ACIT Cir.-1, Nashik V. Taparia Tools Ltd., Nashik

ITA 159/PUN/2007

• Counselvise Citation: 15924514 RSA 2007
• Duration Of Justice: 4 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2000-2001
• Appeal Filed On: 31-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI HARESHWAR SHARMA
• Section: 244A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI G.S. PANNU (AM) ITA NO.159/PN/2007 & 594/PN/2009 (ASSTT. YEAR : 2000-01 & 2000-01) A SSISTANT COMMISSIONER OF INCOME TAX, ... APPELLANT CIRCLE 1, GADKARI CHOWK, OLD AGRA ROAD, NASHIK V. TAPARIA TOOLS LTD., RESPONDENT 52 & 53B, MIDC, SATPUR, NASHIK 422007 PAN. AAACT4711A ITA NO.261/PN/2007 & 1057/PN/2008 (ASSTT. YEAR : 2000-01 & 2004-05) TAPARIA TOOLS LTD., APPELLANT 52 & 53B, MIDC, SATPUR, NASHIK 422007 PAN. AAACT4711A V. ASSISTANT COMMISSIONER OF INCOME TAX, ... RESPONDENT CIRCLE 1, GADKARI CHOWK, OLD AGRA ROAD, NASHIK ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SHRI SHRI HARESHWAR SHARMA ORDER PER BENCH ITA 261/PN/2007 THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E REASST. U/S 147 IS BAD IN LAW SINCE IT IS PASSED ON A MERE CHAN GE OF OPINION WHICH IS NOT JUSTIFIED. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF THE DEDUCTION OF INTEREST OF RS. 97,99,660/- OUT OF RS. ITA . NOS 261 & 159/PN/2007 ETC., TAPARIA TOOLS LTD., A.YS.2000-2001, 2004-05 ETC., PAGE OF 9 2 1,07,10,000/- ON THE DEBENTURES ISSUED BY THE APPEL LANT TO M/S. MALIRAM MAKHARIA STOCK BROKER P. LTD AND SHARP KNIF E I.P. LTD. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT A] THE CLAIM OF THE APPELLANT WAS BASED ON THE DECI SION OF THE A.O. IN THE ASSESSMENTS IN THE PAST YEARS WHERE IN HE HELD THAT THE APPELLANT WAS ENTITLED TO INTEREST @ 18% P .A. ON THE DEBENTURES OVER A PERIOD OF FIVE YEARS BECAUSE THE CLAIM OF THE UPFRONT FEE PAID IN THE VERY FIRST YEAR OF ISSU E OF THE DEBENTURES WAS NOT ACCEPTED AND IF THE SAME WAS PAY ABLE OVER A PERIOD OF FIVE YEARS, THE PAYEES WOULD HAVE DEMANDED INTEREST @ 18%. B] THE STAND OF THE A.O. AFFIRMED BY HIM IS CONTRAR Y TO THE DECISION OF HONBLE ITAT AND H.C. IN RESPECT OF THE MANNER OF ALLOWABILITY OF THE DEDUCTION OF THE UPFRONT FEE PA ID ON THE SAME DEBENTURES. C] REJECTION OF THE APPELLANTS CLAIM HAS RESULTED IN THE CIT(A) NOT FOLLOWING BOMBAY H.C. DECISION IN THE CA SE OF BANK OF BARODA (256 ITR 385] AND ALSO BOMBAY H.C. DECISI ON IN THE CASE OF SHRI. H.A. SHAH [30 ITR 618] RESULTING IN CONTEMPT ON HIS PART. D] THE REVENUE HAVING TAKEN A PARTICULAR VIEW REGAR DING THE VERY TRANSACTION UNDER CONSIDERATION COULD NOT BE PERMITTED IN SUBSEQUENT YEARS WHEN DEDUCTION FOR IN TEREST IS CLAIMED, TO RESILE FROM WHAT WAS DONE IN THE EARLIE R YEARS. 4. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE APPE LLANT SUBMITS THAT THE LEARNED CIT(A) ERRED IN NOT ALLOWI NG THE DEDUCTION OF THE UPFRONT FEE TO THE EXTENT OF RS. 65,45,000/- WHICH REPRESENTED 1/5TH OF THE TOTAL UPFRONT FEE ON THE D EBENTURES ISSUED TO THE ABOVE TWO PARTIES. 4A. THE REASONING GIVEN BY THE LEARNED CIT(A) THAT THE INTEREST OF A HIGHER AMOUNT WAS ALLOWED IN THE PAST YEARS AS A DEDUCTION AND THEREFORE, NO INTEREST WAS ALLOWABLE IN THIS YEAR I S TOTALLY ILLEGAL AND AGAINST THE NORMAL PRINCIPLES OF LAW. 5. THE CHARGE OF INTEREST U/S 234B,234D AND 244A I S ILLEGAL. GROUND NO. 1 2. AT THE TIME OF HEARING, THE LD. A.R. SUBMITTED T HAT HE DOES NOT WHISH TO PURSUE THIS GROUND. THE SAME IS ACCORDING LY DISMISSED AS WITHDRAWN. ITA . NOS 261 & 159/PN/2007 ETC., TAPARIA TOOLS LTD., A.YS.2000-2001, 2004-05 ETC., PAGE OF 9 3 GROUND NOS. 2 TO 4 3. THE LD. A.R. SUBMITTED THAT THE ISSUE RAISED IN THESE GROUNDS AS TO WHETHER THE LD CIT(A) HAS ERRED IN CONFIRMING THE D ISALLOWANCE OF DEDUCTION OF INTEREST ON DEBENTURES ISSUED BY THE A PPELLANT TO M/S. MALIRAM MAKHARIA STOCK BROKER P. LTD. AND SHARP KNI FE I.P. LTD. HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY T HE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR THE A.Y . 2001-02 IN TAPARIA TOOLS LTD. V/S. ACIT, ITA NO. 409/PN/2005 VIDE ORDE R DATED 15TH JUNE 2011, COPY SUPPLIED. 4. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTIF Y THE ASSESSMENT ORDER ON THE ISSUE. 5. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT DURING THE YEAR, THE LD CIT(A) HAS DECIDED THE ISSUE RAISED IN THE G ROUNDS FOLLOWING THE DECISION OF FIRST APPELLATE AUTHORITY IN THIS REGAR D FOR THE A.Y. 2001-02 WHICH HAS BEEN SET ASIDE BY THE TRIBUNAL VIDE ITS ORDER DT. 15TH JUNE 2011 IN THE CASE OF ASSESSEE ITSELF (SUPRA). THE RE LEVANT EXTRACT OF THE ORDER DT. 15TH JUNE 2011 OF THE TRIBUNAL IN THE CAS E OF THE ASSESSEE FOR THE A.Y. 2001-02 IS BEING REPRODUCED HEREUNDER : 6. CONSIDERING THE ABOVE SUBMISSIONS, ESPECIALLY THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAD CLAIMED INTEREST AT THE RATE OF 18% P.A. OF THE FACE VALUE OF THE DEBENTURES ISSUED BY IT ON THE BASIS OF THE DECISION OF THE TRIBUNAL IN THE CASE O F THE ASSESSEE ( 18 ITD 508) UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT, WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW ARE NOT JUS TIFIED IN DENYING SUCH CLAIM OF THE ASSESSEE KEEPING IN VIEW THAT THE RE IS NO ORDER OF THE HONBLE SUPREME COURT STAYING THE OPERATION OF THE DECISION OF HONBLE HIGH COURT ON THE ISSUE PENDING ADJUDICATIO N IN S.L.P BEFORE THE HONBLE SUPREME COURT. WE, THUS, WHILE SETTING ASIDE ITA . NOS 261 & 159/PN/2007 ETC., TAPARIA TOOLS LTD., A.YS.2000-2001, 2004-05 ETC., PAGE OF 9 4 THE ORDERS OF THE AUTHORITIES BELOW ON THE ISSUE, DIRECT THE A.O TO DECIDE THE ISSUE AFRESH RESPECTFULLY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSESSEE ITSELF RE PORTED IN (2003) 260 ITR 102 (BOM.). OF COURSE, THIS DECISION OF TH E A.O WILL BE SUBJECT TO THE OUTCOME OF THE S.L.P PENDING IN THIS REGARD BEFORE THE HONBLE SUPREME COURT. THE ISSUE IS THUS DECID ED IN FAVOUR OF THE ASSESSEE. CONSEQUENTLY, GROUND NOS. 1 & 2 ARE A LLOWED. 6. DURING THE YEAR, IT WAS OBSERVED BY THE A.O THAT THE INTEREST CLAIMED ON NDCS BY THE ASSESSEE FOR ALL THE YEARS F ROM A.Y. 1996-97 TILL 2001-02, HAS EXCEEDED SUBSTANTIALLY OVER AND ABOVE THE ACTUAL AMOUNT OF THE INTEREST PAID BY THE COMPANY AS UPFRONT PAYM ENT IN A.Y. 1996-97 AND 1997-98. ON VERIFICATION, IT WAS FOUND THAT TH E CLAIM OF INTEREST AT RS.1.06 CRORES IN THE A.Y. 2001-02 BY THE ASSESSEE WAS DISALLOWED BEING EXCESS CLAIM OVER AND ABOVE THE ACTUAL LIABILITY. IT WAS OBSERVED THAT THE ASSESSEE HAS ALSO CLAIMED EXCESS DEBIT FOR A.Y. 2 000-01 OVER AND ABOVE THE ACTUAL LIABILITY. THE A.O. ACCORDINGLY WORKED OUT THE EXCESS DEDUCTION ALLOWED FOR THE A.Y. 2000-01 AT RS. 99,96,600/-. T HE A.O. INITIATED PROCEEDINGS U/S. 147 AND HAD DENIED THE EXCESS CLAI M OF RS.97,99,660/- OUT OF THE CLAIMED RS.1,07,10,000/- ON ACCOUNT OF I NTEREST ON DEBENTURES. THE LD CIT(A) HAS UPHELD THE SAME. THE LD CIT(A) H AS SIMPLY FOLLOWED FIRST APPELLATE ORDER FOR THE A.Y. 2001-02. IN VIE W OF THE OUTCOME OF THE APPEAL PREFERRED BY THE ASSESSEE FOR THE A.Y. 2001- 02 ON THE ISSUE IN ITA NO. 409/PN/2005 (SUPRA) WE SET ASIDE THE ORDERS O F THE AUTHORITIES BELOW WITH DIRECTION TO THE A.O TO DECIDE THE ISSUE AFRESH RESPECTFULLY FOLLOWING THE DECISION OF HONBLE MUMBAI HIGH COURT IN THE CASE OF ASSESSEE ITSELF REPORTED IN (2003), 260 ITR 102 (BO M.). OF COURSE, THIS DECISION OF THE A.O WILL BE SUBJECT TO THE OUTCOME OF THE S.L.P. PENDING IN THIS REGARD BEFORE THE HONBLE SUPREME COURT. THE GROUNDS ARE ACCORDINGLY ALLOWED. ITA . NOS 261 & 159/PN/2007 ETC., TAPARIA TOOLS LTD., A.YS.2000-2001, 2004-05 ETC., PAGE OF 9 5 6.1. SO FAR AS ALTERNATIVE GROUNDS 4 AND 4A ARE CON CERNED, IT HAS BECOME INFRUCTUOUS IN VIEW OF THE ABOVE FINDING ON GROUND NOS. 1 & 2. THESE ARE ACCORDINGLY REJECTED. GROUND NO. 5 7. IN THIS GROUND, THE CHARGING OF INTEREST U/S. 23 4B, 234D AND 234A HAS BEEN QUESTIONED WHICH IS CONSEQUENTIAL IN NATUR E. THE GROUND, THUS, DOES NOT NEED INDEPENDENT ADJUDICATION. 8. IN RESULT, APPEAL IS PARTLY ALLOWED. ITA NO. 159/PN/2007 9. THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE GROUND THAT THE LD CIT(A) HAS ERRED IN ALLOWING THE RELIEF TO T HE ASSESSEE AT RS.7,36,861/- (RS. 18,51,321 RS. 11,14,467/-) BA SED ON THE DECISION OF HIGHER JUDICIAL AUTHORITIES. 10. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE RE VENUE AGAINST THE FIRST APPELLATE ORDER WHEREBY THE LD CIT(A) HAS G IVEN THE ABOVE STATED RELIEF OF RS.7,36,861/- ON THE BASIS OF DECISION OF BOMBAY HIGH COURT IN THE CASE OF SUDARSHAN CHEMICALS LTD. REPORTED IN 24 5 ITR 769. THE CONTENTION OF THE LD. D.R. IS THAT THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SUDARSHAN CHEMICALS LTD. (SUP RA) HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AS THE DEPARTMENT HAS PR EFERRED S.L.P AGAINST THE JUDGMENT OF HONBLE BOMBAY HIGH COURT. HE SUBMITTED ITA . NOS 261 & 159/PN/2007 ETC., TAPARIA TOOLS LTD., A.YS.2000-2001, 2004-05 ETC., PAGE OF 9 6 FURTHER THAT THE DECISION OF HONBLE BOMBAY HIGH CO URT IS ALSO NOT RELEVANT TO THE PRESENT CASE. 11. THE LD. A.R., ON THE OTHER HAND, TRIED TO JUSTI FY THE FIRST APPELLATE ORDER ON THE ISSUE RAISED IN THE GROUND STATING TH AT THE SAME IS FULLY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT V/S. LAXMI MACHINE WORKS, 290 ITR 667 (SC). THE LD. A. R. SUBMITTED THAT IN THE SAID DECISION, HONBLE SUPREME COURT HAS BEEN P LEASED TO HOLD THAT EXCISE DUTY AND SALES TAX CANNOT FORM PART OF THE TOTAL TURNOVER U/S. 80 HHC(3). 12. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE A.O ALLOWED THE DEDUCTION AT RS.11,14,467/- OUT OF THE CLAIMED RS.18,51,328/- ON THE BASIS OF FORM NO. 10CCAC GIVING EFFECT TO THE ORIGINAL COMPUTATION OF DEDUCTION U/S. 80HHC. CONSIDERING THE SUBMISSION O F THE ASSESSEE, THE LD CIT(A) HAS DIRECTED THE A.O TO RECOMPUTE DEDUCT ION U/S. 80 HHC AFTER VERIFYING THE REVISED TOTAL INCOME UNDER THE HEAD PROFITS OF BUSINESS SUBJECT TO DECISION OF HIGHER APPELLATE AUTHORITY. WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER IN THIS REGARD. THE F IRST APPELLATE ORDER IS THUS UPHELD. THE GROUND IS ACCORDINGLY REJECTED. 13. IN RESULT, APPEAL IS DISMISSED. ITA NO. 594/PN/2009 14. THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDE R ON SEVERAL GROUNDS AGAINST THE ACTION OF LD CIT(A) IN DELETING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. ITA . NOS 261 & 159/PN/2007 ETC., TAPARIA TOOLS LTD., A.YS.2000-2001, 2004-05 ETC., PAGE OF 9 7 15. AT THE OUTSET OF HEARING, THE LD. A.R. POINTED OUT THAT LEVY OF PENALTY IN THE PRESENT CASE IS CONSEQUENTIAL TO THE ADDITION MADE BY THE A.O IN THE ASSESSMENT FOR THE A.Y. 2000-01 UNDER CO NSIDERATION. 16. THE LD. D.R. TRIED TO JUSTIFY THE PENALTY ORDE R. HE SUBMITTED THAT THERE WAS NO QUESTION OF ANY BONAFIDE ON THE PART O F THE ASSESSEE AND ASSESSEE HAD DELIBERATELY CONCEALED HIS TAXABLE INC OME AS DISCUSSED HEREUNDER IN THE ABOVE APPEALS, BY FURNISHING THE I NACCURATE PARTICULARS OF INCOME TO SERVE HIS OWN INTEREST OF AVOIDING TA X. 17. THE LD. A.R., ON THE OTHER HAND, PLACED RELIANC E ON THE FIRST APPELLATE ORDER. 18. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW, WE FIND THAT THE LD CIT(A) HAS ACCEPTED OBJECTION OF THE AS SESSEE THAT THE PENALTY ORDER PASSED ON 31 ST MARCH 2008 IS BARRED BY TIME LIMIT LAID DOWN BY TH E PROVISO TO SECTION 275(1)(A) OF THE ACT AS AMENDED. THE LD CIT(A) HAS ALSO DELETED THE PENALTY WITH THIS FINDING THAT THE ASSESSEE HAD MADE REASONABLE CLAIM REGARDING THE EXPENDITURE OF INTER EST ON DEBENTURE AT THE RATE OF 18% PER ANNUM FOR THE PERIOD OF DEBENTU RES BASED ON DECISION OF TRIBUNAL AND THE HONBLE BOMBAY HIGH CO URT. FURTHER THAT THE ISSUE INVOLVED RESULTING INTO ADDITION IS DEBATABLE AND TWO VIEWS ARE POSSIBLE, THEREFORE, PENALTY FOR CONCEALMENT IS NOT LEVIABLE. THE LD CIT(A) HAS OBSERVED FURTHER THAT THE ASSESSEE COMPA NY HAD DISCLOSED ALL THE PARTICULARS OF INTEREST EXPENDITURE CLAIMED AND ALSO THE BASIS OF CLAIMING THE DEDUCTION. CONSIDERING THESE MATERIAL FACTS, AS WELL AS OUR ABOVE FINDING IN THE ABOVE REFERRED CROSS APPEALS F OR THE A.Y. UNDER CONSIDERATION, ON THE ISSUE OF VALIDITY OF THE CLAI MED EXPENDITURE OF INTEREST ON DEBENTURE, WE ARE OF THE VIEW THAT IN A BSENCE OF THE POSITIVE ITA . NOS 261 & 159/PN/2007 ETC., TAPARIA TOOLS LTD., A.YS.2000-2001, 2004-05 ETC., PAGE OF 9 8 FINDING THAT THERE WAS CONCEALMENT OF PARTICULARS O F INCOME REGARDING THE SAID CLAIM DISALLOWED BY THE A.O OR FURNISHING INAC CURATE PARTICULARS THEREOF ON THE PART OF THE ASSESSEE, WE ARE OF THE VIEW THAT PENAL ACTION U/S. 271(1)(C) CANNOT BE TAKEN AGAINST THE ASSESSE E. THE LD CIT(A) WAS THUS JUSTIFIED IN DELETING THE PENALTY IN QUESTION . THE FIRST APPELLATE ORDER IN THIS REGARD IS THUS UPHELD. THE GROUNDS I NVOLVING THE ISSUE AS TO WHETHER LD CIT(A) WAS JUSTIFIED IN DELETING THE PEN ALTY ARE THUS REJECTED. 19. CONSEQUENTLY, THE APPEAL IS REJECTED. ITA NO. 1057/PN/2008 20. DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. A.R. MOVED AN APPLICATION UNDER THE SIGNATURE OF THE ASSESSEE WI TH REQUEST FOR ALLOWING THE ASSESSEE TO WITHDRAW THE PRESENT APPEAL PREFERR ED BY THE ASSESSEE, TO WHICH LD. D.R. WAS HAVING NO OBJECTION. 21. IN VIEW OF THE ABOVE SUBMISSION, THE PRESENT AP PEAL IS DISMISSED AS WITHDRAWN. 22. IN SUMMARY, ITA NO. 261/PN/2007 IS PARTLY ALLOW ED, ITA NO. 159/PN/2007 IS DISMISSED, ITA NO. 1057/PN/2008 IS DISMISSED, AND ITA NO. 594/PN/2009 IS REJECTED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011. SD/- SD/- ( G.S.PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 29TH JULY, 2011 US ITA . NOS 261 & 159/PN/2007 ETC., TAPARIA TOOLS LTD., A.YS.2000-2001, 2004-05 ETC., PAGE OF 9 9 COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -I, NASHIK 4. THE CIT(A)- I, NASHIK 5. THE D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE