ITO, Mohali V. Sh. Ramesh Kumar Dudani, Mohali

ITA 1149/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95455 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: B K NOHRIA
• Keywords: Depreciation; Business expenditure; Question of law; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 1149/CHD/2014 ASSESSMENT YEAR: 2008-09 THE ITO, VS SHRI RAMESH KUMAR DUDANI, WARD 6(3), PLOT O. C-104, INDUSTRIAL AREA, MOHALI. PHASE 8, MOHALI. PAN: ABBPD0633J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL RESPONDENT BY : SHRI B.K. NOHRIA DATE OF HEARING : 04.08.2015 DATE OF PRONOUNCEMENT : 06.08.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS) CHANDIGARH DATED 27.10.2014 FOR ASSESSMENT YEAR 2008-09, CHALLENGING THE CANCELLATI ON OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT. 2. THE BRIEF FACTS OF THE ISSUE ARE THAT IN THE ASSESSMENT PROCEEDINGS, CERTAIN EXPENSES WERE RE- ALLOCATED BETWEEN ASSESSEE'S TWO PROPRIETORSHIP CON CERNS, NAMELY THEOG UNIT ( THE UNIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT) AND MOHALI UNIT ( THE UNIT NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE AC T ) AND 2 THE INCOME OF THE ASSESSEE WAS ENHANCED BY RS. 43,62,257/-. THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED. IN THE PENALT Y PROCEEDINGS, THE ASSESSEE HAS STATED THAT ADDITION WAS MADE ON ESTIMATE BASIS. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND LEVIED THE MINIMUM PENALTY. 3. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) T HAT PENALTY IS NOT LEVIABLE AND RELIED UPON JUDGEMENT O F THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S S.S.P. LTD. 328 ITR 643. 4. THE LD. CIT(APPEALS), CONSIDERING THE EXPLANATIO N OF THE ASSESSEE FOUND THAT ADDITION WAS MADE ON ESTIMA TE BASIS ON ACCOUNT OF RE-ALLOCATION OF THE EXPENSES B ETWEEN UNIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF T HE ACT AND UNIT NOT SO ELIGIBLE. IT WAS ALSO FOUND THAT T HE RE- ALLOCATION WAS MADE ON ESTIMATE BASIS. THEREFORE, ON ESTIMATE BASIS, PENALTY SHOULD NOT BE LEVIED AND FO LLOWING THE JUDGEMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S S.S.P. LTD. (SUPRA) CANCEL LED THE PENALTY AND ALLOWED APPEAL OF THE ASSESSEE. 5. THE LD. DR RELIED UPON ORDER OF THE ASSESSING OF FICER AND SUBMITTED THAT THE ISSUE OF DEDUCTION UNDER SEC TION 80IC WAS DECIDED ON QUANTUM AGAINST THE ASSESSEE IN ASSESSMENT YEAR IN APPEAL AS WELL AS IN EARLIER YEA RS. 3 THEREFORE, ASSESSEE HAS CONCEALED THE PARTICULARS O F INCOME AND PENALTY SHOULD NOT BE CANCELLED. 6. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT THE ADDITION IS MADE ON RE-ALLOC ATION OF THE EXPENSES ON ESTIMATE BASIS FOR CLAIMING DEDU CTION UNDER SECTION 80IC OF THE ACT AND SUBMITTED THAT EV EN IF THE TRIBUNAL HAS CONFIRMED ADDITION ON QUANTUM, ASSESSEE'S APPEAL IS PENDING BEFORE HON'BLE HIGH CO URT ON QUANTUM. HE HAS RELIED UPON DECISION OF THE HON'BL E PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS S SB LTD. 328 ITR 643 IN WHICH IT WAS HELD AS UNDER : THE ASSESSING OFFICER MADE ADDITIONS ON ACCOUNT OF DISALLOWANCE OF CERTAIN EXPENSES UNDER THE HEAD OFFI CE EXPENDITURE AND DISALLOWANCE OF THE PROVIDENT FUND AND EMPLOYEES' STATE INSURANCE PAYMENTS MADE BEYOND THE DUE DATE UNDER THE RESPECTIVE ACTS AND ALSO LEVIED PENA LTY UNDER SECTION 271(L)(C) OF THE INCOME-TAX ACT, 1961. THE COMM ISSIONER (APPEALS) DELETED THE PENALTY HOLDING THAT MERE DISAL LOWANCE WAS NOT A GROUND FOR LEVYING PENALTY IN THE ABSENCE OF ANY CONCEALMENT OR GIVING OF INACCURATE PARTICULARS. THI S VIEW WAS UPHELD BY THE TRIBUNAL OBSERVING THAT IN THE ASSESSME NT ORDER THE ASSESSEE HAD SPECIFICALLY EXPLAINED THAT THE EXP ENSES WERE BUSINESS EXPENDITURE AND THEY HAD BEEN INCURRED TO ENTERTAIN CLIENTS AND BUSINESS RELATED PERSONS AND THE ORIGINAL BILLS OF EXPENDITURE COULD ALSO BE VERIFIED. IT WAS FURTHER NOTICED THAT THIS EXPENDITURE HAD BEEN DISALLOWED ON AN EST IMATE BASIS WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE EXPLA NATION OF THE ASSESSEE. THE PROVIDENT FUND AND EMPLOYEES' STATE INS URANCE PAYMENTS HAD BEEN MADE BEFORE THE DUE DATE OF FILING THE RETURN AND NO PENALTY WAS LEVIVIABLE IN THE HANDS OF THE ASSESSEE. ON APPEAL: 4 HELD, DISMISSING THE APPEAL, THAT A CONCURRENT FINDI NG HAD BEEN RECORDED ON FACTS THAT THERE WAS VALID EXPLANAT ION THAT THE ASSESSEE HAD RAISED A DEBATABLE ISSUE FOR CLAIMING THE EXPENDITURE AND DISALLOWANCE WAS NO GROUND FOR LEVYING PENALTY. MERE ERRONEOUS CLAIM IN THE ABSENCE OF ANY CONCEALMENT OR GIVING OF INACCURATE PARTICULARS WAS NO GROUND FOR LEVYING PENALTY. ASSUMING THAT THE ASSESSEE WAS N OT JUSTIFIED IN DELAYING THE DEPOSIT AND WAS LIABLE TO P AY TAX ON THE AMOUNT, THIS COULD NOT BE CONCLUSIVE TO INFER DELIBE RATENESS OF DEFAULT ON THE PART OF THE ASSESSEE. THE ISSUE OF LEV Y OF PENALTY HA. DECIDED ON THE FACTS OF EACH CASE. NO SUBSTANTIA L QUESTION OF LAW AROSE FOR CONSIDERATION. 7. HE HAS, THEREFORE, SUBMITTED THAT PENALTY WAS CORRECTLY CANCELLED BY THE LD. CIT(APPEALS). 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT AT THE ASSESSMENT PROCEEDINGS, CERTAIN EXPENSES WERE RE-ALLOCATED BETWEEN ASSESSEES TWO PROPRIETORSHIP CONCERNS WITH REGARD TO CLAIM OF DED UCTION UNDER SECTION 80IC OF THE ACT. THE ADDITION WAS MAD E ON ESTIMATE BASIS ON ACCOUNT OF RE-ALLOCATION OF THE E XPENSES BETWEEN THE UNIT ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80IC OF THE ACT AND UNIT NOT SO ELIGIBLE. THE CONTENTIO N OF THE ASSESSEE WAS, THEREFORE, CORRECT THAT RE-ALLOCATION OF THE EXPENSES HAVE BEEN MADE ON ESTIMATE BASIS. THE ITA T CHANDIGARH BENCH IN THE CASE OF M/S ROYAL CEMENT COMPANY VS ITO IN ITA/1069 TO 1071/CHD/2014 FOR ASSESSMENT YEAR 2005-06 TO 2007-08 VIDE ORDER DATED 26.02.2015 CANCELLED THE PENALTY ON ACCOUNT OF TRAN SPORT SUBSIDYS DEDUCTION CLAIMED UNDER SECTION 80IC OF T HE 5 ACT. THE FINDINGS IN PARA 5 TO 8 OF THE ORDER ARE REPRODUCED AS UNDER : 5. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND LD. D R RELIED UPON ORDER OF THE LD. CIT(APPEALS). THE HON 'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS R AJ OVERSEAS (SUPRA) HELD AS UNDER : THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME-TAX ACT, 1961, IN RESPECT OF INCOME FROM DUTY DRAW BACK. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT THE INCOME DERIVED FROM DUTY DRA W BACK WAS NOT INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING. PENALTY WAS ALSO LEVIED. THE COMMISSIONER (APPEALS) UPHELD THE VIEW OF THE ASSESSING OFFICER BUT THE TRIBUNAL DELETED THE PENALTY. ON APPEAL TO THE HIGH COURT: HELD, DISMISSING THE APPEAL, THAT IN VIEW OF THE FACTUAL FINDING OF THE TRIBUNAL, IT COULD NOT BE DISP UTED THAT THE ISSUE WAS DEBATABLE AND DEDUCTION CLAIMED BY THE ASSESSEE DID NOT LACK BONA FIDES. PENALTY COULD NOT BE IMPOSED UNDER SECTION 271(L)(C). 6. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS GURDASPUR CO-OPERATIVE SUGAR MILLS L TD. & ANOTHER 354 ITR 27 HELD AS UNDER : HELD, THAT THERE WAS NO DISPUTE ABOUT THE QUANTUM OF RECEIPT OF GRANT-IN-AID FROM THE STATE GOVERNMENT. THE ASSESSEE REFLECTED THE RECEIPT AS CAPITAL RECEIPT, WHEREAS IT HAD BEEN TREATED AS A REVENUE RECEIPT. THE ISSUE, WHETHER THE AMOUNT OF GRANT-IN-AID WAS A CAPITAL RECEIPT OR A REVENUE RECEIPT, WAS A DEBATABLE ISSUE. THERE WAS NO 6 FURNISHING OF INACCURATE PARTICULARS. PENALTY COULD NOT BE IMPOSED. 7. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE DECISIONS, WE ARE OF THE VIEW PENALTY IS NOT LEVIABLE. THE ASSESSEE MADE CLAIM OF DEDUCTION UND ER SECTION 80IC OF THE ACT ON TRANSPORT SUBSIDY. ACCO RDING TO THE SUBMISSION OF ASSESSEE, SIMILAR CLAIM WAS ALLOWED BY ASSESSING OFFICER IN PAST. THE AUTHORIT IES BELOW, FOLLOWING THE DECISION OF THE HON'BLE SUPREM E COURT IN THE CASE OF LIBERTY INDIA (SUPRA) DECLINED THE CLAIM OF DEDUCTION AGAINST THE ASSESSEE. THIS DECIS ION IS DELIVERED ON 31.08.2009 AND BY THAT TIME, THE RETURNS OF INCOME OF THE ASSESSEE WERE ALREADY FILE D CLAIMING DEDUCTION UNDER SECTION 80IC OF THE ACT AS PER PAST PRACTICE. THERE WERE CERTAIN DECISIONS IN FAV OUR OF THE ASSESSEE MAKING CLAIM OF DEDUCTION UNDER SECTIO N 80IC OF THE ACT. THUS, AT THE STAGE OF LEVY OF PEN ALTY, THE ISSUE WAS DEBATABLE. THE ASSESSEE DISCLOSED ALL THE PARTICULARS OF INCOME IN THE RETURN OF INCOME ON TH E BASIS OF THE PAST PRACTICE AS WELL AS CERTAIN DECIS IONS IN FAVOUR OF THE ASSESSEE. THEREFORE, CLAIM OF ASS ESSEE COULD NOT BE SAID TO BE BOGUS AND ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF INCOME AS WELL AS DID NOT FILE ANY INACCURATE PARTICULARS OF INCOME. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW PENALTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD NOT BE LEVIED A GAINST THE ASSESSEE IN THESE ASSESSMENT YEARS. WE, ACCORDINGLY SET ASIDE THE ORDERS OF AUTHORITIES BEL OW AND CANCEL THE PENALTY. 8. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. 9. IT MAY ALSO BE NOTED HERE THAT ASSESSEE HAS CLAI MED DEDUCTION UNDER SECTION 80IC OF THE ACT IN RESPECT OF UNIT AT THEOG (HIMACHAL PRADESH). THE COMPLETE DETAILS OF BOTH THE UNITS WERE FURNISHED BEFORE ASSESSING OFFI CER 7 WITH REGARD TO PROFITS EARNED AND THE EXPENSES INCU RRED BY ASSESSEE IN RESPECT OF BOTH THE UNITS, WHETHER E LIGIBLE FOR DEDUCTION UNDER SECTION 80IC OR NOT. THE ASSES SING OFFICER FOUND THAT IN THE UNIT FOR WHICH DEDUCTION UNDER SECTION 80IC HAS BEEN CLAIMED, PROFIT IS HIGHER AS COMPARED TO THE UNIT NOT ELIGIBLE FOR DEDUCTION UND ER SECTION 80IC. THE ASSESSING OFFICER EXAMINED THE N ATURE OF BUSINESS, DEPRECIATION CLAIMED, EXPENDITURE CLAI MED AND ADMINISTRATIVE EXPENSES AND ON COMPARISON FOUND THAT IN THE UNIT FOR WHICH DEDUCTION UNDER SECTION 80IC HAS BEEN CLAIMED, EXPENSES ARE MORE AS COMPARED TO THE UNIT WHICH IS NOT ELIGIBLE FOR DEDUCTION UNDER SECT ION 80IC OF THE ACT. THUS, THE ASSESSING OFFICER, ON THE BA SIS OF DETAILS FURNISHED IN THE RETURN OF INCOME AS WELL A S DETAILS FURNISHED AT THE ASSESSMENT STAGE RE-ALLOCATED THE EXPENDITURE IN RESPECT OF BOTH THE UNITS ON ESTIMAT E BASIS AND MADE THE ADDITION ON WHICH PENALTY WAS LEVIED. THUS, THE ASSESSEE DECLARED ALL THE PARTICULARS IN THE RE TURN OF INCOME AS WELL AS AT THE ASSESSMENT STAGE. THEREFO RE, IT IS NOT A CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME SO AS TO LEVY THE PENALTY UNDER SECTION 271( 1)(C) OF THE ACT. IT IS ALSO NOT A CASE OF CONCEALMENT OF PARTICULARS OF INCOME BECAUSE THE ASSESSEE DECLARED ALL THE PARTICULARS AND THE ASSESSEE HAS NOT ACCEPTED T HE VIEW OF THE DEPARTMENT AND IS IN FURTHER LITIGATION ON QUANTUM MATTER. THESE FACTS, THEREFORE, CLEARLY SH OW THAT THE PENALTY WAS LEVIED ON ACCOUNT OF ESTIMATED ADDI TION MADE ON ACCOUNT OF RE-ALLOCATION OF EXPENSES BETWEE N UNIT 8 ELIGIBLE FOR DEDUCTION UNDER SECTION 80ICA AND NOT SO ELIGIBLE. THEREFORE, IT IS NOT A FIT CASE OF LEVY OF THE PENALTY. 10. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISIONS AND DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S S.S.P. LTD. ( SUPRA) WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(APPEALS) IN CANCELING THE PENALTY. 11. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH AUGUST,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 6 TH AUGUST,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH