DCIT CIR 13(3), MUMBAI v. HIRALAL RAICHAND & CO., MUMBAI

ITA 1832/MUM/2010 | 2004-2005
Pronouncement Date: 15-07-2011 | Result: Dismissed

Appeal Details

RSA Number 183219914 RSA 2010
Assessee PAN AACFH2854B
Bench Mumbai
Appeal Number ITA 1832/MUM/2010
Duration Of Justice 1 year(s) 4 month(s) 7 day(s)
Appellant DCIT CIR 13(3), MUMBAI
Respondent HIRALAL RAICHAND & CO., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 15-07-2011
Date Of Final Hearing 04-07-2011
Next Hearing Date 04-07-2011
Assessment Year 2004-2005
Appeal Filed On 08-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI P.M.JAGTAP ACCOUNTANT MEMBER & SHRI R.S. PADVEKAR JUDICIAL MEMBER. I.T.A. NO. 1832/MUM/2010. ASSESS MENT YEAR : 2004-05. ASSTT. COMMISSIONER OF INCOME-TAX M /S HIRALAL RAICHAND AND CO. 13(3) MUMBAI. VS. 85 NEW BARDEN LANE MASJID BUNDER LANE MUMBAI 400003. PAN AACFH2854B APPELLANT. RESPONDENT. APPELLANT BY : SHRI T.J. JACOB. RESPO NDENT BY : NONE. O R D E R. PER P.M. JAGTAP A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT(APPEALS)-24 MUMBAI DATED 24-12-2009 WHEREBY HE CANCELLED THE PENALTY OF RS.11 25 655/- IMPOSED BY THE AO U/S 271(1)(C). 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS CARRYING ON THE BUSINESS UNDER THE NAME AND STYLE OF HIS PROPRIETAR Y CONCERN M/S HIRALAL RAICHAND & CO. THE RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION WAS FILED BY HIM ON 05-10-2004 DECLARING A LOSS OF RS.22 94 916/-. IN T HE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN A SUM OF RS.31 37 715/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS WRITTEN OFF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE 2 ITA NO.1832/MUM/2010 ASSESSMENT YEAR : 2004-05. ASSESSEE COULD NOT PRODUCE THE DETAILS REQUIRED BY THE AO TO SHOW THE YEAR IN WHICH THE AMOUNT CLAIMED AS BAD DEBT WAS OFFERED TO TAX. THE ASSESSEE ALSO COULD NOT EXPLAIN AS TO HOW THE SAID AMOUNT WAS TREATED T O HAVE BECOME BAD IN THE YEAR UNDER CONSIDERATION. THE CLAIM OF THE ASSESSEE FOR BAD DEBTS WRITTEN OFF THUS WAS DISALLOWED BY THE AO IN THE ASSESSMENT COMPLETED U/ S 144 VIDE AN ORDER DATED 28- 09-2006. ON APPEAL THE SAID DISALLOWANCE WAS CONFI RMED BY THE LEARNED CIT(APPEALS). CONSEQUENTLY A SHOW CAUSE NOTICE U/ S 271(1)(C) READ WITH SECTION 274 WAS ISSUED BY THE AO IN RESPONSE TO WHICH IT WA S SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE DEBTS WRITTEN OFF HAD ARISEN DURI NG THE COURSE OF HIS BUSINESS AND SINCE THE SAME HAD REMAINED OUTSTANDING FOR A VERY LONG TIME THEY WERE WRITTEN OFF U/S 36(1)(VII) OF THE ACT AS BAD DEBTS. RELYING ON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF CIT VS. OMAN INTERNATIONAL B ANK 100 ITD 285 IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THERE WAS NO OBLIGATION ON HIS PART TO PROVE THAT THE DEBTS WRITTEN OFF HAD ACTUALLY BECOM E BAD IN THE YEAR UNDER CONSIDERATION. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND SATISFACTORY BY THE AO. ACCORDING TO HIM THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO ESTABLISH THAT THE AMOUNT OF BAD DEBTS WRITTEN OFF HAD BEEN OFFER ED TO TAX IN THE EARLIER YEARS. KEEPING IN VIEW THIS FAILURE OF THE ASSESSEE AND RE LYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHA RMENDRA TEXTILE PROCESSOR 306 ITR 677 THE AO IMPOSED A PENALTY OF RS.11 25 655/- U/S 271(1)(C) BEING 100% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE IN RESP ECT OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS. 3. THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT (APPEALS) AND IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE HIM THAT THE OBSER VATIONS OF THE AO TO THE EFFECT THAT CONDITION OF SECTION 36(2) WAS NOT SATISFIED I S ERRONEOUS BECAUSE THE AMOUNT OF 3 ITA NO.1832/MUM/2010 ASSESSMENT YEAR : 2004-05. BAD DEBT HAD BEEN TAKEN INTO ACCOUNT BY THE ASSESSE E IN THE COMPUTATION OF HIS INCOME FOR ASSESSMENT YEAR 1994-95. DOCUMENTARY EVI DENCE IN THE FORM OF BALANCE SHEET WAS ALSO FILED BY THE ASSESSEE ALONG WITH STATEMENT OF SUNDRY DEBTORS AS ON 31-03-1994 WHEREIN M/S KESARIA TEA CO. LTD. W AS REFLECTED AS SUNDRY DEBTOR FOR GOODS TO THE EXTENT OF RS.30 17 620/-. THE ASSE SSEE ALSO EXPLAINED THE BONAFIDE ATTEMPTS MADE BY HIM TO RECOVER THE AMOUNT DUE FRO M M/S KESARIA TEA CO. LTD. AS WELL AS OTHER MISCELLANEOUS PARTIES AMOUNTING TO RS.1 20 000/-. IT WAS CONTENDED THAT THE ASSESSEE THUS HAD MADE ALL POSSI BLE EFFORTS TO RECOVER THE OUTSTANDING SUNDRY DEBTS AND ONLY AFTER HAVING COME TO A BONAFIDE BELIEF THAT IT WAS NOT POSSIBLE TO RECOVER THE SAID AMOUNT IT WAS WRITTEN OF AND CLAIMED AS DEDUCTION U/S 36(1)(VII) READ WITH SECTION 36(2). I T WAS CONTENDED THAT THE CLAIM OF THE ASSESSEE FOR BAD DEBTS WRITTEN OFF THUS WAS ALL OWABLE IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF OMAN INTER NATIONAL BANK 313 ITR 128 ON MERIT AND THE PENALTY IMPOSED BY THE AO IN RESPE CT OF ADDITION MADE ON THIS ISSUE WAS NOT SUSTAINABLE. 4. THE LEARNED CIT(APPEALS) FOUND MERIT IN THE SUBM ISSIONS MADE ON BEHALF OF THE ASSESSEE AND CANCELLED THE PENALTY IMPOSED BY T HE AO U/S 271(1)(C) FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 2.3 OF HIS IMPUGNED ORDER : I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUN SEL AND IN VIEW OF THE FACTUAL POSITION THAT THE DEBTS RELATING TO M/S KESARIA TEA CO. LTD. OF RS.30 17 620/- AND MISCELLANEOUS PARTIES OF RS.1 20 000/- HAVE BECOME BAD AND AS STATED BY THE APPELLANT THAT THE REQUIREMENT S OF SEC. 36(2) HAVE BEEN COMPLIED WITH AND FOLLOWING THE RATIO OF THE JURISD ICTIONAL HIGH COURT IN I) DIT VS. OMAN INTERNATIONAL BANK (2009) 313 ITR 128 (BOM) II) CIT VS. STAR CHEMICALS P. LTD. (2009) 313 ITR 126 (BOM) TH E SAME WAS NOT DISALLOWABLE AND FURTHER THE APPELLANT HAS NOT CON CEALED ANY PARTICULARS OF ITS INCOME NOR FILED ANY INACCURATE PARTICULARS REL ATING TO THE ABOVE. HENCE THE PROVISIONS OF SEC. 271(1)(C) ARE NOT APPLICABL E ON THE GIVEN FACTS OF THE CASE AND THE PENALTY LEVIED OF RS.11 25 655/- IS DE LETED ESPECIALLY IN VIEW 4 ITA NO.1832/MUM/2010 ASSESSMENT YEAR : 2004-05. OF THE FOLLOWING DECISIONS AMONG OTHER CITED AND RE LIED UPON BY THE LT. COUNSEL :- I. KAMBAY SOFTWARE INDIA PVT. LTD. V. DCIT 122 TTJ 721 II. VIP INDUSTRIES LTD. V. ACIT WW TTJ 229 (MUM). IN THE RESULT APPEAL IS ALLOWED. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS) THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING BEFORE US NOBODY HAS PUT IN APPEARANCE ON BEHALF OF THE ASSESSEE INSPITE OF THE FACT THAT NOTICE OF THE SAID HEARING WAS GIVEN TO THE ASSESSEE WELL IN ADVANCE THROUGH NOTICE BOARD. THIS APPEAL OF THE REVENUE IS THEREFORE BEING DISPOSED OF EXPARTE QUA THE RESPON DENT ASSESSEE AFTER HEARING THE ARGUMENTS OF THE LEARNED DR AND PERUSING THE RELEVA NT MATERIAL ON RECORD. AS RIGHTLY HELD BY THE LEARNED CIT(APPEALS) IN HIS IMP UGNED ORDER THE AMOUNT OF BAD DEBTS CLAIMED BY THE ASSESSEE AS DEDUCTION HAVING B EEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE FOR ASSESSMENT YEAR 1994-95 AND THE SAID DEBTS HAVING BEEN WRITTEN OF IN THE BOOKS OF THE AS SESSEE AS IRRECOVERABLE THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OF AS PER THE PROVISIONS OF SECTION 36(1)(VII) READ WITH SECT ION 36(2). ALTHOUGH THE LEGAL POSITION ON THIS ISSUE HAS NOW BEEN SETTLED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF OMAN INTERNATIONAL BANK ( SUPRA) AS WELL AS BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF T RF LIMITED 323 ITR 397 (S.C.) RENDERED SUBSEQUENTLY THE SAME WAS CERTAIN LY A DEBATABLE ISSUE AT THE TIME WHEN THE RETURN FOR THE YEAR UNDER CONSIDERATION CA ME TO BE FILED BY THE ASSESSEE ON 05-10-2004. THE CLAIM MADE BY THE ASSESSEE IN TH E SAID RETURN FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF THUS WAS A LEGAL C LAIM MADE ON THE BASIS OF A 5 ITA NO.1832/MUM/2010 ASSESSMENT YEAR : 2004-05. POSSIBLE VIEW OF THE MATTER AND DISALLOWANCE THEREO F IN OUR OPINION BY THE AO CANNOT ATTRACT THE PENAL PROVISIONS OF SECTION 271( 1)(C) AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S 322 ITR 158. WE THEREFORE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEAR NED CIT(APPEALS) CANCELLING THE PENALTY IMPOSED BY THE AO IN RESPECT OF DISALLOWANC E MADE ON ACCOUNT OF ASSESSEES CLAIM FOR BAD DEBS WRITTEN OFF AND UPHOL DING THE SAME WE DISMISS THIS APPEAL FILED BY THE REVENUE. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. . ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY 2011. SD/- SD/- (R.S. PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI DATED: 15 TH JULY 2011. WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR H-BENCH. (TRUE COPY ) BY ORD ER ASSTT. R EGISTRAR ITAT MUMBAI BEN CHES MUMBA I.