The DCIT, Circle-4, Ahmedabad V. Gujarat Ambuja Proteins Limited, Ahmedabad

ITA 2398/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0184 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-10-2016
• Assessment Year: 1992-1993
• Appeal Filed On: 04-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI N. K. BILLAYA, A.M. AND SHRI MAHAVIR PRASAD, JM ITA NO. 2398/AHD/2013 ASST. YEAR: 1992-93 DY. COMMISSIONER OF INCOME- TAX, CIRCLE-4, AHMEDABAD. VS. GUJARAT AMBUJA PROTEINS LTD., AMBUJA HOUSE, OPP. MEMNAGAR FIRE STATION, NAVRANGPURA, AHMEDABAD. APPELLANT RESPONDENT PAN AAACG 3980A APPELLANT BY SHRI MUDIT NAGPAL, SR.DR RESPONDENT BY SHRI TUSHAR P. HEMANI, AR DATE OF HEARING: 27.10.2016 DATE OF PRONOUNCEMENT: 27/10/2016 O R D E R PER N. K. BILLAYA, ACCOUNTANT MEMBER . WITH THIS APPEAL REVENUE HAS CHALLENGED THE CORREC TNESS OF THE ORDER OF CIT(A)-VIII, AHMEDABAD DATED 16.07.201 3 PERTAINING TO A.Y.1992-93. 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE CI T(A) ERRED IN DELETING PENALTY OF RS.37,50,840/- LEVIED U/S 271(1 )(C) OF THE ACT. 3. THE ROOTS FOR THE LEVY OF PENALTY LIE IN THE ASS ESSMENT ORDER MADE U/S 143(3) OF THE ACT. WHILE SCRUTINIZING THE RETURN OF INCOME FOR ITA NO. 2398/AHD/2016 ASST. YEAR 1992-93 2 THE YEAR UNDER CONSIDERATION THE AO FOUND THAT THE ASSESSEE HAS CLAIMED GODOWN RENT EXPENSES AT RS.72.48 LACS PAID TO M/S COASTAL ROADWAYS LTD.(CRL). ON FURTHER SCRUTINY THE AO NOTI CED THAT THE SAID CRL WAS NOT THE OWNER OF THE GODOWN. THE AO WAS OF THE FIRM BELIEF THAT A PRUDENT BUSINESSMAN WOULD NEVER ENTER INTO A N AGREEMENT FOR A GODOWN WHICH WAS NEVER OWNED BY THE LESSOR. THE R ENT OF RS.72.48 LACS WAS DISALLOWED BY THE AO. 4. THE FIRST APPELLATE AUTHORITY DELETED THE ADDITI ON AND ON REVENUES APPEAL THE TRIBUNAL REVERSED THE ORDER OF CIT(A) AND SUSTAINED THE ADDITION MADE BY THE AO. HON. HIGH CO URT OF GUJARAT DISMISSED THE PETITION OF THE ASSESSEE ON THE GROUN D THAT THERE WAS NO QUESTION OF LAW INVOLVED. 5. TAKING A LEAF OUT OF THE JUDICIAL DECISION IN TH E QUANTUM ASSESSMENT PROCEEDINGS, THE AO INITIATED PENALTY PR OCEEDINGS. 6. DURING THE COURSE OF PENALTY PROCEEDINGS THE AO ASKED THE ASSESSEE TO SHOW CAUSE WHY PENALTY SHOULD NOT BE LE VIED U/S 271(1)(C) OF THE ACT ON THE ALLEGED CLAIM OF GODOWN RENT EXPENSES OF RS.72.48 LACS. ASSESSEE STRONGLY OBJECTED TO THE IN ITIATION OF PENAL PROCEEDINGS CLAIMING THAT THE GODOWN RENT EXPENSES WERE DEBITED IN THE PROFIT AND LOSS ACCOUNT. THE AGREEMENTS WERE MA DE AVAILABLE ALONG WITH CORRESPONDENCE WITH CRL AND THE PAYMENT MADE TO CRL BY ACCOUNT PAYEE CHEQUE DULY ACKNOWLEDGE BY CRL. IT WAS STRONGLY CONTENDED THAT MERELY BECAUSE A LEGITIMATE CLAIM OF THE ASSESSEE ITA NO. 2398/AHD/2016 ASST. YEAR 1992-93 3 WAS NOT SUSTAINABLE IN THE QUANTUM ASSESSMENT PROCE EDINGS PENALTY CANNOT BE LEVIED U/S 271(1)(C) OF THE ACT. 7. THE DETAILED SUBMISSIONS OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE AO WHO PROCEEDED BY LEVYING PENALTY OF RS. 37,50,840/-. 8. ASSESSEE CARRIED THE MATTER BEFORE CIT(A) AND RE ITERATED WHAT HAS BEEN STATED BEFORE THE AO. AFTER CONSIDERING TH E SUBMISSIONS CIT(A) HELD AS UNDER :- I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER AND THE SUBMISSION MADE BY THE APPELLANT DURING THE COURSE OF APPELLATE PRO CEEDINGS. THE A.O HAS IMPOSED PENALTY ON THE ALLEGED DISALLOWANCE OF GODO WN RENT EXPENSES. THE FACTS SHOW THAT INITIALLY THE DISALLOWANCE MADE BY THE A- O WAS DELETED BY CIT(A). THE MATTER FURTHER TRAVELLED TO ITAT WHERE THE DISALLOW ANCE WAS SUSTAINED. THE HONOURABLE HIGH COURT OF GUJARAT HAS ALSO DISMISSED THE PETITION OF THE APPELLANT ON THE GROUND THAT THERE WAS NO QUESTION OF LAW INV OLVED. IT IS NOTED FROM THE ORDER OF THE GUJARAT HIGH COURT THAT IT IS STATED T HAT THE ITAT NEVER QUESTIONED THE PRUDENCE OF EXPENDITURE BUT DISCUSSED THE GENUI NENESS OF EXPENDITURE. IT INDICATES THAT MORE THAN ONE VIEW WAS POSSIBLE AS R EGARDS TO THE ALLOWANCE OR DISALLOWANCE OF GODOWN RENT. IN ORDER TO LEVY PENAL TY UNDER SECTION 271 (1)(C) UNDER SUCH CIRCUMSTANCES, ONE HAS TO LOOK AT EXPLAN ATION 1 TO THE SAID SECTION. UNDER THE SCHEME OF THE ACT, THE SAID EXPLANATION 1 GETS ATTRACTED ONLY WHEN THE ASSESSEE FAILS TO SUBSTANTIATE ITS CLAIM OF EXPENDI TURE OR THE EXPLANATION: GIVEN BY THE ASSESSEE IS FOUND TO BE FALSE. HOWEVER, WHEN THE EXPLANATION GIVEN BY THE APPELLANT IS SIMPLY NOT ACCEPTED BY THE A.O THE SAME CANNOT BE MADE A GROUND FOR LEVYING THE PENALTY. IN THE FACTS OF THE PRESENT CASE, IT IS A CASE WHERE THE EXPLANATION OFFERED BY THE APPELLANT WAS NOT AC CEPTED BY THE A.O. HOWEVER, IT IS NOTED THAT THE SAME HAS NOT BEEN FOUND TO BE FALSE BY ANY OF THE AUTHORITIES. ON THE CONTRARY WHILE MAKING THE DISALLOWANCE OF EX PENDITURE THE A.O IN HIS ORDER IS STATED THAT THE PAYMENT WAS MADE TO M/S CO ASTAL ROADWAYS LTD WHICH WAS ACKNOWLEDGED AND CONFIRMED BY THE REGIONAL MANA GER OF THE COMPANY IN THE . STATEMENT UNDER SECTION 131 OF THE ACT, IT IS NOTED FROM ASSESSMENT ORDER THAT PAYMENT WAS MADE IN SUBSEQUENT YEARS. THUS IN THE PRESENT CASE THE APPELLANT HAD GIVEN AN EXPLANATION WHICH WAS DISBEL IEVED BY THE AO BUT THE EXPLANATION GIVEN HAS NOT BEEN FOUND TO BE FALSE. ITA NO. 2398/AHD/2016 ASST. YEAR 1992-93 4 9. AGGRIEVED BY THIS THE REVENUE IS BEFORE US. THE DR STRONGLY RELIED UPON THE FINDING OF THE AO PER CONTRA THE CO UNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE CLAIM OF GODOWN RENT EXPENSES WERE NOT ALLOWED IN THE QUANTUM PROCE EDINGS. IT IS ALSO AN UNDISPUTED FACT THAT THE GODOWN RENT EXPENS ES WERE PROPERLY DEBITED IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSE E HAS GIVEN ALL THE PARTICULARS REGARDING THE CLAIM OF GODOWN RENT EXPE NSES IN THE RETURN OF INCOME AS WELL AS IN THE ACCOUNTS PRESENTED BEFO RE THE AO. IN OUR UNDERSTANDING OF THE FACTS THE CLAIM OF THE ASSESSE E WAS NOT CONSIDERED TO BE ADMISSIBLE. EXPLANATION-1 TO SECTI ON 271(1)(C) CLEARLY STATES THAT PENALTY IS ATTRACTED ONLY WHEN THE ASSESSEE FAILS TO SUBSTANTIATE ITS CLAIM OF EXPENDITURE OR EXPLANATIO N GIVEN BY THE ASSESSEE IS FOUND TO BE FALSE. HOWEVER, WE FIND THA T IN THE CASE IN HAND THE EXPLANATION GIVEN BY THE ASSESSEE WAS SIMP LY NOT ACCEPTED BY THE AO AND THE SAME COULD NOT BE A GROUND FOR LE VYING THE PENALTY. A PERUSAL OF THE QUANTUM PROCEEDINGS SHOWS THAT THE AO MADE THE DISALLOWANCE AND THE FIRST APPELLATE AUTHO RITY DELETED THE ADDITION. HOWEVER, THE SECOND APPELLATE AUTHORITY R EVERSED THE FINDINGS OF THE FAA AND SUSTAINED THE ADDITION. THI S IN ITSELF SHOWS THAT THE TWO APPELLATE AUTHORITIES ON SAME SET OF F ACTS TOOK TWO DIFFERENT VIEWS. IN OUR UNDERSTANDING OF THE LAW WH EN TWO VIEWS ARE POSSIBLE PENALTY U/S 271(1)(C) CANNOT BE LEVIED. HO N. SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS 322 ITR 158( SC) HAS HELD THAT WHERE THERE IS NO FINDING THAT ANY DETAILS SUP PLIED BY THE ASSESSEE IN THE RETURN OF INCOME FOUND TO BE INCORR ECT OR ERRONEOUS ITA NO. 2398/AHD/2016 ASST. YEAR 1992-93 5 OR FALSE THERE WAS NO QUESTION OF INVOKING THE PENA L PROVISIONS U/S 271(1)(C) OF THE ACT. 10. DRAWING SUPPORT FROM THE RATIO LAID DOWN BY HON . SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA ) WE DECLINE TO INTERFERE. 11. IN THE RESULT APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 OCTOBER, 2016 SD/- SD/- (MAHAVIR PRASAD) JUDICIAL MEMBER (N. K. BILLAYA) ACCOUNTANT MEMBER DATED 27/10/2016 MAHATA/- 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 ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 2398/AHD/2016 ASST. YEAR 1992-93 6 1. DATE OF DICTATION: 27/10/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 27/10/2016 OTHER MEMBER: 3. DATE ON WHICH APPROV DRAFT COMES TO THE SR. P. S ./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 27/10/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: