Contemporary Target Private Limited, Baroda V. The Dy.CIT, Circle-1(1), Baroda

ITA 158/AHD/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 2907 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 13-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Revenue expenditure; Capital expenditure
• Section: 271(1)(c); 80IC

Judgement Text

ITA NO. 158/AHD/2015 CONTEMPORARY TARGET PVT LTD VS. DCIT ASSESSMENT YEAR: 2009-10 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD BENCH D, AHMEDABAD [CORAM: JUSTICE P P BHATT, PRESIDENT, AND PRAMOD KU MAR, VICE PRESIDENT] ITA NO. 158/AHD/2015 ASSESSMENT YEAR: 2009-10 CONTEMPORARY TARGET PRIVATE LIMITED ........... ...APPELLANT 20-21, GANDHI OIL MILL COMPOUND, GORWA INDUSTRIAL ESTATE, GORWA, BARODA-390020 [PAN : AACCC 4410 H] VS THE DEPUTY COMMISSIONER OF INCOME-TAX ........ .........RESPONDENT CIRCLE-1(1), BARODA APPEARANCES BY URVASHI SHODHAN, FOR THE APPELLANT LALIT P JAIN, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 06.12.2018 DATE OF PRONOUNCEMENT : 04.03.2019 O R D E R PER PRAMOD KUMAR, VICE PRESIDENT: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 14 TH NOVEMBER 2014 PASSED BY THE BY THE CIT(A)-I, BAROD A IN THE MATTER OF PENALTY UNDER SECTION 271(1)(C) OF THE AC T FOR THE ASSESSMENT YEAR 2009- 10. 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOW S:- (1) THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING PENALTY LEVIED BY THE ASSESSING OFFICER OF RS. 11,10,000/- ON PART DISALLOWANCE OF THE CLAIM U/S 80IC AND DISALLOWANCE OF INTEREST EXPENSE RELATING TO CAPITAL WORK IN PROGRESS. (2) THE CLAIM OF DEDUCTION U/S 80IC OF THE ACT OF RS. 14,40,670/- IS BASED ON THE AUDIT REPORT U/S 80IC OF THE ACT AND AS SUCH TH E DEDUCTION IS CERTIFIED BY THE TAX AUDITOR. MOREOVER, THE REDUCTION OF RS. 14, 40,670/- FROM THE AMOUNT CLAIMED U/S 80IC OF THE ACT IS NOT BECAUSE OF FURNI SHING OF INACCURATE PARTICULARS IN THE FACTS AND CIRCUMSTANCES OF THE C ASE ON THE PART OF THE ITA NO. 158/AHD/2015 CONTEMPORARY TARGET PVT LTD VS. DCIT ASSESSMENT YEAR: 2009-10 PAGE 2 OF 4 ASSESSEE BUT THE SAME IS THE RESULT OF DIFFERENCE O F OPINION ON THE PART OF DEPARTMENT VIS A VIS THE ASSESSEE. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABL E IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE AND SUCH CLAIM MADE IN THE RETURN OF INCOM E CANNOT AMOUNT TO THE INACCURATE PARTICULARS AS HELD BY THE HON. SUPREME COURT IN THE CASE OF C.I.T. V/S. RELIANCE PETROPRODUCTS PVT. LTD. REPORTED AT 3 22 ITR 158. AS THE RELEVANT CLAIM HAS BEEN MADE IN THE RETURN OF INCOME AND THE BASIC FACTS REGARDING CLAIM IS AVAILABLE IN THE RETURN OF INCOME THE PART DISALLOWANCE OF THE SAME CANNOT LEAD TO PENALTY U/S 271(1)(C) OF THE ACT AS HELD IN THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF CHANDRAPAL BAGG A V/S. ITAT REPORTED AT 261 ITR 67 AND CIT V/S. ATUL MOHAN BINDAL REPORTED AT 317 ITR 1 (S.C.) (3) AS REGARDS DISALLOWANCE OF INTEREST EXPENSE OF RS.20,45,687/- CONSIDERING THE SAME TO BE RELATING TO CAPITAL WORK IN PROGRESS , THERE IS NO CASE FOR PENALTY U/S 271(1)(C)F THE ACT AS THE ISSUE OF A PA RTICULAR EXPENDITURE BEING CAPITAL OR REVENUE IS A MATTER OF CONSTANT LITIGATI ON BETWEEN THE ASSESSEE AND THE DEPARTMENT. THERE ARE HUNDREDS OF CASE LAWS OF TRIBUNAL, HIGH COURTS ETC. FAVORING THE ASSESSEE AND IF AN ASSESSEE CLAIM A DE DUCTION BASED ON THE JUDICIAL OPINION EXPRESSED IN NUMBER OF CASES, HE C ANNOT BE SAID TO HAVE CONCEALED THE INCOME OR FURNISH INACCURATE PARTICUL ARS OF INCOME WHICH ATTRACTS PENALTY U/S 271(1)(C) OF THE ACT. 3. THE ASSESSEE BEFORE US IS ENGAGED IN MANUFACTURI NG AND SALES OF TOOTHBRUSHES. THE ASSESSEE HAS A UNIT IN UTTARAKHAN D (HARIDWAR) IN RESPECT OF WHICH THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.1,49,94,32 5/- UNDER SECTION 80IC OF THE INCOME TAX ACT. DURING THE COURSE OF SCRUTINY ASSE SSMENT PROCEEDINGS, WHEN THIS CLAIM WAS SUBJECTED TO VERIFICATION, THE ASSESSING OFFICER NOTICED THAT THE REMUNERATION OF RS.30.56 LAKHS WAS PAID TO THE DIRE CTORS, BUT NO PART OF THE SAME WAS ALLOCATED TO UTTARAKHAND OPERATIONS. THE PLEA OF THE ASSESSEE THAT THESE PERSONS ARE NOT DIRECTLY DEALING WITH THE OPERATION S OF THE SAID UNIT, BUT THEIR ACTIVITIES ARE CONFINED TO BARODA UNIT DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER. THE PLEA OF THE ASSESSEE THAT TWO OF THESE DIRECTOR S, NAMELY ANIRBAN BOSE AND SP ROY, ARE PRIMARILY EMPLOYEES DEALING WITH BARODA UN IT, AND HAVE BEEN TAKEN ON THE BOARD OF DIRECTORS ONLY AS A MATTER OF CONVENIENCE, WAS SIMPLY NOTED AND REJECTED. THE ASSESSING OFFICER THUS PROCEEDED TO ALLOCATE TH ESE EXPENSES ON THE BASIS OF TURNOVER AND RESULTANTLY REDUCED THE DEDUCTION UNDE R SECTION 80IC BY RS.14,40,670. THERE WAS ALSO A DISALLOWANCE OF RS.20,45,687/- ON ACCOUNT OF INTEREST WHICH OUGHT TO HAVE BEEN CAPITALIZED AS IT PERTAINED TO THE WOR K IN PROGRESS. THE MATTER, HOWEVER, DID NOT REST THERE. THE ASSESSING OFFICER ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C) FOR CONCEALMENT OF INCOME. IT WA S HELD THAT THE ASSESSEE HAD CONCEALED INCOME ON ACCOUNT OF AND THROUGH THESE IN CORRECT CLAIMS. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APP EAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. ITA NO. 158/AHD/2015 CONTEMPORARY TARGET PVT LTD VS. DCIT ASSESSMENT YEAR: 2009-10 PAGE 3 OF 4 5. IT IS BY NOW WELL SETTLED IN LAW THAT MERELY MAK ING AN INCORRECT CLAIM BY ITSELF CANNOT BE VISITED BY PENAL CONSEQUENCES UNDER SECON 271(1)(C). HONBLE SUPREME COURT, IN THE CASE OF CIT VS. RELIANCE PETROPRODUCT S PVT LTD (322 ITR 158), HAS HELD SO. IN THE PRESENT CASE, THE ASSESSEE HAS MADE CLA IM UNDER SECTION 80IC BASED ON ALLOCATION OF DIRECTORS EXPENSES ON THE BASIS OF P RESENCE IN THE UNIT AND DIRECT ATTENTION THERETO WHICH WAS DULY CERTIFIED AS COR RECT BY A CHARTERED ACCOUNTANT. THIS CLAIM BEING INCORRECT IS ONE THING BUT IT CANN OT, FOR THAT REASON ALONE, SAID TO BE DELIBERATE CONCEALMENT OF INCOME. THERE IS A REASON ABLE EXPLANATION FOR THE CLAIM, AND, IN THE LIGHT OF THE SAME, IT WAS NOT A FIT CAS E FOR PENALTY. SIMILARLY, CAPITALIZATION OF INTEREST ON THE WORK IN PROGRESS, ALL THAT HAS B EEN PUT AGAINST THE ASSESSEE IS THAT ON HIS OWN. THE ASSESSEE AGREED, IN RESPONSE TO TH E ASSESSING OFFICERS SUGGESTION, CAPITALIZATION OF THIS INTEREST. THERE IS NO DISPUTE ABOUT BONAFIDES OF INTEREST EXPENDITURE, NOR IS IT EVEN ALLEGATION OF THE AUTHORITIES BELOW THAT THE ISSUE REGARDING CAPITALIZATION OF SUCH INTEREST WAS BEYON D ANY DOUBT OR CONTROVERSY. THE EXPLANATION FOR THE ACTION OF CLAIMING THE DEDUCTIO N HAS NOT THUS BEEN REJECTED AND HELD TO BE DEVOID OF ANY MERITS AT ALL. IN ANY CAS E, THE TREATMENT OF CAPITAL EXPENDITURE VS. REVENUE EXPENDITURE HAS BEEN ALL AL ONG A GREY AREA AND SUBJECT MATTER OF INTENSE LEGISLATION. THE ASSESSEE HAS BEE N GRACIOUS IN ALLOWING THE MATTER TO REACH FINALITY AND NOT LITIGATING ON THE CLAIM. IN VIEW OF THESE DISCUSSIONS AND BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT IT WAS INDEED NOT A FIT CASE FOR IMPOSITION OF PENALTY UNDER SECT ION 271(1)(C). THERE IS NOTHING MORE THAN INCORRECT CLAIM, BUT THAT LAPSE, AS WE HA VE NOTED EARLIER, CANNOT BY ITSELF BE REASON ENOUGH TO IMPOSE THE PENALTY UNDER SECTIO N 271(1)(C) FOR CONCEALMENT OF INCOME. 6. WE, THEREFORE, VACATE THE ORDERS OF THE AUTHORIT IES BELOW AND DELETE THE IMPUGNED PENALTY OF RS.11,10,000/-. THE ASSESSEE G ETS THE RELIEF ACCORDINGLY. 7. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCE D IN THE OPEN COURT TODAY ON THE 4 TH DAY OF MARCH, 2019. SD/- SD/- JUSTICE P P BHATT PRAMOD KU MAR (PRESIDENT) (VICE PRESIDENT) AHMEDABAD, DATED THE 4 TH DAY OF MARCH, 2019 BT COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD