The DCIT, Circle-4, Ahmedabad V. Fun Point Resorts Pvt. Ltd., Ahmedabad

ITA 2139/AHD/2010

• Counselvise Citation: 213920514 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 22-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion; TDS
• Section: 69C; 143(3); 133(6); 194C; 250; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND A. MOHAN ALANKAMON Y, AM) ITA NO.2139/AHD/2010 A. Y.: 2006-7 THE D. C. I. T., CIRCLE-4, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABAD VS FUN POINT RESORTS (PVT.) LTD., NEAR GUJARAT HIGH COURT, S. G. HIGHWAY, AHMEDABAD PA NO. AAACF 7681 F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K. MADHUSUDAN, SR. DR RESPONDENT BY NONE DATE OF HEARING: 17-05-2012 DATE OF PRONOUNCEMENT: 08-06-2012 O R D E R PER A. MOHAN ALANKAMONY: THE REVENUE HAS FILED THIS APPEAL AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) -XX, AHMEDABAD IN APPEAL NO. CIT(A)/XX/332/2009-10 DATED 18-03-201 0, FOR ASSESSMENT YEAR 2006-07, PASSED U/S 271(1) ( C ) RE AD WITH SECTION 250 OF THE IT ACT. 2. THE REVENUE IN ITS APPEAL HAS RAISED THREE GROUN DS WHEREIN THE SECOND AND THIRD GROUNDS BEING GENERAL IN NATURE DO NOT SURVIVE FOR ADJUDICATION. THE LONE SURVIVING GROUND NO.1 IS REP RODUCED HEREIN BELOW FOR ADJUDICATION: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.3,79,340/- LEVIED U/S. 271 (1) ( C) O F THE ACT. ITA NO.2139/AHD/2010 (AY: 2006-07) DCIT, CIR-4, AHMEDABAD VS FUN POINT RESORTS (PVT.) LTD. 2 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN THE BUSINESS OF HOTELS AND RESORTS, FILED ITS RETURN OF INCOME DECLARING INCOME TO BE NIL. THE CASE WAS SELECTED FOR SCRUTIN Y UNDER CASS AND SUBSEQUENTLY ASSESSMENT ORDER U/S 143(3) OF THE IT ACT WAS PASSED ON 01-12-2008 BY THE LEARNED AO. DURING THE ASSESSM ENT PROCEEDINGS THE LEARNED AO OBSERVED THAT FOR THE YE AR UNDER CONSIDERATION THE ASSESSEE HAD DISCLOSED THE FOLLOW ING INCOME FROM OPERATION OF HOTEL AND RESORT BUSINESS AND OTHER SO URCES: INCOME FROM OPERATIONS RS.1,43,52,725/- RESTAURANT INCOME RS. 2,11,875/- SWIMMING POOL INCOME RS. 1,66,880/- MEMBERSHIP FEES RS. 3,10,000/- RS. 1,50,41,480/- OTHER INCOME RS. 84,693/- ON SCRUTINIZING THE CASE OF THE ASSESSEE CERTAIN AD DITIONS WERE MADE BY THE LD.AO, PENALTY PROCEEDINGS WERE INITIATED AN D PENALTY LEVIED. 4. (I) LEVY OF PENALTY FOR DISALLOWANCE U/S 40(A) (IA) OF THE ACT: THE ASSESSEE HAD PAID CATERING CHARGES OF RS.12,32, 336/- FOR SURUCHI RESTAURANT OUT OF WHICH RS.10,47,741/- HAD BEEN PAID TO M/S. RAJASTHAN CATERERS PVT. LTD., WITHOUT DEDUCTIN G TDS. THE LEARNED AO ACCORDINGLY DISALLOWED THIS AMOUNT OF RS .10,47,741/- U/S 40(A) (IA) OF THE ACT, PENALTY PROCEEDINGS WERE INI TIATED AND SUBSEQUENTLY PENALTY WAS LEVIED FOR THE ABOVE DISAL LOWANCE. WHEN THE MATTER REACHED BEFORE THE LEARNED CIT(A), THE P ENALTY LEVIED WAS DELETED WITH THE FOLLOWING OBSERVATIONS: ITA NO.2139/AHD/2010 (AY: 2006-07) DCIT, CIR-4, AHMEDABAD VS FUN POINT RESORTS (PVT.) LTD. 3 6. I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMIS SIONS MADE BY THE APPELLANT AND CASE LAWS RELIED UPON. FR OM THE ORDER OF PENALTY, I FIND THAT THE AO HAS MADE THE DISALLOWANCE/ADDITIONS ON ACCOUNT OF THE FACT THAT THE APPELLANT DID NOT DEDUCT TAX ON PAYMENTS MADE FOR FOOD ITEMS AND CATERING. THE APPELLANT HAD MADE PAYMENT TO RASRANJ AN CATERERS PVT. LTD. IN RESPECT OF PAYMENT OF FOOD IT EMS SOLD BY IT TO THE APPELLANT AND ITS CUSTOMERS. IT IS EXPLAINED THAT SUCH PAYMENTS ARE NOT HIT BY THE PROVISIONS OF SECTION 1 94C OF THE ACT. MERELY BECAUSE CERTAIN EXPENSES CLAIMED BY THE APPELLANT ARE DISALLOWED AND THE ADDITION MADE IS CONFIRMED B Y THE FIRST APPELLATE AUTHORITY DOES NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY. THE FINDING GIVEN IN THE ASSESSMENT PROCEE DINGS FOR DETERMINING OR COMPUTING THE TAX IS CONCLUSIVE AND MAY BE GOOD EVIDENCE FOR ASSESSMENT PROCEEDINGS BUT FOR PE NALTY PROCEEDINGS IT HAS TO BE PROVED THAT THE DISPUTED A MOUNT REPRESENTED INCOME AND THAT THE APPELLANT HAS CONSC IOUSLY AND DELIBERATELY CONCEALED ITS PARTICULARS OF INCOME. P ENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT FROM ASSESSME NT PROCEEDINGS AND THEREFORE THE MATTER HAS TO BE CONS IDERED AFRESH WITH A DIFFERENT ANGLE IN A CASE OF PENALTY. IN THIS CASE, THE EXPLANATION OFFERED BY THE APPELLANT HAS NOT BE EN PROVED TO BE FALSE AND IT HAS ALSO NOT BEEN PROVED WITH SPECI FIC EVIDENCES. I, THEREFORE, HOLD THAT SUCH ADDITION CA NNOT BE TREATED AS A CASE OF CONCEALMENT OF INCOME WITHIN T HE MEANING OF SECTION 271 (1) ( C ) OF THE ACT AND REJECTION O F CONTENTIONS RAISED BY THE APPELLANT CANNOT LEAD TO A CONCLUSION THAT THERE HAS BEEN ANY CONCEALMENT OF INCOME OR FURNISHING IN ACCURATE PARTICULARS OF INCOME. IN VIEW OF THE ABOVE FACTS O F THE CASE, I FIND THAT THERE IS NO JUSTIFICATION IN LEVYING PENA LTY ON THE APPELLANT IN THE SAID CIRCUMSTANCES, BY THE ASSESSI NG OFFICER. THEREFORE, THE PENALTY IMPOSED WITH REGARD TO ADDIT ION OF RS.10,47,741/- IS DIRECTED TO BE CANCELLED. 5. BEFORE US, THE LEARNED DR RELIED ON THE ORDER O F THE LEARNED AO AND SUBMITTED THAT THE SAME MAY BE CONFIRMED. ON PERUSING THE ORDER OF THE LEARNED CIT(A) IT APPEARS THAT M/S. RA SRANJAN CATERERS PVT. LTD. WERE RUNNING A KITCHEN OUTLET WITHIN THE RESORT OF THE ITA NO.2139/AHD/2010 (AY: 2006-07) DCIT, CIR-4, AHMEDABAD VS FUN POINT RESORTS (PVT.) LTD. 4 APPELLANT SUPPLYING FOOD ITEMS TO THE APPELLANTS I N-HOUSE RESTAURANT NAMED SURUCHI. THEREFORE, IN OUR OPINION THE PAYM ENT MADE TO M/S. RASRANJAN CATERERS PVT. LTD. IS A DEBATABLE ISSUE A S TO WHETHER THE PAYMENT IS MADE ON ACCOUNT OF CONTRACT ATTRACTING P ROVISIONS OF SECTION 194C OF THE ACT OR FOR PURCHASE OF FOOD ITE MS. CONSIDERING THE SAME, THE LEARNED CIT(A) WAS FAIR ENOUGH TO DEL ETE THE PENALTY. IN THESE GIVEN CIRCUMSTANCES, WE CONCUR WITH THE VI EW OF THE LEARNED CIT(A) AND THEREFORE, CONFIRM HIS ORDER. 6. (II) LEVY OF PENALTY FOR DISALLOWANCE MADE U/S 4 0A (2) (B) OF THE ACT: THE ASSESSEE HAD SHOWN PAYMENT OF INTEREST ON UNSEC URED LOAN TO DIPTIBEN R. PATEL FOR RS.1,30,775/- @ 12%, VALVANTB HAI P. PATEL FOR RS.1,46,159/- @ 10.25% AND RAMPRASAD P. PATEL FOR R S.5,78,437/- @ 9%. THE ASSESSEE COULD NOT SUBSTANTIATE WITH PROP ER EXPLANATION FOR PAYMENT OF INTEREST TO DIPTIBEN R. PATEL AND VA LVANTBHAI P. PATEL AT HIGHER RATE THAN THAT OF RAMPRASAD P. PATEL. THE LEARNED AO ACCORDINGLY DISALLOWED THE DIFFERENCE IN INTEREST P AYMENT OF RS.69,234/- U/S 40A(2) (B) OF THE ACT. WHEN THE MAT TER CROPPED UP BEFORE THE LEARNED CIT(A), THE LEARNED AO WAS DIREC TED TO DELETE THE PENALTY. THE LEARNED CIT(A) OBSERVED AS UNDER: AS REGARDS PENALTY ON ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S 40A (2) (B) AT RS.69,234/-, NOTHING CONCEALED H AS BEEN POINTED OUT BY THE AO WITH REGARD TO INTEREST PAID. ALL DETAILS ARE SHOWN IN THE AUDIT REPORT AND THE DETAILS ARE VERIFIABLE. IT IS ONLY O N ACCOUNT OF DIFFERENCE OF OPINION THAT EXPLANATION AND CONTENTION OF THE A PPELLANT HAS NOT BEEN ACCEPTED BY THE AO AND THE ADDITION HAS BEEN MADE. MERE DISALLOWANCE OF CLAIM OR CONTENTION IN ABSENCE OF A NY SPECIFIC OR WILLFUL CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS, DOES NOT ITA NO.2139/AHD/2010 (AY: 2006-07) DCIT, CIR-4, AHMEDABAD VS FUN POINT RESORTS (PVT.) LTD. 5 AUTOMATICALLY LEAD TO IMPOSITION OF PENALTY U/S. 27 1 (1) ( C) OF THE ACT. THEREFORE, I HOLD THAT LEVY OF PENALTY ON RS.69,234 /- IS NOT WARRANTED. 7. WE HAVE HEARD THE LEARNED DR WHO HAD RELIED ON T HE ORDER OF THE LEARNED AO. IN A COMPLEXED BUSINESS ENVIRONMENT, TH E ASSESSEE MIGHT HAVE PAID DIFFERENT RATE OF INTEREST FOR LOAN OBTAI NED FROM DIFFERENT SOURCES INCLUDING THAT FROM RELATED PERSONS. CONSID ERING THE FACTS OF THE CASE, THE EXCESS INTEREST PAID IS A DEBATABLE ISSUE AS HELD BY THE LD.CIT(A). THEREFORE EVEN IF ADDITION IS MADE FOR S UCH EXCESS PAYMENT OF INTEREST; IT IS NOT A FIT CASE FOR LEVY OF INTER EST. FURTHER THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAD CONCEAL ED ANY PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS O F SUCH INCOME. THEREFORE, WE CONFIRM THE ORDER OF THE LEARNED CIT( A) AND DELETE THE PENALTY LEVIED ON THIS ISSUE. 8. (III) LEVY OF PENALTY ON ADDITION MADE FOR UNEXPLAI NED EXPENDITURE OF RS.10,000/- U/S 69C OF THE ACT: THE LEARNED AO ON VERIFICATION OF BOOKS OF ACCOUNTS FOUND THAT THE AS SESSEE HAD MADE PAYMENT OF RS.10,000/- VIDE CHEQUES NO.163011 DATE D 24-11-2005 TO RAMPRASAD P. PATEL WHICH WAS CLAIMED AS EXPENDIT URE. THE LEARNED AO REQUIRED SHRI RAMPRASAD P. PATEL TO FURN ISH HIS BOOKS OF ACCOUNTS U/S 133(6) OF THE ACT. ON EXAMINING HIS BO OKS IT WAS FOUND THAT THIS AMOUNT WAS NOT CORRESPONDINGLY DISCLOSED. THEREFORE, THE LEARNED AO TREATED THE PAYMENT TO BE UNEXPLAINED EX PENDITURE AND ADDED TO THE INCOME OF THE ASSESSEE. SUBSEQUENTLY, PENALTY PROCEEDINGS WERE INITIATED AND PENALTY WAS LEVIED. THE LEARNED CIT(A) DELETED THE PENALTY SINCE IN THE QUANTUM APP EAL BEFORE THE LEARNED CIT(A) IN ORDER NO.CIT(A)/AC-4/266/08-09 DA TED 18-01-2010 ITA NO.2139/AHD/2010 (AY: 2006-07) DCIT, CIR-4, AHMEDABAD VS FUN POINT RESORTS (PVT.) LTD. 6 THE ADDITION OF RS.10,000/- MADE U/S 69 C OF THE AC T WAS DELETED. SINCE THE ADDITION IS DELETED BY THE LD.CIT(A) THE LEVY OF PENALTY DO NOT SURVIVE, THEREFORE WE HEREBY CONFIRM THE ORDER OF THE LEARNED CIT(A). 9. THOUGH, THE LEARNED AO HAD RELIED UPON THE CASE UNION OF INDIA VS DHARMENDRA TEXTILES PROCESSORS REPORTED IN 306 ITR 277, FROM THE FACTS OF THE RELEVANT CASE, PENALTY U/S 27 1 (1) ( C) OF THE ACT IS NOT ATTRACTED BECAUSE IN THE CASE BEFORE US EIT HER ADDITIONS ARE MADE ON DEBATABLE ISSUES OR ADDITIONS ARE DELETED B Y THE LD.CIT(A). FURTHER IT IS APPARENT FROM THE FACTS OF THE CASE, THAT THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THEREFORE, W E CONFIRM THE ORDER OF THE LEARNED CIT(A) THEREBY DELETING THE PE NALTY LEVIED BY THE LEARNED AO ON ALL THE THREE COUNTS. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08-06-2012 SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ ITA NO.2139/AHD/2010 (AY: 2006-07) DCIT, CIR-4, AHMEDABAD VS FUN POINT RESORTS (PVT.) LTD. 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: DIRECT DICTATION ON AMS COMP UTER 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 04-06-12 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR.P.S ./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: