A.C.I.T-1(1), MUMBAI V. ELOF HANSSONS (INDIA) PVT LTD, MUMBAI

ITA 1920/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79023 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 01-05-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 08-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOURYA PRATAP
• Keywords: Bonafide belief; Wrong claim; Revenue expenditure

Judgement Text

, , INCOME TAX APPELLATE TRIBUNAL MUMBAI - J BENCH MUMBAI , , / , BEFORE S/SH.VIJAY PAL RAO,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 1920/MUM/2011, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR2003-04 DCIT 1(1), ROOM NO. 579, AAYAKAR BHAVAN, MUMBAI-400020 VS. ELOF HANSSONS (INDIA) PVT. LTD. 5-F, COURT CHAMBERS, 35, NEW MARINE LINES, MUMBAI-400020 PAN: AAACE2661H ( #$ / APPELLANT) ( %&#$ / RESPONDENT) #$ ' / APPELLANT BY : SHRI MOURYA PRATAP %&#$ ( ' / RESPONDENT BY : SHRI NITESH JOSHI ! ! ! ! ( (( ( )* )* )* )* / DATE OF HEARING :28-05-2014 +,' ( )* / DATE OF PRONOUNCEMENT :28- 05- 2014 ! ! ! ! , 1961 ( (( ( 254 )1( )-) )-) )-) )-) . . . . ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) ! ! ! ! PER RAJENDRA,A.M: CHALLENGING THE ORDER DATED 27.10.1010 OF THE CIT(A )-I,MUMBAI,ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.WHETHER ON THE. FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE PENALTY U/S. 271(1)(C) OF RS. 11,23,07 3/-. 2.THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR WI THDRAW THE AFORESAID GROUND OF APPEAL. 2. ASSESSEE-COMPANY,FILED ITS RETURN OF INCOME ON 25.1 1.2003 DECLARING TOTAL INCOME OF RS.1.68 CRORES.ASSESSING OFFICER(AO)FINALISED THE ASSESSMEN T U/S.143(3) OF THE ACT,ON 30.12.2005,DETER- MINING THE TOTAL INCOME AT RS. 1,94,95,629/-.AO HAD MADE FOLLOWING ADDITIONS TO THE INCOME OF THE ASSESSEE: INCOME FROM YASLIK PROJECT- RS.28.47 LAKHS AND ADVANCE PAYMENT OF SUPERANNUATION FUND RS.2,08,859/-. HE ALSO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) R.W.S.274 FOR CONCEALMENT OF PARTICULARS OF INCOME FOR THE YEAR UNDER APPEAL.EFFECTIVE GROUND O F APPEAL PERTAINS TO DELETION OF PENALTY BY THE FIRST APPELLATE AUTHORIRTY(FAA).IN THE PENALTY ORDE R AO OBSERVED THAT THE ASSESSEE WAS FOLLOWING PROJECT COMPLETED METHOD FOR OFFERING INC OME FOR ITS PROJECTS,THAT DURING THE YEAR UNDER APPEAL THERE WAS ONE PROJECT WHICH REMAINED I NCOMPLETE NAMELY YASLIK PROJECT.DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED AS TO WHY ANY INDIRECT EXPENSES HAD NOT BEEN APPORTIONED FOR THE SAME THOUGH IT HAD RECEIVE D SUBSTANTIAL FUNDS FROM THE CONCERNED PARTY.AO OBSERVED THAT THE ASSESSEE HAD ONLY ACCOUN TED FOR DIRECT EXPENSES AGAINST THE RECEIPTS RESULTING THE BALANCE BEING SHOWN AS ADVANCE RECEIV ED IN THE BOOKS AND NOT ACCOUNTED AS INCOME FOR THE YEAR. IN RESPONSE THE ASSESSEE FILED ITS RE PLY WHICH WAS NOT FOUND TO BE ACCEPTABLE BY THE AO.HE DISALLOWED A SUM OF RS. 21,83,22L/- AS INDIRE CT EXPENSE PERTAINING TO THE PROJECT HOLDING THAT THE TREATMENT GIVEN BY THE ASSESSEE TO THE AMO UNT IN QUESTION WAS NOT IN CONSONANCE WITH THE 2 ITA NO. 1920/MUM/2013 ELOF HANSSONS (INDIA) PVT. LT D. PRINCIPLES OF ACCOUNTING FOLLOWED BY THE ASSESSEE F OR THE YASLIK PROJECT.A SUM OF RS. 28,47,124/- WAS TREATED AS PROFIT ON THE RECEIPTS FOR THE YEAR UNDER APPEAL. SECOND ADDITION MADE BY THE AO PERTAINED CONTRIBUTION TO A SUPERANNUATION FUND.DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD TAKEN A LIC POLICY FOR SUPERANNUATION FUND AND SAME COULD BE RENEWED ON 30TH NOVEMBER 2002.AO HELD THAT HOLDING A POLICY DID NOT MEAN THAT THE AMOUNT PAID FROM 01.12.2002 TO NOVEMBER,2003 WAS REVENUE E XPENDITURE FOR THE YEAR UNDER APPEAL.THE PROPORTIONATE AMOUNT OF RS.2,08,859/- FROM DECEMBER 2002 TO 31 ST MARCH 2003 WAS TAKEN AS REVENUE EXPENDITURE BY THE AO AND THE BALANCE WAS T REATED AS ADVANCE FOR THE NEXT YEAR.HE ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE .AO WAS OF THE OPINION THAT THE ASSESSEE HAD FILED INACCURATE PARTICULARS OF INCOME LEADING TO T HE CONCEALMENT INCOME IN RESPECT OF THE ABOVE MENTIONED TWO ADDITIONS.HE HELD THAT THE ASSESSEE H AD NOT OFFERED INCOME FROM YASLIK PROJECT AND HAD MADE A WRONG CLAIM ABOUT ADVANCE PAYMENT OF SUPERANNUATION FUND.FINALLY,HE LEVIED A PENALTY OF RS.11,23,073/-U/S.271(1)(C)OF THE ACT. 2.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,THE ASSESSMENT ORDE R AND THE PENALTY ORDER,HE HELD THAT THE INCOME WHICH WAS TAXED BY THE AO FROM YASLIK PROJECT,I.E.R S.28,47,124/-,WAS OFFERED BY THE APPELLANT ITSELF IN THE NEXT FINANCIAL YEAR,THAT THE ASSESSEE HAD ALSO MENTIONED THE FACT OF DECLARING THE SAID INCOME IN THE NEXT YEAR IN A NOTE FORMING PART OF ACCOUNT NOTE 2(IV) OF SCHEDULE K TO FINANCIAL ACCOUNT,THAT MERELY CONFIRMATION OF ADDITION WOULD NOT AMOUNT TO CONCEALMENT OF INCOME, THAT THE SUPERANNUATION CONTRIBUTION WAS CLAIMED BY THE ASSESSEE WITH BONAFIDE BEIEF AS THE SAID CONTRIBUTION WAS PAID ON YEARLY BASIS AND RENEWAL D ATE WAS ON 01/12/ 02,THAT THE SAME PRACTICE WAS FOLLOWED BY THE ASSESSEE IN EARLIER YEARS WHERE IN THE AO HAD ALLOWED THE IDENTICAL CLAIM , THAT THE AO HAD ALLOWED PROPORTIONATE CONTRIBUTION, WHEREAS THE ASSESSEE HAD CLAIMED THE EXPENDITURE ON YEARLY CONTRIBUTION AND WHICH WAS AL SO ALLOWED BY THE DEPARTMENT,THAT THE AO HAD MERELY DISALLOWED CONSIDERING THE SAME AS PRE-PAID EXPENSES,THAT THE ASSESSEE HAD NOT CONCEALED INCOME.FINALLY,HE DELETED THE PENALTY LEVIED BY THE AO. 2.2. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE PENALTY ORDER OF THE AO.AUTHORIS - ED REPRESENTATIVE(AR) STATED THAT THE MATTER BEFORE US FELL UNDER THE CATEGORY WHERE PENALTY WAS LEVIED ON A DEBATABLE ISSUE, THAT THE ASSESSEE WAS FOLLOWING A PARTICULAR METHOD,PROJECT COM - PLETION METHOD,FOR DETERMINING THE ITS INCOME,THAT ISSUE OF INCOME FROM YASLIK PROJECT WAS CONSIDERED BY THE TRIBUNAL IN ITS ORDER DATED FOR THE AYS.2003-04,2004-05 AND 2005-06,THAT MATTER WAS RESTORED BACK TO THE FILE OF THE AO,THAT ISSUE OF CONTRIBUTION TO SUPERANNUATION FUND WAS ALSO REMITTED TO THE AO BY THE TRIBUANL,THAT IT WAS HELD BY THE TRIBUNAL THAT ONLY PROPORTIO- NATE CONTRIBUTION COULD NOT BE ALLOWED,THAT CONTRIB UTION MADE BY THE ASSESSEE FOR THE WHOLE YEAR HAD TO BE ALLOWED SUBJECT TO CERTAIN VERIFICATIONS, THAT IN EARLIER YEARS SIMILAR CLAIM WAS ALLOWED BY THE AO.HE REFERRED TO THE PAGE NO.25 OF THE PAPER B OOK.HE RELIED UPON THE MATTER OF AMRUTA ENTERPRISES(84ITD172). 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT PENALTY HAS BEEN LEVIED BY THE AO ON ACCOUNT OF TWO ADDITIO NS MADE DURING THE ASSESSMENT PROCEEDINGS. ONE OF THE ADDITIONS IS ABOUT PROJECT COMPLETION ME THOD ADOPTED BY THE ASSESSEE.WE FIND THAT IN ITS ORDER DTD.17.06.2011(ITANOS/5479/MUM/2006/,3721 /MUM/2008/,315/MUM/2009-AYS.2003- 3 ITA NO. 1920/MUM/2013 ELOF HANSSONS (INDIA) PVT. LT D. 04 TO 2005-06)TRIBUNAL HAS HELD THAT METHOD ADOPTED BY THE ASSESSEE WAS ONE OF THE RECOGNISED METHOD AND CLAIM MADE BY IT SHOULD BE ALLOWED AFTER VERIFICATION,THAT THERE SHOULD NOT DOUBLE TAXATION OF ANY INCOME.IN THE MATTER UNDER CONSIDER ATION THE ASSESSEE HAD MADE A NOTE ABOUT THE INCOME IN NOTE 2(IV) OF SCHEDULE K TO FINANCIAL ACC OUNT.THUS,THERE WAS COMPLETE DISCLOSURE OF INCOME.THE AO AND THE ASSESSEE HAD DIFFERENCE OF OP INION ABOUT THE AY.IN WHICH THE INCOME WAS TO BE TAXED.AS FAR AS ADDITION MADE BY THE AO DURIN G THE ASSESSMENT PROCEEDINGS IS CONCERNED IT COULD BE JUSTIFIED OR COULD BE DISPUTED,BUT, SAME C OULD NOT BE BASIS FOR LEVYING PENALTY U/S.271(1)(C)OF THE ACT.AN ADDITION BY THE AO DURIN G THE ASSESSMENT PROCEEDINGS DOES NOT AND SHOULD NOT RESULT IN AUTOMATIC LEVY OF CONCEALMENT PENALTY.WE DO NOT WANT TO REFER THE JUDGMENTS VARIOUS COURTS HOLDING THE SAID PRINCIPLE,AS IT IS ONE OF THE WELL RECOGNISED PRINCIPLE OF TAX JURISPRUDENCE.IN THE MATTER UNDER CONSIDERATION THE ASSESSEE HAD MADE A NOTE IN THE FINANCIAL STATEMENTS THAT WERE PART OF THE RETURN OF INCOME.A S FAR AS CONTRIBUTION TO SUPERANNUATION FUND IS CONCERNED,IT IS A FACT THAT SIMILAR CONTRIBUTION WA S ALLOWED BY THE AO IN EARLIER YEARS AND HE HAD NOT MENTIONED THE REASONS FOR NOT ENDORSING THE SAM E VIEW FOR THE YEAR UNDER APPEAL.IF THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF,CONSIDERING THE EARLIER YEARS ORDER,THAT THE CLAIM MADE BY IT WAS A GENUINE CLAIM,THEN NO FAULT CAN BE FOUND W ITH IT.ACTION OF THE AO IN THE EARLIER YEARS LED HIM TO BELIEVE THE ALLOWABILITY OF THE CLAIM.SO,IN OUR OPINION,PENALTY U/S.271(1)(C)OF THE ACT SHOULD NOT HAVE BEEN LEVIED FOR THE SAID ADDITION.W E FURTHER FIND THAT THE TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF THE AO FOR VERIFICATION. AS THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LE GAL OR FACTUAL INFIRMITY,THEREFORE,CONFIRMING IT,WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEA L FILED BY THE AO STANDS DISMISSED. /)0 !1) * 2 3 ( - ! 4 ( ) 56 . ORDER PRONOUNCED IN THE OPEN COURT ON 2 8 TH MAY,2014. . ( +,' 7 8! 28 , 2014 , ( - : SD/- SD/- ( /VIJAY PAL RAO ) ( / RAJENDRA ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 8! /DATE:28.05.2014 SK . . . . ( (( ( %) %) %) %) ; ') ; ') ; ') ; ') / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT (A) / < = , 4. THE CONCERNED CIT / < = 5. DR J BENCH, ITAT, MUMBAI / >- %)! , . . . 6. GUARD FILE/ - / &) &) &) &) %) %)%) %) //TRUE COPY// .! / BY ORDER, ? / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI