Shaw Wallace Distilleries Ltd., Bangalore V. ACIT, Bangalore

ITA 809/BANG/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8627 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-02-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 18-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K R PRADEEP
• Keywords: Capital asset; Depreciation; Bad and doubtful debts

Judgement Text

ITA.809/BANG/2010 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAY PAL RAO, JUDICIAL MEMBER I.T.A NO.809/BANG/2010 (ASSESSMENT YEAR : 2002-03) SHAW WALLACE DISTILLERIES LTD (SINCE AMALGAMATED WITH UNITED SPIRITS LTD) UB TOWERS, 24/1, VITTAL MALLYA ROAD, BANGALORE 560 001 .. APPELLANT PAN : AACCM8043 V. ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -2(3), BANGALORE .. RESPONDENT ASSESSEE BY : SHRI. K. R. PRADEEP, CA REVENUE BY : SHRI. G. R. REDDY, CIT-DR-I HEARD ON : 10.02.2016 PRONOUNCED ON : 19.02.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE, IT ASSAILS LEVY OF PENALTY MADE U/S.271(1)(C) OF THE INCOME-TAX ACT, 1961 (THE ACT IN SHORT), FOR THE IMPUGNED ASSESSMENT YEAR WHICH WAS CONFIRMED BY THE CIT (A), BUT FOR ITA.809/BANG/2010 PAGE - 2 PRORATA RELIEF GIVEN TO THE ASSESSEE BASED ON THE R ESULTS OF THE QUANTUM APPEAL FILED BY THE ASSESSEE BEFORE THE CIT (A). 02. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBM ITTED THAT PENALTY WAS LEVIED BY THE AO ON PRIOR PERIOD EXPENDITURE OF RS. 1,25,54,985/- DISALLOWED DURING THE ASSESSMENT, MERGER EXPENSE CL AIM OF RS.5,14,240/- AND CLAIM OF ADVANCE / BAD DEBT WRITE OFF OF RS.28, 22,667/-. LD. AR SUBMITTED THAT OUT OF THE ABOVE AMOUNTS, PRIOR PERI OD EXPENDITURE ORIGINALLY CLAIMED CONSISTED OF THREE ITEMS LISTED AS UNDER : (I) ADVANCE TO M/S. BALBIR DISTILLERIES RS.37,06,05 4/- (II) VARIOUS PAYMENTS MADE IN EARLIER YEARS AND SHOWN AS ADVANCES IN THE ASSESSEES BOOKS RS.1,41,05,273/- (III) PRIOR PERIOD EXPENSES RS.1,49,658/- 03. AS PER THE LD. AR, CIT (A) ON ASSESSEES APPEAL AGAINST DISALLOWANCE RELATING TO ABOVE PRIOR PERIOD EXPENSE S MENTIONED AT (II) AND (III) ABOVE, HAD GIVEN PARTIAL RELIEF AND THE ADDI TION WHICH WERE UPHELD BY THE CIT (A) IN QUANTUM PROCEEDINGS OUT OF THE ABOVE , WERE THE FOLLOWING ITEMS : (I) CST PAID IN EARLIER YEAR RS.91,89,001/- (II) PAYMENT OF PROPERTY TAX TO NAGAR NIGAM RS.23,4 6,492/- (III) OBSOLETE STOCK WRITTEN OFF RS.4,96,780/- (IV) EXPENSES RELATING TO EARLIER YEARS RS.1,49,658 /- ITA.809/BANG/2010 PAGE - 3 04. AS PER THE LD. AR, THOUGH PENALTY WAS LEVIED ON ALL THE ABOVE AMOUNTS, CIT (A) IN ASSESSEES APPEAL AGAINST SUCH LEVY HAD DELETED PENALTY LEVIED ON PRIOR PERIOD EXPENDITURE CLAIM OF RS.1,49,658/- WHILE SUSTAINING THE PENALTY LEVIED ON THE OTHER THREE IT EMS. FURTHER AS PER THE LD. AR QUANTUM PROCEEDINGS WERE CARRIED IN APPEAL B EFORE THIS TRIBUNAL AND THIS TRIBUNAL IN ITS ORDER IN ITA NO.553/MUM/20 06, DT.17.05.2013 HAD DELETED THE ADDITION RELATING TO DIFFERENTIAL SALES -TAX PAYMENT OF RS.91,89,001/- AND DIFFERENTIAL PROPERTY TAX OF RS. 23,46,492/- PAID TO NAGAR NIGAM. THUS ACCORDING TO HIM WHAT WAS REMAINING WA S ONLY THE PENALTY RELATABLE TO RS.4,96,780/- FOR OBSOLETE STOCK WRITT EN OFF. AS PER THE LD. AR, CLAIM OF SUCH OBSOLETE STOCK WRITTEN OFF WAS DEALT WITH BY THIS TRIBUNAL IN APPEAL OF THE ASSESSEE AT 5.4.11 OF ITS ORDER DT.17 .05.2013. AGAINST THE TOTAL CLAIM OF RS.25,69,780/-, AS PER THE LD. AR, PENALTY WAS LEVIED ONLY FOR A REASON THAT ASSESSEE COULD PRODUCE DETAILS OF RS.20 .73 LAKHS. DISALLOWANCE TO THE EXTENT OF RS.4,96,780/- WAS SUSTAINED BY THE TRIBUNAL ONLY FOR A REASON THAT ASSESSEE COULD NOT PRODUCE DOCUMENTARY PROOF FOR JUSTIFYING ITS CLAIM. BUT THIS, ACCORDING TO HIM, WOULD NOT MEAN THAT THE CLAIM MADE WAS UNLAWFUL OR WITH ANY MALAFIDE INTENTION. ITA.809/BANG/2010 PAGE - 4 05. COMING TO THE NEXT ITEM OF PENALTY WHICH WAS ON THE ADVANCE TO BALBIR DISTILLERIES OF RS.37,06,054/- WRITTEN OFF B Y THE ASSESSEE, LD. AR SUBMITTED THAT OUT OF THE SAID AMOUNT THE CIT (A) H AD DELETED THE DISALLOWANCE OF RS.33,30,000/- IN QUANTUM APPEAL AN D ONLY RS.3,76,054/- WAS SUSTAINED. LD. AR POINTED OUT THAT IN FURTHER APPEAL OF THE ASSESSEE MENTIONED SUPRA, THIS TRIBUNAL HAD SUSTAINED THE DI SALLOWANCE FOR REASONS MENTIONED AT PARA 5.3.2 OF ITS ORDER. AS PER THE LD. AR THIS AMOUNT WAS PART OF AN ADVANCE WHICH COULD NOT BE RECOVERED. A S PER THE LD. AR, AO HAD CONSIDERED IT TO BE A CAPITAL LOSS AND MADE A D ISALLOWANCE. ACCORDING TO HIM THIS WAS NOT A REASON FOR LEVY OF PENALTY. 06. CONTINUING HIS ARGUMENTS, LD. AR SUBMITTED THAT MERGER EXPENDITURE OF RS.5,14,240/- DISALLOWED BY THE AO W AS ALLOWED FOR AMORTISATION U/S.35DD OF THE ACT. ACCORDING TO HIM JUST BECAUSE ASSESSEE MADE A CLAIM U/S.37(1) OF THE ACT WHICH WAS FOUND T O BE ALLOWABLE U/S.35DD OF THE ACT, IT COULD NOT BE SAID THAT ASS ESSEE HAD FURNISHED ANY INACCURATE PARTICULARS OR MADE AN ILLEGITIMATE CLAI M. 07. IN SO FAR AS THE LAST ITEM OF LEVY OF PENALTY W HICH WAS WRITE OFF OF BAD DEBTS OF RS.28,22,667/- WAS CONCERNED, LD. AR S UBMITTED THAT CIT (A) HAD DELETED THE LEVY OF PENALTY IN SO FAR AS IT REL ATED TO IRRECOVERABLE DEBTS ITA.809/BANG/2010 PAGE - 5 OF RS.15,79,670/-. PENALTY SUSTAINED BY THE CIT (A ) WAS ONLY IN RELATION TO BAD DEBTS OF RS.12,42,988/-. EVEN THIS DISALLOWANC E WAS DELETED BY TRIBUNAL ON ASSESSEES APPEAL. 08. IN ANY CASE, ACCORDING TO HIM, PENALTY ORDER DO ES NOT SPECIFY WHETHER LEVY OF PENALTY WAS FOR CONCEALMENT OR FOR FURNISHI NG INACCURATE PARTICULARS. ACCORDING TO HIM, AO HAD NOT BROUGHT OUT THE REASON WHY PENALTY WAS BEING LEVIED AND BY VIRTUE OF THE JUDGM ENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. MAN JUNATHA COTTON AND GINNING FACTORY, ORDER OF PENALTY OUGHT NOT BE SUST AINED. 09. PER CONTRA LD. DR SUBMITTED THAT ASSESSEE HAD F URNISHED INACCURATE PARTICULARS IN SO FAR AS ITS CLAIM FOR MERGER EXPEN SES OF RS.5,14,240/- WAS CONCERNED. ASSESSEE HAD SHOWN MERGER EXPENSES OTHE R THAN THE ABOVE SUM OF RS.5,14,240/- SEPARATELY AND ADDED BACK IN ITS C OMPUTATION. HOWEVER, THE SUM OF RS.5,14,240/- WHICH WAS ALSO MERGER RELATED EXPENDITURE WAS INCLUDED UNDER OTHER HEADS. THEREBY, AS PER THE L D. DR, ASSESSEE HAD KNOWINGLY TRIED TO MAKE A CLAIM WHICH IT WAS NOT E LIGIBLE FOR. BUT FOR THE CAREFUL VOUCHING ONE BY THE AO, THIS WOULD NOT HAVE COME TO LIGHT. IN SO FAR THE ISSUE OF OBSOLETE STOCK WAS CONCERNED, LD. DR S UBMITTED THAT ASSESSEE HAD NOT GIVEN THE FULL LIST OF OBSOLETE STOCK WITH VALUES, BUT HAD GIVEN ONLY ITA.809/BANG/2010 PAGE - 6 EVIDENCE FOR RS.20.73 LAKHS OUT OF THE TOTAL CLAIM OF RS.25,69,780/-. THUS ACCORDING TO HIM LEVY OF PENALTY IN THE CASE OF ASS ESSEE WAS JUSTIFIED. 10. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IN SO FAR AS LEVY OF PENALTY FOR MERGER EXPENSES IS CONCE RNED, WHAT WE FIND IS THAT ASSESSEE HAD SHOWN A MERGER EXPENDITURE OF RS. 15,99,298/- IN ITS PROFIT AND LOSS ACCOUNT AND SUO MOTU ADDED IT BACK IN ITS COMPUTATION STATEMENT. AS PER THE LD. AR, MERGER RELATED EXPENDITURE TO TH E EXTENT OF RS.5,14,240/- WAS ACCOUNTED BY THE ASSESSEE UNDER V ARIOUS OTHER HEADS WHICH CAME TO LIGHT ONLY DURING THE COURSE OF VERIF ICATION. NEVERTHELESS WHAT WE FIND IS THAT EVEN FOR THIS AMOUNT ASSESSEE WAS ELIGIBLE FOR CLAIMING 1/5 TH WRITE OFF U/S.35DD OF THE ACT. THUS AT THE BEST, CLAIM CAN BE CONSIDERED TO BE ERRONEOUSLY MADE AND NOT ONE DONE WITH ANY MALAFIDE INTENTION OR WITH ANY INTENTION TO CONCEAL. WHETHE R A PARTICULAR EXPENDITURE CAN BE RELATED TO MERGER COST ITSELF IS DEBATABLE. IN OUR OPINION, LEVY OF PENALTY OUGHT NOT HAVE BEEN DONE O N SUCH AMOUNT. 11. COMING TO THE LEVY OF PENALTY RELATING TO PRIOR PERIOD EXPENDITURE OF RS.1,25,57,985/-, ADMITTEDLY THE TRIBUNAL IN ASSESS EES APPEAL VIDE PARA 5.4.10 OF ITS ORDER, HELD THE DIFFERENTIAL CST OF R S.91,89,001/- TO BE AN ALLOWABLE CLAIM. VIDE THE VERY SAME PARA IT ALSO H ELD THAT DIFFERENTIAL ITA.809/BANG/2010 PAGE - 7 PROPERTY TAX OF RS.23,46,492/- TO M/S. NAGAR NIGAM PAID WAS ALSO AN ALLOWABLE CLAIM. CIT (A) AT PAGE 5 OF HIS ORDER IN ASSESSEES APPEAL AGAINST LEVY OF PENALTY, DELETED THE PENALTY LEVIED OF RS.1 ,49,658/- MADE FOR EXPENSES RELATING TO EARLIER YEARS. WHAT IS LEFT O UT OF THE ABOVE AMOUNTS IS RS.4,96,780/- BEING OBSOLETE STOCK WRITTEN OFF AND RS.37,06,054/- BEING ADVANCE TO BALBIR DISTILLERIES. 12. IN SO FAR AS OBSOLETE STOCK IS CONCERNED, ADDIT ION WAS SUSTAINED FOR A REASON THAT ASSESSEE COULD FURNISH DETAILS FOR RS.2 0.73 LAKHS AGAINST THE CLAIM OF RS.25,69,780/-. TRIBUNAL HAS AT PARA 5.4. 11 OF ITS ORDER HAS CLEARLY MENTIONED THIS. TRIBUNAL HAS ALSO MENTIONED THAT W HAT ASSESSEE HAS PRODUCED WAS A LIST OF SMALL ITEMS. NON-PRODUCTION OF SUPPORTING RECORDS TO SHOW VALUE OF OBSOLETE STOCK COULD, IN OUR OPINI ON, BE A REASON FOR DISALLOWANCE. HOWEVER, WE CANNOT SAY THAT SUCH A C LAIM IS FAR FETCHED OR AN ILLEGITIMATE ONE. JUST BECAUSE THE CLAIM WAS DI SALLOWED, IN OUR OPINION, PENALTY OUGHT NOT HAVE BEEN LEVIED ON THE SAID AMOU NT. 13. COMING TO THE DISALLOWANCE OF RS.37,06,054/- TO WARDS ADVANCE TO BALBIR DISTILLERIES WHICH WAS WRITTEN OFF BY THE AS SESSEE, THIS TRIBUNAL AT PARA 3.3 OF ITS ORDER MENTIONED SUPRA, SUSTAINED TH E ORDER OF CIT (A) WHEREIN HE DELETED THE DISALLOWANCE TO THE EXTENT O F RS.33 LAKHS. AO HAD ITA.809/BANG/2010 PAGE - 8 DISALLOWED THE CLAIM FOR A REASON THAT IT WAS A CAP ITAL LOSS BEING AN ADVANCE, GIVEN FOR ACQUIRING CAPITAL ASSET. THERE IS NO FINDING BY THE LOWER AUTHORITIES THAT THE ADVANCES WERE NOT RELATE D TO THE BUSINESS OF THE ASSESSEE. WHETHER WRITE OFF OF ADVANCE CAN BE CONSI DERED AS A CAPITAL LOSS OR REVENUE LOSS IS, IN OUR OPINION, IS A DEBATABLE ISSUE NOT AMENABLE TO A LEVY OF PENALTY. 14. COMING TO THE LAST ITEM OF WRITE OFF OF BAD DEB TS OF RS.28,22,667/- DISALLOWED BY THE AO ON WHICH PENALTY HAS BEEN LEVI ED, CIT (A) IN ASSESSEES APPEAL HAD DELETED THE PENALTY RELATABLE TO THE SUM OF RS.15,79,679/-. WHEN THE MATTER REACHED THIS TRIBU NAL HAD VIDE ITS PARA 5.6.6 OF ITS ORDER DELETED THE DISALLOWANCE MADE BY THE AO IN FULL. HENCE PENALTY LEVIED ON SUCH AMOUNT CANNOT BE SUSTAINED. 15. AS A RESULT, WE ARE OF THE OPINION THAT ASSESSE E COULD NOT HAVE BEEN SADDLED WITH PENALTY ON ANY OF THE ABOVE ITEMS SINC E THE REVENUE HAS NOT BEEN ABLE TO BRING OUT EITHER CONCEALMENT OR FURNIS HING INACCURATE PARTICULARS. LEVY OF PENALTY IS DELETED. ITA.809/BANG/2010 PAGE - 9 16. SINCE WE HAVE DELETED THE PENALTY ON MERITS, TH E QUESTION WHETHER SUCH LEVY WAS FOR CONCEALMENT OR FILING INACCURATE PARTICULARS BECOME ACADEMIC AND INFRUCTUOUS. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH DAY OF F EBRUARY, 2016. SD/- SD/- (VIJAY PAL RAO) (ABRA HAM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER