The DCIT, Circle-1, Surat V. M/s. Gujarat Hira Bourse, Surat

ITA 2567/AHD/2010

• Counselvise Citation: 256720514 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 27-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOPCHNAD
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2567/AHD/2010 ASSESSMENT YEAR :2005-06 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1, ROOM NO. 108, AAYAKAR BHAVAN, MAJURA GATE, SURAT V/S . M/S. GUJARAT HIRA BOURSE 508, BELGIUM TOWER, OPP. LENEAR BUS STATION, RING ROAD, SURAT. PAN NO. AACCG0717B (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI ROOPCHNAD, SR. D.R. /BY RESPONDENT NONE /DATE OF HEARING 09.07.2012 /DATE OF PRONOUNCEMENT 09.07.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE, WHI CH HAS EMANATED FROM THE ORDER OF CIT(A)-I, SURAT, ORDER DATED 24.0 6.2010 FOR ASSESSMENT YEAR 2005-06. THE MAIN GROUND OF APPEAL IS AS UNDER: [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CANCELLING THE PENALTY OF RS.4, 79,640/- LEVIED ION THE ADDITION OF RS.13,10,764/- MADE ON ACCOUNT OF ITA NO. 2567/AHD/10 A.Y. 05-06 PAGE 2 DISALLOWANCE OF PRELIMINARY EXPENDITURE, WHICH WAS REQUIRED TO BE CAPITALIZED AS WARRANTED BY I.T.ACT. 2. THE SOLE GROUND OF APPEAL OF THE REVENUE IS AGAI NST DELETION OF PENALTY U/S 271(1)(C) OF RS.4,79,640/- BY THE CIT(A) ON ADD ITION OF RS.13,10,764/-. 3. THE BRIEF FACT OF THE CASE IS THAT THE ASSESSEE IS A COMPANY AND IS ENGAGED IN ACTIVITIES OF PROMOTING THE DIAMOND INDU STRY IN SURAT AND WAS YET TO START ITS OPERATION. THE ASSESSEE HAD NOT START ED ACTIVITIES TILL THE FIFTH ANNUAL REPORT. THE INCOME OF THE ASSESSEE WAS OUT OF INCOME FROM INTERESTS RECEIVED ON THE BANK DEPOSITS. THE ASSESSEE HAD IN CURRED ADMINISTRATIVE EXPENSES. THE ASSESSEE CLAIMED ADMINISTRATIVE EXPE NSES OF RS. 27.66 LACS. THIS WAS INCLUSIVE OF ADVERTISEMENT AND POOJA EXPEN SES OF RS.14,56,404/-. THE ASSESSEE CLAIMED THESE EXPENSES AS REVENUE EXPE NSES EVEN BUSINESS ACTIVITY OF THE COMPANY HAD NOT BEEN STARTED. THER EFORE, THE LD. A.O. DISALLOWED THESE EXPENSES OF RS.14,56,404/- AS REVE NUE EXPENDITURE BUT ALLOWED 1/10 I.E. RS.1,45,640/- U/S 35D OF THE IT A CT AND REMAINING AMOUNT OF RS.13,10,764/- WAS DISALLOWED. 4. THE PENALTY PROCEEDING U/S 271(1)(C) HAS INITIAT ED BY THE A.O. IN THE ASSESSMENT ORDER FOR FURNISHING INACCURATE PARTICUL ARS OF THE INCOME/CONCEALMENT OF INCOME FOR ALL THE ABOVE ISSU ES OF ADDITION. 5. THE ASSESSEE FILED APPEAL AGAINST THE ORDER OF T HE ADDITION. THE CIT(A) HAD CONFIRMED THE DISALLOWANCE. THE LD. A.O. IMPO SED PENALTY U/S 271(1)(C) VIDE HIS ORDER DATED 13.03.2010 ON ADDITION OF RS.1 3,10,764/- AT RS.4,79,640/- WHICH IS 100% OF TAX SOUGHT TO BE EVADED AS AGAINST MAXIMUM PENALTY LEVIABLE AT RS.14,38,920/- BEING 300% OF THE TAX SO UGHT TO BE EVADED. ITA NO. 2567/AHD/10 A.Y. 05-06 PAGE 3 6. BEING AGGRIEVED, THE ASSESSEE WAS BEFORE CIT(A) WHO HAS DELETED THE PENALTY AND OBSERVED AS UNDER:- 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE A.O. I AGREE WITH THE APPELLANT THAT THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE CLAIM OF THE EX PENSES AMOUNTED TO FURNISHING OF INACCURATE PARTICULARS OR WRONG PARTI CULARS. THERE IS NO FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. THE CLAIM MADE BY THE APPELLANT HAS BEEN TREATED AS COV ERED BY THE PROVISIONS OF SECTION 35D AND HENCE IN THE CURRENT YEAR 1/10 TH HAS BEEN ALLOWED AND BALANCE HAS BEEN CARRIED FORWARD. HENC E, THIS IS NOT A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INC OME OR CONCEALMENT OF INCOME. THE PENALTY LEVIED BY THE A.O. IS, THEREFO RE, DELETED AND THESE GROUNDS OF APPEAL ARE ALLOWED. 7. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD. SR. D.R. CONTENDED THAT THE ASSESSEE HAD CLAIMED REVENUE EXPENDITURE B UT NO BUSINESS HAD BEEN STARTED BY THE COMPANY. THEREFORE, THE APPELLANT H AD FURNISHED THE INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. THE PENALTY LEVIED BY THE A.O. MAY BE CONFIRMED. FROM THE ASSESSEE SIDE, NO ONE APPEARED. THEREFORE, WE TAKE THE DECISION ON THE BASIS OF FAC TS AVAILABLE IN THE FILE. 8. WE HAVE PERUSED THE ASSESSMENT ORDER, PENALTY OR DER AND ORDER OF CIT(A). THE A.O. INITIATED THE PENALTY PROCEEDING ON FURNISHING INACCURATE PARTICULARS OF INCOME/CONCEALMENT OF INCOME. IT AP PEARS THAT LD. A.O. HAD NOT RECORDED PROPER REASONS WHETHER PENALTY IMPOSED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME OR B OTH. RECENTLY, HONBLE GUJARAT HIGH COURT HAS HELD IN SIMILAR SITUATION OF FACTS THAT THE A.O. WAS NOT SURE WHETHER THE ASSESSEE FURNISHED INACCURATE PART ICULARS OR CONCEALMENT OF ITA NO. 2567/AHD/10 A.Y. 05-06 PAGE 4 INCOME AND PENALTY IS DELETED BY THE HONBLE GUJARA T HIGH COURT IN THE CASE OF NEW SORATHIA ENGINEERING CO. V. CIT [2006] 282 ITR WHERE HONBLE GUJARAT HIGH COURT HAS HELD THAT ORDER OF PENALTY MUST CLEA RLY STATE WHETHER IS FOR CONCEALMENT OR FOR FURNISHING INACCURATE PARTICULAR S. FURTHER, THE APPELLANTS CLAIM WAS DEBATABLE WHETHER IT IS REVENUE EXPENDITU RE OR IS REQUIRED TO BE AMORTIZED OF PRELIMINARY EXPENSES U/S 35D OF THE IT ACT. THE APPELLANT HAD NOT FURNISHED INACCURATE PARTICULARS OF INCOME AND ALSO HAD NOT CONCEALED ANY INCOME. THE GENUINENESS OF EXPENSES HAS NOT BEEN D OUBTED BY THE A.O. AS HE HIMSELF ALLOWED 1/10 TH EXPENSES U/S 35D OF THE IT ACT. THEREFORE, WE CONFIRM THE ORDER OF THE CIT(A). 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , ITA NO. 2567/AHD/10 A.Y. 05-06 PAGE 5 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 20.07.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 23.07.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 26.07.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 26.07.2012