The ACIT(OSD)-I., Range-4, Ahmedabad V. M/s. JMC Projects (India) Ltd., Ahmedabad

ITA 2138/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6546 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 22-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Assessee Lawyers: M K PATEL
• Keywords: Gift; Wrong claim; Bonafide mistake
• Section: 43B; 27; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA, AM ITA NO.2138/AHD/2009 (ASSESSMENT YEAR:-2004-05) ASSISTANT COMMISSIONER OF INCOME-TAX (OSD)-I, RANGE-4, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABAD V/S J.M.C. PROJECTS (INDIA) LTD., LEVEL-II, JMC HOUSE, AMBAWADI, AHMEDABAD PAN: AAACJ 3814 E [APPELLANT] [RESPONDENT] ITA NO.2171/AHD/2007 (ASSESSMENT YEAR:-2004-05) M/S JMC PROJECTS (INDIA) LTD., A-104, SHAPATH-4, OPP. KARNAVATI CLUB, S G ROAD, AHMEDABAD V/S DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4, AHMEDABAD [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI A K PATEL, DR ASSESSEE BY :- SHRI M K PATEL, AR O R D E R A N PAHUJA: THE QUANTUM APPEAL IN ITA NO.2171/AHD/2007 FILED BY THE ASSESSEE AGAINST AN ORDER DATED 16-04-2007 OF T HE LD. CIT(APPEALS)-VIII, AHMEDABAD, FOR THE ASSESSMENT Y EAR 2004-05, RAISES THE FOLLOWING GROUNDS:- [1] THAT THE LEARNED CIT(A), HAD GRIEVOUSLY ERRED IN LA W AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.21,02,398/- BEING THE EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND, ALTHOUGH THE SA ME IS PAID BEFORE THE TIME OF FURNISHING OF RETURN OF INCOME U/S 139( 1) OF THE ACT, AND HENCE NOT DISALLOWABLE U/S 43B OF THE ACT. [2] THAT THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN NOT FOLLOWING / IGNORING THE BINDING DECISIONS OF THE HONBLE AHMED ABAD TRIBUNAL AND HONBLE HIGH COURT OF GUJARAT CITED IN SUPPORT OF ASSESSEES CASE. 2 ITA NO.2138/AHD/10 & 2 171/AHD/07 2 [3] THAT THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED ON FAC TS IN CONFIRMING RS.1,73,201/- @ 25% ON ESTIMATE BASIS OUT OF RS.6,9 2,805/- INCURRED ON GIFT, BONI AND CHANDLA EXPENSES. [4] THAT THE ENTIRE EXPENDITURE IS DULY SUPPORTED B Y VOUCHERS AND INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOS E AND DESERVES TO BE ALLOWED IN TOTO AS PRAYED FOR. [5] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND ANY GROUNDS OF APPEAL AT OR BEFORE THE DATE OF HEARING, FOR WHICH PERMISSION MAY KINDLY BE GRANTED AND OBLIGE. 2. ADVERTING FIRST TO GROUND NOS.1 & 2 IN THE ASSES SEES APPEAL, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RE TURN DECLARING LOSS OF RS.8,37,13,493/- FILED ON 27-10-2004 BY THE ASSESS EE-COMPANY, CARRYING ON THE BUSINESS OF CONSTRUCTION, AFTER BEI NG BEING PROCESSED ON 25.3.2005 U/S 143(1) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT], WAS SELECTE D FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 4- 08-2005.DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER[AO IN SHORT] NOTICED THAT THE DETAILS OF PAYMENT OF EMPLO YERS AND EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI WERE NOT PROVIDED IN THE 3CD REPORT FILED ALONG WITH THE RET URN. TO A QUERY BY THE AO, THE ASSESSEE FURNISHED THE RELEVANT DETAILS , WHICH REVEALED THAT THE FOLLOWING PAYMENTS WERE MADE BEYOND THE DU E DATES STIPULATED IN THE RELEVANT ENACTMENTS:- MONTH AMOUNT ACTUAL DATE OF PAYMENT DUE DATE OF PAYMENT MAY-2003 5,35,961 24-07-2003 20-06-2003 JUNE-2003 4,93,366 29-07-2003 20-07-2003 JULY-2003 5,11,744 01-09-2003 20-08-2003 AUGUST-2003 5,25,723 24-09-2003 20-09-2003 SEPTEMBER-03 5,05,244 07-11-2003 08-11-2003 18-11-2003 19-11-2003 20-10-2003 3 ITA NO.2138/AHD/10 & 2 171/AHD/07 3 OCTOBER-2003 5,06,318 03-12-2003 06-12-2003 23-12-2003 20-11-2003 NOVEMBER-03 5,29,438 29-12-2003 30-12-2003 07-01-2004 09-01-2004 20-12-2003 DECEMBER-03 5,30,318 31-01-2004 14-02-2004 17-02-2004 20-01-2004 JANUARY-2004 21,352 5,694 10,933 1,996 25-02-2004 15-02-2004 15-02-2004 15-02-2004 20-02-2004 MARCH-2004 19,473 22-04-2004 20-04-2004 TOTAL 41,97,160 CONTRIBUTION TO ESI:- MONTH AMOUNT ACTUAL DATE OF PAYMENT DUE DATE OF PAYMENT JUNE-2003 2,454 15-07-2003 20-05-2003 SEPTEMBER-03 2,047 15-10-2003 20-08-2003 OCTOBER-2003 1,718 15-11-2003 20-09-2003 NOVEMBER-03 1,417 15-12-2003 20-10-2003 TOTAL 7,636 2.1 IN RESPONSE TO A SHOWCAUSE NOTICE, PROPOSING TO DISALLOW THE AFORESAID AMOUNT, THE ASSESSEE REPLIED THAT THE PAY MENTS FOR THE ENTIRE YEAR HAVE BEEN MADE IN THE ACCOUNTING YEAR R ELEVANT TO THE ASSESSMENT YEAR, EXCEPT FOR THE LAST MONTH OF MARCH , 2004, WHICH WAS MADE IN THE SUBSEQUENT ACCOUNTING YEAR BEFORE T HE DUE DATE OF FILING OF RETURN .IN VIEW OF THE AMENDED PROVISIONS OF SEC. 43B, APPLICABLE FROM THE A.Y. 2004-05, THE ENTIRE SUM WAS ALLOWABL E U/S. 36(1) (VA) OR, ALTERNATIVELY; U/S. 37 (1) OF THE ACT. THE ASSESSEE POINTED OUT THAT THE FINANCE ACT, 2003, OMITTED THE SECOND PROVISO TO SECTION 4 3B OF THE ACT WITH EFFECT FROM 1 ST APRIL, 2004 THEREBY ALSO AMENDING THE FIRST PROVIS O TO SECTION 43B TO COVER ALL THE CASES OF LIABILITIES MENTIONED IN SECTION 43B ( B) TO BE ALLOWED AS DEDUCTION ON 4 ITA NO.2138/AHD/10 & 2 171/AHD/07 4 ACTUAL PAYMENT EVEN IF THE PAYMENT HAS BEEN MADE ON OR AFTER THE DUE DATE BUT BEFORE THE DUE DATE OF FILING OF THE RETURN AND THE EVIDENCE OF SUCH PAYMENT IS ENCLOSED WITH THE RETURN . WHILE REFERRING TO THE J UDGMENT OF THE HONBLE SUPREME COURT IN ALLIED MOTORS (P) LTD. , VS. CIT, 224 ITR 677 (SC) AND THE DECISIONS IN JAGALDAL JUTE & INDUSTRIES LTD. VS. DY. CIT (2004) 91 TTJ (CAL) 770; ACIT VS. VESTAS RRB INDIA LTD. ,92 ITD 1 (DEL); HAFFKINE AJINTHA PHARMACEUTICAL LTD. VS. CIT IN ITA NO. 3140/MUM/1999 FOR THE AY 1 994-95, DATED 29 TH SEPTEMBER, 2003; JT. CIT VS. DEVLDAYAL (SALES) (P) LTD. IN ITA NO. 778/MUM/1999 FOR THE AY 1996-97 DATED 29TH OCTOBER, 2003; AND. S TAR REWINDERS AND ELECTRICALS, RAJGAD V/S ITO IN I.T.A. NO. 1343/PN/2 003 FOR THE A.Y. 2001-02 DATED 23RD JULY. 2004 , THE ASSESSE CONTENDED THAT NO DISALLOWANCE COULD BE MADE. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSION S OF THE ASSESSEE WHILE RELYING UPON THE DECISIONS IN CIT V/S. MADRAS RA DIATORS & PROCESSING LTD. 264 ITR 620 (MAD) AND CIT V/S. STANDARD TILE AND CLAY WORKS P. LTD. 265 ITR 525 (KER.).AS A RESULT, AN AMOUNT OF RS.41,97,160/- ON ACCOUNT OF CONTRIBUTION TOWARDS PROVIDENT FUND AND RS.7.636/- ON ACCOUNT O F CONTRIBUTION TOWARDS ESI, TOTALLING TO RS.42,05,296/- WAS DISALLOWED. 3. ON APPEAL, THE LEARNED CIT(A) RESTRICTED THE DIS ALLOWANCE TO 50% OF THE TOTAL AMOUNT IN THE FOLLOWING TERMS:- 2.3 I FIND THE CONTENTION OF APPELLANT ACCEPTABLE ONLY INSOFAR AS THE EMPLOYER'S CONTRIBUTION TO PF AND ESI IS CONCERNED, TO WHICH SECTION 43B HAS APPLICATION. AS REGARDS EMPLOYEES CONTRIBUTION , SECTION 43B HAS NO APPLICATION AND THE TIME LIMIT IS ONLY U/S. 36(1)(V A). FURTHER, THE EMPLOYEES CONTRIBUTION IS TREATED AS INCOME U/S. 2(24)(X) AND SUBJECT TO THE PAYMENT WITHIN THE TIME LIMIT PRESCRIBED U/S. 36(1)(VA), IT IS ALLOWED AS DEDUCTION. THUS, SECTION 43B AND THE AMENDMENT DISCUSSED ABOVE HAVE NO APPLICATION TO EMPLOYEES CONTRIBUTION. THE VARIOUS JUDICIAL DECISIONS CITED BY THE APPELLANT ARE OF ASSISTANCE ONLY AS REGARDS EMPLOYER'S CONTRIBUTION AND NOT FOR EMPLOYEES CONTRIBUTION. ACCORDINGLY, AS ADMITTED BY THE APPELLANT, THE EMPLOYEES CONTRIBUTION BEING 50% OF THE TOTAL CONTRIBUTION, THE DISALLOWANCE IN THIS REGARD IS RESTRICTED TO 50 % ON ACCOUNT OF EMPLOYEES CONTRIBUTION AND NOT BEING PAID WITHIN TH E TIME LIMITED U/S. 36(1)(VA). THIS GROUND IS TREATED AS PARTLY ALLOWED (179 CTR 308 RELIED ON). 5 ITA NO.2138/AHD/10 & 2 171/AHD/07 5 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE WHILE RELYING ON THE DECISION DATED 28-03- 2008 OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE AY 2005-06 IN IT A NO.4175/AHD/2007, CONTENDED THAT IN VIEW OF AMENDME NT TO SECTION 43B W.E.F. 01-04-2004, THE PAYMENTS HAVING BEEN MAD E BEFORE THE DUE DATE OF FILING OF RETURN, NO DISALLOWANCE WAS C ALLED FOR. THE LD. AR ADDED THAT DISALLOWANCE ON ACCOUNT OF EMPLOYERS CONTRIBUTION TOWARDS PF AND ESI WAS DELETED BY THE LD. CIT(A) AN D THE SAID DECISION WAS UPHELD BY THE ITAT VIDE THEIR ORDER DA TED 17.8.2007 IN ITA NO.2861/AHD./2007.THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AO. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS O F THE ITAT. AS REGARDS EMPLOYERS AND EMPLOYEES CONTRIBUTION TOWA RDS PF , WE FIND THAT THE ITAT AHMEDABAD BENCHES HAVE BEEN CON SISTENTLY FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH CO URT IN THE CASE OF CIT V. P.M.ELECTRONICS LTD., 220 CTR 635 (DELHI), W HEREIN RELYING UPON THE DECISION OF HONBLE APEX COURT IN THE CAS E OF CIT VS. VINAY CEMENT LTD.,213 CTR (SC) 268 , THE HONBLE C OURT CONCURRED WITH THE VIEW TAKEN BY THE HONBLE MADRAS HIGH COUR T IN NEXUS COMPUTER (P) LTD.,219 CTR(MAD) 54 IN HOLDING THAT EMPLOYER/EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND PAYMENTS MADE AFTER THE DUE DATE PRESCRIBED UNDER THE EMPLOY EES PROVIDENT FUND ACT AND RULES MADE THEREUNDER AND BEFORE THE D UE DATE FOR FURNISHING THE RETURN OF INCOME UNDER SUB SEC. 1 OF SEC. 139 OF THE ACT, ARE ALLOWABLE UNDER S.36(1)(VA) READ WITH SEC. 2(24(X) AND SEC. 43B OF THE ACT. 5.1 MOREOVER, RECENTLY HONBLE APEX COURT IN THE CASE OF CIT VS ALOM EXTRUSIONS LTD., 319 ITR 306 (SC) HELD THAT TH E OMISSION OF THE SECOND PROVISO TO SECTION 43B OF THE ACT BY THE FIN ANCE ACT, 2003, 6 ITA NO.2138/AHD/10 & 2 171/AHD/07 6 OPERATED, RETROSPECTIVELY, WITH EFFECT FROM, APRIL 1, 1988 AND NOT PROSPECTIVELY FROM APRIL 1, 2004. HONBLE COURT OBS ERVED THAT EARLIER UNDER THE SECOND PROVISO TO SECTION 43B AS AMENDED BY THE FINANCE ACT, 1989, THE ASSESSEES WERE ENTITLED TO DEDUCTION ONLY IF THE CONTRIBUTION STOOD CREDITED ON OR BEFORE THE DU E DATE GIVEN IN THE PROVIDENT FUNDS ACT. THIS CREATED FURTHER DIFFICULT IES AND ON A REPRESENTATION MADE TO THE FINANCE MINISTRY, ONE MO RE AMENDMENT WAS MADE BY THE FINANCE ACT, 2003. THOUGH THIS AME NDMENT WAS MADE APPLICABLE WITH EFFECT FROM APRIL 1, 2004, THE AMENDMENT WAS CURATIVE IN NATURE AND APPLIED RETROSPECTIVELY WITH EFFECT FROM APRIL 1, 1988.IT WAS CLARIFIED THAT WHEN A PROVISO IN A S ECTION IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE S ECTION WORKABLE, THE PROVISO WHICH SUPPLIES AN OBVIOUS OMI SSION THEREIN IS REQUIRED TO BE READ RETROSPECTIVELY IN OPERATION, P ARTICULARLY TO GIVE EFFECT TO THE SECTION AS A WHOLE. 5.2 HONBLE KARNATAKA HIGH COURT IN THEIR DECIS ION IN ANZ INFORMATION TECHNOLOGY P LTD., 318 ITR 123 WHILE FOLLOWING THEIR EARLIER DECISION IN CIT VS. SABARI ENTERPRISES,298 ITR 141(KAR.) CONCLUDED THAT DEPOSITS MADE BY THE EMPLOYER OF THE EMPLOYEES CONTRIBUTION BELATEDLY AND CONTRIBUTION TOWARDS ESI & PF UNDER THE RELEVANT ENACTMENTS CAN NOT BE TREATED AS INCOME OF THE ASSESSEE U/S 36(1)(VA) READ WITH SEC. 2(24)(X) IN VIEW OF P ROVISIONS OF SEC. 43B OF THE ACT. 5.3 HONBLE DELHI HIGH COURT IN ANOTHER DECISION DATED 23.12.2009 IN CIT VS. AIMIL LTD.(DELHI)IN ITA NO. 1063/2008 OB SERVED THAT SEC. 2(24)(X) PROVIDES THAT AMOUNTS RECEIVED BY AN ASSES SEE FROM EMPLOYEES TOWARDS PF CONTRIBUTIONS ETC. SHALL BE I NCOME. S. 36 (1) (VA) PROVIDES THAT IF SUCH SUMS ARE CONTRIBUTED TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND ON OR BEFORE THE DUE D ATE SPECIFIED IN THE PF LEGISLATION, THE ASSESSEE SHALL BE ENTITLED TO A DEDUCTION. THE SECOND PROVISO TO S. 43B (B) PROVIDED THAT ANY SUM PAID BY THE 7 ITA NO.2138/AHD/10 & 2 171/AHD/07 7 ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO A NY PROVIDENT FUND SHALL BE ALLOWED AS A DEDUCTION ONLY IF PAID O N OR BEFORE THE DUE DATE SPECIFIED IN 36(1)(VA) OF THE ACT. AFTER T HE OMISSION OF THE SECOND PROVISO W.E.F 1.4.2004, THE DEDUCTION IS ALL OWABLE UNDER THE FIRST PROVISO IF THE PAYMENT IS MADE ON OR BEFORE T HE DUE DATE FOR FURNISHING THE RETURN OF INCOME. THE HONBLE HIGH C OURT WHILE CONSIDERING WHETHER THE BENEFIT OF S. 43B CAN BE E XTENDED TO EMPLOYEES CONTRIBUTION AS WELL, WHICH ARE PAID AFT ER THE DUE DATE UNDER THE PF LAW BUT BEFORE THE DUE DATE FOR FILING THE RETURN, HELD THAT (I) THOUGH THE REVENUE HAS ARGUED THAT A DISTINCTIO N IS TO BE MADE BETWEEN EMPLOYERS CONTRIBUTION AND EMPLOYEES C ONTRIBUTION AND THAT EMPLOYEES CONTRIBUTION BEING IN THE NATURE OF TRUST MONEY IN THE HANDS OF THE ASSESSEE CANNOT BE ALLOWED AS A DE DUCTION IF NOT PAID ON OR BEFORE THE DUE DATE SPECIFIED IN THE PF ETC LAW, THE SCHEME OF THE ACT IS THAT EMPLOYEES CONTRIBUTION I S TREATED AS INCOME U/S 2 (24) (X) ON RECEIPT BY THE ASSESSEE AN D ALLOWED AS A DEDUCTION U/S 36 (1) (VA) ON MAKING DEPOSIT WITH TH E CONCERNED AUTHORITIES. S. 43B (B) STIPULATES THAT SUCH DEDUCT ION WOULD BE PERMISSIBLE ONLY ON ACTUAL PAYMENT; (II) THE QUESTION AS TO WHEN ACTUAL PAYMENT SHOULD BE MADE IS ANSWERED BY VINAY CEMENTS 213 CTR 268 WHERE THE DEL ETION OF THE SECOND PROVISO TO S. 43B W.E.F 1.4.2004 WAS HELD AP PLICABLE TO EARLIER YEARS AS WELL. AS THE DELETION OF THE 2ND P ROVISO IS RETROSPECTIVE, THE CASE HAS TO BE GOVERNED BY THE F IRST PROVISO. DHARMENDRA SHARMA 297 ITR 320 (DEL) & P.M. ELECTRON ICS 313 ITR 161 (DELHI) FOLLOWED; (III) IF THE EMPLOYEES CONTRIBUTION IS NOT DEPOSIT ED BY THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACTS AND IS DEPOSITED LATE, THE EMPLOYER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO, FOR WHICH SPECIFIC PROVISIONS ARE M ADE IN THE PROVIDENT FUND ACT AS WELL AS THE ESI ACT. THEREFOR E, THE ACT PERMITS THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS, SUBJECT TO THE AFORESAID CONSEQUENCES. INSOFAR AS THE INCOM E-TAX ACT IS CONCERNED, THE ASSESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE THE RETURN IS FILED, AS PER THE PRINCIP LE LAID DOWN IN VINAY CEMENT. 5.4 IN VIEW OF THE FOREGOING AND IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISION DATED 28-03-2008 OF THE ITAT IN THE ASSESSEES OWN CASE FOR AY 2005-06 IN ITA NO.4175/AHD/2007, WE HAVE NO HESITATION IN HOLDING THAT THE EMPLOYEES CONTRIBUT ION TOWARDS PF 8 ITA NO.2138/AHD/10 & 2 171/AHD/07 8 MADE BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE ACT FOR THE ASSESSMENT YEAR UNDER CON SIDERATION IS ADMISSIBLE. THEREFORE, WE HAVE NO HESITATION IN VAC ATING THE FINDINGS OF THE LD. CIT(A) AND CONSEQUENTLY, DIRECT THE AO TO ALLOW PAYMENT MADE ON ACCOUNT OF EMPLOYEES CONTRIBUTION TOWARDS PF ON OR BEFORE THE DUE DATE OF FILING OF THE RETURN U/S 139(1) OF THE ACT. WITH THESE DIRECTIONS, GROUND NOS. 1 &2 IN THE APPEAL ARE ALL OWED. 6. GROUND NOS. 3 & 4 IN THE ASSESSEES APPEAL RELAT E TO DISALLOWANCE OF RS.1,73,201/- ON ACCOUNT OF GIFT, B ONI AND CHANDLA EXPENSES. THE AO NOTICED THAT THE ASSESSEE-COMPANY CLAIMED GIFT, BONI AND CHANDLA EXPENSES OF RS.6,91,805/-. TO A QU ERY BY THE AO, THE ASSESSEE REPLIED THAT THESE EXPENSES WERE GENU INELY INCURRED FOR THE PURPOSE OF BUSINESS AND AS PER CUSTOMS AND TRAD ITIONS OF THE BUSINESS. SINCE THE TURNOVER OF THE COMPANY WAS RS.185.73 CRORES AN D THE COMPANY HAD PRESENCE IN MANY STATES AND HAVING MULTIPLE SITES, NECESSARY VOUCHERS, DOCUMENTS WERE HUGE IN NUMBERS. ACCORDINGLY, THE AS SESSEE AGREED THAT IF 25% OF THESE EXPENSES WERE DISALLOWED, THEY WOULD H AVE NO OBJECTION . HOWEVER, THE AO DISALLOWED AN AMOUNT OF RS.3,45,902 /-I.E. 50% OF THE EXPENSES ON THE GROUND THAT THE ASSESSEE DID N OT PRODUCE VOUCHERS FOR VERIFICATION NOR ANY EVIDENCE OF PAYME NT FOR SUCH EXPENSES . 7. ON APPEAL, THE LEARNED CIT(A) RESTRICTED THE DIS ALLOWANCE TO 25% OF THE EXPENSES AS PROPOSED BY THE ASSESSEE B EFORE THE AO, FOLLOWING THE ORDERS OF HIS PREDECESSOR FOR THE EA RLIER YEARS. 8. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE DID NOT MAKE ANY SUBMISSIONS ON THIS GROUN D WHILE THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AO. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSEE AGREED BEFORE THE AO AND THE LD. CIT(A) FOR DISALLOWANCE OF 25% OF THE EXPENSES ,SINCE THEY DID 9 ITA NO.2138/AHD/10 & 2 171/AHD/07 9 NOT PRODUCE THE RELEVANT VOUCHERS. THE LD. CIT(A) U PHELD THE DISALLOWANCE TO THIS EXTENT ,INTER ALIA, FOLLOWING THE ORDERS OF HIS PREDECESSOR IN THE EARLIER YEARS. BEFORE US , THE L D. AR DID NOT PLACE ANY MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER NOR MADE ANY SUBMISSIONS. IN THE ABSENCE OF ANY BAS IS , WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NOS.3 & 4 IN THE APPEAL ARE DISMISSED. 10. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO. 5 IN THE APPEAL, ACCORDINGLY, THIS GROUND IS ALSO DISMISSED. ITA NO.2138/AHD/2009[REVENUE] :- 11. ADVERTING NOW TO THE PENALTY APPEAL IN ITA NO.2138/AHD/2010 BY THE REVENUE AGAINST AN ORDER DATED 25-03-2010 O F THE LD. CIT(APPEALS)-XX, AHMEDABAD, FOR THE ASSESSMENT YEA R 2004-05, WHICH RAISES THE FOLLOWING GROUNDS:- [1] THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE PENALTY OF RS.8,16,371/- LEVIED U/S 271(1)(C) OF TH E ACT. [2] THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE DISALLOWANCE MADE ON ACCOUNT OF EMPLOYEES CONTRIBUTION WAS NOT MATTER OF APPEAL BEFORE ITAT A ND PENALTY U/S 271(1)(C) WAS CORRECTLY LEVIED BY THE AO AS PER EXP LANATION 1 TO SECTION 271(1)(C) OF THE ACT. [3] THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN NOT TAKING COGNIZANCE OF THE DECISION OF HON'BLE SUPREM E COURT IN THE CASE OF DHARMENDRA TEXTILES 306 ITR 277, WHEREIN IT IS CLEARLY HELD BY THE HONBLE APEX COURT THAT A WILLFUL DEFAULT BY THE ASSESSEE IS NOT AN ESSENTIAL INGREDIENT FOR LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT. [4] THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE HON'BLE SUPREME COUR T HAS REAFFIRMED THE DECISION IN THE CASE OF DHARMENDRA TEXTILES 306 ITR 277, SUBSEQUENTLY IN THE CASE OF CIT VS. ATUL MOHAN BIND AL 317 ITR 1 (SC). 10 ITA NO.2138/AHD/10 & 2 171/AHD/07 10 [5] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. [6] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE AO MAY BE RESTORED TO THE ABOVE EXTENT. 12. AS IS APPARENT FORM THE GROUND NOS. 1 TO 4, IS SUE RELATES TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. SINCE THE AO DISALLOWED EMPLOYERS AND EMPLOYEES CONTRIBUTION TOWARDS PF A ND ESI BESIDES 50% OF THE EXPENSES ON ACCOUNT OF GIFTS, BONI AND C HANDLA EXPENSES, PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF THE ACT WERE INITIATED ON 29-11-2006 FOR FURNISHING INACCUR ATE PARTICULARS OF INCOME. AFTER THE RECEIPT OF ORDER DATED 17.8.2007 IN ITA NO.2861/AHD./2007 IN REVENUE APPEAL, THE ASSESSEE W AS SHOWCAUSED AS TO WHY PENALTY BE NOT IMPOSED U/S 27 1(1)(C) OF THE ACT IN RELATION TO THE AMOUNT OF RS.21,02,648/- TOW ARDS EMPLOYEES CONTRIBUTION TOWARDS PF AND ESI SUSTAINED BY THE LD . CIT(A) BESIDES DISALLOWANCE OF RS.1,72,951/- ON ACCOUNT OF GIFTS, BONI AND CHANDLA EXPENSES. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE , THE AO LEVIED PENALTY OF RS.8,16,371/- IN RELATION TO THE AMOUNT OF RS.22,75,599/- ON THE GROUND THAT THE ASSESSEE FURN ISHED INACCURATE PARTICULARS OF INCOME, INVOKING EXPLANATION 1 & 4 T O SECTION 271(1)(C) OF THE ACT WHILE RELYING UPON THE DECISIONS IN UNION OF INDIA V. DHARAMENDRA TEXTILE PROCESSORS [2007] 295 ITR 244 (SC), BANARAS TEXTORI UIM VS. CIT (1988) 169 ITR 782; ZEEKOO SHOE FACTORY VS. CIT (1981)127 ITR 837; A.M. SHAH & CO. V. CIT [2000] 108TAXMAN 137(GUJ.); JAMNADAS & CO VS. CIT ( 1994) 210 ITR 218 AND COMMISSIONER OF INCOME-TAX V. GOLD COIN HEALTH FOOD P. LTD. [2008] 304 ITR 308 (SC) . 13. ON APPEAL, THE LEARNED CIT(A) CANCELLED THE PEN ALTY ,HOLDING AS UNDER:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND T HE SUBMISSION FILED ALONGWITH CASE LAWS RELIED UPON BY THE ID. COUNSEL OF THE APPELLANT. IN THIS CASE, THE ASSESSING OFFICER HAD LEVIED PENALTY OF A N AMOUNT OF RS.8,16,371/- ON THE - BASIS OF DISALLOWANCE OF RS. 22,75,599/-. HOWEVER, 11 ITA NO.2138/AHD/10 & 2 171/AHD/07 11 ON GOING THROUGH THE QUANTUM APPELLATE ORDER OF T HE ITAT, IT IS FOUND THAT WHILE LEVYING THE PENALTY OF RS.8,16,371/- T HE ASSESSING OFFICER HAS NOT CONSIDERED PROPERLY THE ORDER OF THE ITAT. IN T HE SAID ORDER, IT HAS BEEN STATED THAT 'THE AMENDED PROVISIONS, WHEREBY T HE PROVISO TO SECTION 43B(B) OF THE ACT HAS BEEN OMITTED ARE APPLICABLE F OR A. Y.2004-05 AND ONWARDS. IN OUR OPINION, THE ASSESSEE'S CASE IS G OVERNED BY THE AMENDED PROVISION ACCORDING TO WHICH THE PAYMENTS M ADE, THOUGH BELATEDLY, BUT BEFORE THE EXPIRY OF DUE DATE FOR FU RNISHING THE RETURN IS ENTITLED TO DEDUCTION, THE ASSESSEE'S CLAIM IS, THE REFORE, ALLOWED AND ORDER OF THE CIT(APPEALS) IS SET ASIDE.' IN VIEW OF AFO REMENTIONED FINDINGS, THE QUANTUM AMOUNT FOR LEVYING PENALTY HAS WRONGLY BEEN ADOPTED BY THE ASSESSING OFFICER IN RESPECT OF DISALLOWANCE UNDER SECTION 43B FOR LATE PAYMENT OF PF / ESI, WHICH IS DELETED BY THE ITAT V IDE THEIR ORDER DATED 17-08-2007. THUS, THE ASSESSING OFFICER IS NOT JUST IFIED IN LEVYING THE PENALTY ON SUCH DELETED AMOUNT. WITH REGARD TO QUANTUM AMOUNT OF PENALTY LEVIED BY THE ASSESSING OFFICER IN RESPECT OF GIFT, BONI AND CHANDIA EXPENSES, THE ASSESSING OFFICER HAD MADE DISALLOWANCE ON ESTIMATE BASIS AND THE C!T(A) HAS ALSO CONFIRMED ONLY ON ESTIMATE BASIS. WHILE LEVYING, THE PENALTY, THE ASSESSING OF FICER HAS ONLY RELIED UPON THE ASSESSMENT ORDER AND NOT BROUGHT OUT ANY N EW MATERIALS TO PROVE THE CONCEALMENT OF INCOME, IT IS SEEN THAT NO PENALTY CAN BE LEVIED FOR A BONAFIDE MISTAKE AND IN THIS CASE IT IS NOT A CASE WHERE THE APPELLANT HAS NOT DISCLOSED FULL DETAILS AT THE TIME OF ASSES SMENT PROCEEDINGS AND THE ADDITION WAS MADE DUE TO MERE DIFFERENCE OF OPI NION. HENCE, THERE IS NO JUSTIFICATION IN HOLDING THAT THERE IS CONCEALME NT OF INCOME AND / OR FILING OF INACCURATE PARTICULARS OF INCOME. FURTHER, THE I SSUE IS DISPUTABLE AND DEBATABLE AND MERELY ON THE FACT THAT THE ADDITION STOOD CONFIRMED TO SOME EXTENT ON ESTIMATE BASIS AT THE APPELLATE STAG E IT WOULD NOT AUTOMATICALLY WARRANT LEVY OF PENALTY U/S. 271(1)(C ). AS THE PENALTY PROCEEDINGS ARE ENTIRELY DIFFERENT FROM THE ASSESSM ENT PROCEEDINGS NO PENALTY CAN BE LEVIED U/S. 271(1)(C) OF THE ACT, UN LESS IT IS ESTABLISHED THAT THERE IS CLEAR CONCEALMENT OF INCOME AND / OR FILIN G OF INACCURATE PARTICULARS. IN LIGHT OF THE ABOVE FACTS AND THE JU DICIAL PRONOUNCEMENTS QUOTED AND RELIED UPON BY THE APPELLANT, I HOLD THA T THE ACTION OF THE AO IN- LEVYING PENALTY U/S.271(1)(C) IN THIS CASE IS NOT J USTIFIED AND THE SAME IS DIRECTED TO BE CANCELLED. 14. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPP ORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASS ESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 15. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE FACTS OF THE CASE , THE AO IMPOSED PENALTY U/S 271(1)(C) OF THE ACT IN RELATION TO THE AMOUNT OF 12 ITA NO.2138/AHD/10 & 2 171/AHD/07 12 RS.21,02,648/- TOWARDS EMPLOYEES CONTRIBUTION TOWA RDS PF AND ESI SUSTAINED BY THE LD. CIT(A) BESIDES DISALLOWANCE OF RS.1,72,951/- ON ACCOUNT OF GIFTS, BONI AND CHANDLA EXPENSES. IT MA Y BE MENTIONED THAT DISALLOWANCE ON ACCOUNT OF EMPLOYERS CONTRIBU TION TOWARDS PF AND ESI WAS DELETED BY THE LD. CIT(A) AND THE SAID DECISION WAS UPHELD BY THE ITAT VIDE THEIR ORDER DATED 17.8.2007 IN ITA NO.2861/AHD./2007. WE HAVE ,VIDE OUR AFORESAID FIND INGS IN PARA 5 TO 5.4 ABOVE DELETED DISALLOWANCE TOWARDS EMPLOYEES C ONTRIBUTION TOWARDS PF & ESI ALSO. THUS, THE ENTIRE DISALLOWAN CE ON ACCOUNT OF CONTRIBUTIONS TOWARDS PF AND ESI MADE BY THE AO HAS BEEN DELETED. IN VIEW OF DELETION OF DISALLOWANCE IN ITS ENTIRETY , PENALTY IMPOSED U/S 271(1)(C) OF THE ACT DOES NOT SURVIVE IN RELAT ION TO THE SAID AMOUNT. HONBLE SUPREME COURT IN THE CASE OF K.C .BUILDERS VS. ACIT,265 ITR 562(SC) HELD THAT ORDINARILY, PENALTY CANNOT STAND IF THE ASSESSMENT ITSELF IS SET ASIDE. WHERE AN ORDER OF ASSESSMENT OR REASSESSMENT ON THE BASIS OF WHICH PENALTY HAS BEEN LEVIED ON THE ASSESSEE, HAS ITSELF BEEN FINALLY SET ASIDE OR CANC ELLED BY THE TRIBUNAL OR OTHERWISE, THE PENALTY CANNOT STAND BY ITSELF AND THE SAME IS LIABLE TO BE CANCELLED. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. R.DALMIA,(1992)107 TAXATION 107, HELD TH AT NO PENALTY SURVIVES AFTER DELETION OF ADDITIONS, FORMING THE B ASIS FOR THE LEVY OF PENALTY. SIMILAR VIEW WAS TAKEN IN ADDL. COMMISSIO NER OF INCOME- TAX V. BADRI KASHI PRASAD (1993] 200 ITR 206 (ALL) AND PRABHAT OIL TRADERS V. INCOME-TAX OFFICER (NO. 3) (1996) 218 IT R (A.T.) 39 (ITAT, AHMEDABAD),CITY DRY FISH COMPANY V. COMMISSI ONER OF INCOME-TAX (1999) 238 ITR 63 (A.P.) , CIT VS. MOHD. BUX SOKAT ALI (2004) 265 ITR 326 (RAJ)AND ACIT VS. VIP INDUSTRIES (2009) 122 TTJ 289 (MUM). 15.1 SINCE THE VERY BASIS UPON WHICH THE PENALTY HAS BEEN IMPOSED DOES NOT EXIST IN VIEW OF OUR AFORESAID FI NDINGS IN PARA 5 TO 5.4 IN QUANTUM APPEAL IN ITA NOS. 2171/AHD/2007, W E ARE OF THE OPINION THAT PENALTY LEVIED IN RELATION TO THE AFOR ESAID AMOUNT OF 13 ITA NO.2138/AHD/10 & 2 171/AHD/07 13 RS.21,02,648/- IN RESPECT OF EMPLOYEES CONTRIBUTIO N TOWARDS PF AND ESI, DOES NOT SURVIVE. 16. AS REGARDS DISALLOWANCE OF RS.1,72,951/- OUT OF GIFTS,BONI AND CHANDLA EXPENSES, IT IS EVIDENT FROM THE AFORESAID FACTS THAT THE AO MADE DISALLOWANCE OF 50% OF THE EXPENSES WHILE THE LD. CIT(A) REDUCED THE SAID ESTIMATE TO 25% OF THE TOTAL EXPEN SES. WE HAVE IN PARA 9 ABOVE IN THE ASSESSEES APPEAL, UPHELD THE F INDINGS OF THE LD. CIT(A). WE ARE OF THE OPINION THAT A MERE REJECTION OF THE CLA IM OF THE ASSESSEE BY RELYING ON DIFFERENT INTERPRETATIONS DOES NOT AMOUNT TO CONCEA LMENT OF THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME BY THE ASSESSEE. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AJAIB SINGH & CO. (2001) 170 CTR (P&H) 489 : (2002) 253 ITR 630 (P&H) HAVE OBSERVED THAT MERELY BECAUSE CERTAIN EXPENSES CLAIMED BY THE ASSESSEE ARE DISALL OWED BY AN AUTHORITY, IT CANNOT MEAN THAT PARTICULARS FURNISHED BY THE ASSES SEE WERE WRONG. IT WAS HELD THAT MERE DISALLOWANCE OF EXPENSES PER SE CANNOT ME AN THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. IN THE CASE UNDER CONSIDERATION, THE LD. CIT(A), CONCLUDED THAT PENALTY CANNOT BE IMPOSED MERELY ON ESTIMATED DISALLOWANCE . MERE DISALLOWANCE OF A CLAIM WILL NOT AMOUNT TO FILING OF INACCURATE PARTICULARS OF INCOME. IT CAN AT BEST B E A WRONG CLAIM NOT A FALSE CLAIM. IN SUCH CIRCUMSTANCES, HONBLE DELHI HIGH C OURT HELD IN THE CASE OF COMMISSIONER OF INCOME-TAX.VS BACARDI MARTINI INDIA LIMITED.,288 ITR 585(DEL) THAT NO PENALTY WAS LEVIABLE. IN CIT VS. HARSHVARD HAN CHEMICALS & MINERALS LTD. (259 ITR 212) (RAJ),HONBLE RAJASTHAN HIGH COURT UP HELD THE FINDING OF THE TRIBUNAL THAT WHEN THE ASSESSEE HAS CLAIMED SOME AM OUNT THOUGH THAT WAS DEBATABLE, IN SUCH CASES, IT CANNOT BE SAID THAT TH E ASSESSEE HAS CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS FOR EVAS ION OF THE TAX. RECENTLY, HONBLE APEX COURT IN CIT VS. RELIANCE PETRO PRODU CTS, ARISING OUT OF SLP (C) NO.27161 OF 2008, VIDE THEIR ORDER DATED 17.3.2010 HELD THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSE LF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICUL ARS, HONBLE APEX COURT CONCLUDED. THUS, MERELY BECAUSE THE ASSESSEE HAD C LAIMED THE EXPENDITURE, 14 ITA NO.2138/AHD/10 & 2 171/AHD/07 14 WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, ATTRACT THE PENALTY U/S 271(1)(C) OF THE ACT. IN THE PRESENT CASE, WE ARE OF THE OPINION THAT THE DISALLOWANCE OF AN ESTIMATED AMOUNT, CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME OR FURNISHING I NACCURATE PARTICULARS THEREOF. 17. IN VIEW OF THE FOREGOING, WE HAVE NO HESITAT ION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A),CANCELLING THE PENALTY LEVIED UNDER SECTION 271 (1)(C) OF THE ACT . THEREFORE, GROUND NOS.1 TO 4 IN THE APPEAL OF THE R EVENUE ARE DISMISSED. 18. GROUND NOS. AND 6 BEING MERE PRAYER NOR ANY SU BMISSIONS HAVING BEEN MADE BEFORE US ON THESE GROUNDS, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED . 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED WHILE THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 3-06-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 3-06-2011 COPY OF THE ORDER FORWARDED TO: 1. J.M.C. PROJECTS (INDIA) LTD., LEVEL-II, JMC HOUS E, AMBAWADI, AHMEDABAD 2. ASSISTANT COMMISSIONER OF INCOME-TAX (OSD)-I, RA NGE-4, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABA D 3. CIT CONCERNED 4. CIT(A)-XX, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD