SELVAS PHOTOGRAPHICS LTD, MUMBAI V. DCIT RG 8(3), MUMBAI

ITA 1925/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7532 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2003-2004
• Appeal Filed On: 30-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Keywords: Business income
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI. P.M. JAGTAP (A.M.) AND SHRI. N.V. VASU DEVAN (J.M.) ITA NO.1925/MUM/2009 ASSESSMENT YEAR : 2003-2004 SELVAS PHOTOGRAPHICS LTD. 9A, MAHAL INDLS. ESTATE, MAHAKALI CAVES RD., ANDHERI (E), MUMBAI 400 093. PAN : AABCS5708D VS. DCIT RG (3) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAMEER DALAL RESPONDENT BY : SHRI NAVEEN GUPTA O R D E R PER P.M. JAGTAP, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A) XXIX, MUMBAI WHEREBY HE CONFIRMED THE PENALTY OF RS.80,450/- IMPOSED BY THE ASSESSING OFFICER U/S.27 1(1)(C) OF THE ACT. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH IS APPEAL ARE THAT THE ASSESSEE, WHICH IS A COMPANY, FILED ITS RETURN OF I NCOME FOR A.Y. 2003-04 ON 12.11.2003 DECLARING A LOSS OF RS.49,35,545/-. IN THE ASSESSMENT COMPLETED U/S.143(3) VIDE AN ORDER DATED 30.11.2005 , DISALLOWANCE, INTER ALIA, WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALES PROMOTION EXPENSES TO THE EXTENT OF 50% ON THE GROUND THAT TH E ASSESSEE COULD NOT FULLY SUPPORT AND SUBSTANTIATE ITS CLAIM FOR THE SA ID EXPENSES. ON APPEAL, THE LEARNED CIT(A) SUSTAINED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER TO THE EXTENT OF 10% OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF SALES PROMOTION EXPENSES OBSERVING THAT THE ASSESSEE COULD NOT ESTABLISH THAT THERE WAS NO PERSONAL ELEMENT INVOLV ED IN THE EXPENDITURE SO CLAIMED. CONSEQUENTLY A NOTICE WAS ISSUED BY THE ASSESSING OFFICER REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENA LTY U/S. 271(1)(C) ITA NO.1925/MUM/2009 A.Y.: 2003-2004 2 SHOULD NOT BE IMPOSED IN RESPECT OF THE ADDITION MA DE ON ACCOUNT OF DISALLOWANCE OF SALES PROMOTION EXPENSES. THE E XPLANATION OFFER BY THE ASSESSEE IN RESPONSE TO THE SAID NOTICE WAS NOT FOU ND ACCEPTABLE BY THE ASSESSING OFFICER AND HE PROCEEDED TO IMPOSE A PENA LTY OF RS.80,450/- U/S. 271(1)(C) BEING 100% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE IN RESPECT OF THE ADDITION OF RS.2,18,909/- MADE ON AC COUNT OF DISALLOWANCE OF SALES PROMOTION EXPENSES TREATING THE SAME AS CONCE ALED INCOME OF THE ASSESSEE. THE PENALTY SO IMPOSED BY THE ASSESSI NG OFFICER WAS CONFIRMED BY THE LEARNED CIT(A) AND AGGRIEVED BY THE SAME, TH E ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT T HE DISALLOWANCE OF 50% OUT OF SALES PROMOTION EXPENSES CLAIMED BY THE ASSESSEE WAS MADE BY THE ASSESSING OFFICER ON ESTIMATED BASIS WITHOUT POINTI NG OUT THAT ANY OF THE EXPENDITURE CLAIMED BY THE ASSESSEE UNDER THE SAID HEAD WAS BOGUS. IT IS WELL SETTLED THAT SUCH AD-HOC DISALLOWANCE MADE ON ESTIMATED BASIS CAN NOT BE REGARDED AS CONCEALED INCOME OF THE ASSESSEE AS ENVISAGED U/S.271(1)(C) TO ATTRACT THE LEVY OF PENALTY. MOREOVER, THE SA ID DISALLOWANCE OF 50% MADE BY THE ASSESSING OFFICER WAS REDUCED BY THE LEARNED CIT(A) TO 10% OF THE TOTAL SALES PROMOTION EXPENSES CLAIMED BY THE ASSES SEE AND THE REASON GIVEN BY THE LEARNED CIT(A) FOR SUSTAINING THE DISALLOWAN CE TO THAT EXTENT IS THAT THE ASSESSEE COULD NOT ESTABLISH THAT THERE WAS NO PERSONAL ELEMENT INVOLVED IN THE SAID EXPENDITURE. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY AND AS HELD BY THE HONBLE GUJARAT HIGH COU RT IN THE CASE OF SAYAJI IRON WORK (253 ITR 749), NO DISALLOWANCE ON ACCOUNT OF INVOLVEMENT OF PERSONNEL ELEMENT IN ANY EXPENSES CAN BE MADE IN THE CASE OF A COMPANY. AS SUCH, CONSIDERING ALL FACTS OF THE CASE, WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE TO IMPOSE PENALTY U/S.271(1)(C) AND LEARNE D CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S.271(1)(C). WE ARE THEREFORE, CANCEL THE SAID PENALTY AND ALLOW THIS APPEAL OF THE ASSESSEE. ITA NO.1925/MUM/2009 A.Y.: 2003-2004 3 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON THIS 22 ND DAY OF FEBRUARY, 2010. SD/- (N.V. VASUDEVAN) (JUDICIAL MEMBER) SD/- (P.M. JAGTAP) (ACCOUNTANT MEMBER) MUMBAI, DATED 22 ND FEBRUARY, 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-XXIX, MUMB AI 4. COMMISSIONER OF INCOME TAX, CITY-XXIX, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.1925/MUM/2009 A.Y.: 2003-2004 4 DATE INITIALS 1. DRAFT DICTATED ON 17-02-2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 18-02-2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM 5. APPROVED DRAFT COMES TO THE SR. PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER