DCIT 9(3), MUMBAI V. VALID ELASTOMER PROCESSORS P.LTD, NAVI MUMBAI

ITA 2431/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79524 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA SINGH
• Assessee Lawyers: GOVIND GOYAL
• Keywords: Business income; Business expenditure; Wrong claim

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - F BENCH. . , !'# !$%&' , %! () BEFORE S/SH.D.MANMOHAN, VI CE-PRESIDENT & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.2431/MUM/2013, ! ! ! ! * * * * / ASSESSMENT YEAR-2009-10 DCIT.-9(3), 2 ND FLOOR, ROOM NO.229, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 V/S. M/S VAID ELASTOMER PROCESSORS PVT. LTD. PLOT NO.R-856, TTC, INDUSTRIAL AREA, REBALE, P.O. GHANSOLI, NAVI MUMBAI-400701 PAN:AAACV3718R ( !+, / APPELLANT) ( -.+, / RESPONDENT) !$) 0 1 % / REVENUE BY : SHRI RAVINDRA SINGH !23 !23 !23 !23 1 1 1 1 % %% % / ASSESSEE BY : SHRI GOVIND GOYAL ! ! ! ! 0 00 0 3! 3! 3! 3! / DATE OF HEARING : 02.07-2014 4* ! 0 3! / DATE OF PRONOUNCEMENT : 23.07-2014 , 1961 0 00 0 !! !! !! !! 254 )1( % %% % &353 &353 &353 &353 (%6 (%6 (%6 (%6 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM %! %! %! %! () () () () !$%&' !$%&' !$%&' !$%&' % %% % ! ! ! ! : CHALLENGING THE ORDERS DATED 21.01.2013 OF THE CIT( A)-20,ASSESSING OFFICER(AO) HAD RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY U/S.271(1)(C) OF RS. 12,62, 149/- 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAD ERRED IN CONCLUDING THAT THERE IS NO DELIBERATE OR WILLFUL F URNISHING OF INACCURATE PARTICULARS OF INCOME, EVEN THOUGH THE ASSESSEE HAD WRONGLY CLAIMED EXPENS ES RELATED TO ITS RENTAL INCOME, AS THOUGH IT IS, BUSINESS RELATED EXPENSE. 3.THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF MANUFAC TURING RUBBER PARTS,FILED ITS RETURN OF INCOME ON 25.09.2008 DECLARING LOSS OF RS.2.05 CROR ES.THE AO FINALISED THE ASSESSMENT U/S.143 (3) OF THE ACT,ON 28.10.2011,DETERMINING THE TOTAL INCOME OF THEASSESSEE AT RS.(-)1,66,54,642/-. EFFECTIVE GROUND OF APPEAL PERTAINS TO DELETION OF PENALTY LEVIED BY THE AO U/S.271(1)(C)OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME .AO HAD LEVIED PENALTY ON THE GROUND THAT THE ASSESSEE HAD DEBITED RS.37,49,699/-;BEING BROKERAGE ,STAMP DUTY,MUNICIPAL CORPORATION TAX AND LEAVE AND LICENSE REGISTRATION CHARGES;AS ITS BUSIN ESS EXPENSE WHEREAS THEY WERE DIRECTLY RELATED TO RENTAL INCOME RECEIVED BY IT.AO HELD CLAIMING SU CH EXPENSES RELATED TO EARNING OF HOUSE PROPERTY INCOME AS ITS BUSINESS INCOME WHICH IS IN ADDITION TO CLAIMING DEDUCTION @ 30% OF THE ANNUAL RENTAL INCOME WAS FURNISHING OF INACCURATE P ARTICULARS OF INCOME.HE LEVIED PENALTY OF RS.12,62,149/- U/S.271(1)(C)OF THE ACT. 2 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS ARGUED THAT THEASS ESSEE,HAVING ITS FACTORY AT GHANSOLI, NAVI MUMBAI,WAS CARRYING ON A BUSINESS OF MANUFACTURING AUTO RUBBER PART,THAT THE BUSINESS HAD DECLINED SUBSTANTIALLY AND IT WAS RUNNING IN HUGE L OSSES,THAT TO OVERCOME FINANCIAL DETERIORATION THE MANAGEMENT DECIDED TO RENT OUT ONE OF ITS FACTO RY PREMISE,THAT YEAR UNDER APPEAL WAS FIRST YEAR OF GIVING ONE OF THE FACTORY BUILDINGS ON RENT ON LEAVE & LICENSE BASIS,THAT IN THAT PROCESS IT HAD INCURRED CERTAIN EXPENSES SUCH AS BROKERAGE,STA MP DUTY AND REGISTRATION CHARGES, THAT ALL THE EXPENSES WERE DULY SUPPORTED AND ACCOUNTED IN THE B OOKS OF ACCOUNT IN THE NORMAL COURSE OF ITS BUSINESS,THAT IN ACCORDANCE WITH THE NORMAL ACCOUNT ING PRACTICES SAME HAD BEEN DEBITED TO PROFIT & LOSS A/C,THAT THE INCOME FROM LETTING OUT WAS ALS O CREDITED TO THE PROFIT & LOSS A/C,THAT THE INCOME FROM RENT AS WELL AS EXPENSES IN RESPECT OF PROPERTY WAS FROM THE SAME BUSINESS,THAT SAME WERE FORMING PART OF THE PROFIT & LOSS A/C. OF THE ASSESSEE-COMPANY,THAT THERE WAS NO INFIRMITY AS FAR AS THE BOOKS OF ACCOUNT WERE CONCE RNED.IT WAS FURTHER ARGUED THAT THE ASSESSEE HAD ALREADY DISCLOSED ALL THE FACTS WITHOUT HIDING ANYTHING,THAT AUDITED ACCOUNTS WERE FILED BEFORE THE AO,THAT EXPENDITURE INCURRED FOR BROKERA GE,STAMP DUTY, REGISTRATION CHARGES AND MUNICIPAL TAX WERE BASICALLY BUSINESS EXPENSES, THA T SAME WERE INCURRED ON A PROPERTY BELONG - ING TO THE BUSINESS OF THE ASSESSEE,THAT THERE WAS NO SPECIFIC DEDUCTION FOR THOSE EXPENSES IN THE COMPUTATION OF INCOME FROM HOUSE PROPERTY,THAT THE BUILDING ITSELF WAS USED FOR THE PART OF THE YEAR FOR THE PURPOSES OF BUSINESS AND FOR PART OF T HE YEAR IT WAS RENTED OUT,THAT IN THE NORMAL COURSE OF BUSINESS INCOME FROM PROPERTY AS WELL AS ALL EXPENSES RELATED TO PROPERTY WOULD HAVE TO BE CONSIDERED AS PART OF BUSINESS INCOME,THAT TH E ASSESSEE WAS ALREADY IN HUGE LOSSES THAT THE ASSESSEE HAD FULLY DISCLOSED ALL THE FACTS WITHOUT CONCEALING ANYTHING,THAT THE ASSESSEE HAD NOT TRIED TO MAKE ANY FALSE CLAIM. 4. AFTER CONSIDERING THE ARGUMENTS OF THE ASSESSEE,FAA HELD THAT THAT IT HAD DEBITED EXPENSES OF BROKERAGE,STAMP DUTY, MUNICIPAL TAX AND LEAVE AND L ICENSE REGISTRATION CHARGES TOTALING TO RS.37, 49,699/- ON THE BASIS OF EVIDENCES ON RECORD,THAT S UCH EXPENSES WERE TO BE ALLOWED EVEN IF RENTAL INCOME WAS TO BE ASSESSED AS INCOME FROM HOUSE PROP ERTY AND NOT AS INCOME FROM BUSINESS, THAT THERE WAS NO CONCEALMENT OF PARTICULARS OF INC OME,THAT DURING THE YEAR ONE OF THE FACTORY BUILDING WAS GIVEN ON RENT ON LEAVE AND LICENSE BAS IS,THAT IT HAD INCURRED VARIOUS EXPENSES FOR THAT PURPOSE,THAT EXPENSES INCURRED BY IT WERE GENU INE,THAT THERE WAS NO FURNISHING OF INACCURATE PARTICULARS OF INCOME OR EXPENDITURE,THAT MERELY ON ACCOUNT OF CHANGE OF HEAD FOR ASSESSMENT,IT CANNOT BE PRESUMED THAT THERE WAS A DELIBERATE OR W ILLFUL FURNISHING OF INACCURATE PARTICULARS OF INCOME OR SUPPRESSION OF INCOME,THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD AGREED TO CHANGE THE HEAD OF INCOME AND THEREFO RE SUCH EXPENSES WERE DISALLOWED,BUT THAT MERELY ON ACCOUNT OF DISALLOWANCE OF SUCH EXPENSES PENALTY FOR CONCEALMENT COULD NOT BE LEVIED,THAT THERE WAS NO INTENTION TO DEFRAUD REVEN UE,THAT BECAUSE OF CHANGE OF HEAD OF INCOME IT COULD NOT BE PRESUMED THAT THERE WAS CONCEALMENT.TH AT THE AO HAD WRONGLY INVOKED THE PROVISIONS OF EXPLANATION 4(A) TO SECTION 271(1)(C) OF THE ACT. 5. BEFORE US,DR ARGUED THAT THE ASSESSEE HAD MADE WRON G CLAIM,THAT IT HAD OFFERED INCOME FORM HOUSE PROPERTY AND CLAIMED EXPENSED UNDER OTHER HEA D.AUTHORISED REPRESENTATIVE(AR)MADE THE SAME SUBMISSIONS THAT WERE MADE BEFORE THE FAA.WE H AVE HEARD THE RIVAL ARGUMENTS AND PERUSED THE MATERIAL.WE FIND THAT THE FAA HAS DELET ED THE PENALTY,AS HE WAS OF THE OPINION THAT PENAL PROVISIONS SHOULD NOT BE INVOKED IF THERE WAS CHANGE IN THE HEADS OF INCOME.IT IS NOT IN DISPUTE THAT THE AO HAS NOT DOUBTED THE GENUINENESS OF THE EXPENDITURE AND INCURRED EXPENDITURE 3 PERTAINS TO EXPENDITURE LIKE LEAVE AND LICENSE REGI STRATION CHARGES AND STAMP DUTY.FOR RENTING OUT THE PREMISES SUCH EXPENDITURE WAS ESSENTIAL.THE FAC TORY PREMISES IS A BUSINESS ASSET AND WAS USED AS SUCH FOR PART OF THE YEAR.EXPENDITURE INCUR RED UNDER THE HEADS BROKERAGE,STAMP DUTY, MUNICIPAL TAX AND LEAVE AND LICENSE REGISTRATION CH ARGES,EVEN IF DISALLOWED DURING QUANTUM PROCEEDINGS,CANNOT BE BASIS FOR INVOKING THE PROVIS IONS OF SECTION OF 271(1)(C)OF THE ACT.ALL FACTS RELATED TO THE TRANSACTION MADE AVAILABLE TO THE AO AND THE CLAIM MADE BY THE ASSESSEE IS NOT PROHIBITED BY LAW.IT HAS DIRECT NEXUS WITH THE BUSINESS ASSET OF THE ASSESSEE.THEREFORE, ADDITION MADE BY THE AO FOR THE SAID AMOUNT DURING ASSESSMENT PROCEEDING CANNOT JUSTIFY LEVY OF CONCEALMENT PENALTY.CONFIRMING THE ORDER OF THE FAA,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED. 37 !23 ! 8!! (!9 0 5 ):3 0 $!3 ; . ORDER PRONOUNCED IN THE OPEN COURT ON 23RD JULY, 2014 . (%6 0 4* ! % &!! < =(! 23 $! , 201 4 0 5 > SD/- SD/- ( . / D.MANMOHAN) ( !$%&' !$%&' !$%&' !$%&' / RAJENDRA) !'# / VICE PRESIDENT %! %! %! %! () () () () /ACCOUNTANT MEMBER / MUMBAI, =(! /DATE: 23.07.2014 SK (%6 (%6 (%6 (%6 0 00 0 -3? -3? -3? -3? @%?*3 @%?*3 @%?*3 @%?*3 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / !+, 2. RESPONDENT / -.+, 3. THE CONCERNED CIT(A)/ A B , 4. THE CONCERNED CIT / A B 5. DR F BENCH, ITAT, MUMBAI / ?C!5 -3 , . . &!! . 6. GUARD FILE/ 5! ! .!?3 .!?3 .!?3 .!?3 -3 -3-3 -3 //TRUE COPY// (%6!! / BY ORDER, / ! $! DY./ASST. REGISTRAR , /ITAT, MUMBAI