Sakthi Sugars Limited, Coimbatore V. DCIT Corporate Circle 1, Coimbatore

ITA 2143/CHNY/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1427 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMIDIPCIT
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . !' ,$ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2143/CHNY/2018 ' (' / ASSESSMENT YEAR :2009-10 M/S SAKTHI SUGARS LIMITED, C/O M/S SUBBARAYAAIYAR PADMANABHAN&RAMAMANI ADVOCATES, NEW NO.75 (OLD NO.105), WINDSOR TOWERS, DR. RADHAKRISHNANSALAI, MYLAPORE, CHENNAI - 600 004. PAN : AADCS 0651 B V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1, COIMBATORE. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SH. R. VIJAYARAGHAVAN, ADVOCATE ,-*+./ / RESPONDENT BY : SHRI SAILENDRAMAMIDI, PCIT 0 .1$ / DATE OF HEARING : 20.08.2018 2!( .1$ / DATE OF PRONOUNCEMENT : 15.11.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, COIMBA TORE, DATED 28.06.2018, CONFIRMING THE PENALTY LEVIED BY THE AS SESSING OFFICER 2 I.T.A. NO.2143/CHNY/18 UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') FOR ASSESSMENT YEAR 2009-10. 2. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE AS SESSEE, SUBMITTED THAT THE ASSESSEE DISCLOSED A LOSS OF 232,11,10,127/- UNDER THE NORMAL PROVISIONS OF INCOME-TAX ACT. HOW EVER, ACCORDING TO THE LD. COUNSEL, THE BOOK LOSS UNDER SECTION 115 JB OF THE ACT WAS 86,01,42,036/-. THE ASSESSING OFFICER COMPLETED TH E ASSESSMENT UNDER SECTION 143(3) OF THE ACT BY AN OR DER DATED 30.12.2011 DISALLOWING THE PAYMENT PERTAINING TO GO ODWILL, THE CLAIM OF DEPRECIATION ON SIVAGANGA UNIT, INTEREST ON DISC OUNTED BILLS, RENT RECEIPTS BESIDES DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE LD.COUNSEL SUBMITTED THAT WITH REGARD TO DISALLOWAN CE PERTAINING TO GOODWILL, AN AMOUNT OF 50.18 CRORES FROM AND OUT OF TOTAL DISALLOWANCE OF 1,55,55,46,433/-, WAS CONFIRMED BY THE CIT(APPEALS), WHICH WAS ALSO CONFIRMED BY THIS TRIB UNAL. MOREOVER, ACCORDING TO THE LD. COUNSEL, THE CIT(APP EALS) HAS ALSO CONFIRMED THE DISALLOWANCE MADE UNDER SECTION 14A O F THE ACT. 3. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE AS SESSEE, REFERRING TO THE DISALLOWANCE WITH REGARD TO GOODWI LL, SUBMITTED THAT THE CIT(APPEALS) CALLED FOR REMAND REPORT FROM THE ASSESSING 3 I.T.A. NO.2143/CHNY/18 OFFICER. THE ASSESSING OFFICER FILED THE REMAND RE PORT BEFORE THE CIT(APPEALS) ON 11.06.2014, A COPY OF WHICH IS AVAI LABLE AT PAGE 12 OF THE PAPER-BOOK. ON THE BASIS OF THE REMAND R EPORT, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) ALLOWED THE CL AIM OF THE ASSESSEE TO THE EXTENT OF 105.51 CRORES. THE BALANCE AMOUNT OF 50.18 CRORES WAS CONFIRMED BY THE CIT(APPEALS). ON FURTHER APPEAL, ACCORDING TO THE LD. COUNSEL, THIS TRIBUNAL ALSO CONFIRMED 50.18 CRORES, THE ADDITION MADE BY THE ASSESSING OF FICER. ACCORDING TO THE LD. COUNSEL, THE PAYMENT WAS MADE TO M/S SHAKTHI SUGAR CANE GROWERS RURAL DEVELOPMENT AND WATER USER S SOCIETY FOR THE PURPOSE OF PAYMENT TO THE CANE GROWERS. SI NCE THE PAYMENT WAS NOT SUBSTANTIATED, ACCORDING TO THE LD. COUNSEL , THIS TRIBUNAL CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R TO THE EXTENT OF 50.18 CRORES. ACCORDING TO THE LD. COUNSEL, MERE D ISALLOWANCE OR INABILITY OF THE ASSESSEE TO SUBSTANTIATE THE CL AIM WOULD NOT AUTOMATICALLY RESULT IN LEVY OF PENALTY. ACCORDING TO THE LD. COUNSEL, THE CLAIM MADE IN THE RETURN OF INCOME WITH REGARD TO PAYMENT MADE TO CANE GROWERS DOES NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING ANY PART OF INC OME. THEREFORE, ACCORDING TO THE LD. COUNSEL, LEVY OF PENALTY IS NO T CALLED FOR. ACCORDING TO THE LD. COUNSEL, THE PENALTY LEVIED ON LY IN RESPECT OF 4 I.T.A. NO.2143/CHNY/18 DISALLOWANCE OF 50,20,41,708/- TOWARDS DISALLOWANCE OF GOODWILL AND 1,48,320/- UNDER SECTION 14A OF THE ACT. ACCORDIN G TO THE LD. COUNSEL, A MERE CLAIM CANNOT BE A REASON FOR LEVYIN G PENALTY IN VIEW OF JUDGMENT OF APEX COURT IN CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 158. 4. ON THE CONTRARY, SHRI SAILENDRAMAMIDI, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT EVEN THOUGH THE ASSE SSING OFFICER DISALLOWED THE PAYMENT MADE TOWARDS GOODWILL, DEPRE CIATION, INTEREST ON DISCOUNTED BILLS, RENT RECEIPTS AND DIS ALLOWANCE UNDER SECTION 14A OF THE ACT, ULTIMATELY THE ADDITION MAD E BY THE ASSESSING OFFICERWAS CONFIRMED ONLY TO THE EXTENT O F 50,20,41,708/- TOWARDS DISALLOWANCE OF GOODWILL AND 1,48,320/- UNDER SECTION 14A OF THE ACT. IN RESPECT OF OTHER ADDITIONS, ACCORDING TO THE LD. D.R., IT WAS DELETED EITHER BY THE CIT(APPEALS) OR BY THE TRIBUNAL. THEREFORE, THE ASSESSING OFFIC ER FOUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME WITH REGARD TO GOODWILL AND EXPENDITURE RELATING TO EARNING OF EXEMPTED INCOME. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER LEVIED THE PENALTY AT 100% OF THE TAX AND THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFIC ER. 5 I.T.A. NO.2143/CHNY/18 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. EVEN THOUGH THERE ARE SEVERAL DISALLOWANCES MADE BY THE ASSESSI NG OFFICER, THE PENALTY IS CONFINED TO GOODWILL AND DISALLOWANCE UN DER SECTION 14A OF THE ACT. WITH REGARD TO GOODWILL, THE TOTAL DIS ALLOWANCE WAS 155,55,46,433/-. HOWEVER, AFTER CALLING FOR REMAND REPORT, THE CIT(APPEALS) SUSTAINED THE DISALLOWANCE ONLY TO THE EXTENT OF 50,20,41,708/-, WHICH WAS ALSO CONFIRMED BY THIS TR IBUNAL. THE DISALLOWANCE OF 1,48,320/- UNDER SECTION 14A WAS ALSO CONFIRMED BY THIS TRIBUNAL. WITH REGARD TO GOODWILL, THE ASS ESSEE CLAIMED BEFORE THE ASSESSING OFFICER AND BEFORE THIS TRIBUN AL THAT THE SUM WAS PAID TO M/S SHAKTHI SUGAR CANE GROWERS RURAL DE VELOPMENT AND WATER USERS SOCIETY FOR DISTRIBUTION TO THE CA NE GROWERS. SINCE THE AMOUNT WAS DISTRIBUTED TO THAT SOCIETY, THE ASS ESSEE COULD NOT PRODUCE THE MATERIAL TO SUBSTANTIATE THE ACTUAL PAY MENT MADE TO THE FARMERS. 6. THE QUESTION ARISES FOR CONSIDERATION IS WHEN TH E ASSESSEE CLAIMS THAT THE AMOUNTS WERE PAID TO THE GOODWILL T O THE CANE GROWERS AND THE SAME WAS NOT SUBSTANTIATED, WHETHER IT AMOUNTS TO CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF 6 I.T.A. NO.2143/CHNY/18 INCOME? THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT A MERE CLAIM IN THE RETURN OF INCOME WITH REGARD TO PAYMEN T MADE BY THE ASSESSEE TO M/S SHAKTHI SUGAR CANE GROWERS RURAL DE VELOPMENT AND WATER USERS SOCIETY CANNOT BE CONSTRUED AS CON CEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. MERELY BECAUSE THE ASSESSEE FAILED TO SUBSTANTIATE THE CLA IM OF PAYMENT, IT CANNOT BE CONSTRUED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P) LTD. (SUPRA) EXAMINED THIS ISSUE AND FOUND THAT MERELY BECAUSE THE ASSESSEE FAILED TO SUBSTANTIATE THE EXPENDITURE SAID TO BE INCURRED AND CLAIMED AS SUCH, THAT WILL NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. IN VIEW OF THIS JUDGMENT OF APEX COURT, TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE CANNOT BE ANY PEN ALTY EITHER FOR CONCEALING INCOME OR FURNISHING INACCURATE PARTICUL ARS OF INCOME. 7. NOW COMING TO DISALLOWANCE MADE UNDER SECTION 14 A OF THE ACT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THA T THE ASSESSING OFFICER HAS TO COMPUTE DISALLOWANCE AS PER THE PROV ISIONS OF RULE 8D OF INCOME-TAX RULES, 1962. THEREFORE, WHEN THE ASSESSEE MADE COMPUTATION AND THE ASSESSING OFFICER MADE COU NTER 7 I.T.A. NO.2143/CHNY/18 COMPUTATION, IT CANNOT BE CONSTRUED THAT THERE WAS CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. THEREFORE, THERE CANNOT BE ANY LEVY OF PENALTY EVEN IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL IS UNABLE TO UPHOLD THE O RDERS OF THE LOWER AUTHORITIES. THE ORDERS OF BOTH THE AUTHORITIES BE LOW ARE SET ASIDE AND THE PENALTY LEVIED BY THE ASSESSING OFFICER, AS CONFIRMED BY THE CIT(APPEALS), IS DELETED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 15 TH NOVEMBER, 2018 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN ) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 15 TH NOVEMBER, 2018. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-1, COIMBATORE 4. PRINCIPAL CIT-1, COIMBATORE 5. 69 ,1 /DR 6. :' ; /GF.