INDIAN ALUMINIUM COMPANY LTD ( SINCE MERGED WITH HINDALCO INDUSTRIES LTD), MUMBAI V. ACIT 6(3), MUMBAI

ITA 2081/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88540 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 03-02-2015
• Assessment Year: 1989-1990
• Appeal Filed On: 15-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Keywords: Depreciation; Wrong claim; Commercial expediency; Bonafide mistake; Revenue expenditure; Capital expenditure
• Section: 43B; 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I , MUMBAI . . , , , BEFORE SHRI N.K.BILLAIYA , A M AND SHRI AMIT SHUKLA , J M ITA NO. 2081 /MUM/20 13 : ASST.YEAR 1989 - 90 M/S.INDIAN ALUMINIUM COMPANY LTD. (SINCE MERGED WITH HINDALCO INDUSTRIES LIMITED), CENTURY BHAVAN, 3 RD FLOOR DR.ANNIE BESANT ROAD, WORLI MUMBAI 400 030. PAN : AAACH1201R. / VS. THE ASST.COMMISSIONER OF INCOME - TAX CIRCLE 6(3) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI NARESH JAIN /RESPONDENT BY : SHRI ASGHAR ZAIN V.P. / DATE OF HEARING : 03 .02.2015 / DATE OF PRONOUNCEMENT : 04.03 .2015. / O R D E R PER AMIT SHUKLA (JM) : THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 21.12.2012 , PASSED BY THE COMMI SSIONER OF INCOME - TAX (APPEALS) 12, MUMBAI, IN RELATION TO THE PENALTY PROCEEDINGS U/S. 271(1)(C) , FOR THE ASSESSMENT YEAR 1989 - 90. IN THE GROUND S OF APPEAL, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS GROSSLY ERRED IN AFFIRMING THE DECISION OF THE AO FOR IMPOSING PENALTY OF RS.53,20,782/ - . ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 2 2 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS GROSSLY ERRED IN AFFIRMING THE DECISION OF THE AO FOR IMPOSI NG PENALTY U/S.271(1)(C) ON DISALLOWANCE U/S 80 - I AMOUNTING TO RS.43,64,230/ - FOR GRANT OF CLAIM ON ACCOUNT OF REALLOCATION OF ADMINISTRATIVE EXPENSE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) HA S GROSSLY ERRED IN AFFIRMING THE DECISION OF THE AO FOR IMPOSING PENALTY U/S 271(1)(C) ON DISALLOWANCE OF RS.9,23,000/ - ON ACCOUNT OF REPLACEMENT OF PLANT AND MACHINERY BEING HELD AS CAPITAL EXPENDITURE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS GROSSLY ERRED IN AFFIRMING THE DECISION OF THE AO FOR IMPOSING PENALTY U/S 271(1)(C) ON DISALLOWANCE OF RS.5,24,079/ - U/S 40A(3) OF INCOME TAX ACT, 1961. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS GROSSLY ERRED IN AFFIRMING THE DECISION OF THE AO FOR IMPOSING PENALTY U/S 271(1)(C) ON DISALLOWANCE OF RS.48,30,254/ - U/S 43B OF INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS CHALLENGED LEVY OF PENALTY ON FOLLOWING DISALLOWANCES: - (I) DISALLOWANCE OF CLAIM OF RS.43,64,230 U/S 80 - I ON ACCOUNT OF REALLOCATION OF ADMINISTRATIVE EXPENSES ; (II) DISALLOWANCE OF RS.9,23,000 ON ACCOUNT OF REPLACEMENT AND REPAIRS OF P LANT AND MACHINERY BEING HELD AS CAPITAL EXPENDITURE. (III) DISALLOWANCE OF RS.5,24,079 MADE U/S 40A (3) . ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 3 (IV) DISALLOWANCE OF RS.48,30,254 U/S 43B. 3. DISALLOWANCE MADE U/S 80 - I 3.1 IN THE RETURN OF INCOME, THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80 - I OF RS.3,73,40,000 FOR ITS TWO NEW INDUSTRIAL UNITS IN RESPECT OF KALWA POLY EXTRUDER PLANT (FIFTH YEAR OF OPERATION) AND TALOJA SHEET MILL - II (SIXTH YEAR OF OPERATION). IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS REDUCED THE SAID CLAIM TO RS.2,01,02,365 BY STATING THAT THE ENTIRE EXPENDITURE OF THE ASSESSEE EXCLUDING DEPRECIATION SHOULD BE ALLOCATED IN PROPORTION OF SALE OF EACH UNIT AND TURNOVER OF THE ASSESSEE COMPANY. IN THE FIRS T APPEAL, THE LEARNED CIT(A) HAS ACCEPTED MOST OF THE ALLOCATIONS MADE BY THE ASSESSEE OF OTHER EXPENSES LIKE DIRECT COST, INTEREST ETC., EXCEPT FOR ADMINISTRATIVE EXPENSES, WHICH WAS ALLOWED IN THE RATIO OF TURNOVER. AS AN EFFECT OF CIT(A) ORDER, THE CLAI M U/S 80 - IA WAS RESTRICTED TO RS.3,29,75,770. THIS ORDER OF THE CIT(A) HAS BEEN AFFIRMED BY THE TRIBUNAL. IN THE PENALTY ORDER, T HE ASSESSING OFFICER HAS LEVIED THE PENALTY ON THIS DIFFERENCE IN CLAIM OF RS.43,64,230 (RS.3,73,40,000 3,29,75,770). 3.2 T HE ASSESSEE S EXPLANATION IN THE PENALTY PROCEEDINGS WAS THAT , CALC ULATION OF DEDUCTION U/S 80 - IA AND THE BASIS OF ALLOCATION OF EXPENSES WITH REGARD TO THE FIRST INDUSTRIAL UNITS HAS BEEN ACCEPTED BY THE DEPARTMENT IN FOUR ASSESSMENT YEARS AND FOR THE SEC OND INDUSTRIAL UNIT, IT HAS BEEN ACCEPTED FOR FIVE ASSESSMENT YEARS. IN THIS YEAR, THE ASSESSING OFFICER HAS ADOPTED COMPLETELY A NEW BASIS FOR COMPUTING THE CLAIM OF VARIOUS EXPENSES AND SCALED DOWN THE DEDUCTIONS. THIS ALLOCATION OF EXPENSES HAVE BEEN ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 4 SU BSTANTIALLY REDUCED BY THE LEARNED CIT(A). HENCE, IT CANNOT BE SAID THAT THERE IS ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. VARIOUS DECISIONS WERE ALSO RELIED UPON IN SUPPORT OF THE CONTENTION THAT, NO PENALTY CAN BE LEVIED ON SUCH REDUCTION OF CLAIM U/S 80 - I. THE LEARNED CIT(A) HAS CONFIRMED THE PENALTY ON THE GROUND THAT THE CLAIM MADE BY THE ASSESSEE WAS ON ADHOC METHOD INSTEAD OF ANY SCIENTIFIC METHOD, AND THEREFORE, THE ASSESSEE HAS CLAIMED HIGHER DEDUCTION, WHICH AMOUNTS TO FI LING OF INACCURATE PARTICULARS. 3.3 BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT IN THE ASSESSMENT YEAR 1983 - 84, THE TRIBUNAL HAS DECIDED THE ISSUE OF ALLOCATION OF EXPENSES AND THE SAME BASIS HAS BEEN ADOPTED ;BY THE ASSESSEE IN THE SUBSEQUENT YEARS. T HUS, THE BASIS ADOPTED BY THE ASSESSEE BY ALLOCATING EXPENSES WAS AS A RESULT OF TRIBUNAL ORDER IN ASSESSEE S OWN CASE. HENCE, NO PENALTY FOR FURNISHING OF INACCURATE PARTICULARS CAN BE LEVIED. 3.4 ON THE OTHER HAND, THE LEARNED DEPARTM ENTAL REPRESENTATI VE, STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 3.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. THE DIFFERENCE IN THE CLAIM OF DEDUCTION U/S 80 - IA IS MAINLY ON THE BASIS OF ALLOCATION OF ADMINISTRATIVE E XPENSES, WHICH HAS BEEN ALLOCATED IN THE RATIO OF TURNOVER. THE ASSESSEE S CASE HAD BEEN THAT IT HAS ADOPTED THE BASIS OF AL LOCATION BASED ON THE PRECEDENT OF TRIBUNAL ORDER FOR ASSESSMENT YEAR 1983 - 84 , WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN SUBSEQUE NT ASSESSMENT YEARS. IN THIS YEAR, THE BASIS OF ALLOCATION OF ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 5 EXPENSES HAS BEEN CHANGED. UNDER THESE FACTS IT CANNOT LEAD TO ANY INFERENCE THAT THE ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS, WHICH WARRANTS LEVYING OF PENALTY U/S. 271(1)(C) BECAUSE CHANGE IN THE BASIS OF ALLOCATION OF EXPENSES IS MATTER OF OPINION . THUS , THE PENALTY LEVIED ON THIS SCORE IS DELETED. 4. ADDITION U/S 40A( 3 ) 4.1 BRIEF FACTS ARE THAT , IN THE TAX AUDIT REPORT, THE ASSESSEE HAD SUBMITTED THE DETAILS OF CASH PAYMENTS EXCEEDING RS.10,000, ALONG WITH THE NATURE OF PAYMENTS. THE AGGREGATE OF SUCH CASH PAYMENT WAS AT RS.5,64,079. IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE SAID PAYMENTS WERE MADE TO THE GOVERNMENT AUTHORITIE S AND ADVANCES T O THE EMPLOYEES, T HE IDENTITY OF SUCH PARTIES, GENUINENESS OF THE PAYMENT AND THE PURPOSE OF PAYMENT, HAD BEEN VERIFIED AND REPORTED BY THE TAX AUDITOR. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENDITURE U/S 40A(3) WITHOUT CONSIDERING THE ASS ESSEE S SUBMISSION REGARDING THE CIRCUMSTANCES OF THE PAYMENT. IN THE FIRST APPEAL, THE CIT(A) GRANTED PART RELIEF OF RS.40,000, WHICH WAS THE PAYMENT MADE TO MAHARASHTRA STATE TRANSPORT AUTHORITY , AND BALANCE DISALLOWANCE OF R S .5,24,079 WAS AFFIRMED. THE PENALTY HAS BEEN LEVIED ON THE BALANCE DISALLOWANCE OF RS.5,24,079. 4.2 IN THE PENALTY PROCEEDINGS, THE ASSESSEE S CASE HAS BEEN THAT, IN THE ASSESSMENT YEARS 1984 - 85 TO 1988 - 89, SIMILAR EXPENDITURE OF CASH PAYMENTS WERE ALLOWED BY THE CIT(A) AND IN THE ASSESSMENT YEAR 1997 - 98, THE SAME HAS BEEN ALLOWED BY THE ITAT. IN THIS YEAR ALSO, THE IDENTITY OF THE PARTIES ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 6 AND THE GENUINENESS OF THE PAYMENT, HAVE NOT BEEN DOUBTED. THEREFORE, NO PENALTY FOR FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOM E SHOULD BE LEVIED. HOWEVER, THE ASSESSING OFFICER HAS LEVIED THE PENALTY, WHICH HAS BEEN CONFIRMED BY THE CIT(A), IN HIS DETAILED ORDER, WHEREIN HIS FINDINGS ARE MOSTLY GENERAL IN NATURE AND DISCUSSION ON THE PROPOSITION OF LAW RELATING TO PENALTY SANS AN Y PROPER ANALYSIS ON FACTS AND THE EXPLANATION GIVEN BY THE ASSESSEE. 4. 3 BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT ONCE THE SIMILAR NATURE OF PAYMENT HAVE BEEN ALLOWED BY THE CIT(A) AND ITAT, THEN IN THIS YEAR NO ADVERSE INFERENCE SHOULD BE DRAWN SPECIALLY FROM THE POINT OF LEVY OF PENALTY U/S 271(1)(C). 4. 4 ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAD STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 4. 5 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ALSO ON THE PERUSAL OF THE IMPUGNED ORDERS, WE FIND THAT THE DISALLOWANCE U/S 40A(3) WAS MADE ON THE GROUND THAT THE ASSESSEE HAS FAILED TO ESTABLISH ANY EXTRA ORDINARY SITUATION OR DIFFICULTY OF THE PAYEE UNDER RULE 6DD. WHEREAS, THE ASSESSEE S CASE HAS BEEN THAT, THE PAYMENT S WERE MADE TO THE GOVERNMENT AUTHORITIES AND ADVANCE TO THE EMPLOYEES, GENUINENESS OF WHICH HAVE NOT BEEN DOUBTED. THE DISALLOWANCES HAVE BEEN MADE MAINLY ON TECHNICAL GR OUND. IN OUR OPINION, SUCH A DISALLOWANCE DOES NOT WARRANT LEVY OF PENALTY, BECAUSE THERE IS NO FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME, BECAUSE , IT IS NOT AN ABSOLUTE LAW THAT ANY PAYMENT MADE IN CASH EXCESS OF RS.10,000 IS TO BE DIS ALLOWED. COMMERCIAL EXPEDIENCY, BUSINESS CONSIDERATION AND ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 7 OTHER FACTORS ARE ALSO REQUIRED TO BE SEEN. HENCE, WE DELETE THE PENALTY, WHICH HAS BEEN CONFIRMED ON SUCH A DISALLOWANCE. 5. REPAIRS AND REPLACEMENT OF PLANT AND MACHINERY : 5.1 THE ASSESSING OFFICER HAS DISALLOWED A SUM OF RS.50,93,8 2 9 TOWARDS REPLACEMENT OF ASSETS , A GAINST WHICH, THE CIT(A) HAS PARTLY ALLOWED THE CLAIM OF THE ASSESSEE BY DIRECTING THE AO TO VERIFY WHETHER EACH AND EVERY ITEMS COVERED IN THE ASSETS WERE INDEPENDENT OR NOT, AND WHETHER IT IS A PART OF ANY PLANT OR MACHINERY. AFTER GIVING EFFECT TO THE C IT(A) S ORDER, THE AO HAS DISALLOWED A SPECIFIC SUM OF RS.9,23,000, WHICH WAS TOWARDS THE CAR, MINIBUS, ELECTRONIC TYPEWRITER ETC. ADMITTEDLY, SUCH AN EXPENDITURE CANNOT BE TREATED AS REVENUE EXPENDITURE. THE AO HAS LEVIED THE PENALTY ON THE GROUND THAT , A T THE FACE OF THE NATURE OF EXPENDITURES SHOWS THAT THESE ARE CAPITAL IN NATURE. THE LEARNED CIT(A) TOO HAS AFFIRMED THE PENALTY. 5.2 BEFORE US, THE LEARNED COUNSEL, SUBMITTED THAT DUE TO BONAFIDE MISTAKE, THE EXPENSES RELATING TO CAR, MINI BUS, ELECTRONI C TYPEWRITER ETC. WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT AND FOR SUCH A BONAFIDE MISTAKE, NO PENALTY U/S 271(1)(C) SHOULD BE LEVIED. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF PRICE WATERHO USE COOPERS V. CIT [(2012) 348 ITR 306 (SC)] . 5.3 ON THE OT HER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY RELYING UPON THE ORDER OF THE CIT(A), SUBMITTED THAT, THIS WAS A WRONG CLAIM MADE BY THE ASSESSEE, WHICH DEFINITELY AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS, AND THEREFORE, PENALTY HAS RIGHTLY BEEN CONFIRMED. ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 8 5.4 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS DEBITED CERTAIN THE EXPENDITURE, WHICH WERE INCURRED TOWARDS CAR, MINI BUS, ELECTRONIC TYPEWRITER ETC., WHICH ARE CAPITAL IN NATURE. IF S UCH AN EXPENDITURE HAS BEEN CLAIMED IN THE PROFIT AND LOSS ACCOUNT AS REVENUE EXPENDITURE, THEN DEFINITELY IT AMOUN TS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME . THUS, PENALTY CONFIRMED BY THE CIT(A) ON THE EXPENDITURE OF RS.9,23,000 IS UPHELD, BECAUSE ADMITTEDLY THERE ARE CAPITAL EXPENDITURE. 