National Dairy Development Board, Anand V. The ACIT.,Anand Circle, Anand

ITA 1476/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5848 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 15-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ANJAY R SHAH JAMES KURIAN
• Keywords: Wrong claim; Revenue expenditure

Judgement Text

ITA NO. 1476 & 1542 /AHD/2014 ASSESSMENT YEAR : 2005 - 06 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDBAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM ] ITA NO. 1476 /AHD/2014 ASSESSMENT YEAR : 20 05 - 06 NATIONAL DAIRY DEVELOPMENT BOARD, .. .. .. . .....APPELLANT P.O. BOX NO.40, ANAND 388 001 (GUJARAT) [PAN: AA B CN 2029 C ] VS. ASSTT. COMMISSIONER OF INCOME TAX ANAND CIRCLE, A NAND . .. ..................RESPONDENT ITA NO. 1 542 /AHD/2014 ASSESSMENT YEAR : 2005 - 06 ASSTT. COMMISSIONER OF INCOME TAX ANAND CIRCLE , ANAND. .. ..................APPELLANT VS. NATIONAL DAIRY DEVELOPMENT BOARD, .. .. .. . ..... RESPONDENT P.O. BOX NO.40, ANAND 388 001 (GUJARAT) [PAN: AABCN 2029 C] APPEARANCES BY: S ANJAY R. SHAH F OR THE A SSESSEE JAMES KURIAN FOR THE REVENUE DATE OF CONCLUDING THE HEARING : MARCH 09, 2017 DATE OF PRONOUNCING THE ORDER : MAY 26 , 2017 O R D E R PER PRAMOD KUMAR AM: 1. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 18.02.2014 , PASSED BY THE LEARNED CIT(A), IN THE MATTER OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME T AX ACT 1961 , IMPOSED ON THE ASSESSEE FOR THE ASSESSMENT YEAR 200 5 - 06 . 2. IN THE IMPUGNED ORDER, LEARNED CIT ( A ) HAS GRANTED PARTIAL RELIEF TO THE ASSESSEE BUT NO NE OF THE PARTIES IS SATISFIED BY THE STAND SO T AKEN B Y THE LEARNED C IT(A) . THE PARTIES ARE IN APPEAL BEFORE US AND HAVE RAISED THE FOLLOWING GRIEVANCES : - ITA NO. 1476 & 1542 /AHD/2014 ASSESSMENT YEAR : 2005 - 06 PAGE 2 OF 5 I) GRIEVANCES RAISED BY THE ASSESSEE: - 1. THE ORDER PASSED BY THE LEARNED CIT(A) IS ERRONE OUS AND CONTRARY TO THE PROVISIONS OF LAW AND FACTS AND THEREFORE REQUIRES TO BE SUITABLY MODIFIED. IT IS SUBMITTED THAT IT BE SO DONE NOW. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT BEING A COMPANY ESTABLISHED UNDER AN ACT OF THE PARLIAMENT, NAMELY NDDB ACT THERE CANNOT BE ANY MALAFIDE INTENTION ON ITS PART TO DEFRAY THE REVENUE. IT IS SUBMITTED IT BE SO HELD NOW AND PENALTY LEVIED BE CANCELLED. 3. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE LEVY OF PENALTY ON DISA LLOWANCE OF APPELLANT'S CLAIM U/S 36(I)(VIII). THE LEARNED CIT(A) ERRED IN HOLDING THAT THE CLAIM BESIDES BEING INCORRECT WAS MALAFIDE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS SUBMITTED NO PENALTY CAN BE LEVIED ON THE SAID DISALLOWANCE. IT BE SO H ELD NOW. 3.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THERE WAS FULL DISCLOSURE IN THE RETURN OF INCOME IN RESPECT OF THE CLAIM BY WAY OF NOTE AND WORKING. 3.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE APPEAL IS PENDING BEFORE HON'BLE GUJARAT HIGH ON SUBSTANTIAL GROUND OF LAW. IT IS SUBMITTED THAT IN SUCH CIRCUMSTANCES LEVY OF PENALTY U/S 271(1)(C) IS UNJUSTIFIED IT BE SO HELD NOW. II) GRIEVANCES RAISED BY THE ASSESSING OFFICER : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING PENALTY OF RS.42,78,697/ - LEVIED U/S 271( 1 )(C) OF THE ACT ON ACCOUNT OF ADDITION IN RESPECT OF INTEREST INCOME OF PROJECT FUND BY HOLDING IT A CASE OF DENIAL OF CLAIM WITHOUT APPRECIATING THE FACT THAT THE INTEREST ON SAID FUND WAS ALREADY ACCRUED TO THE ASSESSEE AND WHICH WAS NOT OFFERED FOR TAXATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING PENALTY OF RS. 4,82,940 / - LEVIED U/S 271(1 )(C) OF THE A CT ON ACCOUNT OF ADDITION OF AMORTIZATION OF LEASEHOLD LAND WITHOUT APPRECIATING THE FACT THAT THE LAND WAS TAKEN ON LEASE FOR THE PERIOD OF 99 YEARS AND THEREFORE THE EXPENSES CLAIMED WAS FOR THE PURPOSE OF ACQUIRING LEASE HOLD RIGHT WHICH WAS A CAPITAL E XPENDITURE AND NOT REVENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE SO AS TO REDUCE THE TAX LIABILITY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. SO FAR AS TH E ASSESSEE S APPEAL IS CONCERNED, THE GRIEVANCES RAISED ARE AGAINST CONFIRMATION OF PENALTY IN RESPECT OF DEDUCTION OF RS.4,02,06,000/ - CLAIMED UNDER ITA NO. 1476 & 1542 /AHD/2014 ASSESSMENT YEAR : 2005 - 06 PAGE 3 OF 5 SECTION 36(1)(VIII) WHICH STANDS DECLINED TO THE ASSESSEE. AS FOR APPEAL OF THE ASSESSING O FFICER, THE G RIEVANCES RAISED THEREIN ARE AGAINST DELETING THE PENALTY IN RESPECT OF INTEREST INCOME ON PROJECT FUND, AMOUNTING TO RS.1,16,92,827/ - AND DIRECTING DEDUCTION OF RS.13,19,780/ - IN RESPECT OF AMORTIZATION OF LEASEHOLD LAND. 4. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE T AKEN NOTE OF. THE ASSESSEE IS AN INSTITUTION OF NATIONAL IMPORTANCE AND IS INCORPORATED AS A COMPANY, THOUGH WITHOUT ANY SHARE CAPITAL, BY AN ACT OF PARLIAMENT I.E. NATIONAL DAIRY DEVELOPMENT BOARD ACT , 1987. DURI NG THE COURSE OF IT S SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER , IN T ER ALIA , NOTED THAT THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS.4,02,06,000/ - UNDER SECTION 36(1)(VIII). THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS ISSUE STANDS COVERED A GAINST THE ASSESSEE BY A DECISION OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2003 - 04. THIS CLAIM WAS, ACCORDINGLY, DISALLOWED . THE MATTER DID NOT END THERE. THE AS SESSING OFFICER ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF THE SAME. WHEN THE MATTER TRAVELLED IN APPEAL BEFORE THE CIT(A), THE SAID PENALTY WAS CONFIRMED ON THE GROUND THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION UNDER SECTION 36(1)(VIII) AS THE ASSESSEE DID NOT HAVE ANY SHARE CAPITAL WHICH WAS SINE QUA N ON FOR THE SAID DEDUCTION IN VIEW OF THE FORMULAE PRESCRIBED IN THE SECTION. RELIANCE WAS PLACED ON A DECISION OF THIS TRIBUNAL IN THE CASE OF GUJARAT STATE FINANCIAL SERVICES LTD VS ACIT [(2010) 39 SOT 570 (AHD)] AND ON HON BLE DELHI HIGH COURT S JUDGMEN T IN THE CASE OF CIT VS ZOOM COMMUNICATIONS PVT LTD [(2010) 327 ITR 510 (DEL)]. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. AS FAR AS PENALTY IN RESPECT OF INTEREST INCOME ON PROJECT EXPENSES IS CONCERNED, IT WAS IMPOSED ON THE GROUND THAT THE INTEREST INCOME ACCRUED TO THE PROJECT FUND, WHICH, ACCORDING TO THE ASSESSEE, WAS TO BE USED FOR THE PURPOSES OF FUND ONLY, ACCRUED TO THE ASSESSEE AND THERE IS NO EVIDENCE OF THE ASSESSEE HAVING PAID THE SAME. THE QUANTUM OF ADDITION OF RS 1,16,92,827 WA S THUS MADE, AND IT WAS ALSO HELD THAT THE ASSESSEE IS TO BE HELD RESPONSIBLE FOR HAVING FURNISHED INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, PENALTY UNDER SECTION 271(1)(C) WAS ALSO IMPOSED. HOWEVER, WHEN MATTER WAS CARRIED IN APPEAL BEFORE THE CIT(A ), THE PENALTY WAS DELETED AS THE CIT(A) WAS OF THE VIEW THAT THE CLAIM OF THE ASSESSEE WAS MADE IN A TRANSPARENT MANNER AND IT WAS A PLAUSIBLE VIEW OF THE MATTER THAT, IN THE GIVEN CIRCUMSTANCES, INTEREST WAS NOT INCOME OF THE ASSESSEE. ON THIS POINT, THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. THE LAST ISSUE WITH RESPECT TO IMPOSITION OF PENALTY IS OF DISALLOWANCE OF DEDUCTION FOR AMORTIZATION OF LEASEHOLD LAND OF RS 13,19,780. SO FAR AS IS THIS ISSU E IS CONCERNED, THE DEDUCTION WAS DECLINED TO THE ASSESSEE WHICH HAS BEEN CONFIRMED BY THE TRIBUNAL ON THE BASIS OF HON BLE SUPREME COURT S DECISION WHICH WAS ADMITTEDLY NOT AVAILABLE AT THE POINT OF TIME WHEN THE RELATED INCOME TAX RETURN WAS FILED. LEAR NED CIT(A) IS OF THE VIEW THAT SINCE THE MATTER HAD NOT REACHED FINALITY AT THE STAGE OF FILING OF INCOME TAX RETURN, AND IT WAS CERTAINLY A DEBATABLE ISSUE AT THAT POINT OF TIME AS TO WHETHER THE DEDUCTION IS TO BE ALLOWED FOR AMORTIZATION OF LEASEHOLD LA ND OR NOT, THE PENALTY IS NOT REQUIRED TO BE IMPOSED. ACCORDINGLY, PENALTY WAS DELETED ON THIS POINT AS WELL. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PER USED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. ITA NO. 1476 & 1542 /AHD/2014 ASSESSMENT YEAR : 2005 - 06 PAGE 4 OF 5 6. AS REGARDS THE PENALTY IN RESPECT OF DEDUCTION UNDER SECTION 36(1)(VIII) BEING DECLINED, WE HAVE NOTED THAT THE TRIBUNAL HAS CONFIRMED THE QUANTUM DISALLOWANCE AND IN DOING SO, THE COORDINATE BENCH HAS TAKEN PARTICULAR NOTE OF THE POSITION (A) THAT PROCESSING OF MILK CANNOT BE TREATED AS INDUSTRY AND, FOR THAT REASON, CONDITION OF SECTION 36(1)(VIII) IS NOT SATISFIED; AND (B) THAT SINCE THE A SSESSEE DOES NOT HAVE A SHARE CAPITAL, PROVISO TO SECTION 36(10(VIII) CANNOT COME INTO PLAY THUS DEFEATING THE FORMULAE IN THAT SECTION. HOWEVER, WE HAVE NOTED EXPLANATION OF THE ASSESSEE THAT (A) VIDE CBDT NOTIFICATION NO SO 627(E) DATED 4.8.99 PRODUCING MILK AND MILK PRODUCTS HAVE BEEN HELD TO BE INDUSTRY, AND THAT (B) PROVISO TO SECTION 36(1)(VIII) IS IN RESPECT OF THE LIMITATION ON DEDUCTION, AND AS SUCH THE LIMITED IMPACT OF PROVISO NOT BEING SATISFIED IN ANY EVENT IS THAT NO SUCH LIMITATION WILL COME INTO PLAY. IT IS THUS CONTENDED THAT THE ASSESSEE IS ELIGIBLE FOR THE RELEVANT DEDUCTION AND THE MATTER, FOR ADJUDICATION ON THAT ISSUE, IS RIGHT NOW PENDING BEFORE HON BLE JURISDICTIONAL HIGH COURT. THE ASSESSE S CLAIM CANNOT BE SAID TO AN OUTLANDISH OR UNACCEPTABLE EXPLANATION FOR THE PURPOSE OF PENALTY. WE SEE MERITS IN THIS APPROACH. WHATEVER BE THE MERITS OF THIS CLAIM, THE CLAIM IS A REASONABLE CLAIM WITH PRIMA FACIE SOME MERITS IN IT AND SUCH A CLAIM CANNOT BE SIMPLY BRUSHED ASIDE FOR THE PENALTY PU RPOSES. IN CIT VS. NATHULAL AGARWALA & SON S (1985) 153 ITR 292 (PAT)(FB) FULL BENCH OF HON'BLE PATNA HIGH COURT HAD, INTER ALIA, OBSERVED THAT 'AS TO THE NATURE OF THE EXPLANATION TO BE RENDERED BY THE ASSESSEE, IT SEEMS PLAIN ON PRINCIPLE THAT IT IS NOT THE LAW THAT THE MOMENT ANY FANTASTIC OR UNACCEPTABLE EXPLANATION IS GIVEN, THE BURDEN PLACED UPON HIM WOULD BE DISCHARGED AND THE PRESUMPTION REBUTTED. IT IS NOT THE LAW AND PERHAPS HARDLY CAN BE THAT ANY AND EVERY EXPLANATION BY THE ASSESSEE MUST BE ACC EPTED. IN MY VIEW, THE EXPLANATION OF THE ASSESSEE FOR THE PURPOSE OF AVOIDANCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANATION. HE MAY NOT PROVE WHAT HE ASSERTS TO THE HILT POSITIVELY BUT AS A MATTER OF FACT MATERIALS MUST BE BROUGHT ON THE RECORD TO SHOW TH AT WH AT HE SAYS IS REASONABLY VALID. THE ABOVE VIEWS WERE APPROVED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MUSSADILAL RAM BHAROSE (L987) 165 ITR 14 (SC). REFERRING TO THE JUDGMENT OF HON'BLE PATNA HIGH C OURT, THEIR LORDS HIPS HAD OBSERVED THAT 'THE PATNA HIGH COURT EMPHASISED THAT AS TO THE NATURE OF THE EXPLANATION TO BE RENDERED BY THE ASSESSEE, IT WAS PLAIN ON PRINCIPLE THAT IT WAS NOT THE LAW THAT THE MOMENT ANY FANTASTIC OR UNACCEPTABLE EXPLANATION WAS GIVEN, THE BU RDEN PLACED UPON HIM WOULD BE DISCHARGED AND THE PRESUMPTION REBUTTED. WE AGREE. WE FURTHER AGREE THAT IT IS NOT THE LAW THAT ANY AND EVERY EXPLANATION BY THE ASSESSEE MUST BE ACCEPTED. IT MUST BE ACCEPTABLE EXPLANATION, ACCEPTABLE TO A FACT - FINDING BODY.' VIEWED IN THE LIGHT OF THIS WELL SETTLED LEGAL POSITION, THE EXPLANATION OF THE ASSESSEE IS INDEED ACCEPTABLE SO FAR AS PENALTY UNDER SECTION 271(1)(C) IS CONCERNED. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY IN RESPECT OF THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIII). AS REGARDS PENALTIES IN RESPECT OF QUANTUM ADDITION OF RS 1,16,92,827, WE HAVE NOTED THAT THERE IS NOTHING TO SUGGEST THAT EXPLANATION OF THE ASSESSEE IS INCORRECT AND THAT THE INTEREST EARNED ON THE FUNDS ARE INDEE D REQUIRED TO BE USED FOR DESIGNATED PURPOSES AND YET THE ADDITION HAS BEEN CONFIRMED ON THE GROUND THAT INTEREST WAS NOT ACTUALLY REFUNDED. ONCE AGAIN, WHATEVER BE THE STATUS OF TAXABILITY, THE FACT REMAINS THAT NEITHER THE EXPLANATION OF THE ASSESSEE HAS BEEN FOUND TO BE INCORRECT OR FALSE OR SIMPLY UNBELIEVABLE. THE CIT(A) WAS THUS QUITE JUSTIFIED IN HOLDING THAT THE PENALTY COULD NOT BE IMPOSED SIMPLY BECAUSE THE INCOME HAS TURNED OUT TO BE TAXABLE AND A WRONG CLAIM IS MADE BY THE ASSESSEE. WE APPROVE T HE ACTION OF THE CITI(A) ON THIS POINT AND DECLINE TO INTERFERE IN THE MATTER. AS REGARDS THE CLAIM FOR AMORTIZATION OF LEASE HOLD LAND, THERE IS NOTHING BEFORE US TO CONTROVERT THE FINDINGS OF THE CIT(A) AND AS SUCH DEMONSTRATE THAT IT WAS NOT A DEBATABLE POINT AT THE POINT OF ITA NO. 1476 & 1542 /AHD/2014 ASSESSMENT YEAR : 2005 - 06 PAGE 5 OF 5 TIME WHEN INCOME TAX RETURN WAS FURNISHED AND THAT IT HAS NOT BEEN MADE IN A TRANSPARENT MANNER. IT IS WELL SETTLED IN LAW THAT A MERE REJECTION OF CLAIM OF DEDUCTION BY ITSELF CANNOT RESULT IN PENALTY UNDER SECTION 271(1)(C) BEING I MPOSED. THE EXPLANATION OF THE ASSESSEE HAS NOT BEEN DISPUTED OR REJECTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. ON THIS POINT ALSO, WE THUS UPHOLD THE ACTION OF THE CIT(A). IN EFFECT, WHILE ASSESSEE SUCCEEDS IN HIS GRIEVANCE, THE ASSESSING OFFICER S GRIEVANCE IS REJECTED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE ASSESSING OFFICER IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 26 TH DAY OF MAY, 2017. SD/ - SD/ - S.S. GODARA PRAMOD KUM AR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD , DATED THE 26 TH DAY OF MAY , 201 7 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD