The ACIT, 4(1), Indore V. M/s Maysoordeep Perfumery House, Indore

ITA 170/IND/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2972 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: ARPIT MUNDRA; S S MUNDRA R P MANDOVARA
• Keywords: Revised return
• Section: 37

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 148/IND/2013 A.Y. 2008-09 M/S. MYSORE DEEP PERFUMERY HOUSE, INDORE PAN AAFFM 4128 G :: APPELLANT VS ACIT-4(1), INDORE :: RESPONDENT AND, ITA NO. 170/IND/2013 A.Y. 2008-09 ACIT-4(1), INDORE :: APPELLANT VS M/S. MYSORE DEEP PERFUMERY HOUSE, INDORE PAN AAFFM 4128 G :: RESPONDENT ASSESSEE BY S/SHRI S.S. MUNDRA, R.P. MANDOVARA & ARPIT MUNDRA DEPARTMENT BY SHRI R.A. VERMA DATE OF HEARING 4.6.2013 DATE OF PRONOUNCEMENT 4.6.2013 2 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS- APPEALS CHALLENGING THE IMPUGNED ORDER DATED 15.1.2013 OF T HE LEARNED FIRST APPELLATE AUTHORITY, INDORE. THE ASSESSEE IS AGGRIEVED IN CONFIRMING THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT ON DISALLOWANCE OF RS.5 LACS PAID TO LIC TOWARDS GROUP GRATUITY FUND, WHICH WAS SUO MOTU OFFERED FOR DISALLOWANCE, DURING ASSESSMENT PROCEEDINGS. 2. DURING HEARING, THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS IDENTICAL TO THE GROUNDS RAISED BY SUBM ITTING THAT THE LD. CIT(A) COULD NOT APPRECIATE THE DECISIONS I N THE CASES OF SURESH CHANDRA MITTAL (251 ITR 9) (SC) AFFIRMING TH E DECISION OF HONBLE JURISDICTIONAL HIGH COURT, RELIANCE PETR O P. LTD. (322 ITR 158) (SC) AND PRICE WATER HOUSE COOPERS P. LTD . (348 ITR 306). IT WAS ALSO PLEADED THAT SUSTAINANCE OF PENAL TY U/S 271(1)(C) OF THE ACT ON DISALLOWANCE OF CLAIM OF RS .5 LACS, BEING GRATUITY EXPENDITURE, IS NOT JUSTIFIED. ON THE OTHE R HAND, THE LD. 3 SR. DR DEFENDED THE ORDER OF THE LD. CIT(A) AND ALS O THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF RS.5 LACS U/S 36(1)(V ) OF THE ACT ON ACCOUNT OF PAYMENT MADE TO LIC, TOWARDS GRATUITY FUND, IN ITS RETURN, DECLARING INCOME OF RS.68,20,680/-. THI S PAYMENT WAS SUPPORTED BY POLICY NO.GG/CA/112969 AND THE REC EIPT OF PAYMENT TO LIC. IN RESPONSE TO THE QUERY BY THE ASS ESSING OFFICER REGARDING THE PAYMENT OF GRATUITY, THE ASSE SSEE INFORMED THAT THIS FUND HAS NOT RECEIVED SO FAR THE APPROVAL OF THE LD. COMMISSIONER TILL FINALISATION OF ASSESSMEN T PROCEEDINGS. THE ASSESSING OFFICER INITIATED PENALT Y PROCEEDINGS U/S 271(1)(C) OF THE ACT. ON APPEAL, TH E LD. CIT(A) WAS OF THE VIEW THAT APPROVAL OF GRATUITY FUND IS S TATUTORY REQUIREMENT AND SUCH CONTRIBUTION SHOULD NOT HAVE B EEN DISALLOWED BY THE ASSESSEE IN ITS COMPUTATION OF IN COME. THE ASSESSEE INFORMED THAT THE ASSESSEE DID NOT RECEIVE ANY ORDER 4 OF THE APPROVAL OR REJECTION OF THE APPLICATION BY THE LD. CIT(A) AND WAS UNDER A REASONABLE BELIEF THAT APPROVAL WIL L BE GRANTED OR HAS BEEN GRANTED. HOWEVER, FACT REMAINS THAT THE ASSESSEE, VIDE APPLICATION DATED 23.9.2008, APPLIED FOR APPRO VAL OF GRATUITY FUND TO THE LD. COMMISSIONER. THE SCHEME O F GROUP GRATUITY IS FORMALITY IN COMPLIANCE OF PART C OF TH E 4 TH SCHEDULE OF THE I.T. ACT. ASSESSEE MADE DIRECT PAYMENT TO TH E LIC FOR CONTRIBUTION TOWARDS GRATUITY FUND. ANOTHER POINT P ERTINENT TO MENTION HERE THAT THE ASSESSEE DULY DISCLOSED ALL M ATERIAL FACTS REGARDING CLAIM OF EXPENSES ON ACCOUNT OF GRATUITY (PAGE 11 OF THE PAPER BOOK) AND THERE IS NO SUCH ALLEGATION OF NON- DISCLOSURE BY THE REVENUE ALSO. THUS, THE CLAIMED D EDUCTION BY THE ASSESSEE BY WAY OF DEBIT IN PROFIT & LOSS ACCOU NT CANNOT BE SAID TO BE CONCEALMENT OF FACTS. IN THE CASE OF REL IANCE PETRO PRODUCTS (SUPRA), THE HON'BLE APEX COURT CLEARLY HE LD THAT MERE DISALLOWANCE OF EXPENDITURE IN ITSELF DOES NOT MEAN FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. THE ASSESSEE IS ALSO SUPPORTED BY THE DECISION IN CIT V S. MEHTA 5 ENGG. LTD. (300 ITR 308) (P&H) AND CIT VS. TEXTOOL CO. LTD. (122 TAXMAN 668) (MAD) WHEREIN THE ASSESSEE MADE DI RECT PAYMENT TO THE LIC FOR CONTRIBUTION TOWARDS GRATUIT Y FUND, IT WAS HELD THAT BENEFIT U/S 36(1)(V) OF THE ACT SHOUL D NOT BE DENIED. IT IS PERTINENT TO MENTION HERE THAT SINCE THE ASSESSEE HAD MADE THE APPLICATION FOR APPROVAL BEFORE THE LD . COMMISSIONER, WHICH WAS PENDING AND UNDER A REASONA BLE BELIEF THAT SUCH APPROVAL EITHER BE GRANTED OR HAD BEEN GRANTED, THE ASSESSEE MADE A CLAIM. THE DECISION IN THE CASE OF PRICE WATER HOUSE COOPERS P. LTD. (SUPRA) FURTHER SUPPORTS THE CASE OF THE ASSESSEE. IT IS ALSO A FACT THAT THERE IS ACTUAL PAYMENT BY THE ASSESSEE TOWARDS GRATUITY FUND AMOUN TING TO RS.5 LACS. IT WAS NOT MERELY A PROVISION OF EXPENSE S WHEN THE BONA FIDE OF EXPENSES ARE NOT IN DOUBT AND EXPENDIT URE HAVE BEEN ACTUALLY INCURRED FOR THE PURPOSE OF BUSINESS, SAME IS ALLOWABLE U/S 37 OF THE ACT. THE HON'BLE APEX COURT IN UNION OF INDIA VS. ASHOK KUMAR (8 SCC 760) CLEARLY HELD T HAT BURDEN OF PROVING MALAFIDE IS HEAVILY ON THE PERSON, WHO A LLEGES ITS. 6 THE INTENTION AND BONAFIDE OF THE ASSESSEE WAS UNDE R A BELIEF THAT THE ASSESSEE HAS ALREADY MADE AN APPLICATION O F APPROVAL BEFORE THE LD. COMMISSIONER AND CLAIMED DEDUCTION. IN VIEW OF THESE FACTS, MERE DISALLOWANCE OF CLAIMED EXPENSES DO NOT GIVE RISE TO A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C ) OF THE ACT, MORE SPECIFICALLY WHEN THE ASSESSEE NEITHER CONCEAL ED ITS INCOME NOR FURNISHED INACCURATE PARTICULARS, WHICH IS THE PRIMARY REQUIREMENT FOR IMPOSITION OF PENALTY U/S 2 71(1)(C) OF THE ACT. THE APPEAL OF THE ASSESSEE IS ALLOWED. 4. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE WHEREIN THE REVENUE IS AGGRIEVED IN DELETING THE PENALTY U/ S 271(1)(A) (C) OF THE ACT (PART RELIEF) ON THE AMOUNT OF TAX C ALCULATED ON THE ADDITION OF SUNDRY CREDITORS AMOUNTING TO RS.11,77, 454/- AND REDUCTION OF PENALTY AMOUNT BY RS.3,50,500/-. THE C RUX OF ARGUMENT ON BEHALF OF THE REVENUE IS THAT THE REVIS ED RETURN WAS FILED BY THE ASSESSEE WHEN THE SHOW-CAUSE NOTIC E WAS ISSUED BY THE DEPARTMENT, THEREFORE, IT IS NOT A VO LUNTARY OFFER BY THE ASSESSEE. ON THE OTHER HAND, THE LEARNED COU NSEL FOR 7 THE ASSESSEE DEFENDED THE ACTION OF THE LD. CIT(A) BY CONTENDING THAT THE OBSERVATION MADE BY THE LD. CIT(A) THAT RE VISED RETURN WAS FILED AFTER ISSUANCE OF SHOW-CAUSE NOTICE IS MA TERIALLY INCORRECT AS THE ASSESSEE DID NOT FILE ANY REVISED RETURN RATHER A LETTER WAS FILED IN RESPONSE TO QUERY DATED 11.11 .2010. THE ASSESSEE WAS ASKED TO GIVE DETAILS OF 14 TRADE PART IES, WHOSE ACCOUNTS WERE HAVING SAME BALANCE AS ON 1.4.2007 TO 31.3.2008. AS PER THE ASSESSEE, VIDE REPLY DATED 11 .10.2010, THE NECESSARY DETAILS OF THE PARTIES ALONG WITH THE COMPLETE ADDRESSES WERE FILED BEFORE THE LD. ASSESSING OFFIC ER, FOR WHICH, OUR ATTENTION WAS INVITED TO PAGE 3 OF THE PAPER BO OK I.E. ASSESSMENT ORDER AND PAGE 33 OF THE PAPER BOOK. IT WAS ALSO PLEADED THAT THE REMAINING PARTIES COULD NOT PAID B ECAUSE OF DISPUTE, WHICH WAS PENDING SETTLEMENT AND IN VIEW O F THESE FACTS, THE ASSESSEE AGREED FOR ADDITION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE TOTAL ITY OF THE FACTS AND THE REPLY DATED 11.10.2010, IN WHICH, THE NECESSARY 8 DETAILS OF THE PARTIES WERE FURNISHED AND MORE SPEC IFICALLY, THE ASSESSEE EXPLAINED THAT FOR NINE PARTIES, THE AMOUN TS WERE PAID BEFORE 31.3.2010 AND THE LIABILITY TOWARDS REMAININ G 5 PARTIES WAS STILL EXISTING AS DISPUTE WAS PENDING FOR SETTL EMENT. TO AVOID LITIGATION AND FOR THE SAKE OF MENTAL PEACE, THE ASSESSEE SURRENDERED THE AMOUNT OF RS.11,77,454/- AS UNCLAIM ED CREDIT BALANCE. THE ASSESSING OFFICER HAS NOT BROUGHT ON R ECORD ANY MATERIAL TO SHOW THAT THE ASSESSEE OBTAINED ANYTHIN G IN CASH OR IN ANY OTHER MANNER BY WAY OF REMISSION OR CESSA TION. THE ASSESSING OFFICER HAS ALSO NOT CONDUCTED ANY INQUIR Y FROM THE CREDITORS ESTABLISHING EITHER THE AMOUNT HAS ALREAD Y BEEN PAID OR THE SAME HAS BEEN FORGONE. MERELY, THE ACT OF AG REEING FOR INCLUSION ON ACCOUNT OF CREDIT LIABILITY OUTSTANDIN G DOES NOT MEAN THAT THE ASSESSEE CONCEALED ITS INCOME OR FURN ISHED INACCURATE PARTICULARS. THE RATIO LAID DOWN IN SURE SH CHANDRA MITTAL (251 ITR 9), VIP INDUSTRIES (2009) 122 TTJ ( MUM) 289 AND MALU ELECTRODES P. LTD. (14 ITJ 398) SUPPORTS T HE CASE OF 9 THE ASSESSEE. THUS, WE FIND NO MERIT IN THE APPEAL OF THE REVENUE. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 4.6.2013. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 7.6.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYAS!