M/s. Hindusthan Auto Distributors, Kolkata V. ACIT, Circle - 56, Kolkata, Kolkata

ITA 2264/KOL/2010

• Counselvise Citation: [2013] 119 COUNSELVISE.COM (IT) 2919 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 30-05-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 27-12-2010
• Court: TRIBUNAL
• Department Lawyers: DILIP KUMAR RAKSHIT
• Keywords: Business expenditure

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [ () , ,, , , ! ''# $% ''# $% ''# $% ''# $% ] ]] ] [BEFORE HONBLE SRI PRAMOD KUMAR, AM & HONBLE SR I GEORGE MATHAN, JM] !' !' !' !' /ITA NO.2264/KOL/2010 (%) *+/ ASSESSMENT YEAR : 2001-02 ($- / APPELLANT ) - % - ( /$- /RESPONDENT) M/S.HINDUSTHAN AUTO DISTRIBUTORS A.C.I.T., CIRCL E-56, KOLKATA -VERSUS- KOLKATA (PAN: AABFH 6412 Q ) $- 0 1 / FOR THE APPELLANT: SHRI SUJOY SEN /$- 0 1 / FOR THE RESPONDENT: SHRI DILIP KUMAR RAKSHIT, SR.DR % 2 0 3 /DATE OF HEARING : 19.03.2013 4* 0 3 /DATE OF PRONOUNCEMENT : 5 / ORDER PER SHRI GEORGE MATHAN, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)- XXXVI, KOLKATA IN APPEAL NO.300/CIT(A)-XXXVI/KOL/CI RCLE-56/05-06 DATED 02/11/2010 AGAINST THE CONFIRMATION OF PENALTY LEVI ED U/S 271(1)(C) OF THE IT ACT IN RESPECT OF THE ELECTRICITY CHARGES DISALLOWED BY TH E AO. 2. SHRI SUJOY SEN, REPRESENTED ON BEHALF OF THE AS SESSEE AND SHRI DILIP KUMAR RAKSHIT, SR.DR REPRESENTED ON BEHALF OF THE REVENU E. 3. IT WAS SUBMITTED BY THE LD AR THAT IN THE COURS E OF ASSESSMENT THE AO HAD MADE THREE SUBSTANTIAL DISALLOWANCES (I) ON ACCOUNT OF RENT (II) ON ACCOUNT OF ELECTRICITY CHARGES IN RESPECT OF TWO RESIDENTIAL P ROPERTIES. IT WAS SUBMITTED BY THE LD. AR THAT THE TRIBUNAL HAD DELETED THE ADDITION IN RE SPECT OF THE DISALLOWANCE OF THE RENT. IT WAS THE FURTHER SUBMISSION THAT IN RESPECT OF THE DISALLOWANCES OF THE ELECTRICITY EXPENSES THE TRIBUNAL HAD CONFIRMED THE DISALLOWANCES MADE BY THE AO. IT ITA NO.2264 /KOL/2010 2 WAS THE SUBMISSION THAT WHILE DISALLOWING THE ELECT RICITY CHARGES THE TRIBUNAL HAD HELD THAT THE ASSESSEE WAS PAYING ELECTRICITY CHARG ES IN RESPECT OF ONE SHRI RATAN LAL PASARI, WHO WAS GIVEN THE POWER OF ATTORNEY IN RESP ECT OF MANAGING AND LOOKING AFTER AND ENGAGED WITH VARIOUS GOVERNMENT DEPARTMENTS TO CONDUCT THE DAY TO DAY BUSINESS OF THE ASSESEE FIRM. IT WAS THE SUBMISSION THAT THE TRIBUNAL HAD ALSO RECOGNIZED THAT THE SAID MR.R.L.PASARI WAS NEITHER AN EMPLOYEE OF T HE FIRM NOR DRAWING ANY SALARY FROM THE FIRM. IT WAS THE SUBMISSION THAT THOUGH TH E SAID EXPENSES ARE BUSINESS EXPENDITURE OF THE ASSESSEE THE TRIBUNAL ON THE GRO UND THAT THE ASSESSEE WAS NOT ABLE TO ESTABLISH THAT THE PAYMENT WAS WHOLLY AND EXCLUS IVELY FOR BUSINESS PURPOSES HAD UPHELD THE DISALLOWANCES. IT WAS THE FURTHER SUBMIS SION THAT THE LD. CIT(A) HAD DELETED THE PENALTY LEVIED IN RESPECT OF THE RENT D ISALLOWED BY THE AO BUT HAD CONFIRMED THE PENALTY IN RESPECT OF THE ADDITION OF RS.2,71,276/- PAID TOWARDS ELECTRICITY CHARGES. IT WAS THE SUBMISSION THAT THE ELECTRICITY EXPENSES WERE PAID IN RESPECT OF THE PERSON WITH POWER OF ATTORNEY WHO WA S LOOKING AFTER THE DAY TO DAY BUSINESS OF THE ASSESSEE. IT WAS THE SUBMISSION TH AT THE AO HAS LEVIED PENALTY 200% WITHOUT CONSIDERING THE EXPLANATION GIVEN BY THE AS SESSEE THAT THE EXPENDITURE WAS INCURRED IN THE COURSE OF THE BUSINESS OF ASSESSEE AS IT WAS NOT PAID TO ANY OF THE PARTNERS OF THE ASSESSEE FIRM BUT ON ACCOUNT OF CON TRACTUAL OBLIGATION TO SHRI PASARI WHOSE GPA HAS BEEN PLACED ON RECORD. IT WAS THE SUB MISSION THAT THE GPA AS PRODUCED BY THE ASSESSEE HAS ALSO NOT BEEN FOUND TO BE FALSE. IT WAS THE SUBMISSION THAT THE PENALTY IS LIABLE TO BE DELETED. 4. IN REPLY THE LD. DR VEHEMENTLY SUPPORTED THE ORD ERS OF LD. CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER AS ALSO THE ORDER OF LD. CIT(A) AS ALSO THE ORDER O F ITAT IN RESPECT OF THE QUANTUM ASSESSMENT CLEARLY SHOWS THAT THE ASSESSEE HAS INCU RRED AN EXPENDITURE OF NEARLY RS.1.79 LAKHS IN RESPECT OF ELECTRICITY CHARGES PAI D FOR THE PREMISES AT 4A, RAINEY PARK, KOLKATA AND RS.81,000/- FOR THE PREMISES AT 1 7, BALLYGUNJE PARK ROAD, KOLKATA. COMING TO THE ISSUE OF THE ELECTRICITY CHARGES PAID IN RESPECT OF SHRI R.L.PASARI, WHO IS NOT A PARTNER, THE GPA GIVEN TO SHRI R.L.PASARI HAS NOT BEEN DISPUTED. OBVIOUSLY ITA NO.2264 /KOL/2010 3 ONCE THE BUSINESS CONNECTION WITH SHRI PASARI IS AC CEPTED THE CONTRACTUAL PAYMENT, IF ANY, SHOULD NORMALLY NOT BE DISALLOWED. HOWEVER, I N THE QUANTUM PROCEEDINGS THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT THE EXPENDI TURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. BUT THE AS SESSEE HAS GIVEN THE DETAILS OF THE NATURE OF EXPENDITURE AS ALSO THE PERSON ON WHOSE A CCOUNTS THE EXPENDITURE HAS BEEN INCURRED AND THE GPA GIVEN TO THAT PERSON HAS ALSO BEEN ACCEPTED AND RECOGNIZED. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE EXPEN DITURE INCURRED BY THE ASSESSEE CAN POSSIBLE BE ON ACCOUNT OF THE BUSINESS OF ASSESSEE AND JUST BECAUSE THE AMOUNTS HAS BEEN DISALLOWED IN THE ASSESSMENT PROCEEDINGS PENAL TY CANNOT BE LEVIED U/S 271(1)(C) OF THE ACT. IN RESPECT OF THE ELECTRICITY EXPENDITU RE IN RESPECT OF PREMISES NO.4 RAINEY PARK, KOLKATA WHERE ALL THE PARTNERS OF THE FIRM RE SIDES WITH THEIR RESPECTIVE FAMILIES THIS EXPENDITURE CAN VERY WELL BE CONSIDERED AS DRA WINGS OF THE PARTNERS. IT HAS ALSO NOT BEEN CONSIDERED WHETHER A PART OF THE RESIDENTI AL PREMISES IS BEING USED FOR THE BUSINESS PURPOSES. IN ANY CASE THE DISALLOWANCE OF THE SAID EXPENDITURE WOULD NOT GIVE A PICTURE OF CONCEALMENT OR FILING OF INACCURA TE PARTICULARS AGAINST THE ASSESSEE. FURTHER, A PERUSAL OF THE PENALTY ORDER PASSED BY T HE AO IN THE LAST PAGE OF HIS ORDER MENTIONS THAT NO ADEQUATE CLARIFICATION COULD BE PROVIDED BY THE ASSESSEE TO CONTROVERT THE FINDINGS OF THE AO. THE FACT THAT TH E AO HAS USED THE WORDS NO ADEQUATE CLARIFICATION WOULD CLEARLY SHOW THAT CLA RIFICATIONS WERE GIVEN BY THE ASSESSEE THOUGH NOT TO THE SATISFACTION OF THE AO. THE CLARIFICATIONS AS GIVEN BY THE ASSESSEE HAS ALSO NOT BEEN SHOWN TO BE FALSE. IN TH E CIRCUMSTANCES WE ARE OF THE VIEW THAT NO PENALTY COULD BE LEVIED BY THE AO ON THE SA ID DISALLOWANCE. WE ALSO ARE OF THE VIEW THAT NO PENALTY IS LEVIABLE IN THE PRESENT CAS E AS THE ASSESSEE HAS PROVIDED THE EXPLANATION AND THE EXPLANATION HAS NOT BEEN FOUND TO BE FALSE. IN THE CIRCUMSTANCES THE PENALTY AS LEVIED BY THE AO AND CONFIRMED BY TH E CIT(A) STANDS DELETED. OUR VIEW FINDS SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. VS- CIT IN CIVI L APPLICATION NO.6924 OF 2012 ARISING OUT OF SLP(C) NO.10700 OF 2009 ON 25.09.201 2. ITA NO.2264 /KOL/2010 4 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE COURT ON 22.03.2013. SD/- SD/- [ , ,, , ] [ .''# $% , ] [PRAMOD KUMAR] [ GEORGE MATHAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER ( (( (3 3 3 3) )) ) DATE: 22.03.2013. R.G.(.P.S.) 5 0 ((7 87*9- COPY OF THE ORDER FORWARDED TO: 1. M/S.HINDUSTHAN AUTO DISTRIBUTORS, C/O M/S.SALARPURI A JAJODIA & CO., 7, C.R.AVENUE, KOLKATA-700072. 2 THE A.C.I.T., CIRCLE-56, KOLKATA. 3 . CIT KOLKATA 4. CIT(A)- XXXVI, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA /7 (/ TRUE COPY, 5%/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES