OTHER DECISION CITED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE A SSESSEE IS ALSO TO BE CONSIDERED BY THE LEARNED ASSESSING OFFICER. THEREF ORE, THE ASSESSEE SHALL BE AT LIBERTY TO MAKE ITS ENTIRE SUBMISSI ON BEFORE THE LEARNED ASSESSING OFFICER WHO SHALL CONSIDER THE SAME AT TH E TIME OF PASSING OF FRESH ORDER.' 5. IN THE RE-ASSESSMENT PROCEEDINGS, THE A.O. REQUE STED TO PRODUCE FULL DETAILS AND EVIDENCES IN SUPPORT OF ITS CONTENTION IN VIEW OF THE SPECIFIC DIRECTION OF THE HON'BLE ITAT. FURTHER, THE A.O. AF FORDED VARIOUS OPPORTUNITIES TO THE A.R. OF THE ASSESSEE AND REPEA TEDLY REQUESTED FOR FURNISHING FULL DETAILS AND EVIDENCES FOR VERIFICAT ION OF THE FACTS AS TO WHETHER THE ADVANCES WERE GIVEN FOR SETTING OFF OF NEW PROJECTS OR WERE GIVEN TO BOOST UP THE EXISTING BUSINESS OF THE ASSE SSEE SO THAT THE ISSUE COULD BE EXAMINED IN THE LIGHT OF THE DECISION OF H ON'BLE SUPREME COURT IN THE CASE OF PATNAIK & CO. LTD. VS. CIT AS DIRECT ED BY THE HON'BLE ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 5 - ITAT SINCE, NO DETAILS AND EVIDENCES WERE FURNISHED BY THE ASSESSEE AND THE AR OF THE ASSESSEE REQUESTED TO DECIDE THE CASE ON THE BASIS OF THE REPLY FILED BY HIM ON 25/08/2011, THE A.O. EXAMINED THE ISSUE IN THE LIGHT OF THE REPLY FILED BY THE ASSESSEE AND HELD A S UNDER: 'CONSIDERING THE ABOVE REPLY OF THE ASSESSEE AND THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CLAIM OF WRITE OFF O F ADVANCE OF RS.1,33,35,818/- AS BAD DEBTS IS NOT ADMISSIBLE U/S 36 OF THE IT. ACT AS THESE ADVANCES WERE GIVEN FOR SETTING UP NEW BUSINE SS AND FOR THE PURCHASE OF PLANT AND MACHINERY AND LAND. HENCE, TH IS CANNOT BE CLAIMED AS BAD DEBTS U/S. 36 OF THE IT. ACT. THEREF ORE, IT IS TREATED AS CAPITAL LOSS AND IS NOT ALLOWED AS A BUSINESS LOSS. ACCORDINGLY, THE CAIRN OF BAD DEBTS OF RS.1,33,35,818/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE'. 6. THE AO HELD THAT THESE ADVANCES WERE GIVEN FOR S ETTING UP NEW BUSINESS AND FOR THE PURPOSE OF PLANT AND MACHINERY AND LAND AND TREATED THE SAME AS CAPITAL LOSS AND NOT ALLOWED AS A BUSIN ESS LOSS AND INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF IT ACT VIDE N OTICE DATED 26/8/2011. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEES VIDE ITS LETTER DATED 28/9/2011 HAS REPLIED AS UNDER: 'WE ARE IN RECEIPT OF YOUR NOTICE U/S.274 R.W.S. 27 1 DATED 26/8/2011, WHEREIN IT HAS BEEN ALLEGED THAT THE ASSESSEE HAS F URNISHED INACCURATE PARTICULARS OF INCOME AND THE ASSESSEE HAS BEEN ASK ED TO SHOW CAUSE WHY AN ORDER IMPOSING PENALTY U/S.271(1)(C) SHOULD NOT BE PASSED FOR A,Y.2003-04. IN THIS CONNECTION, IT IS SUBMITTED THAT TH E PENALTY PROCEEDINGS U/S.271(1)(C) HAD BEEN INITIATED WITH RES PECT TO THE ADDITION/ DISALLOWANCE OF RS.1,33,35,818/- BEING THE AMOUNT O F BAD DEBT WRITTEN OFF. YOUR HONOR WILL KINDLY APPRECIATED THAT THE CL AIM FOR DEDUCTION OF BAD DEBT WRITTEN OFF WHICH CAME TO BE DISALLOWED BY THE AO, PER SE ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 6 - DOES NOT CONSTITUTE THE DEFAULT OF FURNISHING INACC URATE PARTICULARS OF INCOME. THEREFORE, PENAL PROVISIONS OF SECTION 271 (1)(C) IS NOT APPLICABLE ON THE FACTS OF THE ASSESSEE'S CASE. KIN DLY NOTE THAT THE ASSESSEE HAS WRITTEN OFF AN AMOUNT OF RS.1,33,35,81 8/-, BEING THE ADVANCES GIVEN FOR THE PURPOSE OF FURTHERANCE OF IT S BUSINESS. THE AMOUNT IN QUESTION IS ALLOWABLE AS DEDUCTION U/S.36 (1)(VII) AS BAD DEBT WRITTEN OFF IN VIEW OF THE RATIO OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF PATNAIK & CO. LTD. REPORTED IN 161 ITR 365. THEREFORE, A CLAIM FOR DEDUCTION U/S. 36(1)(VII) IN RESPECT OF A DVANCES WRITTEN OFF WHICH WAS MADE ON THE BASIS OF RATIO OF JUDGMENT OF SUPREME COURT IS, A BONAFIDE GENUINE CLAIM. DISALLOWANCE OF SUCH A CL AIM DOES NOT ATTRACT PENALTY U/S. 271(1)(C). IT IS FURTHER STATED THAT T HE EXPLANATION-1, BELOW SECTION 271(1) (C) IS ALSO NOT APPLICABLE TO THE FA CTS OF THE CASE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAD FURNISHED COMPLETE DETAILS WITH RESPECT TO THE AMOUNT WRITTEN OFF AND ALSO JUSTIFICATION FOR SUCH CLAIM. THE EXPLANATION FURNI SHED BY THE ASSESSEE WITH RESPECT TO THE CLAIM OF DEDUCTION WAS NOT FOUN D TO BE WRONG BY THE AO. THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO OFFER AN EXPLANATION OR SUBSTANTIATE AND PROVE THE EXPLANATI ON. THE ADDITION CAME TO BE MADE ONLY DUE TO DIFFERENCE OF OPINION I THE MIND OF THE AO AND THAT OF THE ASSESSEE WITH RESPECT TO THE TREATM ENT OF THE AMOUNT WRITTEN OFF. THEREFORE THE APPELLANT SAYS THAT INIT IATION OF PENALTY PROCEEDINGS U/S.271 (1)(C) IS TOTALLY UNWARRANTED B Y FACTS AND UNJUSTIFIED IN LAW. THE PROCEEDINGS MAY THEREFORE P LEASE BE DROPPED. IN THIS CONTEXT, RELIANCE IS PLACED ON THE SUPREME COURT JUDGMENT IN THE CASE OF CIT V/S. RELIANCE PETRO PRODUCTS PVT. LTD. REPORTED IN (2010) 322 ITR 158 (SC). IN THE JUDGMENT IN THAT CASE, THE HON'BLE SUPREME COURT HAS HELD AS UNDER: 'MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPEND ITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY U/S.271(1)(C). IF, WE ACCEPT THE CONTENTION OF THE REVENUE, THEN, IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WIL L INVITE ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 7 - PENALTY U/S.271(1)(C). THAT IS CLEARLY NOT INTENDME NT OF THE LEGISLATURE.' RELIANCE IS ALSO PLACED ON THE JUDGMENT OF THE KARN ATAKA HIGH COURT IN THE CASE OF CIT V/S. SLN TRADERS REPORTED IN (2011) 60 DTR (KAR.) 44. THIS JUDGMENT WAS DELIVERED ON 13 TH JULY, 2011. IN THIS CASE, THE HON'BLE KARNATAKA HIGH COURT HAS HELD THAT NO PENAL TY U/S.271 (1) (C) WITH RESPECT TO ADDITION MADE U/S.68 OF THE IT ACT. WITHOUT PREJUDICE TO THE ABOVE, IT IS FURTHER SUBMI TTED THAT THE PREDECESSOR AO HAS ALREADY PASSED AN ORDER U/S. 271 (1)(C) OF THE IT ACT ON 7/2/2007 FOR VERY SAME ASSESSMENT YEAR WITH RESP ECT TO THE ADDITION OF RS.1,33,35,818/-. AS PER THE ORDER U/S. 271(1)(C ) DATED 7/2/2007 FOR A.Y. 2003-04 PASSED BY THE ITO, WARD 8(3), AHMEDABA D PENALTY OF RS.47,18,757/- WAS IMPOSED WITH RESPECT TO THE DISA LLOWANCE/ADDITION OF RS.1,33,35.818/-. THE SAID PENALTY WAS DELETED B Y THE CIT (A)-XIV, AHMEDABAD VIDE APPELLATE ORDER NO. CIT (A)-XIV/WD.8 (3)/293/2006- 07 DATED 21/8/2007. THE COPY OF APPEAL EFFECT THERE OF IS SUBMITTED HEREWITH AS PER ANNEXURE-1 FOR THE KIND PERUSAL OF YOUR GOODSELF. THUS, THE ORDER U/S.271 (1)(C) ORIGINALLY PASSED BY THE AO I.E. ITO, WARD 8(3), AHMEDABAD IMPOSING PENALTY OF RS.47,18,7 57/- WITH RESPECT TO THE ADDITION OF RS.1,33,35,818/-IS ALREADY PASSE D. YOUR HONOUR WILL APPRECIATE THAT AS THE PENALTY PRO CEEDINGS U/S.271(1)(C) WITH RESPECT TO NE ADDITION OF RS.1,3 3,35,818/- HAS ALREADY BEEN CONCLUDED BY THE ITO, WARD 8(3) AHMEDABAD ON 7 /2/2011, INITIATION OF PENALTY PROCEEDINGS ONCE AGAIN U/S.27 1(1)(C) VIDE NOTED DATED 26/8/2011 IN RESPECT OF THE VERY SAME ADDITIO N IS ILLEGAL. IT IS THEREFORE REQUESTED TO KINDLY DROP THE PENALTY PROC EEDINGS'. 7 . THE SUBMISSION OF THE ASSESSEE HAS BEEN PERUSED BUT AFTER CAREFUL CONSIDERATION OF THE REPLY OF THE ASSESSEE, THE SAM E IS NOT FOUND ACCEPTABLE. FIRST OF ALL, THE CONTENTION OF THE ASS ESSEE THAT THE PENALTY ORDER U/S. 271(1)(C) OF THE ACT WAS ALREADY PASSED BY THE AO FOR THE VERY ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 8 - SAME ASSESSMENT YEAR WITH RESPECT TO THE ADDITION O F RS. 1,33,25,818/- IS NOT FULLY CORRECT. IT IS CLARIFIED THAT THE PENALTY ORDER OF A.O. DATED 07/02/2007 WAS DELETED BY THE LD. CIT(A) AND THE DE PARTMENT FILED THE APPEAL AGAINST THE SAID ORDER OF LD. CIT(A) BEFORE THE HON'BLE ITAT. THE HON'BLE ITAT VIDE ITS ORDER DATED 18/02/2010 IN ITA NO.3879/AHD/2007 SET ASIDE THE ORDER OF ID. CIT (A) DELETING THE PEN ALTY AND RESTORED THE MATTER TO THE ID. CIT (A) WITH THE DIRECTION THAT HE WILL RE-DECIDE THE LEVY OF PENALTY IN RESPECT OF DISALLOWANCE OF CAPIT AL EXPENDITURE WRITTEN OFF AMOUNTING TO RS. 1,33,35,818/- AFTER PROVIDING OPPORTUNITIES OF BEING HEARD TO THE ASSESSEE.' FURTHER, THE ID. CIT (A) VI DE HIS ORDER IN APPEAL NO. CIT(A) XIV/WD.8 (3)/293/06-07 DATED 27/03/2012 HAS HELD AS UNDER: 'I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER AND THE SUBMISSION MADE BY THE APPELLANT DURING THE COURSE OF APPELLATE PRO CEEDINGS. IT IS SEEN THAT THE ISSUE RELATED TO DISALLOWANCE OF CAPITAL E XPENDITURE WRITTEN OFF AMOUNTING TO RS.1,33 35,818/- HAS BEEN SET ASIDE BY THE ITAT TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION VIDE ITS ORDER D ATED 21/05/2007 IN ITA NO. 1980/AHD/2006. SINCE THE ISSUE OF ADDITION ON WHICH THE PENALTY WAS IMPOSED HAS BEEN SET ASIDE TO THE FILE OF THE A.O. THERE IS NO QUESTION OF IMPOSING PENALTY ON THAT AMOUNT. THE PE NALTY IMPOSED BY THE A.O. IS ACCORDINGLY DIRECTED TO BE DELETED. THE A.O. MAY, HOWEVER, REINITIATE THE PENALTY AFTER COMPLETING THE ASSESSM ENT ORDER AND TAKE FURTHER ACTION AS DEEMED FIT BY HIM.' 8. THUS, THE PENALTY PROCEEDINGS HAVE RIGHTLY BEEN INITIATED BY THE A.O. AND THE CONTENTION OF THE A.O. IN THIS REGARD IS UNTRUE. ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 9 - 9. SECONDLY, THE ASSESSEE DID NOT PRODUCE THE DETAI LS AND THE EVIDENCES EVEN AFTER THE SPECIFIC DIRECTION OF THE HON'BLE IT AT FOR VERIFICATION AND EXAMINATION OF THE FACT AS TO WHETHER THE ADVANCES WERE GIVEN FOR SETTING OFF OF NEW PROJECTS OR WERE GIVEN TO BOOST UP THE E XISTING BUSINESS OF THE ASSESSEE. SO THE ISSUE COULD NOT BE EXAMINED IN THE LIGHT OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PATNAIK & C O. LTD. VS. CIT AS DIRECTED BY THE HON'BLE ITAT BECAUSE OF THE NON CO- OPERATION OF THE ASSESSEE. FURTHER, THE OTHER CASE LAWS RELIED UPON BY THE ASSESSEE HAS NO DIRECT RELEVANCY WITH THE FACTS OF THE CASE AND IN VIEW OF THE FACT THAT THE ASSESSEE FAILED TO PRODUCE THE EVIDENCES IN SUPPORT OF ITS CONTENTION THAT THE ADVANCES WERE GIVEN TO BOOST UP THE EXISTING BU SINESS OF THE ASSESSEE. 10. IT IS PERTINENT TO MENTION HERE THAT THE AUDITOR HAS QUANTIFIED CLEARLY IN COLUMN NO. 17 (A) OF AUDIT REPORT IN FOR M NO. 3CD AS UNDER: 17. AMOUNTS DEBITED TO PROFIT & LOSS ACCOUNT B EING: (A) EXPENDITURE OF CAPITAL NATURE : LOANS & ADVANCES WRITTEN OFF (OUT OFF TOTAL AMOUNT WRITTEN OFF OF RS .1,34,82,163/- LOANS OF RS. 1,46,345/- GIVEN TO EMPLOYEES OF THE C OMPANY HAVE NOT BEEN CONSIDERED ON CAPITAL ACCOUNT). 11 . FROM THE PERUSAL OF THE AUDIT REPORT, IT IS CLEAR T HAT THE CA HAS SPECIFICALLY DISCLOSED THE FACT THAT THE EXPENDITUR E OF RS. 1,33,35,818/- WAS TO BE CONSIDERED BY THE ASSESSEE AS EXPENDITURE OF CAPITAL NATURE. THUS, THE ASSESSEE WAS DUTY BOUND TO ADD BACK THE E XPENDITURE OF CAPITAL NATURE OF RS.1,33,35,818/- IN THE COMPUTATION OF IN COME. INSTEAD OF ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 10 - FOLLOWING THE AUDITOR'S REMARK, THE ASSESSEE COMPAN Y WILLFULLY AND DELIBERATELY FURNISHED INACCURATE PARTICULARS TO AV OID PAYMENT OF TAX. 12. FINALLY, IT IS RELEVANT TO MENTION THAT THE ASSESSEE HAS CITED JUDGMENT IN THE CASE OF CIT V/S. RELIANCE PETRO PRODUCT PVT. LTD. IN THIS REGARD, IT IS PERTINENT TO NOTE THAT THE OBSERVATION OF HON'BL E SUPREME COURT IN THE CASE OF CIT, AHMEDABAD VS. RELIANCE PETROPRODUCT (P ) LTD. (322 ITR 158) IS AS UNDER: '......THE MEANING OF THE WORD ''PARTICULARS' USE D IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INA CCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARS.............' FURTHER, THE HON'BLE COURT HAS NOTED: 'THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPE ND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOC UMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE.' 13. FURTHER, THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SNL TRA DERS. IN THIS REGARD, IT IS RELEVANT TO MENTION THAT THE CASE LAW HAS NO DIRECT RELEVANCY WITH THE FACTS OF THE CASE OF THE ASSESSEE. THE CASE LAW IS OF VERY GENERAL IN NATURE AND HAS NO SPECIFIC BEARINGS WITH THE FACTS OF THE ASSESSEE'S CASE. IN THIS CONNECTION, IT MAY BE MENTIONED THAT THE TERM 'INAC CURATE PARTICULARS' HAS NOT BEEN DEFINED IN THE ACT. AS PER LAW LEXICON , THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS; THE DETAI LS OF A CLAIM OR THE ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 11 - SEPARATE ITEMS OF AN ACCOUNT. SIMILARLY, IN WEBSTER 'S DICTIONARY, THE WORD INACCURATE' HAS BEEN DEFINED AS 'NOT ACCURATE , NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH: ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT'. THUS READING THE WORDS IN CONJUNCTION, IT MEANS THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. 14. THE GUJARAT HIGH COURT, WHICH IS ALSO THE JURIS DICTIONAL HIGH COURT IN THE CASE AT HAND, HAS NOTED IN THE CASE OF A. M. SHAH & CO. V. CIT [2000] 108 TAXMANN 137(GUJ.)THAT: 'ANY CONCEALMENT OR INACCURACY IN THE PARTICULARS O F INCOME IN THE RETURN OCCURRING AT ANY STAGE UPTO AND INCLUSIVE OF THE ULTIMATE STAGE OF WORKING OUT OF TOTAL INCOME WOULD ATTRACT THE PENAL TY PROVISION OF SECTION 271(1)(C). EVERY FIGURE IN THE RETURN WHICH IS SET OPPOSITE TO THE ITEM OF INCOME IS A PARTICULAR INCOME, WHETHER THE FIGURE IS ONE WHICH IS STATED INDEPENDENTLY OF ANYTHING ELSE THAT APPEARS IN THE RETURN OR THE DOCUMENTS ACCOMPANYING IT OR WHETHER IT IS SOMETHIN G DERIVED FROM OTHER FIGURES ELSEWHERE STATED IN SUCH RETURN OR DO CUMENTS. FALSE RESULT MAY BE PRODUCED BY THE FALSITY OF ONE OR MORE OF TH E CONSTITUENT ITEMS IN THE RETURN. THE WORD INACCURATE PARTICULARS' WOULD COVER FALSITY IN THE FINAL FIGURE AS ALSO THE CONSTITUENT ELEMENTS OR IT EMS. THEY SIMPLY WOULD MEAN INACCURATE IN SOME SPECIFIC OR DEFINITE RESPEC T WHETHER IN THE CONSTITUENT OR SUBORDINATE ITEMS OF INCOME OR THE E ND RESULT'. 15. IN THE SAID CASE, HON'BLE GUJARAT HIGH COURT HA S, IN GREAT DETAIL, DEALT WITH THE ISSUES PERTAINING TO SECTION 271(1) (C). H OWEVER, FOR THE SAKE OF BREVITY, ONLY A PART OF THE OBSERVATION OF THE COUR T HAS BEEN PRODUCED HERE. VIDE THE ABOVE JUDGMENT, THE HON'BLE HAS CLAR IFIED AS REGARDS WHAT ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 12 - COULD FALL WITHIN THE PURVIEW OF THE TERM 'INACCURA TE PARTICULARS OF INCOMES. 16. IT IS FURTHER NOTED THAT THE HON'BLE SUPREME CO URT IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS 306 ITR 277 (2008) (SC) HAS NOTED THAT THE EXPLANATIONS APPENDED TO SEC. 271(1)(C) ENTIREL Y INDICATE THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING RETURN. IT IS ALSO HELD TH AT THE SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE AND THAT WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTR ACTING CIVIL LIABILITY AS U/S. 271(1 )(C) OF THE I. T. ACT. 17. IN VIEW OF THE DECISIONS DISCUSSED ABOVE, IT CL EARLY EMERGES THAT IN CASE ANY WHERE ANY PARTICULAR FILED IN THE RETURN O F INCOME BY THE ASSESSEE IS FOUND TO BE INACCURATE, ERRONEOUS OR FA LSE AND WHICH HAS AN IMPACT ON TOTAL INCOME RETURNED BY THE ASSESSEE. IT WOULD ATTRACT LIABILITY FOR PENALTY U/S. 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME. MOREOVER, AFTER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF DHARAMENDRA TEXTILES PROCESSORS (DISCUSSED ABOVE), PENALTY U/S. 271(1)(C) IS A 'CIVIL LIABILITY' AND ' MENS-REA' NEED NOT BE PROVED FOR THE LEVY OF PENALTY. MERE, ESTABLISHING OF INACCURACY IN PARTICULARS OF INCOME WOULD BE ADEQUATE FOR ATTRACT ING THE 'CIVIL LIABILITY' OF PENALTY U/S. 271 (1)(C) OF THE I. T. ACT. ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 13 - 18. FURTHER (191 TAXMAN 179) HON'BLE HIGH COURT OF DELHI IN COMMISSIONER OF INCOME-TAX VS. ZOOM COMMUNICATIO N (P.) LTD.