M/s. Dolaria Enterprises Pvt.Ltd., Ahmedabad V. The ACIT.,(OSD)Range-1, Ahmedabad

ITA 1822/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1748 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 01-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Depreciation; Set aside
• Section: 143(1); 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.1822/AHD/2009 A. Y.: 2004-05 DOLARIA ENTERPRISES PVT. LTD., 305, KAILAS-1, B/H. POST OFFICE, NAVRANGPURA, AHMEDABAD VS THE A. C. I. T. (OSD), RANGE-1, 3 RD FLOOR, JITENDRA CHAMBERS, ASHRAM ROAD, AHMEDABAD PA NO. AABCD 4008K (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S.N. DIVATIA, AR RESPONDENT BY SHRI MUDIT NAGPAL, SR. DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-VI , AHMEDABAD DATED 18-02-2009 FOR ASSESSMENT YEAR 2004-05, CHALL ENGING THE LEVY OF PENALTY OF RS.81,046/- U/S 271 (1) ( C ) OF THE IT ACT. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE AO MADE THE ADDI TION ON ACCOUNT OF DISALLOWANCE OUT OF EDUCATIONAL EXPENSES AND DIS ALLOWANCE OF DEPRECIATION ON LAPTOP. PENALTY WAS ALSO IMPOSED ON THE SAME. THE AO NOTED THAT THE ASSESSEE COMPANY HAS SPONSORED AL L THE ITA NO.1822/AHD/2009 DOLARIA ENTERPRISES PVT. LTD. VS ACIT (OSD), RANGE- 1, AHMEDABAD 2 EXPENSES OF MBA COURSE TO BE UNDERTAKEN BY ONE OF I TS DIRECTORS NAMELY SHRI RAJENDRA PATEL AT LONDON. THE ASSESSEE FURNISHED ALL THE DETAILS CALLED FOR BY THE AO LIKE COPY OF BOARD RESOLUTION, COPY OF THE AGREEMENT, AND BREAK-UP OF THE EXPENSES INCURRE D AND DETAILS OF EDUCATIONAL COURSE UNDERTAKEN BY THE DIRECTOR. BUT THE AO NOTED THAT MBA COURSE DONE BY SHRI PATEL STARTED ON 5/7-9-2003 AND ENDED ON 13-06-2003. HOWEVER, THE DETAILS OF THE COURSE SHOW THAT SHRI PATEL STAYED AT LONDON UP TO 31-03-2004 AND CLAIMED EXPEN DITURE TILL THAT DATE. THE AO NOTED THAT SINCE THE COURSE APPROVED B Y THE ASSESSEE COMPANY ENDED IN JUNE, 2003 ITSELF, THEREFORE, ASSE SSEE COMPANY WAS NOT JUSTIFIED IN CLAIMING THE EXPENDITURE BEYON D THE STUDY COURSE IN LONDON. THE ASSESSEE EXPLAINED THAT THOUGH THE A CADEMIC LECTURES WERE UP TO JUNE, 2003, HOWEVER, THE PROJEC T DESERTION WAS COMPLETED ONLY IN NOVEMBER, 2003 WHICH WAS COMPULSO RY FOR COMPLETING THE COURSE. THEREFORE, EXPENSES WERE PRO VIDED BY THE COMPANY. THE AO HOWEVER, NOTED THAT NO DETAILS OF P ROJECT DESERTION HAS BEEN FURNISHED TO SHOW THAT IT WAS COMPULSORY P ROJECT FOR COMPLETION OF THE STUDY OF THE DIRECTOR AND NO COPY OF THE BOARD RESOLUTION HAS BEEN FURNISHED APPROVING THE EXPENSE S FOR THE EXTENDED STAY OF THE DIRECTOR. ACCORDINGLY, THE CLA IM OF THE ASSESSEE WAS DISALLOWED IN A SUM OF RS.1,91,994/-. IT WAS AL SO NOTICED THAT DEPRECIATION IS CLAIMED ON LAPTOP OF THE COST OF RS .84,800/- WHICH WAS PURCHASED BY THE SAME DIRECTOR FOR HIS STUDY AT LONDON FOR HIS PERSONAL USE. THE ASSESSEE COMPANY LATER ON REIMBUR SED THE EXPENSES OF THE LAPTOP AND INCLUDED THE SAME IN ITS ASSETS AND CLAIMED DEPRECIATION. IT WAS CLAIMED THAT LAPTOP WA S PURCHASED BY THE DIRECTOR FOR THE PURPOSE OF DOING THE SAME COUR SE WHICH WAS LATER ITA NO.1822/AHD/2009 DOLARIA ENTERPRISES PVT. LTD. VS ACIT (OSD), RANGE- 1, AHMEDABAD 3 ON CAPITALIZED IN THE BOOKS OF THE ASSESSEE ON WHIC H DEPRECIATION IS CLAIMED. IT WAS EXPLAINED THAT LAPTOP WAS PURCHASED FOR THE SAME STUDY ON 13-1-2003 I.E. PRIOR TO COMPLETION OF THE STUDY AT UK AT THE COST OF THE DIRECTOR WHICH WAS LATER ON REIMBURSED AND TAKEN IN THE ASSET OF THE ASSESSEE COMPANY. THE AO HOWEVER, DID NOT ALLOW THE CLAIM OF THE ASSESSEE BECAUSE THE ELECTRONIC ITEMS LOOSE THEIR VALUE VERY RAPIDLY AND NO PRUDENT MAN WOULD PURCHASE OLD ARTICLE AT THE SAME RATE. THE ADDITION IS TREATED TO HAVE BEEN MAI NTAINED BY THE LEARNED CIT(A) ON QUANTUM. THE LEARNED COUNSEL SUBM ITTED THAT NO FURTHER APPEAL IS PREFERRED BEFORE THE TRIBUNAL AGA INST THE QUANTUM BEING THE SMALL ISSUE. ON THE SAME FACTS, THE AO LE VIED PENALTY U/S 271 (1) ( C ) OF THE IT ACT VIDE SEPARATE ORDER. TH E LEARNED CIT(A) CONFIRMED THE PENALTY BIDE IMPUGNED ORDER. 3. THE COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT ALL THE FACTS WERE DISCLOSED TO THE AO AT THE ASSESSMENT STAGE AND EXP LANATION OF THE ASSESSEE WAS BONA FIDE AND IT IS NOT A CASE OF CONC EALMENT OR INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. HE HAS SUBMITTED THAT EVEN IN THE EARLIER YEARS SIMILAR EX PENSES WERE CLAIMED WHICH HAS BEEN SHOWN IN THE COMPUTATION OF INCOME AND RETURN HAS BEEN PROCESSED U/S 143(1) OF THE IT ACT. HE HAS FURTHER SUBMITTED THAT LAPTOP WAS USED FOR THE SAME STUDY B Y THE DIRECTOR, THE COST OF WHICH WAS REIMBURSED BY THE ASSESSEE COMPAN Y. THEREFORE, IT BECAME ASSETS OF THE ASSESSEE COMPANY ON WHICH D EPRECIATION WAS CORRECTLY CLAIMED. HE HAS RELIED UPON THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROP RODUCTS PVT. ITA NO.1822/AHD/2009 DOLARIA ENTERPRISES PVT. LTD. VS ACIT (OSD), RANGE- 1, AHMEDABAD 4 LTD. 322 ITR 158. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD. THOUGH THE ADDITION IS MAINTAINED ON QUANTU M AND NO APPEAL IS PREFERRED BEFORE THE TRIBUNAL, IT IS SETTLED LAW THAT QUANTUM AND PENALTY PROCEEDINGS ARE ALTOGETHER SEPARATE AND DIS TINCT PROCEEDINGS AND THE ASSESSEE CAN EXPLAIN THE DETAILS IN THE PEN ALTY MATTER ALSO TO SHOW THAT PENALTY IS NOT LEVIABLE. IT IS NOT IN DIS PUTE THAT THE ASSESSEE COMPANY SPONSORED ALL THE EXPENSES OF MBA COURSE UN DERTAKEN BY THE DIRECTOR, SHRI RAJENDRA PATEL WHO HAS DONE MBA COURSE. IN THE PRECEDING ASSESSMENT YEAR 2003-04, SIMILAR DIRECTOR S FOREIGN STUDY EXPENSES WERE CLAIMED (PB-16) WHICH WAS SHOWN IN TH E RETURN OF INCOME AND THE RETURN HAS BEEN PROCESSED. IT IS NOT IN DISPUTE THAT MBA STUDY WAS APPROVED BY BOARD RESOLUTION OF THE A SSESSEE COMPANY. THE ASSESSEE FURNISHED COPY OF THE BOARD R ESOLUTION, COPY OF THE AGREEMENT, BREAK-UP OF THE EXPENSES INCURRED ON STUDY AND DETAILS OF THE COURSE UNDERTAKEN BY THE DIRECTOR BE FORE THE AO. THUS, IT IS UNDISPUTED FACT THAT THE ASSESSEE PRODUCED AL L THE DETAILS CALLED FOR BEFORE THE AO. IT IS ALSO NOT IN DISPUTE THAT T HE ACADEMIC LECTURES ENDED UP TO JUNE, 2003. THE AO DID NOT DISPUTE THE EXPENDITURE TILL THAT DATE AND ALLOWED DEDUCTION IN FAVOUR OF THE AS SESSEE COMPANY. FOR THE REMAINING PERIOD AFTER JUNE, 2003 THE EXPLA NATION OF THE ASSESSEE WAS THAT THE PROJECT DESERTION WAS TO BE C OMPLETED WHICH IS NECESSARY FOR THE MBA COURSE. IT WAS ALSO EXPLAINED AT THE PENALTY STAGE THAT THE RESOLUTION OF THE COMPANY DATED 12-0 2-2002 APPROVED A SUM OF RS.3,00,000/- PER ANNUM AND THE ACTUAL EXP ENDITURE ITA NO.1822/AHD/2009 DOLARIA ENTERPRISES PVT. LTD. VS ACIT (OSD), RANGE- 1, AHMEDABAD 5 CLAIMED BY THE ASSESSEE WAS RS.2,48,042/- IN THE YE AR 2002-03 AND RS. 67,016/- IN THE FOLLOWING YEAR. IT WOULD, THERE FORE, SHOW THAT THE EXPENDITURE WAS INCURRED EVEN IN LESSER AMOUNT AS A GAINST APPROVED AMOUNT BY RESOLUTION OF THE BOARD OF DIRECTORS. IT IS ALSO NOT DENYING FACT THAT PROJECT DESERTIONS ARE NOW A DAYS ESSENTI AL FOR COMPLETION OF MBA COURSE AND FOR OTHER HIGHER STUDIES. EVEN IF, T HE ASSESSEE HAS NOT GIVEN SUCH EVIDENCE OF FURNISHING PROJECT DESER TION BUT THE SAME WOULD SHOW THAT THE DIRECTOR REMAINED IN LONDON BEY OND THE PERIOD WHERE HE WAS UNDERGOING MBA COURSE. NOTHING IS BROU GHT ON RECORD IF HE WAS DOING ANY OTHER PERSONAL ACTIVITY IN LOND ON AFTER JUNE, 2003. IT IS ALSO A FACT THAT HE PURCHASED LAPTOP ON 13-01-2003 AND USED THE SAME FOR THE PURPOSE OF MBA COURSE PRIOR T O COMPLETION OF THE HIGHER STUDY. HE WAS PAID BACK THE AMOUNT IN QU ESTION ON RETURN FROM LONDON AND THE ASSESSEE COMPANY CAPITALIZED TH E LAPTOP IN ITS BOOKS OF ACCOUNT BY REIMBURSING THE COST OF THE LAP TOP TO HIM. THE ABOVE FACTS, THEREFORE, WOULD SHOW THAT THERE WAS N OTHING UNUSUAL IN THE EXPLANATION OF THE ASSESSEE TO SHOW THAT THE AS SESSEE FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED INCOM E OR THAT CLAIM OF THE ASSESSEE WAS FOUND TO BE FALSE. THE EXPLANATION OF THE ASSESSEE APPEARS TO BE BONA FIDE AND ALL THE FACTS RELATED T O THE MATTER IN ISSUE HAVE BEEN DISCLOSED BEFORE THE AO AT THE ASSESSMENT STAGE. EVEN THE DETAILS OF HIGHER STUDY WERE DISCLOSED TO THE R EVENUE DEPARTMENT IN THE PRECEDING ASSESSMENT YEAR ALSO AS PER THE DE TAILS FURNISHED IN THE PAPER BOOK. THE HONBLE SUPREME COURT IN THE CA SE OF RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) HELD THAT A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C) OF THE INCOME-TAX ACT, 1961, SUGGEST THAT IN ORDER TO BE COVERED BY IT, THERE HA S TO BE ITA NO.1822/AHD/2009 DOLARIA ENTERPRISES PVT. LTD. VS ACIT (OSD), RANGE- 1, AHMEDABAD 6 CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASS ESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1) (C) WOULD EMBRACE THE DETAIL S OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS F OUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HEL D GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPO SE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAI M TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE T HE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RET URN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TH E TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAI LS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORREC T OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENAL TY UNDER SECTION 271(1) ( C ). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. S UCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFF IRMED. ITA NO.1822/AHD/2009 DOLARIA ENTERPRISES PVT. LTD. VS ACIT (OSD), RANGE- 1, AHMEDABAD 7 5. THE HONBLE SUPREME COURT IN THE CASE OF M/S. RA JASTHAN SPINNING & WEAVING MILLS 2009 PIOL 63 SC HELD THAT ON EVERY DEMAND PENALTY IS NOT AUTOMATIC. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SAHABAD CO -OP. SUGAR MILLS LTD. 322 ITR 73 (P&H) HELD THAT MAKING OF WRO NG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING OF INACCURATE INFORM ATION, WHICH MAY CALL FOR LEVY OF PENALTY U/S 271 (1) ( C ) OF THE A CT. THE HONBLE PUNJAB & HARYANA HIGH COURT AGAIN IN THE CASE OF CIT VS SI DHARTHA ENTERPRISES 322 ITR 80 (P & H) HELD THAT LOSS SUFFE RED ON SALE OF MACHINERY WRONGLY TAKEN AGAINST PROFIT OF BUSINESS. ASSESSEE ON REALIZATION MISTAKE COMMITTED BY THE COUNSEL ACCEPT ED THE DECISION OF THE AO. NO DELIBERATE DEFAULT. APPELLATE AUTHORI TIES JUSTIFIED IN DELETING THE PENALTY U/S 271 (1) ( C ) OF THE IT AC T. 6. CONSIDERING THE FACTS OF THE CASE AS NOTED ABOVE , IN THE LIGHT OF THE ABOVE DECISIONS AND IN THE LIGHT OF THE FINDING S OF THE AUTHORITIES BELOW, WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY. THE ASSESSEE DISCLOSED ALL THE FACTS IN TH E RETURN OF INCOME AS WELL AS AT THE ASSESSMENT STAGE. THE CLAIM OF TH E ASSESSEE FOR DEDUCTION OF THE EXPENDITURE WAS BASED UPON PROPER EXPLANATION. ALL RELEVANT AND MATERIAL FACTS WERE DISCLOSED TO THE R EVENUE DEPARTMENT. EXPLANATION OF THE ASSESSEE WAS NOT AFT ERTHOUGHT, INCORRECT OR FALSE. THE LEARNED CIT(A), THEREFORE, WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY ON SUCH A MATTER. WE ACCORDI NGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY. ITA NO.1822/AHD/2009 DOLARIA ENTERPRISES PVT. LTD. VS ACIT (OSD), RANGE- 1, AHMEDABAD 8 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-03-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 18-03-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD