MAHINDRA INTERTRADE LTD, MUMBAI v. DCIT CIR 2(2), MUMBAI

ITA 5178/MUM/2010 | 2000-2001
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 517819914 RSA 2010
Assessee PAN AAACM4745P
Bench Mumbai
Appeal Number ITA 5178/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 7 day(s)
Appellant MAHINDRA INTERTRADE LTD, MUMBAI
Respondent DCIT CIR 2(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-09-2011
Assessment Year 2000-2001
Appeal Filed On 23-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER AN D SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 5178/MUM./2010 (ASSESSMENT YEAR : 2000-01 ) MAHINDRA INTERTRADE LTD. MAHINDRA TOWERS WORLI MUMBAI 400 018 PAN AAACM4745P .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE-2(2) AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .... RESPONDENT REVENUE BY : MR. PRADEEP SHARMA ASSESSEE BY : MR. H.P. MAHAJANI DATE OF HEARING 26.08.2011 DATE OF ORDER 30.09.2011 O R D E R PER J. SUDHAKAR REDDY A.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST IMPUGNED ORDER DATED 30 TH APRIL 2010 PASSED BY THE COMMISSIONER (APPEALS)-V MUMBAI FOR ASSESSMENT YEAR 2000-01 WHEREIN THE CO MMISSIONER (APPEALS) CONFIRMED THE PENALTY UNDER SECTION 271(1)(C) OF TH E INCOME TAX ACT 1961 (FOR SHORT THE ACT ) IMPOSED BY THE ASSESSING OFFICER VIDE HIS ORDER D ATED 30 TH JANUARY 2009. MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY AND ITS BUSINESS IS STATED TO BE AGENCY REP RESENTATION EXPORT TRADING EXPORT AGENCY SERVICES MANAGEMENT SERVICE S AND PROCESSING & MARKETING OF STEEL MATERIAL THROUGH MAHINDRA STEEL SERVICE CENTRE LTD. IT FILED ITS RETURN OF INCOME ON 29 TH OCTOBER 2000 DECLARING A LOSS OF ` 5 92 34 407. THE ASSESSING OFFICER COMPLETED THE AS SESSMENT UNDER SECTION 143(3) ON 12 TH MARCH 2003 ASSESSING THE INCOME AT ` 7 10 09 070. THE ADDITIONS ON WHICH THE PENALTY UNDER SECTION 271(1) (C) IS LEVIED AND WHICH ARE RELEVANT FOR ADJUDICATING THE CASE ARE AS FOLLO WS: (I) DISALLOWANCE OF PROVISIONS FOR DOUBTFUL DEBTS; (II) DISALLOWANCE OF PROVISIONS FOR DIMINUTION IN THE VA LUE OF INVESTMENT; (III) DISALLOWANCE OF PROVISIONS FOR PREMIUM ON REDEMPTIO N OF DEBENTURE; (IV) DEPRECIATION ON INTANGIBLE ASSETS (GOODWILL). THE COMMISSIONER-II MUMBAI VIDE HIS ORDER DATED 2 6 TH AUGUST 2004 CONFIRMED THESE ADDITIONS/DISALLOWANCES IN THE QUAN TUM PROCEEDINGS. 3. ON FURTHER APPEAL MUMBAI H BENCH OF THE TRIBUNAL VIDE ITS ORDER DATED 9 TH MAY 2008 HAD UPHELD THESE ADDITIONS/DISALLOWANCES AND DISMISSED THE APPEAL OF THE ASSESSEE. THEREAFTER THE ASSESSI NG OFFICER ISSUED NOTICE VIDE LETTER DATED 13 TH JANUARY 2009 ASKING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE LEVIED UNDER SECTION 271 (1)(C) OF THE ACT ON THE ADDITIONS CONFIRMED BY THE APPELLATE AUTHORITIES. I T HAS TO BE MENTIONED THAT A NOTICE INITIATING PENALTY PROCEEDINGS UNDER SECTI ON 271(1)(C) WAS ON A EARLIER DATE ISSUED AND SERVED ON THE ASSESSEE AND THE ASSESSEE REQUESTED FOR DROPPING THE PENALTY PROCEEDINGS AND ALTERNATIV ELY TO KEEP THE PENALTY PROCEEDINGS IN ABEYANCE TILL THE DECISION OF THE FI RST APPELLATE AUTHORITY. HENCE THE LEVY WAS KEPT IN ABEYANCE. THE ASSESSING OFFICER AFTER CONSIDERING VARIOUS EXPLANATIONS GIVEN BY THE ASSES SEE CAME TO A CONCLUSION THAT THE EXPLANATION IS NOT BONA-FIDE AN D THAT THE ISSUES IN QUESTION ARE NOT DEBATABLE ISSUES. HE CONCLUDED THA T THE ASSESSEE HAS FILED MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 3 INCORRECT PARTICULARS OF INCOME AND LEVIED A MINIMU M PENALTY OF 100% OF THE TAX SOUGHT TO BE EVADED ON THE INCOME. 4. AGGRIEVED THE ASSESSEE CARRIED THE MATTER BEFORE T HE FIRST APPELLATE AUTHORITY WHEREIN THE COMMISSIONER (APPEALS) REJEC TED VARIOUS CONTENTIONS MADE BY THE ASSESSEE AND CONFIRMED THE PENALTY. FUR THER AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE F OLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE ORDER PASSED BY THE LEARNED CIT(A) IN SO FAR A S IT HOLDS THAT THE ORDER PASSED BY THE LEARNED AO LEVYING PENALTY U/S 271(1 )(C) IS WITHIN PERIOD OF LIMITATION IS BAD IN LAW AS IT I S CONTRARY TO THE PROVISIONS OF THE PROVISO TO SECTION 275(1)(A) AND THE CIRCULAR ISSUED BY CBDT WHICH CIRCULAR WAS BINDING ON THE LEARNED C IT(A). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW AND WITHOUT PREJUDICE TO THE MERITS OF THE MATTER THE LEARNED CIT(A) OUGHT TO HAVE CANCELLED THE ORDER PASSED BY THE LEARNED A SSESSING OFFICER LEVYING PENALTY OF ` 3 63 09 319/- U/S 271(1)(C) OF THE INCOME TAX ACT 1961 AS BAD IN LAW BEING BARRED BY LIMITATION. 3. WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CI T(A) ERRED IN CONFIRMING THE PENALTY OF ` 3 63 09 319 U/S 271(L)(C) OF THE INCOME TAX ACT 1961 REJECTING THE CONTENTION OF THE APPELL ANT THAT IT HAD NEITHER CONCEALED ITS INCOME NOR FURNISHED INACCURA TE PARTICULARS THEREOF AND ACCORDINGLY OUGHT TO HAVE CANCELLED THE ORDER LEVYING THE PENALTY. 5. LEARNED COUNSEL MR. H.P. MAHAJANI ON BEHALF OF TH E ASSESSEE LISTED OUT VARIOUS DATES AND SUBMITTED THAT THE ORDER IMPO SING PENALTY UNDER SECTION 271(1)(C) WAS PASSED ON 30 TH JANUARY 2009 AND WHEREAS THE COMMISSIONER (APPEALS) HAD PASSED THE ORDER IN QUAN TUM PROCEEDINGS ON 31 ST AUGUST 2004 AND HENCE THE ORDER IS BARRED BY LIM ITATION IN TERMS OF PROVISO TO SECTION 275(1)(A) INSERTED BY FINANCE A CT 2003 FOR THE REASON THAT THE FIRST APPELLATE AUTHORITY HAD PASSED ORDER AFTER 1 ST JUNE 2003. HE TOOK THIS BENCH THROUGH THE WORDINGS OF THIS SECTIO N AND THE PROVISO AND SUBMITTED THAT THE ISSUE IS NOW COVERED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF AMRITSAR BENCH OF THE TRIBUNAL IN THE C ASE OF TARLOCHAN SINGH & SONS (HUF) V/S ITO (2008) 114 TTJ 82 (AMRIT.) AS W ELL AS THE DECISION OF LUCKNOW BENCH OF THE TRIBUNAL IN ITO V/S BLOOSOM FL ORICULTURE (2010) 134 MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 4 TTJ 05 (LUCK.). ON THE PROVISIONS OF SECTION 271(1) (C) LEARNED COUNSEL SUBMITTED THAT THE SAME DOES NOT APPLY AS IT PRESUP POSES PASSING OF AN ORDER BY THE COMMISSIONER (APPEALS). 6. ON MERITS LEARNED COUNSEL SUBMITTED THAT THEY ARE FOUR ITEMS OF DISALLOWANCE ON WHICH THE PENALTY IS LEVIED. HE SUB MITTED THAT THE PROVISIONS MADE WERE DISALLOWED AND SUCH DISALLOWANCE WAS CONF IRMED BY THE TRIBUNAL AND THAT THE ASSESSEE HAS CARRIED THE MATTER IN APP EAL AND THE HONBLE HIGH COURT HAS ADMITTED THE QUESTIONS BY ACCEPTING THE C ONTENTIONS OF THE ASSESSEE THAT THERE IS A SUBSTANTIAL QUESTION OF LA W. HE SUBMITTED THAT ON THE ISSUE OF PROVISIONS FOR DOUBTFUL DEBT AND ON TH E ISSUE OF DEPRECIATION ON INTANGIBLE ASSETS THE HIGH COURT ADMITTED THE QUES TIONS. IN VIEW OF THE DECISION OF THE TRIBUNAL IN M/S. NAYAN BUILDERS & D EVELOPERS PVT. LTD. V/S ITO ITA NO.2379/MUM./ 2009 ORDER DATED 18 TH MARCH 2011 IT WAS SUBMITTED THAT ONCE THE HIGH COURT ADMITS SUBSTANTI AL QUESTION OF LAW ON AN ADDITION IT BECOMES APPARENT THAT THE ADDITION IS CERTAINLY DEBATABLE AND IN SUCH CIRCUMSTANCES NO PENALTY IS LEVIABLE. HE FURT HER SUBMITTED THAT IN CASE OF CLAIM FOR PROVISION OF DOUBT DEBTS THE ISSUE TH AT IS DEBATABLE IS THE YEAR OF GRANT OF DEDUCTION. HE SUBMITTED THAT IN THE ASS ESSMENT YEAR 2003-04 CERTAIN DEDUCTIONS WERE GRANTED AND SIMILARLY DEDUC TIONS WERE GRANTED IN OTHER YEARS ALSO. HE POINTED OUT THAT THE ENTIRE CL AIM OF MORE THAN ` 7 87 95 496 WAS ALLOWED IN SUBSEQUENT YEARS AND HE NCE THE ALLOWABILITY IS NOT IN QUESTION . HE ARGUED THAT THE ASSESSEE FURNI SHED FULL DETAILS OF THIS AMOUNT OF PROVISION FOR DOUBTFUL DEBTS AND THAT IT HAS ALSO DEMONSTRATED THE FACTUM OF LOSS AND THE IRRECOVERABLE NATURE OF THE BALANCE. HE CLAIMED THAT THE ISSUE IS DEBATABLE AND THAT THE ASSESSEE WAS EN TITLED TO CLAIM A DEDUCTION EVEN IN CASES WHERE A SIMPLE PROVISION I S MADE IN THE ACCOUNTS INSTEAD OF WRITING-OFF THE SAME. FOR THIS PROPOSITI ON HE RELIED ON THE JUDGMENTS OF HONBLE CALCUTTA HIGH COURT HIGH COURT IN HONGKONG AND SHANGHAI BANKING CORPORATION V/S CIT (1955) 028 IT R 199 (CAL.) AND HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S JWALA PRASAD TIWARI (1953) 024 ITR 537 (BOM.). HE FURTHER RELIED ON CERTAIN DECISI ONS TO BUTTRESS HIS ARGUMENT THAT IN THE PROCESS OF WRITING-OFF OF TRAD E ADVANCE IT IS NOT MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 5 NECESSARY THAT THE CREDIT SHOULD BE TO THE ACCOUNT OF THE INDIVIDUAL PARTIES. HE SUBMITTED THAT WHAT IS IMPORTANT IS A DEBIT TO T HE PROFIT & LOSS ACCOUNT AND THAT THIS CONSTITUTES WRITE-OFF. HE RELIED ON T HE FOLLOWING CASE LAWS. SARANGPUR COTTON MANUFACTURING CO. LTD. V/S CIT (1 983) 143 ITR 166 (GUJ.) DEVI FILMS LTD. V/S CIT (1963) 49 ITR 874 (MAD.) AND VITHALDAS H. DHANJIBHAI BARDANWALA V/S CIT (1981) 130 ITR 95 (G UJ.). HE FURTHER ARGUED THAT EVEN OTHERWISE TRADING LOSSES ARE ALLOWABLE AND FOR THIS PROPOSITION HE RELIED ON CERTAIN CASE LAWS. HE FURTHER RELIED ON A CCOUNTING STANDARD-1 NOTIFIED BY THE CBDT UNDER SECTION 145 AND SUBMITTE D THAT PRUDENCE REQUIRED THAT THE ASSESSEE SHOULD PROVIDE FOR ALL K NOWN LIABILITIES. HE FURTHER POINTED OUT THAT IN THE RETURN OF INCOME IN RESPEC T OF PROVISIONS FOR DOUBTFUL DEBTS AN AMOUNT OF ` 10 36 07 753 WAS ORIGINALLY CLAIMED AND IN VIEW O F THE AMENDMENT TO SECTION 36(1)(VII) BY THE FINANCE ACT 2001 W.E.F. 1 ST APRIL 1989 A PORTION OF THE CLAIM OF ` 2 48 11 807 WAS WITHDRAWN VOLUNTARILY BY WAY OF A LETTER. HE CLAIMED THAT THI S PROVES THE BONAFIDE CONDUCT OF THE ASSESSEE. ON A QUERY FROM THE BENCH THE LEARNED COUNSEL ADMITTED THAT THE REQUIREMENTS OF SECTION 36(2) HA VE NOT BEEN SATISFIED BY THE ASSESSEE IN THIS CASE AND THAT THIS ISSUE IS NO T IN DEBATE. NEVERTHELESS HE SUBMITTED THAT THE CLAIM SHOULD BE ALLOWED EITHE R UNDER SECTION 28 OR 37(1) OF THE ACT. HE SUBMITTED THAT THERE IS NOTHIN G INHERENTLY WRONG IN THE CLAIM MADE BY THE ASSESSEE AND IT IS A DEBATABLE IS SUE AND THAT MERE DISALLOWANCE CANNOT RESULT IN A PENALTY. 7. ON THE ISSUE OF DIMINUTION IN THE VALUE OF INVESTME NT LEARNED COUNSEL SUBMITTED THAT THESE ARE TRADE INVESTMENT. HE SUBMI TTED THAT INVESTMENTS WERE MADE IN THE SHARES OF M/S. SEEKA FASHION AND THE INTENTION OF THE ASSESSEE WAS NOT TO HOLD THE SHARES BUT TO HAVE BE TTER CONTROL ON THE BUSINESS OPERATIONS OF M/S. SEEKA FASHION AS IT WOULD HAVE RESULTED IN THE DIRECT BENEFIT FOR THE ASSESSEE IN EXPORT BUSINESS. HE POINTED OUT THAT THE AMOUNT ADVANCED TO M/S. SEEKA FASHION WAS ALSO WRITTEN-OFF AND UNDER THESE CIRCUMSTANCES AS THE NET-WORTH OF M/S. SEEKA FASHION WAS NEGATIVE THE ASSESSEE WROTE-OFF THE INVESTMENTS. HE SUBMITTE D THAT THE CLAIM WAS MADE ON THE BASIS OF PRUDENCE. ON A QUERY FROM THE BENCH HE SUBMITTED MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 6 THAT THIS ISSUE WAS NOT CARRIED BEFORE THE HIGH COU RT. HE ARGUED THAT THIS IS ALSO A DEBATABLE ISSUE AND RELIED ON THE FOLLOWING CASE LAWS IN SUPPORT OF HIS CLAIM FOR DEDUCTION. PATNAIK & CO. LTD. V/S CIT (1 986) 161 ITR 365 (SC); AND INDIAN COMMERCE AND INDUSTRIES CO. P. LTD. V/S CIT (1995) 213 ITR 533 (MAD.). 8. ON THE PROVISIONS MADE FOR PREMIUM ON DEBENTURE HE SUBMITTED THAT THE LIMITED ISSUE IS THE YEAR OF ALLOWABILITY. HE S UBMITTED THAT THIS IS ALSO A DEBATABLE ISSUE AS THE DEPARTMENT HAD TAKEN A VIEW THAT THE LIABILITY HAS NOT CRYSTALLISED IN THE YEAR. SUCH DISALLOWANCE AS PER THE ASSESSEE DOES NOT RESULT IN FURNISHING INACCURATE PARTICULARS OF INCO ME. 9. ON 4 TH ISSUE ON THE CLAIM FOR DEPRECIATION ON INTANGIBLE ASSETS THE LEARNED COUNSEL SUBMITTED THAT VARIOUS INTANGIBLE A SSETS COULD NOT BE IDENTIFIED AS THE TRANSFER TOOK PLACE BY WAY OF A S LUMP SALE. HE SUBMITTED THAT THE AMOUNT PAID FOR THE TRANSFER IN EXCESS OF NET ASSET VALUE WAS TREATED AS PAYMENT FOR INTANGIBLE ASSETS. ON A QUER Y FROM THE BENCH WITH REFERENCE TO SCHEDULE-XIII TO THE ANNUAL ACCOUNTS A UDITED ON 31 ST MARCH 2000 UNDER THE HEAD SIGNIFICANT ACCOUNTING POLICY FOLLOWED BY THE COMPANY READ WITH SCHEDULE-IV FIXED ASSETS THE LEARNED COUNSEL AGREED THAT THE COMPANY HAS TREATED THE AMOUNT AS GOODWILL AND HAD AMORTIZED THE SAME OVER A PERIOD OF TEN YEARS. NEVE RTHELESS HE RELIED ON THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN DCIT V/S TEL-ABRIDGE INTERNATIONAL LTD. (2009) 126 TTJ 672 FOR THE PRO POSITION THAT THE CLAIM IN QUESTION IS DEBATABLE AND NO PENALTY CAN BE LEVIED. HE FURTHER RELIED ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN KOCH CH EMICAL TECHNOLOGY GROUP INDIA PVT. LTD. V/S DCIT ITA NO.2680/ MUM./2 009 ORDER DATED 28 TH JANUARY 2011 FOR THE PROPOSITION THAT DEPRECIATION IS ALLOWABLE ON INTANGIBLE ASSETS. HE CONCLUDED HIS SUBMISSIONS BY DISTINGUISH ING THE CASE LAWS RELIED UPON BY THE COMMISSIONER (APPEALS) AND SUBMITTED TH AT NO PENALTY CAN BE LEVIED WHEN THE ADDITION ON DISALLOWANCE IS MADE ON A DEBATABLE ISSUE. HE RELIED ON THE FOLLOWING CASE LAWS (I) CIT V/S REL IANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 0158 (SC) AND (II) IDBI LTD. 42 SOT 325 (BOM.). MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 7 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE MR. PRADEE P SHARMA ARGUING ON BEHALF OF THE REVENUE STRONGLY OPPOSED THE CONTENTIONS OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE COMPANY IS A SUBSIDIARY OF MAHINDRA & MAHINDRA AND IS CONTROLLED BY MAHINDRA & MAHINDRA LTD. HE POINTED OUT THAT MR. R.R. KRISHNAN AND MR. ZHOOBEN BHIWANDIWALA WHO ARE IN-CHARGE OF THE ASSESSEE COMPANY WERE FORMERLY E MPLOYEES OF MAHINDRA & MAHINDRA. HE SUBMITTED THAT THE ASSESSEE IS ADVISED BY BEST OF COUNSELS AND HAVE EXPERIENCED AND CAPABLE MANAGEMENT AND A GOOD LEGAL TEAM. HE RELIED ON THE DECISION OF ALLAHABAD BENCH OF THE TRIBUNAL IN ITO V/S GEEP INDUSTRIAL SYNDICATE LTD. (1987) 23 ITD 448 (ALL.) AND SUBMI TTED THAT WHEN ADVISED BY BEST OF BRAINS THE ASSESSEE CANNOT MAKE SUCH BL ATANTLY INADMISSIBLE CLAIMS. HE POINTED OUT THAT OUT OF FOUR ADDITIONS S USTAINED BY THE TRIBUNAL THE ASSESSEE HAS NOT GONE ON APPEAL ON TWO ADDITION S AND ONLY IN THE CASE OF TWO ADDITIONS AN APPEAL HAS BEEN FILED BEFORE THE HIGH COURT. 11. ON THE ISSUE OF LIMITATION THE LEARNED DEPARTMENTA L REPRESENTATIVE REFERRED TO CIRCULAR NO.7/2003 REPORTED IN 263 ITR 62 (STAT.) AND AFTER READING THE SECTION AND THE PROVISO INSERTED HE SU BMITTED THAT THE PROVISO ONLY APPLIES TO THE ORDERS PASSED BY THE COMMISSION ER (APPEALS) WHICH HAVE NOT BEEN APPEALED AGAINST BEFORE THE TRIBUNAL AND THAT PROVISO DOES NOT APPLY TO APPEALS WHICH WERE PENDING BEFORE THE TRIBUNAL. HE SUBMITTED THAT THE PROVISO ONLY EXPANDS THE TIME OF LIMITATIO N FROM SIX MONTHS TO TWELVE MONTHS IN CASES WHERE AN ORDER IS PASSED BY THE COMMISSIONER (APPEALS). HE RELIED UPON THE JUDGMENT OF HON'BLE M ADRAS HIGH COURT IN RAYALA CORPORATION P. LTD. V/S UNION OF INDIA (200 7) 288 ITR 452 (MAD.) AND SUBMITTED THAT THE SECTION HAS BEEN INTERPRETED IN THIS JUDGMENT AND THE SAME SHOULD BE APPLIED. ON THE CASE LAWS RELIED UPO N BY THE LEARNED COUNSEL THE LEARNED DEPARTMENTAL REPRESENTATIVE SU BMITTED THAT IN BOTH THE JUDGMENTS I.E. TARLOCHAN SINGH & SONS (HUF) (SUPRA ) AND BLOOSOM FLORICULTURE (SUPRA) THE JUDGMENT OF HON'BLE MADRA S HIGH COURT IN RAYALA CORPORATION P. LTD. (SUPRA) WAS NOT CONSIDERED. HE SUBMITTED THAT THE FINDING OF THE COMMISSIONER (APPEALS) THAT THE ORD ER UNDER SECTION MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 8 271(1)(C) WAS PASSED BY THE ASSESSING OFFICER WAS W ITHIN THE PERIOD OF LIMITATION HAS TO BE UPHELD. 12. ON MERITS THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CLAIMS OF THE ASSESSEE ARE PRIMA-FACIE NOT ADMI SSIBLE AND WERE NOT BONAFIDE. REFERRING TO THE PROVISIONS OF DOUBTFUL D EBTS HE SUBMITTED THAT THE PREPONDERANCE OF PROBABILITY OF THE CLAIM OF THE AS SESSEE BEING REJECTED WAS VERY HIGH RIGHT FROM THE BEGINNING. HE ARGUED THAT THE DECISION WAS TAKEN CONSCIOUSLY BY THE COMPANY THOUGH THE CLAIM IS AN A BNORMAL CLAIM. HE POINTED OUT THAT THE PROVISIONS FOR DOUBTFUL DEBT FOR ADVANCES TO THE TUNE OF ` 10 36 07 303 WAS DEBITED TO THE PROFIT & LOSS ACCO UNT AND CLAIMED AS DEDUCTION UNDER SECTIONS 28 36 OR 37 OF THE ACT AS THE CASE MAY BE. THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED THAT SUCH VAGUE CLAIMS SHOW THE INTENTION OF THE ASSESSEE TO REDUCE ITS TA X LIABILITY. HE SUBMITTED THAT JUST BECAUSE A PART OF THE CLAIM HAS BEEN ALLO WED IN SUBSEQUENT YEARS GENUINENESS OF THE CLAIM CANNOT BE ACCEPTED. HE REL IED ON THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN CIT V/S INDIAN OVERSEA S BANK (1985) 151 ITR 446 (MAD.) FOR THE PROPOSITION THAT ONLY ACTUAL LO SS HAS TO BE ALLOWED AND NOT NOTIONAL LOSS OR ANTICIPATED LOSS. HE SUBMITTED THAT THE ISSUE IS NOT A DEBATABLE ISSUE AND MERELY BECAUSE THE HIGH COURT E NTERTAINED THE APPEAL THE ISSUE DOES NOT BECOME DEBATABLE. HE FURTHER REL IED ON THE DECISION IN CIT V/S K.A.R.K. FIRM (1934) 2 ITR 0183 (RANG.) FOR T HE PROPOSITION THAT THE ESTIMATED DIMINUTION IN THE VALUE OF ASSETS BASED ON RE-VALUATION CANNOT BE ALLOWED AS A TRADING LOSS. HE FURTHER SUBMITTED THA T THE ASSESSEE HAS NOT GIVEN ANY BREAK-UP OF THE CLAIM AND IN THE LIGHT OF THE LAW AS IT EXISTED THEN THE SAME CANNOT BE PRIMA-FACIE ALLOWABLE UND ER SECTION 28 OF THE ACT. HE POINTED OUT THAT PROVISIONS OF SECTION 36(2) HAS NOT BEEN COMPLIED WITH AND HENCE THE CLAIM UNDER SECTION 36(1)(III) IS N OT PRESSED BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THE LOSS IF ANY WAS IN TH E CAPITAL FIELD. 13. ON THE DIMINUTION IN THE VALUE OF INVESTMENT AS WEL L AS THE PROVISIONS ON PREMIUM ON DEBENTURE HE SUBMITTED THAT THE CLAI MS WERE PRIMA-FACIE PREMATURE AND FINDINGS OF THE TRIBUNAL IN THE QUANT UM PROCEEDINGS SHOW THAT THE SAME ARE VAGUE AND INADMISSIBLE. MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 9 14. ON THE DEPRECIATION CLAIMED ON INTANGIBLE ASSETS T HE LEARNED DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT THE UN DERSTANDING OF THE COMPANY AND ITS AUDITORS AS EVIDENT FROM ITS ANNUA L ACCOUNT IS THAT THE AMOUNT WAS PAID AS GOODWILL. HE SUBMITTED THAT THE ASSESSEE MADE A BLATANTLY FALSE CLAIM BY STATING THAT THE PAYMENTS WERE MADE FOR ACQUISITION OF INTANGIBLE ASSETS. HE POINTED OUT THAT NO PARTIC ULARS WERE SUBMITTED TILL DATE AND IN THE ABSENCE OF SUCH PARTICULARS DEPREC IATION COULD NOT BE ALLOWED. HE EMPHASIZED THAT IF THE ASSESSEE WANTED TO MAKE A GENUINE CLAIM WHICH IS DEBATABLE IT SHOULD HAVE PAID THE TAXES AND THEN MADE THE CLAIM BUT IN THIS CASE THE ASSESSEE HAS NOT DIVULG ED ANY DETAILS AND SIMPLY REDUCED ITS TAXABLE INCOME BY MAKING VAGUE AND INAD MISSIBLE DEDUCTIONS FROM THE INCOME. THUS HE PRAYED THAT THE ORDER PAS SED BY THE COMMISSIONER (APPEALS) BE UPHELD. HE RELIED ON CER TAIN CASE LAWS WHICH WE WOULD BE DEALING IN DUE COURSE. 15. IN REPLY THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE IS TRAVELING BE YOND THE PENALTY ORDER WHICH IS NOT PERMISSIBLE. ON INTANGIBLE ASSETS HE SUBMITTED THAT THE ENTRIES OR DESCRIPTIONS IN THE ANNUAL ACCOUNTS DOES NOT DE FINE THE EXACT NATURE OF THE ASSETS AND THE CLAIM OF THE ASSESSEE CANNOT BE SAID TO BE WRONG. HE SUBMITTED THAT PAYING TAXES AND THEN MAKING A CLAIM IS NOT A RELEVANT CONSIDERATION FOR THE PURPOSE OF LEVY OF PENALTY. H E SUBMITTED THAT THE DETAILS WERE FURNISHED IN THE ANNEXURE TO THE REJOI NDER AND IT IS WRONG TO SAY THAT THE DETAILS WERE NOT FURNISHED BY THE ASSESSEE . HE POINTED OUT THAT THE ASSESSEE WAS ENTITLED TO REFUND THE TAXES AND IN SU CH CIRCUMSTANCES PAYMENT OF TAXES IS NOT CALLED FOR. HE CONTENDED TH AT MAKING OF ALTERNATIVE CLAIM IS NOT PROHIBITED. HE PRAYED FOR RELIEF. 16. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD AS WELL AS THE CASE LAWS CITED BEFORE US WE HOLD AS FOLLOWS:- MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 10 17. THE FIRST ISSUE THAT HAS TO BE ADJUDICATED IS WHET HER THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) ON 30 TH JANUARY 2009 IS BARRED BY LIMITATION. THE CASE OF THE ASSESSEE IS THAT THE COMMISSIONER ( APPEALS) IN THE QUANTUM PROCEEDINGS PASSED HIS ORDER ON 31 ST AUGUST 2004 AND IN VIEW OF THE PROVISO TO SECTION 275(1)(A) THE ORDER OF PENALTY DATED 30 -01-2009 IS BARRED BY LIMITATION. AN APPEAL IN ITA NO.8276/MUM./2004 AGA INST THE QUANTUM I.E ORDER DATED 30-08-2004 OF C.I.T. (APPEALS) WAS FIL ED BY THE ASSESSEE BEFORE THE TRIBUNAL AND THE SAME WAS DISPOSED OFF VIDE ORD ER DATED 09-05-2008. THE PENALTY ORDER UNDER SECTION 271(1)(C) WAS PASSE D BY THE ASSESSING OFFICER WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE TRIBUNAL WAS RECEIVED BY THE CHIEF COM MISSIONER / COMMISSIONER IN THE QUANTUM PROCEEDINGS. TO EXAMIN E THIS ISSUE WE FIRST REFER TO SECTION 275(1)(A) AND THE PROVISO WHICH READS AS FOLLOWS:- SECTION 275 - BAR OF LIMITATION FOR IMPOSING PENAL TIES (1) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE PASSED (A) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHE R ORDER IS THE SUBJECT MATTER OF AN APPEAL TO THE COMMISSIONER (AP PEALS) UNDER SECTION 246 OR SECTION 246A OR AN APPEAL TO THE APP ELLATE TRIBUNAL UNDER SECTION 253 AFTER THE EXPIRY OF THE FINANCIA L YEAR IN WHICH THE PROCEEDINGS IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED ARE COMPLETED OR SIX MONTHS FR OM THE END OF THE MONTH IN WHICH THE ORDER OF THE COMMISSIONER (APPEA LS) OR AS THE CASE MAY BE THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER WHICHEVER PERIOD EXPI RES LATER; PROVIDED THAT IN A CASE WHERE THE RELEVANT ASSESSME NT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE COM MISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A AND TH E COMMISSIONER (APPEALS) PASSES THE ORDER ON OR AFTER THE 1ST DAY OF JUNE 2003 DISPOSING OF SUCH APPEAL AN ORDE R IMPOSING PENALTY SHALL BE PASSED BEFORE THE EXPIRY OF THE FI NANCIAL YEAR IN WHICH THE PROCEEDINGS IN THE COURSE OF WHICH AC TION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED ARE COMPL ETED OR WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER WHICHEVER IS LATER. 18. A PLAIN READING OF THIS SECTION SHOWS THAT UNDER SE CTION 275(1)(A) THE REQUIREMENT OF THE MAIN SECTION IS THAT WHEN AN AS SESSMENT ORDER IS A MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 11 SUBJECT MATTER OF APPEAL BEFORE THE COMMISSIONER (A PPEALS) THEN THE PENALTY ORDER SHOULD BE PASSED WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RECEIVED BY THE CHIEF COMMISSIONER / COMMISSIONER. THE PROVI SO TO THIS SECTION WAS INSERTED W.E.F 1-06-2003 TO EXPAND THIS TIME PERIO D OF SIX MONTHS TO ONE YEAR IN CASES WHEREIN THE COMMISSIONER (APPEALS) P ASSES AN ORDER ON/AFTER 1 ST JUNE 2003 AND NO APPEAL IS FILED BEFORE THE TRIBUN AL. THE PROVISO DOES NOT DEAL WITH CASES WHERE THE APPEALS ARE PENDING BEFOR E THE ITAT UNDER SECTION 253 OF THE ACT. THAT LIMB OF SECTION 275(1)(A) WHI CH FIXES THE TIME LIMIT OF SIX MONTHS FROM THE DATE OF RECEIPT OF ORDER OF THE ITAT BY THE COMMISSIONER / CHIEF COMMISSIONER FOR PASSING AN O RDER OF PENALTY IS NOT DISTURBED IN ANY MANNER BY THE INSERTION OF THE PRO VISO. THIS IS THE INTERPRETATION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF RAYALA CORPORATION PVT. LTD. V/S UNION OF INDIA & ORS (20 07) 288 ITR 452 (MAD.) WHEREIN IT HAS HELD AS FOLLOWS:- A READING OF THE ABOVE SAID PROVISION MAKES IT CLE AR THAT THE INTERPRETATION PLACED BY LEARNED COUNSEL FOR THE PE TITIONER ON THE SAID PROVISION IS ACCEPTABLE. THERE IS NO DISPUTE IN THI S CASE THAT THE PETITIONER HAS FILED AN APPEAL BEFORE THE TRIBUNAL AND THE SAME IS PENDING. IN SUCH A CASE THE LIMITATION PERIOD FOR THE LEVY OF PENALTY WILL BE AS PROVIDED FOR UNDER S. 275(1)(A) I.E. S IX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE TRIBUNAL IS RECEIVED BY THE CHIEF CIT. THERE CANNOT BE ANY DOUBT ON THIS ASPECT . ACCORDINGLY THIS COURT IS OF THE VIEW THAT THE PROVISO TO S. 275 (1) (A) OF THE ACT DOES NOT NULLIFY THE AVAILABILITY TO THE THIRD RESPONDEN T OF THE PERIOD OF LIMITATION OF SIX MONTHS FROM THE END OF THE MONTH WHEN THE ORDER OF THE TRIBUNAL CHENNAI IS RECEIVED BY THE THIRD RES PONDENT HEREIN. 19. COMING TO THE DECISION OF AMRITSAR BENCH OF THE TRI BUNAL IN TARLOCHAN SINGH & SONS (HUF) AS WELL AS THE DECISION OF LUCKN OW BENCH OF THE TRIBUNAL IN BLOOSOM FLORICULTURE (SUPRA) WE FIND THAT THE B ENCHES DID NOT HAVE THE BENEFIT OF THE JUDGMENT OF HONBLE MADRAS HIGH COUR T IN RAYALA CORPORATION P. LTD. (SUPRA). THIS CASE WAS NOT CITED OR CONSIDE RED. AS THE ISSUE OF INTERPRETATION OF PROVISO TO SECTION 275(1)(A) HAS BEEN CONSIDERED AND ADJUDICATED UPON BY THE HONBLE MADRAS HIGH COURT A ND AS THIS IS THE SOLE JUDGMENT ON THIS ISSUE FROM A HIGH COURT WE PREFER TO FOLLOW THE SAME. MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 12 20. IN VIEW OF THE AFORESAID DISCUSSION WE UPHOLD THE FINDINGS OF THE FIRST APPELLATE AUTHORITY AND DISMISS THE GROUND RAISED B Y THE ASSESSEE. 