6. STATUTORY LIABILITY U/S 43B : 6.1 THE BRIEF FACTS ARE THAT , THE ASSESSING OFFICER FOUND THAT AN AMOUNT OF RS.48,29,984 CANNOT BE ALLOWED AS DEDUCTION U/S.43B. IN THE APPELLATE PROCEEDINGS, THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS.33,69,014 AND FOR THE BALANCE AMOUNT OF RS.14,60,970, GAVE THE DIRECTION TO THE A O TO ALLOW THE CLAIM AFTER DUE VERIFICATION OF EVIDENCE OF PAYMENT . IN THE APPEAL EFFECT PROCEEDINGS, THE ASSESSEE FILED A LETTER DATED 03.09.2010 STATING THAT THE DETAILS OF RS.14,60,970 ARE NO LONGER AVAILABLE DUE TO LAPSE OF TIME. ACCORDINGLY, THE AO HA D DISALLOWED THE ENTIRE SUM INCLUDING RS.14,60,970 AND PENALTY HAS BEEN LEVIED. THIS LEVIES OF PENALTY HAS BEEN CONFIRMED BY THE CIT(A) ALSO. 6.2 BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAD EARLIER FILED A W RIT P ETITION BEFORE CALCUTTA HIGH COURT , AGAINST CERTAIN ADJUSTMENTS MADE IN INTIMATION U/S 143(1). THE HON BLE HIGH COURT , PASSED AN INTERIM ORDER DIRECTING THE AO NOT TO PROCEED WITH SUCH AN ADJUSTMENT AND ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 9 ALSO DIRECTED NOT TO SERVE THE COPY OF THE ASSESSMENT ORDER WITHOUT THE PERMI SSION OF THE COURT. LATER ON , V IDE ORDER DATED 26.06.2004 , THE HON BLE HIGH COURT QUASHED THE INTIMATION U/S 143(1) , AND FINALLY THE ASSESSMENT ORDER DATED 30.03.1992 WAS SERVED TO THE ASSESSEE IN MARCH 2004, I.E., AFTER A GAP OF 12 YEARS. DUE TO LAPSE OF SUCH A HUGE TIME, THE ASSESSEE COULD NOT FURNISH THE DETAILS OF ACTUAL PAYMENT. ALL THE PARTICULARS OF THE PAYMENT OTHERWISE HAVE BEEN DULY SHOWN IN THE BOOKS OF ACCOUNT, AND THEREFORE, THE SAME CANNOT BE HELD THAT SUCH A DISALLOWANCE CALLS FOR LEVY OF PEN ALTY U/S 271(1)(C). 6.3 ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ONUS WAS ON THE ASSESSEE TO SHOW THAT THE PAYMEN T HAS BEEN MADE BY THE ASSESSEE WITH THE TIME PRESCRIB ED SO AS TO CLAIM THE DEDUCTION U/S 43B. 6.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT FACTS AS DISCUSSED IN THE QUANTUM PROCEEDINGS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT AS PER THE AUDIT REPORT, THE CLAIM OF EXPENDITURE OF RS.48,29,984 PERTAINED TO ASSESSMENT YEARS 1986 - 87 TO 1988 - 89. THE ASSESSEE HAD CLAIMED THAT IT RELATES TO DUES AND TAXES OF THE FINANCIAL YEAR ENDING ON 31.12.1987, I.E., ASSESSMENT YEAR 1988 - 89, WHICH WAS DISALLOWABLE U/S 43B FOR THE ASSESSMENT YEAR 1988 - 89, AND THEREFORE, IT WAS CLAIMED AS DEDUCTION IN THE ASSESSMENT YEAR 1989 - 90. HE FURTHER TOOK NOTE OF THE AUDITOR S REMARK THAT THE ASSESSEE HAS ALREADY MADE A CLAIM FOR THIS DEDUCTION IN ASSESSMENT YEAR 1988 - 89 AND ONLY ON FINALIZATION OF ASSESSMENT FOR THE ASSESSMENT YEAR 19 88 - 89, THE QUANTUM OF ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 10 SUCH EXPENDITURE ALLOWED IN ASSESSMENT YEAR 1988 - 89 BUT PAID IN ASSESSMENT YEAR 1989 - 90 SHOULD BE DETERMINED. THE AO HELD THAT IF SUCH A CLAIM IN ASSESSMENT YEAR 1988 - 89 HAS BEEN CLAIMED AS DEDUCTION, THEN THE ASSESSEE IS NOT ENTITLED TO SUCH A CLAIM IN THE INSTANT ASSESSMENT YEAR. THE DETAILS OF SUCH EXPENDITURES, WHICH WERE REPORTED AS UNPAID IN THE AUDIT REPORT FOR ASSESSMENT YEAR 1988 - 89, WAS AS UNDER: - SL. NO. PARTICULARS LIABILITIES OF AY 88 - 89 CLAIMED IN A.Y. 1989 - 90 ON PAYMENT . (RS.) UNPAID LIABILITIES AS SHOWN IN AUDIT REPORT OF AY 88 - 89 AND CLAIMED ON PAYMENT BEFORE THE DUE DATE. (RS.) 1. CONTRIBUTION TO GRATUITY FUND 7,23,883 7,23,883 2. FAMILY PENSION FUNDS 28,518 28,518 3. E.S.I. CONTRIBUTION 11,597 11,597 4. LABOUR WELFARE FUND 7,789 7,789 5. SALES TAX SURCHARGE 11,70,822 11,70,822 6. CESS 60,844 4,12,572 7. ROYALTY 2,21,459 2,21,459 8. TURNOVER TAX 13,26,405 13,26,405 9. ENTRY TAX 8,37,069 8,37,069 10. WATER CESS 15,000 15,000 11. SURFACE RENT / DEAD RENT 3,358 3,358 12. ELECTRICITY DUTY 3,23,240 3,23,240 13 MUNICIPAL / BUILDING TAX NIL 8,29,135 TOTAL 48,29,984 59,10,847 6.5 THUS, THE AO NOTED THAT EXCEPT FOR TWO ITEMS LISTED AT SR.NO.6 AND SR.NO.13 ALL OTHER EXPENSES CLAIMED FOR DEDUCTION BY THE ASSESSEE IN ASSESSMENT YEAR 1988 - 89 ARE THE SAME EXPENDITURES WHICH THE ASSESSEE ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 11 HAD CLAIMED IN ASSESSMENT YEAR 1989 - 90, AND THEREFORE, THE CLAIM OF EXPENDITURE HAS BEEN MADE T WICE. FURTHER, THE EXPENDITURES MENTIONED IN SR.NO.1 TO 4 CANNOT BE CLAIMED ON THE BASIS OF THE PAYMENT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, THEY CAN ONLY BE CLAIMED IN ASSESSMENT YEAR 1988 - 89. IN THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE HAD STATED THAT IN THE ORDER GIVING EFFECT TO THE CIT(A) ORDER, IT WAS CLEARLY MENTIONED THAT ONLY SUM OF RS.11,70,822 AND RS.13,26,405 WAS ALLOWED FOR DEDUCTION OUT OF THE TOTAL CLAIM OF RS.59,10,847 AS THE PROOF OF PAYMENT WAS SUBMITTED BEFORE THE AO. OTHER EXPENDITURES STOOD DISALLOWED. THE LEARNED CIT(A) HELD THAT THESE EXPENDITURES HAVE BEEN ALLOWED TO THE ASSESSEE IN ASSESSMENT YEAR 1988 - 89, AND THEREFORE, THERE IS NO REASON TO ALLOW SUCH CLAIM IN ASSESSMENT YEAR 1989 - 90. THE ONLY EXPENDITURES WHICH HAVE BEEN INCURRED IN ASSESSMENT YEAR 1988 - 89, BUT QUALIFIED FOR CONSIDERATION OF ALLOWABILITY ON THE BASIS OF PAYMENT U/S 43B WILL FALL IN ASSESSMENT YEAR 1989 - 90 ARE THE FOLLOWING PAYMENTS: - SL. NO. (AS MENTIONED IN TABLE ABOVE) PARTICULARS LIABILITIES OF AY 88 - 89 CLAIMED IN 1989 - 90 ON PAYMENT. 6 CESS 60,844 7 ROYALTY 2,21,459 9 ENTRY TAX 8,37,069 10 WATER CESS 15,000 11 SURFACE RENT / DEAD RENT 3,358 12 ELECTRICITY DUTY 3,23,240 TOTAL 14,60,970 6.6 HE DIRECTED THE AO TO VERIFY THE PAYMENT OF AFORESAID LIABILITIES, HOWEVER, IN THE APPEAL GIVING AFFECT PROCEEDINGS, THE ASSESSEE COULD NOT ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 12 FURNISH THE ACTUAL EVIDENCES OF PAYMENT DUE TO LAPSE OF TIME FOR THE REASONS STATED BY THE LEARNED COUNSEL BEFORE US , AND HENCE IT WAS TOO DISALLOWED. 6.7 IT IS VERY IMPORTANT TO NOTE HERE THAT THE PREVIOUS YEAR OF THE ASSESSMENT YEAR 1989 - 90 WAS A TRANSITION PERIOD AND THE ACCOUNTING PERIODS FOR ASSESSMENT YEARS 1988 - 89 AND 1989 - 90 WERE OVERLAPPING. EVEN THOUGH HERE IN THIS CASE EXPENDITURES PERTAINED TO ASSESSMENT YEAR 1988 - 89 AND WERE CLAIMED IN THAT YEAR, HOWEVER, THE ACTUAL PAYMENTS WERE MADE IN THE ASSESSMENT YEAR 1989 - 90 AND THEREFORE, SAME WERE CLAIMED IN THIS ON THE PAYMENT BASIS. THIS IS EVIDENT FROM THE FIRS T TABLE AS INCORPORATED ABOVE. IF THE ASSESSEE HAS CLAIMED THE DEDUCTION U/S 43B ON THE BASIS OF ACTUAL PAYMENT, THEN IT SHOULD BE HELD THAT THE ASSESSEE S CLAIM FOR DEDUCTION FOR THE IMPUGNED ASSESSMENT YEAR IS NOT BONAFIDE OR THE ASSESSEE CANNOT BE HELD LIABLE FOR FURNISHING OF INACCURATE PARTICULARS. SO FAR AS THE PROOF OF EVIDENCE OF PAYMENT IS CONCERNED, IT IS SEEN THAT THERE IS A HUGE LAG OF TIME, BECAUSE THE ASSESSMENT PROCEEDINGS FOR GIVING EFFECT OF CIT(A) S ORDER HAD STARTED AFTER A LAPSE OF PERIO D OF MORE THAN 14 YEARS FROM THE PASSING OF THE ORIGINAL ASSESSMENT ORDER. ON THE PRESENT FACTS THE ASSESSEE S BONAFIDE IS LIABLE TO BE ACCEPTED FOR THE REASON THAT THE ACCOUNTING PERIOD FOR THE ASSESSMENT YEARS 1988 - 89 AND 1989 - 90 HAD OVERLAPPED AND ASSES SMENT YEAR 1989 - 90 BEING THE TRANSITION PERIOD (BECAUSE THE ACCOUNTING PERIOD IN MOST OF THE CASES WAS FOR MORE THAN 12 MONTHS), SUCH CLAIM FOR DEDUCTION CANNOT BE ADVERSELY VIEWED, WHETHER IT SHOULD BE TREATED AS ALLOWABLE IN THE ASSESSMENT YEAR 1988 - 89 O R IN THE A.Y. 1989 - 90. THE AMBIGUITY WITH REGARD TO THE YEAR OF ALLOWABILITY OF EXPENSES FOR SUCH A TRANSITION PERIOD SHOULD NOT BE ADVERSELY VIEWED FOR THE PURPOSE OF LEVY OF PENALTY AND MORE OVER ALL THE ITA NO. 2081 /MUM/2013 M/S. INDIAN ALUMINIUM COMPANY LIMITED . 13 PARTICULARS OF PAYMENT AND CLAIM HAS BEEN REPORTED IN THE AUDIT REPORT FILED ALONG WITH THE RETURN OF INCOME. THUS, UNDER THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE UNABLE TO CONFIRM THE PENALTY ON THE GROUND THAT THE ASSESSEE HAD FURNISHED ANY INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, PENALTY U/S 271(1)(C) ON SUCH A DISALLOWANCE IS DELETED. 7 . IN THE RESULT, THE ASSESSEE S APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED ON THIS 04 TH DAY OF MARCH , 2015 . SD/ - ( N.K.BILLAIYA ) SD/ - ( AMIT SHUKLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 04 TH MARCH , 2015 . DEVDAS* / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT , MUMBAI. 4. / CIT(A) - 12 , MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE.