ASST CIT 9(2), MUMBAI V. K.P. POWER P. LTD, MUMBAI

ITA 1348/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8182 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 16-10-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 15-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Keywords: Difference of opinion

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. . .. . . .. . , ,, , !'# !'# !'# !'#, ,, ,! !! !. .. . . . . . BEFORE S/SH.H.L.KARWA,PRESIDENT AN D RAJENDRA,ACCOUNTANT MEMBER ./ ITA 1348/MUM/2011 % % % % & & & & / // / ASSESSMENT YEAR 2003-04 ACIT RANGE 9(2), 218 AAYKAR BHVAVAN, M K ROAD,MUMBAI-20 % V/S. M/S. K.P.POWER PVT.LTD. 229/230 ARUN CHAMBERS 2 ND FLOOR,TARDEO,MUMBAI PAN: AABCK9495M ( '( / // / APPELLANT ) ( )*'( / RESPONDENT ) REVENUE BY : SHRI ASGHAR ZAIN V.P. ASSESSEE BY : NONE % + ,- / DATE OF HEARING : 16-1 0 -2014 ./& + ,- /DATE OF PRONOUNCEMENT : 16 -1 0 -201 4 % % % % , 1961 1961 1961 1961+ + + + 254 254 254 254( (( (1 11 1) )) )! !! ! ',8, ',8, ',8, ',8, 9!: 9!: 9!: 9!: ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM - -- -! 9< ! 9< ! 9< ! 9<, ,, , !'# ! % !'# ! % !'# ! % !'# ! % : CHALLENGING THE ORDER DATED OF CIT(A)-20,MUMBAI THE ASSESSING OFFICER(AO)HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ERRED IN CANCELING PENALTY IMPOSED U/S. 271(1)(C)OF RS.5,25,723/- IGNO RING THE FACT THAT THE ADDITION WITH REFERENCE TO WHICH PENALTY WAS IMPOSED STANDS CONFIRMED IN APPEA L AND THE PENALTY IS WARRANTED IN CONFORMITY WITH THE DECISION OF THE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS & OTHERS (306 ITR 277). 2.THE ASSESSEE PRAYS THAT THE ORDER OF THE CIT(A) O N THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3.THE ASSESSEE CRAVES LEAVE TO AMENDED OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. BRIEF FACTS OF THE CASE: THE SUBJECT MATTER OF PENALTY IS THE ADDITION AGGRE GATING TO RS.14,30,000/- COMPRISING RS.10,00, 000/-ON ACCOUNT OF DISALLOWANCE OF MANAGEMENT FEES, RS.2,15,000/-ON ACCOUNT OF DISALLOWANCE OF SITE DEVELOPMENT EXPENSES AND RS.2,15,540/-ON ACCOU NT OF DISALLOWANCE OF DEDUCTION U/S. 80IA. THE AO HAD ORIGINALLY MADE DISALLOWANCE OF RS.30 LA KHS TOWARDS MANAGEMENT FEES.HOWEVER, ON APPEAL,THE FIRST APPELLATE AUTHORITY(FAA)REDUCED TH E DISALLOWANCE TO RS.10 LAKHS,AS SHE WAS THE VIEW THAT THE CLAIM WAS EXCESSIVE IN TERMS OF THE P ROVISIONS OF SECTION 40A(2)(B)OF THE ACT. THE ASSESSEE DID NOT APPEAL FURTHER,BUT THE DEPARTMENT CHALLENGED THE PART RELIEF GRANTED BY THE FAA,BEFORE THE I.T.A.T.,WHICH DISMISSED THE APPEAL OF THE AO. REGARDING SITE DEVELOPMENT EXPENSES, THE ASSESSEE H AD DEBITED TOTAL SUM OF RS.32,15,000/- OUT OF WHICH, RS.30 LAKHS WAS PAID TO M/S. KING PRAVRS LTD AND THE BALANCE OF RS.2,15,000/-WAS SPENT BY ITSELF.ON BEING ASKED TO GIVE DETAILS,THE ASSESS EE EXPLAINED TO THE AO THAT THE NATURE, FREQUENCY AND THE SCALE OF EXPENSES BEING SO SMALL THAT IT WAS NOT POSSIBLE TO GIVE DETAILS. THIS LED DISALLOWANCE OF THE EXPENSES OF RS.2,15,000/-. AS REGARDS DEDUCTION U/S 80IA,THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.2,15,540/- UND ER THAT SECTION ON INCOME COMPRISING DEVELOPMENT CHARGES OF RS.36,39,233/- AND LEASE RENT OF RS.6,00,000/- AGGREGATING TO RS.42,39,233/-. THE AS SESSEE HAD CLAIMED DEDUCTION ON THE GROUND THAT IT WAS ENGAGED IN THE BUSINESS OF GENERATION O R GENERATION AND DISTRIBUTION OF POWER WHICH ITA/1348/KPPL/03-04 2 WAS THE ELIGIBLE BUSINESS U/S. 80IA. THE AO WAS OF THE VIEW THAT INCOME CLAIMED ON ACCOUNT OF DEVELOPMENT CHARGES AND LEASE RENT WAS NOT INCOME D ERIVED FROM THE GENERATION AND DISTRIBUTION OF POWER AND, HENCE, WAS NOT ELIGIBLE FOR DEDUCTION U/S,80IA. THIS LED TO DISALLOWANCE OF DEDUCTION CLAIMED OF RS.2,15,540/-.ON APPEAL,THE FA A WAS OF THE VIEW THAT BEFORE DENYING THE DEDUCTION THE AO HAD NOT EXAMINED THE DETAILS IN TE RMS OF PROVISIONS OF SECTION 80IA(4)(IV)(B) OF THE ACT. SHE, THEREFORE, DIRECTED THE AO TO EXAMINE THE CLAIM AND ALLOW IF THE SAME WAS COVERED BY THE AFORESAID PROVISIONS.HOWEVER, IN THE CONSEQU ENT PROCEEDINGS THE AO IN THE ABSENCE OF ANY RESPONSE FROM THE ASSESSEE RETAINED THE DISALLOWANC E MADE IN THE ASSESSMENT. 2 .IN THE COURSE OF THE PENALTY PROCEEDINGS,THE ASSES SEE CONTENDED THAT NO PENALTY COULD BE LEVIED, AS IT HAD FURNISHED ALL PARTICULARS AND IT WAS ONLY ON ACCOUNT OF REJECTION OF ITS EXPLANATION THAT TH E AO HAD RESORTED TO THE IMPUGNED DISALLOWANCES,THAT IT HAD NOT CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME SO AS TO ATTR ACT LEVY OF PENALTY. THE AO DID NOT AGREE.HE OBSERVED THAT THE ADDITIONS WERE MADE NOT BECAUSE T HE AO WAS NOT SATISFIED BY THE EXPLANATION OF THE ASSESSEE,BUT BECAUSE THE ASSESSEE COULD NOT SUB STANTIATE ITS CLAIM OF DEDUCTION WITH SUPPORTING AND DOCUMENTARY EVIDENCES. HE ALSO REFERRED TO THE FACT THAT ON APPEAL THE FAA HAD CONFIRMED PART OF THE DISALLOWANCES.HE,THEREFORE, CONCLUDED T HAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME AND LEVIED THE MINIMUM PENALT Y OF RS.5,25,723/-. 3. BEING AGGRIEVED BY THE PENALTY ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA AND MADE SUBMISSION.AFTER CONSIDERING THE ASSESSMEN T ORDER,PENALTY ORDER AND THE REPLY OF THE ASSESSEE, THE FAA HELD THAT IN THE CASE OF ATUL MOH AN BINDAL(317ITR1),THE HONBLE APEX COURT HAD HELD THAT FOR APPLICABILITY OF SECTION 271(1)(C )THE CONDITIONS STATED THEREIN MUST EXISTS,THAT THE CONDITIONS WERE THAT THE ASSESSEE SHOULD HAVE CONCE ALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME BEFORE THE PE NALTY U/S 271(1)(C)COULD BE LEVIED.HE ALSO REFERRED TO THE DECISION OF THE APEX COURT DELIVERE D IN THE MATTER OF RELIANCE PETRO PRODUCTS P. LTD.(322ITR158) AND HELD THAT WHEN THE ASSESSEE FUR NISHED ALL DETAILS OF EXPENDITURE AS WELL AS INCOME IN ITS RETURN WHICH DETAILS IN THEMSELVES WE RE NOT FOUND TO BE INACCURATE THEN IT COULD NOT BE VIEWED AS THE CONCEALMENT OF INCOME,THAT IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT AND MERELY BECAUSE THE ASSESSEE HAD C LAIMED THE EXPENDITURE WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE AS TH E SAME WAS NOT SUSTAINABLE IN LAW, THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)( C).HE FURTHER HELD THAT THE ASSESSEE HAD NOT CONCEALED ANY INCOME,THAT IT HAD MADE CLAIMS WHICH WERE HELD NOT ADMISSIBLE OR SUSTAINABLE IN LAW,THAT THE PARTICULARS OF CLAIMS WERE NOT FOUND I NACCURATE, INCORRECT OR FALSE,THAT THE CLAIMS WERE NOT PERMISSIBLE UNDER THE LAW,THAT A MERE MAKING OF THE CLAIM WHICH WAS NOT SUSTAINABLE IN LAW WOULD NOT AMOUNT TO FURNISHING INACCURATE PARTICULA RS OF INCOME.FINALLY,HE DELETED THE PENALTY IMPOSED BY THE AO. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)ARGUED THA T THE ASSESSEE HAD CONCEALED THE PARTICU - LARS OF INCOME,THAT ADDITION OF RS.10 LAKHS ON ACCO UNT OF MANAGEMENT FEES WAS NOT CONTESTED BY THE ASSESSEE IN APPEAL,THAT IT DID NOT FILE DETAILS ABOUT SITE EXPENSES OR THE DEDUCTION CLAIMED U/S.80IA OF THE ACT.NOBODY APPEARED ON BEHALF OF TH E ASSESSEE. WE HAVE PERUSED THE MATERIAL AVAILABLE OR RECORD.WE FIND THAT THE ISSUE OF DEDUCTION U/S.80IA WAS RESTORED BACK TO THE FILE OF THE AO BY THE FAA,THAT THERE WAS DIFFERENCE OF OPINION ABOUT THE DISALLOWANCE MADE AS PER THE PROVISIONS OF SECTION 40A(2)(B)OF THE ACT AND FOR THE SITE EXPENSES THE ASSESSEE COULD NOT FURNISH DETAILS DUE TO SMALL NESS OF AMOUNT.IN OUR OPINION ADDITION MADE BY THE AO DURING THE ASSESSMENT PROCEEDINGS OR THEIR C ONFIRMATION BY THE APPELLATE AUTHORITIES DO NOT ATTRACT THE PENAL PROVISIONS IN A ROUTINE AND A UTOMATIC MANNER.FOR INVOKING THE PROVISIONS OF SECTION 271(1)(C)OF THE ACT,FILING OF INACCURATE PA RTICULARS OR CONCEALMENT OF PARTICULARS OF INCOME ITA/1348/KPPL/03-04 3 IS A PRE-CONDITION.IT IS SAID THAT PENALTY PROCEEDI NGS ARE ENTIRELY DISTINCT FROM ASSESSMENT PROCEEDINGS AND,HOWSOEVER RELEVANT AND GOOD,THE FIN DINGS IN ASSESSMENT PROCEEDINGS MAY BE, THEY ARE NOT CONCLUSIVE SO FAR AS THE PENALTY PROCE EDINGS ARE CONCERNED. IN THE MATTER UNDER CONSIDERATION PENALTY HAS BEEN LEVIED FOR FILING INACCURATE PARTICULARS AND NOT FOR CONCEALMENT.FROM THE ORDER OF THE AO IT IS NOT CLEAR AS WHICH PARTICULARS WERE NOT ACCURATE. THE ASSESSEE HAD FILED DETAILS ABOUT THE MANAGEMENT FEE BETWEEN THE AO AND THE ASSESSEE- COMPANY.THE AO HAD NOT DOUBTED THE GENUINENESS OF T HE PAYMENT MADE BY THE ASSESSEE.HE WAS OF THE OPINION THAT SAME WAS EXCESS AND THEREFORE H E ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. IN OUR OPINION,ADDITION MADE BY THE AO WAS JUSTIFIE D,BUT FOR THAT DISALLOWANCE PENALTY U/S.271(1) (C) SHOULD NOT HAVE BEEN LEVIED.WE FIND THAT IN THE CASE OF SANDUR MANGANESE AND IRON ORES LTD. THE HONBLE KARNATAKA HIGH COURT(363ITR160),HAS DEA LT THE SIMILAR ISSUE AS UNDER: IT IS SETTLED LAW,IMPOSITION OF PENALTY IS NOT AUT OMATIC. IT IS ONLY WHEN THERE IS AN ATTEMPT TO EVAD E TAX BY OFFERING EXPLANATION WHICH IS FOUND TO BE FA LSE OR NOT BONA FIDE THE PENALTY CAN BE IMPOSED. IN THE FACTS OF THE CASE, WE ARE ALSO SATISFIED THA T THE IMPOSITION OF PENALTY BY THE LOWER APPELLATE AUTHORITY WAS NOT JUSTIFIED OR THE MATERIAL ON RECO RD AND THE TRIBUNAL WAS JUSTIFIED FROM SETTING ASIDE THE ORDER OF IMPOSING PENALTY. IN THAT MATTER THE AO HAD MADE CERTAIN ADDITIONS TO THE INCOME OF THE ASSESSEE AND SAME WERE CONFIRMED BY THE FAA.WHILE DECIDING THE APPEAL,THE FAA HAD LEVIED PENALTY U/S.271(1)(C)OF THE ACT.THE ASSESSEE PREFERRED APPEALS BEFORE THE TRIBU NAL AGAINST THE ADDITIONS AS WELL AS THE PENALTY.THE TRIBUNAL UPHELD THE ADDITIONS,BUT DELET ED THE PENALTY.DEPARTMENT CHALLENGED THE ORDER OF THE ITAT BEFORE THE HONBLE HIGH COURT,BUT APPEAL FILED BY IT WAS DISMISSED.IN OUR OPINION,MERE MAKING OF A CLAIM WHICH WAS ULTIMATELY FOUND TO BE UNSUSTAINABLE MAY NOT BY ITSELF AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGA RDING THE INCOME.THE CASE BEFORE US,FALLS IN THE SAME CATEGORY.THEREFORE,ENDORSING THE ORDER OF THE FAA,WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED . =,> % ?, - @ 9A + 8 % B + , CD. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH OCTOBER,2014. 9!: + ./& ! ' E 16 FGB , 2014 / + 8 . SD/- SD/- (H.L.KARWA/ . .. . . .. . ) ( !'# !'# !'# !'# / RAJENDRA) PRESIDENT/ ! ! ! ! 9< 9< 9< 9< /ACCOUNTANT MEMBER / MUMBAI, H9% /DATE: 16.10.2014 SK 9!: 9!:9!: 9!: + ++ + ),I ),I ),I ),I J!I&, J!I&, J!I&, J!I&, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '( 2. RESPONDENT / )*'( 3. THE CONCERNED CIT(A)/ K L , 4. THE CONCERNED CIT / K L 5. DR ITAT,I BENCH,MUMBAI/ IM8 ),% , . . ' . - . 6. GUARD FILE/ 8 = . *I, ), //TRUE COPY// 9!:% / BY ORDER, N / C DY./ASST. REGISTRAR , /ITAT, MUMBAI.