SONAL ROPES P. LTD, MUMBAI V. ITO 8(3)(2), MUMBAI

ITA 2635/MUM/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62487 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 04-06-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 24-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY
• Assessee Lawyers: K R LAKSHMINARAYAN
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I , MUMBAI BEFORE SHRI B. R. MITTAL, J.M. AND SHRI N. K. BILLA IYA, A.M. ITA NO. : 2635/MUM/2009 ASSESSMENT YEAR : 2003-04 M/S. SONAL ROPES PVT. LTD. 2-NE LAXMI INDUSTRIAL ESTATE, NEW LINK ROAD, ANDHERI(W), MUMBAI-400 053 PAN NO: AAACS 6292 F VS. ITO, 8(3)(2), AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. R. L A KSHMINARAYAN RESPONDENT BY : SHRI AJAY DATE OF HEARING : 04.06.2012 DATE OF PRONOUNCEMENT : 08.06.2012 ORDER PER N. K. BILLAIYA, A.M.: WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE CORRECTNESS OF THE ORDER OF THE LD. CIT(A)-XXIX, MUMBAI DATED 24.0 1.2008. THE APPEAL IS LATE BY 395 DAYS. THE DIRECTOR OF THE APPELLANT COMPANY HAS FILED AN AFFIDAVIT STATING THE REASONS WHY THE APPEAL COULD NOT BE FILED ON TIME. WE HAVE GONE THROUGH THE CONTENTS OF THE AFFIDAVIT AND FIND THAT THE APPELLANT WAS PREVENTED BY REASONABLE AND JUSTIFIAB LE CAUSE, HENCE THE DELAY IS CONDONED. 2. THE ASSESSEE HAS SHOWN ITS GRIEVANCE AGAINST THE LEVY OF PENALTY OF `. 9,46,310/- U/S.271(1)(C) OF THE ACT CONFIRMED BY TH E LD. CIT(A). THE ROOTS OF THE LEVY OF PENALTY LIE IN THE ASSESSMENT ORDER. DURING THE COURSE ITA NO. 2635/MUM/2009 M/S. SONAL ROPES PVT. LTD. 2 OF THE ASSESSMENT PROCEEDINGS. THE A.O. HAS COMPLE TED THE ASSESSMENT BY MAKING THE FOLLOWING DISALLOWANCES:- 1. FOREIGN TRAVEL `. 15,56,115/- 2. OCEAN FREIGHT TRANSPORT/FORWARDING CHARGES `. 10,18,865/- 2.1 FOREIGN TRAVEL EXPENSES WERE DISALLOWED BECAUSE THE SAME WERE INCURRED BY THE ASSESSEE FOR THE BUSINESS OF ASSESS EES SISTER CONCERN M/S. SONAL IMPEX LTD. AND FOR THE SIMILAR REASONS E XPENSES UNDER THE HEAD OCEAN FREIGHT TRANSPORT CHARGES WERE ALSO DISA LLOWED. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), BUT WITHOUT ANY SUCCESS. THE A.O. INITIATED THE PENALTY PROCEEDING S AS HE WAS OF THE OPINION THAT THE ASSESSEE HAS NOT ONLY CONCEALED TH E INCOME BUT HAS ALSO FILED INACCURATE PARTICULARS BY CLAIMING FALSE EXPE NSES. THE ASSESSEE RESISTED THE STAND TAKEN BY THE A.O. STATING THAT T HE EXPENSES WERE INCURRED ON COMMERCIAL GROUNDS AS THE SISTER CONCER N OF THE ASSESSEE WAS IN THE EXPORT BUSINESS AND THE ASSESSEE HAS SOL D THE ITS ENTIRE PRODUCT TO ITS SISTER CONCERN WHICH IN TURN EXPORTE D THE GOODS AND, THEREFORE, THE EXPENSES ON FOREIGN TRAVEL AND OCEA N FREIGHT TRANSPORT/FORWARDING CHARGES WERE INCURRED BY THE A SSESSEE ON BEHALF OF THE SISTER COMPANY AS A MATTER OF COMMERCIAL EX PEDIENCY. HOWEVER, THE A.O. WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. THE A.O. LEVIED THE PENALTY ON HIS FINDING THAT THE ASS ESSEE COMPANY HAS ACCEPTED ALL THE ADDITIONS AS IT HAS NOT PREFERRED ANY APPEAL. FURTHER AS PER THE EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT, THE ONUS LIE ON T HE ASSESSEE TO PROVE THAT THE EXPLANATION FURNISHED BY IT IS BONAFIDE AND THE SAID ONUS HAS NOT BEEN DISCHARGED BY THE ASSESSEE. THE A.O. HELD THAT THE ASSESSEE IS LIABLE FOR LEVY OF PENALTY U/S.271( 1)(C) OF THE ACT AND WENT ON TO LEVY `. 9,46,310/- BEING 100% OF THE TAX SOUGHT TO BE EVADE D BY FURNISHING THE INACCURATE PARTICULARS. ITA NO. 2635/MUM/2009 M/S. SONAL ROPES PVT. LTD. 3 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A), BUT WITHOUT ANY SUCCESS. 4. WE FIND THAT THE LD. CIT(A) THOUGH NOT CONVINCED WITH THE FINDINGS OF THE A.O. THAT IN QUANTUM ADDITION THE ASSESSEE H AS NOT PREFERRED ANY APPEAL. ON THE CONTRARY, IT WAS POINTED OUT BY THE LD. CIT(A) THAT THE ASSESSEE HAS ACTUALLY PREFERRED AN APPEAL AGAINST T HE QUANTUM ORDER BEFORE THE LD. CIT(A) AND THEN BEFORE THE ITAT, BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) CONFIRMED THE PENALTY HOLDING THAT T HE ASSESSEE HAS NO COMMERCIAL REASON IN BOOKING EXPENDITURE IN ITS OWN BOOKS RATHER THAN IN THE BOOKS OF ITS SISTER CONCERN. ACCORDING TO T HE LD. CIT(A), THE ACTION OF THE ASSESSEE WAS AIMED AT AVOIDING THE PAYMENT O F TAX. 5. AGGRIEVED BY THIS FINDINGS OF THE LD. CIT(A), TH E ASSESSEE IS BEFORE US. 6. THE LEARNED COUNSEL APPEARING FOR THE APPELLANT ARGUED THAT THE PENALTY HAS BEEN LEVIED SOLELY ON THE DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSESSEE. SINCE THE PENALTY IS LEVIED ONLY ON THE DISALLOWANCE, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ITS INCOME OR FILED INACCURATE PARTICULARS. 7. THE LEARNED DR RELIED UPON THE ORDERS OF THE LOW ER AUTHORITIES. 8. WE HAVE CONSIDERED THE ARGUMENTS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IT IS NOT IN DISPUTE THAT THE E XPENSES WERE DEBITED BY THE APPELLANT IN ITS BOOKS. THOUGH THE EXPENSES WE RE INCURRED FOR THE BENEFIT OF THE BUSINESS OF ITS SISTER CONCERN M/S. SONAL IMPEX LTD, WE FIND THAT THE APPELLANT HAS ACTUALLY INCURRED THESE EXPENSES AND CONSIDERING THE NATURE OF THE APPELLANTS BUSINESS A ND THE BUSINESS OF ITS SISTER CONCERN WE FIND THAT THE EXPENSES WERE ACTUA LLY INCURRED ON THE ITA NO. 2635/MUM/2009 M/S. SONAL ROPES PVT. LTD. 4 GROUNDS OF COMMERCIAL EXPEDIENCY. AS THE A.O. HAS DISALLOWED THIS CLAIM OF EXPENSES, SUCH DISALLOWANCE IPSO FACTO CANNOT BE A GROUND FOR THE LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. OUR VIEW FINDS SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. RELIANCE PETROPRODUCTS LTD. REPORTED IN 322 ITR 158 (SC), WH EREIN THE HON'BLE SUPREME COURT HAS HELD THAT REJECTING THE CLAIM OF THE ASSESSEE CANNOT BE A GROUND FOR LEVY OF PENALTY. RESPECTFULLY, FOL LOWING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT, THE PENALTY LEVI ED AT `. 9,46,310/- IS DELETED. THE FINDINGS OF THE LD. CIT(A) ARE REVERS ED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 08 TH DAY OF JUNE, 2012. SD/ - SD/ - ( B. R. MITTAL ) ( N. K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 08.06.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI