Akzo Noble Non-Stick Coatings Ltd., Ahmedabad V. The ACIT.,Circle-1, Ahmedabad

ITA 2507/AHD/2010

• Counselvise Citation: 250720514 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 12-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJNISH VOHRA SRDR
• Assessee Lawyers: S R SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.2507/AHD/2010 ASSESSMENT YEAR:2003-04 AKZO NOBLE NON-STICK COATINGS LTD. [NOW KNOWN AS WHITEFORD INDIA LTD], 16/10 DEVENDRA SOCIETY, NR. NARANPURA POST OFFICE, NARANPURA, AHMEDABAD PAN NO.AAACC4767F V/S . ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-1, AHMEDABAD (APPELLANT) .. (RESPONDENT) /BY APPELLANT SHRI S.R. SHAH, AR /BY RESPONDENT SHRI RAJNISH VOHRA, SR-DR /DATE OF HEARING 02-07-2012 /DATE OF PRONOUNCEMENT 09-08-2012 O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THIS PRESENT APPEAL OF THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, AHMEDABA D DATED 14-06-2010 FOR THE ASSESSMENT YEAR 2003-04. THE PENALTY UNDER DISP UTE WAS LEVIED BY THE ACIT, CIRCLE-1, AHMEDABAD VIDE HIS ORDER DATED 28-0 8-2006. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(APPEALS) ERRED IN LAW AND FACTS IN CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT IN RESPE CT OF DISALLOWANCE OF RS.50,76,210/- OF PAYMENT TOWARDS ROYALTY MADE IN T HE QUANTUM ORDER. YOUR APPELLANT SUBMITS THAT IT HAS NEITHER CONCEALE D NOR FURNISHED ANY ITA NO.2507/AHD/2010 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 2 INACCURATE PARTICULARS OF INCOME AND HENCE THERE IS NO PENALTY EXIGIBLE U/S 271(1)(C) OF THE ACT. IT IS SUBMITTED THAT IT BE SO HELD NOW AND PENALTY AS CONFIRMED BY CIT(A) BE DELETED. 2. THE LEARNED CIT(A) GROSSLY ERRED IN LAW AND FACT S IN CONSIDERING THE LIABILITY TO PAY A ROYALTY AS EITHER CONTINGENT OR NON-EXISTENT LIABILITY AND ACCORDINGLY HELD THAT THE APPELLANT PROVIDED INACCU RATE PARTICULARS OF INCOME. YOUR APPELLANT RESPECTFULLY SUBMITS THAT TH OUGH RBI APPROVAL CAME SUBSEQUENT TO YEAR END, THE LIABILITY TO PAY R OYALTY WAS ALREADY ACCRUED AS PENALTY THE AGREEMENT AND HENCE IT WAS C ORRECTLY CLAIMED AS PER THE MERCANTILE SYSTEM OF ACCOUNTING/. YOUR A PPELLANT SUBMITS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE RE CANNOT BE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. IT IS SUBMITTED THAT IT BE SO HELD NOW. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE PENAL TY IN SPITE OF THE FACT THAT THERE WAS NO SATISFACTION DISCERNIBLE FROM THE TENOR OF THE ASSESSMENT ORDER PASSED BY THE LEARNED AO. IT IS SU BMITTED THAT IT BE SO HELD NOW. THE LEARNED CIT(A) ERRED IN CONFIRMING LEVY OF PENALTY IN SPITE OF THE FACT THAT THERE WAS NO CONCRETE FINDIN GS BY THE LEARNED AO AS TO WHETHER SAME IS LEVIED FOR CONCEALMENT OF INC OME OR FOR INACCURATE PARTICULARS OF INCOME. UNDER THE CIRCUMS TANCES, PENALTY U/S. 271(1)(C) CANNOT BE UPHELD. IT IS SUBMITTED THAT I T BE SO HELD NOW. 4. WITHOUT PREJUDICE TO ANY OF THE FORGOINGS, THE L EARNED CIT(A) GROSSLY ERRED IN LAW AND IN FACTS IN CONFIRMING PENALTY WIT H RESPECT TO THE ADDITION OF RS.55,95,526/- WHEREAS IN THE FINAL ANA LYSIS THERE WAS ONLY AN ADDITION OF RS.8,42,160/- MADE TO THE RETURNED INCOME BY THE LEARNED AO IN THE ASSESSMENT ORDER. YOUR APPELLANT RESPECTFULLY SUBMITS THAT LEARNED CIT(A) GROSSLY ERRED IN MISINT ERPRETING PROVISIONS OF EXPLANATION 4, CLAUSE TO SECTION 271(1)(C) IN T HIS REGARD. IT IS SUBMITTED THAT IT BE SO HELD NOW AND IF AT ALL IT I S HELD THAT PENALTY IS LEVIABLE U/S. 271(1)(C) , THE SAME CAN ONLY BE WITH REFERENCE TO THE AMOUNT OF RS.8,42,160/- BEING THE NET ADDITION TO T HE RETURNED INCOME. IT IS SUBMITTED THAT IT BE SO HELD NOW AND THE ENTI RE PENALTY OF RS.18,65,5008/- AS CONFIRMED BY CIT(A) BE DELETED. 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS ENGAGE D IN THE BUSINESS OF MANUFACTURING OF NON-STICK COATINGS/PAINTS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CLAIMED ROYALTY EXP ENSES OF RS.50,76,210/- AND ASSESSING OFFICER LEVIED PENALTY IN RESPECT OF ADDITION OF RS.50,76,210/- ON ACCOUNT OF NON-GENUINE ROYALTY. THE SAID ADDITIO N WAS MADE BECAUSE AS PER THE ASSESSING OFFICER, THE RESERVE BANK OF INDI A (RBI FOR SHORT) APPROVAL TO ENTER INTO TECHNICAL COLLABORATION WITH THE CONC ERNED FOREIGN COMPANY WAS ITA NO.2507/AHD/2010 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 3 GRANTED ONLY ON 17-05-2003 AFTER EXPIRY OF THE FINA NCIAL YEAR PERTAINING TO A.Y. 2003-04 AND THEREFORE DID NOT EXIST ANY LIABILITY D URING THE YEAR UNDER CONSIDERATION. 3. THE ASSESSEE FEELING AGGRIEVED THIS ORDER OF ASS ESSING OFFICER AGAINST THE PENALTY ORDER FILED APPEAL BEFORE LD. CIT(A), W HO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DISMISSED THE APPEAL OF ASSESSEE. NOW, ASSESSEE BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A ) FILED SECOND APPEAL BEFORE US. 4. LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SU BMITTED THAT THE ORDER OF LEVYING PENALTY AS WELL AS CONFIRMING THE SAME A RE BAD IN LAW IN VIEW OF THE FACT THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY C LEAR FINDING WHETHER THE ASSESSEE IS GUILTY OF FURNISHING INACCURATE PARTICU LARS OF INCOME OR CONCEALED THE INCOME. LD. AR OF THE ASSESSEE RELIED UPON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SORATHIA ENGINEERING CO. V. CIT (2006) 282 ITR 642 (GUJ) AND IN SUPPORT OF HIS CONTENTION THAT THE ASSESSING OFFICER AS WELL AS LD. CIT(A) HAS NOT GIVEN A POSITIVE FIND ING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER AN Y INCORRECT PARTICULARS OF SUCH INCOME HAS BEEN FURNISHED BY THE ASSESSEE. LD. AR RELIED UPON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NOS. 1260- 1262/AHD/2010 IN THE CASE OF M/S. MANOHAR METAL CORPORATION V. ITO DATED 13-08-2010 FOR THE A.YS. 2002-03 TO 2004-05 AND ALS O PLACED RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT RENDERED IN THE C ASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) IN SUPPORT OF HIS CONTENTI ON THAT NO PENALTY IS LEVIABLE UNDER THE FACTS AND CIR CUMSTANCES OF THE PRESENT CASE. HE SUBMITTED THAT THE AO LEVIED MINIMUM PENAL TY @ 100% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF SUCH CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PART ICULARS OF INCOME WHICH WORKS TO RS.18,65,508/- AGAINST THE MAXIMUM PENALTY OF RS.55.96 LAKH @ ITA NO.2507/AHD/2010 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 4 300% IS LEVIED ON THE ASSESSEE FOR FURNISHING INACC URATE PARTICULARS OF INCOME/CONCEALMENT OF INCOME AS MENTIONED IN THE OR DER. 5. ON THE CONTRARY, LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND CASE LAWS CITED BY LD. AR OF THE ASSE SSEE. WE FIND THAT IT IS NOT DISPUTED THAT THE WORDS USED IN THE PENALTY ORDER I S CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF I NCOME. LD. CIT(A) HAS INTERPRETED THE SAME AS UNDER:- IN VIEW OF THE FACTS AND CIRCUMSTANCES, THE ASSESS ING OFFICER USED EXPRESSING INACCURATE PARTICULARS OF INCOME/CONCEA LMENT OF INCOME, THEREBY THE MEANING THAT IS INACCURATE PARTICULARS OF INCOME WHICH RELATES TO CONCEALMENT OF INCOME. THE AFORESAID INTERPRETATION OF LD. CIT(A) IS NOT A CCEPTABLE IN VIEW OF THE STATUTORY OF PROVISIONS OF U/S. 271(1)(C) , WHICH R EADS AS UNDER:- IF THE ASSESSING OFFICER OR COMMISSIONER OF APPEAL S OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, IF SATISFY THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF THE INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. FROM THE AFORESAID PROVISIONS, IT IS EVIDENT THAT T WO SITUATIONS ARE CONTEMPLATED (I) THE ASSESSEE HAS CONCEALED THE PAR TICULARS OF HIS INCOME (II) ANOTHER BEING FURNISHED INACCURATE PARTICULARS OF S UCH INCOME. BOTH APPEAR TO BE INDEPENDENT OF EACH. FURTHER THE ASSESSING OFFIC ER OR THE OTHER AUTHORITIES MENTIONED U/S. 271(1)(C) OF THE ACT HAS TO RECORD SATISFACTION AND GIVE A CLEAR FINDING ABOUT THAT WHETHER THE ASSESSEE IS GUILTY O F CONCEALING THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF I NCOME BEFORE LEVYING PENALTY FOR SUCH LAPSE. IN THE PRESENT CASE, THE AO HAS NOT GIVEN ANY CLEAR FINDING WHETHER THE ASSESSEE IS GUILTY OF CONCEALING PARTIC ULARS OF INCOME OR FURNISHING THE INACCURATE PARTICULARS OF INCOME. IN THIS VIEW OF THE MATTER, RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. MANU ITA NO.2507/AHD/2010 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 5 ENGINEERING WORKS (1980) 122 ITR 306 AS WELL AS IN THE CASE OF SORATHIA ENGINEERING CO. (SUPRA) WOULD APPLY ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. RESPECTFULLY, FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MANU ENGINEERING WORKS (SUPRA) WE ALLOW THE GROUND OF ASSESSEES APPEAL AND ASSESSING OFFICER I S DIRECTED TO DELETE THE PENALTY. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP - /08/2012 '() * +, +, +, +, --. --. --. --. /. /. /. /. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. )-2 + +3 / CONCERNED CIT 4. + +3- / CIT (A) 5. .67 ---2, + -2 , '() / DR, ITAT, AHMEDABAD 6. 7:; <= / GUARD FILE. BY ORDER/ +, , >/ ' ? + -2 , '() * STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 24/07 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 25/07 4) DATE OF CORRECTION 27/07 5) DATE OF FURTHER CORRECTION 6) DATE OF INITIAL SIGN BY MEMBERS 7) ORDER UPLOADED ON 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 13-08-2012