ACIT 9(1), MUMBAI V. CIBA SPECILITY CHEMICALS INDIA LTD, MUMBAI

ITA 2131/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48567 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 20-04-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 17-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SINHA
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Depreciation; Bad and doubtful debts; Difference of opinion
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI T.R. SOOD ( A.M.) ITA NO. 2131/MUM /2010 ASSESSMENT YEAR 2001-02 ASSTT. COMMISSIONER OF INCOME - TAX 8(1), ROOM NO. 210, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. M/S CIBA SPECIALITY CHEMICALS INDIA LTD., PLOT NO. 37, CHANDIVALI FARM ROAD, CHANDIVALI, ANDHERI (E), MUMBAI. 400 072. PAN : AAACC4147P (APPELLANT) (RESPONDENT) APPELLANT BY : MR. AJIT KUMAR SINHA RESPONDENT BY : MR.P.J. PARDIWALLA & MS. AARTI SATHE O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 1.12.09 PASSED BY THE LD. CIT (A) FOR THE A .Y. 2001-02. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT IN THI S CASE THE ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATED 30.3.2004 AT AN INCOME OF ` 161759630/- AS AGAINST RETURNED INCOME OF ` 131673268/-. IN THE ASSESSMENT ORDER, THE A.O. MADE THE FOLLOWING ADDIT IONS (PARA 2 OF PENALTY ORDER) :- 1. BACK WAGES CLAIMED ` 32399505/- 2. BAD DEBTS ` 383620/- 3. CLUB EXPENSES ` 510670/- 4. ADVANCE WRITTEN OFF ` 64924/- 5. ROYALTY ` 2969415/- ITA 2131/M/2010 M/S CCIBA SPECIALITY CHEMICALS INDIA LTD. 2 6. EXCLUSION FROM EXPORT PROFIT- ` 11948413/- EXPL.(BAA)/80HHC: (39586 CONFIRMED) ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWANCE M ENTIONED IN ITEM NO. 1, 4 AND 5 AND UPHELD THE EXCLUSION FROM THE ADJUST ED PROFIT OF BUSINESS FOR PURPOSE OF SEC. 80HHC THE AMOUNT OF ` 39586/- ONLY OUT OF ITEM NO. 6 ABOVE. WHILE COMPLETING THE ASSESSMENT, THE A.O. ALSO INITIATED PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT. IN RESPONSE T O SHOW CAUSE NOTICE AS TO WHY PENALTY U/S 271(1)(C) SHOULD NOT BE IMPOSED, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ADDITIONS OR DISALLOWANCES AR E DEBATABLE IN NATURE, THERE IS ABSENCE OF MENSREA ON THE PART OF THE ASSE SSEE AND THE A.O. HAS NOT RECORDED ANY SATISFACTION TO ARRIVE AT SUCH CON CLUSION THAT THE ASSESSEE IS LIABLE TO PENALTY U/S 271(1)(C) AND, TH EREFORE, THE PENALTY PROCEEDING INITIATED BE DROPPED. HOWEVER, THE A.O. DID NOT ACCEPT THE ASSESSEES SUBMISSION. HE WAS OF THE VIEW THAT THE ASSESSEE IS LIABLE TO PENALTY U/S 271(1)(C) WITH RESPECT TO THE AMOUNT OF BACK WAGES CLAIMED ` 32399505/-, ADVANCE WRITTEN OFF ` 64924/- AND ROYALTY ` 2969415/- AGGREGATING TO ` 35433544/- AND ACCORDINGLY HE IMPOSED PENALTY OF ` 14013967/- VIDE ORDER DTD. 29.2.2008 PASSED U/S 271 (1)(C) OF THE ACT. 3. BEFORE THE LD. CIT(A), THE ASSESSEE FILED COPY O F THE TRIBUNAL ORDER IN THE QUANTUM APPEAL WHEREIN THE TRIBUNAL IN ITA N O. 5724/M/07 AND ITA NO. 6676/M/07 DTD. 18 TH JUNE, 2009 HAS DELETED THE DISALLOWANCE OF THE CLAIM OF BACK WAGES OF ` 3,23,99,505/-. THE LD. CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL HELD THAT THE PENALTY ON THE SAID DISALLOWANCE DOES NOT SURVIVE AND HENCE DELETED. WITH REGARD TO THE D ISALLOWANCE OF ADVANCE WRITTEN OFF OF ` 64,924/-, THE LD. CIT(A) OBSERVED THAT THE A.O. HAD DISALLOWED THE SAME HOLDING THAT IT AS CAPITAL IN NATURE AS IT WAS AN ADVANCE THAT HAD BEEN WRITTEN OFF. THE PLEA OF THE ASSESSEE THAT THE AMOUNTS REPRESENTED UNRECONCILED DEBIT BALANCES WRI TTEN OFF WAS NOT ITA 2131/M/2010 M/S CCIBA SPECIALITY CHEMICALS INDIA LTD. 3 ACCEPTED BY THE TRIBUNAL AND HENCE THE DISALLOWANCE WAS CONFIRMED BY THE TRIBUNAL. WITH REGARD TO THE DISALLOWANCE OF RO YALTY PAYMENT OF ` 2969415, THE LD. CIT(A) OBSERVED THAT IT WAS DISALL OWED BY THE A.O. ON THE GROUND THAT IT IS CAPITAL IN NATURE WHICH WAS C ONFIRMED BY THE LD. CIT(A) AND THE TRIBUNAL, BUT THE TRIBUNAL DIRECTED TO THE A.O. TO ALLOW DEPRECIATION @ 25% THEREON. THE LD. CIT(A) FOLLOWI NG THE DECISION IN YASMIN PROPERTIES PVT. LTD. VS. ACIT (46 ITD 331), CEMENT MKTG. COMPANY PVT. LTD. VS. ASST. COMMISSIONER OF SALES T AX AND OTHERS (124 ITR 15 (SC) AND ACIT VS, MAHENDRA SHUDHLAB SERVICES LTD. (31 SOT 361) HELD THAT IN THE CASE OF THE APPELLANT, THE PARTICU LARS OF CLAIMS MADE WERE DISCLOSED, THE EXPLANATION WITH REGARD TO THE CLAIMS MADE HAVE NOT BEEN HELD TO BE FALSE, THE BONAFIDES IN RESPECT OF THE EXPLANATION GIVEN HAVE NOT BEEN QUESTIONED, THEREFORE, IT IS NOT A FI T CASE FOR IMPOSITION OF PENALTY AND ACCORDINGLY DELETED THE PENALTY IMPOSED BY THE A.O. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF AP PEAL:- 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE A.O. IN RESPECT OF ADDITIONS MADE ON ACCOUNT OF ADVANCE WRITTEN OFF OF ` 64,924/- AND ROYALTY OF ` 29,69,415/- WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND TO BE SET ASIDE AND THAT OF THE A.O. BE REST ORED. 5. AT THE TIME OF HEARING, THE LD. D.R. SUBMITS THA T FOR THE REASONS AS MENTIONED IN THE PENALTY ORDER, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY IMPOSED BY THE A.O. HE, THEREF ORE, SUBMITS THAT THE PENALTY IMPOSED BY THE A.O. BE RESTORED. 6. ON THE OTHER HAND, THE LD. SR. COUNSEL FOR THE A SSESSEE WHILE RELYING ON THE ORDER OF LD. CIT(A) SUBMITS THAT SIN CE THE ASSESSEE HAS ITA 2131/M/2010 M/S CCIBA SPECIALITY CHEMICALS INDIA LTD. 4 DISCLOSED ALL THE MATERIAL FACTS AND EXPLANATION GI VEN BY THE ASSESSEE WAS NOT FOUND TO BE FALSE, THEREFORE, THE LD. CIT(A ) WAS FULLY JUSTIFIED IN DELETING THE PENALTY IMPOSED BY THE A.O. AND THE OR DER OF THE LD. CIT(A) BE UPHELD. 7. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THERE IS NO DISPUTE THAT THE A.O. HAS IMPOSED THE PENALTY ON THE FOLLOW ING DISALLOWANCES:- 1. BACK WAGES CLAIMED ` 32399505/- 2. ADVANCE WRITTEN OFF ` 64924/- 3. ROYALTY ` 2969415/- ON APPEAL ON THE ISSUE OF BACK WAGES CLAIMED, IT WA S CONTENDED BY THE ASSESSEE THAT THE TRIBUNAL HAS DELETED THE DISALLOW ANCE IN THE QUANTUM APPEAL, THEREFORE, FOLLOWING THE SAME, THE LD. CIT( A) HAS DELETED THE PENALTY ON THE SAID DISALLOWANCE. WITH REGARD TO TH E DISALLOWANCE OF ADVANCE WRITTEN OFF OF ` 64,924/- AND ROYALTY PAYMENT OF ` 2969415/-, THE LD. CIT(A) AFTER CONSIDERING THE DECISION OF TH E TRIBUNAL WHEREIN THE TRIBUNAL HAS CONFIRMED BOTH THE DISALLOWANCES HELD THAT THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS AND THE EXPLANATI ON GIVEN BY THE ASSESSEE WAS NOT FOUND TO BE FALSE, DELETED THE PEN ALTY IMPOSED BY THE A.O. ACCORDING TO THE REVENUE, SINCE THE DISALLOWAN CES WERE MADE DURING THE COURSE OF ASSESSMENT PROCEEDING AND CONF IRMED BY THE TRIBUNAL, THE ASSESSEE IS LIABLE TO PENALTY. PER C ONTRA THE CLAIM OF THE LD. SR. COUNSEL FOR THE ASSESSEE THAT SINCE THE ASSESSE E HAS MADE FULL DISCLOSURE IN THE RETURN WITH ALL THE SUPPORTING MA TERIAL AND HAS ALSO FILED ITS EXPLANATION, THEREFORE, THERE IS NO CONCE ALMENT ON THE PART OF THE ASSESSEE AND HENCE NOT LIABLE TO PENALTY. WE FURTHE R FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT DISCL OSED COMPLETE PARTICULARS OF INCOME OR THE AFORESAID CLAIMS MADE BY THE ASSESSEE WERE FOUND TO BE FALSE OR UNTRUE OR THE SAME ARE NOT ALL OWABLE UNDER THE ACT ITA 2131/M/2010 M/S CCIBA SPECIALITY CHEMICALS INDIA LTD. 5 OR THERE IS NO DIFFERENCE OF OPINION. MERELY BECAUS E THE ABOVE CLAIMS MADE BY THE ASSESSEE WERE NOT ACCEPTED IN THE ASSES SMENT PROCEEDINGS THAT BY ITSELF DOES NOT MEAN THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOME OR HAS CONCEALED HIS INCO ME. 8. IN ORDER TO APPLY THE PROVISIONS OF SECTION 271( 1)(C) THERE HAS TO BE CONCEALMENT OF PARTICULARS OF INCOME, SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. 9. IN A RECENT JUDGMENT OF THE HONBLE APEX C OURT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) THEIR LORDSHIPS, AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DILIP N. SHROFF VS. JCIT (2007) 291 ITR 519(SC), UNION OF INDIA VS. DHARAMEN DRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC) AND SREE KRISHNA ELECTRICALS VS. STATE OF TAMIL NADU (2009) 23 VST 249 (SC) HAVE OBSERVED AND HELD (PAGE 158 HEADNOTES) AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON ITA 2131/M/2010 M/S CCIBA SPECIALITY CHEMICALS INDIA LTD. 6 THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 10. RESPECTFULLY FOLLOWING THE ABOVE DECISION AND KEEPING IN VIEW THAT THE CLAIM MADE BY THE ASSESSEE WAS BASED ON BONA FI DE BELIEF WHICH WAS NOT FOUND TO BE FALSE OR UNTRUE, WE ARE OF THE VIEW THAT THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE WHICH MAY C ALL FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. ACCORDINGLY, WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE PENAL TY IMPOSED BY THE A.O. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, RE JECTED. 11. IN THE RESULT, THE REVENUES APPEAL STANDS PART LY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.20 11. SD/ - (T.R. SOOD) ACCOUNTANT MEMBER SD/ - (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 29.04.2011. ITA 2131/M/2010 M/S CCIBA SPECIALITY CHEMICALS INDIA LTD. 7 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 19, MUMBA I 4. COMMISSIONER OF INCOME TAX, 9, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA 2131/M/2010 M/S CCIBA SPECIALITY CHEMICALS INDIA LTD. 8 1 DRAFT DICTATED ON 20.4.11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 20.4.11 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR P S 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 ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS