ACIT, Ludhiana V. M/s Abhishek Industries Ltd., Ludhiana

ITA 283/CHANDI/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0102 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 17-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Bonafide belief; Earning of tax free income; Wrong claim; Difference of opinion; Capital receipt; Revenue expenditure
• Section: 14A; 115JB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER& MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.1446/CHD/2010 ASSESSMENT YEAR: 2006-07 M/S ABHISHEK INDUSTRIES LTD., VS. THE ACIT, CIRCLE 1, LUDHIANA LUDHIANA PAN NO. AABCA4139J & ITA NO.283/CHD/2011 ASSESSMENT YEAR: 2011-12 THE ACIT, CIRCLE-1, VS. M/S ABHISHEK INDUSTRIES L TD., LUDHIANA LUDHIANA PAN NO. AABCA4139J (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S.K. MITTAL RESPONDENT BY : SH. ASHWANI KUMAR DATE OF HEARING : 13.04.2016 DATE OF PRONOUNCEMENT : 13.04.2016 ORDER PER SANJAY GARG, JUDICIAL MEMBER THE ABOVE TITLED CROSS APPEALS I.E. ONE BY THE ASSE SSEE AND OTHER BY THE REVENUE HAVE BEEN PREFERRED AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS), [HEREINAFTER REFERRED TO AS CIT(A)], LUDHIANA DATED 10.12.2010 IN RELATION TO THE LEVY OF PENALTY U/S 271(1)( C) OF THE I.T. ACT. 2 2. THE REVENUE HAS COME IN APPEAL AGAINST THE ORDER OF CIT(A) AGITATING THE DELETION OF THE PENALTY LEVIED BY THE AO IN RESPECT TO CERTAIN ITEMS OF ADDITIONS WHEREAS THE ASSESSEE HAS COME IN APPEAL AGITATING THE CONFIRMATION OF PENALTY IN RELATION TO THE REMAINING ITEMS OF ADDITIONS. 3. BRIEFLY STATED, THE ASSESSING OFFICER HAS LEVIED PENALTY IN RELATION TO ADDITIONS / DISALLOWANCE IN RESPECT OF FIVE ITEMS. THE ASSESSEE HAS COME IN APPEAL IN RELATION TO THREE ITEMS. THE FIRST ITEM IS ON ACCOUNT OF ADDITION MADE U/S 14A OF THE ACT BY THE AO ON ACCOUNT OF DISALLOW ANCE OF EXPENDITURE INCURRED FOR EARNING OF TAX EXEMPT INCOME. THE ASSE SSEE DURING THE YEAR RECEIVED DIVIDEND INCOME OF RS. 5,31,251/- WHICH W AS CLAIMED AS EXEMPT. THE ASSESSEE HAS CLAIMED THAT HE HAD NOT INCURRED ANY E XPENDITURE IN RELATION TO THE EARNING OF THE SAID EXEMPT INCOME. THE ASSESSING OF FICER, HOWEVER, MADE THE DISALLOWANCE OF RS. 75,000/- ON ACCOUNT OF EXPENDIT URE INCURRED FOR EARNING OF THE SAID EXEMPT INCOME. IN THE APPEAL, THE LD CIT( A) REDUCED THE SAID DISALLOWANCE TO RS. 50,000/-. THE AO LEVIED PENAL TY IN RESPECT OF THE SAID DISALLOWANCE U/S 271(1)(C ); WHICH HAS BEEN CONFIRM ED BY THE CIT(A). 4. WE FIND THAT DISALLOWANCE U/S 14A IS MADE BECAUS E OF THE STATUTORY PROVISIONS AND IS CALCULATED AS PER THE FORMULA P RESCRIBED OR TAKING INTO CONSIDERATION THE EXEMPT INCOME EARNED VIZ A VIZ THE ACCOUNTS OF THE ASSESSEE. IT IS NOT THE CASE THAT DISALLOWANCE ON THIS ISSUE HAS BEEN MADE ON ACCOUNT OF DISCOVERY OF ANY DISCREPANCY / INACCURATE PARTICULA RS OR CONCEALMENT OF ANY INCOME BY THE ASSESSING OFFICER. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LOWER AUTHORITIES IN IMPOSING PENAL TY U/S 271(1)(C ) IN RELATION 3 TO THE STATUTORY DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A . THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSES SEE. 5. THE SECOND ITEM IN RELATION TO WHICH THE ASSESSE E HAS CONTESTED THE CONFIRMATION OF THE LEVY OF PENALTY IS ON ACCOUNT O F LONG TERM INVESTMENTS, ADVANCES AND LOANS TO SUBSIDIARY COMPANIES WRITTEN OFF. THESE LOANS AND ADVANCES WERE GIVEN TO SAID COMPANIES WHICH HAS BEE N CLAIMED TO BE WRITTEN OFF BY THE ASSESSEE AS REVENUE EXPENDITURE, WHICH ADMIT TEDLY WERE OF CAPITAL IN NATURE. THERE IS NO CASE OF THE ASSESSEE THAT HE WA S UNDER BONAFIDE BELIEF TO CLAIM THE SAID EXPENDITURE AS REVENUE IN NATURE. TH E ASSESSEE IN THIS CASE DELIBERATELY MADE A FALSE CLAIM OF SUCH EXPENDITURE AS REVENUE EXPENDITURE, WHICH WAS NOT ALLOWABLE. THE LD AR OF THE ASSESSEE, HOWEVER, HAS RELIED ON THE DECISION OF THE HONBLE PUNJAB& HARYANA HIGH COURT IN THE CASE OF CIT VS. AMTEK AUTO LIMITED (2013) 352 ITR 394 (P&H) TO CON TEND THAT THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT WHERE TH E ASSESSEE HAD DISCLOSED THE NATURE OF TRANSACTIONS IN THE RETURN AND IT WAS ONLY ON THE BASIS OF INTERPRETATION OF THE PROVISIONS OF THE STATUTE THA T THE ASSESSING OFFICER HAD FOUND THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS NOT REVENUE EXPENDITURE BUT CAPITAL EXPENSES AND WHERE THERE WAS A FINE DIS TINCTION AS TO WHEN AN EXPENDITURE CAN BE TREATED AS REVENUE OR CAPITAL EX PENDITURE, THE ASSESSEE WAS NOT LIABLE TO LEVY OF PENALTY U/S 271(1)(C ) OF TH E ACT. WE FIND THAT THERE IS NO DIFFERENT VIEW SO FAR AS THE ABOVE OBSERVATIONS OF HON'BLE PUNJAB & HARYANA HIGH COURT ARE CONCERNED. HOWEVER, WE FIND THAT SAI D DECISION OF THE HON'BLE HIGH COURT IS NOT APPLICABLE TO THE FACTS OF THE PR ESENT CASE AS THE FACTS BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT WERE ENTIR ELY DIFFERENT. IN THE FACTS OF THE SAID CASE CIT VS AMTEK AUTO LIMITED (SUPRA ), THE TRIBUNAL WHILE ACCEPTING THE APPEAL OF THE ASSESSEE HAD FOUND THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER WERE BASED UPON THE DIFFERENCE OF OPINION AS TO WHETHER SUCH ADDITIONS ARE TO BE TREATED AS REVENUE EXPENDITURE OR CAPITAL IN NATURE AND NOT 4 BECAUSE OF THAT THE ASSESSEE HAD MADE A FALSE CLAIM . EVEN IT WAS ALSO FOUND THAT EVEN IF THE ADDITIONS WERE MADE, THERE WAS NO CHANG E IN THE AMOUNT OF THE TAX PAYABLE BY THE ASSESSEE AS ULTIMATELY RETURN OF THE ASSESSEE WOULD REMAIN LESS THAN THE AMOUNT ASSESSABLE U/S 115JB OF THE ACT. HO WEVER, IN THE PRESENT APPEAL BEFORE US, THERE IS NOT THE ISSUE OF DIFFERENCE OF OPINION, BUT, IN OUR VIEW, THE ASSESSEE HAD MADE A DELIBERATE FALSE CLAIM FOR THE PURPOSE OF EVASION OF TAX. THE ASSESSEE HAD TAKEN A CHANCE THAT IF HIS RETURN WOUL D NOT BE SELECTED FOR SCRUTINY, HE WOULD GO WITHOUT PAYING THE DUE TAXES. MERELY BE CAUSE THE ASSESSEE HAD DISCLOSED THE TRANSACTIONS IN THE RETURN OF INCOME, IN OUR VIEW, WOULD ITSELF DOES NOT ABSOLVE THE ASSESSEE FROM LEVY OF PENALTY, WHEN IT IS ESTABLISHED ON THE FILE THAT THE ASSESSEE HAD MADE A DELIBERATE FALSE CLAIM FOR EVASION OF TAX AND THERE WAS NEITHER ANY BONAFIDE ON THE PART OF THE ASSESSE E NOR THE SAME WAS A DEBATABLE ISSUE WHERE ANY DIFFERENCE OF OPINION WAS INVOLVED. WE, THEREFORE, UPHOLD THE PENALTY IN RELATION TO THE ABOVE ISSUE. 6. THE THIRD ITEM RELATING TO WHICH THE ASSESSEE HA S AGITATED THE LEVY OF PENALTY IS FOR DISALLOWANCE MADE ON ACCOUNT OF AIR INFORMATION. WE FIND FROM THE RECORD THAT ASSESSING OFFICER HAD ASKED THE ASS ESSEE TO RECONCILE VARIOUS RECEIPTS AS PER AIR INFORMATION. THE ASSESSEE RECON CILED VARIOUS RECEIPTS BUT COULD NOT FILE DOCUMENTARY EVIDENCE IN RELATION TO FOUR ITEMS, THE ADDITIONS IN RELATION TO WHICH WERE MADE BY THE ASSESSING OFFICE R AT RS. 34,737/-, WHICH ADDITION WAS FURTHER CONFIRMED BY THE CIT(A). WE F IND THAT THE ASSESSEE HAD RECONCILED THE RECEIPTS IN RELATION TO VARIOUS ITEM S. MERELY BECAUSE HE COULD NOT RECONCILE RECEIPTS IN RELATION TO SMALL AMOUNT OF R S. 34,737/-; DUE TO CERTAIN CIRCUMSTANCES, THAT, ITSELF, DOES NOT PROVE THAT A SSESSEE HAD FILED ANY INACCURATE PARTICULARS OF INCOME OR HAD CONCEALED HIS INCOME. THE PENALTY LEVIED ON THIS ISSUE BY THE LOWER AUTHORITIES IS, THEREFORE, ORDER ED TO BE DELETED. 5 7. NOW COMING TO THE APPEAL OF THE REVENUE, THE REV ENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE PENALTY IN RE LATION TO THE TWO ITEMS. THE FIRST ITEM IS IN RELATION TO THE TREATMENT OF SALES TAX SUBSIDY AS TO WHETHER THE SAME WAS CAPITAL RECEIPT OR REVENUE RECEIPT AND THE OTHER ISSUE IS IN RELATION TO THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST FREE A DVANCE GIVEN TO SISTER CONCERN. THE LD.AR OF THE ASSESSEE, AT THE VERY O UTSET, HAS BROUGHT OUR ATTENTION TO THE DECISION OF THE TRIBUNAL DATED 6.3 .2014 IN THE OWN CASE OF THE ASSESSEE FOR EARLIER ASSESSMENT YEAR 2004-05. THE TRIBUNAL HAS DISCUSSED THE IDENTICAL ISSUE IN PARAS 43 TO 46 OF THE SAID DECIS ION AND IT HAS BEEN OBSERVED THAT ADDITION IN RELATION TO THE ABOVE ISSUES WAS D EBATABLE IN NATURE. THE ASSESSEE HAS FILED A SLP BEFORE THE HONBLE SUPREME COURT WHICH HAS BEEN ADMITTED AND QUESTIONS OF LAW HAVE BEEN FRAMED ON T HIS ISSUE. THE TRIBUNAL, THUS, HAS HELD THAT ON ACCOUNT OF DISALLOWANCE ON D EBATABLE ISSUES / DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING O FFICER, PENALTY U/S 271 (1)(C) OF THE ACT IS NOT LEVIABLE. WE FIND THAT THE ISSUE AS TO WHETHER THE SALES TAX SUBSIDY IS TO BE TREATED AS CAPITAL IN NATURE OR RE VENUE IN NATURE IS A HIGHLY DEBATABLE ISSUE. THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LIMITED VS. CIT REPORTED IN (1997) 228 ITR 253 (SC) AND IN CIT VS. PONNI SUGARS & CHEMICAL LTD (2008) 306 ITR 392 (SC) HAS EMPHASIZED THAT THE CHARACTER OF RECEIPTS IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE OF WHICH THE SUBSIDY IS GIVEN. THE HONBLE SUPREME COURT IN ANOTHER CASE CIT VS. RELIANCE INDUSTRIES LTD IN CIVIL APPEAL NO. 7770AND OTHER OF 2011 VIDE ORDER DT 9.9.2011 HAS RE MANDED THE ISSUE BACK TO THE HON'BLE BOMBAY HIGH COURT AS TO WHETHER SALES TAX S UBSIDY IS TO BE TREATED AS CAPITAL IN NATURE OR REVENUE IN NATURE. UNDER SUCH CIRCUMSTANCES, WE DO NOT FIND IT A FIT CASE OF LEVY OF PENALTY AS THERE IS NO ALL EGATION THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR HAS CONCEALED ITS INCOME. IT IS JUST A CASE OF DIFFERENCE OF OPINION BETWEEN THE AS SESSEE AND THE ASSESSING OFFICER REGARDING THE TAXABILITY OF THE SUBSIDY REC EIPTS. SIMILARLY, THE 6 DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF INTEREST FREE ADVANCES GIVEN TO THE SISTER CONCERN IS ALSO A CASE OF DIFFERENCE OF OPIN ION AND THE ASSESSEES SLP ON THIS ISSUE HAS ALREADY BEEN ADMITTED BY THE HONBLE SUPREME COURT. UNDER SUCH CIRCUMSTANCES, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LOWER AUTHORITIES IN IMPOSING PENALTY U/S 271(1)(C) OF T HE ACT. WE, THEREFORE, UPHOLD THE ORDER OF THE LD. CIT(A) ON THESE ISSUE AND THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AND APPEAL OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.04.2016 SD/- SD/- (RANO JAIN) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 TH APRIL, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR