M/s. Caparo Engineering India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1247/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65477 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 14-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRITHI LAL
• Keywords: Wrong claim; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI JOGINDER SINGH: JUDICIAL MEMBER & SHRI SHAMIM YAHYA: ACCOUNTANT MEMBER ITA NO. 1172/DEL/12 A.YRS. 2005-06 ACIT, CIRCLE 3(1), VS. M/S CAPARO ENGINEERING IND IA PVT. LTD. NEW DELHI. 101-104, 1 ST FLOOR, NAURANG HOUSE, 21, K.G. MARG, NEW DELHI-110001. PAN: AABCC 7862 N ITA NO. 1247/DEL/12 A.YRS. 2005-06 M/S CAPARO ENGINEERING INDIA PVT. LTD. VS. ACIT, C IRCLE 3(1), 101-104, 1 ST FLOOR, NAURANG HOUSE, NEW DELHI. 21, K.G. MARG, NEW DELHI-110001. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI P.C. YADAV ADV. REVENUE BY : SHRI PRITHI LAL SR. DR O R D E R PER JOGINDER SINGH, J.M: : THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS AP PEALS, CHALLENGING THE ORDER OF THE LD. CIT(A) DATED 5 TH DECEMBER 2011. 2. THE REVENUE IS AGGRIEVED WITH THE DIRECTION OF T HE LD. FIRST APPELLATE AUTHORITY TO DELETE THE PENALTY TO THE EXTENT OF DI SALLOWANCE MADE UNDER THE HEAD REPAIRS AND MAINTENANCE TO PALLET AND BINS, WH EREAS THE ASSESSEE IS AGGRIEVED IN PARTLY UPHOLDING THE PENALTY IMPOSED B Y THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SEC. 271(1)(C) OF THE AC T TO THE EXTENT OF RS. 10 LACS ON BUSINESS DEVELOPMENT EXPENSES. ITA 1172 & 1247/DEL/12 CAPARO ENGINEERING INDIA PVT. LTD. 2 3. DURING HEARING WE HAVE HEARD SHRI P.C. YADAV LEA RNED COUNSEL FOR THE ASSESSEE AND SHRI PRITHI LAL LD. SR. DR. 4. IN THE APPEAL OF THE ASSESSEE, THE CRUX OF THE A RGUMENTS IS THAT DURING QUANTUM PROCEEDINGS TWO DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER AND THE ADVANCE TAX ON RS. 40 LACS WAS PAI D BY THE ASSESSEE. SINCE THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THEREFORE, NO PENALTY IS LEVIABLE AS THE CL AIMS WERE MADE IN A BONA FIDE MANNER. 5. LEARNED COUNSEL FOR THE ASSESSEE FURTHER ASSERT ED THAT EXPLANATION B TO SEC. 271(1)(C) IS ALSO NOT APPLICABLE TO THE FAC TS OF THE PRESENT APPEAL. THE LD. COUNSEL PLACED RELIANCE UPON THE DECISION O F THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PFIZER LTD. (ITA NO. 15 4/MUM/10) ALONG WITH DECISION IN THE CASE OF DHARMENDRA TEXTILE. RELIAN CE WAS ALSO PLACED UPON THE DECISION IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC); MS. MADHUSHREE GUPTA V. UNION OF INDIA & ANR . (2009) 317 ITR 107 (DEL.). THE CRUX OF THE ARGUMENT ON BEHALF OF THE A SSESSEE IS THAT ALL MATERIAL FACTS WERE DULY DISCLOSED BY THE ASSESSEE. THE PAYM ENTS WERE MADE BY CHEQUES, THEREFORE, NO PENALTY WAS LEVIABLE. 6. ON THE OTHER HAND, LD. SR. DR ASSERTED THAT THE PENALTY WAS RIGHTLY IMPOSED AS THE FALSE CLAIM WAS MADE BY THE ASSESSEE . THE LD. SR. DR ALSO CHALLENGED THE PART RELIEF GRANTED TO THE ASSESSEE. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 8. THE FACTS, IN BRIEF, ARE THAT ASSESSEE DECLARED INCOME OF RS. 1,19,07,361/- IN ITS RETURN. THE ASSESSMENT WAS CO MPLETED ON 28-12-2007 U/S 143(3) OF THE ACT, ASSESSING THE INCOME OF RS. 1,52,95,008/-. THE ASSESSING OFFICER MADE DISALLOWANCE OF RS. 13,70,3 27/- ON ACCOUNT OF ITA 1172 & 1247/DEL/12 CAPARO ENGINEERING INDIA PVT. LTD. 3 REPAIR & MAINTENANCE EXPENSES FOR BINS BY CAPITALIZ ING THE SAME. DISALLOWANCE OF RS. 10 LACS WAS ALSO MADE ON ACCOUN T OF BUSINESS DEVELOPMENT EXPENSES. THE ASSESSMENT ORDER WAS CHA LLENGED BEFORE THE LD. CIT(A). THE APPEAL OF THE ASSESSEE WAS DISMISSED. 8.1. THE LD. ASSESSING OFFICER INITIATED PENALTY P ROCEEDINGS U/S 271(1)(C) FOR THE AFORESAID ADDITIONS. THE CRUX OF ARGUMENTS EVEN BEFORE THE LD. CIT(A) WAS THAT THE ADDITION WAS MADE DUE TO DIFFER ENCE OF OPINION AND AT THE SAME TIME, NEITHER THERE IS CONCEALMENT OF INCO ME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE STAND OF THE REVENUE IS THAT THE ASSESSEE COMPANY FAILED TO FILE DOCUMENTARY EVIDENC E TO SUBSTANTIATE ITS CLAIM FOR SUCH EXPENSES. 8.2. SO FAR AS THE DISALLOWANCE ON ACCOUNT OF BUSIN ESS DEVELOPMENT EXPENSES IS CONCERNED, THE CLAIM OF THE ASSESSEE I S THAT IN THE INTEREST OF BUSINESS THE PERSONS FROM AUTOMOBILE INDUSTRIES WER E INVITED AND THE CONFERENCE WAS JOINTLY ORGANIZED WITH ANOTHER GROUP COMPANY, NAMELY, CAPARO MARUTI LTD. AND THUS THE TOTAL COST OF HOSPI TALITY/ BUSINESS PROMOTION EXPENSES WAS TO THE TUNE OF RS. 18,86,750/-, OUT OF WHICH THE AMOUNT OF RS. 8,86,750/- WAS BORNE BY OTHER GROUP COMPANY AND THE REMAINING AMOUNT OF RS. 10 LACS WAS BORNE BY THE ASSESSEE COMPANY. THE COPY OF BILL ALONG WITH PAYMENT RECEIPTS WERE DULY PRODUCED BEFORE THE AUTH ORITIES. IT IS PERTINENT TO MENTION HERE THAT THE PAYMENTS WERE MADE THROUGH CH EUQES. UNCONTROVERTEDLY THE COPY OF THE BILL ALONG WITH CO PY OF THE INTERNAL CORRESPONDENCE WITH THE GROUP COMPANY WERE FILED DU RING APPELLATE PROCEEDINGS. THIS IS ALSO AN ADMITTED FACT THAT DUR ING ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED BY THE ASSESSIN G OFFICER TO FILE THE DETAILS OF EXPENSES AND THE SAME WERE FILED. THE AS SESSING OFFICER WAS OF THE VIEW THAT CLAIM OF REPAIR & MAINTENANCE IN RESP ECT OF BINS AND PALLETS ITA 1172 & 1247/DEL/12 CAPARO ENGINEERING INDIA PVT. LTD. 4 WAS UNDER THE HEAD FABRICATION CHARGES, WHEREAS THE CLAIM OF THE ASSESSEE WAS THAT BINS AND PALLETS WERE PURCHASED DURING THE RELEVANT ASSESSMENT YEAR ON CAPITAL ACCOUNT AND THE SAME WERE DULY CAPI TALIZED IN THE BALANCE- SHEET. ANOTHER QUESTION ARISES WHETHER QUANTUM PROC EEDINGS AND PENALTY PROCEEDINGS ARE DIFFERENT. OBVIOUSLY THESE PROCEEDI NGS ARE DIFFERENT BUT CERTAINLY AFFECT EACH OTHER AND FACTS AND CIRCUMSTA NCES HAVE TO BE CONSIDERED INDEPENDENTLY. ANOTHER QUESTION ARISES, WHETHER THE RE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THERE IS NO DISPUTE TO THE FACT THAT THE PAYMENTS WERE MADE THROUGH CHE QUE AND THE CONFERENCE WAS CONDUCTED FOR THE PURPOSE OF BUSINESS PROMOTION BY INVITING THE PERSONS RELATING TO THE AUTOMOBILE INDUSTRIES JOINTLY WITH THE GROUP COMPANY. THE INCURRING OF EXPENSES IS ALSO NOT IN DOUBT. THE DIS ALLOWANCE WAS MADE ON THE GROUND THAT THE NAME OF THE COMPANY WAS NOT MEN TIONED ON THE BILL, WHICH WAS ISSUED BY ITC MAURYA ( A GOVT. OF IND IA HOTEL). THE JOINT ORGANIZATION OF THE CONFERENCE IS ALSO NOT IN DOUBT . IN SUCH A SITUATION, INCURRING OF EXPENSES IS NOT IN DOUBT. THERE IS A D IFFERENT MATTER THAT PART DISALLOWANCE OR DISALLOWANCE WAS MADE. SO FAR AS TH E FURNISHING OF HAND BILLS IS CONCERNED, IT IS NOT NECESSARY THAT IN EAC H AND EVERY CASE THE HAND BILLS ARE PRINTED ESPECIALLY WHEN JOINT ORGANIZATIO N OF THE CONFERENCE IS NOT IN DOUBT; SPECIALLY WHEN THE PAYMENT WAS MADE THROU GH CHEQUE, THAT TOO TO A GOVT. HOTEL. 9. FOR IMPOSING PENALTY U/S 271(1)(C), EITHER THERE SHOULD BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. EVEN OTHERWISE, AS HELD BY THE HONBLE APEX COURT I N THE CASE OF RELIANCE PETROPRODUCTS LTD. (SUPRA), MERE MAKING A WRONG CLA IM BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGA RDING INCOME OF THE ITA 1172 & 1247/DEL/12 CAPARO ENGINEERING INDIA PVT. LTD. 5 ASSESSEE AND DISALLOWANCE OF EXPENSES WILL NOT PER SE AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. 9.1. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AJAYAB SINGH & CO. 253 ITR 630 HELD THAT MERELY BEC AUSE CERTAIN EXPENSES CLAIMED BY THE ASSESSEE WERE DISALLOWED, CANNOT MEA N THAT THE PARTICULARS FURNISHED BY THE ASSESSEE WERE WRONG. THE DISALLOWA NCE OF EXPENSES PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INACCUR ATE PARTICULARS OF ITS INCOME. 9.2. UNCONTROVERTEDLY THE CONFERENCE WAS JOINTLY OR GANIZED. THE PAYMENT WAS MADE BY CHEQUES, THAT TOO TO A GOVT. HOTEL. T HEREFORE, FOR MAKING DISALLOWANCE NO PENALTY IS LIABLE TO MADE U/S 271(1 )(C). 9.3. THE HONBLE MADHYA PRADESH HIGH COURT IN THE C ASE OF CIT VS. SKYLINE AUTO PVT. LTD. 271 ITR 335 EVEN WENT TO THE EXTENT, WHEN MISTAKE IS BONA FIDE, IS NOT A GOOD GROUND FOR IMPOSING PENALT Y U/S 271(1)(C). THERE MAY BE A GOOD GROUND FOR QUANTUM ADDITION BUT MAY N OT BE SO GOOD FOR IMPOSING PENALTY U/S 271(1)(C). 9.4. IN THE ABSENCE OF HAND BILLS ETC., PROOF OF PA YMENT OF BILL TO A GOVT. HOTEL, THAT TOO THROUGH CHEUQE IS ALSO A GOOD EVIDE NCE FOR INCURRING EXPENSES. 9.5. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO CLA IMED THAT THE EXPENSES WERE FULLY ALLOWED IN THE CASE OF CAPARO MARUTI LTD . IN ORDER U/S 143(3) OF THE ACT PASSED BY THE LD. ASSESSING OFFICER . THE C OPY OF THE BILL ALONG WITH THE PROOF OF PAYMENT WAS DULY PLACED ON RECORD DURI NG ASSESSMENT PROCEEDINGS ITSELF, WHICH HAS BEEN MADE PART OF TH E PAPER BOOK (PAGES 30 TO 32 OF THE PAPER BOOK). SO FAR AS THE ISSUANCE OF BI LL TO A PARTICULAR NAME IS CONCERNED, IT WAS EXPLAINED BY THE LD. COUNSEL THAT BILL WAS NOT ISSUED IN ONE NAME AS THE COST WAS SHARED ON MUTUAL BASIS. BUT TH E FACT REMAINS THAT THE ITA 1172 & 1247/DEL/12 CAPARO ENGINEERING INDIA PVT. LTD. 6 IMPUGNED AMOUNT WAS PAID ON ACCOUNT OF BILL TO ITC MAURYA. SO FAR AS PENALTY PROCEEDINGS AND QUANTUM PROCEEDINGS ARE CON CERNED, IT WAS HELD BY VARIOUS JUDICIAL PRONOUNCEMENTS THAT BOTH PROCEEDIN GS ARE DISTINCT AND SEPARATE AND THE ASSESSMENT PROCEEDING WOULD NOT A UTOMATICALLY JUSTIFY THE REVENUE TO IMPOSE PENALTY U/S 271(1)(C). THE RATIO LAID DOWN IN CIT VS. DHARAM CHAND L. SHAH 204 ITR 462 (BOM.) SUPPORTS TH IS VIEW. THE WORD CONCEALMENT EMPLOY SOMETHING MORE THAN MERE FAIL URE TO DISCLOSE. WHEN THE INCURRING OF EXPENSES FOR THE CONFERENCE W AS NOT IN DOUBT, THEREFORE, THERE IS NO QUESTION OF CONCEALMENT OF I NCOME. 9.6. SO FAR AS THE CONTENTION OF THE REVENUE THAT T HE EXPENSES WERE NOT INCURRED FOR BUSINESS PURPOSES IS CONCERNED, WE ARE NOT CONCURRING WITH SUCH PROPOSITION, ESPECIALLY WHEN THE EXPENDITURE WAS IN FACT INCURRED FOR COMMERCIAL EXPEDIENCY. THEREFORE BUSINESS INTEREST ARE TO BE LOOKED AFTER BETTER BY THE ASSESSEE AND NOT BY THE REVENUE. THE RATIO LAID DOWN IN ADDL. CIT VS. KUBERSINGH BHAGWANDAS (1979) 118 ITR 379 (M P)(FB) SUPPORTS THIS VIEW. IDENTICAL RATIO WAS LAID DOWN IN USHERS WILTSHIRE BREWERY LTD. VS. BRUCE 6 TAX CASE 399; AND J.R. PATEL & SONS (P) LTD. VS. CIT 69 ITR 782 (GUJ.). THE TRUE TEST OF EXPENDITURE LAID OUT W HOLLY OR EXCLUSIVELY FOR THE PURPOSE OF TRADE OR BUSINESS HAS BEEN WELL DEFINE D BY THE HONBLE APEX COURT IN CIT VS. DELHI SAFE DEPOSITS CO. LTD. 133 I TR 756 (SC); AND THE HONBLE BOMBAY HIGH COURT IN IAC V. BAJAJ TEMPO LTD . 202 ITR 36 (BOM.). FOR INCURRING EXPENSES, SOME TIMES THERE AR E INDIRECT BENEFIT TO THE ASSESSEE AND SOME TIMES MAY NOT BE DIRECT AND IMMED IATE BENEFITS, THEREFORE, INCURRING OF EXPENDITURE CANNOT BE SAID TO BE FOR NON BUSINESS PURPOSE UNDER THE FACTS. OUR VIEW IS SUPPORTED BY T HE RATIO OF DECISION IN CIT V. SALES MAGNESITE (P) LTD. 214 ITR 1 (BOM.). ITA 1172 & 1247/DEL/12 CAPARO ENGINEERING INDIA PVT. LTD. 7 9.7. SO FAR AS REASONABLENESS OF EXPENDITURE IS CON CERNED, ITS COMMERCIAL EXPEDIENCY HAS TO BE ADJUDGED FROM THE POINT OF VIE W OF THE BUSINESSMAN AS HAS BEEN HELD IN CIT VS. PANIPAT WOOLLEN & GENERAL MILLS CO. LTD. 103 ITR 66 (SC); AND N.M. RAYALOO IYER & SONS V. CIT 26 ITR 265 (MAD.). 9.8. SINCE THERE IS NEITHER CONCEALMENT OF INCOME N OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THEREFORE, NO PEN ALTY IS LEVIABLE. CONSEQUENTLY, THE APPEAL OF THE REVENUE IS DISMISSE D, WHEREAS THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21-09-2012. SD/- SD/- ( SHAMIM YAHYA ) ( JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21-09-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 1172 & 1247/DEL/12 CAPARO ENGINEERING INDIA PVT. LTD. 8