Oswal Woollen Mills Ltd., Ludhiana V. DCIT, Ludhiana

ITA 1140/CHANDI/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73460 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 28-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMARVEER SINGH
• Keywords: Reopening of assessment; Business expenditure; Audit objection; Difference of opinion; Commercial expediency; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 37; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1134/CHD/2011 (ASSESSMENT YEAR : 2005-06) THE D.C.I.T., VS. M/S OSWAL WOOLLEN MILLS LTD., CIRCLE-VII, G.T.ROAD, SHERPUR, LUDHIANA. LUDHIANA. PAN: AAACO1973F AND ITA NO.1140/CHD/2011 (ASSESSMENT YEAR : 2005-06) M/S OSWAL WOOLLEN MILLS LTD., VS. THE D.C.I.T., G.T.ROAD, SHERPUR, CIRCLE-VII, LUDHIANA. LUDHIANA. PAN: AAACO1973F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NAVDEEP SHARMA DEPARTMENT BY : SHRI AMARVEER SINGH, DR DATE OF HEARING : 16.01.2014 DATE OF PRONOUNCEMENT : 28.01.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE R EVENUE ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, LUDHIANA DATED 16.09.2011 RELATING TO ASSESSMENT YE AR 2005-06 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961. 2 2. BOTH THESE APPEALS BY THE ASSESSEE AND THE REVEN UE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE REVENUE IN ITA NO.1134/CHD/2011 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD, CIT(A)-II, LUDHIANA HAS ERRED IN HOLDING THAT ONLY RS.31,47,31 0/- SHOULD HAVE BEEN TAXED DURING THE YEAR ON ACCOUNT OF SURCHARGE PAID TO PSE B, AS AGAINST THE EXPENDITURE OF RS.2,04,43,346/- DEBITED TO P&L ACCOUNT WHICH WA S DISALLOWED BY THE AO, THUS ALLOWING EXPENDITURE TO THE EXTENT OF RS.1,72,96,03 6/- (20443346-3147310) CLAIMED BY THE ASSESSEE DURING THE A.Y. 2005-06, AL THOUGH SURCHARGE TO THE EXTENT OF RS.1,72,96,036/- WAS REDUCED BY THE HON'BLE SUPR EME COURT IN THE CIVIL APPEAL NO. 2334 OF 2006 FILED BY THE ASSESSEE AND T HEREFORE THE AMOUNT OF EXPENDITURE ACTUALLY INCURRED DURING THE A.Y. 2005- 06 WAS ONLY RS.31,47,310/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN ALLOWING THE CLAIM OF THE ASS ESSEE THAT THE EXPENDITURE TO THE EXTENT OF RS.1,72,96,036/- BE ALLOWED IN A.Y. 2 005-06 BY ACCEPTING THE ASSESSEE'S CONTENTION THAT RS.1,72,96,036/- HAD BEE N CREDITED TO THE INCOME IN THE A.Y. 2006-07. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE, AS THE EXPENDITURE CLAIMED BY THE ASSESS EE DURING THE A.Y. 2005-06 HAD BEEN REDUCED BY RS.1,72,96,036/-, THE SAME SHOU LD HAVE BEEN ADDED AS INCOME OF A.Y. 2005-06 AND NOT A.Y. 2006-07. THE OR DER OF HON'BLE SUPREME COURT WAS PASSED ON 28.04.2006 AND ASSESSEE HAD SUF FICIENT TIME TO REVISE THE RETURN FOR A.Y. 2005-06. 4. THE ASSESSEE IN ITA NO.1140/CHD/2011 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT (A) ERRED IN LAW & ON FACTS BY NOT ANNULLING THE REASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTI ON 147. THE REASSESSMENT PROCEEDINGS WAS VOID-AB-INITIO AS THE ASSESSING OFF ICER HAS WRONGLY ASSUMED JURISDICTION TO REOPEN THE ASSESSMENT U/S 147/148. THE ASSESSMENT ORDER PASSED U/S 143(3)/147 MAY BE DIRECTED TO BE ANNULLE D. 2. THAT LD. CIT(A) FURTHER ERRED IN LAW AND ON FACTS O F THE CASE IN SUSTAINING THE REOPENING OF ASSESSMENT BY HOLDING THAT ASSESSEE DI D NOT DISCLOSE THE FACTS IN RETURN REGARDING THE SURCHARGE LEVIED BY PSEB, W HEREAS COMPLETE FACTS WERE DISCLOSED IN THE BALANCE SHEET IN 'NOTES ON AC COUNTS', WHICH WAS PART OF THE RETURN. DIRECTION BE GIVEN TO CANCEL THE REASSE SSMENT BASED ON CHANGE OF OPINION. 3. THAT THE LD. CIT (A) ERRED IN LAW AND ON FACTS BY N OT SETTING ASIDE THE REOPENING PROCEEDINGS ON THE REASONS THAT SURCHARGE PAID TO PSEB ON ACCOUNT OF PEAK LOAD CHARGES FOR NON CONVERSION OF CONNECTION FROM 11 KVA TO 35 KVA/ 66 KVA WAS PENAL IN NATURE AND NOT ALLOW ABLE AS BUSINESS 3 EXPENDITURE. NO FRESH MATERIAL FACTS HAD COME ON RE CORD FOR REASSESSMENT AND IT WAS MERELY A CHANGE OF OPINION IN VIEW OF AN AUDIT OBJECTION. DIRECTIONS BE GIVEN TO CANCEL THE ASSESSMENT. 4. THAT THE LD. CIT (A) HAS FURTHER ERRED IN LAW AND O N FACTS IN UPHOLDING THE DISALLOWANCE OF RS.3147310 (WHICH WAS FINALLY ASCER TAINED BY PSEB ON THE BASIS OF DECISION OF HON'BLE SUPREME COURT) PAID TO PUNJAB STATE ELECTRICITY BOARD AS SURCHARGE FOR USE OF PEAK LOAD BY TREATING IT AS PENALTY FOR INFRINGEMENT OF LAW AND HENCE NOT ALLOWABLE. DIREC TIONS MAY BE GIVEN TO ALLOW THE SAID AMOUNT AS NECESSARY BUSINESS EXPENDITURE, IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF INDUSTRIAL CABLE REPORTED IN 162 TAXMAN 423 (PB.) AND M/S HERO CYCLES LTD REPORTED I N 178 TAXMAN 484 (PB.). 5. THE ASSESSEE BY WAY OF GROUND NOS.1 TO 3 HAS RAI SED THE ISSUE AGAINST REOPENING OF ASSESSMENT UNDER SECTION 147/1 48 OF THE ACT. FURTHER BY WAY OF GROUND NO.4 THE ASSESSEE HAS RAIS ED THE ISSUE AGAINST DISALLOWANCE OF RS.31,47,310/- BEING THE AMOUNT PAI D TO PUNJAB STATE ELECTRICITY BOARD(PSEB) AS SURCHARGE FOR USE OF PEA K LOAD. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT (APPEALS) IN RESTRICTING THE DISALLOWANCE TO RS.31,47,310/- AS A GAINST THE EXPENDITURE OF RS.2,04,43,346/- DISALLOWED BY THE ASSESSING OFF ICER, ON ACCOUNT OF SURCHARGE PAID TO PSEB. AS THE ISSUE RAISED BY BOT H THE ASSESSEE AND THE REVENUE ON THE MERITS IS IN RESPECT OF THE SAME EXP ENDITURE, WE PROCEED TO DISPOSE OF THE SAME AFTER REFERRING TO THE FACTS OF THE CASE. 7. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.11,62,76,452/- ON 22.4.2010 IN RESPONS E TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT. THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.2,42,92,486/- ON ACCOUNT OF SURCH ARGE @ 17.5% FOR NON CONVERSION OF CONNECTION FROM 11KCA/66KVA FOR T HE PERIOD FROM MARCH 1993 TO DECEMBER 1996 AND THE PAYMENT WAS MAD E BY THE COMPANY AFTER REJECTION OF ITS GRIEVANCE BY THE HON 'BLE PUNJAB & HARYANA HIGH COURT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID AMOUNT WAS PENAL IN NATURE AND NOT ALLOWABLE A S DEDUCTION. THE 4 ASSESSING OFFICER RECORDED THE REASONS FOR REOPENIN G OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND ISSUED NOTICE UNDE R SECTION 148 OF THE ACT TO THE ASSESSEE. THE ASSESSEE AFTER FILING THE RETURN OF INCOME IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT ASKED FOR THE REASONS AND THE INFORMATION ON THE BASIS OF WHICH THE ASSES SMENT PROCEEDINGS WAS REOPENED. THE ASSESSING OFFICER AFTER CONSIDER ING THE ISSUE AT LENGTH HELD THAT THE ASSESSEE WAS NOT ENTITLED TO T HE SAID EXPENDITURE AS IT WAS PENAL IN NATURE AND COULD NOT BE HELD TO HAV E BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE. T HE ASSESSING OFFICER THUS MADE AN ADDITION OF RS.2.43 CRORES. 8. BEFORE THE CIT (APPEALS), THE FIRST CONTENTION O F THE ASSESSEE WAS THAT AS NO FRESH INFORMATION/FACTS HAD BEEN RECEIVE D BY THE ASSESSING OFFICER ON THE BASIS OF WHICH HE HAD THE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. A S PER THE ASSESSEE THE DETAILED FACTS REGARDING LEVY OF SURCHARGE @ 17 .5% BY PSEB BECAUSE OF NON-CONVERSION OF CONNECTION FROM 11 K.V. TO 33 K.V. WAS FULLY DISCLOSED IN THE PRINTED BALANCE SHEET FILED ALONG WITH THE RETURN AND WAS DULY CONSIDERED BY THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT, AND HAD ALLOWED THE EXPENSES ACCORDINGL Y. THE ASSESSEE THUS SUBMITTED THAT THE ASSESSING OFFICER BY ISSUIN G NOTICE UNDER SECTION 148 OF THE ACT AND PROPOSING TO DISALLOW THE EXPEND ITURE OF RS.2.43 CRORES WAS NOTHING BUT CHANGE OF OPINION. FURTHER THE BASIS FOR REOPENING OF THE ASSESSMENT WAS ONLY AN OBJECTION R ECEIVED FROM THE AUDIT PARTY AND ON THAT BASIS RE-ASSESSMENT PROCEED INGS INITIATED WERE TOTALLY ILLEGAL AND UNWARRANTED IN LAW. IN RESPECT OF THE MERITS OF THE CASE, IT WAS POINTED OUT BY THE ASSESSEE THAT THE S AID EXPENDITURE WAS AN ALLOWABLE EXPENDITURE UNDER SECTION 37 OF THE ACT A S THE SAME WAS INCURRED FOR THE PURPOSE OF ITS BUSINESS. THE SAID PEAK LOAD CHARGES 5 WERE RAISED BY PSEB IN THEIR ELECTRICITY BILL FOR E VERY MONTH AND THE SAME WAS THUS AN ALLOWABLE EXPENDITURE. IT WAS FUR THER CONTENDED BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE ISSUE WAS DI RECTLY COVERED BY THE ORDER OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. INDUSTRIAL CABLES INDIA LTD. [162 TAXMAN 423 (P &H)], WHICH WAS LATER FOLLOWED IN THE CASE OF HERO CYCLES LTD. [178 TAXMAN 484 (P&H)] AND IN ASSESSEES OWN CASE RELATING TO ASSESSMENT Y EAR 2003-04, WHEREIN ADDITION WAS DELETED BY THE TRIBUNAL IN ITA NO.7/CH ANDI/2007 VIDE ORDER DATED 28.1.2008. THE CIT (APPEALS) UPHELD TH E REOPENING OF ASSESSMENT AS THE ASSESSEE HAD FAILED TO DISCLOSE T HE RELEVANT FACTS OF THE RETURNED INCOME. IN RESPECT OF THE ISSUE RAISED ON MERITS, FURTHER PLEA OF THE ASSESSEE WAS THAT THE EXPENDITURE OF RS.2.43 CR ORES HAD BEEN REDUCED TO RS.2.04 CRORES BY THE ASSESSING OFFICER AS PER T HE ORDER PASSED UNDER SECTION 154 OF THE ACT. IT WAS FURTHER POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE BEFORE THE CIT (APPEALS) THAT THE HON'BLE SUPREME COURT IN CIVIL APPEAL FILED BY THE ASSESSEE HAD RE DUCED THE AMOUNT OF SURCHARGE BY RS.1,72,96,036/-, WHICH HAS BEEN SHOWN AS INCOME BY THE ASSESSEE IN THE SUBSEQUENT YEAR. THE EXPENDITURE T HUS INCURRED BY THE ASSESSEE WAS ONLY RS.31,47,310/-. THE CIT (APPEALS ) HELD THAT THE SURCHARGE PAID BY THE ASSESSEE TO THE ELECTRICITY B OARD WAS IN THE NATURE OF PENALTY AND CONSEQUENTLY IT WAS RIGHTLY DISALLOW ED BY THE ASSESSING OFFICER. HOWEVER, AS THE HON'BLE SUPREME COURT IN ASSESSEES CIVIL APPEAL NO.2335 OF 2006 VIDE JUDGMENT DATED 28.4.200 6 AGAINST PSEB & OTHERS HAD GIVEN RELIEF OUT OF SURCHARGE/PENALTY IM POSED FOR EXCESS USAGE OF THE LOAD, THEN THE SAME IS NOT TO BE DISAL LOWED IN THE INSTANT ASSESSMENT YEAR AS THE SAME HAS BEEN OFFERED TO TAX IN THE SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2006-07 AS OTHER INCOME . 6 9. THE ASSESSEE IS IN APPEAL AGAINST THE ADDITION O F RS.31,47,310/- AND THE REVENUE IS IN APPEAL AGAINST THE DELETION O F RS.1,72,96,036/-. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT AFTER COMPLETION OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORD ER DATED 15.12.2006, NOTICE UNDER SECTION 154 OF THE ACT WAS ISSUED ON 1 6.1.2008, AGAINST WHICH THE ASSESSEE FILED THE REPLY ON 28.1.2008 WHI CH IS PLACED AT PAGE 7 OF THE PAPER BOOK. HOWEVER, THE SAID PROCEEDINGS W ERE DROPPED, THOUGH NO ORDER WAS PASSED BY THE ASSESSING OFFICER. THER EAFTER NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED AND THE SAME ISSU E WAS RAISED AS IN THE PROCEEDINGS UNDER SECTION 154 OF THE ACT. THE SAID NOTICE WAS ISSUED ON 26.3.2010 I.E. WITHIN THE PERIOD OF FOUR YEARS FROM THE CLOSE OF THE ASSESSMENT PROCEEDINGS. IT WAS CONTENDED BY THE LE ARNED A.R. FOR THE ASSESSEE THAT NOTICE UNDER SECTION 148 OF THE ACT C OULD NOT BE ISSUED. THE LEARNED A.R. FOR THE ASSESSEE FURTHER POINTED O UT THAT THE ISSUE OF ALLOWABILITY OF EXPENDITURE OF RS.2.04 CRORES MADE FOR EXTRA PEAK LOAD IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. INDUSTRIAL CABLES I NDIA LTD. (SUPRA), CIT VS. HERO CYCLES LTD. (SUPRA) AND IN ASSESSEES OWN CASE (SUPRA) BY THE ORDER OF THE TRIBUNAL. THE LEARNED A.R. FOR TH E ASSESSEE DREW OUR ATTENTION TO THE DETAILS OF THE EXPENDITURE PLACED AT PAGES 12 AND 13 OF THE PAPER BOOK ALONGWITH SOME OF THE BILLS AT PAGES 14 TO 18 OF THE PAPER BOOK AND POINTED OUT THAT IN THE NOTES TO ACC OUNT, IT WAS DECLARED THAT THE PUNJAB ELECTRICITY BOARD, LUDHIANA HAD RAI SED VARIOUS CHARGES. COPY OF NOTES TO ACCOUNT IS PLACED AT PAGE 19 OF TH E PAPER BOOK, IN WHICH IT WAS DECLARED THAT THE COMPANY HAD PAID SUM OF RS.2.04 CRORES TO PSEB WHICH WAS CHARGED TO THE REVENUE ACCOUNT AN D APPEAL AGAINST THE SAME WAS PENDING BEFORE THE HON'BLE SUPREME COU RT OF INDIA. FURTHER DECLARATION TO THE EFFECT WAS MADE IN THE S UCCEEDING YEAR I.E. ASSESSMENT YEAR 2006-07 AND THE RESULT OF THE SPECI AL LEAVE PETITION 7 BEFORE THE HON'BLE SUPREME COURT WAS ALSO DECLARED. COPY OF THE NOTES TO ACCOUNT IS PLACED AT PAGES 20 AND 21 OF THE PAPE R BOOK. 10. THE LEARNED D.R. FOR THE REVENUE POINTED OUT TH AT THE PERUSAL OF THE ORDER OF THE ASSESSING OFFICER WOULD REFLECT TH AT THE PRESENT CHARGES HAD BEEN LEVIED BY PSEB AS THE ASSESSEE FAILED TO U PGRADE ITS SYSTEM AND THE SAID CHARGES WERE PENAL IN NATURE. IN RESPECT OF REOPENING OF ASSESSMENT, IT WAS POINTED OUT BY THE LEARNED D.R. FOR THE REVENUE THAT THOUGH THE LEARNED COUNSEL STATES THAT DECLARATION WAS MADE IN THE NOTES TO ACCOUNT BUT IF THERE IS APPLICATION OF MIND BY T HE ASSESSING OFFICER THEN IT WOULD NOT FALL IN THE DOMAIN OF CHANGE OF O PINION. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE DELHI HIGH CO URT IN THE CASE OF CIT VS. USHA INTERNATIONAL LTD. [348 ITR 485 (DEL)] . 11. THE LEARNED A.R. FOR THE ASSESSEE, HOWEVER, POI NTED OUT THAT SIMILAR ISSUE WAS ALLOWED IN THE CASE OF THE ASSESS EE IN ASSESSMENT YEAR 2003-04 AND THERE WAS NO MERIT IN THE REOPENING OF ASSESSMENT. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN RELATION T O THE EXPENDITURE OF RS.2,04,43,346/- ON ACCOUNT OF SURCHARGE @ 17.5% F OR NON CONVERSION OF CONNECTION FROM 11KCA/66KVA FOR THE PERIOD FROM MARCH 1993 TO DECEMBER 1996 AND THE PAYMENT WAS MADE BY THE COMPA NY AFTER REJECTION OF ITS GRIEVANCE BY THE HON'BLE PUNJAB & HARYANA HIGH COURT. THE SAID EXPENDITURE WAS DISALLOWED IN THE HANDS OF THE ASSESSEE BY THE ASSESSING OFFICER BEING PENAL IN NATURE. HOWEVER, THE CIT (APPEALS) CONSIDERED THE RESULT OF SLP UNDER WHICH SUM OF RS. 1,72,96,036/- WAS REFUNDED TO THE ASSESSEE, WHICH IN TURN HAD BEEN OF FERED AS OTHER INCOME BY THE ASSESSEE IN THE RETURN OF INCOME REL ATING TO ASSESSMENT YEAR 2006-07. THE ASSESSEE DURING THE YEAR UNDER C ONSIDERATION HAD PAID 8 SUM OF RS.2.04 CRORES TO PSEB AGAINST THE DEMAND RA ISED BY IT AND BOOKED THE SAME AS AN EXPENDITURE ON ACCOUNT OF PEA K LOAD CHARGES LEVIED BY THE PSEB. THE FIRST ISSUE ARISING IN THE PRESENT APPEAL IS WHETHER THE SAID EXPENDITURE IS ALLOWABLE IN THE HA NDS OF THE ASSESSEE OR THE SAME IS PENAL IN NATURE. WE FIND THAT SIMILAR ISSUE OF PEAK LOAD CHARGES AROSE BEFORE THE HON'BLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF CIT VS. INDUSTRIAL CABLES INDIA LTD. (SUPRA ) AND IT WAS HELD THAT THE EXCESS CHARGES PAID FOR USING EXCESS LOAD WAS P AID IN THE COURSE OF BUSINESS AND THE SAME WAS BUSINESS EXPENDITURE. 13. FURTHER THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. HERO CYCLES LTD. (SUPRA) CONSIDERED SIMILAR ISSUE AGAINST THE DELETION OF PAYMENT MADE TO PSEB ON ACCOUNT OF EXTR A CHARGES BEING PENALTY PAID AND FOLLOWING THE RATIO LAID DOWN BY T HE HON'BLE HIGH COURT IN CIT VS. INDUSTRIAL CABLES INDIA LTD. (SUPRA), IT WAS HELD AS UNDER: 3. THERE IS NO DOUBT THAT PAYMENTS MADE IN THE NAT URE OF PENALTY OR FINE FOR ANY WRONGFUL ACT CANNOT BE ALLOWED AS PERMISSIBLE DEDUC TIONS BUT MERE LABEL OF THE PAYMENT IS NOT CONCLUSIVE. CERTAIN PAYMENTS MAY BE INCIDENTAL TO ITS BUSINESS AND HAVE TO BE ALLOWED ON THE TEST OF 'COMMERCIAL EXPEDIENCY, IF NO VIOLAT ION OF LAW OR PUBLIC POLICY IS INVOLVED. WHERE PENALTY IS NOT FOR DELIBERATE VIOLATION OF LA W, THE AMOUNT MAY BE ALLOWED AS DEDUCTION. THERE MAY BE CASES INVOLVING ILLEGALITY OR MORAL TURPITUDE ON THE ONE HAND AND INNOCENT VIOLATION ON THE OTHER. LAW IS WELL SE TTLED. REFERENCE MAY BE MADE TO JUDGMENTS OF THE HON'BLE SUPREME COURT IN HAJI AZIZ AND ABDUL SHAKOOR BROS V. CIT, (1961) 41 ITR 350, MALWA VANASPATTI V. CIT, (1997) 225 ITR 383, PARKASH COTTON MILLS PVT. LIMITED V. CJJ.J (1993) 201 ITR 684. THE TEST HAS TO BE APPLIED FROM CASE TO CASE. 14. THE CHANDIGARH BENCH OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.47/CHANDI/2007 RELATING TO ASSESSMENT YEAR 2003- 04 WITH LEAD ORDER IN THE CASE OF ADDL.CIT VS. M/S NAHAR EXPORT LTD. I N ITA NO.5/CHANDI/2007 RELATING TO ASSESSMENT YEAR 2003-0 4, ORDER DATED 28.1.2008 VIDE PARAS 33 AND 34 HELD AS UNDER: 33. THE COMMISSIONER OF INCOME-TAX (A) HAS DEALT W ITH THIS ISSUE IN PARA 8.3 OF HIS ORDER. IT HAS BEEN POINTED BY THE COMMISSIONER OF INCOME-TAX (A) THAT IN EARLIER YEARS, THE ASSESSEE HAD NOT PAID THE DEMAND AND HAD CONTES TED THE CLAIM MADE BY M.P. STATE ELECTRICITY BOARD ON ACCOUNT OF ELECTRICITY CESS IM POSED ON CONSUMPTION OF ELECTRICITY. THE CLAIM OF THE ASSESSEE WAS NOT ALLOWED FOR NON-P AYMENT OF THE DEMAND. HOWEVER, IN THE YEAR UNDER APPEAL, THE ASSESSEE HAS PAID THE DE MAND. 9 SO HOWEVER, THE MATTER IS BEING CONTESTED BEFORE TH E AUTHORITIES. IT HAS BEEN HELD BY THE COMMISSIONER OF INCOME-TAX (A) THAT THE ASSESSEE IS ENTITLED TO DEDUCTION IN THE YEAR OF PAYMENT NOTWITHSTANDING THE FACT THAT THE CLAIM IS BEING CONTESTED. IT HAS FURTHER BEEN HELD BY THE COMMISSIONER OF INCOME-TAX (A) THAT DED UCTION IS ALLOWABLE TO THE ASSESSEE IN THE YEAR UNDER APPEAL. SO HOWEVER, IN CASE THE CLAIM OF THE ASSESSEE THAT IT IS NOT LIABLE TO PAY CESS IS ACCEPTED THE AMOUNT OF CESS A LLOWED AS A DEDUCTION SHALL BE ASSESSABLE IN THE YEAR IN WHICH THE REFUND IS RECEI VED BY THE ASSESSEE. 34. IN OUR CONSIDERED VIEW, THERE IS NO INFIRMITY I N THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A). WE, THEREFORE, FIND NO JUSTIFICATI ON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A) IN THIS REGARD. THE GROUND OF APPEAL RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 15. IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT AND THE TRIBUNAL IN ASSESSEES OWN CASE, WE HOLD THAT THE EXCESS PEAK LOAD CHARGES LEVIED BY THE PSEB PAID BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WERE ALLOWABLE EXPENDI TURE IN THE HANDS OF THE ASSESSEE AS BEING RELATABLE TO CARRYING ON THE BUSINESS OF THE ASSESSEE COMPANY. THE TOTAL EXPENDITURE PAID BY TH E ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS RS.2.04 CRORES. THE H ON'BLE SUPREME COURT IN CIVIL APPEAL FILED BY THE ASSESSEE AGAINST PSEB & OTHERS (SUPRA) VIDE JUDGMENT DATED 28.4.2006 HAD REDUCED C HARGES TO RS.31,47,310/- AND THE ASSESSEE WAS ENTITLED TO REF UND OF RS.1,72,96,036/-, WHICH HAS BEEN SHOWN AS INCOME BY THE ASSESSEE IN THE SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2006-07. THE ASSESSEE HAD ALREADY DECLARED THE INCOME TO THE EXTENT OF RS.1.73 CRORES IN THE SUCCEEDING YEAR, WHICH HAS BEEN TAXED IN THE HANDS OF THE ASSE SSEE. THE SAID EXPENDITURE IS DULY ALLOWABLE IN THE HANDS OF THE A SSESSEE AND THE BALANCE EXPENDITURE OF RS.31,47,310/- IS ALSO DIREC TED TO BE ALLOWED BY THE ASSESSING OFFICER IN VIEW OF OUR FINDING IN THE PARAS HEREINABOVE. IN VIEW THEREOF, GROUND OF APPEAL NO.4 RAISED BY TH E ASSESSEE ON THE MERITS IS ALLOWED AND THE GROUNDS OF APPEAL NOS.1 A ND 2 RAISED BY THE REVENUE ARE DISMISSED. IN VIEW OF OUR ALLOWING TH E ISSUE ON MERITS OF 10 APPEAL, WE ARE NOT ADJUDICATING THE ISSUE OF REOPEN ING OF ASSESSMENT UNDER SECTION 147/148 OF THE ACT. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JANUARY, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 28 TH JANUARY, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH J