The ACIT, Circle-8, Ahmedabad V. Pearl Energy & Infrastructure Ltd.,(Now Known as Sambhav Media Ltd.,), Ahmedabad

ITA 802/AHD/2004

• Counselvise Citation: 80220514 RSA 2004
• Duration Of Justice: 7 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-02-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 11-03-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Bad and doubtful debts; Difference of opinion; Revised return

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ %&' ( ) %&' ( ) %&' ( ) %&' ( ), , , , &* + &* + &* + &* + & ' & ' & ' & ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND B.P. JAIN, ACCOUNTANT MEMBER) ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 [ASSTT.YEAR: 2000-2001] ACIT, CIR.8 AHMEDABAD. /VS. PEARL ENERGY & INFRASTRUCTURE LTD. (NOW KNOWN AS SAMBHAV MEDIA LTD.) SAMBHAV HOUSE NR. JUDGES BUNGLOW, BODAKDEV, AHMEDABAD. ITA NO.843/AHD/2006 [ASSTT.YEAR: 2000-2001] SAMBHAV MEDIA LTD. 21, ADARSH COMPLEX SWASTIK CHAR RASTA, AHMEDABAD . /VS. ACIT, CIR.8 AHMEDABAD. ITA NO.1209/AHD/2006 [ASSTT.YEAR: 2000-2001] ACIT (OSD) RANGE-8, AHMEDABAD. /VS. SAMBHAV MEDIA LTD. 21, ADARSH COMPLEX SWASTIK CHAR RASTA, AHMEDABAD . ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 &/ REVENUE BY : SHRI S.K. GUPTA, CIT-DR 45 1 2 &/ ASSESSEE BY : SHRI S.N. SOPARKAR 6 1 57*/ DATE OF HEARING : 15 TH FEBRUARY, 2012 89: 1 57*/ DATE OF PRONOUNCEMENT : 02-03-2012 &; / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE ARE TWO REVENUES APPEALS AND ONE ASSESSEES APPEAL AND ALSO ONE ASSE SSEES CO FOR ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -2- ASSESSMENT YEAR 2000-2001 DIRECTED AGAINST THE ORDE RS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XI, AHMEDABAD. THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.802/AHD/2004 (A.Y 2000-2001 : REVENUES APPE AL) 2. THE FIRST GROUND OF THE REVENUES APPEAL READS A S UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.48,62,405/- BEING THE LOSS CLAIM ED BY THE ASSESSEE AS BUSINESS LOSS. 3. THE LEARNED CIT-DR SUBMITTED THAT THE ASSESSEE H AS NOT ACCEPTED THE CLAIM FILED BY M/S.MEKOR INTERNATIONAL CONSORTI UM (MEKOR FOR SHORT) FOR NON-FULFILLMENT OF THE CONTRACT FOR PURC HASE OF IMPORTED NEWS PRINT AND THE MATTER WAS VERY MUCH SUBJUDICE BEFORE THE HONBLE BOMBAY HIGH COURT. HE SUBMITTED THAT THE ASSESSEE HAS NOT MADE THIS CLAIM IN ITS ORIGINAL RETURN OF INCOME FILED, AS TH E COMPANY HAS NOT ACCEPTED THIS CLAIM AND THE MATTER WAS SUBJUDICE. HE SUBMITTED THAT IN THE REVISED RETURN OF INCOME, THE ASSESSEE HAS MADE A CLAIM AND A NOTE WAS AFFIXED WITH THE RETURN OF INCOME CLAIMING THAT THE ASSESSEE COMPANY WAS LIABLE TO PAY COMPENSATION IN RESPECT OF THE SU IT FILED BY THE MEKOR AGAINST THE ASSESSEE-COMPANY FOR NON-FULFILMENT OF CONTRACT FOR THE PURCHASE OF NEWS PRINT. THE LEARNED CIT-DR SUBMITT ED THAT IN SPITE OF FILING OF THE REVISED RETURN, THE ASSESSEE HAS NOT DEBITED THE AMOUNT CLAIMED BY THE MEKOR IN ITS BOOKS OF ACCOUNTS. H E REFERRED TO THE RELEVANT PARAS OF THE ASSESSMENT ORDER IN SUPPORT O F THE CASE OF THE REVENUE. HE RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ALEMBIC CHEMICAL WORKS LTD. VS. DCIT, 2 66 ITR 47 AND CIT VS. ASHWIN VANASPATI INDUSTRIAL P. LTD., 283 IT R 439. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE CIT(A). IN REPLY TO ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -3- A SPECIFIC QUESTION FROM THE BENCH REGARDING THE FA CT THAT WHETHER THIS AMOUNT HAS BEEN ALLOWED AS DEDUCTION IN THE SUBSEQU ENT YEARS AND WHETHER THIS AMOUNT HAS ACTUALLY BEEN PAID TO THE MEKOR AND THE YEAR IN WHICH SUCH PAYMENT WAS MADE, THE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT GIVE ANY SPECIFIC AND SATISFACTORY REPLY TO THE QUERY RAISED BY THE BENCH. HOWEVER, HE SUBMITTED THAT THE ISSUE MA Y BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH SUITABLE DIRECTI ON. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). WE FIND THAT A SUIT WAS FILED BY THE MEKOR AGAINST THE ASSESSEE-COMPANY BEFORE THE HONBLE BOMBAY HIGH COURT FOR NON-FULFILLMENT OF CONTRACT FOR PURC HASE OF IMPORTED NEWS PRINT AND THE ASSESSEE COMPANY HAS NOT ACCEPTED THE CLAIM AND THE MATTER WAS SUB-JUDICE DURING THE RELEVANT PERIOD. THE ASS ESSEE HAS NOT CLAIMED THE DEDUCTION OF THIS AMOUNT IN ITS ORIGINAL RETURN OF INCOME FILED AND HAS CLAIMED THE SAME IN THE REVISED RETURN OF INCOME BY MAKING A FRESH CLAIM ON ACCOUNT OF SUIT FILED BY THE MEKOR. THE HONB LE HIGH COURT HAS ADMITTED THE SUIT FILED BY THE MEKOR AGAINST THE ASSESSEE-COMPANY. HOWEVER, THE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT STATE AS TO WHETHER THE CLAIM OF MEKOR WAS DECIDED IN FAVOUR OF THE MEKOR AND AGAINST THE ASSESSEE-COMPANY AND IN WHICH YEAR THE ACTUAL PAYMENT WAS MADE BY THE ASSESSEE ON ACCOUNT OF NON-FULFILLMENT OF THE CONTRACT FOR PURCHASE OF IMPORTED NEWS PRINT AND WHETHER THE CLA IM IN THE SUBSEQUENT YEAR WAS MADE BY THE ASSESSEE-COMPANY. IN THESE FA CTS OF THE CASE, WE HOLD THAT IT SHALL BE IN THE INTEREST OF JUSTICE TO SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO VER IFY THE FACTS AND ALLOW THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT YEAR 20 00-2001 IN APPEAL BEFORE THE TRIBUNAL, PROVIDED, ANY SIMILAR CLAIM HA S NOT BEEN MADE BY THE ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -4- ASSESSEE IN ANY OF THE SUBSEQUENT ASSESSMENT YEARS AND THE CLAIM OF THE MEKOR HAS BEEN ALLOWED BY THE HONBLE BOMBAY HIGH COURT AND THE ASSESSEE HAS IN FACT COMPLIED WITH AND HAS PAID THE COMPENSATION SUBSEQUENTLY ON ACCOUNT OF LOSS FOR NON-FULFILLMENT OF THE CONTRACT FOR PURCHASE OF IMPORTED NEWS PRINT. WE DIRECT ACCORDI NGLY. 5. THE GROUND NO.2 OF THE REVENUES APPEAL READS AS UNDER: 2. THE LD.CIT(A)HAS ALSO ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.54,59 ,000/- 6. THE LEARNED CIT-DR RELIED ON THE ORDER OF THE AS SESSING OFFICER. HE REFERRED TO THE RELEVANT PARAGRAPHS OF THE ASSES SMENT ORDER IN SUPPORT OF THE CASE OF THE REVENUE. HE SUBMITTED THAT THE DETAIL OF ACTION TAKEN BY THE ASSESSEE FOR RECOVERY OF THE AMOUNT HAS NOT BEEN FILED BY THE ASSESSEE. HE SUBMITTED THAT THE ONUS IS ON THE ASS ESSEE THAT THE DEBT WAS INCURRED DURING THE COURSE OF THE BUSINESS AND PROP ER ACTION WAS TAKEN FOR RECOVERY THEREOF AND THE LOSS INCURRED IN THE RELEV ANT PERIOD ONLY. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NOW IT IS WELL SETTLED LAW THAT WHEN THE ASSESSEE HAS WRITTEN OFF DEBTS IN A P ARTICULAR YEAR, THE SAME HAS TO BE ALLOWED AS ALLOWABLE DEDUCTION TO THE ASS ESSEE. HE SUBMITTED THAT ALL THE BAD DEBTS ALLOWED BY THE CIT(A) REPRES ENTED TRADE DEBTS ONLY AND THE AMOUNTS PERTAINED TO THE PAYMENTS WHICH WER E NOT TRADE DEBTS, HAVE NOT BEEN ALLOWED BY THE CIT(A). 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). WE FIND THAT THE DEBTS PERTAINED TO NON-TRADE PARTIES HAVE NOT BEEN ALLOWED BY THE CIT( A) AS BAD DEBTS. IT IS NOT NECESSARY TO TAKE ANY LEGAL STEPS IN ORDER TO J USTIFY THE CLAIM OF THE BAD DEBTS. THE AMOUNT HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -5- THE ASSESSEE AND THIS FACT HAS NOT BEEN DISPUTED BY THE REVENUE. THE CIT(A) HAS PASSED A WELL REASONED ORDER WHILE ALLOW ING THE CLAIM OF THE ASSESSEE. THE CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE IS IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES AND FI NANCE AND IN BUSINESS VARIOUS DEBTS HAD ARISEN IN THE PAST. IN THESE FAC TS OF THE CASE, WE FIND THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) ON THIS ISSUE, WHICH IS CONFIRMED AND THE GROUND NO.2 OF THE REVENUES APPE AL IS DISMISSED. 8. THE GROUND NO.3 OF THE REVENUES APPEAL READS AS UNDER: 3. THE LD.CIT(A) HAS ALSO ERRED IN LAW AND ON FACT S IN DELETING THE DISALLOWANCE OF RS.3,61,22,730/- MADE ON ACCOUN T OF LOSS ON WIND MILLS AND CHANGE IN THE METHOD OF VALUATION OF STOCK. 9. THE LEARNED CIT-DR SUBMITTED THAT THE LOSS CLAIM ED BY THE ASSESSEE ON ACCOUNT OF WIND MILLS WAS DISALLOWED ON THREE COUNTS; FIRSTLY, THE LOSS DOES NOT PERTAIN TO THE RELEVANT YEAR, SEC ONDLY, IT IS A CAPITAL LOSS AND THIRDLY THE ASSESSEE HAS CHANGED ITS METHOD OF VALUATION OF CLOSING STOCK, WHICH WAS NOT PERMISSIBLE AS PER THE LAW. H E SUBMITTED THAT MERELY BECAUSE THE DIRECTORS OF THE ASSESSEE-COMPAN Y HAVE DECIDED TO WRITE OFF ITS WORK-IN-PROGRESS OF THE SAID WIND MIL LS POWER PROJECT, THE SAME DOES NOT BECOME ALLOWABLE AS REVENUE EXPENDITU RE. HE REFERRED TO THE RELEVANT PORTIONS OF THE ASSESSMENT ORDER IN SU PPORT OF THE CASE OF THE REVENUE AND HE SUBMITTED THAT VALUATION OF WORK-IN- PROGRESS OF WIND POWER PLANT, METHOD HAS BEEN CHANGED WITHOUT ANY VA LID REASON. THE ASSESSEE WAS CONSTANTLY FOLLOWING THE COST METHOD OF VALUATION WHICH WAS CONVENIENTLY CHANGED TO NET REALIZABLE VALUE. HE SUBMITTED THAT THIS DISTORTED PICTURE OF THE VALUATION DOES NOT RE FLECT THE TRUE STATE OF AFFAIRS OF THE BUSINESS OF THE ASSESSEE. HE RELIED ON THE ORDER OF THE ASSESSING OFFICER. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS OPPOSED THE ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -6- SUBMISSIONS OF THE LEARNED CIT-DR. HE SUBMITTED T HAT THE LOSS PERTAINED TO THE RELEVANT PERIOD AND THE ASSESSEE WAS HOPEFUL IN THE EARLIER YEARS AND IT WAS IN THE RELEVANT ACCOUNTING PERIOD THAT T HE ASSESSEE-COMPANY HAS DEICED TO CLOSE DOWN ITS ENERGY DIVISION. HE R EFERRED TO 10 TH ANNUAL REPORT OF THE BOARD OF DIRECTORS WHEREIN UNDER THE HEAD OPERATIONS DURING THE YEAR IT WAS SPECIFICALLY MENTIONED THAT THE GOVERNMENT OF GUJARAT NOT COMING OUT WITH ANY LONG TERM POLICY FO R DEVELOPMENT OF NON-CONVENTIONAL ENERGY SOURCES, ESPECIALLY WIND EN ERGY, HAS PROMPTED THE COMPANY TO HIVE OFF ITS ENERGY DIVISION DURING THE YEAR. REGARDING SECOND OBJECTION OF THE REVENUE THAT THE LOSS WAS A CAPITAL LOSS, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF BUYING AND SELLING OF WIND MILLS AND IT WAS VERY MUCH STOCK- IN-TRADE AND WAS SHOWN AS SUCH, YEAR AFTER YEAR. REGARDING THIRD OBJECTION OF THE CORRECT METHOD OF VALUATION, THE L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS WELL SETTLED THAT THE VALUATION CAN BE MADE ON COST OR MARKET PRICE WHICHEVER IS LESS. HE SUBMI TTED THAT THE ASSESSEE- COMPANYS TITLE TO THE ASSETS WERE DEFECTIVE AND IT WAS DECIDED TO WRITE OFF THE SAME AND THEREFORE THE NET REALIZABLE VALUE WAS NIL AND WAS DECLARED ACCORDINGLY. HE RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TA X V. GANGA CHARITY TRUST FUND, 162 ITR 612 AND ECHKE LTD. V. COMMISSIO NER OF INCOME-TAX, 310 ITR 44 IN SUPPORT OF HIS SUBMISSIONS. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE P ERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND ALSO CO PIES OF THE RELEVANT DOCUMENTS FILED IN THE COMPILATION BY THE ASSESSEE. WE FIND THAT THE ASSESSEE-COMPANY HAS DECIDED DURING THE RELEVANT PE RIOD TO CLOSE DOWN ITS ENERGY DIVISION. THE 10 TH ANNUAL REPORT OF THE BOARD OF DIRECTORS OF ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -7- THE ASSESSEE-COMPANY UNDER THE HEAD OPERATIONS DUR ING THE YEAR HAS SPECIFICALLY MENTIONED THAT THE GOVERNMENT OF GUJAR AT NOT COMING OUT WITH ANY LONG TERM POLICY FOR DEVELOPMENT OF NON-CO NVENTIONAL ENERGY SOURCES, ESPECIALLY WIND ENERGY, HAS PROMPTED THE C OMPANY TO HIVE OFF ITS ENERGY DIVISION DURING THE YEAR. THE MACHINES WERE SEIZED UNDER THE ORDER OF THE HONBLE BOMBAY HIGH COURT BASED ON THE PETITION MOVED BY A BANK HOLDING PRIOR CHARGE OVER THE MACHINES. CO NSIDERING THESE FACTS THAT THE ASSESSEES TITLE TO THE SAID MACHINES WERE DEFECTIVE, IT WAS DECIDED TO WRITE OFF THE SAME. IN THESE FACTS, WE ARE UNABLE TO UPHOLD THE FIRST OBJECTION OF THE REVENUE THAT THE LOSS DOES N OT PERTAIN TO THE RELEVANT YEAR. 11. REGARDING THE SECOND OBJECTION OF THE REVENUE T HAT THE LOSS WAS A CAPITAL LOSS, WE FIND THAT THE ASSESSEE WAS IN THE BUSINESS OF BUYING AND SELLING OF THE WIND MILLS AND HAS SHOWN THE SAME AS ITS STOCK-IN-TRADE. THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT YEAR, COPY OF WHICH HAS BEEN FILED IN THE COMPILATION BY THE ASSESSEE SHOWED THE SAME UNDER THE HEAD INCREASE/DECREASE IN STOCK. IN THESE FACTS OF TH E CASE, WE HOLD THAT THE LOSS BEING AS A RESULT OF THE BUSINESS OPERATION OF WIND MILL PROJECT OF THE ASSESSEE, WHICH WAS TREATED AS STOCK-IN-TRADE BY TH E ASSESSEE WAS NOT A CAPITAL LOSS AND ACCORDINGLY THE SECOND OBJECTION O F THE REVENUE IS NOT SUSTAINABLE. THE THIRD OBJECTION OF THE REVENUE IS THAT THE ASSESSEE HAS WRONGLY CHANGED THE METHOD OF VALUATION OF WIND MIL L PROJECT IS NOT SUSTAINABLE. WE FIND THAT THE ASSESSEE HAS PURCHAS ED THE WIND MILL FROM M/S.REPL AND THE SAME DID NOT REMAIN IN THE POSSESS ION OF THE ASSESSEE AS PER THE ORDER OF THE HONBLE BOMBAY HIGH COURT A ND AS SUCH THE ASSET WAS NOT EXISTING IN THE HANDS OF THE ASSESSEE AFTER THE POSSESSION THEREOF WAS TAKEN AWAY BY THE BANK IN TERMS OF THE ORDER OF THE HIGH COURT. ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -8- THESE FACTS COULD NOT BE CONTROVERTED ON BEHALF OF THE REVENUE. THE ASSESSEE HAVING FOUND THAT THE WIND MILL PROJECT HA S NO REALISABLE VALUE, THE VALUATION METHOD WAS CHANGED SO AS TO ADOPT CO ST OR ITS REALISABLE VALUE WHICHEVER IS LESS. THIS METHOD OF VALUATION OF STOCK AT COST OR MARKET VALUE WHICHEVER IS LESS IS A UNIVERSALLY ACC EPTED METHOD AS PER THE ACCOUNTING STANDARDS AND HAS BEEN ACCEPTED BY THE H ONBLE COURTS. DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSE SSEE SUPPORT THE CASE OF THE ASSESSEE. IN THESE FACTS OF THE CASE, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN HOLDING THAT SUCH NON-EX ISTING ASSETS CANNOT BE CONSIDERED IN THE VALUATION OF THE STOCK OF THE ASS ESSEE AND THE ASSESSEE HAS JUSTIFIABLY REVALUED THE STOCK IN TERMS OF THE METHOD OF VALUATION ADOPTED BY IT IN THE YEAR UNDER CONSIDERATION. THE CIT(A) HAS RECORDED THAT IT IS NOT THE CASE OF THE AO THAT THE VALUE SH OWN BY THE ASSESSEE ON THE BASIS OF NET REALISABLE VALUE IS NOT CORRECT. IN THESE FACTS OF THE CASE, WE HOLD THAT THE THIRD OBJECTION OF THE REVENUE REG ARDING METHOD OF VALUATION IS ALSO NOT SUSTAINABLE AND THERE IS NO M ISTAKE IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE AO ON T HIS ISSUE, AND ACCORDINGLY, THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED AND THE GROUND NO.3 OF THE REVENUES APPEAL IS DISMISSED. CO NO.148/AHD/2007 (A.Y.2000-2001 : ASSESSEES CO) 12. THE GROUND NOS.1, 4 AND 5 OF THE CO READ AS UND ER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN NOT UPHOLDING THE ASSESSEES CLAIM FOR DED UCTION IN A SUM OF RS.7,85,164 PERTAINING TO THE BAD AND DOUBTFUL D EBTS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) ERRED IN NOT ALLOWING RS.6,03,000 AS DEDUCTION U/S. 24 FOR COMPUTATION TO INCOME FROM HOUSE PROPERTY. ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -9- 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) ERRED IN NOT DELETING THE ADDITION OF RS.75,097 WHI CH WAS MADE BY WAY OF REDUCING THE LONG TERM CAPITAL LOSS. 13. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THESE GROUNDS OF THE CO, WHICH ARE ACCORDINGLY DISMISSED. 14. THE GROUND NOS. 2 AND 3 OF THE ASSESSEES CO AR E AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN NOT ALLOWING RS.7,51,125 AS DEDUCTION FOR BAD DEBTS WRITTEN OFF AGAINST FOUR PERSONS NOTICED AT THE TOP OF PAGE 14 OF THE IMPUGNED APPELLATE ORDER. 3. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE REALISED THAT THE SAID SUM OF RS.7,51,125 WAS ALLOWABLE AS DEDUCTION ALSO U/S.37 OR U/S. 28. 15. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY SUB MITTED THAT THE AMOUNT OF RS.7,51,125/- REPRESENTS DEBTS NOT PERTAI NING TO TRADE DEBTS OF THE ASSESSEE. THE LEARNED CIT-DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 16. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE AMOUNT OF RS.7,51,125/- DOES NOT REPRESENT TRADE DEBTS OF THE ASSESSEE AND ACCOR DINGLY ARE NOT ALLOWED AS BAD DEBTS AND DEDUCTION TO THE ASSESSEE. THE CI T(A) HAS PASSED A WELL REASONED ORDER ON THIS ISSUE, WHICH IS ACCORDINGLY CONFIRMED AND THE GROUND NOS.2 AND 3 OF THE ASSESSEES CO ARE DISMISS ED. 17. THE GROUND NO.6 OF THE ASSESSEES CO READS AS U NDER: 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN NOT ACCEPTING THE ASSESSEES CLAIM OF REDU CTION OF RS.2,40,00,000/- FROM SALES IN THIS YEAR. ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -10- 18. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROFIT SHOWN ON SALE OF WIND TURBINE GENERATORS TO BESTO T RADELINK PVT. LTD. WAS CONDITIONAL SALES AND ASSESSEE COMPANY DID NOT EFFECT SALE ON NON- FULFILLMENT OF CONDITIONS AND THEREFORE THE TRANSFE R COULD NOT BE MATERIALIZED AND THERE WAS NO EXISTENCE OF SALES AN D THE FIGURE THEREOF SHOULD BE REDUCED FROM THE TOTAL INCOME OF THE ASSE SSEE. ON A SPECIFIC QUESTION FROM THE BENCH, THE LEARNED COUNSEL FOR TH E ASSESSEE COULD NOT STATE THAT WHETHER THE SALES UNDER CONSIDERATION WE RE MADE IN THE SUBSEQUENT YEARS AND HAVE BEEN ENTERED IN THE BOOKS OF ACCOUNTS OF THE SUCCEEDING YEAR OR YEARS. CONSEQUENT TO THE QUERY PUT BY THE BENCH, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE AO FOR VERIFICATION OF THE FACTS . HE RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF S. R. KOSHTI VS COMMISSIONER OF INCOME-TAX (GUJ), 276 ITR 165. TH E LEARNED DR HAS OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. HE REFERRED TO PARA-4 AND 4.1 OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVENUE. HE RELIED ON THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) PVT. LTD. VS. CIT, 28 4 ITR 323. 19. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE P ERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE SALE HA S TAKEN PLACE DURING THE RELEVANT PERIOD AND THE AMOUNT WAS CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON THAT BASIS ALONE. EVEN IN THE REVISED RETURN OF INCOME FILED SUBSEQUENTLY BY THE ASSESSEE, THE SALE ENTRIES WERE NOT REVERSED BY THE ASSESSEE. THE ASSESSEE HAS PUT FORWARD ITS CLAIM BY FILING A LETTER DATED 21-3-2003. THE ASSESSEE COULD NOT STATE THAT WHETHER FRESH SALES WERE MADE OF THE SAME IN THE ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -11- SUBSEQUENT YEAR OR YEARS AND HAVE FOUND PLACE IN TH E BOOKS OF ACCOUNTS OF THE SUBSEQUENT YEARS. IN THESE FACTS OF THE CAS E, WE ARE OF THE CONSIDERED VIEW THAT THE AMOUNT HAS BEEN RIGHTLY TA XED IN THE YEAR UNDER APPEAL BEFORE US AND THERE IS NO MISTAKE IN THE ORD ER OF THE CIT(A) IN HOLDING THAT THE AO HAS RIGHTLY TAXED IN THE RELEVA NT ASSESSMENT YEAR AND THIS GROUND NO.6 OF THE CO OF THE ASSESSEE IS DISMI SSED. ITA NO.1209/AHD/2006 (A.Y.2000-2001 ) - REVENUES A PPEAL: 20. THE ONLY ISSUE IN THIS APPEAL REGARDING THE VAL IDITY OF PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. THE LEA RNED CIT-DR RELIED ON THE ORDER OF THE AO AND THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). 21. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT THE PENALTY WAS IMPOSED ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR BAD DEBTS. WE FIND THAT THE ASSESSEE HAS DISCLOSED ALL THE MATERI AL FACTS RELEVANT TO THE ASSESSMENT YEAR BEFORE THE AO AT THE TIME OF FILING OF THE RETURN ITSELF. IT IS A CASE OF HONEST DIFFERENCE OF OPINION REGARDING THE ALLOWABILITY OF CERTAIN DEDUCTIONS CLAIMED BY THE ASSESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS WITHHELD SOME INFORMA TION AND ITS CONDUCT WAS NOT BONA FIDE . IN THESE FACTS OF THE CASE, WE CONFIRM THE ORDER OF THE CIT(A) IN CANCELLING THE PENALTY ON THIS ISSUE. 22. THE OTHER ISSUES ON WHICH THE PENALTY UNDER SEC TION 271(1)(C) OF THE ACT WAS LEVIED WAS REGARDING THE DISALLOWANCE O F EXCESS CAPITAL LOSS OF RS.75,097/-. ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -12- 23. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT I T IS A CASE OF BONA FIDE MISTAKE IN CALCULATING THE LONG TERM CAPITAL LOSS IN APPLYING THE COST OF INDEXATION BY THE ACCOUNTANT. THE CIT(A) HAS GI VEN A FINDING THAT COMPLETE FACTS RELATING THEREOF WERE GIVEN BY THE A SSESSEE IN ITS RETURN OF INCOME FILED WITH THE DEPARTMENT. IN THESE FACTS, SINCE THE MISTAKE WAS BONA FIDE IN CALCULATION ONLY AND THE MATERIAL FACTS WERE DI SCLOSED AT THE TIME OF ASSESSMENT ITSELF, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN HOLDING THAT NO PENALTY WAS LEVIABLE ON THIS ISSUE. ACCORDINGLY, THE ORDER OF THE CIT(A) IN CANCELING T HE PENALTY IS CONFIRMED AND THIS GROUND OF THE REVENUES APPEAL I S DISMISSED. ITA NO.843/AHD/2006 (A.Y.2000-2001) - ASSESSEES AP PEAL 24. THE ONLY ISSUE RAISED IN THIS APPEAL IS REGARDI NG IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS MADE A CLA IM OF STATUTORY DEDUCTION UNDER SECTION 24 AND ALSO DEPRECIATION. HOWEVER, ALL THE RELEVANT FACTS WERE DISCLOSED IN THE RETURN OF INCO ME FILED BY THE ASSESSEE WITH DEPARTMENT AND IT IS A CASE OF BONA FIDE DIFFE RENCE OF OPINION BETWEEN THE ASSESSEE AND THE DEPARTMENT REGARDING T HE ALLOWABILITY OF CLAIM MADE BY THE ASSESSEE. HE RELIED ON THE DECIS ION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRO DUCTS PVT. LTD., 322 ITR 158 WHEREIN IT IS HELD THAT MAKING OF A CLAIM O F DEDUCTION DOES NOT AMOUNT TO CONCEALMENT OF INCOME. THE LEARNED CIT-D R HAS OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE . HE REFERRED TO RELEVANT PARA-2.3 OF THE APPELLATE ORDER PASSED BY THE CIT(A) IN SUPPORT OF THE CASE OF THE REVENUE. HE SUBMITTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION FOR REPAIR UNDER SECTION 24 AND ALSO IN T HE FORM OF DEPRECIATION ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -13- ON THE BUILDING. THE LEARNED COUNSEL FOR THE ASSES SEE IN HIS REJOINDER REFERRED TO PARA 6.2 OF THE APPELLATE ORDER PASSED BY THE CIT(A) IN THE QUANTUM CASE OF THE ASSESSEE FOR THE RELEVANT ASSTT .YEAR 2000-01 IN SUPPORT OF ITS CASE THAT THE CLAIM OF DEDUCTION WAS BONA FIDE AS THE DEPRECIATION WAS CLAIMED ON THE BUSINESS ASSETS BY THE ASSESSEE. 25. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE P ERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT ALL THE MAT ERIAL FACTS RELEVANT FOR THE ASSESSMENT ORDER PASSED WERE DISCLOSED BY THE A SSESSEE AT THE TIME OF THE ASSESSMENT ITSELF. THE DEPRECIATION WAS CLAIME D BY THE ASSESSEE ON ITS BUSINESS ASSETS. MERELY BECAUSE THE ASSESSEE WAS N OT ENTITLED TO DOUBLE DEDUCTION OF DEPRECIATION AS WELL AS DEDUCTION UNDE R SECTION 24 OF THE ACT IN ACCORDANCE WITH THE SCHEME OF THE IT ACT, 19 61, IT CANNOT BE SAID THAT THE ASSESSEE WAS GUILTY OF CONCEALMENT OF INCO ME OR FILING OF INACCURATE PARTICULARS OF INCOME. THE CONDUCT OF T HE ASSESSEE WAS BONA FIDE AND IT IS A CASE OF HONEST DIFFERENCE OF OPINION B ETWEEN THE ASSESSEE AND THE DEPARTMENT REGARDING THE ALLOWABILITY OF CE RTAIN CLAIM OF DEDUCTION MADE BY THE ASSESSEE. THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD.(SUPRA) SUPPORTS THE CASE OF THE ASSESSEE. THE ASSESSEE HA S AGITATED THE DISALLOWANCE IN THE QUANTUM APPEAL BEFORE THE CIT(A ) FOR THE RELEVANT YEAR AND THE DEDUCTION BEING NOT ALLOWABLE AS PER T HE LAW, WAS NOT ALLOWED TO THE ASSESSEE. THERE IS NO MATERIAL BROU GHT ON RECORD TO SUGGEST THAT THE EXPLANATION OF THE ASSESSEE WAS NO T BONA FIDE AND SINCE THE ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS R ELATING TO THE CLAIM OF THE ASSESSEE, WE HOLD THAT IT IS NOT A FIT CASE FOR LEV Y OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT WHICH IS ACCORDINGLY CANCELLED AND THE GROUND OF THE ASSESSEE IS ALLOWED. ITA NO.802/AHD/2004 WITH CO NO.148/AHD/2007 ITA NO.843/AHD/2006 AND ITA NO.1209/AHD/2006 -14- 26. IN THE RESULT, THE REVENUES APPEAL IN ITA NO.8 02/AHD/2004 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND ITA NO.1 209/AHD/2006 IS DISMISSED AND THE ASSESSEES CO NO.148/AHD/2007 IS DISMISSED. THE ASSESSEES APPEAL IN ITA NO.843/AHD/2006 IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&' ( ) %&' ( ) %&' ( ) %&' ( ) /B.P. JAIN) &* + &* + &* + &* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD