TaxTMI 
TaxTMI 
2011 (9) TMI 466
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....claring a loss of Rs. 5,92,34,407. The Assessing Officer completed the assessment under section 143(3) on 12th March 2003, assessing the income at Rs. 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 follows:- (i) disallowance of provisions for doubtful debts; (ii) disallowance of provisions for diminution in the value of investment; (iii) disallowance of provisions for premium on redemption of debenture; (iv) depreciation on intangible assets (goodwill). The Commissioner-II, Mumbai, vide his order dated 26th August 2004, confirmed these additions/disallowances in the quantum proceedings. 3. On further appeal, Mumbai "H" Bench of the Tribunal, vide its order dated 9th May 2008, had upheld these additions/disallowances and dismissed the appeal of the assessee. Thereafter, the Assessing Officer issued notice vide letter dated 13th 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. It has to be mentioned that a notice initiating penalty proceedings unde....
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....04 and, hence, the order is barred by limitation in terms of proviso to section 275(1)(a), inserted by Finance Act, 2003, for the reason that the first appellate authority had passed order after 1st June 2003. He took this Bench through the wordings of this section and the proviso and submitted that the issue is now covered in favour of the assessee by the decision of Amritsar Bench of the Tribunal in the case of Tarlochan Singh & Sons (HUF) v. ITO [2008] 114 TTJ 82/24 SOT 40 (Asr.) (UO) as well as the decision of Lucknow Bench of the Tribunal in ITO v. Bloosom Floriculture [2010] 134 TTJ 51 (Luck.)(UO). On the provisions of section 271(1)(c), learned Counsel submitted that the same does not apply as it presupposes 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 submitted that the provisions made were disallowed and such disallowance was confirmed by the Tribunal and that the assessee has carried the matter in appeal and the Hon'ble High Court has admitted the questions by accepting the contentions of the assessee that there is a substantial question of law. He ....
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.... for all known liabilities. He further pointed out that in the return of income, in respect of provisions for doubtful debts, an amount of Rs. 10,36,07,753, was originally claimed and in view of the amendment to section 36(1)(vii) by the Finance Act, 2001, w.e.f. 1st April 1989, a portion of the claim of Rs. 2,48,11,807, was withdrawn voluntarily by way of a letter. He claimed that this proves the bona fide conduct of the assessee. On a query from the Bench, the learned Counsel admitted that the requirements of section 36(2), have not been satisfied by the assessee in this case and that this issue is not in debate. Nevertheless, he submitted that the claim should be allowed either under section 28 or 37(1) of the Act. He submitted that there is nothing inherently wrong in the claim made by the assessee and it is a debatable issue and that mere disallowance cannot result in a penalty. 7. On the issue of diminution in the value of investment, learned Counsel submitted that these are trade investment. He submitted 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 better control on the business ....
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....tted that 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. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC) and (ii) Industrial Development Bank of India Ltd. v. Dy. CIT [2010] 42 SOT 325 (Bom.). 10. The learned Departmental Representative, Mr. Pradeep 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 employees 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. Geep Industrial Syndicate Ltd. [1987] 23 ITD 448 (All.), and submitted that when advised by best of brains, the assessee cannot make such blatantly inadmissible claims. He pointed out that out of four additions sustained by the Tribunal, the assessee has not gone....
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....on'ble Madras High Court in CIT v. Indian Overseas Bank [1985] 151 ITR 446 (Mad.), for the proposition that only actual loss 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 entertained the appeal, the issue does not become debatable. He further relied on the decision in CIT v. K.A.R.K. Firm [1934] 2 ITR 183 (Rang.), for the proposition that the estimated diminution in the value of assets, based on re-valuation, cannot be allowed as a trading loss. He further submitted that 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 under 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 not pressed by the assessee. He further submitted that the loss if any was in the capital field. 13. On the diminution in the value of investment as well as the provisions on premium on debenture, he submitted that the claims were prima facie premature and findings of the Tribunal in the quantum proceedings show that th....
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...., the order of penalty dated 30-01-2009 is barred by limitation. An appeal in ITA no.8276/Mum./2004, against the quantum i.e order dated 30-08-2004 of C.I.T. (Appeals), was filed by the assessee before the Tribunal and the same was disposed off vide order dated 09-05-2008. The penalty order under section 271(1)(c) was passed 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 Commissioner / Commissioner in the quantum proceedings. To examine this issue we first refer to Section 275(1)(a) and the proviso which reads as follows:- "Section 275 - Bar of limitation for imposing penalties.-(1) No order imposing a penalty under this Chapter shall be passed- (a) in a case where the relevant assessment or other order is the subject matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the orde....
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....m 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 Section 275 (1)(a) of the Act, does not nullify the availability to the third respondent 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 respondent herein." 19. Coming to the decision of Amritsar Bench of the Tribunal in Tarlochan Singh & Sons (HUF) as well as the decision of Lucknow Bench of the Tribunal in Bloosom Floriculture (supra), we find that the Benches did not have the benefit of the judgment of Hon'ble Madras High Court in Rayala Corpn. (P.) Ltd. (supra). This case was not cited or considered. As the issue of interpretation of proviso to section 275(1)(a) has been considered and adjudicated upon by the Hon'ble Madras High Court and as this is the sole judgment on this issue from a High Court, we prefer to follow the same. 20. In view of the aforesaid discussion, we uphold the findings of the first appellate authority and dismiss the ground raised by the assessee. 21. Coming to the merits of t....
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....ons in 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 Commissioner (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 doubtful 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 these were pre amendment case laws. We agree that these case laws are not applicable anymore. The assessee has not demonstrated that the loss has crystallized 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 account as required under section 36(2). 25. Before us, the learned Counsel cited a number of case laws to demonstrate his point that the cla....
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....iminution in the value of investments". The undisputed facts are that, the assessee has not 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. Reliance placed on the judgment in the case of Patnaik & Co. Ltd. (supra) and Indian Commerce & Industries Co. (P.) Ltd. (supra), are distinguishable, as in those cases, there was actual sale of the assets. In the case on hand, the loss was claimed on re-valuation of an asset. There is no transfer of any asset. This is prima facie not allowable and is not made on any provision of law. This is the reason that the assessee has chosen not to carry the 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 fact 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 shares of ....
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.... 32. In view of the above discussion, we have no hesitation 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 case is different. On the other hand, we are of the considered opinion that the judgment of the Hon'ble Delhi High Court in CIT v. Zoom Communication (P.) Ltd. [2010] 327 ITR 510 (Delhi) is applicable to the facts of this case. In this case of the Honourable Delhi High Court after considering the judgment of the honourable supreme court in the case of Reliance Petroproducts (P.) Ltd. (supra), has held that, if the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, 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....