Maruti Panchal Cylinders Pvt. Ltd., Kalol V. The DY.CIT.,Mehsana Circle, Mehsana

ITA 1728/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0342 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-01-2013
• Assessment Year: 2000-2001
• Appeal Filed On: 21-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR SRDR
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.1728/AHD/2010 ASSESSMENT YEAR :2000-01 M/S MARUTI PANCHAL CYLINDERS PVT. LTD., 7, SHASTRINAGAR SOCIETY, KALOL [ PAN NO. AABCM 0626L ] V/S . DCIT, MEHSANA CIRCLE, MEHSANA / APPELLANT .. / RESPONDENT) /BY APPELLANT SHRI DHIREN SHAH, AR /BY RESPONDENT SHRI RAHUL KUMAR, SR-DR /DATE OF HEARING 15-01-2013 /DATE OF PRONOUNCEMENT 18-01-2013 / // / O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-GANDHINAGAR ( CIT(A) FOR SHORT) DATED 26-02-2010 PERTAINING TO ASSESSMENT YEAR (AY) 2000-01. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN DISMISSING THE APPEAL. HE OUGHT TO HAVE ALLOWED THE APPEAL FUL LY IN ACCORDANCE WITH THE GROUNDS OF APPEAL RAISED BY THE APPELLANT BEFORE HIM. I. LEVY OF PENALTY U/S. 271(1) OF THE ACT RS.1, 24,598/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY US. 271(1)(C) OF THE ACT OF RS.1,24,598/- AS LEVIED BY THE LD. A.O. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO CONSIDER THE VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT. ITA NO.1728/AHD/2010 A.Y. 2000-01 M/S MARUTI PANCHAL CYLINDERS PVT. LTD. V. DCIT MSN CIR. PAGE 2 2. BRIEFLY STATED FACTS ARE THAT WHILE FRAMING ASSE SSMENT U/S 43(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) THE ASSESSING OFFICER INITIATED PENALTY PROCEEDING ON T HE FOLLOWING ADDITIONS:- I) INTEREST AND LABOUR EXPENSES RS.1,39,213/- II) DIFFERENCE IN STOCK RS.5,88,500/- III) EXPENSES CAPITALIZED RS.1,39,092/- IV) INFLATION OF PURCHASES RS.8,41,599/- V) INVESTMENT OUT OF UNDISCLOSED SOURCES RS.3,67,6 50/- IN QUANTUM PROCEEDINGS UP TO THE STAGE OF HONBLE I TAT, THE FOLLOWING ADDITIONS WERE SURVIVED:- (1) INTEREST EXPENSES TREATED AS CAPITAL RS.1,10, 121/- (2) LABOUR EXPENSES TREATED AS CAPITAL RS. 7, 000/- (3) DIFFERENCE IN VALUATION OF CLOSING STOCK RS.2 ,06,510/- THE ASSESSING OFFICER LEVIED PENALTY OF RS.1,54,598 /-. AGAINST THIS ORDER ASSESSEE FILED APPEAL BEFORE LD. CIT(A) WHO AFTER C ONSIDERING THE SUBMISSIONS OF ASSESSEE DISMISSED THE APPEAL. 3. THE ASSESSEE FEELING AGGRIEVED BY THIS ORDER FIL ED SECOND APPEAL BEFORE THE TRIBUNAL. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LEVY OF PENALTY IS NOT JUSTIFIED. HE SUBMITTED THAT INTEREST EXPENSES TREA TED AS REVENUE EXPENDITURE IS A DEBATABLE ISSUE AS WELL AS LABOUR EXPENSES TREATED AS REVENUE EXPENDITUE IS ALSO A DEBATABLE ISSUE. HE SU BMITTED THAT THESE CLAIMS WERE MADE BY THE ASSESSEE AS THE PROVISO TO SECTION 36(1)(III) OF THE ACT WAS NOT APPLICABLE AT THE RELEVANT TIME. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE JUDGMENT OF HONBLE SU PREME COURT RENDERED IN THE CASE OF CIT V. RELIANCE PETROPRODUCT PVT. LTD. (2010) 322 ITR 174 (SC). HE SUBMITTED THAT ANOTHER ADDITIO N IS WITH RESPECT TO ITA NO.1728/AHD/2010 A.Y. 2000-01 M/S MARUTI PANCHAL CYLINDERS PVT. LTD. V. DCIT MSN CIR. PAGE 3 THE DIFFERENCE IN STOCK AS THE STOCK STATEMENT SUBM ITTED BEFORE BANK AND AS RECORDED IN THE BOOKS OF ACCOUNT. HE SUBMITTED T HAT BEFORE THE BANK STATEMENT OF STOCK WAS GIVEN TO AVAIL CREDIT FACILI TIES. HE PLACED RELIANCE ON THE VARIOUS JUDGMENTS OF DIFFERENT HIGH COURTS O N THE FOLLOWING:- 1. CIT V. H.P. STATE FOREST CORPORATION LTD. (2011 ) 241 CTR 413 (HP) 2. CIT V. RUBBER UDYOG VIKAS (P) LTD. (2011) 335 I TR 558 (P&H) 3. CIT V. AERO TRADERS (P) LTD. (2010) 322 ITR 316 (DEL) 4. CIT V. MODI INDUSTRIAL CORPORATION (2010) 195 T AXMAN 68 (P&H) 5. CIT V. RAMPUR ENGG. LTD. (2010) 187 TAXMAN 171 (DEL) 6. CIT V. DEEKSHA HOLIDAYS LTD. (2010) 186 TAXMANK 183 (DEL) ON THE CONTRARY, LD. SR-DR FOR THE REVENUE STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT V. ZOOM COMMUNICATION (P) LTD. (2010) 327 IUTR 510 (DEL) AND ALSO THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDE RED IN THE CASE OF A.M. SHAH & CO. V. CIT (1999) 238 ITR 415 (GUJ). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD AND THE JUDGMENTS CITED BY BOTH THE SIDES AND PAPER BOOK FILED BY THE ASSESSEE. WE FIND THAT LD. CIT(A) HAS CONFIRMED PENALTY ON ADDITIONS OF INTEREST AND LABOUR EXPENSE S CLAIMED AS REVENUE AND ALSO DIFFERENCE IN VARIATION OF CLOSING STOCK. WE FIND THAT ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE IN RES PECT OF INTEREST AND LABOUR EXPENSES CLAIMED AS REVENUE EXPENSES ON THE GROUND THAT THE SAME WERE PRE-PRODUCTION PERIOD OUGHT TO HAVE BEEN CAPITALIZED. UNDISPUTEDLY, THE PROVISO TO SECTION 36(1)(III) OF THE ACT WAS INSERTED WITH EFFECT FROM 01-04-2004. THEREFORE, BEFORE INSE RTION OF THE PROVISO THE CLAIM OF ASSESSEE REMAINED DEBATABLE. UNDER THE SE FACTS, WE ARE OF ITA NO.1728/AHD/2010 A.Y. 2000-01 M/S MARUTI PANCHAL CYLINDERS PVT. LTD. V. DCIT MSN CIR. PAGE 4 THE CONSIDERED VIEW THAT THE PENALTY ON THIS ADDITI ON IS NOT JUSTIFIED. THE RATIO LAID IN THE JUDGMENT OF HONBLE SUPREME COURT RENDERED IN THE CASE OF RELIANCE PETROPRODUCT PVT. LTD. (SUPRA) WOULD BE APPLICABLE. RESPECTFULLY FOLLOWING THE SAME, ASSESSING OFFICER IS DIRECTED TO DELETE THE PENALTY LEVIED ON THIS ADDITION. 5.1 SO FAR THE ADDITION ON STOCK IS CONCERNED, THE HONBLE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 1651/AHD/2005 FOR AY 2000- 01 DATED 31-10-2008 HAS GIVEN A FINDING OF FACT THA T THERE IS A DIFFERENCE OF 345 PIECES WHICH IS EVIDENT ON THE BASIS THAT NU MBER OF PIECES SUBMITTED TO THE BANK 4100 AND VALUATION OF STOCK O F RAW MATERIAL AND CYLINDER CASING THAT IS AVAILABLE IN NUMBER OF PIEC ES 3755 THEREBY THERE WAS A QUANTITATIVE DIFFERENCE OF 345 PIECES. SO FAR THIS CONFIRMATION OF PENALTY ON THIS ISSUE IS CONCERNED WE DO NOT FIND A NY INFIRMITY INTO THE ORDER OF LD. CIT(A) AS IT HAS BEEN CATEGORICALLY HE LD BY THE HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF A.M. SHAH & CO. (SUPRA) THAT ANY DIFFERENCE IN STOCK TANTAMOUNT TO FURNISHI NG OF INACCURATE PARTICULARS OF INCOME AND IT HAS BEEN HELD THAT THE LEVY OF PENALTY IS JUSTIFIED. RESPECTFULLY FOLLOWING THE RATIO LAID TH EREIN THE ORDER OF LD. CIT(A) TO THIS EXTENT IS AFFIRMED. THE DECISIONS RE LIED BY THE LD. CIT(A) ARE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE AS IN THE CASE OF CIT V. H.P. STATE FOREST CORPORATION LTD. (2011) 241 CTR 413 (HP) THE FACTS WERE DIFFERENT AS IN THAT CASE, THE ASSESSEE HAD SH OWN WORK-IN-PROGRESS AND ALSO CLAIM DETERIORATION IN STOCK IN THE CASE O F CIT V. RUBBER UDYOG VIKAS (P) LTD. (2011) 335 ITR 558 (P&H) THE ISSUE WAS WITH REGARD TO SETTING OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINS T THE CAPITAL GAINS AND IN THE CASE OF CIT V. AERO TRADERS (P) LTD. (2010) 322 ITR 316 (DEL) THE ADDITION WAS MADE ON THE BASIS OF ESTIMATED PROFIT. IN THE PRESENT CASE, THE FACTS ARE SQUARELY COVERED BY THE DECISION OF H ONBLE JURISDICTIONAL ITA NO.1728/AHD/2010 A.Y. 2000-01 M/S MARUTI PANCHAL CYLINDERS PVT. LTD. V. DCIT MSN CIR. PAGE 5 HIGH COURT RENDERED IN THE CASE OF A.M. SHAH & CO. (SUPRA). IN THIS VIEW OF THE MATTER, THE PENALTY LEVIED ON THE ADDITION M ADE IN DIFFERENCE OF STOCK IS CONFIRMED. THIS GROUND OF ASSESSEES APPEA L IS PARTLY ALLOWED. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP !' #- 18/01/2013 *+, - ../ ../ ../ ../ 0/ 0/ 0/ 0/ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ','.2 3 / CONCERNED CIT 4. 3- / CIT (A) 5. /67 ...2, .2 , *+, / DR, ITAT, AHMEDABAD 6. 7:; <= / GUARD FILE. BY ORDER/ , /TRUE COPY/ >/* '? .2 , *+, - STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 15/01 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 15/01 4) DATE OF CORRECTION 16/01 5) DATE OF FURTHER CORRECTION 17/01 6) DATE OF INITIAL SIGN BY MEMBERS 17/01 7) ORDER UPLOADED ON 18/01 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 18/01