SHIRPUR GOLD REFINERY LTD, MUMBAI V. ACIT 9(3), MUMBAI

ITA 2827/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1872 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 07-04-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 10-04-2013
• Court: TRIBUNAL
• Assessee Lawyers: B S SHARMA
• Keywords: Difference of opinion; Change of opinion

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI SANDEEP GOSAIN , J M ./ ITA NO . 2827 / MUM/20 1 0 ( / ASSESSMENT YEAR : 20 0 1 - 20 0 2 ) SHIR PUR GOLD REFINERY LTD., 5 - A, TRISHALA PREMISES, 122, SHEIKH MEMOS STREET, ZAVERI BAZAR, MUMBAI - 400002 VS. CIT(A) - 20, M UMBAI ./ ./ PAN/GIR NO. : A A ACA 4896 K ( / APPELLANT ) .. ( / RESPONDENT ) /A SSESSEE BY : SHRI DALPAT SHAH & B.S.SHARMA /REVENUE BY : SHRI JAVED AKHTAR / DATE OF HEARING : 12 / 10 / 2015 / DATE OF PRONOUNCEMENT 16/12 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS I S AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - MUMBAI, DATED 6 - 2 - 2003, FOR THE ASSESSMENT YEAR S 200 1 - 02 , IN THE MATTER OF IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE I.T.ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. BRIEF FAC TS OF THE CARE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING , EXPORT AND SALE OF GOLD. DURING THE YEAR UNDER CONSIDERATION ORIGINALLY THE ASSESSMENT WAS FRAMED U/S.143(3), THEREAFTER THE AO REOPENED THE ASSESSMENT AND DISALLOWED THE EX PENDITURE INCURRED ON ADMINISTRATIVE AND INTEREST ON THE PLEA THAT MANUFACTURING ACTIVITY DID NOT COMMENCE DURING THE YEAR, THEREFORE, EXPENDITURES ARE IN THE NATURE OF PRE - OPERATIVE EXPENSES. IT WAS CONTENDED BEFORE THE AO ITA NO.2827/13 2 THAT ASSESSEE WAS ALREADY IN THE BUSINESS OF GOLD AND EVEN DURING THE YEAR UNDER CONSIDERATION THE COMPANY HAD TURNOVER OF RS.18.98 LAKHS, HENCE, IT CANNOT BE SAID THAT BUSINESS WAS NOT COMMENCED AND THAT REASSESSMENT WAS FRAMED AFTER CHANGE OF OPINION . E VEN DURING THE PRECEDING YEAR THE ASSESSEE HAD RETURN ED SUBSTANTIAL INCOME , THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAD INCURRED ADMINISTRATIVE AND INTEREST EXPENSES BEFORE COMMENCEMENT OF BUSINESS. HOWEVER, THE AO DID NOT AGREE WITH THE ASSESSEES CONTENTION FOR LEVY OF PENALTY W HICH WAS CONFIRMED BY THE CIT(A). 3. IT WAS FUR THER SUBMITTED THAT IN T HIS CASE LOSS IS REDUCED TO NIL INCOME AND THEREFORE UNDER EXPLANATION 4 TO SECTION 271(1)(C) , NO PENALTY CAN BE LEVIED U/S. 271(1)(C) IN THE PRESENT CASE FOR A.Y. 2001 - 02 , AS THE AMEN DMENT IS EFFECTIVE FROM 01.04.2003 I.E. FROM A.Y. 2003 - 04 AND AS HELD BY THE HON BLE SUPREME COURT IN THE CASE OF VIRTUAL SOFT SYSTEMS LTD., 289 ITR 83. LD. AR ALSO PLACED ON RECORD ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESMSNET YEAR 2007 - 08, WHEREIN SIMILAR DISALLOWANCE WAS DELETED AND THE ORDER OF THE TRIBUNAL WAS CONFIRMED BY THE HONBLE BOMBAY HIGH COURT IN ITA NO.2607/2011, DATED 13 - 3 - 2013. 4 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT DURING THE YEAR UNDER CON SIDERATION THE ASSESSEE HAS FILED ITS RETURN OF INCOME AT A LOSS OF RS. 84 .16 LAKHS. SCRUTINY ASSESSMENT ORDER WAS FRAMED U/S.143(3), THEREAFTER ASSESSMENT WAS REOPENED AND INCOME WAS ASSESSED AT NIL . WITH RESPECT TO THE DISALLOWANCE OF EXPENSES, T HE AO LEV IED PENALTY U/S.271(1)(C). WHEN THERE IS NO TAX LEVIABLE WITH RESPECT TO THE ADDITION MADE, NO PENALTY IS LEVIABLE IN TERMS OF DECISION OF THE ITA NO.2827/13 3 HONBLE SUPREME COURT IN THE CASE OF M/S VIRTUAL SOFT SYSTEMS LTD. INCOME TAX APPEAL NO. 7115/2005, ORDER DATED 6 - 2 - 2007, WHEREIN IT WAS HELD THAT PRIOR TO ITS AMENDMENT BY THE FINANCE ACT, 2002 IN THE ABSENCE OF ANY POSITIVE INCOME AND NO TAX BEING LEVIED, PENALTY FOR CONCEALMENT OF INCOME COULD NOT BE LEVIED. IT WAS PRECISELY LAID DOWN BY THE HON BLE SUPREME COURT T HAT NOTES ON CLAUSES ON THE AMENDMENT INTRODUCED BY THE FINANCE ACT, 2002 MAKES SPECIFIC MENTION INTER ALIA OF THE AMENDMENT TO BE EFFECTIVE FROM 1 - 4 - 2003. THE RELEVANT ASSESSMENT YEAR UNDER CONSIDE R ATION IS 2001 - 02 AND SINCE NO TAX WAS LEVIABLE, EVEN AFT ER THE ADDITION, NO PENALTY IS IMPOSABLE. 5 . EVEN ON MERITS, WE FOUND THAT MERE DISALLOWANCE OF EXPENDITURE CLAIMED, CANNOT BE MADE THE REASON FOR LEVYING PENALTY AS PER DECISION OF HON BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS LIMITED, 322 ITR 158 . 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 16/12 / 201 5 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 16/12 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , /ITAT, MUMBAI 1. / THE APPELLANT 2. / T HE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//