Atlantic Shipping Services, Bhavnagar V. The ACIT, Circle-1, Bhavnagar

ITA 2650/AHD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94600 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 29-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 13-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A L THAKKAR
• Keywords: Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NOS: 2649 & 2650/AHD/2013 (ASSESSMENT YEARS: 2006-07 & 2007-08) ATLANTIC SHIPPING SERVICES ASHISH JYOT COMPLEX, SANSKAR MANDAL, BHAVNAGAR-364002 V/S THE ASSTT. COMM. OF INCOME TAX, CIRCLE-1, BHAVNAGAR (APPELLANT) (RESPONDENT) PAN: AA DFA 6136E APPELLANT BY : SHRI A.L. THAKKAR, AR RESPONDENT BY : SHRI SOMOGYAN PAL, SR. D.R. ( )/ ORDER DATE OF HEARING : 29-09-2015 DATE OF PRONOUNCEMENT : 16 -10-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINST THE ORDERS OF CIT(A)- XX, AHMEDABAD DATED 10.09.2013 FOR A.Y. 2006-07 & 2 007-08. ITA NOS. 264 9 & 2650/AHD/2013 . A.Y. 2006-07 & 2007-08 2 2. BEFORE US, AT THE OUTSET THE LD. A.R. SUBMITTED THA T THOUGH THE APPEALS OF ASSESSEE RELATES TO TWO DIFFERENT ASSESSMENT YEARS BUT THE FACTS AND CIRCUMSTANCES OF BOTH THE CASES ARE SIMILAR EXCEPT FOR THE ASSESSMENT YEARS AND AMOUNTS AND THE SUBMISSIONS ARE ALSO COMMON FOR BOTH THE APPEALS AND THEREFORE BOTH THE APPEALS CAN BE HEARD TOGETHER. L D D.R DID NOT OBJECT TO THE AFORESAID SUBMISSIONS OF LD. A.R. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS TOGETHER FOR THE SAKE OF CONVENIEN CE AND PROCEED WITH THE FACTS IN A.Y. 2006-07 IN ITA NO. 2649/AHD/2013. 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF PROVIDING BARGE SERVICES. ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2006- 07 ON 27.9.2006 DECLARING TOTAL LOSS OF RS 6,85,630 /-. THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 27.10.2008 A ND THE TOTAL LOSS WAS DETERMINED AT RS 6,35,630/-. THEREAFTER THE CASE WA S REOPENED AND PURSUANT TO WHICH ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 14 7 VIDE ORDER DATED 13.12.2011 AND THE TOTAL LOSS WAS DETERMINED AT RS 2,28,414/- BY INTER ALIA DISALLOWING THE INTEREST EXPENSES OF RS 4,52,462/- U/S 36(1)(III) FOR THE REASON THAT THE INTEREST WAS INCURRED TOWARDS THE C ONSTRUCTION OF NEW BARGE, WHICH ACCORDING TO THE AO WAS A CAPITAL EXPENDITURE AND THEREFORE NOT ALLOWABLE. ON THE AFORESAID DISALLOWANCE OF INTERES T EXPENDITURE, AO VIDE ORDER DATED 20.6.2012 CONCLUDED THAT INTEREST EXPEN SES WAS WRONGLY CLAIMED BY THE ASSESSEE MORE SO IN VIEW OF THE FACT THAT TH E BOOKS OF ACCOUNTS OF ASSESSEE WERE AUDITED BY CHARTERED ACCOUNTANTS AND THEREBY ASSESSEE HAS CONCEALED THE INCOME BY FURNISHING INACCURATE PARTI CULARS OF INCOME AND THEREFORE ASSESSEE WAS LIABLE FOR PENALTY U/S 271(1 )(C) OF THE ACT AND ACCORDINGLY LEVIED PENALTY OF RS 1,49,310/-. AGGRIE VED BY THE PENALTY ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A ) WHO VIDE ORDER DATED ITA NOS. 264 9 & 2650/AHD/2013 . A.Y. 2006-07 & 2007-08 3 10.9.2013 CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND:- 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS. 1,49,310/- LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF T HE I.T. ACT, 1961. 4. BEFORE US, LD AR REITERATED THE SUBMISSIONS MADE BE FORE AO AND LD. CIT(A). HE FURTHER SUBMITTED THAT ASSESSEE HAD DEBI TED THE INTEREST IN ITS BOOKS OF ACCOUNTS AND HAD PROVIDED DETAILS IN THE R ETURN OF INCOME AND ALSO FURNISHED THE DETAILS IN ASSESSMENT AND REASSESSMEN T PROCEEDINGS AND WHEN ASSESSEE CAME TO KNOW ABOUT THE NON ALLOWABILITY OF EXPENSES, IT VOLUNTARILY ACCEPTED THE DISALLOWANCE OF INTEREST IN REASSESSME NT PROCEEDINGS. HE THEREFORE SUBMITTED THAT ASSESSEE HAD NOT CONCEALED ANY FACTS WHICH WOULD REQUIRE THE LEVY OF PENALTY U/S. 271(1)(C) OF THE A CT. HE FURTHER PLACED RELIANCE ON THE DECISIONS IN THE CASE OF CIT VS JAG RAN AGENTS (P) LTD (2014) 52 TAXMANN.COM 80 (DEL), CIT VS KEVIN PROCESS TECHN OLOGIES P. LTD. (2013) 40 TAXMANN.COM 249 (GUJ) AND CIT VS RELIANCE PETROPRODUCTS PVT. LTD (2010) 322 ITR 158 (SC). HE THEREFORE PRAYED TH AT PENALTY BE DELETED. ON THE OTHER HAND ID DR RELIED ON THE ORDER OF AO A ND LD. CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THE PRESENT CASE PENALTY U/S 271(L)(C) HAS BEEN LEVIED ON THE INTEREST DISALLOWED BY AO AS ACCORDING TO A.O, THE INTEREST INCURRED FOR THE CONSTRUCTION OF BARGE WAS NOT ALLOWABLE AS IT WAS I N THE NATURE OF CAPITAL EXPENDITURE AND BY CLAIMING THE INTEREST EXPENDITUR E, ASSESSEE HAS CONCEALED INCOME BY FURNISHING INACCURATE PARTICULA RS OF INCOME. ITA NOS. 264 9 & 2650/AHD/2013 . A.Y. 2006-07 & 2007-08 4 6. THE PENALTY UNDER S. 271(L)(C) OF THE ACT IS LEVIAB LE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT THAT AN Y PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME. IT IS WELL SETTLED THAT ASSESSMENT PROCEEDI NGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT AND THE FINDI NG IN THE ASSESSMENT PROCEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR TH E PURPOSES OF THE PENALTY PROCEEDINGS. 7. THE NECESSARY INGREDIENTS FOR ATTRACTING EXPLANATIO N 1 TO SECTION. 271(L)(C) ARE THAT: (I) THE PERSON FAILS TO OFFER THE EXPLANA TION, OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AO OR THE LD. CIT (A) OR THE LD. CIT TO BE FALSE, OR (III) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CATEGORIES, TH EN ACCORDING TO THE DEEMING PROVISION PROVIDED IN EXPLANATION 1 TO SECTION. 271 (L)(C) THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME SHALL B E CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED, FOR THE PURPOSES OF CLAUSE (C) OF SECTION. 271(1), AND THE PENALTY F OLLOWS. ON THE OTHER HAND, IF THE ASSESSEE IS ABLE TO OFFER AN EXPLANATION, WH ICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE, AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME HAVE BEEN DISCLOSED BY HIM, THEN IN THAT CASE PENALTY SHALL N OT BE IMPOSED. 8. IN THE PRESENT CASE THE ASSESSEE HAD DISCLOSED THE MATERIAL FACTS BEFORE THE AO. WHEN THE ASSESSEE HAS MADE A PARTICULAR CLAIM I N THE RETURN OF INCOME AND HAS ALSO FURNISHED ALL THE MATERIAL FACTS RELEV ANT THERETO, THE ITA NOS. 264 9 & 2650/AHD/2013 . A.Y. 2006-07 & 2007-08 5 DISALLOWANCE OF SUCH CLAIM CANNOT AUTOMATICALLY LEA D TO THE CONCLUSION THAT THERE WAS CONCEALMENT OF PARTICULARS OF HIS INCOME BY THE ASSESSEE OR FURNISHING INACCURATE PARTICULARS THEREOF. WHAT IS TO BE SEEN IS WHETHER THE SAID CLAIM MADE BY THE ASSESSEE WAS BONA FIDE AND W HETHER ALL THE MATERIAL FACTS RELEVANT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED, THE ASSESSEE CANNOT BE HELD LIABLE FOR CONCEALMENT PENA LTY U/S. 271(1) (C) OF THE ACT. 9. A CASE FOR LEVY OF PENALTY FOR CONCEALMENT OF INCOM E HAS TO BE EVALUATED IN TERMS OF PROVISIONS OF EXPLANATION. 1 TO SECTION. 2 71(1)(C), AS PER WHICH IF IN RELATION TO ANY ADDITION IN THE ASSESSMENT, THE ASSESSEE OFFERS NO EXPLANATION OR OFFERS EXPLANATION WHICH IS FOUND TO BE FALSE OR IS NOT ABLE TO SUBSTITUTE THE EXPLANATION AND IS ALSO NOT ABLE TO PROVE THAT THE EXPLANATION IS BONAFIDE, THE ADDITION MADE WOULD AMOUNT TO CONCEAL MENT OF PARTICULARS OF INCOME. IT IS A SETTLED LEGAL POSITION THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM ASSESSMENT PROCEEDINGS AND THE FINDINGS GIVEN IN THE ASSESSMENT THOUGH IT MAY CONSTITUTE GOOD EVIDENCE BUT SAME IS NOT CONCLUSIVE IN THE PENALTY PROCEEDINGS FURTHER, MERELY BECAUSE ASSESSE E HAS NOT CHALLENGED THE ORDER OF ASSESSMENT LEVYING TAX AND INTEREST AN D HAS PAID TAX AND INTEREST THAT BY ITSELF WILL NOT BE SUFFICIENT FOR THE AUTHO RITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY. WE ARE OF THE VIEW T HAT IN THE ABSENCE OF COMPLETE AND CONVINCING CORROBORATIVE EVIDENCE, THE REVENUE MAY JUSTIFY ADDITION, BUT IN THE MATTER OF PENALTY PROCEEDINGS, THE ONUS LIES HEAVILY ON THE REVENUE TO PROVE THAT THE ASSESSEE HAD CONCEALE D ITS INCOME OR HAS FILED INACCURATE PARTICULARS OF ITS INCOME. WE ALSO FIND THAT THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS 322 ITR 158 HAS HELD AS UNDER:- ITA NOS. 264 9 & 2650/AHD/2013 . A.Y. 2006-07 & 2007-08 6 THE ARGUMENT OF THE REVENUE THAT 'SUBMITTING AN INC ORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCURATE PARTI CULARS OF SUCH INCOME' IS NOT CORRECT. BY NO STRETCH OF IMAGINATIO N CAN THE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. A MERE MAKING OF THE CLAIM, WHICH IS N OT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WIL L INVITE PENALTY U/S 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF TH E LEGISLATURE. 10. IN VIEW OF THE AFORESAID FACTS WE ARE OF THE VIEW T HAT IN THE PRESENT CASE NO PENALTY IS LEVIABLE U/S 271(1)(C) AND THEREFORE DIR ECT ITS DELETION. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 11. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED. NOW WE TAKE UP FOR A.Y. 2008-09 IN ITA NO. 2650/A HD/2013 12. IN THE PRESENT CASES, SINCE BOTH THE PARTIES HAVE A DMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL TO THAT OF A.Y 2006-07 IN ITA NO. 2649/AHD/2013 WHICH WE HAVE DECIDED HEREINABOVE, WE THEREFORE FOR THE REASONS STATED HEREINABOVE WHILE DECIDING THE APPEA L FOR A.Y. 2006-07 IN ITA NO. 2649/AHD/2013 (SUPRA) AND FOR SIMILAR REASO NS ALLOW THE GROUND OF ASSESSEE IN THE PRESENT APPEAL. ITA NOS. 264 9 & 2650/AHD/2013 . A.Y. 2006-07 & 2007-08 7 13. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALL OWED. SD/- SD/- (RAJPAL YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMED ABAD ORDER PRONOUNCED IN OPEN COURT ON 16 - 10 - 2015 .