COLUMBIA PETRO CHEM P. LTD, MUMBAI V. ITO 9(1)2, MUMBAI

ITA 1651/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8829 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Tax effect
• Section: 143(3); 115JB; 80IB; 27; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1651/MUM/2009 (ASSESSMENT YEAR: 2005-06) M/S. COLUMBIA PETRO CHEM P. LTD. INCOME TAX OFFICER - 9(1)-2 D-101, 32ND ROAD, TRIVENI MUMBAI BEHIND NATIONAL COLLEGE VS. BANDRA (W), MUMBAI 400050 PAN - AAACC 4865 C APPELLANT RESPONDENT APPELLANT BY: SHRI HARESH P. SHAH RESPONDENT BY: SHRI SURENDRA KUMAR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-IX, MUMBAI DATED 19.01.2009. 2. THE ISSUE IN THE APPEAL IS WITH REFERENCE TO LEVY O F PENALTY OF `54,36,508 /- UNDER SECTION 271(1)(C) OF THE I.T. ACT AND RAIS ED 9 GROUNDS. 3. BRIEFLY STATED THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING OF PETROLEUM PRODUCTS AND HAS TWO UNI TS , AT SILVASSA AND AT TALOJA, MUMBAI. ASSESSEE FILED RETURN OF INCOME ON 29.10.2005 DECLARING TOTAL INCOME AT ` 68,330/- AND ADMITTING TAX LIABILITY U/S 115JB. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 23 .12.2007 DETERMINING THE TOTAL INCOME UNDER SECTION 115JB AT ` 7,67,50,810/-. WHILE COMPUTING THE TOTAL INCOME THE A.O., RESTRICTED THE CLAIM OF DEDUCTION UNDER SECTION 80IB TO ` 6,01,62,723/- AS AGAINST THE CLAIM OF ` 7,50,19,616/- MADE BY THE ASSESSEE ON THE PRETEXT THAT EXPENDITURE ALLOCABLE TO ELIGIBLE UNIT WAS CLAIMED IN NON- ELIGIBLE UNIT THERE BY INCREASING T HE PROFIT AND DEDUCTION U/S 80IB ON ELIGIBLE UNIT. THE AO ALLOCATED THE EXP ENDITURE ON PERCENTAGE BASIS REJECTING THE CLAIM OF ASSESSEE ON SEPARATE B OOKS MAINTAINED FOR THIS PURPOSE. ACCORDINGLY PENALTY PROCEEDINGS WERE INITI ATED UNDER SECTION ITA NO. 1651/MUM/2009 M/S. COLUMBIA PETRO CHEM P. LTD. 2 271(1)(C) BY ISSUING NOTICE UNDER SECTION 274 R.W.S . 271(1)(C). IN RESPONSE TO THE NOTICE ASSESSEE SUBMITTED THAT- I. THE DEDUCTION WAS PROPERTY CLAIMED AND ALL THE RELEVANT PARTICULARS WERE FURNISHED. II. THE PENALTY PROCEEDINGS DOES NOT ATTRACT MEREL Y BECAUSE DIFFERENT METHODOLOGY IN WORKING THE DEDUCTION UNDE R SECTION 80IB WAS ADOPTED. III. THERE WAS NO TAX WHICH SOUGHT TO BE EVADED BY CLAIM ING HIGHER DEDUCTION UNDER SECTION 80IB AS THE RETURNED INCOME AND THE ASSESSED INCOME IS UNDER SECTION 1115JB OF THE ACT. IV. APPORTIONMENT OF EXPENSES IS UNJUSTIFIED AS THE ASS ESSEE COMPANY IS MAINTAINING SEPARATE BOOKS OF ACCOUNT. THE CONTENTIONS OF THE ASSESSEE WERE NOT ACCEPTED B Y THE A.O., WHO FINALISED THE PENALTY PROCEEDINGS AND IMPOSED A PENALTY OF `54,36.508 /- BEING 100% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED UNDER SECT ION 271(1)(C). 4. BEFORE THE CIT(A) THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ASSESSEE WAS MAINTAINING SEPARATE BOOKS OF ACCO UNTS AT BOTH THE UNITS AND THE AUDIT REPORT WAS ALSO OBTAINED FROM SEPARAT E AUDITORS. THEREFORE, THE ASSESSEE HAD DISCLOSED ALL THE MATERIAL FACTS R ELATING THE WORKING OF DEDUCTION UNDER SECTION 80IB OF THE SILVASSA UNIT. HOWEVER, THE A.O. HAS WORKED OUT THE SAID DEDUCTION BY ADOPTING SOME DIFF ERENT METHOD AND THEREFORE, THE QUANTUM OF DEDUCTION COMPUTED BY THE A.O. DIFFERED FROM THE CLAIM OF THE ASSESSEE. THE ALLEGED DIFFERENCE THERE FORE WAS NOT BECAUSE ANY PARTICULARS WERE INACCURATELY FURNISHED OR ANY PART ICULARS OF INCOME WAS CONCEALED. THE LEARNED COUNSEL CONTENDED THAT THE V IEW TAKEN BY THE A.O. THAT ASSESSEE HAD DISCLOSED LOSS FROM TALOJA FACTOR Y BY BOOKING MORE EXPENSES IN NON-80IB UNITS AND SHOWING MAXIMUM PROF IT IN 80IB ELIGIBLE UNIT TO SAVE TAX LIABILITY WAS BASED ON SUSPICION/P RESUMPTIONS. THERE WAS NO INTENTION TO DEFRAUD THE REVENUE IN ANY MANNER A S THE RETURN WAS FILED AND TAX WAS PAID UNDER THE PROVISIONS OF SECTION 11 5JB OF THE ACT AND THERE IS NO DIFFERENCE IN THE INCOME OFFERED AND ASSESSED . THUS, THERE WAS NO CONCEALMENT WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. HE PLACED RELIANCE ON THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASES OF DILLIP N. SHROFF VS. JCIT 291 ITR 519 AND CIT VS. SURESHCHAND RA MITTAL 254 ITR 9 FOR THE PROPOSITION THAT IMPOSITION OF PENALTY IS NOT A UTOMATIC AS IT IS A MATER OF ITA NO. 1651/MUM/2009 M/S. COLUMBIA PETRO CHEM P. LTD. 3 DISCRETION AND THEREFORE, THE LAW REQUIRES THE A.O. TO BE FAIR AND OBJECTIVE. BESIDES THIS, THERE IS NO EFFECT ON THE RETURNED IN COME AS SUCH AS THE RETURNED INCOME AND THE ASSESSED INCOME, I.E. BOOK PROFIT AS PER THE PROVISIONS OF SECTION 115JB WAS SAME AND THEREFORE AS PER EXPLANATION 4 THE AMOUNT OF TAX SOUGHT TO BE EVADED WAS NIL. HE A LSO PLACED RELIANCE ON THE DECISION IN THE CASE OF JAYCO INDIA PVT. LTD. V S. ITO 152 TAXMAN 14 (DEL) AND PRAYED THAT THE PENALTY MAY BE DELETED. THE CIT (A) DID NOT ACCEPT THE CONTENTIONS AND CONFIRMED THE PENALTY STATING THAT THE ASSESSEE HAS NOT BEEN ABLE TO FILE ANY SATISFACTORY EXPLANATION FOR THE DISPROPORTIONATE ALLOCATION OF EXPENSES BETWEEN THE TWO UNITS WHICH ENHANCED THE PROFIT OF THE ELIGIBLE UNIT FOR DEDUCTION UNDER SECTION 80IB EXCLUSIVELY. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE LEARNED COUNSEL AND LEARNED D.R. 6. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE TOTA L INCOME RETURNED AND ALSO DETERMINED INVOKING PROVISIONS OF SECTION 115JB WAS SAME. CONSEQUENTLY WE ARE OF THE OPINION THAT EXPLANATION 4 OF SECTION 271(1)(C) IS NOT APPLICABLE TO THE FACTS OF THE CASE. EXPLANATIO N 4 TO SECTION 271(1) IS AS UNDER: - 271. (1) .. EXPLANATION 4 FOR THE PURPOSES OF CLAUSE (III) OF THIS SUB-SECTION, THE EXPRESSION THE AMOUNT OF TAX SOUGHT TO BE EVADED, (A) IN ANY CASE WHERE THE AMOUNT OF INCOME IN RESP ECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PART ICULARS HAVE BEEN FURNISHED HAS THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERTING THAT LOSS INTO INCOME, MEA NS THE TAX THAT WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RE SPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAD SUCH INCOME BEE N THE TOTAL INCOME; (B) IN ANY CASE TO WHICH EXPLANATION 3 APPLIES, MEA NS THE TAX ON THE TOTAL INCOME ASSESSED [AS REDUCED BY THE AMOUNT OF ADVANCE TAX, TAX DEDUCTED AT SOURCE, TAX COLLECTED AT SOURCE AND SELF-ASSESSMENT TAX PAID BEFORE THE ISSUE OF NO TICE UNDER SECTION 148; (C) IN ANY OTHER CASE, MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE B EEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY TH E AMOUNT ITA NO. 1651/MUM/2009 M/S. COLUMBIA PETRO CHEM P. LTD. 4 OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED. SINCE THE TOTAL INCOME WAS DETERMINED UNDER SECTION 115JB AND RETURNED INCOME AND ASSESSED INCOME UNDER THAT PROVISION BEI NG SAME, NONE OF THE CLAUSES OF EXPLANATION 4 CAN BE INVOKED IN LEVYING PENALTY ON DETERMINING TAX SOUGHT TO BE EVADED WHEN THE ASSESSEE OFFERED T AX U/S 115JB AND ULTIMATELY ACCEPTED AS SUCH, EVEN AFTER RESTRICTING THE DEDUCTION U/S 80IB IN THE NORMAL COMPUTATION. 7. BE THAT AS IT MAY, AS SEEN FROM THE ORDER OF THE A. O. UNDER SECTION 143(3), THE PROCEEDINGS UNDER SECTION 271(1)(C) ARE INITIATED ON THE ISSUE OF MAKING INACCURATE CLAIM OF DEDUCTION. PROVISIONS OF SECTION 271(1)(C) ARE ATTRACTED WHERE THERE IS CONCEALMENT OF INCOME OR F URNISHING OF INACCURATE PARTICULARS. MAKING A CLAIM WHICH IS NOT ALLOWED BY THE A.O. DOES NOT WARRANT ANY PENALTY UNDER SECTION 271(1)(C) AS DETE RMINED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. 322 ITR 158. THERE IS NEITHER CONCEALMENT OF INCOME NOR FUR NISHING INACCURATE PARTICULARS IN THE PRESENT FACTS OF THE CASE. AS SE EN FROM THE FACTS OF THE CASE THE ASSESSEE HAD MADE THE CLAIM ON THE BASIS O F BOOKS OF ACCOUNT AND AUDITED RESULTS. THE ASSESSING OFFICER ALSO ALLOWED LARGE AMOUNT OF CLAIM AND HIS ACTION IN RESTRICTING THE CLAIM DUE TO REALLOCA TION OF HEAD QUARTER AND OTHER COMMON EXPENDITURES DID NOT HAVE ANY EFFECT O N ULTIMATE TAX EFFECT AS THE INCOME SO DETERMINED WAS STILL LESS THAN THE TO TAL INCOME OFFERED AND ACCEPTED U/S 115JB. CERTAINLY THERE IS NO TAX PLANN ING INVOLVED IN THIS CASE AS THE ASSESSEE HAS SUFFERED TAX UNDER SECTION 115J B ONLY. THE CIRCUMSTANCES DO INDICATE THAT THE CLAIM IS A BONAF IDE CLAIM REJECTION OF WHICH DOES NOT WARRANT ANY PENALTY UNDER SECTION 27 1(1)(C). ACCORDINGLY WE CANCEL THE PENALTY AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 8. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY 2011. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 21 ST JANUARY 2011 ITA NO. 1651/MUM/2009 M/S. COLUMBIA PETRO CHEM P. LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IX, MUMBAI 4. THE CIT IX, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.