ACIT, CHENNAI v. M/s. Deccan Agency, CHENNAI

ITA 1190/CHNY/2011 | 2001-2002
Pronouncement Date: 29-11-2011 | Result: Dismissed

Appeal Details

RSA Number 119021714 RSA 2011
Assessee PAN AAAFD2959F
Bench Chennai
Appeal Number ITA 1190/CHNY/2011
Duration Of Justice 5 month(s) 4 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. Deccan Agency, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 29-11-2011
Date Of Final Hearing 29-11-2011
Next Hearing Date 29-11-2011
Assessment Year 2001-2002
Appeal Filed On 24-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN JUDICIAL MEMBER .. I.T.A. NO. 1190/MDS/2011 ASSESSMENT YEAR : 2001-02 THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-III(4) CHENNAI. V. M/S. DECCAN AGENCY 46 DR. B. N. ROAD T. NAGAR CHENNAI-600 017. [PAN: AAAFD2959F] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. E. B. RENGARAJAN JR. STANDING COUNSEL RESPONDENT BY : SHRI D. ANAND ADVOCATE DATE OF HEARING : 29-11-2011 DATE OF PRONOUNCEMENT : 29-11-2011 O R D E R PER GEORGE MATHAN JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-II CHENNAI IN ITA NO. 4/08-09 DATED 2 1-02-2011 FOR THE ASSESSMENT YEAR 2001-02. 2. SHRI K. E. B. RENGARAJAN JR. STANDING COUNSEL RE PRESENTED ON BEHALF OF THE REVENUE AND SHRI D. ANAND ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. I.T.A. NO.1190/MDS/2011 2 3. IN THE REVENUES APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1.A ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LEARNED CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED BY THE A.O. U/S 271(1)(C) AMOUNTING TO ` 6 29 160/-. 1.B THE LEARNED CIT(A) HAS FAILED TO APPRECIATE T HAT THE DEBTS WRITTEN OFF FELL OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 36(2) OF THE I.T.ACT 1961 THAT NOWHERE IN THE RETURN OF INC OME OR THE FINANCIAL STATEMENTS ANNEXED TO THE RETURN OF INCOM E THE FACT REGARDING WRITING OFF OF BAD DEBTS WAS MENTIONED BY THE ASSESSEE AND THAT ONLY AFTER SCRUTINY BY THE A.O. THE MATERI AL FACTS WERE DISCLOSED BY THE ASSESSEE AND HENCE THERE IS FURNIS HING OF INACCURATE PARTICULARS OF INCOME/CONCEALMENT OF INCOME. 2. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND AOR ALTER THE ABOVE GROUNDS OF APPEAL AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL THE ORDER OF THE LEARNED CIT(APPEALS) MAY BE SET A SIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 4. IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSE SSEE IS IN THE BUSINESS OF DISTRIBUTION OF LOTTERY TICKETS AND FINANCING. IT WAS THE SUBMISSION THAT THE ASSESSEE FIRM HAD GIVEN A LOAN OF ` 16 05 000/- TO ONE OF ITS SISTER CONCERNS. IT WAS THE SUBMISSION THAT THE SISTER CONCERN HAD IN FACT SUFF ERED LOSSES AND AS IT WAS UNABLE TO REPAY THE LOAN THE SAME HAD BEEN WRITTEN OFF AS BAD DEBT IN ITS BOOKS. IT WAS THE SUBMISSION THAT IN THE COURSE OF ASSESSMENT PRO CEEDINGS THE ASSESSING OFFICER HAD TREATED THE WRITE OFF AS CAPITAL LOSS AND NOT A S A REVENUE LOSS. IT WAS THE SUBMISSION THAT ON APPEAL THE LEARNED CIT(A) HAD DE LETED THE DISALLOWANCE ON THE I.T.A. NO.1190/MDS/2011 3 GROUND THAT THE DEDUCTION OF THE BAD DEBT WRITTEN O FF FELL WITHIN THE PURVIEW OF THE PROVISIONS OF SECTION 36(1)(VII) OF THE INCOME TAX ACT 1961. IT WAS THE SUBMISSION THAT ON APPEAL BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) THE TRIBUNAL HAD REVERSED THE ORDER OF THE LEARNED CIT(A) AND HA D HELD THAT THE AMOUNT ADVANCED TO THE SISTER CONCERN WAS NOT FOR BUSINESS PURPOSE OF THE ASSESSEE. IT WAS THE SUBMISSION THAT CONSEQUENT TO THE ORDER OF THE TRIBUNAL REVERSING THE ORDER OF THE LEARNED CIT(A) PENALTY UNDER SECTION 271(1 )(C) HAD BEEN LEVIED ON THE ASSESSEE. IT WAS THE SUBMISSION THAT THE LEARNED C IT(A) HAD CANCELLED THE PENALTY HOLDING THAT ALL THE FACTS HAD BEEN PLACED BEFORE T HE ASSESSING OFFICER AND THERE WAS NO CONCEALMENT OF PARTICULARS OF INCOME OR FURN ISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE OR DER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. 5. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). IT WAS THE SUBMISSION THAT THE WRITE OFF OF THE BAD DEBTS HAD CATEGORICALLY BEEN DONE IN THE BOOKS OF A CCOUNTS OF THE ASSESSEE AND THIS WAS NOT DISPUTED. IT WAS THE SUBMISSION THAT THE A SSESSEE DID HAVE A BUSINESS CONNECTION INSOFAR AS ANY LOSS INCURRED BY THE SIST ER CONCERN OF THE ASSESSEE IN WHICH THE ASSESSEES PARTNERS WERE ALSO INVOLVED WO ULD AFFECT THE CREDIT RATING OF THE ASSESSEE FIRM AS ALSO ITS PARTNERS. IT WAS THE SUBMISSION THAT AS THERE WAS A GENUINE BUSINESS CONNECTION THE DEBT WRITTEN OFF WO ULD BE LIABLE TO BE ALLOWED. HOWEVER THE TRIBUNAL HELD OTHERWISE. IT WAS THE S UBMISSION THAT ONLY THE I.T.A. NO.1190/MDS/2011 4 INTERPRETATION OF THE LAW WHICH HAD LED TO THE DISA LLOWANCE BY THE TRIBUNAL. IN THE CIRCUMSTANCES THE PENALTY CANCELLED BY THE LEARNED CIT(A) WAS LIABLE TO BE UPHELD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUT SET IT IS NOTICED THAT THE AMOUNT WRITTEN OFF BEING ` 16 05 000/- REPRESENTED THE AMOUNT ADVANCED BY THE ASSESSEE FIRM TO ITS SISTER CONCERN M/S. DECCA N PICTURES TELUGU. IT WAS FURTHER NOTICED THAT THE PROJECT OF THE SISTER CONCERN M/S . DECCAN PICTURES TELUGU DID NOT TAKE OFF AND CONSEQUENTLY THE MONEY WAS LOST. IT I S ALSO NOTICED THAT THERE IS NO AVERMENT THAT THE BAD DEBT CLAIMED BY THE ASSESSEE WAS NOT WRITTEN OFF IN THE BOOKS NOR IS THERE ANY AVERMENT THAT THE AMOUNT ADV ANCED WAS FOR EXTRANEOUS CONSIDERATIONS. IT IS ALSO NOTICED THAT THE ASSESS EE IS IN THE BUSINESS OF LOTTERY AGENCY AND FINANCING. THE ASSESSEE HAS DISCLOSED T HE TRANSACTION IN ITS RETURN AND HAD MADE A CLAIM WHICH THE ASSESSEE FELT WAS PERMIS SIBLE IN LAW. THERE IS NO SUPPRESSION OF THE FACTS. IT ALSO REMAINS UNDISPUT ED THAT THE ASSESSEE HAS LOST THE MONEY. THE ISSUE THAT HAD BEEN DECIDED WAS WHETHER THE BAD DEBT INCURRED BY THE ASSESSEE WAS LIABLE TO BE ALLOWED IN THE REVENUE FI ELD OR IT WAS A CAPITAL LOSS. THE ASSESSEE CLAIMED IT AS A REVENUE LOSS AND THE ASSES SING OFFICER HELD THE SAME TO BE A CAPITAL LOSS. THIS BY ITSELF CANNOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME OR C ONCEALED ANY PARTICULARS OF ITS INCOME. THE FACTS AND FIGURES ARE VERY MUCH AVAILA BLE AND THERE IS NO DISPUTE ON THE FACTS OR THE FIGURES. IT IS CLEARLY AN INTERPR ETATION OF THE LAW WHICH HAD LED TO THE ADDITION BEING SUSTAINED. IN THE CIRCUMSTANCES IT CANNOT BE HELD THAT THE I.T.A. NO.1190/MDS/2011 5 ASSESSEE HAS DONE ANY CONTUMACIOUS ACT WHICH LEADS TO THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THE ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. IN THE CIRCUMSTANCES THE APPEAL OF THE REVENUE IS DISMISSED. 7. THE ORDER WAS PRONOUNCED IN THE COURT ON 29/11/2 011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI DATED THE 29 TH NOVEMBER 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE