Hungry Jacks Fast Food P.Ltd, Mumbai vs Assessee

आयकर अपीलीय अिधकरण "एच " यायपीठ मुब ं ई म । IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH "H", MUMBAI ी आर. आर. सी. सी. शमा , लेखा सद य एवं ी िववेक वमा , याियक सद य के सम । BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA No. : 2335/Mum/2012 (Assessment year: 2006-07) M/s Hungry Jacks Fast Food Pvt Vs Income-tax Officer-5(1)(4), Ltd, 5th Floor, Aayakar Bhavan, M/s Natvarlal Vepari & Co, Maharshi Karve Road, Oricon House, 4th Floor, Mumbai -400 020 12, K Dubash Marg, Mumbai - 400 023 ःथयी लेखा सं.:PAN: AAACH 9793 A अपीलाथ (Appellant) ू यथ (Respondent) Appellant by : Dr K Shivaram Ms. Neelam Jadhav Respondent by : Shri Jitendra Kumar

सुनवाई क तार ख /Date of Hearing : 05-01-2015 घोषणा क तार ख /Date of Pronouncement : 04-03-2015

आदेश ORDER ी िववेक वमा , या स: स: PER VIVEK VARMA, JM:

The appeal is filed by the assessee against the order of CIT(A) 9, Mumbai, dated 14.02.2012, sustaining the levy of penalty of Rs. 9,10,000/- by the AO.

2. The facts are that the assessee entered into a joint venture (JV) with Radha Restaurant Pvt Ltd to start restaurant business under the brand name of "Komals". To start the business, the assessee gave Rs. 27.00 lacs as unsecured loan to its JV partner for business purpose. This JV was dissolved and the loan given for the purposes of business became irrecoverable. Even the cheque received by the assessee from Mr. R.T. Sekar on behalf of RRPL bounced. The assessee filed recovery suit on account of dishonored cheque, but the suit is lying pending, because notice 2 M/s Hungry Jacks Fast Food Pvt Ltd ITA 2335/M/2012

could not be served on Mr. R.T. Sekar, as he had left the country.

3. In this factual scenario, the assessee claimed this amount as bad debt.

4. The AO while examining the issue, held the same to be a capital loss and therefore denied the claim of bad debt.

5. In the appeal before the CIT(A), the CIT(A) held it to be business loss but did not allow the claim of bad debt. In any case, the CIT(A) reversed the order of the AO. In the appeal filed by the assessee before the ITAT on this issue of bad debts, the coordinate Bench, sustained the order of the CIT(A), holding the same to be business loss.

6. In the interim period, the AO had initiated penalty proceedings u/s 271(1)(c) on this issue, as the explanation offered by the assessee was not acceptable as bona fide, as per Explanation 1 to section 271(1)(c). The AO, therefore, computed the penalty at Rs. 9,10,000/- & levied the same on the assessee.

7. In the appeal proceedings before the CIT(A), the assessee reiterated the facts of the case, as to how the sum of Rs. 27,00,000/- is irrecoverable. The CIT(A) sustained the order of the AO, levying the penalty, relying on the decision of UOI vs Dharmendra Textile Processors, reported in 306 ITR 277, wherein the Hon'ble Supreme Court lay the ratio that mens rea is not necessary.

8. Against this order of the CIT(A), the assessee is now before the ITAT.

9. Before us the AR primarily submitted that neither there was any concealment of income, nor any inaccurate particulars of income by the assessee, nor is there any loss to the revenue.

3 M/s Hungry Jacks Fast Food Pvt Ltd ITA 2335/M/2012

The AR submitted that the only difference between the assessee and the revenue officers is that there is a difference of interpretation. The AR, therefore, submitted that since there was neither any attempt to provide inaccurate particulars of income concealment, and the issue has been blown only on the basis of interpretation, neither the penalty becomes exigible legally, nor the case of Dharmendra Textile (supra) could be applied.

10. The AR therefore, submitted that the penalty be deleted.

11. The DR relied on the orders of the revenue authorities.

12. We have heard the arguments and have pursued the orders of the revenue authorities. Undoubtedly, it is not the case of either any concealment of income or furnishing of inaccurate particulars of income. As we see, it is not the case of any revenue loss either. We find that the CIT(A) has placed reliance on the case of Dharmendra Textile (supra), but, at the time when the CIT(A) passed the impugned order, the following cases, Sr. No. Case Citation 01 CIT v Reliance Petroproducts (P) Ltd 322 ITR 158 02 CIT vs Atul Mohan Bindal 317 ITR 1 03 Shree Krishna Electricals vs State of Tamil Nadu 23 VST 249(SC)

diluting the ratio of Dharmendra Textile (supra) were already in place, rendering the decision of Dharmendra Textiles as otiose. When we look at the decision of Reliance Petroproducts Pvt. Ltd. (supra), the Hon'ble Supreme Court has very categorically held that penalty cannot be visited if the details and particulars had been placed on record. We find that the assessee made the claim in its return of income, which the revenue authorities interpreted differently.

13. This means that only on the facts, there was a difference in opinion, as to how to characterize the income/loss. In such a 4 M/s Hungry Jacks Fast Food Pvt Ltd ITA 2335/M/2012

case, where there is a difference of opinion amongst the revenue authorities themselves, penalty, in such a case is not exigible.

14. We, therefore, set aside the order of the CIT(A) and direct the AO to cancel the penalty.

15. As a result, the appeal as filed by the assessee is allowed.

Order pronounced in the open Court on 04/03/2015.

(आर.

आर. सी.

सी. शमा ) (िववेक वमा ) Sd/- Sd/-

लेखा सदःय &याईक सदःय (R C SHARMA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 04/03/2015

ूित/Copy to:-

1) अपीलाथ /The Appellant. 2) ू यथ /The Respondent. 3) The CIT(A) -9, Mumbai. 4) The CIT-5, Mumbai/CIT -5, Mumbai.

5) िवभागीय ितिनिध "एच", आयकर अपीलीय अिधकरण, मुंबई/ The D.R. "H" Bench, Mumbai.

6) गाड* फाईल Copy to Guard File.

आदे शानुसार/By Order / / True Copy / /

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, मुबं ई Dy./Asstt. Registrar I.T.A.T., Mumbai

*च हान व.िन.स *Chavan, Sr.PS