(2010) STATED THAT: 'IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS I NCORRECT, IN LAW, WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCOME OF THE ASSESSEE, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING I NCORRECT, IN LAW, IS MALA FIDE THE EXPLANATION 1 TO SECTION 271(1) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE.' [PARA 19 ] 19. IT IS CLEAR THAT ANY CONCEALMENT OR INACCURACY IN THE PARTICULARS OF INCOME IN THE RETURN OCCURRING AT ANY STAGE UP-TO A ND INCLUSIVE OF THE ULTIMATE STAGE OF WORKING OUT OF TOTAL INCOME WOULD ATTRACT THE PENALTY PROVISION OF SECTION 271(1)(C). 20. IN VIEW OF THE ABOVE FACTS LEARNED ACIT WAS SAT ISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IT S INCOME AND LIABLE FOR PENALTY U/S.271(1) (C) OF THE IT. ACT. THEREFORE, L EVY A MINIMUM PENALTY @100% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED ON A CCOUNT OF FILING OF INACCURATE PARTICULARS OF INCOME, WHICH WORKS OUT T O RS.46,67,536/-, AGAINST THE MAXIMUM PENALTY OF RS.1,40,02,608/-ON T HE ASSESSEE. 21. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A), LEARNED CIT(A) HELD THAT HE HAS INCLINED WITH THE CONTENTION OF APPELLANT THAT ALL THE POSSIBLE D ETAILS AND FACTS RELATED TO ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 14 - ISSUE DISCLOSED BY THE APPELLANT AND ALSO SUBMITTED DURING THE PROCEEDINGS. IT IS THE CLAIM OF APPELLANT THOUGH CA PITAL IN NATURE AS NOTIFIED BY THE TAX AUDITOR BUT THE SAME WAS ALLOWA BLE AS BUSINESS LOSS AS PER THE RATIO OF HONBLE SUPREME COURT DECISION IN THE CASE OF PATNAIK & CO. LTD.(SUPRA). THE AO AFTER REJECTION OF APPELLAN TS EXPLANATION WHICH WAS NOT A FALSE EXPLANATION INVOKED THE PENALTY PRO VISIONS WITHOUT APPRECIATING THE FACTS AND LEGAL PROPOSITIONS. HE H AS INCLINED THAT RATIO OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA) SQUARELY APPLICABLE IN THE CASE OF APPELLAN T. THE APPELLANT COMPANY IS A SICK COMPANY AND THE RETURNED LOSS OF RS.1,42,91,510/- AFTER SUCH ASSESSMENT AT LOSS OF RS.9,56,913/- HAS NOT GIVEN ANY KIND OF ADVANTAGE TO APPELLANT SINCE ALL SUCH LOSSES CARRIE D FORWARD GOT LAPSED AND THEREFORE, THERE CANNOT BE ANY INTENTION BY THE APPELLANT FOR EVASION OF TAX. HE WAS ALSO INCLINED WITH THE APPELLANT THA T FACTS AND RATIO OF CASE RELIED ON BY AO IN PENALTY ORDER ARE DISTINGUISHABL E AND NOT APPLICABLE IN THE CASE OF APPELLANT IN VIEW OF SUBSEQUENT DECISIO NS (CONSIDERING THE SAID DECISION) AS RELIED ON BY APPELLANT. 22. FINALLY, AO DIRECTED TO DELETE THE PENALTY SO I MPOSED. 23. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IM PUGNED ORDER, IN OUR CONSIDERED OPINION, ORDER OF THE CIT(A) DOES NO T REQUIRE ANY KIND OF ITA NO.700/AHD/ 2014 DCIT VS. SHREE KRISHNA KESHAV LABORATORIES LTD. ASST.YEAR 2003-04 - 15 - INTERFERENCE. IN THE RESULT, WE UPHOLD THE ORDER OF THE CIT(A). IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. 24. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT I S DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 21/04/2017 SD/- SD/- IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; (PRADIP KUMAR KEDIA) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 21/04/2017 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-XIV, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY