M/s Overseas Trading & Shipping Co. Pvt. Ltd., RAJKOT-GUJARAT V. The Dy. Commr. Income Tax, ( Inter. Taxation), Gandhidham Circle, GANDHIDHAM

CO 30/RJT/2015

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2847 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-03-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 05-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C S ANJARIA
• Keywords: Wrong claim; Commercial expediency

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.754/RJT/2014 & CO NO.30/RJT/2015 ( / ASSESSMENT YEAR : 2004-05) DY.COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION), RAJKOT / VS. OVERSEAS TRADING & SHIPPING CO.PVT.LTD. SBZ-S-140, WARD-12A OPP.BANK OF BARODA, GANDHIDHAM-370 204 ./ ./ PAN/GIR NO. : AAACO 4310 N ( / APPELLANT ) .. ( / RESPONDENT ) & CROSS OBJECTOR REVENUE BY : MR.C.S. ANJARIA, SR.DR ASSESSEE BY : MR.VIMAL DESAI, AR !'# $ % / DATE OF HEARING 15/03/2017 &' $ % / DATE OF PRONOUNCEMENT 24/03/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL OF THE REVENUE IS DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, RAJK OT [CIT(A) IN SHORT] DATED 13/10/2014 PERTAINING TO ASSESSMENT Y EAR (AY) 2004-05 ARISING OUT OF PENALTY ORDER OF THE ASSESSING OFFIC ER (AO) UNDER ITA NO.754/AHD/ 2014 & CO NO.30/RJT/2015 (ASSESSEE) DCIT VS. OVERSEAS TRADING & SHIPPING CO.PVT.LTD. ASST.YEAR 2004-05 - 2 - S.271(1)(C) DATED 01/11/2013. THE ASSESSEE HAS ALS O FILED CROSS OBJECTION THEREON. 2. THE GROUND RAISED BY THE REVENUE READS AS UNDER :- THE LD.CIT(A) HAS ERRED IN LAW AND IN FACTS IN DELETING THE PENALTY OF RS.11,63,375/-, WHICH WAS RIGHTLY LEVIED BY THE ASSESSING OFFICER IN LIGHT OF FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEFLY STATED, THE ASSESSEE IS A BRANCH OF FORE IGN COMPANY ENGAGED IN TRADING OF VARIOUS GOODS LOCALLY AND IN INTERNATIONAL MARKET. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE F ILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS.51,46,060/-, WHICH WAS LATER ON REVISED TO RS.50,41,632/-. THE ASSESSMENT WAS COMPLETED UNDER S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT'), WHEREIN THE ASSESSING OFFICER (AO) INTER-ALIA OBSERVED THAT CLAIM OF COMMISSION EXPENSES OF RS.28,37,500/- BY THE ASSESSEE IS BOGUS . HE ACCORDINGLY IMPOSED PENALTY THEREON @100% AMOUNTING TO RS.11,63 ,375/- VIDE ORDER UNDER S.271(1)(C) OF THE ACT DATED 01/11/2013. 4. THE ASSESSEE CONTESTED THE AFORESAID PENALTY ORD ER BEFORE THE CIT(A). THE CIT(A) OBSERVED ON MERITS THAT THE AFO RESAID COMMISSION OF RS.28,37,500/- TO PARTY NAMELY BGH EXIM LTD. IS ATTRIBUTABLE TO NON- ITA NO.754/AHD/ 2014 & CO NO.30/RJT/2015 (ASSESSEE) DCIT VS. OVERSEAS TRADING & SHIPPING CO.PVT.LTD. ASST.YEAR 2004-05 - 3 - PERFORMANCE OF CONTRACT. THE COMMISSION WAS PAID O UT OF BUSINESS NECESSITIES AND COMMERCIAL EXPEDIENCY. IT WAS NOTE D BY THE CIT(A) THAT THE ASSESSEE ENTERED INTO A CONTRACT FOR PURCHASE O F FURNACE OIL WITH SSOE LTD. THE ASSESSEE APPLIED FOR LICENCE WHICH W AS NOT RECEIVED. IN ORDER TO AVOID PAYMENT OF DAMAGES FOR NON-PERFORMAN CE OF CONTRACT, THE CONTRACT WAS TRANSFERRED IN THE NAME OF BGH EXIM LT D. WHICH HAD THE REQUISITE LICENCE. BGH EXIM LTD. TOOK OVER THE CON TRACT AND IMPORTED THE FURNACE OIL ON BEHALF OF THE ASSESSEE. THE ASS ESSEE PAID COMMISSION OF RS.28,37,500/- TO BGH EXIM LTD. THUS, THE COMMI SSION WAS PAID IN THE COURSE OF CARRYING ON THE BUSINESS. THE CIT(A) ALSO NOTED THAT BOTH ASSESSEE AS WELL AS THE RECIPIENT OF COMMISSION NAM ELY BGH EXIM LTD. BOTH ARE TAX PAYING COMPANIES FALLING IN THE SAME T AX RATE BRACKET. THE RECEIPT OF COMMISSION HAS BEEN PROPERLY REFLECTED A S INCOME OF RECIPIENT AND OFFERED FOR TAXATION WITHOUT ADJUSTMENTS TOWARD S BROUGHT FORWARD OR CURRENT LOSSES. THEREFORE, NO LOSS IS CAUSED TO TH E REVENUE AT ALL. ON THESE BROAD CONSIDERATIONS, THE CIT(A) FOUND MERIT IN THE APPEAL OF THE ASSESSEE AND HELD THAT ASSESSEE AT BEST CAN BE CHAR GED WITH A WRONG CLAIM BUT DEFINITELY NOT A FALSE CLAIM. HE ACCORDINGLY S TRUCK DOWN THE PENALTY IMPOSED BY THE AO. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.754/AHD/ 2014 & CO NO.30/RJT/2015 (ASSESSEE) DCIT VS. OVERSEAS TRADING & SHIPPING CO.PVT.LTD. ASST.YEAR 2004-05 - 4 - 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL THE REVENUE. THE REVENUE HAS ASSA ILED THE ACTION OF THE CIT(A) IN EXONERATING THE ASSESSEE FROM THE CLUTCHE S OF PENALTY UNDER S.271(1)(C) OF THE ACT TOWARDS BOGUS COMMISSION PAY MENTS. WE FIND FROM THE ORDER OF THE CIT(A) AS NOTED ABOVE THAT TH E ACTION OF THE CIT(A) IN DELETING THE PENALTY HAS SOUND BASIS. THE CIT( A) HAS NARRATED FACTUAL BACKGROUND GIVING RISE TO THE INCIDENCE OF COMMISSI ON EXPENSES IN QUESTION. IT IS OSTENSIBLE FROM THE FACTS NARRATED BY THE CIT(A) AS NOTED IN THE PRECEDING PARAS THAT THE PAYMENT OF COMMISSI ON WAS DRIVEN BY THE CONSIDERATIONS OF BUSINESS NECESSITIES. COUPLED WI TH THIS, THE CASE HAS BEEN MADE OUT BY THE CIT(A) TOWARDS THE BONAFIDES O F THE CLAIM WITHOUT ANY DEMUR. WE NOTE THAT THE RECIPIENT IS ALSO SU SCEPTIBLE TO SAME RATE OF TAX AS APPLICABLE TO ASSESSEE AND THEREBY NO LOSS T O THE REVENUE. THUS, THE CASE OF THE ASSESSEE IS PLAUSIBLE. IN THE TO TALITY OF THE FACTS OF THE CASE, WE FIND THAT CIT(A) HAS RIGHTLY APPRECIATED T HE CONTROVERSY AND DELETED THE PENALTY. THE ACTION OF THE CIT(A) THUS CANNOT BE FAULTED. THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. ASSESSEES CO NO.30/RJT/2015 7. THE ASSESSEE HAS ALSO CHALLENGED THE ACTION OF T HE REVENUE AS PER ITS CROSS OBJECTION MEMO. SINCE THE ASSESSEE HAS PRIMA-FACIE CASE ON MERITS FOR NON-APPLICATION OF PROVISIONS OF SECTION 271(1)(C) AS NOTED ITA NO.754/AHD/ 2014 & CO NO.30/RJT/2015 (ASSESSEE) DCIT VS. OVERSEAS TRADING & SHIPPING CO.PVT.LTD. ASST.YEAR 2004-05 - 5 - ABOVE, WE DO NOT CONSIDER IT NECESSARY TO DEAL WIT H GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS-OBJECTION. THE CROSS OBJECTI ON IS THEREFORE TREATED AS INFRUCTUOUS. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS ALSO DISMISSED AS INFRUCTU OUS. ORDER PRONOUNCED IN THE COURT ON 24/03/20 17 AT AHMEDABAD. SD/- SD/- ( MAHAVIR PRASAD) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD ; DATED 24/03/2017 ..!, '.+!../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. , % -% / CONCERNED CIT 4. -% ( ) / THE CIT(A)-II, RAJKOT 5. 1'23 +%+! , , /DR,ITAT, RAJKOT 6. 3>? @# / GUARD FILE. / BY ORDER, 1% +% //TRUE COPY// / ( DY./ASSTT.REGISTRAR) %&, / ITAT, RAJKOT