ITO, Mohali V. Sh. Deepak Verma, Mohali

ITA 1115/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6783 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 21-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 02-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1115/CHD/2016 (ASSESSMENT YEAR : 2010-11) THE I.T.O., WARD 6(2), VS. SH.DEEPAK VERMA, MOHALI. # 395, PHASE-1, MOHALI. PAN: ACKPV7983P (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.ZEENIA HANDA, ADDL. CIT DR RESPONDENT BY : SHRI T.N.SINGLA DATE OF HEARING : 03.10.2017 DATE OF PRONOUNCEMENT : 13.10.2017 ORDER PER ANNAPURNA GUPTA, A.M. : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-2, CHANDIGARH DATED 23.8.2016 RELATING TO ASSESSMENT YEAR 2010-11, DELETING PENALTY AMOUNTING TO RS.17,12,237/- LEVIED U/S 271(1)(C) OF THE INCOME T AX ACT, 1961 (IN SHORT THE ACT). 2. BRIEF FACTS ON THE ISSUE ARE THAT ASSESSEE IS DO ING BUSINESS IN TWO PROPRIETARY CONCERNS NAMELY M/S B.M . PACKAGING, MOHALI AND M/S B.M. MACHINES, BADDI. THE PROFITS OF M/S B.M. MACHINES, BADDI ARE EXEMPT UNDE R THE PROVISIONS OF SECTION 80IC OF THE ACT AND ACCORDING LY ASSESSEE CLAIMED DEDUCTION U/S 80IC. DURING ASSESSM ENT PROCEEDINGS ASSESSING OFFICER NOTED THAT THE EXPENS ES CLAIMED IN M/S B.M. PACKAGING WHICH IS A NON-EXEMPT UNIT 2 WERE MUCH HIGHER AS COMPARED TO THE EXPENSES CLAIME D IN M/S. B.M.MACHINES, BADDI AND THE RESULTANT GP FOUND WAS 57.9% IN THE EXEMPT UNIT AND 17.95% IN THE NON EXEM PT UNIT. THE ASSESSING OFFICER REACHED TO THE CONCLUSI ON THAT THE EXPENSES OF BADDI UNIT HAD BEEN BOOKED AGAINST THE INCOME OF MOHALI UNIT WHICH IS A NON EXEMPT UNIT. T HE ASSESSING OFFICER THUS, REALLOCATED THE EXPENSES IN THESE TWO UNITS IN PROPORTION TO THEIR SALES DURING THE R ELEVANT PERIOD AND MADE ADDITION OF RS.55,41,224/- UNDER TH E HEADS PURCHASE AND CONSUMABLE AND OTHER EXPENSES. O N APPEAL BY THE ASSESSEE, LD. CIT(APPEALS) PARTLY ALL OWED THE APPEAL OF THE ASSESSEE, DELETING THE ADDITION MADE ON ACCOUNT OF REALLOCATION OF EXPENSES UNDER THE HEAD PURCHASE AND CONSUMABLE OF RS.50,19,196/- WHILE TH E REALLOCATION UNDER THE HEAD OTHER EXPENSES OF RS.5, 22,028/- WAS CONFIRMED. ON FURTHER APPEAL BY THE DEPARTMENT, THE ITAT UPHELD BOTH THE ADDITIONS. THEREAFTER THE ASSE SSING OFFICER INITIATED PENALTY PROCEEDINGS FOR FURNISHIN G INACCURATE PARTICULARS OF INCOME AND CAME TO THE CONCLUSION THAT THE ASSESSEE IN THIS CASE HAD SUPPR ESSED TAXABLE INCOME AND FURNISHED INACCURATE PARTICULAR S OF INCOME AND THUS LEVIED PENALTY OF RS.17,12,237/- BE ING 100% OF TAX SOUGHT TO BE EVADED. 3. AGGRIEVED BY THE SAME, THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(APPEALS) CONTENDING THAT THE DIFF ERENCE IN THE GP OF THE TWO UNITS WAS ON ACCOUNT OF VARIATION IN THE TECHNOLOGY USED FOR PRODUCTION AT THE TWO UNITS. I T WAS 3 ALSO STATED THAT THE ADDITION HAD BEEN MADE MERELY ON THE BASIS OF SURMISES AND CONJECTURES WITHOUT FINDING A NY DISCREPANCY IN THE BOOKS OF ACCOUNT WHICH WERE PROD UCED BEFORE THE ASSESSING OFFICER AND DULY EXAMINED BY H IM ALSO. IT WAS ALSO CONTENDED THAT THE LD.CIT(APPEALS) HAD ALLOWED ASSESSEES APPEAL IN QUANTUM PROCEEDINGS AND THEREF ORE, THE ISSUE WAS DEBATABLE. THE LD.CIT(APPEALS) AFTER CONSIDERING ASSESSEES SUBMISSIONS DELETED PENALTY LEVIED HOLDING THAT NO INFORMATION IN THE RETURN OF INCOME WAS FOUND INCORRECT, NOR ANY DISCREPANCY DETECTED IN TH E BOOKS OF ACCOUNT AND IT WAS SIMPLE CASE OF DENIAL OF CLAI M U/S 80IC OF THE ACT BASED ON REALLOCATION OF EXPENSES I N THE TWO UNITS. RELYING UPON THE DECISION OF THE APEX COURT IN CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD.(2010) 322 ITR 158 (SC) THE LD.CIT(A) DELETED THE PENALTY LEVIED. THE RELEV ANT FINDINGS OF THE LD.CIT(APPEALS) AT PARA 5.3 OF HIS ORDER ARE AS UNDER: 5.3 I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER U /S 271(1)(C) AND SUBMISSION OF THE APPELLANT IN THIS REG ARD. IN THIS CASE, APPELLANT IS DOING BUSINESS IN AN EXEMPT UNIT AT BADDI, WHERE PROFITS ARE EXEMPT U/S 80IC AND IN ANOTHER UNIT AT MOHALI WHERE PROFITS ARE TAXABLE. ACCORDINGLY APPELLANT MADE A CLAIM FOR DEDUCTION U/S 80IC OF THE ACT, WHICH WAS NOT FOU ND ACCEPTABLE BY THE ASSESSING OFFICER ON THE GROUND T HAT IN THE EXEMPT UNIT AT BADDI THE GROSS PROFITS AND NET PROF IT WERE VERY HIGH AS COMPARED TO THE PROFITS IN THE NORMAL UNIT A T MOHALI. DRIVEN BY THE UNEVEN PROFITS OF THE APPELLANT IN TWO UNITS, ASSESSING OFFICER MADE REALLOCATION OF EXPENSES IN THE TWO UNITS AND ACCORDINGLY CLAIM OF DEDUCTION UNDER 80IC WAS REVISED AND ADDITIONS OF RS. 55,41,224/- WAS MADE AND THIS REALLOCATION OF EXPENSES WAS DONE ON THE BASIS OF SALE S DURING THE YEAR. IN THE CLAIM OF THE APPELLANT AO HAS N OT POINTED OUT ANY DISCREPANCY NOR DEFECTS IN THE BOOK S OF ACCOUNTS OF BILLS ETC. IT IS A CASE WHERE CERTAIN C LAIM WAS MADE BY THE APPELLANT WAS NOT FOUND ACCEPTABLE AS PER THE LAW AND NOT THE CASE WHERE CERTAIN INCOME HAS BEEN CONCEALE D OR INACCURATE PARTICULARS OF INCOME WERE FURNISHED. THE CLAIM OF THE 4 APPELLANT OF DEDUCTION U/S 80IC WAS NOT FOUND ACCEP TABLE BY THE AO WHICH WAS REVISED AND AT THE LEVEL OF THE CIT (A) THE ADDITION ON ACCOUNT OF PURCHASE AND CONSUMABLES OF R S. 50,19,196/- WAS DECIDED IN THE FAVOUR OF THE APPELL ANT. THE ITAT SET ASIDE THE ORDER OF THE CIT(A) AND RESTORED THE ORDER OF AO PROVE THAT THE ISSUE IS DEBATABLE WHERE MORE THA N ONE OPINION IS POSSIBLE. IN MY CONSIDERED VIEW, THE APPE LLANT HAS NOT CONCEALED THE CORRECT PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS. THE RELIANCE IS PLACED ON THE RAT IO OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF RE LIANCE PERTO PRODUCTS PVT. LTD. (SUPRA) WHEREIN IT HAS BEE N HELD AS UNDER: ' IN ORDER TO ATTRACT THE PROVISIONS OF S. 271(1)(C) THERE HAS TO BE CONCEALMENT OF INCOME OR FURNISHING OF INACCU RATE PARTICULARS OF HIS INCOME BY THE ASSESSEE. IN THE IN STANT CASE, ASSESSEE CLAIMED DEDUCTION OF INTEREST ON LOANS TAKEN BY IT FOR PURCHASE OF SHARES. AO DISALLOWED S UCH INTEREST. ADMITTEDLY, NO INFORMATION GIVEN IN THE RETU RN WAS FOUND TO BE INCORRECT OR INACCURATE. HENCE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURA TE PARTICULARS. MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS. 4. AGAINST THE ORDER OF THE CIT(A) THE REVENUE HA S FILED THE PRESENT APPEAL RAISING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED U/S 271(L)(C) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.17,12,237/- WITHOUT APPRECIATING THAT THE ASSESS EE HAD FURNISHED INACCURATE PARTICULARS OF INCOME AND H AD CONCEALED INCOME BY BOOKING EXPENSES OF ITS EXEMPT UNI T AGAINST THE INCOME OF TAXABLE UNIT. 3. IT IS PRAYED THAT THE ORDER OF THE CIT(A) BE SET ASI DE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOS E OFF. 5. BEFORE US, THE LD. DR POINTED OUT THAT IT WAS A FIT CASE FOR LEVY OF PENALTY SINCE THE I.T.A.T. IN ITS ORDER PASSED IN QUANTUM PROCEEDINGS HAD GIVEN CLEAR CUT FINDINGS TH AT THE ASSESSEE HAD PURPORTEDLY INFLATED ITS PROFITS IN TH E ELIGIBLE 5 BUSINESS. THE LD. DR DREW OUR ATTENTION TO THE REL EVANT FINDINGS OF THE I.T.A.T. AT PARA 15 OF ITS ORDER AS UNDER: 15. THE ABOVE CLEARLY SHOWS THAT THE SAME PRODUCTS ARE BEING SOLD FROM BOTH THE UNITS AND AT THE SAME PRICE RANGING BETWEEN RS.5,25,000/- TO RS.6,25,000/- IN BOTH CASES. HOW THE MACHINES WERE COSTING LESS AT BADDI WAS NOT EXPLAINED. WHEN THE END PRODUCT IS SAME, THE COST WOULD ALSO BE THE SAM E. BY INSTALLING A MACHINE OF RS. 6 LAKHS IT CANNOT BE SAID THAT THE ASSESSEE IS ACHIEVING ECONOMY OF SCALE OR SOME OTHE R TECHNOLOGICAL DEVELOPMENT. IT IS A SIMPLE CASE OF INF LATION OF PROFITS IN THE ELIGIBLE UNIT AND IN SUCH SITUATION THE ASS ESSING OFFICER HAS CLEAR POWERS IN TERMS OF SECTION 80IA(10) TO COMPUTE THE REASONABLE PROFIT. THE LD. CIT(A) HAS MISDIRECTED HIMSELF BY OBSERVING THAT ASSESSING OFFICE R HAS NOT POINTED OUT ANY DISCREPANCY BECAUSE THE ASSESSI NG OFFICER HAS CLEARLY POINTED OUT WRONG ALLOCATION OF V ARIOUS EXPENSES WHICH WAS ACCEPTED BY THE ASSESSEE BEFORE THE CIT(A). FURTHER, THE ASSESSING OFFICER HAS ALSO GIVE N REASONS SHOWING THAT PROFITS IN EXEMPT UNIT HAVE BEEN INFLATED. IN SECTION 80IA(10), IT IS CLEARLY PROVIDED THAT IF ASSESSIN G OFFICER HAS REASONS THAT THE BUSINESS HAS BEEN SO ARRANGED T O SHOW INFLATED PROFITS IN ELIGIBLE UNIT THEN ASSESSI NG OFFICER HAS POWER TO RECOMPUTE THE PROFITS OF SUCH ELIGIBLE UNIT. AS SEEN FROM THE SALE INVOICE THERE IS DEFINITELY A REA SON TO BELIEVE THAT ASSESSEE HAS INFLATED THE PROFITS IN ELIG IBLE UNIT BECAUSE THE SAME PRODUCT IS BEING SOLD FORM BOTH THE UNITS FOR ALMOST IDENTICAL PRICE. IN THIS BACKGROUND, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THAT OF ASSESSING O FFICER. 6. THE LD. DR ALSO DEW OUR ATTENTION TO THE FINDING S OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FRAME D U/S 143(3) OF THE ACT TO STRENGTHEN ITS CONTENTION THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF ITS INCOME. THE LD. DR POINTED OUT THAT THE ASSESSING OFFICER HAD DEMON STRATED IN HIS ASSESSMENT ORDER THAT THE NATURE OF THE ACTI VITIES CARRIED OUT BY BOTH THE ELIGIBLE AND NON-ELIGIBLE U NITS WAS IDENTICAL, THE NATURE OF PRODUCT MANUFACTURED BY BO TH THE UNITS WAS IDENTICAL, MOST OF THE PURCHASES IN BOTH THE UNITS WAS PROCURED FROM THE SAME SOURCES/PARTIES, MOST OF THE SALES IN BOTH THE UNITS WAS FROM THE SAME PARTIES A ND, THEREFORE, THERE WAS NO REASON FOR THE ASSESSEE TO SHOW 6 MUCH HIGHER PROFITS IN THE ELIGIBLE UNIT BEING GP R ATE OF 57.95% AND NP RATE OF 50.04% AS AGAINST THAT SHOWN IN THE NON-ELIGIBLE UNIT OF GP RATE OF 17.95% AND NP RATE OF 12.66%. THE LD. DR STATED THAT THE CASE WAS SQUARE LY COVERED BY THE DECISION OF THE HON'BLE DELHI HIGH C OURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD., 3 27 ITR 510 (DEL). 7. THE LD. COUNSEL FOR ASSESSEE PER CONTRA, POINTED OUT FROM THE PENALTY ORDER THAT THE BASIS OF MAKING THE ADDITION WAS SOLELY THE DIFFERENCE IN THE GP AND NP RATES RE FLECTED BY THE TWO UNITS. THE LD. COUNSEL FOR ASSESSEE FURTHE R RELIED UPON THE SUBMISSIONS MADE BEFORE THE LD.CIT(APPEALS ) SPECIFICALLY DRAWING OUR ATTENTION TO ITS CONTENTIO N THAT THE ADDITIONS HAVE BEEN MADE WITHOUT POINTING OUT ANY S PECIFIC DEFECT DETECTED IN THE EXPENSES CLAIMED BY THE ASSE SSEE OR FOR THAT MATTER WITHOUT EVEN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD. COUNSEL FOR ASSESSEE ALSO DREW OUR ATTENTION TO ITS CONTENTION THAT THE ENTIRE BOOKS O F ACCOUNT, SALES, PURCHASES, EXPENSES ALONGWITH VOUCHERS, EXCI SE RETURNS, SALES-TAX RETURNS AND TRUTHFULNESS AND GENUINENESS OF THE SALES AND PURCHASES HAD NEVER BE EN DOUBTED BY THE ASSESSING OFFICER WHO HAD VERIFIED T HE SAME AND NO DEFECT OR DISCREPANCY WAS FOUND OR DETECTED DURING THE COURSE OF EXAMINATION OF THE BOOKS OF ACCOUNT. THE LD. COUNSEL FOR ASSESSEE ALSO DREW OUR ATTENTION TO THE FACT THAT THE LD.CIT(APPEALS) HAD ON THE SAME SET OF FACTS DE LETED THE ADDITION MADE, WHICH PROVED THAT THE ISSUE WAS DEBA TABLE 7 AND MORE THAN ONE OPINION POSSIBLE AND THUS IT CANN OT BE SAID TO BE A CASE OF CONCEALMENT OF INCOME OR FURNI SHING INACCURATE PARTICULARS OF INCOME BY ANY STRETCH OF LOGIC. THE LD. COUNSEL FOR ASSESSEE RELIED UPON THE FINDIN G OF THE LD.CIT(APPEALS) IN THIS REGARD. 8. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIE S AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW. W E FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(APPEALS). THE PENALTY IN THE PRESENT CASE HAS BEEN LEVIED ON ACCOUNT OF ADD ITION MADE BY REALLOCATING EXPENSES BETWEEN ELIGIBLE AND NON- ELIGIBLE UNITS, PRIMARILY PURCHASES, THUS RESULTING IN HIGHER PROFITS BEING REFLECTED IN THE NON-ELIGIBLE UNIT AN D CONSEQUENTIAL REDUCTION IN PROFITS OF THE ELIGIBLE UNIT. IT IS NOT DISPUTED THAT THE BOOKS OF ACCOUNTS, ALL BILLS AND VOUCHERS WERE EXAMINED BY THE ASSESSING OFFICER AND EVEN SALES-TAX AND EXCISE-TAX RETURNS WERE SO EXAMINED A ND NO DEFECT OR DISCREPANCY WAS POINTED OUT. IT IS ALSO A FACT ON RECORD THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WE RE NOT REJECTED. UNDENIABLY, THE ADDITION WAS MADE MERELY ON ACCOUNT OF DIFFERENCE IN GP AND NP REFLECTED BY TWO UNITS AND FOR THE REASON THAT SINCE BOTH THE UNITS WERE I NDULGING IN IDENTICAL ACTIVITIES THERE WAS NO REASON FOR THE M TO REFLECT DIFFERENT RATES OF GP AND NP. IT HAS BEEN H ELD BY THE ITAT WHILE CONFIRMING THE ADDITION THAT IT WAS A CL EAR CASE OF INFLATION OF PROFITS OF THE ELIGIBLE UNIT BY THE ASSESSEE AND IN SUCH CIRCUMSTANCES THE AO HAD CLEAR POWERS I N TERMS OF SECTION 80IA(10) TO COMPUTE REASONABLE PRO FITS. 8 CLEARLY NOT A SINGLE DETAIL FURNISHED BY THE ASSES SEE HAS BEEN POINTED OUT AS BEING EITHER INACCURATE OR CON CEALED BY THE ASSESSEE. THE ADDITION WAS MADE AND UPHELD PURE LY ON THE BASIS OF ESTIMATION. IN SUCH CIRCUMSTANCES, I T CANNOT BE SAID THAT THE ASSESSEE HAD CONCEALED OR FURNISHE D ANY INACCURATE PARTICULARS OF INCOME SO AS TO ATTRACT P ENALTY U/S 271(1)(C) OF THE ACT. THE RELIANCE PLACED BY T HE LD.CIT(APPEALS) ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD., 322 ITR 158 (SC) IS APT. FURTHER WE FIND NO MERIT IN THE C ONTENTION OF THE LD. DR THAT THE CASE IS COVERED BY THE DECIS ION IN THE CASE OF ZOOM COMMUNICATION (SUPRA). IN THAT CASE IT WAS FOUND THAT THE ASSESSEE HAD MADE A CLAIM WHICH WAS WHOLLY UNTENABLE IN LAW AND HAD NO FOUNDATION ON WHICH IT COULD HAVE BEEN CLAIMED. IT WAS IN SUCH CIRCUMSTANCES THA T THE LEVY OF PENALTY WAS UPHELD. THE FACTS IN THE PRESE NT CASE ARE ENTIRELY DIFFERENT AND THE CLAIM OF THE ASSESSE E WAS NOT WHOLLY UNTENABLE IN LAW SINCE THE CIT(A) HAD DELETE D THE ADDITION MADE WHILE THE ITAT UPHELD IT FOR THE REAS ON THAT THE SURROUNDING FACTS AND CIRCUMSTANCES DEMONSTRATE D THAT THE ASSESSEE HAD TRIED TO INFLATE PROFITS OF ITS EL IGIBLE UNIT AND THE AO IN SUCH CIRCUMSTANCES COULD HAVE EXERCIS ED HIS POWER IN TERMS OF SECTION 80IA(10) TO COMPUTE REAS ONABLE PROFITS. IN VIEW OF THE ABOVE, WE CONFIRM THE ORDER OF THE LD.CIT(APPEALS) DELETING THE PENALTY LEVIED U/S 27 1(1)(C) OF THE ACT. 9 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13 TH OCTOBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH