ACIT, Najibabad V. M/s. Parmarth Iron Pvt. Ltd., Bijnor

ITA 1206/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61662 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 10-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 09-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: TARUN KUMAR ARS; SOMAL AGGARWAL
• Keywords: Charitable institution; Competent authority
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI F BENC H BEFORE SHRI U.B.S. BEDI, JM & SHRI A.N. PAHUJA, AM ITA NO.1206/DEL/2012 WITH CO NO.159/DEL./2012 ASSESSMENT YEAR:2008-09 ACIT,CIRCLE-NAJIBABAD, INCOME TAX OFFICE, STATION ROAD, WAHID NAGAR, NAJIBABAD V/S. PARMARTH IRON PVT. LTD., 10 TH K.M. STONE, NAGINA ROAD, BIJNOR [PAN NO.:AADCP 1049 C] ASSESSEE BY S/SHRI SOMAL AGGARWAL & TARUN KUMAR, ARS REVENUE BY SHRI B.R.R. KUMAR, DR DATE OF HEARING 10-05-2012 DATE OF PRONOUNCEMENT 11-05-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 9 TH MARCH, 2012 BY THE REVENUE AND THE CORRESPONDING CROSS OBJECTION[CO] FILED ON 03.05.2 012 BY THE ASSESSEE AGAINST AN ORDER DATED 25.11.2011 OF THE LD. CIT(A), BAREI LLY, RAISE THE FOLLOWING GROUNDS:- I.T.A. NO.1206/D/2012{REVENUE] 1) THE CIT(A) HAS ERRED IN LAW AND UNDER THE CIRCUMSTANCES OF THE CASE IN ALLOWING RELIEF TO THE ASSESSEE ON ACCOUNT OF SERVICE TAX LIABILITY WHICH WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER BY INVO KING THE PROVISIONS OF SECTION 43B OF THE INCOME-TAX ACT , 1961. 2) THE CIT(A) HAS ERRED IN LAW AND UNDER THE CIRCUMSTANCES OF THE CASE IN NOT APPRECIATING THAT THE SITUATION OF THE CASE WARRANTED THE APPLICABILITY O F THE ITA N O.1206 /DEL./2012& CO NO. 159/DEL./2012 2 DECISION OF THE HONBLE APEX COURT AS REPORTED IN T HE CASES OF M/S CHOWARNGHEE SALES BUREAU AS REPORTED IN 87 ITR 542 AS WELL AS IN THE CASE OF M/S SINCLAI R MURRAY & CO. AS REPORTED IN 97 ITR 615. 3) ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED IN THIS RESPECT. 4) ANY OTHER GROUND, WHICH MAY BE TAKEN DURING THE COURSE OF THE APPELLATE PROCEEDINGS. C.O. NO.159/D/2012[ASSESSEE] 1) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF LD. AO IN MAKING DISALLOWAN CE OF ` ` 1,42,500/- UNDER THE HEAD LEGAL AND PROFESSIONAL CHARGES. 2) THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER T HE ACTION OF LEARNED ASSESSING OFFICER IN MAKING ADDITIONS/ DISALLOWANCES IN THE IMPUGNED ORDER AND IN FRAMING THE IMPUGNED ASSESSMENT ORDER IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3) THAT THE CROSS OBJECTOR CRAVES THE LEAVE TO ADD , AMEND, MODIFY, DELETE ANY OF THE GROUND(S) OF CROSS OBJECT ION BEFORE OR AT THE TIME OF HEARING.. 2. ADVERTING FIRST TO GROUND NOS.1 AND 2 IN THE APP EAL OF THE REVENUE, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT E-RETURN DECLARING INCOME OF ` `25,59,420/- FILED ON 23.08.2008 BY THE ASSESSEE, WAS TAKEN UP F OR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 (HE REAFTER REFERRED TO AS THE ACT) ON 24.09.2009. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE R EFLECTED SERVICE TAX PAYABLE NOT DUE FOR AN AMOUNT OF ` `10,54,698/- IN ITS BALANCESHEET AS ON 31.3.2008.. SINCE THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE OF PAYMENT OF THE AMOUNT, THE AO DISALLOWED THE SAME IN TERMS OF PROVISIONS OF SECTI ON 43B OF THE ACT. ITA N O.1206 /DEL./2012& CO NO. 159/DEL./2012 3 3. ON APPEAL, THE LD. CIT(A) , WHILE RELYING UPON THE DECISION OF HONBLE DELHI HIGH COURT IN NOBLE & HEWITT (I) (P) LTD., (2008) ,166 TAXMAN 48 (DELHI) AS ALSO DECISION IN REAL IMAGE MEDIA TECHNO LOGIES(P) LTD.,116 TTJ 964(CHENNAI),ALLOWED THE CLAIM OF THE ASSESSEE IN T HE FOLLOWING TERMS:- THE FACTS OF THE CASES RELIED BY THE APPELLANT ARE CLEARLY APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERA TION. AS DISCUSSED ABOVE, AS A MATTER OF FACT, THE APPELLANT DID NOT CLAIM LIABILITY OF SERVICE TAX IN THE PROFIT AND LOSS ACC OUNT AND DID NOT CLAIM THE SAME IN THE COMPUTATION OF INCOME. HE WA S MAINTAINING BOOKS OF ACCOUNT ON MERCANTILE SYSTEM. THE AO DID NOT DISPUTE THE METHOD OF ACCOUNTING AND ALSO D ID NOT HAVE ANY DISPUTE ABOUT THE FACT THAT THIS LIABILITY WAS NOT DEBITED IN THE P&L ACCOUNT AND NOR WAS IT CLAIMED IN THE DETER MINATION OF TAXABLE INCOME. THEREFORE, HAVING REGARD TO THE FA CTS OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISIONS (SUPR A), THE GROUND OF APPEAL IS ALLOWED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. DR SUPPORTED THE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE SUPPORTED THE FINDINGS OF THE LD.CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSEE DID NOT CLAIM ANY DEDUCTION IN RESPECT OF LIABILITY FOR SERVICE TAX IN THE PROFIT AND LOSS AC COUNT OR IN THE COMPUTATION OF INCOME. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN T HE LIABILITY WAS NOT EVEN CLAIMED NOR DEBITED IN THE PROFIT AND LOSS ACCOUNT, CONSIDERING THE FACT THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCO UNTING, THE QUESTION OF DISALLOWING THE DEDUCTION NOT CLAIMED WOULD NOT ARI SE. MOREOVER, THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONTROVERTIN G THE AFORESAID FINDINGS OF FACTS RECORDED BY THE LD. CIT(A). IN THESE CIRCUMST ANCES, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NOS. 1 AND 2 IN THE AP PEAL OF THE REVENUE ARE DISMISSED. 6.. COMING NOW TO GROUND NO.1 IN THE CROSS OBJECTI ON OF THE ASSESSEE, ON PERUSAL OF COPY OF ACCOUNT UNDER THE HEAD LEGAL & PROFESSIONAL CHARGES, THE ITA N O.1206 /DEL./2012& CO NO. 159/DEL./2012 4 AO NOTICED AN AMOUNT OF ` `50,000/- PAID IN CASH. THE ASSESSEE DID NOT FURNI SH ANY DETAILS NOR EXPLAINED THE PURPOSE OF THE SAID E XPENDITURE .SIMILARLY, AN AMOUNT OF ` `80,000/- IS STATED TO HAVE BEEN PAID TO MR. M.L. LAHOTI TOWARDS EXPENSES AND FEES FOR FILING SLP IN THE SUPREME CO URT OF INDIA IN CONNECTION WITH MATTER RELATING TO TAMPERING OF SEAL OF THE EL ECTRIC METER ,ON INSPECTION BY THE VIGILANCE TEAM OF THE UP POWER CORPORATION LTD. . SINCE THE ASSESSEE COMMITTED AN OFFENCE AND A DEMAND OF ` ` 12,65,26,391/- WAS RAISED BY THE COMPETENT AUTHORITY, RELYING UPON DECISION IN ISWAR DAS VS. CIT,244 ITR 146(ALL.), THE AO DISALLOWED THE AMOUNT OF ` ` 1,30,000/-,INCLUDING THE AMOUNT OF ` 50,000/- OF WHICH NO DETAILS WERE FURNISHED. BESIDE , AN AMOUNT OF ` `12,500/- DEBITED ON ACCOUNT OF FEES PAID TO THE INCOME TAX COUNSEL FOR THE AY 2004-05 AND 2005-06 WAS DISALLOWED ON THE GROUND THE ASSES SEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE AMOUNT DID NOT RELATE TO THE YEAR UNDER CONSIDERATION. 7. ON APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO IN THE FOLLOWING TERMS:- THE ISSUE OF INCURRING ANY EXPENDITURE BY AN ASSES SEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE ALLOWED AS EXPENDITURE INCURRED FOR BUSINESS PUR POSE IS WELL SETTLED. IN THE CASE UNDER CONSIDERATION, THE PAYM ENT OF ` `80,000/- IS ADMITTEDLY, INCURRED IN CONNECTION WITH DEFENCE OF THE ASSESSEE ON ACCOUNT OF CRIMINAL OFFENCE. THEREFORE, THE GRO UND OF APPEAL FOR THIS CLAIM IS DISMISSED. REGARDING PAYMENT OF ` `50,000/- THE ASSESSEE DID NOT SUBMIT DETAILS BEFORE THE ASSESSIN G OFFICER AND NO SUBMISSION WAS MADE EVEN DURING APPEAL PROCEEDIN GS. THEREFORE, THE CLAIM ON THIS GROUND IS DISPOSED. T HE PAYMENT OF ` `12,500/-, ADMITTEDLY, DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION, THEREFORE, THE GROUND OF APPEAL ON T HIS ISSUE IS DISMISSED. 8. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED AR ON BEHALF OF THE ASSESSEE WHILE REITERATING THEIR SUBMISSIONS BEFORE THE LD. CIT(A) MERELY RELIED UPON THE DECISION IN CIT VS. DHANRAJGIRJI RAJA NARASINGIRJI ,91 ITR 4 58 (SC);& ANANDA MARGA ITA N O.1206 /DEL./2012& CO NO. 159/DEL./2012 5 PRACHARAKA SANGHA VS. CIT 218 ITR 284 (CALCUTTA) IN SUPPORT OF CLAIM OF DEDUCTION OF ` 80,000/- WHILE NO SUBMISSIONS WERE MADE IN RESPECT OF REMAINING AMOUNT OF ` 50,000/- & ` 12,500/-.ON THE OTHER HAND, THE LD. DR SUPPORTED TH E FINDINGS IN THE IMPUGNED ORDER OF THE CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FINDINGS O F THE LD. CIT(A), THE ASSESSEE DID NOT EVEN FURNISH ANY DETAILS NOR EXPLAINED THE PURPOSE OF EXPENDITURE OF ` 50,000/- BEFORE THE AO OR THE LD. CIT(A).EVEN BEFO RE US SITUATION IS NO BETTER AND THE LD. AR DID NOT EVEN MAKE A WHISPER IN RESPE CT OF THIS CLAIM.. SIMILARLY, IN RESPECT OF AN AMOUNT OF ` ` 12,500/-, THE LD. CIT(A) CONCLUDED THAT THE SAID PAYMENT OF ` `12,500/-, ADMITTEDLY, DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT MAKE ANY SUBMISSION IN RESPECT OF THIS AMOUNT ALSO . IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT P LACE BEFORE US ANY MATERIAL CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT (A),WE ARE NOT INCLINED TO INTERFERE. 9.1 AS REGARDS AMOUNT OF ` 80,000/- THE LD. CIT(A) CONCLUDED THAT ADMITTEDLY THE EXPENDITURE WAS INCURRED IN CONNECTION WITH DEF ENCE OF THE ASSESSEE IN A CRIMINAL OFFENCE. TO A QUERY BY THE BENCH, THE LD. AR ALSO ADMITTED THAT EXPENDITURE WAS INCURRED IN CONNECTION WITH DEFENCE OF A CHARGE OF THE CRIMINAL OFFENCE AND RELIED UPON DECISION IN DHANRAJGIRJI RA JA NARASINGIRJI (SUPRA). DESPITE OUR SPECIFIC QUERY, THE LD. AR DID NOT EXPLAIN THE NATURE OF CRIMINAL OFFENCE OR OBJECT OF THE PROSECUTION OR EVEN PURPOSE OF DEFENC E. NOT EVEN A WHISPER HAS BEEN MADE BEFORE US AS TO HOW THE EXPENDITURE IS IN CURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. WE ARE OF THE OPINION THAT THE DEDUCTIBILITY OF EXPENDITURE INCURRED IN DEFENDING A CRIMINAL PROSECUTION DEPENDS UPON THE NATURE AND OBJECT OF PROSECUTION AND THE P URPOSE OF DEFENCE. NO SUCH DETAILS WERE PLACED BEFORE THE LOWER AUTHORITIES NO R EVEN EXPLAINED BEFORE US. THE DECISION IN DHANRAJGIRJI RAJA NARASINGIRJI (SUP RA) RELATES TO INITIATION OF A ITA N O.1206 /DEL./2012& CO NO. 159/DEL./2012 6 CRIMINAL PROSECUTION WITH A VIEW TO BRING ABOUT A SETTLEMENT OF CIVIL CLAIMS ARISING OUT OF BUSINESS AND NOT IN RELATION TO DEFE NCE OF A CRIMINAL PROSECUTION. THE LD. AR DID NOT EXPLAIN BEFORE US AS TO HOW THIS DECISION HELPS THE ASSESSEE . THE DECISION IN ANANDA MARGA PRACHARAKA SANGHA(SUP RA) RELATED TO THE ISSUE AS TO WHETHER EXPENSES INCURRED IN PROVIDING DEFEN CE TO THE HEAD & AND EXECUTIVE MEMBERS OF THE CHARITABLE TRUST IN CRIMI NAL PROCEEDINGS WOULD NOT ATTRACT PROVISIONS OF SEC. 13(1)(C) OF THE ACT. THE LD. AR DID NOT DEMONSTRATE BEFORE US AS TO HOW THIS DECISION IS APPLICABLE IN THE INSTANT CASE WHEN NEITHER THE RELEVANT DETAILS RELATING TO NATURE AND OBJECT OF PROSECUTION OR THE PURPOSE OF DEFENCE, ARE AVAILABLE BEFORE US. ADMITTEDLY, TH E EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE FOR DEFENDING A CRIMINAL O FFENCE AND THERE IS NO MATERIAL BEFORE US AS TO WHETHER THE EXPENDITURE I S INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE. IN THE ABSENCE OF ANY BASIS ,WE ARE NOT INCLINED TO INTERFERE. 9.3 IN VIEW OF THE FOREGOING, GROUND NO.1 IN THE AP PEAL OF THE ASSESSEE IS DISMISSED. 10.. GROUND NO. 3 IN THE APPEAL OF THE REVENUE AND GROUND NO.2 IN THE CROSS OBJECTION OF THE ASSESSEE, BEING GENERAL IN N ATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HA VING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.4 IN THE APPEAL OF THE REVENUE AND GROUND NO.3 IN THE CROSS OBJECTION OF THE ASSESSEE, ACCORDINGLY, A LL THESE GROUNDS ARE DISMISSED. 11. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. ITA N O.1206 /DEL./2012& CO NO. 159/DEL./2012 7 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AND THE ASSESSEE ARE DISMISSED. SD/- SD/- (U.B.S. BEDI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. ASSESSEE 2. ACIT,CIRCLE-NAJIBABAD, INCOME TAX OFFICE, STATIO N ROAD, WAHID NAGAR, NAJIBABAD 3. CIT CONCERNED. 4. CIT (APPEALS), BAREILLY 5. THE DR, ITAT,F BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT