The ACIT,(OSD),Range-4, Ahmedabad V. Kevin Process Technologies Pvt.Ltd., Ahmedabad

ITA 951/AHD/2010

• Counselvise Citation: 95120514 RSA 2010
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-12-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 31-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y P VERMA
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Opportunity of being heard; Bad and doubtful debts; Difference of opinion
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH BEFORE: SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEEN A, ACCOUNTANT MEMBER THE ACIT, (OSD)-I, RANGE-4, AHMEDABAD, NAVJIVAN TRUST BLDG., OFF. ASHRAM ROAD, AHMEDABAD (APPELLANT) VS. KEVIN PROCESS TECHNOLOGIES PVT. LTD. A/1/3706, PHASE-V, GIDC, VATVA, AHMEDABAD (RESPONDENT) PAN NO. AAACK8850D REVENUE BY : SRI Y.P. VERMA SR. D.R. ASSESSEE BY : SRI MEHUL K. PATEL, A.R. DATE OF HEARING : 03 -12-2012 DATE OF PRONOUNCEMENT : 14 -12-2012 / ORDER PER : T.R. MEENA, ACCOUNTANT MEMBER:- THESE ARE TWO APPEALS FILED BY THE REVENUE AGAINST THE LD. CIT(A) ORDER DATED 27-11-2010 & 12-11-2009 FOR A.Y. 03-04 & 04-05. AS BOTH THE APPEALS ARE HEARD TOGETHER, ISSUE AND ASSESSEE ARE SAME. THEREFORE, THE SAME ITANO.951/AHD/2010&ITANO.952/AHD/2010 A.Y.:-2003-04 & 2004-05 ITA NO. 951/AHD/2010 A.Y. 2003-04 & 952/AHD/2010 A .Y. 2004-05 PAGE NO. ACIT VS. KEVIN PROCESS TECHNOLOGIES PVT. LTD. 2 ARE DECIDED IN ONE COMMON ORDER. THE SOLE GROUND O F THE APPEAL IS AGAINST DELETION OF PENALTY IMPOSED U/S 271(1)(C) AT RS. 12 ,63,208/- FOR A.Y. 03-04 AND RS. 3,66,715/- FOR A.Y. 04-05. 2. THE FACT FOR A.Y. 03-04 ARE THAT THE ASSESSEE HA D CLAIMED BAD DEBT OF RS. 34,09,456/- IN THE NAME OF M/S CMC MACHINERY IN PROFIT AND LOSS ACCOUNT BUT ACCOUNT OF THE PARTY HAD NOT BEEN WRITT EN OFF . THE LD. AO DID NOT FIND THIS DEBT AS BAD AND ADDED BACK IN THE INC OME OF THE ASSESSEE. THE PENALTY PROCEEDED U/S 271(1)(C) WAS INITIATED BY TH E AO FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN THE COURSE OF T HE ASSESSMENT PROCEEDINGS. IN APPEAL BEFORE THE CO-ORDINATE D BENCH AHMEDABAD IN ITA NO. 2857/AHD/2006 A.Y. 03-04 HAS CONFIRMED THE ADDITION. THE OPERATIVE PART IS AS UNDER: AFTER HEARING THE PARTIES AND GOING THROUGH THE RE CORD, WE FIND, AS A MATTER OF FACT, NEED NOT BE CONSIDERED AS BAD DEBT AS IS EVIDENT FROM THE FACT THAT THE ASSESSEE HAS RECEIVED A SUM OF RS . 9,00,000/- IN DECEMBER 2003. WE ALSO FIND THAT THE ISSUE UNDER C ONSIDERATION IS SQUARELY COVERED BY THE RECENT DECISION OF THE GUJR AT HIGH COURT IN CASE OF DHAL ENTERPRISES & ENGINEERS P. LTD. VS. CI T [IT REFERENCE NO. 68 OF 1998 ORDER DATED 10.11.2006] WHEREIN IT I S HELD AS UNDER:- EVEN IF WE GO BY THE PLAIN READING OF CLAUSE (VII) , THE REQUIREMENT FOR ALLOWING DEDUCTION ON ACCOUNT OF BA D DEBT IS THAT THE BAD DEBT SHOULD BE WRITTEN OFF AS IRRECOVE RABLE. MERE DEBITING THE AMOUNT IS NOT SUFFICIENT. THE REQUIRE MENT IS THAT THE ASSESSEE SHOULD ALSO PROVE THAT THE DEBT HAS BE COME BAD IN THAT PARTICULAR YEAR. AS POINTED OUT RIGHTLY BY TH E TRIBUNAL, THERE WAS CORRESPONDENCE REGARDING THE AMOUNT IN QU ESTION THAT DUE TO SOME DIFFERENCES THE AMOUNT WAS NOT PAI D IN THAT PARTICULAR YEAR. BUT, WHEN CORRESPONDENCE WAS THER E TO THE FACT THAT THE ASSESSEE WAS INSISTING FOR PAYMENT FO R RECOVERY OF THE DEBT, IT CANNOT BE SAID THAT THE DEBT HAS BECOM E BAD IN THE RELEVANT ASSESSMENT YEAR. WE, THEREFORE, SEE NO IN FIRMITY IN THE ORDER OF THE TRIBUNAL AND WE ANSWER THE FIRST QUEST ION AGAINST THE ASSESSEE. ITA NO. 951/AHD/2010 A.Y. 2003-04 & 952/AHD/2010 A .Y. 2004-05 PAGE NO. ACIT VS. KEVIN PROCESS TECHNOLOGIES PVT. LTD. 3 HOWEVER, WE MAKE IT CLEAR THAT IF THE BAD DEBT IS N OT ALLOWED IN THAT PARTICULAR YEAR AND IF THE ASSESSEE SHOWS THAT THE AMOUNT OF DEBT HAS BECOME BAD IN SOME OTHER SUBSEQUENT YEA R, HE CAN APPROACH THE CONCERNED AUTHORITY FOR DEDUCTION ON A CCOUNT OF BAD DEBT OF THE AMOUNT CLAIMED HERE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HI GH COURT, WE UPHOLD THE ORDER OF THE CIT(A) IN DISALLOWING THE C LAIM OF THE ASSESSEE. AT BEST IT CAN BE A BAD DEBT FOR THE SUB SEQUENT YEAR AND THE ASSESSEE WOULD BE AT LIBERTY TO CLAIM IN THE SUBSEQ UENT YEAR AFTER PLACING NECESSARY MATERIAL ON RECORD. THE ASSESSIN G OFFICER WOULD CONSIDER THE CLAIM OF THE ASSESSEE, IN ACCORDANCE W ITH LAW. 3. THE LD. AO HAD GIVEN REASONABLE OPPORTUNITY OF B EING HEARD BEFORE IMPOSING THE PENALTY. THE ASSESSEE FILED REPLY VID E LETTER DATED 23/02/09 WHICH WAS CONSIDERED BY THE AO IN PENALTY ORDER FOR ASSESSMENT YEAR 2003- 04. BUT AFTER RELYING ON THE DECISION OF BANARAS TERITORIUM VS. CIT (1988) 169 ITR 782 & ZEEKOO SHOES FACTORY VS. CIT (1981) 1 27 ITR 837, UOI VS DHARMENDRA TEXTILE PROCESSORS (2008) 166 TAXMAN 65 (SC), JAMNADAS & CO. VS. CIT (1994) 210 ITR 218 HAD LEVIED THE MINIM UM PENALTY AT RS. 12,63,208 ON ADDITION OF RS. 34,37,300 FOR A.Y. 03 -04. 4. THE AO MADE ADDITION OF RS. 4,71,997/- U/S 80IB CLAIMED BY THE ASSESSEE ON OTHER INCOME IN ASSESSMENT ORDER FOR A. Y. 04-05 AS UNDER:- (I). BAD DEBT RECOVERED: 10,7,766/- (II). INTEREST: 2,2,797/- (III). OFFICE AND FURNITURE USER CHARGE: 30,000/- (IV). SALE TAX ACCOUNT: 1,84,594/- (V). DISALLOWANCE OF BAD DEBT CLAIMED: 4,44,229/- (VI). MISCELLANEOUS: 1,1,595/- (VII). EXCHANGE RATE OF FLUCTUATION: 57,331/- ITA NO. 951/AHD/2010 A.Y. 2003-04 & 952/AHD/2010 A .Y. 2004-05 PAGE NO. ACIT VS. KEVIN PROCESS TECHNOLOGIES PVT. LTD. 4 5. FURTHER, ADDITION WAS ALSO MADE ON ACCOUNT OF BA D DEBT AT RS. 4,54,229/-, SOFTWARE DEVELOPMENT EXPENSES AT RS. 1, 43,137/- AND PRIOR PERIOD EXPENSES AT RS. 41,141/-. FINALLY, THE ITAT CONFIRMED THE ADDITION ON ACCOUNT OF 80IB DEDUCTION FOR THE BAD DEBT RECOV ERED, INTEREST, OFFICE AND FURNITURE USER CHARGES, AND SALES TAX ACCOUNT. THU S, THE ADDITION WAS REDUCED FROM 4,71,997/- TO 4,34,838/- AND ADDITION ON ACCOUNT OF BAD DEBT AT RS. 4,44,229/- AND DISALLOWANCE OF SOFTWARE AND DEV ELOPMENT EXPENSES AT RS. 1,43,137/- HAD CONFIRMED. THUS, TOTAL ADDITION WAS CONFIRMED AT RS. 10,22,203/-. THE AO HAD INITIATED PROCEEDING U/S 271(1)(C) IN ASSESSMENT ORDER FOR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. BEFORE IMPOSING PENALTY U/S 271(1)(C), THE AO HAD GIVEN REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLANT. THE APPELLANT RELIED VIDE LETTER 3 RD MARCH, 2008 WHICH HAS BEEN CONSIDERED BY THE AO AND IMPOSED PEN ALTY AT RS. 3,66,715/- FOR A.Y. 2004-05. 6. BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASSE SSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAS DELETED THE PE NALTIES IN BOTH THE YEARS AFTER ANALYZING THE PROVISION U/S 271(1)(C) AND CA SE LAWS RELIED UPON AS UNDER:- (1). KANBAY SOFTWARE INDIA PVT LTD VS. DCIT IN IT A NO. 300/PN/07 A.Y. 2002-03 PUNE FOR FURNISHING OF INACCURATE PART ICULARS OF INCOME. (2). SHIV LAL TAK VS. CIT 251 ITR 373 FOR CLAIM OF DEDUCTION WAS FABRICATED AND FALSE. (3). CIT VS. BACARDI MARTINI INDIA 288 ITR 585 DELH I HIGH COURT MERELY DIFFERENCE OF OPINION OF DISALLOWANCE OF EXPENSES. (4). GEM GRANITES (KARNATAKA) VS. DCIT ITAT, PUNE M ERELY ADDITION AS CONFIRMED ITA NO. 951/AHD/2010 A.Y. 2003-04 & 952/AHD/2010 A .Y. 2004-05 PAGE NO. ACIT VS. KEVIN PROCESS TECHNOLOGIES PVT. LTD. 5 (5). CIT VS. HARSHVARDHAN CHEMICALS AND MINERALS L TD. 259 ITR 212 RAJASTHAN HIGH COURT ON ARGUABLE, CONTROVERSIAL AND DEBATABLE DEDUCTION CLAIMED (6). GUJRAT CREDIT CORPORATION LTD. VS. ACIT 113 I TD 133 AHMEDABAD ITAT ON REDUCTION OF ARREARS CLAIM 7. THEREFORE, THE LD. CIT(A) IN VIEW OF THE ABOVE C ASE LAWS DELETED THE PENALTY ON ACCOUNT OF DISALLOWANCE OF BAD DEBT AND PRIOR EXPENSES IN A.Y. 03-04 AND ADDITION ON ACCOUNT OF DEDUCTION U/S 80IB , DISALLOWANCE OF BAD DEBT AND DISALLOWANCE OF SOFTWARE DEVELOPMENT EXPEN SES FOR A.Y. 04-05. 8. NOW, THE REVENUE IN BOTH THE YEARS ARE BEFORE U S. THE LD. SR. D.R. VEHEMENTLY CONTENDED THAT THE HONBLE ITAT HAD CONF IRMED THE QUANTUM ADDITION AND THE AO HAD PROVED THE CONCEALMENT OF I NCOME FOR WHICH INACCURATE PARTICULARS OF INCOME HAD BEEN FURNISHED BY THE APPELLANT. THE APPELLANT CLAIMED BAD DEBT IN A.Y. 03-04 EVEN THEN THE APPELLANT HAD RECOVERED THE DEBT IN SUBSEQUENT YEAR FOR RS. 34,9, 455/- HOWEVER, FOR A.Y. 2004-05 THE ASSESSEE HAD CLAIMED FALSE DEDUCTION U /S 80IB AT RS. 4,34,837/- ON INCOME FROM OTHER SOURCES. ACCORDINGLY, THE HON BLE ITAT HAD CONFIRMED THE ADDITION IN BOTH THE YEARS. HE FURTH ER RELIED IN THE CASE OF GUJRAT STATE FINANCIAL SERVICES LTD. VS. ACIT B BENCH DECISION IN ITA NO. 2078 AND 256/A/2006 A.Y. 01-02 WHEREIN THE HON BLE ITAT HAD CONFIRMED THE PENALTY ON ADDITION MADE ON ACCOUNT O F DOUBTFUL DEBT. THUS, HE REQUESTED TO CONFIRM THE PENALTY IN BOTH THE YEA RS. AT THE OUTSET, THE LEARNED COUNSEL FOR THE APPELLANT CONTENDED THAT TH E HONBLE ITAT IN QUANTUM APPEAL HAD CONSIDERED THE DECISION OF JURIS DICTION OF HIGH COURT IN THE CASE OF M/S DHALL ENTERPRISES AND ENGINEERING P VT. LTD. VS. CIT 207 CTR 729 IN BOTH THE YEARS AND CONFIRMED THE ADDITIO N BY HOLDING THAT IN A.Y. 03-04. THE ASSESSEE HAD PROVED THAT THE DEBT BECOME BAD IN THE YEAR ITA NO. 951/AHD/2010 A.Y. 2003-04 & 952/AHD/2010 A .Y. 2004-05 PAGE NO. ACIT VS. KEVIN PROCESS TECHNOLOGIES PVT. LTD. 6 ITSELF AND FURTHER FOR A.Y. 2004-05, THE HONBLE IT AT CONFIRMED THE ADDITION BY HOLDING THAT THE BAD DEBT SHOULD BE WR ITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT. BY MERELY DEBITING THE AMOUNT IN P ROFIT AND LOSS ACCOUNT IS NOT SUFFICIENT. THE LD. COUNSEL FOR THE APPELLANT FURTHER ARGUED THAT HONBLE JURISDICTION HIGH COURT DECISION IN THE CASE OF DHA LL ENTERPRISE AND ENGINEERING PVT LTD (SUPRA) DOES NOT HOLD GOOD LAW AS HONBLE SUPREME COURT IN THE CASE OF TRF 322 ITR 397, THE DECISION OF THE JURISDICTIONAL HIGH COURT HAD BEEN REVERED BY THE APEX COURT AND T HE CONDITION PRECEDENT AS PER THE AMENDED PROVISION IS THAT THE APPELLANT HAS WRITTEN OF AMOUNT IN THE BOOKS OF ACCOUNT IS SUFFICIENT TO CLAIM THE BAD DEBT. HE FURTHER RELIED ON THE CASE OF RELIANCE PETRO-CHEMICAL PRODUCT PVT. LT D. 322 ITR 158 AND PWC VS. CIT 348 ITR 346 (SC). AS ADDITION MADE BY THE AO ARE DEBATABLE IN NATURE AND FURTHER U/S 80IB DEDUCTION WAS CLAIMED BY THE APPELLANT ON REVENUE EXPENSES DISALLOWED BY THE AO LIKE SALES TAX. THUS, HE REQUESTED TO DELETE THE PENALTY IN BOTH THE YEARS. 9. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED T HE MATERIAL ON RECORD AND GONE THROUGH THE CASE LAWS CITED BY BOTH THE PARTIES. IN BOTH THE YEARS, THE ADDITIONS WERE DEBATABLE. THE ASSESSEE HAD CLAIMED BAD DEBTS IN THE PROFIT AND LOSS ACCOUNT. THE OTHER ADDITIONS I N A.Y. 04-05 ON ACCOUNT OF SOFTWARE DEVELOPMENT EXPENSES IS ALSO DEBATABLE IN NATURE. BUT, THE ASSESSEE CLAIMED 80IB DEDUCTION ON BAD DEBT RECOVERED, INTE REST, OFFICE AND FURNITURE USER CHARGES, AND SALE TAX AMOUNT FOR WHICH THE ASS ESSEE HAS FURNISHED THE INACCURATE PARTICULARS OF INCOME BY CLAIMING 80IB DEDUCTION ON THIS INCOME AND CONCEALING THE PARTICULAR OF INCOME U/S 271(1)( C) THUS, WE HAVE CONSIDERED VIEW THAT PENALTY ON DISALLOWANCE OF 80I B DEDUCTION AT RS. 4,34,837/- A.Y. 04-05 IS CONFIRMED. THEREFORE, THE AO IS DIRECTED TO CALCULATE THE PENALTY AMOUNT ON RS. 4,34,837/-. TH E REMAINING PENALTY IN ITA NO. 951/AHD/2010 A.Y. 2003-04 & 952/AHD/2010 A .Y. 2004-05 PAGE NO. ACIT VS. KEVIN PROCESS TECHNOLOGIES PVT. LTD. 7 BOTH THE YEARS ON OTHER ADDITIONS ARE HEREBY DELETE D BY CONSIDERING THE ORDER OF APEX COURT IN THE CASE OF RELIANCE PETROCHEMICAL AND PWC (SUPRA). THE ASSESSEE HAD DISCLOSED THE PARTICULARS OF DEDUCTION IN PROFIT AND LOSS ACCOUNT AS WELL AS IN BOOKS OF ACCOUNT BEFORE THE AO FOR WH ICH NO INACCURATE PARTICULARS HAVE BEEN FURNISHED. ACCORDINGLY, THE PENALTY LEVIED FOR A.Y. 03-04 IS DELETED AND PENALTY FOR 04-05 IS PARTLY AL LOWED. 10. IN THE RESULT, THE REVENUES APPEAL FOR A.Y. 03 -04 IS DISMISSED AND FOR 04-05 IS PARTLY ALLOWED ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (MUKUL KR. SHRAWAT) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 14/12/2012 AK / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '#