COLORWORLD SOLUITONS P. LTD, MUMBAI V. ASST CIT 10(1), MUMBAI

ITA 7820/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9394 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: JIGAR SAIYE
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 7820/MUM/2011 (ASSESSMENT YEAR: 2008-09) M/S COLORWORLD SOLUTIONS PVT. LTD., 158, DANI COMPOUND, VIDYANAGRI MARG, CST ROAD, KALINA, SANTACRUZ (EAST), MUMBAI -400 098 PAN AABCC 5260 E VS ASST. COMMISSIONER OF INCOME-TAX, - 10(1), AAYAKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JIGAR SAIYE RESPONDENT BY : SHRI A.B. KOLI DATE OF HEARING: 30.10.2012 DATE OF PRONOUNCEMENT: 21.11.2012 O R D E R PER VIVEK VARMA, JM: THE APPEAL ARISES FROM THE ORDER OF CIT(A), DATED 22.09.201 1, WHEREIN, THE CIT(A) HAS SUSTAINED THE LEVY OF PENALTY OF RS 52,25,722 U/S 271(1)(C). THE GOA FILED ALONG WITH THE APPEAL FILED, HAVE BE EN REVISED AS PER VERIFICATION DATED 16.10.2012. WE, THEREFORE, P ROCEED ON THE REVISED GOA, WHICH ARE IN SUBSTITUTION TO THE ORIGINAL GOA. 2. THE FACTS EMANATING FROM THE APPEAL ARE THAT THE ASS ESSEE, A PRIVATE LIMITED COMPANY CLAIMED PROVISIONS OF DOUBTFUL DEBTS T O THE EXTENT OF RS. 15,61,859 DURING THE INSTANT YEAR. IN THE RE GULAR PROCEEDINGS, ON AN ENQUIRY FROM THE AO, THE ASSESSEE EX PLAINED THAT IT HAD CLAIMED THIS AMOUNT AS PROVISION FOR DOUBTFUL DEBTS DUR ING THE YEAR, BUT HAD ACTUALLY WRITTEN OFF THE AMOUNT IN THE SU BSEQUENT YEAR, WHERE, THE ASSESSEE HAD NOT CLAIMED AS EXPENSE. THE AS SESSEE FURTHER M/S COLORWORLD SOLUTIONS PVT. LTD. ITA 7820/MUM/2011 2 EXPLAINED THAT OUT OF RS. 15,25,722, THE ASSESSEE RECOVERE D RS. 1,15,687 IN ASSESSMENT YEAR 2009-10, WHICH WAS OFFERED TO TAX AND THE ACTUAL CLAIM IN ASSESSMENT YEAR 2009-10 WAS ONLY RS 14,46,172 . 3. THE AO DISALLOWED THE PROVISION AND ADDED BACK THE PR OVISION, AS MADE BY THE ASSESSEE IN THE INSTANT YEAR, AND ALSO IN ITIATED THE PENALTY U/S 271(1)(C). 4. IN THE PENALTY PROCEEDINGS AS WELL AS BEFORE THE CIT(A ), THE ASSESSEE PLEADED THAT IN SO FAR AS PENALTY IS CONCERNED, THE REVENUE AUTHORITIES WERE WRONG BECAUSE THERE WAS NO CONCEALMEN T OF ANY FACTS BY THE ASSESSEE AND NEITHER THERE WAS FURNISHING OF INACC URATE PARTICULARS OF INCOME, THEREFORE, PENALTY WAS NOT EXIGIBLE. THE ASSESSEE PLACED ITS RELIANCE ON THE DECISION OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD., REPORTED IN 322 ITR 158, WHEREIN IT WAS HELD T HAT EVEN IN CASES OF CLAIMS MADE, WHICH ARE OTHERWISE NOT ALLOWABLE, PEN ALTY WAS NOT EXIGIBLE. 5. THE CIT(A), REJECTED THE SUBMISSIONS AND SUSTAINED THE ORDER OF THE AO, LEVYING PENALTY U/S 271(1)(C). 6. AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE ITAT. 7. BEFORE US, THE AR CONCEDED THAT IT WAS AN INADVERTEN T MISTAKE COMMITTED BY THE ASSESSEE, BUT SUBMITTED THAT NEITHER T HERE WAS ANY REVENUE LOSS TO THE DEPARTMENT NOR IT WAS A CASE OF CO NCEALMENT OF INCOME NOR THERE WAS FURNISHING OF INACCURATE PARTICULARS O F INCOME, AS ALL THE FACTS FOR THE CURRENT YEAR AS WELL AS OF THE SU BSEQUENT YEAR WERE BEFORE THE AO, INCLUDING THE ACTUAL RECOVERY OF RS. 1,1 5,687 OUT OF THE CLAIMED AMOUNT OF RS 15,61,859. THE AR PLACED RELIANCE ON THE DECISION OF COORDINATE BENCH AT MUMBAI IN THE CASE OF ARR OW COATED PRODUCTS LTD. VS. ACIT, REPORTED IN 136 ITD 315, WHEREIN THE ASSESSEE M/S COLORWORLD SOLUTIONS PVT. LTD. ITA 7820/MUM/2011 3 HAD DEBITED AN AMOUNT BY WAY OF PROVISIONS FOR DOUBTFUL DE BTS IN 2004-05. THE BAD DEBTS WERE WRITTEN OFF IN 2005-06 & 20 06-07. THE AO, THEREIN, DISALLOWED THE CLAIM IN 2006-07, ON APPEAL, THE I TAT ALLOWED THE SAME. THE ITAT FURTHER HELD THAT THE AMOUNT DISALLOWED FOR 2006-07, ON APPEAL, THE ITAT ALLOWED THE SAME. THE ITA T FURTHER HELD THAT THE AMOUNT DISALLOWED FOR 2006-07 COULD HAVE BE EN ALLOWED IN ASSESSMENT YEAR 2004-05, IN THE LIGHT OF THE DECISION OF VIJAYA BANK VS CIT, REPORTED IN 323 ITR 166 (SC). THE AR SUBMITTED TH AT THOUGH THE ASSESSEE ADMITS IT TO BE AN INADVERTENT MISTAKE BUT IN THE LIGHT OF THE DECISION OF VIJAYA BANK, THE SAME COULD HAVE BEEN ALLO WED, WHICH THE ASSESSEE HAD ONLY CLAIMED AS PROVISION. 8. THE AR ALSO PLACED BEFORE US SYNOPSIS, WHEREIN RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: THIN AVOORAN SUGARS LTD VS ASST. CIT 117 STC 457 (S C) ACIT VS VIP INDUSTRIES 122 TTJ 289 (MUM) CIT VS KERALA SPINNERS LTD. 247 ITR 541 (KER) CIT VS RELIANCE PETROPRODUCTS P LTD. 322 ITR 158 (S C) JAYANT VEGOLIS & CHEMICALS P. LTD. 323 ITR 641 (BOM ) SURREL ENTERPRISES P. LTD. VS. ACIT 37 SOT 117 (AHD .) CIT VS. BRAHMAPUTRA CONSORTIUM LTD. 112 TAXMAN.COM4 86 9. THE AR SUBMITTED THAT IN ALL THESE JUDGMENTS, WHAT HA S BEEN HELD IS THAT EVEN THOUGH A CLAIM, WHICH IS OTHERWISE NOT A LLOWABLE, BUT IF THE DETAILS ARE PROVIDED FOR, IT CANNOT AMOUNT TO FURNISHIN G OF INACCURATE PARTICULARS. 10. THE AR, THROUGH THIS SYNOPSIS, ALSO PLACED RELIANCE ON KAMBAY SOFTWARE WAREHOUSING CORP VS. DCIT 31 SOT 15 3 (PUNE) CIT VS. HARYANA WAREHOUSING CORP 182 TAXMAN CHANDRA PAL BAGGA VS. ITAT 261 ITR 67 (RAJ) 11. THE AR CONCLUDED THAT EVEN THOUGH THE DECISION OF RELIANCE PETROPRODUCTS (P) LTD. WAS REFERRED TO BY THE ASSESSEE AND MENTIONED IN THE IMPUGNED ORDER, THE CIT(A) IGNORED THE RATIO DECIDED THEREIN M/S COLORWORLD SOLUTIONS PVT. LTD. ITA 7820/MUM/2011 4 AND ON THE CONTRARY PLACED RELIANCE ON THE DECISION OF DH ARMENDRA TEXTILES, AND IN THAT CONTEXT, EVEN THOUGH, THE ASSESSEE HAS ADMITTED OF INADVERTENT MISTAKE, STILL PENALTY IS NOT EXIGIBLE. 12. THE DR SUPPORTED THE DECISION OF THE REVENUE AUTHO RITIES AND FURTHER PLACED BEFORE US, THE DECISION OF COORDINATE BENC H AT AHMEDABAD IN THE CASE OF GUJARAT STATE FINANCIAL SERVICE S LTD. VS ACIT, REPORTED IN 39 SOT 570 (AHM), WHEREIN IT WAS HELD (HE AD NOTES), AO DISALLOWED THE DEDUCTION CLAIMED IN RESPECT OF PRO VISIONS FOR BAD & DOUBTFUL DEBTS AND PROVISIONS FOR DIMINUTION IN VALUE O F INVESTMENTS AND LEVIED PENALTY U/S 271(1)(C), THE PENALTY WAS RIGHTLY LE VIED . THE DR, THEREFORE, SUBMITTED THAT THE DECISIONS OF THE REVENUE AU THORITIES WERE CORRECT AND PLEADED THAT THE LEVY OF PENALTY BE SUSTAINED. 13. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES A ND HAVE ALSO PERUSED THE MATERIAL PLACED BEFORE US AND THE CASE LAWS RELIED UPON BY THE AR AND REFERRED TO IN THE IMPUGNED ORDER. THE SHORT ISSUE BEFORE US IS WHETHER THE CREATION OF PROVISION DURING THE YEAR W AS LEGALLY CORRECT OR NOT. 14. THE ISSUE IS WRITING OFF OF BAD AND DOUBTFUL DEBTS. SECTIO N 36(1)(VII), WHICH ALLOWS THE ASSESSEE TO WRITE OFF THE DEBTS DOE S NOT TALK ABOUT PROVISION, THEREFORE, THE WHOLE EDIFICE OF THE ASSESSEE CRACKS WHEN THE LAW DOES NOT ALLOW THE ASSESSEE TO TAKE A LIBER TY ON A PROVISION OF A SECTION. THE ASSESSEE CANNOT BE ALLOWED TO TAKE THE LIBERTY TO SLIP FROM THE PROVISIONS, BY TAKING RECOURSE OF AN INADVERTENT MISTAKE. 14.1 IT MUST BE MENTIONED THAT ALL THE CITATIONS REFERRED TO BY THE AR IN PRE PARAS, INCLUDING THE CASE OF RELIANCE PETROPRODUCTS (P) LTD. (SUPRA) CANNOT COME IN AID FOR THE ASSESSEE, BECAUSE EVEN IN RE LIANCE PETROPRODUCTS (SUPRA) , IT WAS A DISALLOWABLE CLAIM, WHICH DID NOT A FALL M/S COLORWORLD SOLUTIONS PVT. LTD. ITA 7820/MUM/2011 5 IN THE SUBSEQUENT YEAR. HERE IN THE INSTANT CASE, THE IS SUE IS OF AN ILLEGITIMATE CLAIM OF PROVISION, WHICH COULD NOT HAVE BEEN MADE, UNDER THE LAW. 15. WE ARE IN AGREEMENT, THAT ALL THE DETAILS AND PARTICU LARS WERE BEFORE THE AO, AND THERE WAS NO LOSS TO THE REVENUE, BU T ALL THESE EVENTS ARE ONLY SUBSEQUENT TO THE LEGAL VALIDITY OF THE C LAIM. SINCE IN THE INSTANT CASE, THE ASSESSEE HAD MADE A PROVISION WHIC H DID NOT HAVE A LEGAL SANCTION IN THE INSTANT YEAR, THE CASE OF THE ASSESSEE CANNOT ESCAPE THE RIGORS OF CLAUSE (C) OF SECTION 271(1) SP ECIALLY IN A CASE OF A COMPANY, WHERE THERE WAS TAR BESIDES STATUTO RY AUDIT CONDUCTED BY THE AUDITOR, THESE STATUTORY COMPLIANCES C ANNOT UNDER ANY CIRCUMSTANCE, COULD BE HELD TO BE INADVERTENT MISTAKE /ERROR COMMITTED BY THE ASSESSEE, AS THE AR HAD BEEN PLEADING AND TRYING TO SHIELD THE SAME AS INADVERTENCE. 16. WE, THEREFORE, HAVE NO ALTERNATIVE, BUT TO SUSTAIN THE ORDERS OF THE REVENUE AUTHORITIES, LEVYING THE PENALTY ON THE FACTS SPECIFIED TO THIS CASE. 17. THE APPEAL FILED BY THE ASSESSEE, IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 21/11/2012. SD/- (D. KARUNAKARA RAO) ACCOUTANT MEMBER SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATE: 21/11/2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. M/S COLORWORLD SOLUTIONS PVT. LTD. ITA 7820/MUM/2011 6 3) THE CIT (A)- 41 , MUMBAI. 4) THE CIT CENTRAL-III, MUMBAI, 5) THE D.R. C BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN