M/s Colour Cottex Pvt. Ltd., Ludhiana V. ITO, W-5(2), Ludhiana

ITA 1715/CHANDI/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4797 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 29-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: B M MONGA SHRI ROHIT KAURA
• Keywords: Wrong claim; Bonafide mistake; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH B, CHANDIGARH , ! . .., # $, %& BEFORE: SH. SANJAY GARG, JM & DR. B.R.R. KUMAR, AM ITA NO. 1715/CHD/2017 ASSESSMENT YEAR : 2014-15 M/S COLOUR COTTEX PVT. LTD. 536/21, D/6A, INDUSTRIAL AREA-C DHANDARI KALAN, LUDHIANA THE ITO WARD-5(1) LUDHIANA PAN NO: AAECC8698K APPELLANT RESPONDENT !' ASSESSEE BY : SHRI. B.M. MONGA, SHRI. ROHIT KAURA #!' REVENUE BY : SHRI. MANJIT SINGH $ %! & DATE OF HEARING : 21/08/2018 '()*! & DATE OF PRONOUNCEMENT : 22/10/2018 %'/ ORDER PER DR. B.R.R. KUMAR, A.M THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A)-2, LUDHIANA DT. 13/10/2017. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF THE LD. CIT(A) IS AGAINST THE LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT(A), HAS GROSSLY ERRED IN UPHOLDING THE PENALTY LEVIED BY THE AO WHICH ITSELF HAS BEEN LEVIED ON THE BASIS OF ILLEGAL SHOW CAUSE NOTICE ISSUED UNDER SECTION 274 R.W.S 271(1)(C) AS IT DID NOT SPECIFY ON WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDIN GS HAD BEEN INITIATED, I.E., WHETHER THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. THE LD. CIT(A), IS NOT JUSTIFIED IN UPHOLDING THE P ENALTY OF RS. 1,80,600/- WHICH ITSELF, IS ON ISSUE OF CAPITAL EXPENDITURE, CLAIMED AS REVENUE EXPENDITURE AND DOES NOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. GROUND NO. 1 IS GENERAL IN NATURE. 4. GROUND NO. 2 IS NOT PRESSED. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING & EXPORT OF READYM ADE GARMENTS HAS FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 01.12.2014 DECLARING AN 2 INCOME OF RS.28,08,270/-. THE ASSESSMENT WAS COMPLE TED BY THE ASSESSING OFFICER VIDE ORDER UNDER SECTION 143(3) OF THE ACT DATED 08.11.2016 AT AN ASSESSED INCOME OF RS. 36,77,200/- AS AGAINST RETURNED INCOME OF RS.28,08,270/-. WHILE COMPLETING THE ASSESSMENT IN THIS CASE, THE A SSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF DISALLOWANCE OF ROC EXPENSES OF RS.6,02,000/-THE TO THE RETURNED INCOME OF THE ASSESSEE COMPANY. PENALTY PR OCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF INCOME OF RS. 6,02,000/- REPRESENTED BY ABOVE ME NTIONED ADDITION WERE ALSO INITIATED BY THE ASSESSING OFFICER AGAINST THE ASSE SSEE COMPANY AND LEVIED PENALTY OF RS. 1,80,600/-UPON THE ASSESSEE U/S 271( 1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF RS.6,02,000/ - VIDE ORDER DATED 25.05.2017. THE LEVY OF PENALTY OF RS. 1,80,600/- WAS UPHELD B Y THE LD. CIT(A). 6. BEFORE US LD. AR ARGUED THAT THE DISALLOWANCE U/ S 37(1) OF THE INCOME TAX ACT HAS BEEN MADE BY INVOKING HONBLE APEX COURT JU DGMENT IN THE CASE OF M/S PUNJAB STATE INDUSTRIAL CORN LTD VS CIT 225 ITR 772. IN ORDER TO ATTRACT PENALTY PROVISIONS OF 271(1)(C), THERE HAS TO BE CONCEALMEN T OF INCOME OR FURNISHING OF INACCURATE PARTICULAR OF INCOME BY THE ASSESSEE. IN THE INSTANT ASSESSEE CLAIMED DEDUCTION ON ACCOUNT OF EXPENDITURE INCURRED TO INC REASE IN AUTHORIZED SHARE CAPITAL OF THE COMPANY FOR THE PURPOSE OF INFUSION OF MORE CAPITAL FOR BUSINESS EXPANSION. NO INFORMATION PERTAINING TO THIS EXPEND ITURE WAS FOUND TO BE INCORRECT OR INACCURATE PARTICULARS, MERELY BECAUSE THE ASSESSEE CLAIMED DEDUCTION WHICH HAS NOT BEEN ACCEPTED BY THE REVENU E, PENALTY PROVISIONS U/S 271(1)( C) OF INCOME TAX ACT,1961 CANNOT BE INITIAT ED. HE ALSO RELIED ON THE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS RELIAN CE PETRO PRODUCTS LTD (2010)230 CTR (SC) 320 WHEREIN IT HAS BEEN HELD THA T MERELY BECAUSE ASSESSEE CLAIMED DEDUCTION OF EXPENDITURE WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE, PENALTY UNDER SECTION 271 (1) ( C) IS NOT ATTRACTED, MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN THE LAW, BY ITSE LF WILL NOT AMOUNT TO FURNISHING OF 3 INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETUR N WHERE THE CLAIM MADE IS NOT ACCEPTED BY AO FOR ANY REASON, THE ASSESSEE WOU LD ATTRACT PENALTY U/S 271 (1) ( C) .THAT IS CLEARLY NOT THE INTENTION OF LEGI SLATURE IT IS FURTHER SUBMITTED THAT THE ASSESSEE IS A HONEST TAX PAYER AND HAS BEEN COO PERATING IN ASSESSMENT PROCEEDING FOR THE LAST SEVERAL YEARS. HE FURTHER R ELIED ON THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS AJAIB SINGH & CO. (2002) 253 ITR 630 WHEREIN IT WAS OBSERVED THAT MERELY BECAUSE OF CERT AIN EXPENSES CLAIMED BY THE ASSESSEE ARE DISALLOWED BY AN AUTHORITY. IT CANNOT MEAN THAT PARTICULARS FURNISHED BY THE ASSESSEE WER E WRONG. IT WAS HELD THAT MERE DISALLOWANCE OF EXPENSES PER SE CANNOT MEAN TH AT ASSESSEE HAS FURNISHED IN ACCURATE PARTICULARS OF ITS INCOME. HE RELIED ON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). THE ASSESSEE HAS RELIED ON THE DECI SIONS OF THE ITAT IN THE CASE OF IREDA IN ITA NO. 1183/DEL/ 2010 DT. 29/05/2015, JOT INDRA STEEL & TUBE LTD. IN ITA NO. 6881/DEL/2015 DT. 18/09/2017. THE TRIBUNAL DELE TED THE ADDITION ON THE GROUNDS THAT THE ASSESSEE CANNOT BE HELD TO HAVE FU RNISHED EITHER WRONG PARTICULARS OF INCOME OR HAS CONCEALED PARTICULARS OF INCOME. IT WAS HELD IN THE CASE OF JOTINDRA STEEL & TUBE LTD. THAT THE CLAIM W AS A DEBATABLE ISSUE. THE CASE OF BRAHMPUTRA CONSORTIUM LTD. THE PENALTY WAS DELETED ON THE GROUNDS THAT IT WAS A BONAFIDE MISTAKE OF CLAIMING WRONG DE PRECIATION AND ROC FEE. AND ALSO IN THE CASE OF BHATIA CORPORATION PVT. LTD . THE HONBLE HIGH COURT OF DELHI IN THE CASE OF SAMTEL INDIA LTD. 96 TAXMAN 16 2 HELD THAT MERELY BECAUSE ASSESSEE HAS CLAIMED EXPENDITURE WHICH CLAIM WAS NO T ACCEPTED THAT BY ITSELF WOULD NOT ATTRACT PENALTY UNDER SECTION 271(1)(C) 7. LD. DR ON THE OTHER HAND ARGUED THAT WHEN THE AD DITION MADE AGAINST THE ASSESSEE STANDS UNDISPUTED, THE FACTUM OF FURNI SHING OF INACCURATE PARTICULARS STANDS PROVED AND THAT PENALTY HAS BEEN RIGHTLY IMPOSED AND RELIED 4 UPON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN CA SE OF CIT VS. ZOOM COMMUNICATION PVT. LTD. 327 ITR 510 (DEL.). 8. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND WE FIND STRENGTH IN THE ARGUMENTS OF THE LD. AR THAT THE CL AIM OF THE ASSESSEE WAS A BONAFIDE CLAIM AND THERE WAS NO MALAFIDE ON THE PAR T OF THE ASSESSEE. THE VARIOUS COURTS HAVE HELD THAT PENALTY UNDER SECTION 271(1(C) ON THE GROUNDS OF FURNISHING OF INACCURATE PARTICULARS OF INCOME CAN BE LEVIED ONLY WHEN THE ITEM HAS BEEN SUPPRESSED OR A BOGUS CLAIM HAD BEEN MADE. HOWEVER WHEN THERE IS NO DELIBERATE CONCEALMENT OR INACCURATE FACT WAS FI LED AND PENALTY OF CONCEALMENT BY WAY OF FURNISHING INACCURATE PARTICU LARS OF INCOME CANNOT BE LEVIED. THE EXPLANATION OFFERED BY THE ASSESSEE IS IN CONSONANCE WITH THE PROVISIONS OF THE INCOME TAX ACT, 1961 AS PER EXPLA NATION 1 OF SECTION 271(1)(C), HENCE THE PENALTY IS LIABLE TO BE DELETED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. SD/- SD/- . .., # $, (SANJAY GARG ) ( DR. B.R.R. KUM AR, AM) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE