Appeal details
Counselvise Citation
104120514 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-03-2012
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2006-2007
Appeal Filed On
05-04-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT, JM AND SHRI A. MOHA N ALANKAMONY, AM) ITA NO.1041/AHD/2010: A. Y.: 2006-07 THE INCOME TAX OFFICER, VAPI WARD -4, DAMAN VS M/S. LUCKY STAR INTERNATIONAL, 101, SHIVAM COMPLEX, VAPI DAMAN ROAD, PA NO. AABFL 5088 N (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SAMIR TEKRIWAL, SR. DR RESPONDENT BY SHRI SHASHIKANT NENE, AR DATE OF HEARING: 23-02-2012 DATE OF PRONOUNCEMENT: 13-03-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A), VALSA D DATED 12-11-2009 FOR ASSESSMENT YEAR 2006-07 IN APPEAL NO. CIT(A)/VL S/22/621/09-10, CHALLENGING THE DELETION OF PENALTY U/S 271(1) (C) OF THE IT ACT ON ACCOUNT OF DISALLOWANCE MADE U/S 40 (A) (IA) OF THE IT ACT OF RS.13,57,400/- FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED RETURN OF INCOME DECLARING INCOME OF RS.4,93,002/- FOR AY 200 6-07. WHILE FINALIZING THE ASSESSMENT U/S 143(3) OF THE IT ACT THE AO MADE TOTAL ADDITIOIN OF RS.14,42,203/- AND IMPOSED PENALTY FOR THE ADDITION OF RS.13,57,400/-. THE ASSESSEE DID NOT PREFER APPEAL ON THIS ADDITION ITA NO.1041/AHD/2010 (AY 2006-07): ITO, W-4, DAMANV S M/S. LUCKY STAR INTERNATIONAL 2 MADE BY THE AO. HOWEVER, THE ASSESSEE CONTESTED THA T THE PENALTY LEVIED DUE TO THE ADDITION MADE BY INVOKING SECTION 40(A) (IA) OF THE IT ACT DO NOT AMOUNT TO FURNISHING OF INACCURATE PARTI CULARS OF INCOME BECAUSE THE AO HAS NOT DOUBTED THE PAYMENT MADE TO THE PARTIES. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL AND IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) IN REGARD TO COMMISSION E XPENSES OF RS.10,46,163/- THAT THE SAID AMOUNT WAS PAID TO P. E. C. LTD. FOR PURCHASES MADE AND IS LINKED TO PERFORMANCE QUOTA O F P.E.C. LTD. THEREFORE, DEDUCTION OF TAX AT SOURCE WAS NOT DEEME D NECESSARY AS THE ASSESSEE BELIEVED THAT TRANSPORTATION WAS TO ENSURE THE PERFORMANCE AND TURNOVER OF THE PARTIES IN QUESTION AND THAT TH E AO HAS NEITHER PINPOINTED ANY INACCURACY IN THE DETAILS SUBMITTED NOR TREATED THE EXPLANATION OFFERED AS UNSATISFACTORY, THEREFORE, Q UESTION OF LEVY OF PENALTY U/S 271(1) (C) OF THE IT ACT DOES NOT ARISE . 3.1 REGARDING CLEARING AND FORWARDING EXPENSES OF R S.2,01,037/- IT WAS SUBMITTED THAT THE SAME WAS PAID TO TRANS WORLD SHIPPING (INDIA) PVT. LTD. WHICH IS A SHIPPING AGENT FOR UNITED ARAB SHIPPING CO. WHICH IS A NON-RESIDENT SHIPPING CO. AND THAT THEREFORE, TDS PROVISIONS NOT ATTRACTED IN RESPECT OF THE PAYMENT MADE TO THE SAI D PARTY AS PER CBDT CIRCULAR NO.723 DATED 19-9-1995, REFERRED TO BY THE M. 3.2 WITH REGARD TO FEES AND LEGAL EXPENSES IN RESPE CT OF PAYMENT OF PROFESSIONAL FEES TO S. V. NENE & CO. OF RS.1,10,20 0/- IT WAS SUBMITTED BY THE ASSESSEE THAT PROVISIONS OF SECTION 40(A) (I A) OF THE IT ACT CAME INTO FORCE FOR THE FIRST TIME FOR THE PREVIOUS YEAR PERTAINING TO AY 2006- 07, THE ASSESSEE FIRM FAILED TO COMPLY WITH THE SAM E AND A LENIENT VIEW SHOULD BE TAKEN SO FAR AS THE DISALLOWANCE IS CONCE RNED. IN RESPECT OF PENALTY PROCEEDINGS, IT WAS SUBMITTED THAT GENUINEN ESS OF THE ITA NO.1041/AHD/2010 (AY 2006-07): ITO, W-4, DAMANV S M/S. LUCKY STAR INTERNATIONAL 3 EXPENDITURE IS NOT DOUBTED AND NO INACCURATE PARTIC ULARS HAVE BEEN FOUND AND THE EXPLANATION OFFERED BY THE ASSESSEE H AS NOT BEEN PROVED TO BE UNSATISFACTORY AND THEREFORE, PENALTY SHOULD NOT BE LEVIED. IN SUPPORT OF HIS ABOVE CONTENTIONS, THE ASSESSEE REFE RRED TO THE DECISIONS IN THE CASE OF TWINS STAR JUPITAR CO-OP. HOUSING SO CIETY LTD. VS ITO, 118 IDT, STAR INTERNATIONAL PVT. LTD. VS ACIT, 308 ITR 33 AND MAHAVIR IRRIGATION PVT. LTD. 117 ITD 9. 4. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS M ADE BY THE ASSESSEE AND THE PENALTY ORDER AND BY REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHAIRMAN, SEBI VS SRIRAM MUTUAL FUND & ANR. (2006) SCC 361, WHEREIN IT HAS BEEN INT ER ALIA HELD THAT WHILE CONSIDERING AN APPEAL AGAINST AN ORDER U/S. 2 71(1) (C) WHAT IS REQUIRED TO BE EXAMINED IS THE RECORD WHICH THE OFF ICER IMPOSING THE PENALTY HAD BEFORE HIM AND IF THAT RECORD COULD SUSTAIN THE FINDING THAT THERE HAD BEEN CONCEALMENT, THAT WOULD BE SUFFICIENT TO SUSTAIN THE PENALTY. PENALTY CAN BE LEVIED IN TWO S ITUATIONS CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. CONCEALMENT REFERS TO DELIBERATE ACT ON THE PART OF THE ASSESSEE WHICH IS DIRECT. A MERE OMISSION OR NEGLIG ENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSION VERY OR SUGGESTION FALSE. THAT BRINGS OUT THE ISSUE WHETHER NON-DEDUCTION OF TAX AT SOURCE AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME AS REQUIRED BY THE PROVISIONS U/S. 271 (1) ( C)? HELD THAT IT IS NOT A CASE WHERE PENALTY IS MANDATORY IMPOSABLE. THE ASSESSEE SUFFERED TAX ON THE AMOUNT OF EXPENSES SUBJECT TO TDS BEING NOT DED UCTED AND CONSIDERING THE FACT THAT DISALLOWANCE MADE U/S 40( A) (IA) OF THE IT ACT IS TECHNICAL IN NATURE DELETED THE PENALTY. ITA NO.1041/AHD/2010 (AY 2006-07): ITO, W-4, DAMANV S M/S. LUCKY STAR INTERNATIONAL 4 5. BEING AGGRIEVED AND DISSATISFIED WITH THE ABOVE FINDINGS OF THE LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LEARNED BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIALS ON RECORD. DURING THE COURSE OF HEARING OF THE APPEAL THE LEARNED DR RELI ED UPON THE ORDER OF THE AUTHORITIES BELOW. ON THE OTHER HAND, THE LEARN ED AR REFERRING TO PARA 3 AND 4 OF THE PENALTY ORDER, SUBMITTED THAT A LL THE ADDITIONS IN RESPECT OF COMMISSION EXPENSES OF RS.10,46,163/-, C LEARING AND FORWARDING EXPENSES OF RS.2,01,037/- AND FEES AND L EGAL EXPENSES OF RS.1,10,200/- (TOTALLING TO RS.13,57,400/-) HAVE BE EN DISALLOWED HOLDING THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SE CTION 40(A) (IA) OF THE IT ACT AND THAT THE AO HAS LEVIED PENALTY ON THE S AID AMOUNT BEING FULLY SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURAT E PARTICULARS OF ITS INCOME TO THE EXTENT OF RS.13,57,400/- AND TREATING IT TO BE A FIT CASE FOR LEVYING PENALTY. THE ASSESSEE ALSO SUBMITTED THAT T HE ISSUE IS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCS PVT. LTD., 2010-TIOL-21-SC-I I IN SLP(C) NO.27161 OF 2008 DATED 17 TH MARCH, 2010 (PB-4) WHEREIN IT HAS BEEN HELD AS UNDER: INCOME TAX 271 (1) ( C ) MERELY BECAUSE THE AS SESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPT ED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF W OULD NOT, ATTRACT PENALTY UNDER SECTION 271(1) (C): BY ANY ST RETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNO T TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. 6.1 THE ASSESSEE FURTHER REFERRED TO THE DECISION O F ITAT DELHI A BENCH IN THE CASE OF DCIT VS ASIAN HOTELS LTD., 201 1-TIOL-795-ITAT- DEL (ITA NO.3820/DEL/2010 DATED JANUARY,7, 2011 (PB -1) WHEREIN IT HAS BEEN HELD AS UNDER: ITA NO.1041/AHD/2010 (AY 2006-07): ITO, W-4, DAMANV S M/S. LUCKY STAR INTERNATIONAL 5 INCOME TAX SECTIONS 40(A) (IA), 271 (1) (C) WHE THER PENALTY IS LEVIABLE IN A CASE WHERE THE SUBSTANTIAL RETURNE D INCOME PROVES THE BONAFIDE OF ASSESSEE VIS--VIS DISALLOWA NCE OF 40(A) (IA). ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 22 ND DECEMBER 2003 DECLARING AN INCOME OF RS.6.32 CRORES . AN ASSESSMENT WAS PASSED U/S 143(3) ON 30 TH MARCH 2006 WHEREBY TOTAL INCOME OF THE ASSESSEE HAS BEEN DETER MINED AT RS.11.53CRORES. DURING THE COURSE OF ASSESSMENT PRO CEEDING LD. AO FOUND THAT THE ASSESSEE HAD MADE THE PROVISI ONS IN RESPECT OF CERTAIN FOREIGN PAYMENTS AND CLAIMED THE SE PROVISIONS WITHOUT DEDUCTING CORRESPONDING TDS. AO DISALLOWED THIS CLAIM OF ASSESSEE AND LEVIED PENALT Y UNDER SECTION 271(1)(C )RELYING UPON THE DECISION OF RELI ANCE (2010- TIOL-21-SC-II) CIT(A) DELETED THE PENALTY MATTER REACHED TO THE ITAT. AFTER HEARING THE PARTIES THE ITAT HELD AS UNDER, ++ THERE IS NO DOUBT THAT THE CLAIM MADE BY THE ASS ESSEE IS IN RESPECT OF BUSINESS EXPENSES. HAD THE ASSESSEE D EDUCTED THE TDS AND PAID IT TO THE GOVT. AMOUNT THEN ITS DE DUCTION COULD BE ALLOWED. ACCORDING TO THE ASSESSEE IT HAS PAID THE TAX ALSO IN THE NEXT YEAR FOR THE SUM OF RS.7,07,29 4/- AND EVEN THEREAFTER DEDUCTION WAS NOT GRANTED TO IT. LD. FIR ST APPELLATE AUTHORITY HAS ACCEPTED THE PLEA OF ASSESSEE THAT IT WAS A BONAFIDE ERROR; ++ TAKING INTO CONSIDERATION THE OVERALL FACTS AND CIRCUMSTANCES PARTICULARLY THE AMOUNT OF DISALLOWAN CE VIS A VIS THE RETURNED INCOME, WE ARE OF THE VIEW THAT IT IS A BONAFIDE LAPSE AT THE END OF THE ASSESSEE. THERE IS NO DELIBERATE ATTEMPT TO CONCEAL THE PARTICULARS OF IN COME. LD. CIT(A) HAS RIGHTLY APPRECIATED THE FACTS AND CIRCUM STANCES WE DO NOT SEE ANY REASON TO INTERFERE IN HIS ORDER. THE ASSESSEE FURTHER SUBMITTED THAT THE FACTS IN TH E ABOVE CASE ARE IDENTICAL TO THAT OF THE PRESENT CASE OF THE ASSESS EE AND THE ISSUE IS COVERED BY THE ABOVE DECISION. 6.2 THE ASSESSEE FURTHER SUBMITTED THAT THE ISSUE I S ALSO COVERED BY THE DECISION OF ITAT HYDERABAD A BENCH DATED 17 TH JUME, 2010 IN THE ITA NO.1041/AHD/2010 (AY 2006-07): ITO, W-4, DAMANV S M/S. LUCKY STAR INTERNATIONAL 6 CASE OF ACIT VS M/S. SEAWAYS SHIPPING LTD. IN ITA NO.80/H/2011 FOR AY 2005-06 (PB 9 TO 11) WHEREIN ALSO IDENTICAL ISS UE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND AGAIN ST THE REVENUE VIDE PARA 5 OF ITS ORDER BY HOLDING AS UNDER: AT THE TIME OF HEARING ON 16.6.2011, NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HEARD THE DEPARTMENTAL REPRESENTATIVE. IN THIS CASE, PENALTY IS LEVIED FOR DISALLOWANCE OF EXPENDITURE U/S 40(A) (IA) OF THE INCOME TAX ACT. NON DEDUCTION OF TDS BY THE ASSESSEE WAS RESULTED IN DISALLOWANCE OF EXPEND ITURE U/S 40(A) (IA), THAT ITSELF CANNOT BE CONSTRUED AS FURN ISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THE ASSESSEE HAS FAILED TO DEDUCT TDS WHICH RESULTE D IN DISALLOWANCE OF EXPENDITURE. IN OUR OPINION, THE MI STAKE COMMITTED BY THE ASSESSEE WAS COMPENSATED BY DISALL OWING THE EXPENDITURE. FURTHER, THE REVENUE CANNOT PENALI SE THE ASSESSEE BY LEVYING PENALTY U/S 271 (1) (C) OF THE ACT. IN ORDER TO LEVY PENALTY U/S 271 (1) (C) OF THE ACT, THERE H AS TO BE CONCEALMENT OF PARTICULARS OF INCOME OF THE ASSESSE E OR THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF ITS INCOME. PRESENT IS NOT THE CASE OF CONCEALMENT OF I NCOME OR IT IS NOT THE CASE OF REVENUE THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE DEPARTMENT HA S NOT FOUND OUT THAT THE ASSESSEE HAS FURNISHED ANY FACTU AL INCORRECT INFORMATION AND THE ASSESSEE IS NOT GUILT Y OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN OUR OPINION, THE CONDITIONS LAID DOWN IN SECTION 271(1) (C) OF T HE ACT IS NOT COMPLIED WITH. BEING SO, LEVY OF PENALTY IS NOT JUS TIFIED MERELY BECAUSE THE ASSESSEE HAS CLAIMED CERTAIN EXPENDITUR E THAT EXPENDITURE IS NOT ELIGIBLE IN VIEW OF THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT AND FOR THAT REASON, EXPENDIT URE IS DISALLOWED. PENALTY CANNOT BE LEVIED FOR MERE MAKIN G OF A CLAIM OF EXPENDITURE WHICH IS NOT SUSTAINABLE AND D ELETION OF PENALTY BY THE LEARNED CIT(A) IS JUSTIFIED. WE PLAC E RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. (322 ITR 158 ( SC). ACCORDINGLY THE GROUND RAISED BY THE REVENUE HOLDS NO MERIT. 6.3 THE LEARNED DR IN HIS REJOINDER HAS NOT PRODUCE D ANY MATERIAL TO CONTROVERT THE AFORESAID SUBMISSIONS OF THE ASSESSE E. ITA NO.1041/AHD/2010 (AY 2006-07): ITO, W-4, DAMANV S M/S. LUCKY STAR INTERNATIONAL 7 7. IN VIEW OF ABOVE DISCUSSIONS AND THE DECISIONS C ITED BY THE ASSESSEE, WE FIND FORCE IN THE SUBMISSIONS OF THE A SSESSEE. WE ARE OF THE VIEW THAT THE LEARNED CIT(A) ON PROPER APPRECIA TION OF THE FACTS OF THE CASE, CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND THE CITATIONS REFERRED TO BY THE ASSESSEE BEFORE HIM, HAS RIGHTLY DELETED THE PENALTY AND WE FIND NO JUSTIFICATION TO INTERFERE IN THE OR DER OF THE LEARNED CIT(A) DELETING THE PENALTY IN THE MATTER IN THE ABSENCE O F ANY MATERIAL PRODUCED BY THE LEARNED DR TO CONTROVERT THE SAME. WE CONFIRM HIS FINDINGS. THERE IS NO MERIT IN THE GROUND OF APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF MARCH, 2012 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - ITA NO.1041/AHD/2010 (AY 2006-07): ITO, W-4, DAMANV S M/S. LUCKY STAR INTERNATIONAL 8 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD
