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

ITA 159/AHD/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 2922 (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: 2010-2011
• Appeal Filed On: 13-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Revenue expenditure
• Section: 271(1)(c); 80IC

Judgement Text

ITA NO. 159/AHD/2015 CONTEMPORARY TARGET PVT LTD VS. DCIT ASSESSMENT YEAR: 2010-11 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. 159/AHD/2015 ASSESSMENT YEAR: 2010-11 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 22 ND OCTOBER 2014 PASSED BY THE BY THE CIT(A)-I, BARODA IN THE MATTER OF PENALTY UNDER SECTION 271(1)(C) OF THE AC T FOR THE ASSESSMENT YEAR 2010- 11. 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. 10,10,000/- 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.9,79,626/- 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. 9,7 9,626/- 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. 159/AHD/2015 CONTEMPORARY TARGET PVT LTD VS. DCIT ASSESSMENT YEAR: 2010-11 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.19,86,056/- RELATING TO CAPITAL WORK IN PROGRESS, THERE IS NO CASE FOR PENA LTY U/S 271(1)(C) OF THE ACT AS THE ISSUE OF A PARTICULAR EXPENDITURE BEING CAPI TAL OR REVENUE IS A MATTER OF CONSTANT LITIGATION BETWEEN THE ASSESSEE AND THE DE PARTMENT. THERE ARE HUNDREDS OF CASE LAWS OF TRIBUNAL, HIGH COURTS ETC. FAVORING THE ASSESSEE AND IF AN ASSESSEE CLAIM A DEDUCTION BASED ON THE J UDICIAL OPINION EXPRESSED IN NUMBER OF CASES, HE CANNOT BE SAID TO HAVE CONCE ALED THE INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME WHICH ATTR ACTS PENALTY U/S 271(1)(C) OF THE ACT. 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT WHATEV ER WE DECIDE IN ITA NO.158/AHD/2015, I.E. ASSESSEES APPEAL ON THE SAME ISSUE FOR THE ASSESSMENT YEAR 2009-10 WHICH WAS HEARD ALONGWITH THIS APPEAL, WILL APPLY MUTATIS MUTANDIS IN THIS ASSESSMENT YEAR AS WELL. 4. VIDE OUR ORDER OF EVEN DATE, IN ASSESSEES APPEA L FOR THE ASSESSMENT YEAR 2009-10, WE HAVE, INTER ALIA, OBSERVED AS FOLLOWS:- 3. THE ASSESSEE BEFORE US IS ENGAGED IN MANUFACTUR ING 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 ,49,94,325/- UNDER SECTION 80IC OF THE INCOME TAX ACT. DURING THE COU RSE OF SCRUTINY ASSESSMENT PROCEEDINGS, WHEN THIS CLAIM WAS SUBJECT ED TO VERIFICATION, THE ASSESSING OFFICER NOTICED THAT THE REMUNERATION OF RS.30.56 LAKHS WAS PAID TO THE DIRECTORS, BUT NO PART OF THE SAME WAS ALLOCATE D TO UTTARAKHAND OPERATIONS. THE PLEA OF THE ASSESSEE THAT THESE PE RSONS ARE NOT DIRECTLY DEALING WITH THE OPERATIONS OF THE SAID UNIT, BUT T HEIR ACTIVITIES ARE CONFINED TO BARODA UNIT DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER. THE PLEA OF THE ASSESSEE THAT TWO OF THESE DIRECTORS, NAMELY ANIRBA N BOSE AND SP ROY, ARE PRIMARILY EMPLOYEES DEALING WITH BARODA UNIT, AND H AVE 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 THESE EXPENSES ON THE BASIS OF TURNOVER AND RESULTANTLY REDUCED TH E DEDUCTION UNDER SECTION 80IC BY RS.14,40,670. THERE WAS ALSO A DISALLOWANC E OF RS.20,45,687/- ON ITA NO. 159/AHD/2015 CONTEMPORARY TARGET PVT LTD VS. DCIT ASSESSMENT YEAR: 2010-11 PAGE 3 OF 4 ACCOUNT OF INTEREST WHICH OUGHT TO HAVE BEEN CAPITA LIZED AS IT PERTAINED TO THE WORK IN PROGRESS. THE MATTER, HOWEVER, DID NOT RES T THERE. THE ASSESSING OFFICER ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C ) FOR CONCEALMENT OF INCOME. IT WAS HELD THAT THE ASSESSEE HAD CONCEALE D INCOME ON ACCOUNT OF AND THROUGH THESE INCORRECT CLAIMS. AGGRIEVED, ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND CONSIDERED FACTS OF THE CASE IN THE LIGHT OF TH E APPLICABLE LEGAL POSITION. 5. IT IS BY NOW WELL SETTLED IN LAW THAT MERELY MAK ING AN INCORRECT CLAIM BY ITSELF CANNOT BE VISITED BY PENAL CONSEQUENCES UNDE R SECON 271(1)(C). HONBLE SUPREME COURT, IN THE CASE OF CIT VS. RELIA NCE PETROPRODUCTS PVT LTD (322 ITR 158), HAS HELD SO. IN THE PRESENT CASE, T HE ASSESSEE HAS MADE CLAIM UNDER SECTION 80IC BASED ON ALLOCATION OF DIR ECTORS EXPENSES ON THE BASIS OF PRESENCE IN THE UNIT AND DIRECT ATTENTION THERETO WHICH WAS DULY CERTIFIED AS CORRECT BY A CHARTERED ACCOUNTANT. TH IS CLAIM BEING INCORRECT IS ONE THING BUT IT CANNOT, FOR THAT REASON ALONE, SAI D TO BE DELIBERATE CONCEALMENT OF INCOME. THERE IS A REASONABLE EXPLAN ATION FOR THE CLAIM, AND, IN THE LIGHT OF THE SAME, IT WAS NOT A FIT CASE FOR PENALTY. SIMILARLY, CAPITALIZATION OF INTEREST ON THE WORK IN PROGRESS, ALL THAT HAS BEEN PUT AGAINST THE ASSESSEE IS THAT ON HIS OWN. THE ASSESSEE AGRE ED, IN RESPONSE TO THE ASSESSING OFFICERS SUGGESTION, CAPITALIZATION OF T HIS INTEREST. THERE IS NO DISPUTE ABOUT BONAFIDES OF INTEREST EXPENDITURE, NO R IS IT EVEN ALLEGATION OF THE AUTHORITIES BELOW THAT THE ISSUE REGARDING CAPITALI ZATION OF SUCH INTEREST WAS BEYOND ANY DOUBT OR CONTROVERSY. THE EXPLANATION F OR THE ACTION OF CLAIMING THE DEDUCTION HAS NOT THUS BEEN REJECTED AND HELD T O BE DEVOID OF ANY MERITS AT ALL. IN ANY CASE, THE TREATMENT OF CAPITAL EXPE NDITURE VS. REVENUE EXPENDITURE HAS BEEN ALL ALONG A GREY AREA AND SUBJ ECT MATTER OF INTENSE LEGISLATION. THE ASSESSEE HAS BEEN GRACIOUS IN ALLO WING THE MATTER TO REACH FINALITY AND NOT LITIGATING ON THE CLAIM. IN VIEW O F THESE DISCUSSIONS AND BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDE RED 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 HAVE NOTED EARLIER, CANNOT BY ITSELF BE REASON ENOUGH TO IMPOSE THE PEN ALTY UNDER SECTION 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. 5. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER IN THIS YEAR THAN THE VIEW SO TAKEN BY US. ITA NO. 159/AHD/2015 CONTEMPORARY TARGET PVT LTD VS. DCIT ASSESSMENT YEAR: 2010-11 PAGE 4 OF 4 6. RESPECTFULLY FOLLOWING THE ABOVE ORDER, WE DELET E THE IMPUGNED PENALTY OF RS.10,10,000/- IMPOSED UNDER SECTION 271(1)(C). TH E ASSESSEE GETS 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 1. DATE OF DICTATION: ...ORDER PREPARED AS PER THE TWO PAGES MANUSCRIPTS OF HONBLE VP WHICH ARE ATTACHED HEREWITH.................. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ........... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: ... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ...... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER : . 8. DATE OF DESPATCH OF THE ORDER: ......