M/s. Chemfilt, Anand V. The ACIT, Cent.Circle-I, Baroda

ITA 2341/AHD/2009

• Counselvise Citation: 234120514 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-10-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 03-08-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR K SHYAM PRASAD
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Assessment record
• Section: 80HHC

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , . ! !,'# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A. NO.2341/AHD/2009 ( ! & ! & ! & ! & / / / / ASSESSMENT YEAR : 2002-03) M/S.CHEMFILT 1304/A, GIDC AT V U NAGAR ANAND ! ! ! ! / VS. THE ASST.CIT CENTRAL CIRCLE-1 BARODA ' '# ./() ./ PAN/GIR NO. : AABF 5751 D ( '* / // / APPELLANT ) .. ( +,'*/ RESPONDENT ) '* - '/ APPELLANT BY : SHRI S.N.SOPARKAR, A.R. +,'* . - ' / RESPONDENT BY : DR.K.SHYAM PRASAD, SR.D.R. !/ . 0#/ // / DATE OF HEARING : 11/10/2011 1 & . 0# / DATE OF PRONOUNCEMENT : 14.10.11 '2/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-IV, AHMEDABA D DATED 20/01/2009 AND THE ONLY GROUND IS IN RESPECT OF CONFIRMATION OF PENALTY OF RS.33,56,413/- LEVIED U/S.271(1)(C) OF THE I.T.ACT. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 11. 03.2005 AND THE PENALTY ITA NO. 2341/AHD/2009 MS.CHEMFILT VS. ACIT ASST.YEAR - 2002-03 - 2 - ORDER U/S.271(1)(C) OF THE I.T.ACT DATED 31/03/2008 WERE THAT THE ASSESSEE-FIRM WAS SUBJECTED TO CONCEALMENT PENALTY LEVIED IN RESPECT OF FOLLOWING TWO ADDITIONS:- 1. ADDITION ON EXPENSES CLAIMED OUT OF EXPORT SALES: THE ASSESSEE HAD CLAIMED EXPENSES TO THE TUNE OF RS.96,37,692/- OUT OF ITS TOTAL EXPORT SALES ON THE GROUND THAT THIS AMOUNT HAD BEEN PAID TO M/S.SDEC FOR REND ERING ENGINEERING WORK TO ASSESSEES CLIENT M/S.MODECOR. HOWEVER, DETAILED INVESTIGATION BY THE AO REVEALED THAT NO TECHNICAL SERVICES HAD BEEN RENDERED BY M/S.SDEC AN D THAT THE PAYMENT OF RS.96,37,692/- WAS MERELY AN ATTEMPT BY THE ASSESSEE TO REDUCE ITS TAXABLE INCOME BY CLAIMING F ALSE EXPENSES. ACCORDINGLY, THE EXPENDITURE WAS ADDED B ACK TO THE INCOME OF THE ASSESSEE. 2. ADDITION ON EXCESS DEDUCTION CLAIMED U/S.80HHC IN HIS RETURN, THE ASSESSEE HAD CLAIMED DEDUCTION U/S.80HHC OF RS.39,77,265/-. HOWEVER, IN COURSE OF ASSESSMENT PROCEEDINGS THE AO RECALCULATED AN INCR EASE THE TOTAL TURNOVER, THEREBY, REDUCING THE DEDUCTION TO RS.32,49,470/-. THE ASSESSEE AGREED WITH THE CONTE NTION OF THE AO AND FILED A REVISED STATEMENT OF TOTAL INCO ME AND A REVISED CLAIM OF DEDUCTION. THIS GROUND WAS NOT AP PEALED AGAINST BEFORE LD. LEARNED CIT(APPEALS). 3. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES IT WAS NOTICED THAT AS FAR AS THE LEVY OF PENALTY ON DISALLOWANCE OF EX PENSES FOR EXPORT SALES IS CONCERNED, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS PLACED BEFORE US AN ORDER OF THE ITAT A BENCH AHM EDABAD BEARING ITA NOS.184 & 322/AHD/2006 (FOR A.Y. 2002-03) PASSE D IN THE CASE OF ITA NO. 2341/AHD/2009 MS.CHEMFILT VS. ACIT ASST.YEAR - 2002-03 - 3 - THE ASSESSEE TITLED AS M/S.CHEMFILT VS. ACIT, DAT ED 12/09/2008, WHEREIN VIDE PARAGRAPH NO.14, IT WAS FINALLY HELD A S UNDER:- 14. FROM THE ABOVE FACTS IT IS CLEAR THAT THE ASSE SSEE APPOINTED SDEC, AN ENGINEERING COMPANY FOR THE EXECUTION OF CONTRACT OF MEDCORE IN SAUDI ARABIA. THE PAYMENT MADE TO SDEC WAS APPROVED BY THE FOREIGN EXCHANGE DEPARTMENT OF RBI, AHMEDABAD. FROM THE PAIN READING OF THE CONTRACT, IT IS CLEAR THAT THE ASSESSEE-COMPANY WAS TO CARRY OUT THE DESIGN/ENGINEERING/FABRICATION AND SUPPLY/COMMISSIO NING WORK FOR MEDCORE. . IN THE PRESENT CASE ALSO THE LOWE R AUTHORITIES COULD NOT BRING ANYTHING ADVERSE ON THE EXPENDITURE INCURRED FOR SUB-CONTRACTOR I.E., PAYMENT MADE TO S DEC. THE CIT(A) HAS ALSO MADE DISALLOWANCE JUST ON THE BASIS OF ESTIMATES AND ON CONJUNCTURE AND SURMISES. IN VIEW OF THE AB OVE DISCUSSION, FACTS AND CIRCUMSTANCES OF THIS CASE, WE ARE OF THE VIEW THAT THE ENTIRE EXPENDITURE INCURRED IS FOR THE PURPOSES OF BUSINESS, HENCE, IS ALLOWABLE. WE REVERSE THE ORDERS OF THE LOWER A UTHORITIES. ON THIS ISSUE, THE APPEAL OF THE ASSESSEE IS ALLOWED A ND THAT OF THE REVENUE IS DISMISSED. 4. SINCE THE RESPECTED CO-ORDINATE BENCH HAS ALREAD Y ALLOWED THE CLAIM IN ITS TOTALITY, THEREFORE, IN CONSEQUENCE TH EREOF NO CONCEALMENT PENALTY SHALL SURVIVE. ACCORDINGLY, PART OF THE CON CEALMENT PENALTY PERTAINING TO THE AFORESAID ADDITION IS HEREBY DELE TED. 4.1. THE OTHER REASON FOR LEVY OF PENALTY WAS STATE D TO BE EXCESS CLAIM OF DEDUCTION U/S.80HHC OF THE I.T.ACT. IN THIS REGARD, LD.AR MR. S.N.SOPARKAR HAS DEMONSTRATED THAT AS PER THE ORIGI NAL INCOME-TAX RETURN ASSESSEE HAS CLAIMED A DEDUCTION U/S.80HHC OF THE I .T.ACT OF RS.39,77,265/- AS PER THE FOLLOWING CALCULATION:- ITA NO. 2341/AHD/2009 MS.CHEMFILT VS. ACIT ASST.YEAR - 2002-03 - 4 - (III) A/M. OF DEDUCTION : 93,30,729 X 3,93,04,213 -------------------------------- 6,45,45,828 = 56,81,807 @ 70% RS. 39,77,265 4.2 LATER ON, THE SAID CALCULATION WAS AMENDED AND AS PER THE REVISED STATEMENT, THE CLAIM OF THE 80HHC WAS REDUCED AS PE R THE FOLLOWING CALCULATION:- BUSINESS INCOME : RS. 93,30,729 X 3,93,04,21 3 ------------------------------- 7,90,02,366 : 46,42,100/- @ 70 % - RS.32,49,470 5. LD.AR HAS EXPLAINED THAT AS PER THE EXPORT SALES THE GROSS AMOUNT WAS RS.5,55,93,968/- WHICH WAS INCLUSIVE OF FOREIGN CONSULTANCY AND COMMISSION CHARGES OF RS.1,44,56,538/-. INSTEAD O F ADOPTING THE GROSS AMOUNT OF EXPORT SALES, THE ASSESSEE HAS ADOPTED ON LY THE NET AMOUNT OF EXPORT SALES OF RS.4,11,37,430/-. LD.AR HAS FURTHE R EXPLAINED THAT IN THE DENOMINATOR THE TOTAL SALES THEREFORE WERE TAKEN AT RS.6,45,45 ,828/- HAVING TWO COMPONENTS; I.E. EXPORT SALES OF RS.4,1 1,37,430/- PLUS INDIGENOUS DOMESTIC SALES OF RS.2,48,87,298/-. WHE N THE SAID DEFECT CAME TO THE NOTICE OF THE ASSESSEE, THEN THE FIGURE OF TOTAL SALES WAS REVISED TO RS.7,90,02,366/-. THE LD.AR HAS POINTED OUT THAT THOUGH IN THE DENOMINATOR THE COMPONENT OF FOREIGN CONSULTANCY OF RS.1.44 CRORES WERE ADDED CORRESPONDING ADDITION WAS NOT MADE IN T HE NUMERATOR OF EXPORT SALES OF RS.3.93 CRORES. THE LEARNED AUTHOR ISED REPRESENTATIVE ITA NO. 2341/AHD/2009 MS.CHEMFILT VS. ACIT ASST.YEAR - 2002-03 - 5 - OF THE ASSESSEE HAS VEHEMENTLY CONTESTED THAT FROM THE ABOVE CALCULATION IT IS EVIDENT THAT THE CORRESPONDING ADDITION IN TH E FIGURE OF THE NUMERATOR WAS NOT MADE. HAD THAT ALSO BEEN DONE, THEN THE C LAIM OF DEDUCTION U/S.89HHC WOULD NOT HAVE REDUCED, INSTEAD IT WOULD HAVE ENHANCED. FINALLY, HE HAS VEHEMENTLY CONTESTED THAT ALL THE F ACTS AND FIGURES WERE VERY MUCH IN THE KNOWLEDGE OF THE REVENUE DEPARTMEN T AND DULY SHOWN IN THE RECORDS, HENCE THERE WAS NO QUESTION OF CONC EALMENT OF FACTS AT ALL. MERE CHANGE IN THE CALCULATION OF AN EXEMPTION FIGU RE SHOULD NOT BE A REASON FOR LEVY OF CONCEALMENT PENALTY. IN SUPPOR T, CASE LAWS CITED IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. REPORTED AT [2010] 322 ITR 158 (SC). 6. FROM THE SIDE OF THE REVENUE, LD.DR, DR.K.SHYAM PRASAD HAS PLACED RELIANCE ON THE ORDERS OF THE REVENUE AUTHOR ITIES. 7. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES AND CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE AS DI SCUSSED HEREINABOVE, SINCE THE BASIS OF REVISION OF THE CALCULATION OF D EDUCTION U/S.80HHC OF THE I.T.ACT WAS VERY MUCH BEFORE THE ASSESSING OFFI CER AND THAT REVISION WAS BASED UPON THE FACTS AND THE FIGURES ALREADY AV AILABLE ON ASSESSMENT RECORD, THEREFORE, THERE WAS NO OCCASION TO ALLEGE THAT THERE WAS CONCEALMENT OF FACTS ON THE PART OF THE ASSESSEE. MOREOVER, THE ASSESSEE HAS ALSO DEMONSTRATED THE REASON FOR THE SAID REVIS ION WHICH APPEARED TO BE LOGICAL, HENCE, EVEN OTHERWISE THIS IS NOT THE C ASE OF FURNISHING OF INACCURATE PARTICULARS SO AS TO LEVY CONCEALMENT PE NALTY. IN THE RESULT, FOLLOWING THE DECISION OF HONBLE SUPREME COURT DEC ISION IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. REPORTED AT [2010] 322 ITR 158 ITA NO. 2341/AHD/2009 MS.CHEMFILT VS. ACIT ASST.YEAR - 2002-03 - 6 - (SC), WE HEREBY HOLD THAT THE IMPUGNED PENALTY WAS WRONGLY LEVIED. WE HEREBY DIRECT TO DELETE THE PENALTY. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. SD/- SD/- (A. MOHAN ALANKAMONY) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 14/ 10 /2011 30..!, .!../ T.C. NAIR, SR. PS '2 . +4 5'4& '2 . +4 5'4& '2 . +4 5'4& '2 . +4 5'4&/ COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-I, BARODA 5. 49: +! , , / DR, ITAT, AHMEDABAD 6. :;