M/s. PROMINENCE ELECTRIC (INDIA) P. LTD., MUMBAI v. DCIT Rg. - 8(1), MUMBAI

ITA 4677/MUM/2006 | 2001-2002
Pronouncement Date: 20-04-2010 | Result: Allowed

Appeal Details

RSA Number 467719914 RSA 2006
Assessee PAN EMBER2001B
Bench Mumbai
Appeal Number ITA 4677/MUM/2006
Duration Of Justice 3 year(s) 8 month(s) 1 day(s)
Appellant M/s. PROMINENCE ELECTRIC (INDIA) P. LTD., MUMBAI
Respondent DCIT Rg. - 8(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 20-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 20-04-2010
Assessment Year 2001-2002
Appeal Filed On 18-08-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B : MUMBAI BEFORE SHRI D. MANMOHAN HONBLE VICE PRESIDENT AND SHRI B.RAMAKOTAIAH ACCOUNTANT MEMBER ITA. NO. 4677/MUM/2006 ASSESSMENT YEAR 2001-2002 M/S. PROMINENCE ELECTRIC (INDIA) PVT. LTD. MUMBAI 400 059. PAN AABCP-6060-D VS. DCIT RANGE 8 (1) MUMBAI 400 020 (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI SATISH R. MODY FOR RESPONDENT : S/SHRI AARSI PRASAD / S.S. RAN A SM.KESHKAMAT ORDER PER D. MANMOHAN V.P. 1. PENALTY OF RS. 11 96 208/- LEVIED BY THE ASSESS ING OFFICER UNDER SECTION 271 (1) (C) OF THE I.T. ACT ON THE A SSESSEE-COMPANY HAVING BEEN PARTLY CONFIRMED BY THE LEARNED CIT(A) A FURT HER APPEAL WAS PREFERRED BY THE ASSESSEE-COMPANY BEFORE THE TRIBUN AL CONTENDING INTER ALIA THAT ALL THE FACTS WERE ON RECORD AND MERELY BECAUSE THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS ON THE MATTER PENALTY SHOULD NOT BE LEVIED. 2. FACTS OF THE CASE ARE STATED IN BRIEF. IN RESPE CT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2001- 2002 ASSESSEE CLAIMED DEDUCTION UNDER SECTION 43B OF THE ACT WITH REFERENCE TO THE INTEREST PAYABLE TO MAHARASHTRA STATE FINANCE CORPO RATION (MSFC). AS PER THE TAX AUDIT REPORT THE ASSESSEE CLAIMED AN AM OUNT OF RS.30 24 545/-. IN THE NOTE IT WAS EXPLAINED THAT T HE ASSESSEE-COMPANY HAD SETTLED ITS ACCOUNTS WITH MSFC IN A ONE TIME SE TTLEMENT SCHEME. 2 3. THE ASSESSING OFFICER OBSERVED THAT AS PER THE SCHEME SETTLEMENT IS VALID SUBJECT TO PAYMENT MADE BY THE ASSESSEE-COMPANY WITHIN THE SPECIFIED TIME ; HOWEVER IN THE INSTANT CASE OUT OF A TOTAL AMOUNT OF RS. 1.04 CRORES SHOWN AS OUTSTANDING ON A CCOUNT OF LOANS FROM MSFC ASSESSEE CLEARED ONLY A PART OF THE AMOUN T AND DID NOT CLEAR TOTAL LIABILITY WITHIN THE SPECIFIED TIME. THEREFOR E THE ASSESSING OFFICER CONCLUDED THAT THE CLAIM OF DEDUCTION IS NOT PERMIS SIBLE AND FURTHER CONCLUDED THAT THE ASSESSEE FURNISHED INACCURATE PA RTICULARS IN THE RETURN OF INCOME WHICH ATTRACTS PROVISIONS OF SECTI ON 271 (1) (C) OF THE ACT. DESPITE AN EXPLANATION THE ASSESSING OFFICER PROCEEDED TO LEVY PENALTY @ 100% ON THE DISALLOWANCE OF RS.30 29 545/ -. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO RE-WORK THE PENALTY IN THE LIGHT OF THE FACT THAT D ISALLOWANCE TO THE EXTENT OF RS.9 32 359/- ONLY WAS UPHELD IN THE QUANTUM PRO CEEDINGS. OPERATIVE PORTION OF THE ORDER PASSED BY CIT(A) IN THE QUANTU M PROCEEDINGS IS EXTRACTED FOR IMMEDIATE REFERENCE : 5. DURING THE RELEVANT FINANCIAL YEAR THE COMPANY HA D PAID A TOTAL AMOUNT OF RS.8 70 000/- TOWARDS UNPAID INTERE ST AND THIS FACT HAS BEEN CONFIRMED BY THE ASSESSING OFFIC ER IN THE ASSESSMENT ORDER. THESE AMOUNTS WERE PAID ON 14-06- 2000 FALLING WITHIN THE FINANCIAL YEAR. FURTHER IN ITS BOOKS OF ACCOUNTS FOR THE FINANCIAL YEAR UNDER CONSIDERATION THE APPELLANT HAD SHOWN AN EXCESSIVE LIABILITY TOWARDS MSFC OF RS.8 42 186/- WHICH WAS TREATED AS INCOME IN THE CU RRENT FINANCIAL YEARS ACCOUNT BY WRITING BACK THE EXCESS LIABILITY. THE APPELLANT COMPANY HAD ALSO PAID AN AMOUNT OF RS . 5 LACS IN SEPTEMBER 2001 BEFORE THE FILING OF RETURN OF INCOME TO MSFC WHICH HAS BEEN CONFIRMED BY THEM VIDE THEIR LETTER DATED 8-11-2001. SINCE THE OUTSTANDING LIABILITY WA S CONVERTED BY MSFC BY WAY OF CONSOLIDATION UNDER ONE TIME 3 SETTLEMENT SCHEME INTO A TERM LOAN THE UNPAID LIAB ILITY IS DEEMED TO HAVE BEEN PAID AS PER THE BANKING LAW AND COMMERCIAL LAWS. IN THIS REGARD THE APPELLANTS REPRESENTATIVE RELIED UPON THE DECISIONS IN THE CAS ES OF J.B. BODA & CO. PVT. LTD. VS. CBD 137 CTR 287 (SC) AND H OUSE OF LORDS IN MACNIVEN VS. WESTMORE LAND INVESTMENT L TD. 255 ITR 612 (HL). IT WAS SUBMITTED THAT IN THE CIRC UMSTANCE THE APPELLANT HAD RIGHTLY CLAIMED THE DEDUCTION AS IS EVIDENT FROM THE TABLE BELOW I. AS PER BALANCE SHEET MSFC O/S AS ON 31-03-2000 RS. 1 21 42 186 AS PER BALANCE SHEET MSFC O/S AS ON 31-03-2001 BALANCE RS. 1 04 30 000 RS. 17 12 186 PAID BY SCI AS CONFIRMED BY ASSESSING OFFICER RS. 7 50 000 PAID BY CO. AS CONFIRMED BY ASSESSING OFFICER TREATED AS INCOME IN THE BALANCE SHEET NO GIVEN EFF ECT RS. 1 20 000 _________________ RS. 8 42 186 II. WRONGLY DISALLOWED UNDER SECTION 43B RS. 30 24 545 PAID BY SCI AS CONFIRMED BY ASSESSING OFFICER RS. 7 50 000 PAID BY CO. AS CONFIRMED BY ASSESSING OFFICER RS. 1 20 000 TREATED AS INCOME IN THE BALANCE SHEET NOT GIVEN EF FECT BALANCE LESS: PAID AFTER BALANCE SHEET DATE BEFORE FILING R ETURN BALANCE NOT PAID BUT DEEMED TO BE PAID ON CONVERSIO N RS. 8 42 186 _________________ RS. 13 12 359 RS. 5 00 000 ___________________ RS. 8 12 359 6. FURTHER IN THE COURSE OF APPEAL PROCEEDINGS THE APPELLANTS REPRESENTATIVE SUBMITTED NECESSARY EVIDENCES INCLUDING THE LETTER OF MSFC ON THE BASIS OF WHICH THE CLAIM FOR DEDUCTION HAS BEEN MADE AS ALSO 4 THE LETTER OF CONFIRMATION RECEIVED FROM MSFC IN RE GARD TO THE PAYMENTS. IN THE CIRCUMSTANCES SINCE THE APPELLANT HAD TREATED A PORTION OF THE LIABILITY AS ITS INCOME AND HAD PAID THE BALANCE SUM DURING THE YEAR OR THEREAFTER BY THE DUE DATE OF FILING THE RETURN OF INCOME IT HAD RIGHTFULLY CLAIMED THE DEDUCTION OF THE AMOUNT UNDER SECTION 43B OF THE ACT. IT WAS SUBMITT ED THAT IN THE CIRCUMSTANCES THE ASSESSING OFFICER IS NOT CORRECT IN NOT ALLOWING THE CLAIM AS MADE BY THE APPELLANT. HE MAY BE DIRECTED TO ALLOW THE CLAIM AS MADE IN THE RETURN. 7. THE SUBMISSION MADE BY THE APPELLANTS REPRESENTATI VE HAS BEEN CONSIDERED. ITS CLAIM THAT ON ACCOUNT OF O NE TIME SETTLEMENT THE APPELLANT COMPANY HAD DURING T HE YEAR THE OUTSTANDING LIABILITY IN THE FORM OF INTER EST AMOUNT SHOULD BE TAKEN AS HAVING BEEN PAID IS WITHO UT ANY SUBSTANCE. THERE IS NO INDICATION TO THIS EFFEC T IN THE LETTER OF SETTLEMENT WHICH HAS BEEN RELIED UPON IN THIS REGARD. FURTHER THE TWO DECISIONS RELIED UPON IN THIS CONNECTION BY THE APPELLANTS REPRESENTATIVE AND REFERRED TO ABOVE ARE OF NO HELP IN DECIDING THE IS SUE IN FAVOUR OF THE APPELLANT CONSIDERING THAT THESE WERE PRONOUNCED IN TERMS OF OTHER LAWS AND ENACTMENTS AN D NOT IN CONNECTION WITH THE PROVISIONS OF SECTION 43 B OF THE ACT. THEREFORE RELIEF CANNOT BE ALLOWED TO THE APPELLANT ON THE BASIS OF THE SAID DECISIONS. SECTI ON 43B OF THE ACT IN TERMS OF WHICH THE CLAIM HAS BEEN MADE BY THE APPELLANT FOR THE DEDUCTION PROVIDES FO R PAYMENT OF THE LIABILITY. THEREFORE WHERE NO PAYME NT IS 5 MADE THERE IS NO CASE FOR ALLOWING THE DEDUCTION U NDER THE SECTION. 8. THE ASSESSING OFFICER IN THE INSTANT CASE HAS NOT ALLOWED THE APPELLANT THE DEDUCTION OF RS.30 24 545 /- THAT RELATES TO THE UNPAID INTEREST LIABILITY OF TH E EARLIER YEARS. A PORTION OF THAT AMOUNT AMOUNTING TO RS.8 42 186/- HAS BEEN TREATED AS INCOME BY THE APPELLANT IN THE PROFIT AND LOSS ACCOUNT FOR THE YE AR. THIS INCOME EMANATES OUT OF THE SAID INTEREST LIABI LITY OF THE EARLIER YEARS. THEREFORE EVEN IF THE AMOUNT IS HELD AS INADMISSIBLE FOR DEDUCTION IT WILL BE THE REDUC ED AMOUNT AFTER THE ADJUSTMENT OF RS.30 24 545/- CLAIM ED AS DEDUCTION AGAINST WHAT IS TREATED AS INCOME OF RS.8 42 186/- ON ACCOUNT OF REMISSION OF THE SAME LIABILITY. OUT OF THE BALANCE AMOUNT THE APPELLANT HAD CLAIMED TO HAVE MADE PAYMENT OF RS.7 50 000/- TOWARDS THE INTEREST LIABILITY ON 14-06-2000. THE ASSESSING OFFICER HAS REFERRED TO THE SAID PAYMENT IN THE ASSESSMENT ORDER. THE APPELLANT HAD MADE ANOTHE R PAYMENT OF RS.5 00 000/- BEFORE THE DUE DATE OF FIL ING OF THE RETURN OF INCOME. THUS THERE IS A PAYMENT O F RS.12 50 000/- AGAINST THE SAID INTEREST LIABILITY BY THE DUE DATE OF FILING OF THE RETURN OF INCOME. THE THI RD PAYMENT OF RS.1 20 000/- IS TOWARDS PRINCIPAL AMOUN T AND THEREFORE CANNOT BE PERMITTED TO BE ADJUSTED AGAINST THE INTEREST LIABILITY. 9. SINCE THE APPELLANT IS ELIGIBLE FOR DEDUCTION IN TE RMS OF SECTION 43B OF THE ACT IN RESPECT OF WHAT HAS BEEN CLAIMED OUT OF INTEREST LIABILITY DURING THE FINANC IAL YEAR 6 AND UPTO THE DUE DATE OF FILING THE RETURN OF INCOM E THE AMOUNT OF RS.12 50 000/- SO PAID TOWARDS THE INTERE ST IS ALSO LIABLE FOR ADJUSTMENT AGAINST THE TOTAL INT EREST LIABILITY CLAIMED AS DEDUCTION. IF THE SAID AMOUNT OF RS.12 50 000/- THAT IS ADMISSIBLE ON PAYMENT BASIS IS ADDED TO THE AMOUNT SHOWN AS INCOME ON ACCOUNT OF REMISSION OF RS.8 42 186/- THE ONLY BALANCE AMOUNT THAT REMAINS IS OF RS.9 32 359/-. 10. THEREFORE OUT OF TOTAL AMOUNT OF RS.30 24 545/- TH AT HAS BEEN DISALLOWED AS DEDUCTION BY THE ASSESSING OFFICER ONLY RS.9 32 359/- CAN BE HELD AS INADMISS IBLE FOR SUCH DEDUCTION. THE APPELLANT IS ENTITLED FOR DEDUCTION IN RESPECT OF BALANCE AMOUNT OF RS.20 92 186/-. 4. FURTHER AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. LEARNED COUNSEL SUBMITTED THAT FACTS ARE FULLY AND TRULY D ISCLOSED BEFORE THE ASSESSING OFFICER AT THE TIME OF FILING THE RETURN OF INCOME. ADVERTING OUR ATTENTION TO PAGE 5OF THE PAPER BOOK IT WAS CONTEND ED THAT THE FACTUM OF SETTLEMENT OF ITS ACCOUNT WITH MSFC AND ITS PROPOSA L TO CLAIM INTEREST WHICH WAS DISALLOWED IN THE EARLIER YEARS WAS INCOR PORATED IN THE NOTE IN THE TAX AUDIT REPORT. IN FACT OUT OF TOTAL SUM OF RS.30 29 545/- ASSESSEE PAID A PORTION OF THE AMOUNT WITHIN THE TIME AVAILA BLE UNDER LAW AND BALANCE WAS CLAIMED AS DEEMED PAYMENT. BASED UPON T HE INFORMATION AVAILABLE ON RECORD LEARNED CIT(A) DIRECTED THE AS SESSING OFFICER TO GRANT FURTHER DEDUCTION. IT WAS THUS CONTENDED THAT THE C LAIM MADE BY THE ASSESSEE BASED UPON INFORMATION FURNISHED BEFORE TH E ASSESSING OFFICER IS BONAFIDE ON WHICH PENALTY SHOULD NOT BE LEVIED I N THE LIGHT OF DECISION OF THE APEX COURT IN THE CASE OF RELIANCE PETROL PR ODUCTS PVT. LTD. 322 ITR 158. 7 5. ON THE OTHER HAND LEARNED DR STRONGLY RELIED U PON THE ORDERS PASSED BY THE TAX AUTHORITIES. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. AS COULD BE NOTICED FROM THE OR DER PASSED BY THE CIT(A) IN THE QUANTUM PROCEEDINGS ALL THE PARTICULA RS NECESSARY FOR THE PURPOSE OF MAKING A CLAIM OF DEDUCTION WERE AVAILAB LE ON RECORD AND IT CAN BE CONSIDERED AS A BONAFIDE CLAIM. MERELY BECAU SE THE CLAIM WAS PARTLY DISALLOWED AT APPELLATE STAGE IT CANNOT BE CONSTRUED THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME WITH A VIEW TO CONCEAL INCOME BY CLAIMING HIGHER DEDUCTION. HAVIN G REGARD TO THE FACTS OF THE CASE AND IN THE LIGHT OF DECISION OF THE APE X COURT CITED BY THE LEARNED COUNSEL WE ARE OF THE VIEW THAT THIS IS NO T A FIT CASE FOR LEVY OF PENALTY. 7. WE THEREFORE CANCEL THE PENALTY LEVIED BY THE ASSESSING OFFICER. APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 2 0 TH DAY OF APRIL 2010. SD/- SD/- (B.RAMAKOTAIAH) ( D MANMOHAN ) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI : DATED: 20 TH APRIL 2010 VBP/- 8 COPY FORWARDED TO: 1 M/S. PROMINENCE ELECTRIC (INDIA) PVT. LTD. 5 BIK ANER BHAVAN JB NAGAR ANDHERI-KURLA ROAD ANDHERI (EAST) MUMBAI 400 059. PAN AABCP-6060-D 2 DCIT RANGE 8 (1) AAYAKAR BHAVAN M.K. MARG MUM BAI 400 020 3 CIT (A)-VIII MUMBAI. 4 CIT M.C-VIII MUMBAI. 5 DR B BENCH 6. GUARD FILE /TRUE COPY/ BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI