Sailani Agrotech Industries Ltd., Ahmedabad V. The ACIT.,(OSD),Circle-8, Ahmedabad

CO 133/AHD/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9923 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business expenditure; Wrong claim; Onus to prove
• Section: 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., , BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.897/AHD/2011 ( / ASSESSMENT YEAR : 2007-08) ACIT (OSD) CIRCLE-8 AHMEDABAD / VS. SAILANI AGROTECH INDUSTRIES LTD. 504, SAMUNDRA COMPLEX CG ROAD NAVRANGPURA, AHMEDABAD ./ ./ PAN/GIR NO. : AAACR 9131 Q ( # / APPELLANT ) .. ( $% # / RESPONDENT ) AND CO NO.133/AHD/2011 FOR AY 2007-08 (IN ITA NO.897/AHD/2011 FOR AY 2007-08) SAILANI AGROTECH INDUSTRIES VS. THE ACIT LTD., AHMEDABAD AHMEDABAD (CROSS OBJECTOR .. (RESPON DENT) REVENUE BY : SHRI B.L. YADAV SR.DR ASSESSEE BY : SHRI TEJ SHAH, AR &'() / DATE OF HEARING 08/10/2014 *+,-() / DATE OF PRONOUNCEMENT 15/10/2014 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THE REVENUE AND THE ASSESSEE BOTH HAVE CHALLENGED T HE ORDER OF THE COMMISSIONER-OF INCOME TAX (APPEALS)-XIV, AHMED ABAD (CIT(A) IN SHORT) DATED 28/01/2011 BY WAY OF APPEAL AND CRO SS-OBJECTION RESPECTIVELY. BOTH THE APPEAL AND THE CROSS OBJECT ION ARE TAKEN UP ITA NO.897/AHD/2011 (BY REVEN UE) AND CO NO.133/AHD/2011 (BY ASSESSEE) THE ACIT(OSD) VS. SAILANI AGROTECH INDUSTRIES LTD. ASST.YEAR 2007-08 - 2 - TOGETHER AND ARE BEING DISPOSED OF BY A CONSOLIDATE D ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE APPEAL FILED BY THE REVENU E, I.E. ITA NO.897/AHD/2011 FOR AY 2007-08. THE REVENUE HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL:- 1) THE LD.CIT(A)-XIV, AHMEDABAD HAS ERRED IN LAW A ND ON FACTS IN DELETING THE PENALTY OF RS.3,25,198/- LEVIED U/S.27 1(1)(C) OF THE ACT. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.COMMISSIONER OF INCOME-TAX(A)-XIV, AHMEDABAD OUG HT TO HAVE UPHELD THE ORDER F THE ASSESSING OFFICER. 3) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE L D.COMMISSIONER OF INCOME-TAX(A)-XIV, AHMEDABAD MAY BE SET-ASIDE AND T HAT OF THE ASSESSING OFFICER BE RESTORED. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 29/12/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE DISALLOWANCE OF THE INTEREST EXPENSES U/S.43B OF TH E ACT, MISCELLANEOUS EXPENSES WRITTEN OFF, FBT & INTEREST ON TDS, LICEN CE EXPENSES AND ADDITION U/S.41(1) OF THE ACT. THE AO ALSO INITIAT ED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT AND THE PENALTY ORDER U/S .271(1)(C) WAS PASSED ON 23/06/2010, THEREBY THE AO LEVIED PENALTY ON DIS ALLOWANCE OF FBT AND INTEREST ON TDS OF RS.39,946/- AND LICENCE EXPENSES OF RS.9,26,181/- TOTALLING TO RS.9,66,127/-. THE AO L EVIED A PENALTY OF RS.3,25,198/- ON THE TOTAL ADDITION. AGAINST THIS, THE ASSESSEE FILED AN ITA NO.897/AHD/2011 (BY REVEN UE) AND CO NO.133/AHD/2011 (BY ASSESSEE) THE ACIT(OSD) VS. SAILANI AGROTECH INDUSTRIES LTD. ASST.YEAR 2007-08 - 3 - APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS ALLOWED THE APPEAL. 4. THE LD.SR.DR SUBMITTED THAT THE LD.CIT(A) WAS NO T JUSTIFIED IN DELETING THE ADDITION. HE SUBMITTED THAT THE AO DE LIBERATELY DID NOT MAKE ADDITION ON ACCOUNT OF FBT AND INTEREST ON TDS AND ALSO CLAIMED A FALSE CLAIM OF LICENCE EXPENSES. THIS ACT OF THE ASSESSEE AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN SUPPORT OF THIS CONTENTION, LD.SR.DR RELIED ON THE DECISION OF THIS TRIBUNAL (ITAT B BENCH AHMEDABAD) RENDERED IN THE CASE OF GUJARAT ST ATE FINANCIAL SERVICES LTD. VS. ACIT REPORTED AT (2010) 39 SOT 5 70 (AHD.) AND ALSO THE JUDGEMENT OF HONBLE DELHI COURT RENDERED IN TH E CASE OF CIT VS. HCIL KALINDEE ARSSPL REPORTED AT (2013) 37 TAXMANN. COM 347 (DELHI). HE ALSO RELIED ON THE JUDGEMENT OF HONBLE HIGH COU RT OF DELHI RENDERED IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P.) LTD. REPORTED AT (2010) 191 TAXMAN 179 (DELHI). 4.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. HE SUBMITTED THAT THE ASSESSEE HAD DISCLOSED ALL MATERIAL PARTICULARS BEF ORE THE AO. THERE WAS NO CONCEALMENT OF PARTICULARS. HE PLACED RELIANCE ON THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT.LTD. REPORTED AT (2010) 322 ITR 1 58(SC) AND SUBMITTED THAT UNDER THE FACTS OF THE PRESENT CASE, THE PENALTY AS IMPOSED BY THE AO IS NOT JUSTIFIED AND THE LD.CIT(A) HAS RI GHTLY DELETED THE SAME. ITA NO.897/AHD/2011 (BY REVEN UE) AND CO NO.133/AHD/2011 (BY ASSESSEE) THE ACIT(OSD) VS. SAILANI AGROTECH INDUSTRIES LTD. ASST.YEAR 2007-08 - 4 - 4.2. IN REJOINDER, THE LD.SR.DR SUBMITTED THAT THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD.(SUPRA) WOULD NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE OF THE ASSESSEE. HE SUBMITTED THAT ADMITTEDLY THE ASSESSE E HAD OFFERED THE AMOUNT OF FBT AND INTEREST ON TDS AMOUNTING TO RS.3 5,162/- AND RS.4,084/- RESPECTIVELY WHEN THE CASE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND A SPECIFIC QUERY WAS RAISED TO THE A SSESSEE BY THE AO. HE FURTHER SUBMITTED THAT AS REGARDS, THE DISALLOWA NCE OF THE EXPENDITURE OF RS.9,26,181/- THE ASSESSEE COULD NOT PROVE THE S AME AS BUSINESS EXPENDITURE SINCE HE COULD NOT ESTABLISH THE NEXUS BETWEEN THE LICENCE EXPENSES AND THE BUSINESS ACTIVITIES OF THE ASSESSE E. 5. WE HAVE HEARD RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AS WELL AS THE JUDGEMENTS RELIED UPON BY THE PARTIES. THE LD.CIT( A) HAS DECIDED THESE ISSUES IN HIS ORDER AT PARA-2.4 BY OBSERVING AS UND ER:- 2.4. DECISION : I HAVE CAREFULLY CONSIDERED THE CONTENTION OF TH E LEARNED COUNSEL FOR THE APPELLANT AND THE CASE LAWS RELIED UPON BY HIM AND HAVE ALSO GONE THROUGH THE PENALTY ORDER IN QUESTION PASSED BY THE A.O. IN THIS CASE, PENALTY UNDER SEC TION 271(1)(C) HAS BEEN LEVIED BY THE A.O. ON THE GROUND THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME BY N OT ADDING BACK THE FBT OF RS.35162, TDS RS.4784/- IN RETURN OF INC OME AND WORNG CLAIM OF LICENSE EXPENSES OF RS.9,26,181/- AS THE APPELLANT COMPANY COULD NOT ESTABLISH THE NEXUS BETWEEN LICEN SE EXPENSES AND THE BUSINESS ACTIVITIES. FROM THE FACTS, OF TH E CASE, IT COMES OUT THAT SO FAR AS THE PENALTY PROCEEDINGS ARE CONC ERNED, IT IS SEEN THAT THE APPELLANT HAS OFFERED AN EXPLANATION WHICH HAS NOT BEEN ACCEPTED BY THE A.O. AS REGARDS THE FBT RS.35,162/ - AND TDS OF ITA NO.897/AHD/2011 (BY REVEN UE) AND CO NO.133/AHD/2011 (BY ASSESSEE) THE ACIT(OSD) VS. SAILANI AGROTECH INDUSTRIES LTD. ASST.YEAR 2007-08 - 5 - RS.4,784/- IS CONCERNED, ITS IS SEEN THAT THE SAME COULD NOT BE ADDED BACK TO THE RETURN OF INCOME DUE TO THE BONA FIDE MISTAKE. THE APPELLANT HAS SUBMITTED ALL THE PARTICULARS REG ARDING THE SAID EXPENDITURE DURING THE COURSE OF THE ASSESSMENT PRO CEEDINGS. IN RESPECT OF THE LICENSE EXPENSES OF RS.9.26,181/-, I T IS SUBMITTED BY THE APPELLANT THAT ALL THE DETAILS OF SAID EXPENDIT URE LIKE LEDGER COPY ETC. HAS BEEN PROVIDED DURING THE COURSE OF TH E ASSESSMENT PROCEEDINGS. THE AO HAS ALSO ACCEPTED THE FACT THA T THE ASSESSEE HAS SUBMITTED THE DETAILS IN RESPECT OF THE EXPENSE S BUT HAS THE APPELLANT FAILED TO ESTABLISH THE NEXUS OF THE SAID EXPENSES AND THE BUSINESS ACTIVITIES OF THE COMPANY THE ADDITION HAS BEEN MADE. THIS MAY BE SUFFICIENT FOR HOLDING THE CASE AGAINST THE APPELLANT IN QUANTUM, BUT CERTAINLY NOT WHEN IT COMES TO THE QUE STION LEVYING THE PENALTY UNDER SECTION 271(1)(C), AS QUANTIFICAT ION OF THE PENALTY IS TO BE PRIMARILY DONE WITH REFERENCE TO T HE TAX SOUGHT TO BE EVADED. SINCE ALL THE FACTS HAVE BEEN DISCLOSED BY THE APPELLANT, THE PENALTY PROCEEDINGS FOR FURNISHING O F INACCURATE PARTICULARS ARE NOT ATTRACTED IN THIS CASE. I WOUL D LIKE HERE TO REFER TO THE RATIO OF JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF T.ASHOK PAI VS. CIT (2007) 292 ITR 11, IN WHICH THE APEX COURT HAS HELD THAT THE PENALTY PROCEEDINGS ARE INDEPENDE NT FROM THOSE OF THE ASSESSMENT PROCEEDINGS AND THE MATTERS HAVE TO BE CONSIDERED AFRESH IN THE PENALTY PROCEEDINGS FROM T HE ANGEL REQUIRED BY THE LAW RELATING TO THE PENALTY AND THA T THE BURDEN OF PROOF PLACED ON THE ASSESSEE UNDER THE EXPLANATION IS SUBJECT TO THE CONDITIONS THEREIN. IT WAS ALSO HELD IN THE CA SE OF CIT VS. RELIANCE PETROPRODUCTS PVT.LTD. BY HONBLE AHMEDABA D APEX COURT THAT WHERE THERE WAS NO FINDING THAT ANY DET AILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE INCORRECT OR ERR ONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF INVITING PENALTY UNDE R SECTION 271(1)(C); A MERE MAKING OF CLAIM, WHICH IS NOT SUS TAINABLE IN LAW, BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING INCOME OF ASSESSEE AND SUCH CLAIM MADE IN RETURN CANNOT AMOUNT TO INACCURATE PARTICULARS. HAVING C ONSIDERED THE ENTIRETY OF THE FACTS, I FIND THAT IN THIS CASE THE RE IS NO ANY INACCURATE FURNISHING OF PARTICULARS. KEEPING IN V IEW THE DISCUSSION MADE AS ABOVE AND THE LEGAL POSITION WIT H REGARD TO PENALTY FOR INACCURATE PARTICULARS, I HOLD THAT NO PENALTY UNDER ITA NO.897/AHD/2011 (BY REVEN UE) AND CO NO.133/AHD/2011 (BY ASSESSEE) THE ACIT(OSD) VS. SAILANI AGROTECH INDUSTRIES LTD. ASST.YEAR 2007-08 - 6 - SECTION 271(1)(C) IS WARRANTED. HENCE THE PENALTY IMPOSE UNDER SECTION 271(1)(C) OF RS.3,25,198/- IS HEREBY CANCEL LED. 5.1 THE SETTLED POSITION OF LAW IS THAT THE EXPEND ITURE WHICH IS RELATED TO THE BUSINESS ACTIVITY IS ONLY ALLOWABLE EXPEND ITURE. THE ASSESSEE IS REQUIRED TO PROVE THAT ANY EXPENDITURE CLAIMED IN I TS ACCOUNTS HAS A NEXUS WITH THE BUSINESS ACTIVITY AND IS INCURRED O N SUCH ACTIVITY, IN THIS CASE THE ASSESSEE HAS CLAIMED A SUM OF RS.9,26,181/ - AS LICENCE EXPENSES. THE ASSESSEE WAS REQUIRED TO PLACE MATERIAL BEFORE THE AO PROVING THAT SUCH EXPENDITURE WAS INCURRED FOR THE BUSINESS PURP OSES. THE ASSESSEE HAS NOT PLACED ANY MATERIAL ON RECORD SUGGESTING TH AT HE HAD ACQUIRED ANY LICENCE AND SUCH LICENCE WAS ACQUIRED FOR BUSIN ESS PURPOSES. NEITHER BEFORE THE AO NOR BEFORE THIS TRIBUNAL DESPITE A SP ECIFIC QUERY FROM THIS BENCH, LD.COUNSEL FOR THE ASSESSEE WAS NOT IN A POS ITION TO DEMONSTRATE THAT THE EXPENDITURE WAS INCURRED FOR BUSINESS PURP OSES. UNDER THESE FACTS, THE AO INFERRED THAT THE ASSESSEE MADE A FAL SE CLAIM. NO FAULT CAN BE FOUND IN THE FINDING OF AO SINCE THE ASSESSEE WA S REQUIRED TO DEMONSTRATE THAT THE EXPENDITURE OF LICENCE WAS, IN FACT, INCURRED FOR ACQUIRING LICENCE FOR BUSINESS PURPOSES. WE FIND F ORCE IN THE CONTENTION OF LD.SR.DR THAT HAD THE CASE OF THE ASSESSEE WAS N OT TAKEN FOR SCRUTINY ASSESSMENT, THEN SUCH FALSE CLAIM WOULD HAVE ESCAPE D FROM TAXATION. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD.(SUPRA) WOULD NOT HELP AS THE AO IN QUANTUM PROCEEDINGS HAS GIVEN FINDING THAT THE ASSESSEE HAS ACCEPTED THE CONTENTIONS OF REVENUE AND AGREED ON PROPOSED DISAL LOWANCE. SO FAR AS ITA NO.897/AHD/2011 (BY REVEN UE) AND CO NO.133/AHD/2011 (BY ASSESSEE) THE ACIT(OSD) VS. SAILANI AGROTECH INDUSTRIES LTD. ASST.YEAR 2007-08 - 7 - THE AMOUNT OF FBT AND INTEREST ON TDS IS CONCERNED, KEEPING IN VIEW THE FACT THAT DURING THE COURSE OF ASSESSMENT THE ASSESSEE HAD SUBMITTED THAT SUCH LAPSE WAS A BONA FIDE MISTAKE AND HE OFFE RED FOR TAXATION. THEREFORE, THE PENALTY ON THIS AMOUNT, IN OUR CONSI DERED VIEW, IS RIGHTLY DELETED. AFTER CONSIDERING THE TOTALITY OF THE FAC TS AND THE ISSUES DISCLOSED HEREINABOVE, WE HEREBY SET ASIDE THE ORD ER OF THE LD.CIT(A) TO THE EXTENT OF DELETING THE PENALTY ON ADDITION MADE ON ACCOUNT OF THE LICENCE EXPENDITURE AND SUSTAIN THE PENALTY ON SUCH AMOUNT. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED . 6. NOW, WE TAKE UP THE CROSS OBJECTION NO.133/AHD/2 011 FOR AY 2007-08 FILED BY THE ASSESSEE (OUT OF ITA NO.897/AH D/2011 FOR AY 2007-08),WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISE D BY THE ASSESSEE:- 1. THE LD.CIT(A) WAS JUSTIFIED IN LAW AND ON FACTS IN DELETING PENALTY LEVIED U/S.271(1)(C) OF THE ACT. 2. THE LD.CIT(A) WAS CORRECT IN LAW AND ON FACTS IN DE LETING THE PENALTY LEVIED U/S.271(1)(C) OF THE ACT AS THERE AR E NO INACCURATE PARTICULARS FILED AND EXPLANATION 1 TO S .271(1)(C) IS NOT ATTRACTED. 3. THE CROSS OBJECTOR RESERVES ITS RIGHT TO ADD, AMEND OR ALTER ALL OR ANY OF THE GROUNDS OF CROSS-OBJECTIONS BEFORE OR DURING THE HEARING OF THE APPEAL AND CROSS OBJECTIONS. 7. IN VIEW OF OUR DECISION PASSED IN REVENUES APPE AL, I.E. IN ITA NO.897/AHD/2011 FOR AY 2007-08(SUPRA), WHEREIN WE HAVE DECIDED THE ISSUE PARTLY IN FAVOUR OF THE REVENUE AND, ACCORDIN GLY, THE CROSS- ITA NO.897/AHD/2011 (BY REVEN UE) AND CO NO.133/AHD/2011 (BY ASSESSEE) THE ACIT(OSD) VS. SAILANI AGROTECH INDUSTRIES LTD. ASST.YEAR 2007-08 - 8 - OBJECTION FILED BY THE ASSESSEE IN SUPPORT THE ORDE R OF THE LD.CIT(A) IS REJECTED. 8. IN THE COMBINE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED, WHEREAS THE CROSS-OBJECTION FILED BY THE A SSESSEE IS DISMISSED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 15 /10/2014 1)..,&.../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $% # / THE RESPONDENT. 3. 234 5 / CONCERNED CIT 4. 5 ( ) / THE CIT(A)-XIV, AHMEDABAD 5. 6&7$34 , )34- , 2 / DR, ITAT, AHMEDABAD 6. 79:;' / GUARD FILE. / BY ORDER, %6$ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 13.10.14 (DICTATION-PAD 12- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..13.10.14 OTHER MEMBER... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BAC K TO THE SR.P.S./P.S. 15.10.14 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 15.10.14 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER