PROSPECTS SHIPPING P. LTD, MUMBAI v. ITO 5(2)(4), MUMBAI

ITA 5267/MUM/2010 | 2006-2007
Pronouncement Date: 09-09-2011 | Result: Dismissed

Appeal Details

RSA Number 526719914 RSA 2010
Assessee PAN AAACP8397C
Bench Mumbai
Appeal Number ITA 5267/MUM/2010
Duration Of Justice 1 year(s) 2 month(s) 14 day(s)
Appellant PROSPECTS SHIPPING P. LTD, MUMBAI
Respondent ITO 5(2)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 09-09-2011
Assessment Year 2006-2007
Appeal Filed On 25-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH BEFORE SHRI D.MANMOHAN VICE PRESIDENT & SHRI T.R.SOOD ACCOUNTANT MEMBER I.T.A.NO.5267/MUM/2010 A.Y 2006-07 M/S PROSPECTS SHIPPING PVT. LTD. 203 ADAMJI BUILDING MASJID BUNDER MUMBAI 400 009. PAN: AAACP 8397 C VS. THE INCOME TAX OFFICER WARD 5(2)(4) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI APURVA R. SHAH. RESPONDENT BY : SHRI V.V.SHASTRI. DATE OF HEARING: 30/08/2011 DATE OF PRONOUNCEMENT: 9/9/2011 O R D E R PER T.R.SOOD AM: IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS: THE COMMISSIONER OF INCOME TAX (APPEALS)-9 MUMBAI ERRED- 1.1. IN CONFIRMING THE LEVY OF PENALTY U/S.271(1) FOR FURNISHING INACCURATE PARTICULARS OF INCOME WITHOUT ADEQUATELY APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE MAT TER. 1.2 IN NOT CONSIDERING THE WRITTEN EXPLANATIONS GIV EN BY THE APPELLANT. 1.3 IN NOT APPRECIATING THAT THE APPELLANT HAD A HU GE MAGNITUDE OF CARRIED FORWARD LOSSES AND HENCE COULD HAVE HAD NO INTENTION OF CONCEALING ANY INCOME. 1.4 IN NOT APPRECIATING THAT THERE WERE NO PARTICUL ARS WHICH HAD BEEN CONCEALED. 1.5 IN NOT APPRECIATING THE REASON WHY THE APPELLAN T WAS REQUESTING AN ADJOURNMENT AND HENCE IN DENYING THE APPELLANT AN ADEQUATE OPPORTUNITY TO PRESENT ANY FURTHER INFO RMATION OR CLARIFICATION WHICH THE COMMISSIONER WOULD HAVE NEE DED. SINCE THE ADJOURNMENT WAS DENIED SUBMISSIONS WERE MADE B ASED ON THE LIMITED INFORMATION AVAILABLE AND THE APPEAL WAS DECIDED BASED THEREON. ITA NO.5267 OF 10 2 2. BRIEF FACTS OF THE CASE ARE THAT DURING ASSESSME NT PROCEEDINGS IT WAS NOTICED THAT ASSESSEE HAD DEBITED FINANCE CH ARGES AMOUNTING TO RS.62 65 315/- IN PROFIT & LOSS ACCOUNT OUT OF WHIC H A SUM OF RS.42 36 176/- WAS DISALLOWED BY THE ASSESSEE ITSEL F. THE ASSESSEE WAS ASKED TO FURNISH PROOF FOR PAYMENT OF BALANCE I NTEREST ON SOME LOANS AMOUNTING TO RS.20 29 139/-. IT WAS ACCEPTED THAT SUCH INTEREST WAS NOT PAID AND THEREFORE SAME WAS DISALLOWED. F URTHER PENALTY U/S.271(1) HAS ALSO BEEN LEVIED BY THE AO. 3. BEFORE THE CIT(A) IT WAS MAINLY CONTENDED THAT T RUE DISCLOSURE HAS ALREADY BEEN MADE AND PART OF THE INTEREST WAS DISALLOWED BY THE ASSESSEE ITSELF. SINCE INTEREST WAS CONVERTED INTO LOAN THEREFORE ASSESSEE HAS REASONABLE BASIS FOR CLAIMING THE SAME . THE LD. CIT(A) AFTER CONSIDERING THE EXPLANATION CONFIRMED THE PEN ALTY. 4. BEFORE US LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ASSESSEE WAS NOT HAVING ANY BUSINESS DURING THE YEAR BECAUSE ASSESSEE HAS SOLD ITS SHIP. HE FURTHER SUBMITTED THAT ASSESSEE W AS HAVING HUGE CARRIED FORWARD LOSSES AND THAT IS WHY BANK LOANS C OULD NOT BE PAID AND EVEN INTEREST COULD NOT BE PAID. NO APPEAL WAS FILED AGAINST THE QUANTUM BECAUSE SUCH ADDITION HAD NO TAX IMPLICATIO N. SINCE IT IS MERELY A CASE OF INCREASE IN LOSS THEREFORE A LEN IENT VIEW MAY BE TAKEN AND PENALTY MAY BE DELETED. 5. ON THE OTHER HAND LD. DR SUBMITTED THAT EXPLANA TION 3C WAS INSERTED TO SEC.43B WITH RETROSPECTIVE EFFECT FROM 1-4-1989 BY FINANCE ACT 2006. BY THIS EXPLANATION IT HAS BEEN CLARIFIE D THAT EVEN IF INTEREST ITA NO.5267 OF 10 3 IS CONVERTED INTO LOAN SAME CANNOT BE TREATED AS P AYMENT OF INTEREST AND THEREFORE CONVERSION OF SUCH INTEREST INTO LO AN CANNOT BE TREATED AS PAYMENT AND ULTIMATELY CANNOT BE ALLOWED U/S.43B . SINCE THE DEDUCTION WAS NOT ALLOWABLE AS PER THE SPECIFIC PRO VISION STILL THE ASSESSEE CLAIMED THE DEDUCTION WHICH CLEARLY AMOUN TS TO FURNISHING OF INACCURATE PARTICULARS. HOWEVER THE PENALTY HAS BE EN HELD TO BE LEVIABLE EVEN IF IT IS ONLY A CASE OF INCREASE IN L OSSES. IN THIS REGARD HE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. GOLD COIN HEALTH FOOD P. LTD. [304 ITR 308]. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND FORCE IN THE SUBMISSIONS OF THE LD. DR. EXPLANATION 3C TO SEC.43B READS AS UNDER: EXPLANATION 3C. FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED THAT A DEDUCTION OF ANY SUM BEING INTEREST PAYABLE UNDER CLAUSE ( D ) OF THIS SECTION SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WHICH HAS B EEN CONVERTED INTO A LOAN OR BORROWING SHALL NOT BE DEEMED TO HAVE BEEN ACTUALLY PAID.] THIS EXPLANATION WAS INSERTED BY FINANCE ACT 2006. THOUGH THIS EXPLANATION WAS MADE EFFECTIVE FROM RETROSPECTIVE E FFECT FROM 1-4- 1989. BUT THE SAME WAS AVAILABLE BEFORE FILING OF R ETURN BECAUSE WE ARE IN A.Y 2006-07. THEREFORE IT IS CLEAR THAT ASS ESSEE WAS AWARE THAT IF INTEREST WAS ACTUALLY NOT PAID AND MERE CONVERSI ON OF THE INTEREST INTO LOAN SUCH INTEREST WAS NOT ALLOWABLE TO HIM STILL PREFERRED TO MAKE THIS CLAIM WHICH IS CLEARLY FURNISHING OF INAC CURATE PARTICULARS. THE ASSESSEE HAS MADE A CLAIM DESPITE A SPECIFIC LA W BY WHICH SUCH CLAIM WAS NOT MAINTAINABLE. SIMPLY BECAUSE IT IS A CASE WHERE ITA NO.5267 OF 10 4 ASSESSEE HAS INCURRED HEAVY LOSSES AND ALSO HAD CAR RIED FORWARD LOSSES PENALTY CANNOT BE DELETED. THE HON'BLE SUPR EME COURT IN THE CASE OF CIT VS. GOLD COIN HEALTH FOOD P. LTD. [SUPR A] HAS CLEARLY HELD THAT PENALTY U/S.271(1) IS LEVIABLE EVEN IF MERELY A LOSS HAS INCREASED BY WAY OF ADDITION. THIS POSITION WAS FURTHER AGAIN CONFIRMED BY A LARGER BENCH IN THE CASE OF JCIT VS. SAHELI LEASING AND INDUSTRIES LTD. [324 ITR 170]. THEREFORE RESPECTFULLY FOLLOWING TH E ABOVE DECISIONS WE CONFIRM THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 9 /9/2011. SD/- SD/- (D.MANMOHAN) (T.R.SOOD) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI: 9/9/2011. P/-*