DCIT, Mohali V. M/s Punjab Communication Limited, Mohali

ITA 255/CHANDI/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4460 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: A K JINDAL
• Keywords: Capital asset; Wrong claim; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 255/CHD/2013 ASSESSMENT YEAR: 2005-06 THE DCIT, VS. M/S PUNJAB COMMUNICATION LIMITED CIRCLE 6(1) B-91, INDUSTRIAL AREA, PHASE-8 MOHALI MOHALI PAN NO. AACP9916H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. J.S. NAGAR RESPONDENT BY : SHRI A.K. JINDAL DATE OF HEARING : 03/10/2013 DATE OF PRONOUNCEMENT : 18/10/2013 ORDER PER T.R.SOOD, A.M. THE APPEALS BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A), CHANDIGARH ON 18/12/2012 . 2. IN THIS APPEAL REVENUE HAS RAISED FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSE SSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), HAS ERRED IN DELETING THE PENALTY AMOUNTING TO RS. 4,83,00,90/- 2 WHICH WAS LEVIED BY THE ASSESSING OFFICER U/S 271(1 )(C) WITH RESPECT TO THE FOLLOWING THREE ADDITIONS. I) ADDITION OF RS. 12,06,434/- ON ACCOUNT OF OBSOLETE ASSETS WRITTEN OFF. II) ADDITION OF RS. 1,720/- BEING DISALLOWANCE OF EXPEN SES DEBITED UNDER THE HEAD CHARITY AND DONATION III) ADDITION OF RS. 1,12,023/- BEING DISALLOWANCE OF EX PENSES INCURRED ON ACCOUNT OF BUY BACK OF SHARES. 3. WHETHER THE ASSESSEE WAS NOT LIABLE FOR PENALTY FOR CLAIMING CAPITAL EXPENDITURE OUT OF REVENUE RECEIPTS ON ACCOUNT OF: I) OBSOLETE ASSETS WRITTEN OFF. II) EXPENSES INCURRED ON ACCOUNT OF BUY BACK OF S HARES. 4. WHETHER THE ASSESSEE WAS NOT LIABLE FOR PENALTY FOR CLAIMING PATENTLY INADMISSIBLE EXPENDITURE INCURRED FOR CHARITY AND DONATION 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT SOME AD DITIONS WERE MADE IN THE ASSESSMENT AND ON APPEAL SOME ADDITIONS WERE DELETE D BY CIT(A) AND PENALTY PROCEEDING WERE ALSO INITIATED. THE FIRST ADDITION WAS IN RESPECT OF DEDUCTION OF CLAIM BY THE ASSESSEE AMOUNTING TO RS. 12,06,434 ON ACCOUNT OF OBSOLETE ASSETS WRITTEN OFF . THE ASSESSEE WAS ASKED WHY THI S DEDUCTION SHOULD NOT BE DISALLOWED. IT WAS SUBMITTED THAT AMOUNT SHOULD HAV E BEEN DISALLOWED BY THE ASSESSEE IN COMPUTATION BUT INADVERTENTLY THE SAME COULD NOT BE DONE AND THEREFORE AMOUNT SHOULD BE REDUCED OUT OF THE RETUR NED LOSS. SAME CONTENTION WAS RAISED IN RESPECT OF DEDUCTION ON ACCOUNT OF CH ARITY AND DONATION AMOUNTING TO RS. 1720/- WHICH WAS CLAIMED THROUGH M ISCELLANEOUS EXPENSES. 4. FURTHER ASSESSEE HAS ALSO CLAIMED EXPENSES AMOUNTIN G TO RS. 1,12,023/- FOR BUYING BACK OF SHARES OF THE COMPANY. IN RESPONSE T O THE SHOW CAUSE NOTICE. IT WAS SUBMITTED THAT THIS AMOUNT WAS PAID TO REGISTRA R OF THE ISSUE, I.E. M/S 3 KARVY CONSULTANT (P) LTD. FOR BUYING BACK OF COMPAN YS SHARES. HOWEVER AO WAS OF THE OPINION THAT BUYING BACK OF ITS OWN SHAR ES IS NOT BUSINESS ACTIVITY OF THE COMPANY THEREFORE SUCH EXPENDITURE WAS NOT A LLOWABLE. ON THESE THREE ITEMS PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) W ERE ALSO INITIATED. 5. DURING PENALTY PROCEEDINGS IT WAS MAINLY SUBMITTED THAT ASSESSEE COMPANY WAS FILING RETURN THROUGH ITS CONSULTANT WHO IS SUP POSE TO LOOK INTO ALL THE TAX ISSUES. THE CONSULTANT BY MISTAKE FORGOT TO DISALLO W THE SUM OF RS. 12,06,434/- ON ACCOUNT OF RETURN OF OBSOLETE ASSETS AND SUM OF RS. 1720/- ON ACCOUNT OF CHARITY AND DONATION. SINCE ITS A CASE OF MISTAKE AND ALL THE FIGURES ALSO HAVE BEEN DISCLOSED IN THE RETURN PENA LTY SHOULD NOT BE LEVIABLE. IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T IN CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 157(S.C.) IN RESPECT OF EXPENDITURE INCURRED FOR BUY BACK OF SHARES. 6. IN RESPECT OF EXPENDITURE PAID TO REGISTRAR IT WAS SUBMITTED THAT NO CAPITAL ASSET WAS ACQUIRED NOR ANY BENEFIT OF ENDURING NATU RE WAS OBTAINED. THE EXPENDITURE WAS DISALLOWED MERELY ON THE GROUND THE SAME IS NOT CONNECTED WITH THE BUSINESS ACTIVITY OF THE COMPANY. IT WAS S UBMITTED THAT MAINTENANCE OF STATUTORY RECORD IS NECESSARY FOR MAINTAINING ST ATUS OF THE COMPANY. IN ANY CASE PENALTY CANNOT BE LEVIED ON SUCH DISALLOWANCE. HOWEVER AO DID NOT AGREE WITH THESE SUBMISSIONS AND LEVIED PENALTY UND ER SECTION 271(1)(C). BEFORE THE CIT (A) SIMILAR SUBMISSIONS WERE REITERA TED AND SOME CASE LAW 4 WAS ALSO CITED. THE LD. CIT AGREED WITH THE SUBMISS IONS AND DELETED THE PENALTY. 7. BEFORE US. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE LOWER AUTHORITY. HE FURTHER SUBMITTED THAT THER E WAS NO INTENTION TO EVADE THE TAXES AS ASSESSEE HAD INCURRED HUGE LOSSES. HE FURTHER RELIED ON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT VS. SIDHARTHA ENTERPRISES (2010) 228 CTR (P&H) 579 AND DECISION OF HONBLE SUPREME COURT IN CASE OF PRICE WATER HOUSE COOPERS (P) LTD. VS. CIT & ANOTHER (2012) 77 DTR (SC)153, (COPY OF THESE JUDGM ENTS HAVE BEEN FILED ON RECORD). 8. ON THE OTHER HAND LD. DR SUPPORTED THE ORDER OF AO . 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY AND FIND FORCE IN THE SAME. CLAIM REGARDING WRITING OFF OF OBSOLETE ASSET AND CLAIM FOR CHARITY AND DONATION WHICH SHOULD HAVE BEEN DISALLOWED BY THE T AX CONSULTANT HIMSELF SEEMS TO HAVE BEEN IGNORED TO BE DISALLOWED IN THE COMPUTATION ON ACCOUNT OF MISTAKE OF THE TAX CONSULTANT. SIMILAR STAND HAVE B EEN TAKEN RIGHT FROM THE STAGE OF ASSESSMENT. THE HONBLE SUPREME COURT HAS CLEARLY HELD IN CASE OF PRICE WATER HOUSE COOPERS (P) LTD VS. CIT (SUPRA) T HAT IF SOME CLAIM HAS BEEN MADE AGAINST THE LEGAL PROVISION BY MISTAKE OF TAX CONSULTANT THE PENALTY IS NOT LEVIABLE. THEREFORE IN OUR OPINION NO PENALT Y SHOULD HAVE BEEN LEVIED IN RESPECT OF THESE TWO ITEMS. 5 10. AS FAR AS THE ISSUE REGARDING DISALLOWANCE OF EXPEN DITURE INCURRED TOWARDS PAYMENT TO REGISTRAR FOR BUY BACK OF SHARES IS CONC ERNED, THE SAME IS REGARDING DISALLOWANCE OF EXPENDITURE FOR WHICH PAR TICULARS HAVE ALREADY BEEN DISCLOSED IN THE RETURN OF INCOME. THIS WAS A BONAF IDE CLAIM MADE BY THE ASSESSSEE. DISALLOWANCE OF AN ITEMS OF AN EXPENDITU RE WILL NOT ATTRACT PENALTY PROCEEDING UNLESS SUCH DISALLOWANCE WAS MADE ON ACC OUNT OF SOME BOGUS CLAIM. THE DECISION OF HONBLE SUPREME COURT IN CAS E OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 157(S.C.) IS CLEAR LY APPLICABLE. 11. THEREFORE IN OUR OPINION THE PENALTY IS RIGHTLY DEL ETED BY LD. CIT(A) AND WE UPHOLD HIS ORDER. IN THE RESULT THE REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/10/2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 18 TH OCTOBER, 2013 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR 0 ITAT, CHANDIGARH