The DCIT, Circle-9, Ahmedabad V. M/s. L.G. Chaudhary, Ahmedabad

ITA 228/AHD/2010

• Counselvise Citation: 22820514 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 22-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: MRS URVASHI SHODHAN
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT, JM AND SHRI A. MOHA N ALANKAMONY, AM) ITA NO.228/AHD/2010: A. Y.: 2006-07 THE D. C. I. T., CIRCLE-9, 1 ST FLOOR, A WING, NEW INCOME TAX OFFICE, OPP. SAJANAND COLLEGE, PANJRAPOL, AMBAWADI, AHMEDABAD VS M/S. L. G. CHAUDHARY, M/19- 150, SWATANTRA SENANI NAGAR 2, B/H. PRAGATINAGAR BUST STOP, NARNPURA, AHMEDABAD P.A. NO. AACFL 5043 J (APPELLANT) (RESPONDENT) APPELLANT BY SHRI B.L. YADAV, SR. DR RESPONDENT BY MRS. URVASHI SHODHAN, AR DATE OF HEARING: 06-03-2012 DATE OF PRONOUNCEMENT: 16-03-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A)-XV, AH MEDABAD DATED 19 TH NOVEMBER, 2009 FOR ASSESSMENT YEAR 2006-07 IN APPEA L NO. CIT(A)- XV/DCIT/CIR.9/50/09-10, CHALLENGING THE DELETION OF PENALTY OF RS.1,97,55,306/- LEVIED BY THE AO U/S 271(1) (C) OF THE IT ACT. 2. BRIEFLY, THE FACTS OF THE CASE AS EMERGED FROM T HE ORDER OF THE LEARNED CIT(A) ARE THAT PENALTY OF RS.1,97,55,306/ HAS BEEN IMPOSED BY THE AO WITH RESPECT TO THE ADDITIONS OF (I) RS.5,85 ,87,521/- MADE ON ACCOUNT OF DISALLOWANCE U/S. 40(A) (IA) OF THE IT A CT AND RS.1,03,222/- ITA NO.228/AHD/2010 (AY 2006-07): DCIT, AHMEDABAD V S M/S. L. G. CHAUDHARY 2 MADE ON ACCOUNT OF DISALLOWANCE OUT OF TELEPHONE/OF FICE/SITE & STAFF WELFARE EXPENSES. THE MATTER REACHED BEFORE THE LEA RNED CIT(A). THE LEARNED CIT(A), AFTER CONSIDERING THE RIVAL SUBMISS IONS DIRECTED THE AO TO DELETE THE PENALTY WITH RESPECT TO ADDITION MADE U/S 40(A) (IA) OF THE IT ACT HOLDING THAT THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. FURTHER, IT WAS H ELD BY THE LEARNED CIT(A) THAT TDS WAS DULY DEDUCTED AND DEPOSITED IN GOVERNMENT ACCOUNT THOUGH THERE WAS A DELAY ON THE PART OF THE ASSESSEE IN MAKING SUCH DEPOSIT IN THE GOVERNMENT ACCOUNT WHICH IS ONL Y A TECHNICAL BREACH AND PENALTY CANNOT BE LEVIED IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN STEE L LTD. VS STATE OF ORISSA, 83 ITR 27 (SC). THE LEARNED CIT(A) ALSO DIR ECTED THE AO TO DELETE THE PENALTY LEVIED WITH RESPECT TO DISALLOWA NCE OUT OF TELEPHONE AND OTHER EXPENSES HOLDING THAT THESE WERE ADDITION S MADE ON ESTIMATE BASIS. 3. BEING AGGRIEVED AND DISSATISFIED WITH THE ABOVE FINDINGS OF THE LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE LEARNED DR RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED AR SUBMITTED BEFORE US THAT THE ISSUE UNDER CONSIDERATION IS COVERED BY THE DECISION OF ITAT AH MEDABAD A BENCH DATED 30-07-2010 IN ITA NOS. 789 TO 791/AHD/2007 IN THE CASE OF DCIT VS MAZDAL LTD. AND THE DECISION OF ITAT D BENCH D ATED 22-02-2011 IN ITA NO.2865/AHD/2010 IN THE CASE OF ACIT VS M/S. SA RASWATI CONSTRUCTION CO., WHEREIN THE ISSUE HAS BEEN DECIDE D BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE BY DISMISSING THE DEPARTMENT AL APPEALS, COPY OF WHICH WERE PLACED ON RECORD. THE TRIBUNAL IN ITS OR DER DATED 22-02-2011 ITA NO.228/AHD/2010 (AY 2006-07): DCIT, AHMEDABAD V S M/S. L. G. CHAUDHARY 3 IN THE CASE OF M/S. SARASWATI CONSTRUCTION CO. (SUP RA) IN PARA 5 PAGE 6 HAS HELD AS UNDER: 5. IN THE PRESENT CASE BEFORE US, THE FACTS ARE UN DISPUTED THAT THE ASSESSEE HAD DEDUCTED TDS FROM GROSS CONTACT PA YMENT TO CATERING CONTRACTOR BUT THE SAME WAS NOT DEPOSITED INTO GOVT. EXCHEQUER BEFORE EXPIRY OF TIME PRESCRIBED UNDER SU B-SECTION 1 OF SECTION 2000 OF THE ACT IN VIEW OF SECTION 40(A) (I A) OF THE ACT. WE FIND THAT THIS IS NOT ALLOWABLE AS DEDUCTION WHILE COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFIT & GAINS OF BUSINESS OR PROFESSION FOR THE YEAR. WE FIND FROM THE ORDERS O F THE LOWER AUTHORITIES THAT THERE IS NO ALLEGATION THAT THE PA YMENT OF CATERING EXPENSES ON WHICH TDS IS DEDUCTED BUT NOT PAID TO G OVT. EXCHEQUER IS NON-GENUINE OR BOGUS. IT IS ALSO A FAC T THAT THE LOWER AUTHORITIES HAVE NOT BROUGHT ANYTHING OR NOT DISPUT ED THAT THE PAYMENT IS EXCESSIVE OR UNREASONABLE. THE DISALLOWA NCE IS SIMPLY MADE EITHER FOR NON-DEDUCTION OF TDS IN VIEW OF PRO VISIONS OF SECTION 40(A) (IA) OF THE ACT OR NON-PAYMENT OF TDS DEDUCTED TO THE GOVT. EXCHEQUER. IN VIEW OF THE ABOVE DISCUSSIO N, THAT THE LEGAL FICTION CRATED BY SECTION 40(A) (IA) WILL NOT APPLY TO THE PROVISIONS OF SECTION 271 (1) ( C ) OF THE ACT, THE DISALLOWANCE MADE SIMPLY BY INVOKING THE PROVISIONS OF SECTION 40(A) (IA) OF TH E ACT WILL NOT ATTRACT PENALTY FOR FURNISHING OF INACCURATE PARTIC ULARS OF INCOME BECAUSE THERE IS NO INACCURATE PARTICULARS OF INCOM E IN THE RETURN. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) DELETIN G THE PENALTY AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. THE LEARNED AR FURTHER PLEADED THAT THE ASSESSEE IS NOT LIABLE FOR PENALTY AS IS HELD BY THE LEARNED CIT(A) AND THE SA ME BE UPHELD BY THE TRIBUNAL. 4.1 ON PERUSAL OF THE RECORDS, WE FIND THAT THE ADD ITION ON ACCOUNT OF DISALLOWANCE OF RS.5,85,87,521/- WAS MADE BY THE AO DUE TO NON-PAYMENT OF TDS IN TIME WHICH IS TECHNICAL IN NATURE. HENCE, THE SAME DOES NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF IN ACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. FURTHER, THE ADDITION OF RS.1,03,222/- ON ACCOUNT OF DISALLOWANCE OF EXPENSES WAS MADE ON EST IMATE BASIS. IT IS ALSO SETTLED LAW THAT ADDITION MADE ON ESTIMATE BAS IS DOES NOT ATTRACT ITA NO.228/AHD/2010 (AY 2006-07): DCIT, AHMEDABAD V S M/S. L. G. CHAUDHARY 4 PENALTY. THE LEARNED CIT(A) ON PROPER APPRECIATION OF FACTS HAS RIGHTLY DELETED THE PENALTY MADE BY THE AO ON BOTH THE ABOV E ISSUES. THE LEARNED DR ALSO HAS NOT PRODUCED ANY MATERIAL ON RE CORD TO CONTROVERT THE FINDINGS OF THE LEARNED CIT(A). 4.2 THE SAME ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT AHMEDABAD B BENCH VIDE ORDER DATED 13 -03-2012 IN ITA NO.1041/AHD/2010 FOR AY 2006-07 IN THE CASE OF M/S. LUCKY STAR INTERNATIONAL BY DISMISSING THE DEPARTMENTAL. THE F INDINGS OF THE TRIBUNAL IN PARA 6 TO 8 ARE REPRODUCED AS UNDER: 6. WE HAVE HEARD THE LEARNED BOTH THE PARTIES, PE RUSED THE ORDERS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIALS ON RECORD. DURING THE COURSE OF HEARING OF THE APPEAL THE LEARNED DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. ON THE OTHER HAND, THE LEARNED AR REFERRING TO PARA 3 AND 4 OF THE PEN ALTY ORDER, SUBMITTED THAT ALL THE ADDITIONS IN RESPECT OF COMM ISSION EXPENSES OF RS.10,46,163/-, CLEARING AND FORWARDING EXPENSES OF RS.2,01,037/- AND FEES AND LEGAL EXPENSES OF RS.1,1 0,200/- (TOTALLING TO RS.13,57,400/-) HAVE BEEN DISALLOWED HOLDING THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 40( A) (IA) OF THE IT ACT AND THAT THE AO HAS LEVIED PENALTY ON THE SAID AMOUNT BEING FULLY SATISFIED THAT THE ASSESSEE HAS FURNISHED INA CCURATE PARTICULARS OF ITS INCOME TO THE EXTENT OF RS.13,57 ,400/- AND TREATING IT TO BE A FIT CASE FOR LEVYING PENALTY. T HE ASSESSEE ALSO SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCS PVT. LTD., 2010-TIOL-21-SC-II IN SLP(C) NO.27161 OF 2008 DATED 17 TH MARCH, 2010 (PB-4) WHEREIN IT HAS BEEN HELD AS UNDE R: INCOME TAX 271 (1) ( C ) MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM W AS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, ATTRACT PENALTY UNDER SECTION 271(1) (C): BY ANY STRETCH OF IMAGINATION, MAKING AN INCOR RECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCU RATE PARTICULARS. 6.1 THE ASSESSEE FURTHER REFERRED TO THE DECISION O F ITAT DELHI A BENCH IN THE CASE OF DCIT VS ASIAN HOTELS LTD., 2011-TIOL- ITA NO.228/AHD/2010 (AY 2006-07): DCIT, AHMEDABAD V S M/S. L. G. CHAUDHARY 5 795-ITAT-DEL (ITA NO.3820/DEL/2010 DATED JANUARY,7, 2011 (PB- 1) WHEREIN IT HAS BEEN HELD AS UNDER: INCOME TAX SECTIONS 40(A) (IA), 271 (1) (C) WHE THER PENALTY IS LEVIABLE IN A CASE WHERE THE SUBSTANTIAL RETURNED INCOME PROVES THE BONAFIDE OF ASSESSEE VIS -- VIS DISALLOWANCE OF 40(A) (IA). ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 22 ND DECEMBER 2003 DECLARING AN INCOME OF RS.6.32 CRORES . AN ASSESSMENT WAS PASSED U/S 143(3) ON 30 TH MARCH 2006 WHEREBY TOTAL INCOME OF THE ASSESSEE HAS BEEN DETERMINED AT RS.11.53CRORES. DURING THE COURSE OF ASSESSMENT PROCEEDING LD. AO FOUND THAT THE ASSESSE E HAD MADE THE PROVISIONS IN RESPECT OF CERTAIN FOREI GN PAYMENTS AND CLAIMED THESE PROVISIONS WITHOUT DEDUCTING CORRESPONDING TDS. AO DISALLOWED THIS CLA IM OF ASSESSEE AND LEVIED PENALTY UNDER SECTION 271(1) (C )RELYING UPON THE DECISION OF RELIANCE (2010-TIOL-2 1-SC- II) CIT(A) DELETED THE PENALTY MATTER REACHED TO THE ITAT. AFTER HEARING THE PARTIES THE ITAT HELD AS UNDER, ++ THERE IS NO DOUBT THAT THE CLAIM MADE BY THE ASSESSEE IS IN RESPECT OF BUSINESS EXPENSES. HAD TH E ASSESSEE DEDUCTED THE TDS AND PAID IT TO THE GOVT. AMOUNT THEN ITS DEDUCTION COULD BE ALLOWED. ACCORDI NG TO THE ASSESSEE IT HAS PAID THE TAX ALSO IN THE NEX T YEAR FOR THE SUM OF RS.7,07,294/- AND EVEN THEREAFTER DEDUCTION WAS NOT GRANTED TO IT. LD. FIRST APPELLAT E AUTHORITY HAS ACCEPTED THE PLEA OF ASSESSEE THAT IT WAS A BONAFIDE ERROR; ++ TAKING INTO CONSIDERATION THE OVERALL FACTS AND CIRCUMSTANCES PARTICULARLY THE AMOUNT OF DISALLOWAN CE VIS A VIS THE RETURNED INCOME, WE ARE OF THE VIEW T HAT IT IS A BONAFIDE LAPSE AT THE END OF THE ASSESSEE. THERE IS NO DELIBERATE ATTEMPT TO CONCEAL THE PARTICULARS OF IN COME. LD. CIT(A) HAS RIGHTLY APPRECIATED THE FACTS AND CIRCUMSTANCES WE DO NOT SEE ANY REASON TO INTERFERE IN HIS ORDER. ITA NO.228/AHD/2010 (AY 2006-07): DCIT, AHMEDABAD V S M/S. L. G. CHAUDHARY 6 THE ASSESSEE FURTHER SUBMITTED THAT THE FACTS IN TH E ABOVE CASE ARE IDENTICAL TO THAT OF THE PRESENT CASE OF THE AS SESSEE AND THE ISSUE IS COVERED BY THE ABOVE DECISION. 6.2 THE ASSESSEE FURTHER SUBMITTED THAT THE ISSUE I S ALSO COVERED BY THE DECISION OF ITAT HYDERABAD A BENCH DATED 17 TH JUME, 2010 IN THE CASE OF ACIT VS M/S. SEAWAYS SHIP PING LTD. IN ITA NO.80/H/2011 FOR AY 2005-06 (PB 9 TO 11) WHERE IN ALSO IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE VIDE PARA 5 OF ITS ORDER BY HOLDING AS UNDER: AT THE TIME OF HEARING ON 16.6.2011, NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HEARD THE DEPARTMENTAL REPRESENTATIVE. IN THIS CASE, PENALTY IS LEVIED FOR DISALLOWANCE OF EXPENDITURE U/S 40(A) (IA) OF THE I NCOME TAX ACT. NON DEDUCTION OF TDS BY THE ASSESSEE WAS RESULTED IN DISALLOWANCE OF EXPENDITURE U/S 40(A) ( IA), THAT ITSELF CANNOT BE CONSTRUED AS FURNISHING INACC URATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THE ASSESSEE HAS FAILED TO DEDUCT TDS WHICH RESULTED IN DISALLOWANCE OF EXPENDITURE. IN OUR OPINION, THE MI STAKE COMMITTED BY THE ASSESSEE WAS COMPENSATED BY DISALLOWING THE EXPENDITURE. FURTHER, THE REVENUE CANNOT PENALISE THE ASSESSEE BY LEVYING PENALTY U/S 271 (1) (C) OF THE ACT. IN ORDER TO LEVY PENALTY U/S 27 1 (1) (C) OF THE ACT, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF INCOME OF THE ASSESSEE OR THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF ITS INCOME. PRE SENT IS NOT THE CASE OF CONCEALMENT OF INCOME OR IT IS NOT THE CASE OF REVENUE THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE DEPARTMENT HA S NOT FOUND OUT THAT THE ASSESSEE HAS FURNISHED ANY FACTUAL INCORRECT INFORMATION AND THE ASSESSEE IS N OT GUILTY OF FURNISHING OF INACCURATE PARTICULARS OF I NCOME. IN OUR OPINION, THE CONDITIONS LAID DOWN IN SECTION 271(1) (C) OF THE ACT IS NOT COMPLIED WITH. BEING SO, LEVY OF PENALTY IS NOT JUSTIFIED MERELY BECAUSE THE ASSESSE E HAS CLAIMED CERTAIN EXPENDITURE THAT EXPENDITURE IS NOT ELIGIBLE IN VIEW OF THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT AND FOR THAT REASON, EXPENDITURE IS DISALLO WED. PENALTY CANNOT BE LEVIED FOR MERE MAKING OF A CLAIM OF EXPENDITURE WHICH IS NOT SUSTAINABLE AND DELETION O F PENALTY BY THE LEARNED CIT(A) IS JUSTIFIED. WE PLAC E ITA NO.228/AHD/2010 (AY 2006-07): DCIT, AHMEDABAD V S M/S. L. G. CHAUDHARY 7 RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. (322 ITR 158 (SC). ACCORDINGLY THE GROUND RAISED BY THE REVENUE HOLDS NO MERIT. 6.3 THE LEARNED DR IN HIS REJOINDER HAS NOT PRODUCE D ANY MATERIAL TO CONTROVERT THE AFORESAID SUBMISSIONS OF THE ASSESSEE. 7. IN VIEW OF ABOVE DISCUSSIONS AND THE DECISIONS C ITED BY THE ASSESSEE, WE FIND FORCE IN THE SUBMISSIONS OF THE A SSESSEE. WE ARE OF THE VIEW THAT THE LEARNED CIT(A) ON PROPER A PPRECIATION OF THE FACTS OF THE CASE, CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE CITATIONS REFERRED TO BY THE ASSESSEE BEFOR E HIM, HAS RIGHTLY DELETED THE PENALTY AND WE FIND NO JUSTIFIC ATION TO INTERFERE IN THE ORDER OF THE LEARNED CIT(A) DELETING THE PENALT Y IN THE MATTER IN THE ABSENCE OF ANY MATERIAL PRODUCED BY THE LEARNED DR TO CONTROVERT THE SAME. WE CONFIRM HIS FINDINGS. THERE IS NO MERIT IN THE GROUND OF APPEAL OF THE REVENUE. THE SAME IS AC CORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 4.3 CONSIDERING THE FACTS OF THE CASE AND IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIND ANY JUSTIFICATION TO IN TERFERE WITH THE FINDINGS OF THE LEARNED CIT(A). WE CONFIRM HIS FINDINGS. THE RE IS NO MERIT IN THIS DEPARTMENTAL APPEAL. ACCORDINGLY, WE DISMISS THE AP PEAL OF THE REVENUE. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF MARCH, 2012 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - ITA NO.228/AHD/2010 (AY 2006-07): DCIT, AHMEDABAD V S M/S. L. G. CHAUDHARY 8 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 DY. REGISTRAR, ITAT, AHMEDABAD