21. COMING TO THE MERITS OF THE CASE THE FIRST ISSUE I S CLAIM FOR PROVISIONS FOR DOUBTFUL DEBTS . THE ASSESSEE HAD INITIALLY CLAIMED DEDUCTION OF PROVISIONS FOR DOUBTFUL DEBTS AND ADVANCES OF ` 10 36 07 303 UNDER SECTION 36(1)(VII). DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE PARTLY WITHDREW HIS CLAIM TO THE TUNE OF ` 2 48 11 807. IN THE SUBMISSIONS MADE BEFORE THE COMMISSIONER (APPEALS) ON 6 TH NOVEMBER 2009 THE COMPANY VIDE PARA-9/PAGE-6 OF THE PAPER BOOK STATES AS FOLLOWS:- 9. IT MAY NOT BE OUT OF PLACE TO MENTION THAT WHERE THE CLAIM IN THE RETURN OF INCOME IN RESPECT OF PROVISION FOR D OUBTFUL DEBTS WAS TO THE EXTENT OF ` 10 36 07 753 A SUM OF ` 2 48 11 807 FORMING PART THEREOF WAS VOLUNTARILY OFFERED TO TAX VIDE LETTER REF. NO.TAX:MIL DT. 2.1.2003 IN VIEW OF THE AMENDMENT TO SECTION 36(1)( VII) BY THE FINANCE ACT 2001 WITH RETROSPECTIVE EFFECT FROM 1 .4.1989 (A.Y. 1989- 90). THIS ALSO ESTABLISHES THE BONA FIDE CONDUCT OF THE ASSESSEE. 22. FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE HAS M ADE A CONSCIOUS CLAIM UNDER SECTION 36(1)(VII) DESPITE THE RETROSP ECTIVE AMENDMENT BY FINANCE ACT 2001 W.E.F. 1 ST APRIL 1989 WHEREIN AN EXPLANATION HAS BEEN INSERTED CLARIFYING THAT A PROVISION FOR BAD AND DO UBTFUL DEBTS MADE IN THE ACCOUNTS OF THE ASSESSEE SHALL NOT BE A PART OF ANY BAD DEBT OR PART THEREOF WRITTEN-OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUN T OF THE ASSESSEE. WE DO NOT UNDERSTAND AS TO WHY THE ASSESSEE HAS WITHDRAWN ONLY THE CLAIM FOR ` 2 48 11 807 AND STILL CONTINUE TO CLAIM THE BALANCE AMOUNT OF ` 7 10 09 070. NO EXPLANATION IS FORTHCOMING. A PROVISION IS MADE AND CLAIMED AS A DEDUCTION. 23. THE UNDISPUTED FACT IN THIS CASE IS THAT THE PROVIS IONS OF SECTION 36(2) ARE NOT SATISFIED. THE TRIBUNAL IN ITS ORDER IN QU ANTUM PROCEEDINGS IN ITA NO.8276/MUM./2004 VIDE PARA-3.2 NOTED THIS FINDIN GS OF THE ASSESSING OFFICER. WHEN THE ASSESSEE ADMITS THAT THE PROVISIO NS OF SECTION 36(2) ARE NOT SATISFIED THEN HOW CAN IT SAY THAT ITS CLAIM U NDER SECTION 36(1)(VII) IS MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 13 PRIMA-FACIE CORRECT. THUS THE CLAIM UNDER THIS SEC TION IS NOT GENUINE AND IS MADE WITHOUT ANY BASIS. 24. COMING TO THE ALTERNATIVE CLAIM MADE UNDER SECTION 28 OR 37(1) THE TRIBUNAL VIDE PARA-6.2 OF ITS ORDER IN THE QUANTUM PROCEEDINGS OBSERVED THAT THE ASSESSEE IS HOPEFUL OF RECOVERY OF THE AMO UNTS FROM VARIOUS PARTIES BECAUSE THE ASSESSEE ITSELF IS MAKING PROVISIONS I N THE PROFIT & LOSS ACCOUNT AND HAS NOT WRITTEN-OFF THE DUES.. IT ALSO OBSERVED THAT WITHOUT ACTUAL INCURRING THE LOSS IN THIS YEAR THE LOSS CANNOT BE ALLOWED ON THE BASIS OF PROVISIONS MADE IN THE BOOKS OF ACCOUNT. THE COMMIS SIONER (APPEALS) IN THE QUANTUM PROCEEDINGS HAS OBSERVED THAT THE ASSESSEE HAS NOT TREATED THIS ADVANCE AS LOSS ASSETS BY WRITING-OFF IN THE BOOKS OF ACCOUNT BUT HAS SHOWN THEM UNDER THE HEAD PROVISIONS FOR BAD AND DOUBTFUL DEBTS. HE DREW A CLEAR DISTINCTION BETWEEN THE PROVISION AND ACTUAL WRITE-OFF AND HELD THAT THE ASSESSEE ITSELF IS OF THE VIEW THAT IT IS DOUBT FUL BUT NOT ACTUAL LOSS.HE DISTINGUISHED VARIOUS CASE LAWS RELIED UPON BY THE LEARNED COUNSEL WHICH WERE RELIED ON BEFORE US ALSO ON THE GROUND THAT TH ESE WERE PRE AMENDMENT CASE LAWS. WE AGREE THAT THESE CASE LAWS ARE NOT AP PLICABLE ANYMORE. THE ASSESSEE HAS NOT DEMONSTRATED THAT THE LOSS HAS CRY STALLIZED IN THIS YEAR AND THAT THIS IS A LOSS IN THE REVENUE FIELD AND NOT IN THE CAPITAL FIELD AS ADMITTEDLY THE AMOUNTS HAVE NOT BEEN TAKEN INTO AC COUNT AS REQUIRED UNDER SECTION 36(2). 25. BEFORE US THE LEARNED COUNSEL CITED A NUMBER OF CA SE LAWS TO DEMONSTRATE HIS POINT THAT THE CLAIM WAS A POSSIBLE LEGAL CLAIM AND THAT THE ISSUE IS A DEBATABLE ISSUE. WE DO NOT THINK SO. IN THE CASE OF HONGKONG AND SHANGHAI BANKING CORPORATION V/S CIT (1955) 028 IT R 199 (CAL.) AND HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S JWALA PRASAD TIWARI (1953) 024 ITR 537 (BOM.) THE COURTS WERE DEALING WITH PRE AME NDED LAW. ACTUAL LOSS VERSES PROBABLE ESTIMATED REDUCTION IN VALUE WAS NO T THE ISSUE. THE HON'BLE SUPREME COURT IN PATNAIK & CO. LTD. (SUPRA) WAS C ONSIDERING THE CLAIM OF A LOSS SUSTAINED ON DISPOSING OF THE ASSESSEES SUBSC RIPTION TO THE ORISSA GOVT. FLOATED LOAN. THIS IS A CASE WHERE THERE WAS A SALE AND THE QUESTION WAS WHETHER THE LOSS WAS IN THE CAPITAL FIELD OR IN THE REVENUE FIELD. IN THE CASE MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 14 ON HAND IT IS A MERE PROVISION. THE HONBLE MADRAS HIGH COURT IN INDIAN COMMERCE AND INDUSTRIES CO. P. LTD. (SUPRA) WAS CO NSIDERING A CASE WHERE THE COMPANY HAS SOLD THE SHARES ACQUIRED BY IT AND INCURRED A LOSS. HERE ALSO IT IS NOT A CASE OF A PROVISION. ON THE OTHER HAND WE FIND THAT THE COMMISSIONER (APPEALS) HAS RIGHTLY RELIED ON THE JU DGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN SALEM MANGNESITE PVT. LTD. V/S CIT (2009) 180 TAXMAN 545 (BOM.) WHICH CONSIDERED THE CASE OF WRIT E-OFF OF A PART OF LOAN GIVEN TO A SUBSIDIARY COMPANY WHEREIN THE ASSESSEE WAS NOT IN A MONEY LENDING / FINANCE BUSINESS AND HENCE HELD THAT THE LOSS WAS NOT ALLOWABLE. 26. THOUGH THE FIRST APPELLATE AUTHORITY RELIED ON CER TAIN OTHER JUDGMENTS IT WOULD NOT BE SUFFICE TO SAY THAT THIS CLAIM WAS NOT PRIMA-FACIE ADMISSIBLE FOR THE REASON THAT (I) THE CONDITIONS UNDER SECT ION 36(2) WERE NOT SATISFIED AND HENCE NO ALLOWANCE CAN BE MADE UNDER SECTION 36(1)(VII) IRRESPECTIVE OF THE INSERTION OF THE PROVISO TO SEC. 36(1)(VII); (II) AS ADMITTEDLY THE LOSS HAS NOT CRYSTALLIZED DURING THE YEAR THE CLAIM COU LD NOT HAVE BEEN MADE EITHER UNDER SECTION 28 OR 37 OF THE ACT; AND (III) IT IS NOT PROVED THAT THE LOSS IS IN THE REVENUE FIELD. 27. AS RIGHTLY POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THE COMPANY IS MANAGED BY EXPERIENCED PERSONS AND IT HA S THE ASSISTANCE OF WELL REPUTED LEGAL ADVISORS. IN THOSE CIRCUMSTANCES IT CANNOT BE HELD THAT THE CLAIM WAS INADVERTENTLY MADE. IN OUR OPINION T HE CLAIM WAS NOT BONAFIDE AND WAS MADE WITHOUT ANY BASIS. THE ASSESSEE IN ITS EXPLANATION WAS NOT ABLE TO SUBSTANTIATE ITS CASE AND HAS FAILED TO PRO VE THAT SUCH EXPLANATION IS BONAFIDE. 28. WE NOW TAKE UP THE ISSUE OF PROVISIONS FOR DIMINUTION IN THE VALUE OF INVESTMENTS . THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS N OT SOLD THE SHARES IN QUESTION AND HAS CLAIMED A NOTIONAL LOSS. THIS CLAIM OF LOSS IS MADE ON A MERE DIMINUTION IN THE VALUE OF INVESTMENTS. R ELIANCE PLACED ON THE JUDGMENT IN THE CASE OF PATNAIK & CO. LTD. (SUPRA) AND INDIAN COMMERCE AND INDUSTRIES CO. P. LTD. (SUPRA) ARE DISTINGUISH ABLE AS IN THOSE CASES THERE WAS ACTUAL SALE OF THE ASSETS. IN THE CASE ON HAND THE LOSS WAS MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 15 CLAIMED ON RE-VALUATION OF AN ASSET. THERE IS NO TR ANSFER OF ANY ASSET. THIS IS PRIMA-FACIE NOT ALLOWABLE AND IS NOT MADE ON ANY PR OVISION OF LAW. THIS IS THE REASON THAT THE ASSESSEE HAS CHOSEN NOT TO CARRY TH E ISSUE IN FURTHER APPEAL. BY NO STRETCH OF IMAGINATION THIS CAN BE CALLED AS A DEBATABLE ISSUE. THE ASSESSEE HAS ATTEMPTED TO MAKE OUT A CASE THAT THIS INVESTMENT WAS FOR OPERATIONAL REASONS. SUCH AN EXPLANATION IS DEVOID OF MERIT. 29. COMING TO THE CLAIM OF PROVISIONS FOR PREMIUM ON DEBENTURE THOUGH THE ASSESSEE HAS CITED A NUMBER OF CASE LAWS THE F ACT REMAINS THAT THE LIABILITY ARISES ONLY ON HAPPENING OF AN EVENT I.E. THE DEBENTURE HOLDER NOT OPTING TO CONVERT THE DEBENTURE HELD INTO EQUITY SH ARES OF THE COMPANY AT PAR AT ANY TIME AFTER SIX MONTHS FROM THE DATE OF ISSUE. THE COMPANY ALSO HAD SUCH AN OPTION. WHEN THE OPTION TO REDEEM THE D EBENTURE IS NOT EXERCISED THE QUESTION OF LIABILITY TO PAY PREMIUM DOES NOT ARISE. WHEN AN EVENT HAS NOT OCCURRED THERE IS NO CRYSTALLIZATION OF LIABILITY AND NO LOSS CAN BE ALLOWED UNDER THE ACT. IN OUR OPINION THIS CLAI M IS ALSO PRIMA-FACIE WRONG. IT IS PREMATURE. THE ASSESSEE HAS ACCEPTED T HE SAME AND HAS NOT CARRIED THE MATTER IN FURTHER APPEAL. 30. THE LAST ISSUE IS THE DISALLOWANCE OF CLAIM FOR DEP RECIATION ON WHAT THE ASSESSEE CALLS INTANGIBLE ASSETS. THE ASSESSEE ENTE RED INTO AGREEMENT WITH MAHINDRA & MAHINDRA ON 1 ST SEPTEMBER 1999 FOR THE PURCHASE OF INTERTRADE DIVISION OF MAHINDRA & MAHINDRA AS A GOING CONCERN BASIS. THE PURCHASE CONSIDERATION WAS OVER AND ABOVE THE NET ASSETS VA LUE OF THE CONCERN. THE ASSESSEE IN ITS ANNUAL ACCOUNTS TREATED THIS AMOU NT AS GOODWILL. IN SCHEDULE-XIII UNDER THE HEAD SIGNIFICANT ACCOUNTING POLICY FOLLOWED BY THE COMPANY UNDER THE SUB-HEAD FIXED ASSET IT IS STATED AS FOLLOWS:- GOODWILL ARISING ON ACQUISITION OF BUSINESS IS BEIN G AMORTIZED OVER A PERIOD OF 10 YEAR 31. IN SCHEDULE-IV WHICH GIVES FIXED ASSETS THE ENTIR E VALUE HAS BEEN SHOWN AS INTANGIBLE AND 10% CLAIMED AS AMORTIZED EX PENDITURE. NO DETAILS ON INTANGIBLE ASSETS HAVE BEEN GIVEN AT ANY STAGE O F THE PROCEEDING. THE ASSESSEE IN THE SUBMISSIONS AND EXPLANATIONS STATES THAT THE INTANGIBLE MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 16 ASSETS IN QUESTION CONSISTS OF TECHNICAL KNOWHOW (T ECHNICAL AND COMMERCIAL INFORMATION TRADEMARK BRAND NAME FRANCHISE PATI ENT ETC.). THESE SUBMISSIONS ARE CONTRARY TO THE UNDERSTANDING OF TH E MANAGEMENT OF THE ASSESSEE COMPANY AS WELL AS THE UNDERSTANDING OF I TS AUDITORS AS EVIDENT FROM THE ANNUAL ACCOUNTS WHEREIN THIS AMOUNT WAS C ONSIDERED AS GOODWILL. THUS IN OUR CONSIDERED OPINION THE ASSESSEE HAS D ELIBERATELY FURNISHED INACCURATE PARTICULARS BY TRYING TO SHOW GOODWILL AS CERTAIN OTHER INTANGIBLE ASSETS WITH A VIEW TO CLAIM DEPRECIATION. SUCH FALS E CLAIM CANNOT BE CONSIDERED AS A DEBATABLE OR A POSSIBLE CLAIM. THE TRIBUNAL IN QUANTUM PROCEEDINGS HAS RIGHTLY OBSERVED THAT MERELY SAYI NG THAT THERE ARE CERTAIN INTANGIBLE ASSETS DOES NOT WARRANT GRANT OF DEPRECI ATION. THE TERM GOODWILL HAS NOT BEEN MENTIONED ANYWHERE IN THE CLAIM FOR DE DUCTION. IT COULD BE CULLED OUT ONLY FROM THE ANNUAL ACCOUNTS. 32. IN VIEW OF THE ABOVE DISCUSSION WE HAVE NO HESITAT ION IN HOLDING THAT IN THE CASE OF ALL THESE ADDITIONS / DISALLOWANCE THE ISSUES CANNOT BE CONSIDERED AS DEBATABLE AND IT IS A CASE WHERE THE ASSESSEE HAS CONSCIOUSLY FURNISHED INACCURATE PARTICULARS OF INCOME. 33. THUS THE CASE LAWS RELIED UPON BY THE ASSESSEE I.E . THE DECISION OF THE HON'BLE SUPREME COURT IN RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) AND OTHER CASE LAWS DO NOT APPLY AS THE FACTS OF THE CA SE IS DIFFERENT. ON THE OTHER HAND WE ARE OF THE CONSIDERED OPINION THAT T HE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN CIT V/S ZOOM COMMUNICAT ION PVT. LTD. 327 ITR 510 (DELHI) IS APPLICABLE TO THE FACTS OF THIS CASE . IN THIS CASE OF THE HONOURABLE DELHI HIGH COURT AFTER CONSIDERING THE J UDGMENT OF THE HONOURABLE SUPREME COURT IN THE CASE OF RELIANCE UT ILITIES (SUPRA) HAS HELD THAT IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ON LY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION F URNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONAFIDE IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 34. COMING TO THE DECISION OF M/S. NAYAN BUILDERS AND D EVELOPERS P. LTD. (SUPRA) WE FIND THAT THE DELHI BENCH OF THE TRIBUN AL IN ACIT V/S KHANNA MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 17 ANNADHANAM ITA NO.1395/DEL./2005 ORDER DATED 22 ND JULY 2011 HELD THAT THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HIGH COURT DOES NOT NECESSARILY MEAN THAT NO PENALTY CAN BE LEIVED UNDE R SECTION 271(1)(C) AS THERE IS NO SUCH GENERAL PROPOSITION OF LAW AND THA T THE ISSUE SHOULD BE DECIDED ON FACTS OF THE CASE. WE PREFER TO FOLLOW T HE RATIO OF THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN KHANNA AMNADHANA M (SUPRA) FOR THE FOLLOWING REASON. THE TERM 'SUBSTANTIAL QUESTION O F LAW' AS SEEN UNDER SECTION 100 CODE OF CIVIL PROCEDURE IN RESPECT OF F ILING OF SECOND APPEAL CAME TO BE EXPLAINED BY THE SUPREME COURT IN SANTOSH HA ZARI V/S PURUSHOTTAM TIWARI (2001) (251 ITR 84) AND THE RELEVANT PORTION IS AS FOLLOWS: 'THE WORD 'SUBSTANTIAL' AS QUALIFYING 'QUESTION OF LAW' MEANS HAVING SUBSTANCE ESSENTIAL REAL OF SOUND WORTH IMPORTANT OR CONSIDERABLE. IT IS TO BE UNDERSTOOD AS SOMETHING IN CONTRA DISTINCTION WITH TECHNICAL OF NO SUBSTANCE OR CONS EQUENCE OR ACADEMIC MERELY. THE EXPRESSION 'SUBSTANTIAL QUEST ION OF LAW' HAS NOT BEEN SUFFIXED BY THE WORDS 'OF GENERAL IMPO RTANCE' AS HAS BEEN DONE IN OTHER PROVISIONS SUCH AS SECTION 1 09 OF THE CODE OF CIVIL PROCEDURE OR ARTICLE 133(1)(A) OF THE CONSTITUTION OF INDIA. THE SUBSTANTIAL QUESTION OF LAW ON WHICH A SECOND APPEAL SHALL BE HEARD NEED NOT NECESSARILY BE A SUBSTANTI AL QUESTION OF LAW OF GENERAL IMPORTANCE. THE TERM SUBSTANTIAL QUESTION OF LAW DOES NOT NECES SARILY MEAN THAT THE ISSUE IS DEBATABLE. THE ISSUE MAY BE AN IMPORTA NT ISSUE BUT NOT NECESSARILY DEBATABLE. IN THIS CASE ON FACTS WE H AVE COME TO A CONCLUSION THAT THE CLAIMS ARE SPECULATIVE UNTENABLE WHOLLY WITHOUT BASIS AND LEGALLY INCORRECT. THE HON'BLE DELHI HIGH COURT IN CIT V/S SPLENDER CONSTRUCTION INCOME TAX APPEAL NO.1977 OF 2010 JUDGMENT DATED 1 4 TH JANUARY 2011 VIDE PARA-9 OF ITS JUDGMENT HAS HELD AS FOLLOWS:- THE TRIBUNAL HAS SIDE TRACKED THE MAIN ISSUE. IT W AS OBVIOUS THAT CONVERSION OF THE LAND INTO INVESTMENT JUST BEFORE THE SALE OF THE PROPERTY WAS MADE TO AVOID PAYMENT OF FULL TAXES. T HOUGH THE AO ACCEPTED THE CONVERSION THE ASSESSEES CLAIM THAT THE GAINS WAS A LTCG AMOUNTED TO FURNISHING INACCURATE PARTICULARS OF INCOME. THE ISSUE WAS NOT DEBATABLE AS HELD BY THE TRIBUNAL. TH OUGH THE APPEAL WAS ADMITTED BY THE HIGH COURT THE TRIBUNAL GLOSSE D OVER A VERY IMPORTANT AND FUNDAMENTAL FACT THAT THE APPEAL WAS ADMITTED AND DISMISSED ON THE SAME DATE. ACCORDINGLY WHEN THE O RDER OF THE AO IN QUANTUM PROCEEDINGS WAS SUSTAINED BY ALL SUCCESSIVE AUTHORITIES AND MAHINDRA INTERTRADE LTD. ITA NO.5178/M/2010 18 THE HIGH COURT ALSO DISMISSED THE APPEAL AT THE ADM ISSION STAGE ALBEIT AFTER ADMITTING THE SAME IT CANNOT BE SAID THAT TH E ISSUE WAS DEBATABLE. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF T HE HON'BLE DELHI HIGH COURT WE REJECT THE CONTENTIONS OF THE ASSESSEE. 35. IN VIEW OF THE ABOVE DISCUSSION WE CONFIRM THE ORD ER OF THE COMMISSIONER (APPEALS) AND DISMISS THE GROUNDS OF T HE ASSESSEE. 36. IN THE RESULT ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2011 SD/- VIJAY PAL RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI DATED: 30 TH SEPTEMBER 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A) MUMBAI CONCERNED; (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR B BENCH ITAT MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT MUMBAI BENCHES MUMBAI