ITO, BHIWADI V. SADEM INDIA LTD., Alwar

ITA 196/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5599 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2004-2005
• Appeal Filed On: 03-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: RAJIV SOGANI C A DHK
• Keywords: Business expenditure; Reasonable cause

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 196/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2004-05. INCOME TAX OFFICER, WARD-BHIWADI ( STATIONED AT ALWAR) CUKE VS. M/S SADEM INDIA LTD., A - 1115, INDUSTRIAL AREA, BHIWADI, DISTT.- ALWAR, RAJASTHAN LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAICS2565F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI . R.A. VERMA (ADDL. CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJIV SOGANI (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06/02/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 10/2/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 1 ST DECEMBER 2015, PERTAINING TO ASSESSMENT YEAR 2004-05. THE REVENUE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL :- 1. THE LD. CIT(A) HAS ERRED ON THE FACTS & CIRCUMSTANC ES OF THE CASE IN DELETING THE PENALTY OF RS. 27,00,000/-. 2. THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR AD D TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. 2. GROUND NO. 2 IS GENERAL IN NATURE, NEEDS NO SEPA RATE ADJUDICATION, SAME IS THEREFORE DISMISSED. 3. ONLY EFFECTIVE GROUND IS AGAINST THE DELETION OF PENALTY OF RS. 27 LAKHS. BRIEFLY STATED THE FACTS ARE THAT IN THE QUANTUM PR OCEEDING WHILE ASSESSING THE 2 ITA NO. 196/JP/2016 M/S SADEM INDIA LTD. INCOME, THE ASSESSING OFFICER INITIATED PENALTY PRO CEEDINGS IN RESPECT OF COMMISSION INCOME CLAIMED BY THE ASSESSEE. SUBSEQUENTLY, PENA LTY WAS IMPOSED WHILE PASSING ORDER DATED 23/7/2014. AGGRIEVED BY THIS, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT (APPEALS), WHO AFTER CONSIDERING THE SUBMISSION S ALLOWED THE APPEAL AND DELETED THE PENALTY.AN APPLICATION SEEKING THE ADJO URNMENT IS FILED ON BEHALF OF THE ASSESSEE THROUGH HIS AUTHORIZED REPRESENTATIVE ON T HE GROUND THAT THE AUTHORIZED REPRESENTATIVE HAS BEEN RECENTLY ENGAGED IN THIS CA SE. WE DO NOT SEE THAT THE GROUND SEEKING ADJOURNMENT IS BASED ON A REASONABLE CAUSE. THEREFORE, SAME IS REJECTED. 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ORDER OF THE AO AND SUBMITTED THAT THE LD. CIT (APPEAL) WAS NOT JUSTIF IED IN DELETING THE ADDITION. ON THE CONTRARY, LD. AUTHORIZED REPRESENTATIVE ON BEHALF O F THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT (APPEALS) AND SUBMITTED THAT T HE PENALTY HAS BEEN RIGHTLY DELETED. THERE IS NOT INCOME OR FURNISHING OF INAC CURATE INCOME WHICH IS CONSIDER PRECEDING FOR INITIATED THE PENALTY PROCEEDINGS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. THE LD. CIT (APPEAL) AFTER CONSIDERING THE SUBMISSIONS HAS GIVEN FINDINGS OF F ACTS BY OBSERVING AS UNDER IN PARA 4.3 TO 4.7 OF HIS ORDER. 4.3 I HAVE GONE THROUGH THE PENALTY ORDER AS WELL AS SUBMISSIONS MADE BY THE APPELLANT INCLUDING JUDICIAL CITATIONS GIVEN THEREIN AND FIND THAT A PENALTY OF RS. 27,00,000 HAS BEEN IMPOSED U/ S 271 (1) (C) OF THE IT ACT BY THE AO. THE PENALTY WAS IMPOSED ON T HE GROUND THAT COMMISSION INCOME OF RS. 74,63,431 DECLARED BY THE APPELLANT UNDER THE HEAD INCOME FROM BUSINESS WAS TREATED BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS AS INCOME FROM OTHER SOURCES . IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT APPELLA NT HAS DECLARED COMMISSION INCOME OF RS. 46,46,867 FROM M/S MEHRU E LECTRICALS AND 3 ITA NO. 196/JP/2016 M/S SADEM INDIA LTD. ENGINEERS PVT. LTD. AND OF RS. 28,16,564 FROM M/S L ENSER COMMUNICATION PVT. LTD., WHICH TOTAL TO RS. 74,63,4 31 FOR THE PERIOD UNDER CONSIDERATION. THIS COMMISSION INCOME WAS TR EATED AS INCOME FROM OTHER SOURCES BY THE AO ON THE GROUND THAT NO SERVICES WERE RENDERED BY THE APPELLANT COMPANY FOR EARNING OF SU CH INCOME. ACCORDINGLY, PENALTY PROCEEDINGS U/S 271 (1) (C) OF THE IT ACT WERE INITIATED FOR FURNISHING O INACCURATE PARTICULAR OF INCOME AND A PENALTY OF RS. 27 LACS HAS BEEN IMPOSED BY THE AO ON HIS GR OUND. 4.4 THE APPELLANT HAS STATED THAT THERE IS NOT CON CEALMENT OF INCOME ON ITS PART AND THEREFORE PENALTY PROCEEDINGS HAVE BEEN WRONGLY INITIATED BY THE AO. THE INCOME DECLARED BY THE AP PELLANT IN THE RETURN OF INCOME AS INCOME FROM BUSINESS HAS BEEN C HANGED BY THE AO TO INCOME FROM OTHER SOURCES, WITHOUT HAVING ANY TAX IMPACT. THE APPELLANT HAS FILED A COPY OF THE COMPUTATION OF IN COME AND ASSESSMENT ORDER TO SUBSTANTIATE ITS CONTENTIONS. I T IS FURTHER STATED THAT THE SAID COMMISSION INCOME RECEIVED BY THE APP ELLANT HAS ALSO BEEN HELD TO BE ALLOWABLE BUSINESS EXPENDITURE UNDE R THE HEAD COMMISSION PAYMENT IN THE CASE OF THE PAYEES I.E. M /S MEHRU ELECTRICALS AND ENGINEERS PVT. LTD, AND M/S LENSER COMMUNICATION PVT. LTD. THE APPELLANT HAS ALSO FILED A COPY OF THE AP PELLATE ORDERS PASSED IN THE CASE OF M/S M/S MEHRU ELECTRICALS AND ENGINE ERS PVT. LTD. TO SUBSTANTIATE ITS CONTENTIONS. 4.5 THE APPELLANT HAS PLACED RELIANCE ON THE ORDER OF THE HONBLE SUPREME COURT PASSED IN THE CASE OF CIT VS NALWA SO NS INVESTMENT LTD. AND IN THE CASE OF GOLD COIN HEALTH FOOD PVT. LTD. AS REPORTED IN 304 ITR 308, TO SUBSTANTIATE THE CONTENTION THAT TA X SOUGHT TO BE EVADED WILL MEAN THE TAX CHARGEABLE NOT AS IF IT WA S THE TOTAL INCOME. THEREFORE, IN THE CASE OF THE APPELLANT, THIS CONDI TION IS NOT SATISFIED AND THUS NO PENALTY IS LEVIABLE IN SUCH CIRCUMSTANC ES. THE APPELLANT HAS ALSO PLACED RELIANCE ON THE JUDGEMENT OF HONBL E SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD., WHERE IT WAS HELD THAT SECTION 271 (1) (C) APPLIES WHERE THE ASSESSEE H AS CONCEALED THE PARTICULARS OF HI INCOME OR FURNISHED INACCURATE PA RTICULARS O SUCH INCOME. THE PRESENT WAS NOT A CASE OF CONCEALMENT OF THE IN COME. AS REGARDS THE FURNISHING OF INACCURATE PARTICULARS, NO INFORMATIO N GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. THE WORDS INA CCURATE PARTICULARS MEANS THAT THE DETAILS SUPPLIED IN THE RETURN ARE NOT ACC URATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THE ABSENC E OF A FINDING BY THE ASSESSING OFFICER THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF INVITING PENALTY U/S 271 (1) (C). 4 ITA NO. 196/JP/2016 M/S SADEM INDIA LTD. 4.6 HAVING CONSIDERED THE DETAILED SUBMISSIONS MAD E ON THIS ISSUE AND JUDICIAL DECISIONS CITED ON THIS SUBJECT, I FIN D THAT AO HAS AILED TO BRING ON RECORD ANY MATERIAL IN THE COURSE OF PENAL TY PROCEEDINGS TO THE EFFECT THAT INACCURATE PARTICULARS OF INCOME HA VE BEEN FURNISHED BY THE APPELLANT. VARIOUS COURT HAVE HELD THAT AO HAS TO ARRIVE AT A SATISFACTION IN THE COURSE OF PENALTY PROCEEDINGS T HAT ASSESSEE HAS FURNISHED INACCURATE PARTICULAR OF INCOME OR HAS CO NCEALED HIS INCOME, BEFORE IMPOSING THE PENALTY. FURTHER, THERE IS NOT CHANGE IN THE QUANTUM OF TOTAL INCOME ASSESSED AND DECLARED BY TH E APPELLANT. AO HAS ONLY RELIED UPON THE QUANTUM ORDER WHERE THE NA TURE OF INCOME DECLARED BY THE APPELLANT WAS CHANGED BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS AND LATER ON HAS BEEN CONFIR MED BY THE CIT (A). HOWEVER, THE SAME INCOME DECLARED BY THE PAYE E COMPANIES AS COMMISSION EXPENSE HAVE BEEN HELD BY THE HONBLE IT AT, JAIPUR BENCH AS ALLOWABLE EXPENDITURE UNDER THE HEAD COMMISSION EXPENSES. THEREFORE, THERE IS NO RATIONAL OR LOGIC IN HOLDING THAT APPELLANT HAS DECLARED WRONG/INACCURATE PARTICULARS OF COMMISSION INCOME. 4.7 THE APPELLANT HAS ALSO RELIED UPON THE ORDER O F HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158, WHERE IT WAS HELD THAT WHERE THERE IS NO FIN DING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO INCORRECT OR ERRONEOUS OR FALSE THERE IS NOT QUESTION OF INVITIN G THE PENALTY UNDER SECTION 271 (1) (C). A MERE MAKING OF A CLAIM, WHI CH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING IN ACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTI CULARS. WE DO NOT SEE ANY REASON TO INTERFERE INTO THE ABOV E FINDINGS OF THE LD. CIT (APPEALS) AS NO CONTRARY MATERIAL IS PLACED ON RECO RD BY THE REVENUE. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE H AD DISCLOSED THE AMOUNT ON WHICH PENALTY WAS IMPOSED. MERELY, ON THE GROUND THAT SA ME OUGHT TO HAVE BEEN TREATED AS INCOME FROM OTHER SOURCES. IT IS MERE CHANGE OF HEAD OF INCOME THERE IS NO CONCEALMENT AS SUCH OR FURNISHING OF INACCURATE PAR TICULARS. HENCE, THIS GROUND OF THE REVENUE APPEAL IS REJECTED. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 5 ITA NO. 196/JP/2016 M/S SADEM INDIA LTD. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10/02 /2017. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 10/02/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- INCOME TAX OFFICER, WARD-BHIWADI (STATIONED AT ALWAR). 2. THE RESPONDENT M/S.SADEM INDIA LTD., A-1115, IN DUSTRIAL AREA, BHIWADI, DISTT.-ALWAR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO.196/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 6 ITA NO. 196/JP/2016 M/S SADEM INDIA LTD.