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Azofen Pvt. Ltd., 37/38, L.K. Arcade, Marol Naka, Marol, Andheri (East), Mumbai 400059. Vs. The DCIT (OSD), RG.8(1), Aaykar Bhavan, MK Road, Mumbai 400020
June, 09th 2015
                  MUMBAI BENCHES `A' MUMBAI
          [ .. , Û è  .  ,                    è


                   . / ITA No.5493/MUM/2013
                   [ [ /Assessment Year 2005-06
   Azofen Pvt. Ltd.,         / The DCIT (OSD), RG.8(1),
   37/38, L.K. Arcade,             Aaykar Bhavan, MK Road,
   Marol Naka, Marol,              Mumbai 400020
   Andheri (East),
    Mumbai 400059.
   è    . /   . / PAN/GIR No. : AAACA 5098F
         ( /Appellant)             ..         (× / Respondent)
                    . / ITA No.5491/MUM/2013
                   [ [ /Assessment
                           Year 2005-06
   The DCI T ­ 8(1),       Azofen Pvt. Ltd.,
   Aaykar Bhavan, Room     37/38, L.K. Arcade,
   No.260A, 2 n d Floor, MKMarol Naka, Marol,
   Road, Mumbai 400 020    Andheri (East),
                            Mumbai 400059.
   è    . /   . / PAN/GIR No. : AAACA 5098F
    ( /Appellant)     ..        (× / Respondent)

     Assessee by             Shri D.Z.Patel
     Revenue by              Shri Jeevanlal Lavidiya
               / Da te o f Hearing        : 08/06/2015
             /Date of Pronouncement : 08/06/2015
                                / O R D E R


      These are cross appeals and are directed against order passed by Ld.
CIT(A)-16, Mumbai dated 30/05/2013 for assessment year 2005-06. Grounds
of appeal read as under:
                                            2         . / ITA No.5493&5491/MUM/2013
                                                             [ [ /Assessment Year 2005-06

Grounds of Assessee's Appeal:
       1) In the facts and circumstances of the case and in law the learned CIT
      (Appeals) erred in confirming penalty u/s 271(1)(c) on donation of Rs.4,000/-
      which was inadvertently left out from the computation of total income.

       2) In the facts and circumstances of the case and in law, the learned CIT (Appeal)
      erred in not adjudicating the Ground No.5 read with para 4 of Statement of Facts
      to the effect that there was no satisfaction recorded by the A.O. for initiating
      proceedings u/s. 271(1)(c) in respect of the impugned addition of donation of
      Rs.4,000/ - which is first and foremost condition precedent to initiating and
      levying penalty u/s. 271(1)(c) and therefore in not holding the impugned order as
      bad in law, ab-initio on this count alone.

      3) Without prejudice to the above the learned CIT (Appeal) ought to have
      appreciated that the appellant had duly agreed for adding back the impugned
      amount of donation when pointed out by the A.O. and that the said omission was
      a bonafide mistake on the part of the Appellant not intending to conceal any
      particulars thereof.

Grounds of Revenue's Appeal:
       1. "On the facts and in the circumstances of the case and in law, the Learned
      Commissioner of Income Tax (Appeals) erred in deleting the penalty under section
      271(1 )(c) of the Act levied on disallowance of write off of debit balance of Rs
      14,01,768/ - in Government agencies without appreciating that the assessee had
      unilaterally written off the said deposits and claimed deduction of the same even
      though the said deposits are not bad debts as envisaged in Section 36(1 )(vii)
      r.w.s. 36(2) of the Act and hence not allowable as deduction by mere unilateral
      write off".

       2. "On the facts and in the circumstances of the case and in law, the Learned
      Commissioner of Income Tax (Appeals) erred in deleting the penalty under section
      271 (1 )(c) of the Act levied on disallowance of write off of debit balances of Rs
      14,01,768/ - in Government agencies without appreciating that the assessee
      failed to prove with evidence that (a) the deposits with the Government agencies
      had become irrecoverable during the relevant previous year, (b) the assessee's
      claim had been rejected by the concerned authorities and (c) the deposits are
      impossible to recover as observed by the Hon' ble ITAT in para 10 of its order
      dated 29-07-2011".

      3. "On the facts and in the circumstances of the case and in law, the Learned
      Commissioner of Income Tax (Appeals) erred in deleting the penalty under section
      271(1 )(c) of the Act levied on disallowance of write off of debit balances of Rs
      14,01,768/- in Government Agencies without appreciating that in the assessment
      proceedings, appellate proceedings before the CIT(A) and before the ITAT and in
      the penalty proceedings, the assessee failed to prove that the said amounts are
      not recoverable at all, thereby failing to rebut the presumption in Explanation 1 of
      section 271(1 )(c) of the Act."
                                              3         . / ITA No.5493&5491/MUM/2013
                                                               [ [ /Assessment Year 2005-06

2.     The assessee is engaged in the business of investment and development
of real estate and builders. The assessee written off the following amounts and
claimed the same as expenditure:
i) MSEB Deposit                                      Rs. 8,45,635/-
ii)Thane Municipal Corporation ­ Water Deposit         Rs. 4,65,060/-
iii)Thane Municipal Corporation ­Tree cutting deposit Rs.        25,500/-
iv)Thane Municipal corporation-Rent deposit            Rs.        5,700/-
v) MIDC- Security deposit                             Rs.       60,800/-
vi) BEST                                             Rs.          5,580/-
vii) Excess provision                            (-) Rs.          6,507/-
                                                     Rs. 14,01,768/-

3.     The AO did not allow such claim of the assessee and added the same to
the income of the assessee.        The addition was subject to further appeals and
ultimately the disallowance was upheld by the Tribunal as per order dated
29/07/2011 passed in ITA No.3810/Mum/2010, copy of the said order was
placed on our record and the observations of the Tribunal while upholding the
addition as found in para -10 are as under:
       "10. We have heard the submissions of the ld. Counsel for the assessee, who
       submitted that the loss in question is trading loss and should be allowed as a
       deduction. We have considered his submission and are of the view that the loss
       in question is no doubt a trading loss because it is incidental to the business of
       the assessee. But the question is whether the loss can be said to have accrued to
       the assessee. As rightly held by the revenue authorities there is no evidence on
       record to show that the claim of the assessee has been rejected by the various
       authorities. The amounts were due from various government bodies. The
       assessee cannot, therefore, plead impossibility of recovery. The assessee has
       also not substantiated that the amounts are not recoverable at all. In these
       circumstances we are of the view that the revenue authorities are justified in
       rejecting the claim of the assessee.    We may also       add that Ground No.3
       raised by assessee is misconceived because the amount in question cannot be
       said to be a debt owed to the assessee and it does not arise out of
       trading/business transaction. Ground No.2 & 3 are accordingly dismissed."

4.     It is on this addition the impugned penalty has been levied, the deletion
of which is contested by the Revenue in the impugned appeal.

5.     We have heard both the parties and their contentions have carefully
considered. The impugned payment which have been disallowed are made by
                                       4         . / ITA No.5493&5491/MUM/2013
                                                        [ [ /Assessment Year 2005-06

the assessee to the authorities mentioned in the details.. The Tribunal while
deciding the quantum has held that the amount claimed by the assessee is no
doubt a trading loss because it is incidental to the business of the assessee,
but only on the ground that this loss did not accrue to the assessee in the
relevant year, the addition was upheld.       Neither the genuineness of the
payment by the assessee is doubted nor the write off action of the assessee is
doubted. These amounts have been claimed on the ground that these were
paid   long back and    in the absence of original receipts, it could not claim
refund of these amounts. This may be good ground for upholding the addition
but cannot be a good ground for upholding the levy of concealment penalty.
Therefore, we are of the opinion that sustenance of        impugned penalty is
contrary to the law and has rightly been deleted by Ld. CIT(A). We decline to
interfere in the relief granted by the Ld. CIT(A) and Revenue's appeal is

6.     Coming to the appeal filed by the assessee, the assessee claimed an
amount of Rs.4000/- on account of donation, which was disallowed.               For
such a small disallowance concealment penalty cannot be levied. This may be
a claim made by the assessee by oversight for which concealment penalty
should not be levied. We, therefore, after hearing both the parties delete the
penalty and allow the appeal filed by the assessee.

7.     In the result, Revenue's appeal is dismissed and appeal filed by the
assessee is allowed.
       Order pronounced in the open court on 08/06/2015
            Û   08/06/2015                                 

           Sd/-                                                Sd/-
(.   / D.KARUNAKARA RAO)                              (..  / I.P. BANSAL)
 è / ACCOUNTANT MEMBER                      Û è / JUDICIAL MEMBER
 Mumbai;         Dated 08/06/2015
                           5     . / ITA No.5493&5491/MUM/2013
                                        [ [ /Assessment Year 2005-06

    /Copy of the Order forwarded to :
1.    / The Appellant
2.   × / The Respondent.
3.    È() / The CIT(A)-
4.    È / CIT
5.    ,   ,  / DR, ITAT,
6.   [  / Guard file.

                                            / BY ORDER,
×  //True Copy//

                           /            (Dy./Asstt. Registrar)
                             ,   / ITAT, Mumbai
.../Vm, Sr. PS
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