PETRON ENGINEERING CONSTRUCITON LTD, MUMBAI V. ACIT 10(2), MUMBAI

ITA 7461/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71636 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-07-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 01-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief; Wrong claim; Bad and doubtful debts
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH, MUMBAI , BEFORE SHRI H.L.KARWA , PRESIDENT & SHRI N.K.BILLAIYA , AM ITA NO. 7461 / MUM/ 20 1 0 ( ASSESSMENT YEAR : 20 0 5 - 20 0 6 ) PETRON ENGINEERING CONSTRUCTION LIMITED, 6 TH FLOOR, SWASTIK CHAMBERS, SION TROMBAY ROAD, CHEMBUR, MUMBAI - 400 071. VS. ACIT 10 (2), MUMBAI - 20. PAN/GIR NO. : A A C C P 8 775 G ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI VIJAY MEHTA /REVENUE BY : SHRI SANJEE V JAIN DATE OF HEARING : 2 9 TH DATE OF PR ONOUNCEMENT : 31 ST OCTOBER, 2013 O R D E R PER N.K.BILLAIYA , AM : WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE CORRECTNESS OF THE ORDER OF THE CIT(A) - 22 , MUMBAI , DATED 10 - 8 - 2010 , PERTAINING TO ASSESSMENT YEAR 20 0 5 - 200 6 . 2 . THE ONLY GRIE VANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS. 13,84,931/ - , LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 3 . A PERUSAL OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT, DATED 26 - 12 - 2007 , SHOW THAT THE PENALTY HAS BEEN LEVIED ON THE FOLLOWING DISALLOWANCES : - ITA NO. 7 461 / 1 0 2 ( A ) . TECHNICAL FEES U/S. 40(A)(IA) : RS.12,65,800/ - ( B ) . BAD DEBTS U /S.36(1)(VII) : RS.25,55,846/ - ( C ) . WORKS CONTRACT TAX U/S.43B : RS.7,94,792/ - 4 . AT THE VERY OUTSET, LEARNED COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THAT IN QUANTUM PROCEEDINGS, THE ASSESSEE DID NOT PRESS THE ADDITIONS MADE AT IN SL.NO.(A) & (B) MENTIONED ABOVE AND DID NOT CONTEST THE DISALLOWANCE MENTIONED IN (C) ABOVE. THEREFORE, SO FAR AS THE DISALLOWANCES ARE CONCERNED, THE MA TTER IS SETTLED. 5 . THE AO HAS DISALLOWED TECHNICAL FEES OF RS. 12,68,800/ - UNDER SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE WHILE MAKING THIS PAYMENT. THE CONTENTION OF THE ASSESSEE IS THAT IT HAS DEDUC TED TAX AT SOURCE IN THE YEAR FOR WHICH IT HAS PAID THE ADVANCES AT RS. 12,65,000/ - AND CLAIMED THE ADVANCES AS EXPENDITURE IN SUBSEQUENT YEAR. THEREFORE, WHEN THE ADVANCE WAS CLAIMED AS EXPENDITURE, THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE BECAUSE IT HAS ALREADY MADE DEDUCTION IN THE YEAR OF ADVANCE. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED BAD DEBTS AT RS. 8,70,31,665/ - OUT OF WHICH THE AO DISALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS. 2,54,74,850/ - . IN THE QUANTUM PROCEEDINGS, THE CIT(A) OBSERVED THAT THE BAD DEBTS WRITTEN OFF BY THE ASSESSEE FELL INTO THREE CATEGORIES (A) BAD DEBTS IN RESPECT OF PSU CLIENTS AT RS. 1,78,56,406/ - , (B) BAD DEBTS IN RESPECT OF M/S ITA NO. 7 461 / 1 0 3 GODREJ BOYCE MFG. CO. LTD. AT RS. 10,90,000/ - A ND (C) BAD DEBTS IN RESPECT OF PARTIES WHOSE INDIVIDUAL AMOUNT IS LESS THAN RS. 10 LACS FOR NOT FURNISHING DETAILED ANALYSIS AT RS. 65,28,174/ - . THE CIT(A) DELETED THE DISALLOWANCE IN RESPECT OF CATEGORY (A) & (B) MENTIONED HEREIN ABOVE AND RESTRICTED THE DI SALLOWANCE UNDER CATEGORY (C) TO RS. 25,55,846/ - . IN RESPECT OF ADDITIONS ON ACCOUNT OF WORK CONTRACT TAX, THE ASSESSEE CONTENDED THAT IT HAS CLAIMED WORKS CONTRACT TAX DEDUCTION ON THE BASIS OF CERTIFICATE PROVIDED BY THE AUDITORS OF THE COMPANY, WHICH HAS BEEN SUBMITTED ALONG WITH THE RETURN. THE ASSESSEE FURTHER SUBMITTED THAT THE DEDUCTION IN RESPECT OF WORKS CONTRACT TAX TAKES PLACE AT DIFFERENT SITES AND A CERTIFICATE TO THAT EFFECT IS ISSUED BY THE CLIENTS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESS EE CONTENDED THAT IT HAS NOT RECEIVED WORK CONTRACT TAX CERTIFICATE FROM FIVE PARTIES AMOUNTING TO RS. 7,94,792/ - . THE AO DISALLOWED THIS AMOUNT UNDER SECTION 43B OF THE ACT AS UNPAID TAX LIABILITY. IN PENALTY PROCEEDINGS, THE ASSESSEE REITERATED ITS STAND THAT IT HAS NEITHER FILED ANY INACCURATE PARTICULAR INCOME NOR HAS CONCEALED ANY PARTICULAR OF INCOME. MERELY BECAUSE CERTAIN DISALLOWANCES WERE MADE FOR THE ASSESSMENT YEAR, I P SO FACTO , WOULD NOT LEAD TO CONCEALMENT O R FILING OF INACCURATE PARTICULARS OF INCOME FOR THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE AO , REJECTING THE SUBMISSIONS OF THE ASSESSEE , WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS CONCEALED FACTS ITA NO. 7 461 / 1 0 4 WHILE FILING RETURN OF INCOME AND, THEREFORE, HIT BY EXPLANATION TO SECTION 271(1)(C) OF THE ACT AND LEVIED PENALTY. 6. THE ASSESSEE STRONGLY AGITATED THIS LEVY OF PENALTY BEFORE THE CIT(A), BUT WITHOUT ANY SUCCESS. 7 . BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE REITERATED ITS STAND AS WAS TAKEN DURING THE COURSE OF THE ASSESS MENT PROCEEDINGS. 8. PER CONTRA , LEARNED DR STRONGLY RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 9 . WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO PERUSED THE ASSESSMENT ORDER AND THE ORDER OF THE TRIBUNAL IN QUANTUM PROCEEDINGS. AS DISCUSSED HEREINABOVE, THE ASSESSEE HAS DEDUCTED TAX ON TECHNICAL FEES WHEN IT PAID THE ADVANCES. IN THE OPINION OF THE AO, WHEN THE ASSESSEE CLAIMED THE SAID AMOUNT AS EXPENDITURE, THE ASSESSEE SHOULD HAVE DEDUCTED THE TAX. THEREFORE, DIS ALLOWANCES WERE MADE UNDER SECTION 40(A)(IA) OF THE ACT. THIS CLEARLY SHOWS THAT THE ASSESSEE HAS NOT CLAIMED ANY FALSE OR BOGUS EXPENDITURE, THEREFORE, NO PENALTY IS LEVIABLE, SO FAR AS DISALLOWANCE ON TECHNICAL FEES IS CONCERNED. IN REGARD TO THE DISALLO WANCE ON BAD DEBTS, IT WAS SUBSTANTIALLY REDUCED BY THE CIT(A) IN THE FIRST APPELLATE PROCEEDINGS. NEITHER THE AO NOR THE APPELLATE AUTHORITIES HAS POINTED OUT THAT THE ASSESSEE HAS MADE FALSE OR BOGUS CLAIM OF BAD DEBTS. MERELY BECAUSE THE ASSESSEE COULD NOT ITA NO. 7 461 / 1 0 5 SUBSTANTIATE ITS CLAIM ON WRITE OFF THAT ITSELF COULD NOT BE A GROUND FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE LAST DISALLOWANCE IN RESPECT OF WORK CONTRACT TAX ALSO DOES NOT JUSTIFY THE LEVY OF PENALTY AS PER THE BUSINESS PRACTICE OF THE ASSESSEE. T HE DEDUCTION IN RESPECT OF WORKS CONTRACT TAX TAKES PLACE AT DIFFERENT SITES AND A CERTIFICATE TO THAT EFFECT IS TO BE ISSUED BY THE CLIENTS. HOWEVER, IN THE PRESENT CASE, THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT ITS CLIENTS MUST HAVE DEDUCTED TAX AT SOURCE AND ON THE BASIS OF ITS BUSINESS PRACTICE, THE ASSESSEE CLAIMED THE SAME AS ITS EXPENDITURE . A S NO CERTIFICATE WAS RECEIVED BY THE ASSESSEE , T HE LIABILITY REMAINED UNPAID IN ITS BALANCE SHEET WHICH WAS DISALLOWED BY THE AO UNDER SEC TION 43B OF THE ACT. IN OUR HUMBLE OPINION, THIS CANNOT TANTAMOUNT TO MAKING FALSE OR BOGUS CLAIM. 10 . CONSIDERING THE FACTS IN TOTALITY IN RESPECT OF ALL THE THREE DISALLOWANCES, WE DO NOT FIND ANY MATERIAL FACT BROUGHT ON RECORD TO JUSTIFY THAT THE CLAIM OF THE ASSESSEE IS BOGUS OR FALSE. THEREFORE, D RAWING SUPPORT FROM THE PRINCIPLE OF LAW LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS LIMITED, REPORTED IN 322 ITR 158 , WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO T O CANCEL THE PENALTY SO LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 11 . RESULTANTLY , THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 7 461 / 1 0 6 ORDER PRONOUNCED IN THE OPEN COURT ON 31/10 / 2013 . SD/ - ( ) ( H.L.KARWA ) SD/ - ( ) ( N.K.BILLAIYA ) / PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 31/10 / 2013 /PKM , 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, MUMBAI