The DCIT, Circle-1, Surat V. Himson International Pvt.Ltd., Surat

ITA 2568/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85607 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 27-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Depreciation; Difference of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI ACCOUNTANT MEMBER ITA NO S . 1171/AHD/2009 & 1251, 2333 /AHD/2010 A. Y S . 200 6 - 0 7, 2007 - 08 & 200 8 - 0 9 M/S. HIMSON INTERNATIONAL PVT. LTD., 701, CENTRE POINT, RING ROAD, SURAT . PAN: AAACN 7828A VS ACIT, RANGE - 1 , SURAT. (APPELLANT) (RESPONDENT) ITA NOS.1594/AHD/2009 & 1574, 2522, 2568/AHD/2010 A.Y S .200 6 - 07, 2007 - 08 & 2008 - 09 ACIT, RANGE - 1 , SURAT. VS M/S. HIMSON INTERNATIONAL PVT. LTD., 701, CENTRE POINT, RING ROAD, SURAT . PAN: AAACN 7828A (APPELLANT) (RESPONDENT) REVENUE BY : SMT. SONIA KUMAR , SR. D.R. ASSESSEE(S) BY : SHRI M.K. PATEL , A.R. / DATE OF HEARING : 23 / 01 /201 5 / DATE OF PRONOUNCEMENT: 30 / 01 /201 5 / O R D E R PER BENCH ALL THESE CONNECTED APPEALS ARE HAVING SOME COMMON ISSUES , THEREFORE , CONSOLIDATED AND HEREBY DECIDED BY THIS SINGLE ORDER. 2. WE SHALL FIRST TAK E UP THE ASSESSEE S APPEAL FOR ALL THE YEARS. 3. GROUND NO.1 FOR A.Y. 2006 - 07 RAISED BY THE ASSESSEE IS AS UNDER: ITA NOS.1171, 1594 - A - 09, 1251, 1574, 2333, 2522, 2568 - A - 10 (HIMSON INTERNATIONAL PVT. LTD ) FOR A.Y S . 20 0 6 - 0 7, 2007 - 08 & 200 8 - 0 9 - 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER FOR DISALLOWANCE OF RS.13,30,952/ - WITH REGARD TO ELECTRIC POWER CHARGES. 4. VIDE AN ORDER U/S.143(3) FOR A.Y.2005 - 06 DATED 26.12.2008, THE AO HAS DISALLOWED THE CLAIM AS UNDER: 2. DISALLOWANCE OF CAPITAL EXPENDITURE. THE A SSESSEE HAS DEBITED RS.1330952/ - BEING CAPITAL EXPENDITURE IN ELECTRIC POWER ACCOUNT UNDER THE HEAD ELECTRIC POWER AND FUEL CHARGES IN P & L ACCOUNT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.R. STATED IN LETTER DATED 03.12.2008 REGARDING THE CAPITAL EXPENDITURE DEBITED TO P&L A/C. HENCE, AN AMOUNT OF RS.1330952/ - IS NOT ALLOWED AS REVENUE EXPENDITURE FROM THE ELECTRICITY BILL. HOWEVER THE ASSESSEE IS ENTITLED TO DEPRECIATION OF RS.99,821/ - @ 7.50% ON THE ABOVE AMOUNT OF RS.13,30,952/ - . HOWEVER THE A SSESSEE IS ENTITLED TO DEPRECIATION ON WDV IN THE SUBSEQUENT YEAR. SINCE GP ADDITION HAS ALREADY BEEN MADE NO SEPARATE ADDITION IS MADE ON THIS ACCOUNT. 5. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE ACTION OF THE AO WAS CONFIRM ED AS UNDER: 3. THIS GROUND IS REGARDING ALLOWING DEPRECIATION ON THE DISALLOWANCE OF RS.13,30,952/ - IN THE ASSESSMENT ORDER, THE A.O. HAS STATED THAT THE ASSESSEE HAS DEBITED A SUM OF RS.13,30,952/ - UNDER THE HEAD ELECTRIC POWER AND FUEL CHARGES. ACCORDIN G TO THE A.O., THE ASSESSEE HAS ADMITTED THAT THIS IS A CAPITAL EXPENDITURE AND HENCE THE SAME CAN NOT BE ALLOWED. THE A.O., HOWEVER, DID NOT MAKE A SEPARATE ADDITION SAYING THAT THIS ADDITION HAS ALREADY BEEN TAKEN CARE OF BECAUSE OF THE G.P. ADDITION ALR EADY MADE IN THE ASSESSMENT ORDER. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS ADMITTED THAT IT IS CAPITAL EXPENDITURE BUT DEPRECIATION SHOULD BE ALLOWED. SINCE THE DISALLOWANCE HAS NOT BEEN DISPUTED THE SAME IS UPHELD. THE A.O. HAD NOT MADE A SEPA RATE ADDITION AS THIS DISALLOWANCE WAS TELESCOPED I NTO THE G.P. ADDITION. HOWEVER, SINCE THE G.P. ADDITION HAS BEEN DELETED, THE DISALLOWANCE OF RS.13,30,952/ - SEPARATELY MADE IN THE COMPUTATION IS CONFIRMED. THIS AMOUNT HAS BEEN CORRECTLY DISALLOWED AS CA PITAL EXPENDITURE. THIS GROUND OF APPEAL IS, THEREFORE, DISPOSED OF WITH THE ABOVE DIRECTION. 6. LEARNED AR HAS CONTESTED BEFORE US THAT THE AO SHOULD BE DIRECTED TO GRANT DEPRECIATION ON THE AMOUNT SO DISALLOWED BEING CAPITAL EXPENDITURE IN NATURE. ITA NOS.1171, 1594 - A - 09, 1251, 1574, 2333, 2522, 2568 - A - 10 (HIMSON INTERNATIONAL PVT. LTD ) FOR A.Y S . 20 0 6 - 0 7, 2007 - 08 & 200 8 - 0 9 - 3 7. F ROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., SMT. SONIA KUMAR HAS INFORMED THAT ITAT D BENCH AHMEDABAD IN ASSESSEE S OWN CASE FOR A.Y. 2005 - 06 IN ITA NO.2393/AHD/2008 VIDE AN ORDER DATED 9 TH OF JANUARY, 2015 HAS HELD AS UNDER: 2. THE GROUND NO.L OF THE ASSESSEE'S APPEAL IS AS UNDER: 1, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A OUGHT TO HAVE GRANTED DEDUCTION OF RS.4,98,402/ - TOWARDS ELECTRIC POWER AS THE SAME IS INCURRED IN THE COURSE OF BUSINESS.' 3. THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT AN AMOUNT OF RS,4,98,402/ - TOWARDS ELECTRIC POWER WAS CAPITALIZED BY THE DEPARTMENT AND DEPRECIATION HAS BEEN ALLOWED THEREIN BY THE CIT(A). THE LEARNED DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT(A). WE HAVE CONSIDERE D RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). THE ASSESSEE HAS ALREADY BEEN ALLOWED DEPRECIATION ON THE AMOUNT OF ELECTRIC POWER CAPITALIZED AND NO CASE FOR ALLOWING THE SAME AS REVENUE EXPENDITURE COULD BE MADE BEFORE US, AND ACCORD INGLY, THE GROUND NO. 1 OF THE ASSESSEE IS DISMISSED. 8. IN VIEW OF THE ABOVE, WE HEREBY FOLLOW THE VERDICT OF THE RESPECTED CO - ORDINATE BENCH AND DO NOT FIND ANY FORCE IN THIS GROUND OF THE ASSESSEE. MOREOVER, WE HAVE ALSO NOTED THAT AO HIMSELF HAS HELD T HAT THE ASSESSEE IS ENTITLED FOR THE CLAIM OF DEPRECIATION ON THE SAID AMOUNT. DUE TO HIS REASON, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD NOT HAVE ANY GRIEVANCE, ONCE IT WAS SUO MOTU ALLOWED BY THE REVENUE DEPARTMENT. IN THE RESULT, THIS GROUND OF THE ASSESSEE IS HEREBY DISMISSED. 9. GROUND NO.2 FOR A.YS. 2006 - 07 AND 2007 - 08 IS IN RESPECT OF THE DISALLOWANCE OF GARDEN EXPENSES. 10. AT THE OUTSET, WE HAVE BEEN INFORMED THAT ON IDENTICAL FACTS IN THE PAST FOR A.Y. 2005 - 06 THIS ISSUE WAS CARRIED UPTO THE STAGE OF THE SECOND APPEAL AND RESPECTED CO - ORDINATE B BENCH IN ASSESSEE S OWN CASE ITA NOS.1171, 1594 - A - 09, 1251, 1574, 2333, 2522, 2568 - A - 10 (HIMSON INTERNATIONAL PVT. LTD ) FOR A.Y S . 20 0 6 - 0 7, 2007 - 08 & 200 8 - 0 9 - 4 BEARING ITA NO.2393/AHD/2008 VIDE AN ORDER DATED 9 TH OF JANUARY, 2015 HAS ALLOWED THIS GROUND OF THE ASSESSEE IN THE FOLLOWING MANNER: 9. THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT EXPENSES OF RS.5 1 ,216/ - IS INCURRED FOR MAINTENANCE OF GARDEN AND COMPLETE DETAILS THEREOF WERE FILED. THE LEARNED DR RELIED ON THE ORDERS OF THE AO AND THE CIT(A). WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT THE GARDEN EXPENSE S WERE INCURRED BY THE ASSESSEE FOR THE BUSINESS PURPOSE AND COPIES OF BILLS WERE ALSO PRODUCED BEFORE THE AO AND THE CIT(A), AND THEREFORE, THERE IS NO CASE FOR DISALLOWANCE OF 20% OF THE TOTAL GARDEN EXPENSES CLAIMED BY THE ASSESSEE. A CCORDINGLY, THE DIS ALLOWANCE OF RS.51,216/ - IS DELETED, AND THE GROUND NO.4 OF THE ASSESSEE IS ALLOWED. 11. RESPECTFULLY FOLLOWING THE ABOVE DECISION FOR THESE TWO YEARS THIS GROUND OF THE ASSESSEE IS HEREBY ALLOWED. 12. GROUND NO.3 FOR A.YS.2006 - 07 AND 2007 - 08 AND GROUND NO.2 FOR A.Y.2008 - 09 ARE IN RESPECT OF THE INVOCATION OF PROVISION OF SECTION 14A OF IT ACT. AS FAR AS A.Y. 2008 - 09 IS CONCERNED , LEARNED AR HAS ACCEPTED THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE FOR THIS YEAR, HOWEVER , HE HAS PLEADED THAT THE DISALLO WANCE OF RS.1,71,556/ - WAS EXCESSIVE. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., SMT. SONIA KUMAR HAS SUPPORTED THE ACTION OF THE REVENUE DEPARTMENT. 13. THE ADMITTED LEGAL POSITION IS THAT SUB SECTION (3) OF SECTION 14A WAS INTRODUCED AND RULE 8D OF INCOME TAX RULE CAME INTO OPERATION BY THE FINANCE ACT, 2006. BY THESE AMENDMENTS , A SCIENTIFIC M ETHOD HAS BEEN PROVIDED TO DETERMINE THE EXPENDITURE RELATED TO EXEMPT ED INCOME. IN A SITUATION , WHEN THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE INCURRED TO EARN THE EXEMPTED INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME THEN THE STATUTE H AS PRESCRIBED A FORMULA UNDER RULE 8D TO ARRIVE AT THE FIGURE OF SUCH EXPENDITURE. THEREFORE , IN THE ABSENCE OF ANY SPECIFIC CONTRARY MATERIAL FROM THE SIDE OF THE ASS ESSEE , WE HEREBY ITA NOS.1171, 1594 - A - 09, 1251, 1574, 2333, 2522, 2568 - A - 10 (HIMSON INTERNATIONAL PVT. LTD ) FOR A.Y S . 20 0 6 - 0 7, 2007 - 08 & 200 8 - 0 9 - 5 CONFIRM THE VIEW TAKEN BY THE REVENUE AUTHORITIES FOR A.Y. 2008 - 09. AS FAR AS THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 WERE CONCERNED , THE AO HAS NOTED IN THE PROFIT AND LOSS ACCOUNT THAT THERE WERE CERTAIN EXPENSE IN THE NATURE OF OFFICE EXPENSES, BANK COMMISSION, INTEREST, ETC. THE AO HAS ESTIMATED 10% OF THOSE EXPENSES FOR THE PURPOSE OF DISALLOWANCE. FOR A.Y. 2007 - 08, WE HAVE ALSO NOTED THAT THE PROVISIONS OF RULE 8D WERE WRONGLY APPLIED BEING PROSPECTIVE IN NATURE. WE THEREFORE, DIRECT TO DELETE THE ADDITION. THE RESULT IS THAT THE GROUND OF THE ASSESSEE FOR A.Y.2006 - 07 AND 2007 - 08 ARE ALLOWED BUT FOR A.Y.2008 - 09 THIS GROUND IS DISMISSED. 14. FOR A.Y. 2006 - 07 AND 2007 - 08 AND 2008 - 09, GROUND NO.4 OF THE ASSESSEE IS IN RESPECT OF CLAIM P ERTAINING TO SEZ UNIT. 15. AT THE OUTSET, WE HAVE BEEN INFORMED THAT FOR A.Y. 2004 - 05 ON IDENTICAL FACTS RESPECTED CO - ORDINATE B BENCH AHMEDABAD IN ITA NOS. 1300 & 2030/AHD/2008 IN ASSESSEE S OWN CASE ORDER DATED 12.12.2014 THE MATTER HAS BEEN RESTORED BACK TO THE FILE OF THE AO WITH CERTAIN DIRECTION S , RELEVANT PARAGRAPH 9 IS REPRODUCED BELOW: 9. WE FIND THAT THE CIT(A) WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE ABOVE STATED REASONS. THE CLAIM OF THE ASSESSEE IS THAT IT COULD NOT CLAIM EXEMPTION U/S 10A AS ACCORDING TO ITS RETURN THERE WAS LOSS FROM THE ELIGIBLE UNIT AND CONSEQUENTLY FOR THE FIRST TIME OPPORTUNITY TO CLAIM EXEMPTION U/S 10A AROSE ONLY WHEN CERTAIN DISALLOWANCES/ADDITIONS WERE MADE BY THE ASSESSING OFFICER WHICH RES ULTED IN POSITIVE INCOME OF THE ELIGIBLE UNDERTAKING. WE FIND THAT THE ASSESSING OFFICER HAS NOT ALLOWED ANY OPPORTUNITY TO THE ASSESSEE FOR CLAIMING EXEMPTION U/S 10A AFTER COMPUTING THE BUSINESS INCOME OF THE ALLEGED ELIGIBLE UNDERTAKING AT A POSITIVE FI GURE FOR THE FIRST TIME. IN OUR CONSIDERED VIEW, WHILE MAKING THE ASSESSMENT U/S 143(3) OF THE ACT, THE ASSESSING OFFICER IS DUTY BOUND TO COMPUTE THE TOTAL INCOME AS PER THE PROVISIONS OF INCOME - TAX ACT AND THEREFORE, IN ALLOWING DEDUCTIONS/EXEMPTIONS ALS O TO THE ASSESSEE WHICH IS STATUTORILY ALLOWABLE TO THE ASSESSEE. IN THE CIRCUMSTANCES, WE SET ASIDE THE ORDERS OF THE LOWER ITA NOS.1171, 1594 - A - 09, 1251, 1574, 2333, 2522, 2568 - A - 10 (HIMSON INTERNATIONAL PVT. LTD ) FOR A.Y S . 20 0 6 - 0 7, 2007 - 08 & 200 8 - 0 9 - 6 AUTHORITIES ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE FOR DEDUCTIONS U/S 10A OF THE ACT AND THEREAFTER PASSING AN ORDER IN ACCORDANCE WITH THE LAW. NEEDLESS TO MENTION THAT REASONABLE OPPORTUNITY OF HEARING SHOULD BE ALLOWED BY THE ASSESSING OFFICER TO THE ASSESSEE BEFORE ADJUDICATING THE ISSUE IN ACCORDANCE WITH THE LAW. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 16. RESPECTFULLY FOLLOWING THIS DECISION, THIS ISSUE FOR THE YEARS UNDER CONSIDERATION IS ALSO REFERRED BACK TO THE STAGE OF THE AO; HENCE TO BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 17. FOR A.YS.2007 - 08 AND 2008 - 09, GROUND NO.1 IS IN RESPECT OF DISALLOWANCE OF PROFESSIONAL CHARGES. THE FACTS OF THE CASE HAVE REVEALED THAT THE ASSESSEE HAS FURNISHED LEDGER ACCOUNT OF THE PROFESSIONAL CHARGES AND THERE WAS EXPENDITURE SHOWN AS CONSULTATION OF BUSINESS . ACCORDING TO AO, THERE WAS NO SPECIFIC DETAIL OF CONSULTANCY HENCE 1/5 OF THE EXPENDITURE WAS DISALLOWED. WE ARE OF THE VIEW THAT THE ASSESSEE HAS FURNISHED THE DETAILS OF THE EXPENDITURE HENC E IT WAS UNWARRANTED ON THE PART OF THE AO TO ESTIMATE THE IMPUGNED DISALLOWANCE IN THE ABSENCE OF ANY SPECIFIC CONTRARY FINDING. WE, THEREFORE, REVERSE THOSE FINDINGS A ND DIRECT TO ALLOW THE CLAIM. 18. FOR A.Y. 2007 - 08, VIDE GROUND NO.5, THE ASSESSEE HAS RAISED AN ISSUE THAT THE REVENUE AUTHORITIES HAVE ERRED IN TAXING MAT LIABILITY OF RS.4,04,894/ - WHEN THERE WAS NO SUCH LIABILITY ON THE ASSESSEE. 19. THE SHORT ARGUMENT OF THE LEARNED AR BEFORE US IS THAT MAT LIABILITY IS REQUIRED TO BE RE - ASCERTAINED I N VIEW OF THE APPEALS DECIDED IN THE CASE OF THE ASSESSEE FOR A.Y.2004 - 05, 2005 - 06 AND ONWARDS. LEARNED ITA NOS.1171, 1594 - A - 09, 1251, 1574, 2333, 2522, 2568 - A - 10 (HIMSON INTERNATIONAL PVT. LTD ) FOR A.Y S . 20 0 6 - 0 7, 2007 - 08 & 200 8 - 0 9 - 7 AR HAS FURTHER PLEADED THAT IF MAT CREDIT IS AVAILABLE THEN THE SAME SHOULD BE ALLOWED TO THE ASSESSEE. ON HEARING THE SUBMISSIONS OF OTHER SIDE, WE ARE OF THE VIEW THAT THE A O IS OTHERWISE DUTY BOUND TO RE - CALCULATE THE TAX UNDER MAT PROVISION AFTER GIVING EFFECT OF THE APPELLATE ORDERS. NATURALLY, IF MAT CREDIT IS AVAILABLE AS PER LAW THE AO SHALL GRANT THE SAME TO THE ASSESSEE UNDER THE PROVISIONS OF THE ACT. WE ORDER ACCORDINGLY. THIS GROUND OF THE ASSESSEE MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSE ONLY. 20. FOR A.Y.2008 - 09 A DISALLOWANCE U/S.40A(IA) WAS CHALLENGED VIDE GROUND NO.3 AND IN THIS REGARD FACTS OF THE CASE AS PER THE ASSESSMEN T ORDER WERE THE ASSESSEE HAD DEDUCTED THE TAX AT SOURCE IN THE MONTHS OF SEPTEMBER 2009, FEBRUARY 2008 AND MARCH 2008, HOWEVER IT WAS DEPOSITED IN THE GOVERNMENT ACCOUNT ON 14 TH OCTOBER, 2008. THE AO HAS ALSO NOTED THAT THE RETURN OF INCOME WAS FILED ON 3 0 TH OF SEPTEMBER, 2008. THE ASSESSEE HAS INFORMED THAT A SUM OF RS.2,95,686/ - WAS DISALLOWED BY THE ASSESSEE SUO MOTU IN THE RETURN OF INCOME. FOR THE BALANCE OF AMOUNT RS.40,487/ - THE AO HAS INVOKED THE SAID PROVISION AND DISALLOWED THE SAME. THE SHORT RE QUEST BEFORE US IS THAT THE AFORESAID AMOUNT MAY BE DIRECTED TO BE ALLOWED IN THE YEAR IN WHICH IT WAS ACTUALLY PAID. RATHER, LEARNED CIT(A) HAS ALSO HELD THAT THE PROVISIONS OF THE ACT PROVIDES FOR ALLOWING THE PAYMENT IN THE YEAR IN WHICH IT IS PAID. WE ORDER ACCORDINGLY AND ALLOW THIS GROUND OF THE ASSESSEE AS PER THE DIRECTION. 21. FROM THE SIDE OF THE REVENUE, CROSS APPEALS HAVE BEEN FILED FOR A.Y.2006 - 07, 2007 - 08 AND 2008 - 09 SO RAISING IDENTICAL ISSUE OF DELETION ITA NOS.1171, 1594 - A - 09, 1251, 1574, 2333, 2522, 2568 - A - 10 (HIMSON INTERNATIONAL PVT. LTD ) FOR A.Y S . 20 0 6 - 0 7, 2007 - 08 & 200 8 - 0 9 - 8 OF ADDITION BY LEARNED CIT(A) PERTAI NING TO ESTIMATION OF PROFIT IN GROUND NO.1. 22. NOW BEFORE US AN ORDER OF ITAT D BENCH AHMEDABAD IN ASSESSEE S OWN CASE FOR A.Y.2004 - 05 BEARING ITA NO.1300 AND 2030/AHD/2008 ORDER DATED 12.12.2014 HAS BEEN FURNISHED ACCORDING TO WHICH THE ADDITION WAS NOT PROPER AND THE SAME WAS DELETED . R ELEVANT PARAGRAPHS 31 AND 32 ARE REPRODUCED BELOW: 31 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER PROC EEDED ON THE ASSUMPTION THAT THE GROSS PROFIT RATE DISCLOSED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS 9.05% AND ON THE BASIS OF THIS HE CONSIDERING GROSS PROFIT RATE DISCLOSED IN THE PRECEDING TWO YEARS AT AN AVERAGE RATE WHICH WORKED OUT TO 19. 665% AND THEREFORE, MADE TRADING ADDITION OF RS.1,08,96,008/ - 32. THE ASSESSEE AT PAGE NO.70 OF THE PAPER - BOOK PLACED A WORKING OF THE GROSS PROFIT RATE OF THE YEAR UNDER CONSIDERATION ALONGWITH COPY OF THE TAX AUDIT REPORT AT PAGE NOS.15 - 37 OF THE PAPER - BOOK FILED BY BEFORE US. THE ABOVE WORKING SHOWS THAT THE GROSS PROFIT RATE DISCLOSED DURING THE YEAR WAS 17.26% AND NOT 9.05% AS ASSUMED BY THE ASSESSING OFFICER. THUS, IT SHOWS THAT THE ASSESSING OFFICER PROCEEDED IN THE CASE ON A WRONG ASSUMPTION THAT T HE GROSS PROFIT RATE DISCLOSED BY THE ASSESSEE DURING THE YEAR WAS 9.05%. FURTHER, WE FIND THAT AS OBSERVED BY THE CIT(A) THE MARKET IN WHICH THE ASSESSEE SOLD ITS GOODS IN EAR LIER YEARS WAS DIFFERENT FROM THE MARKET IN WHICH THE ASSESSEE SOLD ITS GOODS DU RING THE YEAR UNDER CONSIDERATION AND THIS CHANGE IN THE MARKET CAUSED CHANGE IN THE GROSS PROFIT RATE. IN ABSENCE OF ANY ERROR BEING POINTED OUT BY THE REVENUE IN THE ABOVE STATED FACTS, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE CI T(A) WHICH IS CONFIRMED AND THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 23. IN THE RESULT, RESPECTFULLY FOLLOWING THE ABOVE DECISION WE HEREBY DISMISS THIS GROUND OF THE REVENUE IN ALL THE YEARS. 24. FOR A.Y.2007 - 08, THE REVENUE HAS RAISED GROUND NO.2 AGAINST THE DELETION OF ADDITION MADE BY THE AO OF RS.1,03,323/ - AFTER MAKING ADJUSTMENT OF SECTION 145A OF IT ACT. ITA NOS.1171, 1594 - A - 09, 1251, 1574, 2333, 2522, 2568 - A - 10 (HIMSON INTERNATIONAL PVT. LTD ) FOR A.Y S . 20 0 6 - 0 7, 2007 - 08 & 200 8 - 0 9 - 9 25. OUR ATTENTION HAS BEEN DRAWN ON THE FINDINGS OF LEARNED CIT(A) AS FOLLOWS: 3.1 THIS IS REGARDING DISALLOWANCE OF RS.1,03,723/ - U/ S.145A. VIDE LETTER DATED 05.03.2010 THE APPELLANT HAS STATED THAT THE AO HAS SUBSTITUTED THE FIGURE OF R S.1,03,723/ - BY RS.5,22,627/ - , VIDE ORDER DATED 16.02.2010 PASSED U/S,154 AS THERE WAS AN APPARENT MISTAKE. IN THE ASSESSMENT ORDER THE AO HAS STATED T HAT THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHETHER THIS AMOUNT OF EXCISE DUTY WAS INCLUDED IN THE EARLIER YEAR THROUGH ADJUSTMENT U/S 145A. IN CASE IT WAS NOT OFFERED AS INCOME THE SAME WAS NOT TO BE ALLOWED AS EXPENSES DURING THE YEAR UNDER CONSIDERATION . THE ASSESSEE REPLIED THAT THE ASSESSEE HAS ALREADY OFFERED THE OPENING STOCK EXCISE DUTY IN A.Y. 2005 - 06 BY AGGREGATING THE SAME TO THE CLOSING STOCK. THE ASSESSEE HAS ALSO MENTIONED THAT SECTION 145A IS A TAX NEUTRAL AND DOES NOT LEAD TO ENHANCEMENT OF PROFIT IN ANY WAY. THE AO HAS STATED THAT THE REPLY OF THE ASSESSEE IS NOT ACCEPTABLE. ACCORDING TO HIM SECTION 145A IS NOT TAX NEUTRAL AND OPENING STOCK AND CLOSING STOCK SHOULD INCLUDE TAX, DUTY, CESS AS PART OF ITS COST AS PROVIDED BY SECTION 145A. THE AO FURTHER STATED THAT THE CLOSING STOCK SHOULD ALWAYS HAVE ELEMENT OF TAX, DUTY, CESS AND ACCORDING TO THE AO THE ASSESSEE HAS NOT INCLUDED THIS AMOUNT IN THE CLOSING STOCK OF LAST YEAR. HE, THEREFORE, ADDED THE AMOUNT OF RS.5,22,627/ - SAYING THAT THE ASS ESSEE HAS NOT INCLUDED THIS AMOUNT IN THE CLOSING STOCK OF LAST YEAR BUT HAS INCLUDED THE SAME IN THE OPENING STOCK OF LAST YEAR 3.3 IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE REQUIREMENT OF SECTION 145A IS THAT THE ASSESSEE MUST INCLUDE TAX DUTIES, CES S ETC. FOR VALUING THE CLOSING STOCK. THE ASSESSEE CAN FOLLOW THE EXCLUSIVE METHOD FOR THE BOOK PURPOSES BUT FOR THE PURPOSE OF TAX AUDIT REPORT AND DISALLOWANCE U/S.43B IT IS NECESSARY THAT THE ASSESSEE MUST SHOW THE EFFECT OF SECTION 145A BY FOLLOWING TH E INCLUSIVE MET H OD I.E. BY INCLUDING ALL TAX, DUTIES, CESS ETC. IN THE CLOSING STOCK. THE ASSESSEE HAS TO NECESSARILY FOLLOW THE CLOSING STOCK OF LAST YEAR AS OPENING STOCK OF THE CURRENT YEAR. THEREFORE, IF THE ASSESSEE HAS INCLUDED THE TAX, DUTIES, CESS ETC. IN THE CLOSING STOCK OF A.Y. 2006 - 07 THEN HE CAN CLAIM IT IN THE OPENING STOCK OF A.Y. 2007 - 08. HENCE THE ADDITION OF RS.5,22,627/ - IS WRONG. HOWEVER, SINCE THE ADDITION MADE IN THE LAST YEAR WAS DELETED BY THE CIT(A), THE APPELLANT CANNOT GET THE CLA IM OF ADDITION OF LAST YEAR MENTIONED IN THE GROUND OF APPEAL. HENCE DISALLOWANCE OF RS.5,22,627/ - IS DELETED. THEREFORE, THIS GROUND OF APPEAL, IS ALLOWED. 26. AFTER HEARING BOTH THE SIDES, WE ARE OF THE VIEW THAT THERE WAS NO FALLACY IN THE FINDINGS OF LEARNED CIT(A) WHEN IT WAS FOUND ON FACTS THAT THE AMOUNT IN QUESTION WAS INCLUDED IN THE CLOSING STOCK AND THAT THE ASSESSEE IS FOLLOWING THIS METHOD YEAR AFTER YEAR. WE HEREBY AFFIRM THE ITA NOS.1171, 1594 - A - 09, 1251, 1574, 2333, 2522, 2568 - A - 10 (HIMSON INTERNATIONAL PVT. LTD ) FOR A.Y S . 20 0 6 - 0 7, 2007 - 08 & 200 8 - 0 9 - 10 FACTUAL AS WELL AS LEGAL FINDING GIVEN BY LEARNED CIT(A) AND DISMI SS THIS GROUND OF THE REVENUE. 27. FOR A.Y. 2006 - 07, THE REVENUE HAS ALSO CHALLENGED THE DELETION OF PENALTY LEVIED U/S.271(1)(C) DUE TO DISALLOWANCE OF EXPENDITURE HELD AS CAPITAL EXPENDITURE AND THE DISALLOWANCE MADE U/S.14A OF IT ACT. 28. AT THE OUTS ET, WE HAVE BEEN INFORMED THAT ITAT D BENCH AHMEDABAD IN ASSESSEE S OWN CASE FOR A.Y. 2004 - 05 BEARING ITA NO.2243 AND 2493/AHD/2009 VIDE AN ORDER DATED 12.12.2014 HAS QUASHED THE PENALTY PROCEEDINGS IN THE FOLLOWING MANNER: 10. WE FIND THAT IN THE INSTANT CASE, NO POSITIVE MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE EXPENDITURE CLAIMED WAS ACTUALLY F ALSE OR BOGUS. PENALTY U/S 271(1 )(C) CANNOT BE LEVIED ONLY ON THE BASIS OF PROBABILITY. THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN CO NFIRMING PENALTY U/S 271(L)(C) IN RESPECT OF DISALLOWANCE OF RS.9,73,072/ - ON THE GROUND THAT THE EXPENDITURE FOR BUSINESS PURPOSES COULD HAVE BEEN LESSER. OUR VIEW FINDS SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANC E PETROPRODUCTS PVT. LTD., [2010] 322 ITR 158 (SC), WHEREIN IT WAS HELD THAT 'WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALT Y U/S 271(1 )(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. ' THEREFORE, WE DELETE THE LEVY OF PENALTY U/S 271(1)(C) IN RESPECT OF DISALLOWANCE OF EXPENSES OUT OF FOREIGN TRAVEL EXPENDITURE. THEREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED . 14. WE FIND THAT THE GENUINENESS OF THE EXPENDITURE IS NOT IN DOUBT. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE HAS CONCEALED ANY PARTICULARS OF INCOME OR HAS FURNISHED ANY INACCURATE PARTICULARS OF INCOME IN THIS RESPECT. ON THE BASIS OF PARTICULARS FURNISHED IN RESPECT OF EXPENSE IN QUESTION, IT WAS INF ERRED THAT THE SAME WAS CAPITAL IN NATURE AND ONLY DEPRECIATION WAS ALLOWABLE TO THE ASSESSEE. 15. THE CLAIM OF THE ASSESSEE WAS THAT IT WAS A REVENUE EXPENDITURE AS NO TANGIBLE ASSET WAS ACQUIRED BY THE ASSESSEE BY INCURRING THE SAID EXPENDITURE. ITA NOS.1171, 1594 - A - 09, 1251, 1574, 2333, 2522, 2568 - A - 10 (HIMSON INTERNATIONAL PVT. LTD ) FOR A.Y S . 20 0 6 - 0 7, 2007 - 08 & 200 8 - 0 9 - 11 16. IN THE ABOVE FACTS, IN OUR CONSIDERED VIEW, THE OPINION OF CIT(A) THAT THE DISALLOWANCE WAS BECAUSE OF DIFFERENCE OF OPINION AND THEREFORE, PENALTY U/S 271(1)(C) CANNOT BE SUSTAINED IS JUSTIFIED. WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 29. RESPECTFULLY FOLLOWING THIS DECISION PRONOUNCED IN ASSESSEE S OWN CASE WE HEREBY CONFIRM THE DELETION AS MADE BY LEARNED CIT(A). RESULTANTLY, THIS GROUND OF THE REVENUE IS DISMISSED. 30. TO SUM UP, ASSESSEE S APPEALS ARE PART LY ALLOWED AND THE REVENUE APPEALS ARE DISMISSED. SD/ - SD/ - (ANIL CHATURVEDI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30 / 01 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD