ACIT CIR 21(3), MUMBAI v. TIDEWATER DETERGENT CO., MUMBAI

ITA 3442/MUM/2009 | 2002-2003
Pronouncement Date: 28-02-2011 | Result: Dismissed

Appeal Details

RSA Number 344219914 RSA 2009
Assessee PAN AABFT7973J
Bench Mumbai
Appeal Number ITA 3442/MUM/2009
Duration Of Justice 1 year(s) 9 month(s) 1 day(s)
Appellant ACIT CIR 21(3), MUMBAI
Respondent TIDEWATER DETERGENT CO., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 28-02-2011
Date Of Final Hearing 10-02-2011
Next Hearing Date 10-02-2011
Assessment Year 2002-2003
Appeal Filed On 27-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 3442/MUM/2009 (ASSESSMENT YEAR 2002-03) ACIT CIR 21 (3) C-11 BLDG 5 TH FL. PRATYAKSHKAR BHAVAN BKC BANDRA (E) MUMBAI-400051 . APPELLANT VS TIDEWATER DETERGENT CO LIBERTY TALKIES COMPOUND SAKIVIHAR ROAD SAKINAKA ANDHERI (E) MUMBAI-400072 PAN: AABFT7973J .. RESPONDENT APPELLANT BY : SHRI SUMEET KUMAR RESPONDENT BY : SHRI K SHIVRAM O R D E R PER VIJAY PAL RAO JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER DATED 6.8.2009 OF CIT(A) ARISING FROM THE PE NALTY ORDER PASSED U/S 271(1)( C ) OF THE ACT FOR THE ASSESSME NT YEAR 2002-03. 2. REVENUE HAS RAISED VARIOUS GROUNDS IN THIS APPEA L HOWEVER THE ONLY ISSUE ARISES FOR OUR CONSIDERATIO N IS WHETHER ITA NO. 3442/MUM/2009 (ASSESSMENT YEAR 2002-03) 2 IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEA RNED CIT(A) IS JUSTIFIED IN DELETING THE PENALTY LEVIED U/S 27 1(1)( C ) OF THE ACT ON THE ADDITION OF I) RS.37 51 706/- ON ACCOUNT OF BAD DEBTS. II) RS.10 38 424/- ON ACCOUNT OF INTEREST TO M/S URISAN COSMETICS LTD III) RS.9 11 571/- ON ACCOUNT OF PAID TO BMC. . TOTALING TO RS.5701701 3. THE ASSESSEE FILED RETURN OF INCOME ON 30.10.200 2 DECLARING TOTAL LOSS OF RS.32 22 160. THE SCRUTI NY ASSESSMENT WAS COMPLETED U/S 144 OF INCOME TAX ACT VIDE ORDER DATED 28.01.2005. SINCE NOBODY ATTENDED OR F ILED ANY DETAILS BEFORE THE AO IN RESPONSE TO THE NOTICE IS SUED U/S 143(2) AS WELL AS U/S 142(1) THE AO INTER ALIA DI SALLOWED THE CLAIM OF THE BAD DEBTS WRITTEN OFF OF RS.37 51 706/ - AND INTEREST OF RS. RS.10 38 424/-PAID TO M/S URISAN COSMETICS LTD AND RS.9 11 571/- PAID TO BMC. THESE DISALLO WANCES HAVE BEEN CONFIRMED BY THE CIT(A) AS WELL AS BY T HIS TRIBUNAL. THE AO INITIATED PENALTY PROCEEDINGS A ND LEVIED PENALTY OF RS.21 26 399/- IN RESPECT OF THESE THRE E DISALLOWANCE. 4. ON APPEAL THE CIT(A) HELD THAT THE DISALLOWANC E OF BAD DEBT FOR WANT OF CONFIRMATION OR SUPPORTING EVIDEN CE FROM THE ITA NO. 3442/MUM/2009 (ASSESSMENT YEAR 2002-03) 3 CONCERNED AUTHORITIES DOES NOT AMOUNT TO FILING IN ACCURATE PARTICULARS OF INCOME. AS REGARDS THE INTEREST EXPENSE PAID TO BMC AND M/S URISAN COSMETICS LTD WERE DISALLOWE D BY THE AO FOR WANT OF VERIFICATION AND THAT DOES NOT AUTOM ATICALLY LEADING TO CONCLUSION THAT THE ASSESSEE HAS NOT PA ID THE INTEREST AT ALL AND INTEREST PAYABLE TO THE BANK I S NOT ALLOWABLE U/S 43B OF THE ACT. THEREFORE THE DISALL OWANCE OF THE SAME WILL NOT ATTRACT THE LEVY OF PENALTY. 5. BEFORE US THE LEARNED DR HAS SUBMITTED THAT TH E ASSESSEE WAS ASKED REPEATEDLY TO PRODUCE THE DETAIL S OF INTEREST PAID AND WRITING OF BAD DEBTS AS WELL AS PROFIT AND LOSS ACCOUNTS ALONG WITH THE SUPPORTING EVIDENCE. EVEN NOBODY WAS APPEARED ON BEHALF OF THE ASSESSEE DURIN G THE ASSESSMENT PROCEEDINGS EXCEPT MENTIONING IN THE LET TER DATED 29.12.2004 THAT THE INTEREST WAS PAID TO BMC AND M /S URISAN COSMETICS LTD. SIMILARLY THE ASSESSEE HAS NOT PROD UCED ANY EVIDENCE OR FURNISHED ANY EXPLANATION TO JUSTIFY IN DEBITING RS.37 51 706/- AS BAD DEBT WRITTEN OFF. NO BOOKS O F ACCOUNTS WERE PRODUCED FOR VERIFICATION. THE AO HAD RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE WHICH WERE UPHELD BY THE CIT(A) AS WELL BY THIS TRIBUNAL. THE LEARNED DR HAS FURTHER CONTENDED THAT EVEN DURING THE APPELLATE PROCEEDINGS IN THE Q UANTUM APPEAL THE ASSESSEE HAS NOT FILED ANY ACCOUNT IN S UPPORT OF ITA NO. 3442/MUM/2009 (ASSESSMENT YEAR 2002-03) 4 THE CLAIM OF BAD DEBTS AS WELL AS INTEREST PAYMENT. THE LEARNED DR HAS FURTHER CONTENDED THAT THE AO NOTI CED THAT THERE WAS A DIFFERENCE IN THE INTEREST CLAIM TO HAV E BEEN PAID TO BMC BANK AND M/S URISAN COSMETICS LTD AND THE DISCREPANCY HAS NOT BEEN CLARIFIED /EXPLAINED BY T HE ASSESSEE EVEN DURING THE APPELLATE PROCEEDINGS. THE AO HA S POINTED OUT THAT THE ASSESSEE HAS DEBITED A SUM OF RS.18 95598/- IN THE PROFIT AND LOSS ACCOUNT WHEREAS THE ASSESSEE ME NTIONED THAT THE INTEREST PAID TO BMC BANK O F RS.9 11 57 1/- AND M/S URISAN COSMETICS LTD OF RS.10 38 242/- WHICH COME S TO RS.19 49 813/-. THIS DISCREPANCY HAS NOT BEEN E XPLAINED BY THE ASSESSEE. THE LEARNED DR HAS FURTHER CONTENDED THAT THE BAD DEBTS WRITTEN OFF BY THE ASSESSEE ARE NOT SUNDR Y TRADE DEBTS BUT THESE ARE ONLY THE LOAN/ADVANCES GIVEN B Y THE ASSESSEE AND THEREFORE THE SAME CANNOT BE ALLOW ED AS PER THE PROVISIONS OF SECTION 37(1)(VII) R.W.S 36(2). S INCE THE AMOUNTS WERE NOT TAKEN IN PROFIT AND LOSS ACCOUNT FOR ANY PREVIOUS YEAR THEREFORE THE CLAIM OF THE ASSESSEE IS FALSE AND AMOUNTS TO FURNISHING IN ACCURATE PARTICULARS O F INCOME. HE HAS RELIED UPON THE DECISION OF THE KERALA HIG H COURT IN THE CASE OF CIT V/S INDIA SEA FOODS REPORTED IN 10 5 ITR 708 AND THE DECISION OF THE HON.DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION REPORTED IN 323 ITR 510. HE HAS ALSO RELIED UPON THE ORDER OF THE AO. ITA NO. 3442/MUM/2009 (ASSESSMENT YEAR 2002-03) 5 6. ON THE OTHER HAND THE LEARNED AR HAS SUBMITTED THAT THE MAIN PARTNER OF THE ASSESSEE FIRM WAS FACING S OME FAMILY PROBLEMS AND DIFFICULTIES AS HIS WIFE WAS BED RIDDE N FOR MORE THAN 3 YEARS DUE TO CANCER AND SUBSEQUENTLY DIED. THE BUSINESS WAS CLOSED DUE TO THESE DIFFICULTIES AND T HEREFORE NOBODY APPEARED BEFORE THE AO. HE HAS FURTHER CONT ENDED THAT APART FROM DEATH OF THE WIFE HIS DAUGHTER WA S ALSO UNDERGOING SOME MATRIMONIAL DISPUTES AND FINALLY GOT DIVERSED. THUS DUE TO THESE SERIES OF SHOCKING EV ENTS THE ASSESSEE COULD NOT DEVOTE THE TIME TO LOOK AFTER TH E BUSINESS PROPERLY. ULTIMATELY THE BUSINESS WAS CLOSED AND THE EMPLOYEES OF THE ASSESSEE LEFT DUE TO NON PAYMENT OF SALARY. THEREFORE BECAUSE OF THESE DIFFICULTIES THERE WAS N O PROPER REPRESENTATION ON BEHALF OF THE ASSESSEE BEFORE TH E AUTHORITIES. 7. AS REGARDS THE BAD DEBTS THE LEARNED AR HAS SU BMITTED THAT THE GROUP COMPANIES VIZ M/S URISAN COSMETICS L TD HAD BEEN EXPORTING TOOTHPASTE AND HEALTHCARE PRODUCTS T O SOVIET UNION THROUGH MR.SANJHEEV MEHATA THE AUTHORIZED REPRESENTATIVE OF MAHALAXMI JEWELLERS AND TRADERS . THE ASSESSEE ENGAGED THEM FOR EXPORT OF DETERGENT AND F OR THAT PURPOSE PAID A SUM OF RS.30 LAKHS ON 15.12.1995 AS ADVANCE ITA NO. 3442/MUM/2009 (ASSESSMENT YEAR 2002-03) 6 TO BE ADJUSTED AGAINST THE EXPORT COMMISSION PAYABL E TO THEM. THE OFFER COULD NOT E CONCLUDED DUE TO PRICE DISADV ANTAGE AND THE SAID ADVANCE COULD NOT BE RECOVERED AND IT WAS WRITTEN OFF WITH INTEREST. SIMILARLY THE ADVANCES OF RS.1 50 000/- WAS PAID TO MR. VIKRAM SARIYA A LABO UR CONTRACTOR FOR PARKING OF EXPORT GOODS AND WHEN THE EXPORT DID NOT MATERIALIZED THE SAID AMOUNT WAS ALSO NOT RECEI VED BACK. THIS AMOUNT WAS WRITTEN OFF BY THE ASSESSEE AS BAD DEBT. THE AO DISALLOWED THE CLAIM OF BAD DEBTS WITHOUT GIVING ANY REASONS FOR THE SAME WHEREAS THE SAME BECAME BAD D URING THE COURSE OF BUSINESS. THE ASSESSEE COULD NOT FU RNISH THE RELEVANT EVIDENCE DUE TO DIFFICULTIES FACED BY THE ASSESSEE. ACCORDINGLY THE AR HAS SUBMITTED THAT OUT OF RS .37 LAKHS RS.6 51 706/- WAS ON ACCOUNT OF INTEREST AND RS.31 50 000/- WAS PRINCIPAL AMOUNT. THEN ADVANCE S WERE GIVEN IN THE COURSE OF BUSINESS AND THE REMAINING AMOUNT IS INTEREST DUE AGAINST THE PARTIES. THEREFORE THE C LAIM OF THE ASSESSEE THOUGH DISALLOWED BY THE AUTHORITIES THE SAME DOES NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF THE PARTICULARS OF THE INCOME. HE H AS FURTHER CONTENDED THAT THE EXPLANATION OF THE ASSESSEE IS B ONAFIDE AND PENALTY IS NOT WARRANTED . ITA NO. 3442/MUM/2009 (ASSESSMENT YEAR 2002-03) 7 8. AS REGARDS THE DISALLOWANCE OF INTEREST THE LD . AR OF THE ASSESSEE SUBMITTED. THE CLAIM OF THE ASSESSEE W AS DISALLOWED BECAUSE OF NON FURNISHING OF THE RELEVAN T PARTICULARS AND EVIDENCE AND IT WAS NOT BOGUS CLAIM . HOWEVER THE DISALLOWANCE IN RESPECT OF THE BMC BANK INTERES T U/S 43B IS CONCERNED THE SAME WILL NOT ATTRACT THE PENALTY PROVISIONS. HE HAS RELIED UPON THE DECISIONS OF THE HONBLE SUP REME COURT IN THE CASE OF CIT V/S RELIANCE PETROPRODUCT S PVT.LTD REPORTED IN 322 ITR 158(SC). 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF BAD DEBTS AS WELL AS INTEREST EXPENDITUR E FOR WANT OF NECESSARY RECORD EVIDENCE AS WELL AS THE BOOKS OF ACCOUNT. IN RESPECT OF THE INTEREST OF BMC BANK THE SAME WAS DISALLOWED U/S 43B. THE CLAIM OF THE BAD DEBTS WAS BASICALLY DISALLOWED BECAUSE THE ASSESSEE FAILED TO PROVE THA T THESE CLAIMS HAVE SATISFIED THE CONDITIONS OF SECTION 36(1)(VII) AND 36(2) OF THE ACT AS THE AMOUNT DID NOT REPRESENT SUNDRY DEBTORS OR TRADE DEBTORS REPRESENTING THE ADVANCES GIVEN BY THE ASSESSEE. THE ASSESSEE EXPLAINED THE DIFFICUL TIES AND REASONS FOR NOT REPRESENTING THE RELEVANT DETAILS AS THE MAIN PARTNER OF THE ASSESSEE FIRM WAS FACING FAMILY DI FFICULTIES WHICH HAS BEEN EXPLAINED BY THE ASSESSEE BEFORE THE CIT(A) ITA NO. 3442/MUM/2009 (ASSESSMENT YEAR 2002-03) 8 IN THE APPELLATE PROCEEDINGS. THE ADVANCES GIVEN B Y THE ASSESSEE IS NOT FOUND AS BOGUS CLAIM BUT ITS OUTST ANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE SINCE 1995 AND THEREFORE THOUGH THE ASSESSEES CLAIM IS NOT ALLO WABLE U/S 37(1)(VII) R.W. S 36(2) HOWEVER THE SAME CANNOT B E HELD AS BOGUS OR INHERITENTLY FALSE CLAIM. THE FACT OF AD VANCES GIVEN TO THE REPRESENTATIVE OF MAHALAXMI JEWELLERS AND T RADERS MR.SANJHEEV MEHATA AND VIKRAM SARIA HAS NOT BEEN FOUND BOGUS CLAIM BECAUSE IT IS APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE SINCE LONG TIME. ACCORDINGLY MERE DI SALLOWANCE OF THE CLAIM AS IT IS NOT ALLOWABLE UNDER THE PROV ISIONS OF STATUTE DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF THE PARTICULARS OF THE INCOME. WE FIND THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E THE EXPLANATION OF THE ASSESSEE FOR NOT FILING THE RELE VANT RECORD IS BONAFIDE AND CANNOT BE DIS-BELIEVED. 10. AS REGARDS THE CLAIM OF INTERESTS EXPENSE PAI D TO THE BMC BANK THE SAME HAS BEEN DISALLOWED BY APPLYING THE PROVISIONS OF SECTION 43B THEREFORE THE DISALLOWA NCE OF THE SAME CANNOT BE TREATED AS FURNISHING INACCURATE PA RTICULARS OF INCOME OF CONCEALMENT OF INCOME. SIMILARLY THE IN TEREST EXPENDITURE PAID TO M/S URISAN COSMETICS LTD WAS DI SALLOWED FOR NON-FILING OF THE RECORD AND EVIDENCE. IT HAS NOT BEEN HELD THAT THE CLAIM IS BOGUS OR IN-HERITENTLY FALSE. TH EREFORE IN ITA NO. 3442/MUM/2009 (ASSESSMENT YEAR 2002-03) 9 VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCT (SUPRA) THE PENALTY IS NOT JUSTIFIED. AS REGARDS THE DECISION IN THE CASE OF Z OOM COMMUNICATION IT IS HELD BY THE HON. DELHI HIGH CO URT THAT IF THE CLAIM IS ABSOLUTELY ILLEGAL THEN THE SAME AMOUN TS TO FURNISHING IN ACCURATE PARTICULARS OF INCOME. ACC ORDINGLY THE DECISION OF HONBLE DELHI HIGH COURT IS NOT APPLIC ABLE TO THE PRESENT CASE. 11. IN VIEW OF THE ABOVE DISCUSSION WE FIND NO ERR OR OR ILLEGALITY IN THE ORDER OF THE CIT(A) IN DELETING THE PENALTY. THE SAME IS UPHELD. 12. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED.. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH FEB.2011 SD SD (T.R.SOOD) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI DATED 28 TH FEB 2011 SRL:22211 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI