The ACIT, Circle-1(2), Baroda V. Inox India Ltd, Baroda

ITA 1095/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63155 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-11-2012
• Assessment Year: 1997-1998
• Appeal Filed On: 09-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEVENDRASINH KALYAN
• Keywords: Business expenditure; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.1095-1096/AHD/2010 ASSESSMENT YEARS :1997-98 & 1998-99 DCIT, CIRCLE-1(2), BARODA V/S . M/S INOX INDIA LTD., 4 TH FLOOR, ABS TOWER, OLD PADRA ROAD, BARODA [ PAN NO. AAACI 4426P / APPELLANT .. / RESPONDENT) /BY ASSESSEE SHRI BHAVIN MARFATIA, AR /BY REVENUE SHRI DEVENDRASINH KALYAN, CIT-DR /DATE OF HEARING 08-11-2012 ! /DATE OF PRONOUNCEMENT 23-11-2012 ' ' ' ' / // / O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THESE TWO APPEALS OF THE REVENUE ARE DIRECTED AGAI NST THE COMMON ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-I, BA RODA (CIT(A) FOR SHORT) DATED 18-12-2009 PERTAINING FOR THE ASSESSMENT YEAR S (AY) 1997-98 & 1998- 99. FIRST WE TAKE UP ITA NO.1095/AHD/2010 (FOR A.Y. 97- 98) 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN DELETING THE PENALTY OF RS.2, 17,000/- LEVIED U/S. 271(1) OF THE ACT ON THE ADDITIONS AMOUNTING TO RS .5,04,326/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(APPEALS)ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS, BY ITA NO.1095-96/AHD/2010 A.YS. 97-98 & 98-99 DCIT CIR-1(2) BRD V. M/S. INOX INDIA LTD. PAGE 2 CLAIMING BUSINESS EXPENDITURE OF RS.4,78,260/- UNDE R THE HEAD STAFF AND LABOUR TRAINING EXPENSES INCURRED ON THE SPONS ORSHIP OF ADVANCE EDUCATION AT USA FOR THE SON OF MANAGING DIRECTOR, WHO IS NOT A MEMBER OF STAFF. THE EXPENDITURE WAS COUCHED AS ST AFF AND LABOUR TRAINING EXPENSES AND THUS FURNISHED INACCURATE PA RTICULARS OF INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THA T THE EXPENDITURE INCURRED FOR THE EDUCATION OF SHRI SIDDHARTH JAIN S ON OF THE MANAGING DIRECTOR IS OF PERSONAL NATURE AS HE IS IN NO WAY C ONNECTED TO THE BUSINESS AFFAIRS OF THE COMPANY EITHER AS AN EMPLOY EE OR DIRECTOR. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A LIM ITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF VACUUM INSULATED TANKS, COLD CONVERTOR SYSTEMS, ATMOSPHERIC VAPORIZERS AND CRYO CONTAINERS ETC. LD. CIT-DR OF THE REVENUE SUBMITTED THAT PENALTY HAS BEEN LEVIED ON T HE ADDITION AMOUNTING TO RS.5,04,326/-. HE SUBMITTED THAT EXPENDITURE WAS CL AIMED AS BUSINESS EXPENDITURE UNDER THE HEAD STAFF AND LABOUR TRAINI NG EXPENSES INCURRED ON THE SPONSORSHIP OF ADVANCE EDUCATION OF THE SON OF MANAGING DIRECTOR FOR HIGHER STUDIES AT ABROAD. HE SUBMITTED THAT EXPENDI TURE WAS CLAIMED UNDER STAFF AND LABOUR TRAINING EXPENSES AND THUS FURNISH ED INACCURATE PARTICULARS OF INCOME. HE SUBMITTED THAT LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE BUSINESS EXPENSES AS CLAIMED WAS NOT A BUSINESS EXP ENSES SINCE THE SON OF THE MANAGING DIRECTOR WAS NOT AN EMPLOYEE OF THE AS SESSEE-COMPANY AND THERE IS NOTHING ON RECORD SUGGESTING THAT THE EXPE NDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS. HE SUBMITTED THAT LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT EXPENDITURE WAS ESSENTIALLY A PERSONA L IN NATURE. HE SUBMITTED THAT THERE IS NO RESOLUTION OF THE ASSESSEE-COMPANY THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS. HE RELIED UPO N THE DECISION OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF ZOOM COMMUNICATION . ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT NEITHER IT IS A CASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. HE SUBMITTED THAT THE EXPENDITURE WAS DULY REFLECTED I NTO THE BOOKS OF ACCOUNT. HE SUBMITTED THAT THE EXPENDITURE WAS ESSENTIALLY F OR BUSINESS PURPOSE AS THE ASSESSEE-COMPANY ENTERED INTO AN AGREEMENT WITH THE SON OF MANAGING ITA NO.1095-96/AHD/2010 A.YS. 97-98 & 98-99 DCIT CIR-1(2) BRD V. M/S. INOX INDIA LTD. PAGE 3 DIRECTOR. HE DREW OUR ATTENTION TO PAGE-6 OF THE PA PER BOOK, WHEREIN IN THE NOTES NO.3 IT HAS BEEN DULY REFLECTED. HE FURTHER D REW OUR ATTENTION TO PAGE-61 OF THE PAPER BOOK, WHEREIN THE COPY OF THE AGREEMEN T IS ENCLOSED. HE SUBMITTED THAT ONE OF THE CONDITION IN THE AGREEMEN T WAS THAT AFTER RETURNING TO INDIA, THE CANDIDATE WILL SERVE TO ASSESSEE-COMPANY FOR A MINIMUM PERIOD OF THREE YEARS. HE ALSO DREW OUR ATTENTION TO THE RESO LUTION OF THE ASSESSEE- COMPANY, WHEREIN IT HAS BEEN RESOLVED THAT ALL THE EXPENSES TO BE INCURRED BY MR. SIDDHARTH JAIN DURING HIS STAY AT ABROAD WILL B E BORNE BY THE ASSESSEE- COMPANY. HE SUBMITTED THAT THE AO HAS OBSERVED THAT THE ASSESSEE DID ONLY CONCEAL THE PARTICULARS OF ITS INCOME BUT ALSO FURN ISHED INACCURATE PARTICULARS OF INCOME DELIBERATELY. LD. COUNSEL FOR THE ASSESSE E CONTENDED THAT THE ASSESSEE HAS BEEN CHARGED FOR BOTH THE DEFAULT AND THIS IS NOT PERMISSIBLE UNDER LAW. IN SUPPORT OF HIS CONTENTION HE RELIED O N THE DECISION OF THIS TRIBUNAL RENDERED IN THE CASE OF MUKESHCHANDRA A LAKDAWALA V. ITO (2010) 4 ITR (TRIB.) 307 (AHD) AND THE DECISION OF HONBLE L UCKNOW BENCH RENDERED IN THE CASE OF DCIT V. B.J.D. PAPER PRODUCTS (20120 17 TAXMANN.COM 11 (LUCK). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ON THE POINT OUT QUERY, LD. COUNSEL FOR THE ASSESSEE COULD NOT FURNISH DETAILS WHEN THE SON OF MANAGING DIRECTOR OF THE ASSESSEE-COMPANY RETUNED FROM ABROAD AND WHEN HE JO INED THE ASSESSEE- COMPANY AND COULD NOT GIVE ANY DETAIL OF ANY OF THE RESOLUTION PASSED IN FAVOUR OF THE PERSON WHO ENTERED INTO AN AGREEMENT WITH SHRI SIDDHARTH JAIN, SON OF THE MANAGING DIRECTOR OF THE ASSESSEE-COMPAN Y. FURTHER, THE ARGUMENT AS ADVANCED BY THE LD. COUNSEL FOR THE ASS ESSEE THAT ASSESSING OFFICER HAS LEVIED THE PENALTY FOR BOTH CONCEALMENT S OF THE MATERIALS PARTICULARS AND FURNISHING OF INACCURATE PARTICULAR S OF INCOME AND ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE CO-ORDINATE BENCH RENDERED IN THE CASE OF MUKESHCHANDRA A LAKDAWALA (SUPRA) WE FIND THAT THIS GROUND WAS NOT RAISED BEFORE LD. CIT(A) AND THESE DECISIONS WERE N OT CITED BEFORE THE LD. ITA NO.1095-96/AHD/2010 A.YS. 97-98 & 98-99 DCIT CIR-1(2) BRD V. M/S. INOX INDIA LTD. PAGE 4 CIT(A). THEREFORE, IN THE INTEREST OF JUSTICE WE SE T ASIDE THE ORDER OF LD. CIT(A) AND THIS GROUND OF REVENUES APPEAL IS RESTO RED BACK TO THE FILE OF LD. CIT(A) TO DECIDE AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. IN THE LIGHT OF THE DECISION OF THE HO NBLE CO-ORDINATE BENCH RENDERED IN THE CASE OF MUKESHCHANDRA A LAKDAWALA (SUPRA). IN CASE THE ASSESSEE DOES NOT SUCCEED ON THIS GROUND THEN THE L D. CIT(A) WOULD DECIDE AFRESH ON MERIT. IN THIS VIEW OF THIS MATTER, THE A PPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES. COMING TO ITA NO. 1096/AHD/2010 (FOR A.Y. 98-99). 6. THE FACTS ARE IDENTICAL IN AY 1997-98 AND TAKING A CONSISTENT VIEW WE REMIT BACK THE FILE TO LD. CIT(A) FOR FRESH DECISIO N AS INDICATED ABOVE. THIS APPEAL OF REVENUE IS ALSO ALLOWED FOR STATISTICAL P URPOSES. 7. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES. 8. IN COMBINED RESULT, BOTH THE APPEAL OF REVENUE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP #$%- 23/11/2012 +,- . ITA NO.1095-96/AHD/2010 A.YS. 97-98 & 98-99 DCIT CIR-1(2) BRD V. M/S. INOX INDIA LTD. PAGE 5 ' ' ' ' //0 //0 //0 //0 10 10 10 10 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. $-$/3 4 / CONCERNED CIT 4. 4- / CIT (A) 5. 0 78 ///3, /3!, +,- / DR, ITAT, AHMEDABAD 6. 8;< => / GUARD FILE. BY ORDER/ ' , /TRUE COPY/ ?/+ $ /3!, +,- . STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 08/11 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 12/11 4) DATE OF CORRECTION 16/11 5) DATE OF FURTHER CORRECTION 19/11 6) DATE OF INITIAL SIGN BY MEMBERS 21/11 7) ORDER UPLOADED ON 23/11 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 23/11