Phoenix Lamps Ltd., Noida V. JCIT, Noida

ITA 155/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3929 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 22-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 08-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: SHAR AD AGARWAL
• Keywords: Sale consideration of property below Jantri Value; Difference of opinion; Change of opinion
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 155/DEL /2014 ASSESSMENT YEAR: 2005-06 PHEONIX LAMPS LTD., (FORMERLY HALONIX LTD.,) 59AM NSEZ, PHASE-II, NOIDA. (PAN: AABCP7718G) VS JOINT COMMISSIONER OF INCOME TAX, NOIDA, RANGE-1, NOIDA. (APPELLANT) (RESPONDENT) A PPELLANT BY: SHRI SHASHWAT BAJPAI, ADV. & SHRI SHAR AD AGARWAL RESPONDENT BY: SMT. PARAMITA TRIPATHY, CIT DR DATE OF HEARING : 26.07.2017 DATE OF PRONOUNCEMENT: 24.10.2017 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) NOIDA FOR ASSESSMENT YEAR 2005-06 WHEREIN HE HAS CO NFIRMED THE PENALTY OF RS. 18 LAKH IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE ACT'). ITA NO. 155/DEL/2014 ASSESSMENT YEAR 2005-06 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS INTO MANUFACTURING HALOGEN LAMPS AND CFL LAMPS. I T HAD TWO EXISTING UNITS AT NOIDA AND ONE NEW UNIT STARTED IN UTTARAKHAND IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R UNDER CONSIDERATION. THE ASSESSEE HAD CLAIMED EXEMPTION U/S 80IC OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE A CT') ABOUT WHICH THERE IS NO DISPUTE. THE RETURN OF INCOME WA S FILED SHOWING A TOTAL INCOME OF RS. 16,85,43,920/- WHICH WAS SUBSEQUENTLY REVISED BY THE ASSESSEE. THE ASSESSME NT WAS COMPLETED AT A TOTAL INCOME OF RS. 17,26,15,083/- A FTER MAKING THE FOLLOWING ADDITIONS DISALLOWANCES:- I) RS. 19,37,758/- ADDED U/S 50C OF THE INCOME TAX ACT , 1961 (HEREINAFTER CALLED 'THE ACT') ON THE BASIS OF CIRCLE RATE IN RESPECT OF PROPERTY SITUATED AT SECTOR 80, NOIDA. II) DISALLOWANCE OF RS. 37,31,300/- BEING AMOUNT DISALLOWED BY THE ASSESSING OFFICER OUT OF DIRECTOR S REMUNERATION. SUBSEQUENTLY, PENALTY OF RS. 18 LAKH WAS IMPOSED U/ S 271(1)(C) OF THE ACT ON THESE TWO ADDITIONS/DISALLOWANCES WHI CH ON APPEAL WAS ALSO CONFIRMED BY THE LD. CIT(A). NOW, THE ASS ESSEE HAS ITA NO. 155/DEL/2014 ASSESSMENT YEAR 2005-06 3 APPROACHED THE ITAT AND HAS CHALLENGED THE CONFIRMA TION OF PENALTY. 3. AT THE OUTSET, LD. AR SUBMITTED THAT THE ASSESSE E WAS SEEKING DELETION OF PENALTY ONLY ON THE DISALLOWANC E OF RS. 37,31,300/- WHICH HAD BEEN DISALLOWED OUT OF DIREC TORS REMUNERATION. 3.1 ON THE SECOND ISSUE ON WHICH THE PENALTY HAD BE EN CONFIRMED I.E. REALLOCATION OUT OF MANAGERIAL REMUN ERATION TO THE DEHRADUN UNIT, THE LD. AR SUBMITTED THAT THE ASSESS EE COMPANY IN THE UTTARAKHAND UNIT HAD CLAIMED PAYMENT OF DIRE CTORS REMUNERATION (INCLUDING SITTING FEES ETC.) AT RS. 1 4,95,700/- AND HAD DEBITED THE REMAINING AMOUNT OF RS. 1.52 CRORES IN THE NOIDA UNIT. THE TOTAL MANAGERIAL REMUNERATION CLAIMED DU RING THE YEAR AND DEBITED IN THE ACCOUNT WAS RS. 1.6703 CRORE. I T WAS SUBMITTED THAT THE ASSESSING OFFICER WAS OF THE OPI NION THAT SINCE THE COMPANY HAD THREE UNITS, IT WOULD HAVE DIVIDED THE DIRECTORS REMUNERATION BETWEEN THREE UNITS EQUALLY OR ON THE BASIS OF TURNOVER EFFECTED BY THESE THREE UNITS. IT WAS FUR THER SUBMITTED THAT THE ASSESSING OFFICER PROCEEDED TO REALLOCATE THE MANAGERIAL REMUNERATION BETWEEN THE THREE UNITS, THEREBY DISAL LOWING RS. 37,31,300/- AS A DEDUCTIBLE EXPENSE ON WHICH PENALT Y U/S ITA NO. 155/DEL/2014 ASSESSMENT YEAR 2005-06 4 271(1)(C) WAS IMPOSED. LD. AR SUBMITTED THAT FULL PARTICULARS WITH REGARD TO PAYMENT ON ACCOUNT OF COMMISSION, SA LARY, ALLOWANCES AND PERQUISITES PAID TO THE DIRECTOR HAD BEEN DULY FURNISHED BEFORE THE ASSESSING OFFICER AND, THEREFO RE, IT WAS NOT THE CASE OF THE DEPARTMENT THAT THERE WAS ANY CONCE ALMENT OF INCOME OR ANY FURNISHING OF INACCURATE PARTICULARS OF INCOME THEREOF. IT WAS ALSO SUBMITTED THAT THIS WAS THE I NITIAL YEAR OF THE UTTARAKHAND UNIT IN WHICH THE PLANT WAS SET UP FOR THE FIRST TIME AND THE ASSESSEE WAS FULLY JUSTIFIED IN MAKING THE CLAIM ON THE BASIS OF CAPITAL OUTLAY I.E. THE FIXED ASSETS BECAU SE DURING THE INITIAL YEARS, IT IS THE MANAGEMENT OF THE CAPITAL OUTLAY AND ITS DEPLOYMENT WHICH IS THE MAIN FUNCTION AND RESPONSIB ILITY OF THE MANAGEMENT. IT WAS ALSO SUBMITTED THAT ANY COMPARI SON BETWEEN THE NET PROFIT OF THE OLD AND ESTABLISHED U NITS AT NOIDA AND NEWLY SET UP UNIT AT DEHRADUN WAS UNJUST AND UN FAIR AND DEVOID OF REAL BUSINESS CONSIDERATION WHICH THE ASS ESSING OFFICER HAD DONE. IT WAS ALSO SUBMITTED THAT THERE WAS NO JUSTIFICATION IN APPORTIONING THE SALARY AND WAGES EQUALLY BETWEE N THE UNITS IN NOIDA AND UTTARAKHAND BECAUSE NOIDA ESTABLISHMEN T HAD TWO UNITS AND UTTARAKHAND HAD ONLY ONE UNIT. IT WAS AL SO EMPHASISED THAT NOIDA ESTABLISHMENT EMPLOYED 1030 E MPLOYEES ITA NO. 155/DEL/2014 ASSESSMENT YEAR 2005-06 5 WHEREAS UTTARAKHAND UNIT HAD ONLY 660 EMPLOYEES DUR ING THE YEAR UNDER CONSIDERATION. IT WAS ALSO SUBMITTED TH AT THE NOIDA UNIT HAD A TURNOVER OF FIVE TIMES THAN THAT OF THE UTTARAKHAND UNIT AND ALSO HAD EXPORTS WHEREAS UTTARAKHAND UNIT DID NOT HAVE ANY EXPORT. IT WAS SUBMITTED THAT THIS UNDISP UTED FACT DEMANDED MUCH HIGHER ATTENTION AND TIME OF THE DIRE CTORS AT NOIDA THAN THE UTTARAKHAND UNIT IN THE FIELD OF MAN MANAGEMENT AND DRIVING AND MOTIVATING THE EMPLOYEES TO INCREAS E THE EXPORTS. 3.2 IT WAS FURTHER SUBMITTED BY THE LD. AR THAT TH E ASSESSEE HAD APPORTIONED THE MANAGERIAL REMUNERATION ON THE BASIS OF CAPITAL OUTLAY WHEREAS THE ASSESSING OFFICER HAD AP PORTIONED THE SAME ON THE BASIS OF NET PROFIT AND SALARY WHICH WA S ONLY A DIFFERENCE OF OPINION AND ACCORDINGLY NO PENALTY WA S LEVIABLE ON SUCH A CHANGE OF OPINION. IT WAS ALSO SUBMITTED TH AT THE LD. COMMISSIONER OF INCOME TAX(A) HAD CONFIRMED THE PEN ALTY ON THE GROUND THAT THE ASSESSEES APPORTIONMENT DID NOT AP PEAR PRUDENT OR LOGICAL WHEREAS PENALTY IS LEVIABLE ONLY WHEN TH ERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS AND NOT ON THE BASIS OF CHANGE OF OPINION. 3.3 THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF H ON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TA X VS ITA NO. 155/DEL/2014 ASSESSMENT YEAR 2005-06 6 DHARAMPAL PREMCHAND LTD. REPORTED IN 329 ITR 572 (D EL) WHEREIN SIMILAR PENALTY DELETED BY THE TRIBUNAL WAS UPHELD BY THE HON'BLE DELHI HIGH COURT BY PLACING RELIANCE ON THE APEX COURT JUDGMENT IN COMMISSIONER OF INCOME TAX VS REL IANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC). RELIANCE WAS ALSO PLACED ON A JUDGMENT OF THE HON'BLE BOMBAY HIGH COU RT IN THE CASE OF COMMISSIONER OF INCOME TAX VS MIRC ELECTRON ICS LTD. REPORTED IN (2017) 77 TAXMANN.COM 67 (BOMBAY). LD. AR SUBMITTED THAT THE PENALTY AS UPHELD BY THE LD. COM MISSIONER OF INCOME TAX(A) MAY KINDLY BE DELETED. 4. IN RESPONSE, THE LD. C.I.T. DR READ OUT FROM THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE LD. COMMISSIONER O F INCOME TAX(A) AND SUBMITTED THAT AS POINTED OUT BY THE ASS ESSING OFFICER AS WELL AS THE LD. COMMISSIONER OF INCOME TAX(A), T HIS WAS JUST A PLOY BY THE ASSESSEE TO AVOID PAYMENT OF TAX AND TH ERE WAS NO JUSTIFIABLE REASON FOR THE ASSESSEE TO HAVE APPORTI ONED THE REMUNERATION ON THE BASIS OF CAPITAL OUTLAY. SHE A LSO POINTED OUT THAT THE QUANTUM HAS BEEN CONFIRMED BY THE ITAT WHI CH WAS ALL THE MORE REASON FOR CONFIRMING THE LEVY OF PENALTY. IT WAS PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X(A) BE UPHELD. ITA NO. 155/DEL/2014 ASSESSMENT YEAR 2005-06 7 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS IT HAS BEEN SUBMIT TED BY THE LD. AR THAT HE IS NOT CHALLENGING THE IMPOSITION OF PEN ALTY ON ADDITION OF RS. 19.37,758/- ADDED U/S 50C OF THE IN COME TAX ACT, THE ASSESSEES APPEAL ON THIS ISSUE IS DISMISS ED AS NOT PRESSED. 5.1 AS FAR AS THE SECOND ISSUE ON WHICH THE PENALTY HAS BEEN CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX(A) I.E. THE RE- ALLOCATION OUT OF MANAGERIAL REMUNERATION, IT IS SE EN THAT THE ASSESSEES CASE IS COVERED BY THE JUDGMENT OF THE H ON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF IN COME TAX VS MIRC ELECTRONICS LTD. (SUPRA) WHEREIN THE HON'BL E HIGH COURT HAD PLACED RELIANCE ON ITS EARLIER JUDGMENT IN THE CASE OF ZANDU PHARMACEUTICALS VS COMMISSIONER OF INCOME TAX REPOR TED IN 350 ITR 366 (BOMBAY) AND HAD ARRIVED AT A CONCLUSION TH AT THE OPINION OF THE RESPONDENT ASSESSEE IN NOT ALLOCATIN G ANY PERSONAL EXPENSES OF THE HEAD OFFICE TO THE ELIGIBLE UNITS I S A POSSIBLE VIEW AND THEREFORE IT COULD NOT BE SAID THAT THERE WAS A NY FILING OF INACCURATE PARTICULARS AND/OR CONCEALMENT OF INCOME ON THE PART OF THE RESPONDENT ASSESSEE WARRANTING IMPOSITION OF PENALTY. THE HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONE R OF INCOME ITA NO. 155/DEL/2014 ASSESSMENT YEAR 2005-06 8 TAX VS VIRGO MARKETING (P) LTD. (2008) 172 TAXMAN 83 HELD THAT IF THE ASSESSING OFFICER TOOK A VIEW CONTRARY TO TH AT EXPRESSED BY THE ASSESSEE, IT DID NOT PER SE MEAN THAT THE ASSESSEE HAD ADOPTED AN ILLEGAL DEVICE FOR REDUCING ITS TAX LIAB ILITY. IT IS UNDISPUTED THAT THERE ARE NO NORMS PRESCRIBED UNDER THE INCOME TAX ACT FOR ALLOCATION OF COMMON EXPENSES INCURRED BY THE ASSESSEE AND THE SAME HAS TO BE APPORTIONED TO VARI OUS MANUFACTURING UNITS ON THE BASIS OF AN ESTIMATE ONL Y. THE ASSESSEE COMPANY ADOPTED THE CAPITAL BASIS FOR APPO RTIONMENT WHEREAS, AS PER THE ASSESSING OFFICER, THE SAME SHO ULD BEEN ALLOCATED ON THE BASIS OF SALARY AND WAGES. THUS, IT WAS ONLY A CASE OF DIFFERENCE OF OPINION BETWEEN THE ASSESSING OFFICER AND THE ASSESSEE. IT IS NOT THE DEPARTMENTS CASE THAT RELEVANT FACTS WERE NOT DISCLOSED IN THE INCOME TAX RETURN OF THE FINANCIAL STATEMENT OF THE ASSESSEE. IT IS UNDISPUTED THAT T HE ASSESSEE HAD FURNISHED ALL THE DETAILS OF EXPENDITURE AS WELL AS INCOME AND NO SUCH DETAILS WERE FOUND TO BE INACCURATE NOR COULD BE VIEWED AS CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE. THEREFORE, AT MOST, IT WAS A CASE OF THE ASSESSEE MAKING AN INCOR RECT CLAIM IN LAW WHICH CANNOT TANTAMOUNT TO FURNISHING OF INACCU RATE PARTICULARS OF INCOME. THE HONBLE APEX COURT HAS HELD IN ITA NO. 155/DEL/2014 ASSESSMENT YEAR 2005-06 9 COMMISSIONER OF INCOME TAX VS RELIANCE PETROPRODUCT S (SUPRA) THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED A DEDU CTION WHICH WAS NOT ACCEPTABLE TO THE REVENUE, THE SAME BY ITSE LF WOULD NOT ATTRACT THE PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT. ACCORDINGLY, WE ARE OF THE CONSIDERED OPINION THAT THIS WAS NOT A FIT CASE FOR IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT AND WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX(A) ON THE ISSUE OF LEVY OF PENALTY ON APPORTIONMENT OF MA NAGERIAL REMUNERATION AND DIRECT THE ASSESSING OFFICER TO DE LETE THE PENALTY SO IMPOSED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 24 TH OCTOBER, 2017. SD/- SD/- (PRASHANT MAHARASHI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 TH OCTOBER, 2017 GS ITA NO. 155/DEL/2014 ASSESSMENT YEAR 2005-06 10 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR