TURBOMACH (INDIA) P. LTD, MUMBAI V. ITO 8(3)(3), MUMBAI

ITA 2402/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9371 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 08-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 15-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Keywords: Capital asset; Revenue expenditure; Capital expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . . , , ! '#$% , & ' BEFORE S/SHRI DINESH KUMAR AGARW AL,JM AND N.K. BILLAIYA, AM ./I.T.A. NO.2402/MUM/2009 ( ( ( ( ( / ASSESSMENT YEAR: 2005-06 M/S. TURBOMACH (INDIA) PVT. LTD., 5&6, PAPA INDUSTRIAL ESTATE, SUREN ROAD, ANDHERI (E), MUMBAI-400 078 / VS. THE ITO 8(3)(3), AAYAKAR BHAVAN, MUMBAI-400 020 ) & ./ *+ ./PAN/GIR NO. : AABCT 7422R ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY: SHRI PRV RAGHAVAN -.), 0 / / RESPONDENT BY : SHRI V. KRISHNAMOORTHY 0 1& / DATE OF HEARING : 08.11.2012 23( 0 1& / DATE OF PRONOUNCEMENT : 21.11.2012 4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-XXIX, MUMBAI DT. 22.01.2009 PERTAINING TO A. Y.2005-06. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS. 1,35,823/- LEVIED U/S . 271(1)(C) OF THE ACT. 3. THE ROOT FOR THE LEVY OF PENALTY IS FOUND IN THE ASSESSMENT ORDER COMPLETED ON 17.12.2007 WHEREIN THE ASSESSING OFFIC ER MADE FOLLOWING ADDITIONS: ITA NO. 2402/M/09 2 1) ON ACCOUNT OF EXCHANGE GAIN & LOSS - RS. 3,10,945/ - 2) ON ACCOUNT OF DONATION - RS. 15,000/- 3) ON ACCOUNT OF LOSS ON SALE OF ASSETS - RS. 52,6 55/- 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT AN AMOUNT OF RS. 3,10,945/- WAS CHARGED AGAINS T PROFIT IN THE PROFIT AND LOSS ACCOUNT BEING LOSS ON FOREIGN EXCHANGE. THE A O FURTHER OBSERVED THAT THE ECB LOAN WAS TAKEN BY THE ASSESSEE FROM ITS PRI NCIPAL M/S. TURBOMACH SA RIAZZINO, SWITZERLAND. THIS ECB LOAN HAS BEEN UTIL IZED FOR THE PURPOSE OF BUYING THE FIXED ASSETS IN INDIA. THE AO DISALLOWE D THIS EXCHANGE LOSS FOLLOWING SECTION 43A OF THE ACT AND ACCOUNTING STA NDARD (AS-11) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA HOLD ING THAT AMOUNT OF EXCHANGE DIFFERENCES ON ACCOUNT OF RESTATING THE LO AN OUTSTANDING, DUE TO EXCHANGE RATE FLUCTUATION IS TO BE CAPITALIZED AND NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT, AS A REVENUE EXPENDITURE. 5. DONATION OF RS. 15,000/- WAS FOUND TO BE DEBITED IN THE PROFIT AND LOSS ACCOUNT FOR WHICH ASSESSEE DID NOT ADDUCE ANY EXEMP TION CERTIFICATE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 6. THE LAST ADDITION OF RS. 52,655/- WAS MADE ON AC COUNT OF THE LOSS ON SALE OF FIXED ASSETS. THE SAID LOSS FOUND TO BE DE BITED IN THE P&L ACCOUNT WHICH ACCORDING TO THE AO SHOULD HAVE BEEN REDUCED FROM THE BLOCK OF ASSETS OF MOTOR CAR. 7. WITH THIS FACTUAL MATRIX, THE AO PROCEEDED TO LE VY PENALTY U/S. 271(1)(C) OF THE ACT ON THE DISALLOWANCES MADE IN T HE ASSESSMENT PROCEEDINGS FOR THE YEAR. THE PENALTY PROCEEDINGS W ERE INITIATED FOR FURNISHING INACCURATE PARTICULARS LEADING TO INCORR ECT INCOME FROM BUSINESS. THE AO SHOW-CAUSED THE ASSESSEE TO EXPLAIN WHY PENA LTY SHOULD NOT BE LEVIED U/S. 271(1)(C) OF THE ACT R.W. ITS EXPLANATI ON. THE ASSESSEE FILED A DETAILED REPLY PLEADING THAT THERE WAS NO CONCEALME NT OF INCOME, IT IS MERELY A CASE OF DISALLOWANCES MADE BY THE AO WHICH COULD NOT BE SAID TO FILE ITA NO. 2402/M/09 3 INACCURATE PARTICULARS. HOWEVER, THE SUBMISSIONS OF THE ASSESSEE WERE REJECTED. THE AO WENT ON TO LEVY MINIMUM PENALTY A T THE RATE OF 100% AT RS. 1,35,823/-. 8. THE MATTER WAS CARRIED OVER BEFORE THE LD. CIT(A ) BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) CONFIRMED THE PENALTY PLAC ING RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277. 9. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED THAT IT IS A CASE OF DISALLOWANCES OF EXPENSES ONLY AND CONSIDERING T HE NATURE OF DISALLOWANCES, IT CANNOT BE SAID THAT THE ASSESSEE HAS WILLFULLY FILED INACCURATE PARTICULARS. THE LD. COUNSEL RELIED UPON THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. (SC) 322 ITR 158, CIT VS ATUL MOHAN BINDAL 317 ITR 01 AND RAJAST HAN SPINNING & WEAVING MILLS 224 CTR 01. 10. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE LOWER AUTHORITIES. WE ALSO HAD THE BENEFIT OF THE ASSESSMENT ORDER FOR THE YEAR UNDER CONSIDERATION. A PERUSAL OF THE ASS ESSMENT ORDER SHOWS THAT THE ADDITION ON ACCOUNT OF EXCHANGE FLUCTUATION WAS MADE BECAUSE IN THE OPINION OF THE AO, IT WAS A CAPITAL EXPENDITURE. IT IS THE SAY OF THE COUNSEL THAT THE YEAR UNDER CONSIDERATION IS THE FIRST YEAR OF ACCOUNTING STANDARD (AS- 11). DUE TO INADVERTENCE, THE LOSS ON ACCOUNT OF E XCHANGE FLUCTUATION WAS CHARGED TO PROFIT AND LOSS ACCOUNT. WE DO NOT FIND ANY REASON FOR THE LEVY OF PENALTY ON THIS ACCOUNT AS THE ASSESSEE DEBITED THE EXPENDITURE TO ITS PROFIT AND LOSS ACCOUNT ON A POSSIBLE VIEW THAT IT IS REVE NUE EXPENDITURE. MERELY BECAUSE THE ASSESSEE FAILED IN ITS CLAIM, IT CANNOT IPSO-FACTO LEAD TO FILING OF INACCURATE PARTICULARS. FOR THIS PROPOSITION, WE R ELY UPON THE RATIO LAID DOWN ITA NO. 2402/M/09 4 BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA). 12. DISALLOWANCE OF DONATION OF RS. 15,000/- CANNOT BE SAID , BY ANY STRETCH OF IMAGINATION , OF FILING OF INACCURATE PA RTICULARS. THEREFORE, NO PENALTY IS LEVIABLE ON THIS ACCOUNT ALSO. 13. THE THIRD ADDITION IS ON ACCOUNT OF LOSS ON SAL E OF FIXED ASSETS. IN THE CONCEPT OF BLOCK ASSETS, IT IS TRUE THAT THE LOSS O N ACCOUNT OF SALE OF ANY CAPITAL ASSET HAS TO BE FIRST REDUCED FROM THE WRIT TEN DOWN VALUE OF THE BLOCK OF ASSETS TO WHICH THAT ASSET BELONGS. HOWEVER, IN THE INSTANT CASE, INSTEAD OF REDUCING FROM ITS WDV OF THE BLOCK, THE ASSESSEE CHARGED THE LOSS TO PROFIT AND LOSS ACCOUNT. AGAIN THIS CANNOT BE SAID TO BE F ILING OF INACCURATE PARTICULARS RESULTING INTO LEVY OF PENALTY U/S. 271 (1)(C) OF THE ACT. 14. CONSIDERING THE ENTIRE FACTS IN TOTALITY AT ASS ESSMENT STAGE, WE DO NOT FIND ANY MERIT IN THE CASE WHICH MAY LEAD TO LEVY O F PENALTY U/S. 271(1)(C) OF THE ACT. ACCORDINGLY, WE DIRECT THE AO TO CANCEL T HE PENALTY LEVIED AT RS. 1,35,823/-. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 5 16 51 0 7 81 ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2012 . 4 0 3( & 7 9 6 21.11.2012 3 0 : SD/- SD/- (DINESH KUMAR AGARWAL) (N.K. BILLAI YA) / JUDICIAL MEMBER & / ACCOUNTANT MEMBER MUMBAI; 9 DATED 21 / 11 /2012 . . ./ RJ , SR. PS ITA NO. 2402/M/09 5 4 4 4 4 0 00 0 -1' -1' -1' -1' '(1 '(1 '(1 '(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. '<: -1 , , / DR, ITAT, MUMBAI 6. : = / GUARD FILE. 4 4 4 4 / BY ORDER, .'1 -1 //TRUE COPY// > >> > / ? ? ? ? * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI