M/S Prarthana Const P Ltd, Ahmedabad V. The Dycit Sr-1, Ahmedabad

ITA 2233/AHD/2002

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2408 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-10-2010
• Assessment Year: 1992-1993
• Appeal Filed On: 26-06-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Unexplained investment; Business expenditure; Question of law; Set aside
• Section: 271(1)(c); 274; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD (BEFORE HONBLE SHRI MAHAVIR SINGH, J.M. AND HON'BL E SHRI D.C. AGRAWAL, A.M.) I.T.A. NO. 2233/AHD./2002 ASSESSMENT YEAR : 1992-1993 M/S. PRARTHANA CONSTRUCTION PVT. LTD., -VS.- COMMISSIONER OF INCOME TAX AHMEDABAD (APPEALS)-XI, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MEHUL K. PATEL RESPONDENT BY : SHRI K. MADHUSUDAN, SR. D.R. O R D E R PER SHRI D.C. AGARWAL, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE FOR THE AS SESSMENT YEAR 1992-93 AGAINST THE LEVY OF PENALTY OF RS.2,40,010/- UNDER SECTION 271(1)(C) OF THE ACT. 2. GROUND RAISED BY THE ASSESSEE IS AS UNDER :- THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEAL S) ERRED IN CONFIRMING THE PENALTY OF RS.2,40,010/- IMPOSED BY ASSESSING OFFICER U/S. 271(1)(C) AND THAT THE SAME SHOULD BE DELETED. 3. THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOLLOWING ADDITIONS AND DISALLOWANCES WERE MADE :- (I) DISALLOWANCE OF SALARY WAGES EXPENSES RS.3,18,9 07/-; (II) DISALLOWANCE OF WARRANTY EXPENSES RS.47,040/ -; (III) DISALLOWANCE OF OCTROI EXPENSES RS.47,766/ -; (IV) DISALLOWANCE OF ADVERTISEMENT EXPENSES RS.2, 22,400/-; (V) DISALLOWANCE OF TELEPHONE EXPENSES RS.1,00,20 3/-. THE A.O. HAD INITIATED PENALTY PROCEEDINGS IN RESP ECT OF THESE ADDITIONS. IN RESPONSE TO SHOW- CAUSE NOTICE ISSUED BEFORE LEVY OF PENALTY THE ASSE SSEE FURNISHED A REPLY DATED 16.06.2000, ACCORDING TO WHICH PENALTY COULD NOT BE LEVIED ON T HESE ADDITIONS. ACCORDING TO THE ASSESSEE, EXPENSES ARE REIMBURSABLE AND THERE IS NO FINDING T HAT THESE EXPENSES ARE NOT GENUINE. FURTHER, CERTAIN DISALLOWANCES WERE MADE BECAUSE THE ASSESSE E WAS NOT ABLE TO PRODUCE VOUCHERS AND EXPLANATIONS AGAINST THE ADDITIONS WERE NOT FOUND S ATISFACTORY. THE ASSESSING OFFICER, HOWEVER, 2 ITA NO. 2233-AHD-2002 REJECTED THE EXPLANATIONS AND PROCEEDED TO LEVY THE PENALTY ON THESE ADDITIONS. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE L EVY OF PENALTY THROUGH A SUMMARY ORDER. 4. BEFORE US, IT WAS SUBMITTED BY THE LD. A.R. THAT THE ADDITIONS RELATING TO SALARY AND WAGES HAS BEEN DELETED BY THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) AS UNDER :- AS REGARDS SALARY AND WAGES, I AM IN AGREEMENT WIT H THE APPELLANTS REPRESENTATIVE THAT IN SO FAR AS HIS OWN ESTABLISHM ENT IS CONCERNED, THE SALARY AND WAGES EXPENSES CANNOT BE CLAIMED AS A RE IMBURSEMENT FROM THE CUSTOMERS. ACCORDINGLY, THE DISALLOWANCE OF RS.3,18 ,907/- MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT IS DELETED. THE WARRANTY EXPENSES OF RS.47,040/- WAS ALLOWED BY THE TRIBUNAL IN THE ORDER IN ITA NOS. 147 & 148/AHD/2000 PRONOUNCED ON 07.07.2006 AS UNDER :- SO FAR AS WARRANTY EXPENSES ARE CONCERNED, HERE AL SO NEITHER INCURRING OF THE EXPENSES NOR GENUINENESS OF PAYMENT HAS BEEN DO UBTED, DISALLOWANCE HAS BEEN MADE ON ASSUMPTIONS, ASSESSEE IN ITS BUSIN ESS INTEREST, IF CARRIES ANY REPAIRS AND MAINTENANCE TO PROJECT ITSELF AS A GOOD BUILDING, THE SAME HAS TO BE HELD AS BUSINESS EXPENDITURE, THEREFORE, GROUND NO. 1 IS ALLOWED. SO FAR AS THE OCTROI EXPENSES IS CONCERNED, IT WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BUT NO APPEAL HAS BEEN FILED B Y THE ASSESSEE BEFORE THE TRIBUNAL. ADVERTISEMENT EXPENSES OF RS.2,22,400/- HAS BEEN A LLOWED BY THE TRIBUNAL IN THE ORDER IN ITA NOS. 147 & 148/AHD/2000 PRONOUNCED ON 07.07.200 6 AS UNDER :- COMING TO THE REMAINING GROUNDS OF AY 1992-93, APR OPOS GROUND NO. 1 ABOUT ADVERTISEMENT EXPENSES, LEARNED COUNSEL CONTE NDS THAT ASSESSEE IS ONE OF REPUTED BUILDERS HAVING BUSINESS OPERATIONS NOT ONLY AT AHMEDABAD BUT ITS SURROUNDING AND MUMBAI ALSO. ON THE KNOWLED GE THAT ASSESSEE HAS UNDERTAKEN PARTICULAR PROJECTS VARIOUS FLAT PURCHAS ERS APPROACH THE ASSESSEE WHICH FACILITATED EFFICIENCY AND PROPER BO OKING OF THE PROJECTS THUS ADDING TO THE BUSINESS REPUTATION OF THE ASSES SEE. THOUGH THERE IS AN AGREEMENT IN THIS RESPECT WITH VARIOUS NTCS, FOR TH EIR PROJECTS THAT IS CONFINED TO PARTICULAR PROJECT IN QUESTION, HOWEVER , THE ASSESSEE ON BROADER AREA BASIS TO SUPPORT ITS CONSTRUCTION ACTI VITIES ADVERTISED BY WAY OF HOARDING AND OTHER MEDIA ABOUT ITS BUSINESS POTE NTIAL AND TO INFORM CUSTOMERS NOT ONLY ABOUT THE EXISTENCE AND CONTINUA NCE OF CONSTRUCTION ACTIVITIES BUT ABOUT PROJECTS WHICH ARE IN OFFING. COMPLETE DETAILS OF EXPENDITURE HAS BEEN GIVEN, GENUINENESS WHEREOF HAS NOT BEEN DOUBTED, ASSESSEE AS A REPUTED BUSINESS ORGANIZATION HAS RIG HT TO ADVERTISE ITS 3 ITA NO. 2233-AHD-2002 BUSINESS ACTIVITY, OVER AND ABOVE AGREEMENT WITH NT C, THE EXPENDITURE WAS CLEARLY FOR BUSINESS PURPOSE. THE ADDITION REGARDING WARRANTY EXPENSES WAS DELETE D BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THIS WAS SET ASIDE BY THE TRIBUNAL A S UNDER :- 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MAT ERIAL AVAILABLE ON RECORD. IN THE FACTS AND CIRCUMSTANCES, WE ARE OF T HE VIEW THAT ASSESSEE NEEDS TO BE GIVEN A CHANCE TO PRODUCE THOSE AGREEME NTS AND NECESSARY CONFIRMATIONS FROM CONSTRUCTION PROJECT ORGANIZATIO N THAT THERE WAS SUCH UNDERSTANDING AND MATERIAL TO THAT EFFECT. IN VIEW THEREOF, THIS GROUNDS IN BOTH YEARS ALLOWED FOR STATISTICAL PURPOSE. THUS ACCORDING TO THE LD. A.R., ONLY ONE ADDITION S URVIVES WHICH IS OCTROI EXPENSES. NO MATERIAL FACT WAS FOUND TO BE CONCEALED BY THE ASSESSEE IN R ESPECT OF THIS ADDITION. ADDITION WAS CONFIRMED FOR WANT OF RECEIPT EVEN THOUGH GENUINENE SS OF THE PAYMENT AND IMPORT OF GOODS INTO THE CITY WAS NOT DOUBTED. 5. WE HAVE HEARD RIVAL SUBMISSION AND PERUSED THE M ATERIAL PLACED ON RECORD. AS MENTIONED ABOVE, SALARY AND WAGES OF RS.3,18,907/- ADDED BY T HE AO WAS DELETED BY THE LEARNED CIT(A) AND THE DEPARTMENT HAS NOT PREFERRED ANY APPEAL. A DVERTISEMENT EXPENSES OF RS.2,22,400/- HAS BEEN DELETED BY THE TRIBUNAL. THE TEKA CENTERING EXPENSES OF RS.1,00,023/- HAS BEEN SET AS IDE BY THE TRIBUNAL. THE ONLY EXPENDITURE DISALLOWED BY TH E AO AND CONFIRMED BY THE LEARNED C1T(A) AND NO APPEAL HAS BEEN FILED BY THE ASSESSEE BEFORE THE TRIBUNAL IS OCTROI EXPENSES OF RS.47,766/- . SINCE OUT OF FIVE EXPENDITURE DISALLOWED BY THE A SSESSING OFFICER, FOUR HAVE BEEN EITHER DELETED BY THE CIT(A) OR DELETED BY THE TRIBUNAL OR SET ASI DE. THEREFORE, THERE IS NO CASE FOR LEVY OF PENALTY FOR CONCEALMENT IN RESPECT OF THESE SUMS. S O FAR AS OCTROI EXPENSES IS CONCERNED, THE LEARNED CIT(A) HAS OBSERVED THAT A SUM OF RS.11,428 /- WAS PAID TOWARDS OCTROI FOR COMPUTERS AND ITS ACCESSORIES AND RS.36,338/- WAS PAID ON ACC OUNT OF NON-PRODUCTION OF OCTROI RECEIPTS OF THE SAME COMPUTERS WHILE CARRYING THEM IN A CAR. NO CASE WAS MADE OUT THAT THE CLAIM FOR OCTROI EXPENSES WAS FALSE. IN FACT, DISPUTE WAS ONLY ON TH E NATURE OF THE CLAIM AND NOT ON THE GENUINENESS THEREOF. ON THIS ADDITION ALSO NO PENAL TY CAN BE IMPOSED IN VIEW OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. RELIA NCE PETROPRODUCTS LTD,, (2010) 322 1TR 158 (SC). ACCORDING TO THE APEX COURT, IF ANY INFORMATI ON GIVEN IN THE RETURN IS NOT FOUND INCORRECT, THEN MERELY FOR MAKING UNSUSTAINABLE CLAIM, PENALTY UNDER SECTION 271(1 )(C) CANNOT BE LEVIED. 4 ITA NO. 2233-AHD-2002 SO FAR AS PENALTY IN RESPECT OF OTHER AMOUNT DELETE D IS CONCERNED, WE GET SUPPORT FROM THE FOLLOWING DECISIONS: 1. ACIT VS. VIP INDUSTRIES (2009) 122 TTJ 289 (MUM. ) / (2009) 21 DTR 153 (MUM.) WHERE THE ADDITION WAS DELETED BY THE TRIBUNAL IN Q UANTUM APPEAL, THE VERY FOUNDATION FOR LEVY OF THE PENALTY CEASED TO E XIST. 2.ADDITIONAL COMMISSIONER OF INCOME-TAX V. BADRI PR ASAD KASHI PRASAD [1993] 200 ITR 0206- [ALLAHABAD HIGH COURT] HELD, _ THAT THE LEVY OF PENALTY WAS BASED ON THE ADDITIO N TO INCOME MADE BY THE INCOME-TAX OFFICER. THE ADDITION WAS DELETED BY THE TRIBUNAL. HENCE, THE TRIBUNAL WAS JUSTIFIED IN CANCELLING THE PENALTY. 3. PRABHAT OIL TRADERS V. INCOME-TAX OFFICER (NO. 3 ) [1996] 218 ITR (A.T.) 0039- [INCOME-TAX APPELLATE TRIBUNAL--AHMEDABAD] PENALTY--CONCEALMENT OF INCOME--AMOUNT ALLEGEDLY IN VESTED IN PURCHASE OF COMMODITY AND PROFIT ON ITS SALE OUTSIDE THE BOOKS OF ACCOUNT --ADDITION MADE TO INCOME ON THE GROUND THAT THE AMOUNT REPRESENTED UNEXPLAINED INVE STMENT AND ALSO SUPPRESSED PROFITS ON SALE OUTSIDE BOOKS OF ACCOUNT--NO EVIDENCE THAT EXPLANATION REGARDING PURCHASE WAS FALSE-- ADDITION DELETED IN QUANTUM PROCEEDINGS--PENALTY COULD NOT BE LEVIE D--INCOME-TAX ACT, 1961, S. 271(1)(C). 4. COMMISSIONER OF INCOME-TAX V. MOHD. BUX SOKAT ALI [2004] 265 ITR 0326- [RAJASTHAN HIGH COURT] FOR THE ASSESSMENT YEAR 1987-88, THE ASSESSING AUTH ORITY MADE ASSESSMENT ON THE FIRM ON A TOTAL INCOME OF RS. 5,90,300 AGAINST THE RETURNED INCOME OF RS. 2,45,224. THE ASSESSING AUTHORITY ALSO PASSED AN ORDER UNDER SECTION 186(1) OF THE INCOME-TAX ACT, 1961, REFUSING CONTINUATION OF REGISTRATION. THE TRIBUNAL GRANTED REGISTRATION AND DELETED THE ADDITION. THE ASSESSING OFFICER HAD IMPOSED PENALTY BUT THE C OMMISSIONER (APPEALS) CANCELLED IT. THE ORDER WAS UPHELD BY THE INCOME-TAX APPELLATE TR IBUNAL ON THE GROUND THAT THE VERY BASIS FOR LEVYING PENALTY DID NOT SURVIVE. ON AN AP PLICATION TO DIRECT REFERENCE : _ HELD, _ THAT THE ORDER OF THE INCOME-TAX APPELLATE TRIBUN AL DIRECTING REGISTRATION AND DELETING ADDITION HAD BECOME FINAL. THE TRIBUNAL WA S JUSTIFIED IN CANCELLING THE PENALTY. NO QUESTION OF LAW AROSE FROM ITS ORDER. 5. COMMISSIONER OF INCOME-TAX V. BENGAL JUTE MILLS CO. LTD. [1988] 174 ITR 0402- [CALCUTTA HIGH COURT] 5 ITA NO. 2233-AHD-2002 WHERE PENALTY WAS IMPOSED SOLELY ON THE BASIS OF AN ADDITION OF RS. 4 LAKHS TO THE ASSESSEE'S TOTAL INCOME AND THE ADDITION WAS DELETE D BY THE TRIBUNAL: HELD, _ THAT IT WAS EVIDENT FROM THE MATERIAL ON RECORD T HAT THE PENALTY HAD BEEN IMPOSED SOLELY ON THE BASIS OF THE ADDITION OF RS. 4 LAKHS TO THE ASSESSEES INCOME. IF THE ADDITION WAS DELETED, THE CHARGE OF CONCEALMENT OF INCOME CO ULD NOT BE SUSTAINED. IMPOSITION OF PENALTY UNDER SECTION 271(L)(C) OF THE INCOME-TAX A CT, 1961, WAS, THEREFORE, NOT VALID. 6. C OMMISSIONER OF INCOME-TAX V. SHISHPAL[2002] 255 ITR 0187- [RAJASTHAN HIGH COURT] THE ASSESSEE WAS APPREHENDED BY THE CUSTOMS AUTHORI TIES AND WAS FOUND POSSESSING PRECIOUS STONES OF THE VALUE OF RS. 64,503. SINCE T HE ASSESSEE COULD NOT PROVE THE ACQUISITION/SOURCE OF INVESTMENT IN THE PRECIOUS ST ONES, THE INCOME-TAX OFFICER BROUGHT TO TAX THE UNEXPLAINED INVESTMENT BY RESORTING TO SECT ION 69 OF THE INCOME-TAX ACT, 1961, AND DIRECTED ISSUANCE OF PENALTY NOTICE INCLUDING N OTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT. HE LEVIED A PENALTY O F RS. 32,256. THE COMMISSIONER OF INCOME-TAX (APPEALS) CANCELLED THE ENTIRE PENALTY O N THE BASIS THAT SINCE IN THE QUANTUM APPEAL THE ADDITION ITSELF WAS DELETED, THERE WAS N O CASE FOR PENALTY UNDER SECTION 271(1)(C). THIS WAS UPHELD BY THE TRIBUNAL. ON A RE FERENCE : _ HELD, _ THAT THE CANCELLATION OF PENALTY WAS VALID. IN VIEW OF ABOVE, WE HOLD THAT NO PENALTY CAN BE LE VIED IN THIS EASE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 07.01.20 11 SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAW AL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07/ 01 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, (4) CIT CONCERNED, (5) D.R. , ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGIS TRAR, ITAT, AHMEDABAD LAHA/SR.P.S.