DCIT 17(2), MUMBAI V. KAMAR INFRASTRUCTURE, MUMBAI

ITA 2904/MUM/2012

• Counselvise Citation: 290419914 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MITESH J THAKKAR
• Assessee Lawyers: SU RENDRA KUMAR
• Keywords: Reasonable cause; Difference of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 27

Judgement Text

, , ,, , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH. . .. . . .. . , ,, , / !'# !'# !'# !'# , ' ' ' ' BEFORE S/SH. B.R. MITTAL, JUDICIAL MEMBER & RAJENDR A, ACCOUNTANT MEMBER /. ITA NO.2904/MUM/2012, $ $ $ $ % % % % / ASSESSMENT YEAR-2007-08 DCIT 17(2) 1 ST FLOOR, R.NO.113, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI. VS KAMAR INFRASTRUCTURE, 20 HUSSEIN PATEL, WADI BUNDER, MUMBAI-400010 PAN: AAHFK5238P ( &' / APPELLANT) ( ()&' / RESPONDENT) $*+ $*+ $*+ $*+ , , , , ' '' ' / APPELLANT BY : SHRI SURENDRA KUMAR ! - , ' / REVENUE BY : SHRI MITESH J. THAKKAR $ $ $ $ - -- - +. +. +. +. / DATE OF HEARING : 31-10-2013 /0% - +. / DATE OF PRONOUNCEMENT : 06-11-2013 $ $ $ $ , 1961 - -- - 254 )1( ' '' ' +1+ +1+ +1+ +1+ '2 '2 '2 '2 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM: CHALLENGING THE ORDER DATED 17.02.2012 OF CIT(A)-19 ,MUMBAI,ASSESSING OFFICER (AO) HAS FILED 5 (FIVE)GROUNDS OF APPEAL,BUT THE EFFECTIVE GROUND OF APPEAL IS ABOUT DELETION OF PENALTY BY THE FIRST APPELLATE AUTHORITY (FAA)THAT WAS IMPOSED BY THE AO U/S.,271(1)(C) OF THE ACT.GROUNDS FILED BY THE AO READ AS UNDER: 1.WHETHER ON THE FACT AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT PENALTY RS.4,48,000/- IS NOT SUSTAINAB LE U/S 27 1(1)(C) OF THE ACT ON FURNISHING OF INACCURATE PARTICULARS OF REVENUE EXPENDITURE OF RS .21,33,480/- WHICH ARE OF CAPITAL NATURE AND ADMITTED BY THE ASSESSEE 2.ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING PENALTY U/S 27L(1)(C) OF RS.4,48,000/-RELYING ON TH E DECISION OF S.C. IN THE CASE OF RELIANCE PETRO PRODUCT(P) LTD., 2463/2010 322 ITR 158 THOUGH THE F ACT WERE NOT IDENTICAL. 3.ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) NOT APPRECIATED THE FACTS THAT PENALTY U/S 271(1)(C) WAS CORRECTLY LEVI ED BY THE AO AS IT WAS STRICT LIABILITY ON THE ASSESSEE FOR GIVING CORRECT PARTICULARS WHILE FILLI NG HIS RETURN OF INCOME AS PER RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF U.O.I. V/S DHARMENDRA TEXTILE(SUPREME COURT 3 JUDGES DECISION). 4.THE APPELLANT PRAYS THAT THE ORDER THE CIT(A) BEI NG ERRONEOUS IN FACTS AND IN LAW BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. FACTS OF THE CASE: 2 ITA NO. 2904/MUM/2012 KAMAR INFRASTRUCTURE. 2. ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF IMPORTI NG THE SCRAP OF CRANES AND USING IT IN MANUFACTURING THE CRANES AND GIVING THE CRANES ON H IRE. DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAD SHOWN PURCHASE OF M.S. PLATES AMOUNTIN G TO RS. 21.33 LACS.ASSESSEE CLAIMED THAT THE EXPENDITURE INCURRED BY IT,FOR PURCHASING M.S.P LATES,WAS A REVENUE EXPENDITUER, WHEREAS THE AO TREATED THE SAID EXPENDITURE AS CAPITAL EXPENDIT UER.AO ALSO INITIATED THE PENALTY PROCEEDINGS AGAINST THE ASSESSEE FOR FURNISHING INACCURATE PART ICULARS OF INCOME AND ISSUED A NOTICE U/S.274 OF THE ACT.AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE,HE LEVIED A PENALTY OF RS. 4.84 LACS,VIDE HIS ORDER DATED 29.06.2010. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FAA HELD THAT MERE MAKING OF CLAIM,WHICH WAS NOT SU STAINABLE BY LAW,WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS.SHE REFERRED T O THE JUDGMENT DELIVERED BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S (322 ITR 180) AND HELD THAT PENALTY LEVIED BY THE AO WOULD NOT SUSTAINED. DEPARTMENTAL REPRESE NTATIVE (DR) SUPPORTED THE ORDER OF THE AO. AUTHORISED REPRESENTATIVE (AR) RELIED UPON THE ORDE R OF THE FAA AND SUBMITTED THAT IT WAS NOT A CASE OF FILING OF INACCURATE PARTICULARS OR CONCEAL ING THE INCOME, THAT THE GENUINENESS OF INCURRING OF EXPENDITURE WAS NOT QUESTIONED BY THE AO, THAT T HERE WAS DIFFERENCE OF OPINION, THAT THE ISSUE WAS DEBATABLE AND HENCE PENALTY WAS NOT LEVIABLE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.PENALTY FOR FURNISHING INACCURATE PARTICULARS OR CONCEALING THE PARTICULAR S OF INCOME CANNOT BE LEVIED IF CERTAIN CONDITIONS ARE NOT FULFILLED.IT HAS BEEN HELD BY TH E COURTS THAT ISSUES DECIDED DURING ASSESSMENT PROCEEDINGS ARE NOT BINDING IN PENALTY PROCEEDINGS. IT IS NOT DIFFICULT TO UNDERSTAND THE LOGIC BEHIND IT -PROVISIONS FOR FINALISING ASSESSMENT AND FOR IMPOSING PENALTY HAVE BEEN INCORPORATED IN TAX LAWS FOR DIFFERENT PURPOSES. FIRST IS FOR DETER MINING THE TAX LIABILITY OF THE ASSESSEE AND IS THE BASIC SOURCE OF EXCHEQUER,ON THE OTHER HAND PENALT Y IS IMPOSED FOR OMISSION AND COMMISSION OF ASSESSEES.CONSEQUENTLY, LAW RELATING TO ASSESSMENT PROCEDURE IS NOT APPLICABLE TO PENAL PROCEED - INGS.DURING THE ASSESSMENT/ APPELLATE PROCEEDINGS A O/FAA CAN DRAW A CONCLUSION THAT PARTICULAR ITEM FORMS PART OF TAXABLE INCOME OF THE ASSESSEE.B UT,SUCH CONCLUSION OR FINDING CANNOT OR SHOULD NOT BECOME BASIS FOR IMPOSING PENALTY U/S.271(1)(C) OF THE ACT.IN THE CASE OF HARI MACHINE LTD.(311 ITR 285)A CLAIM OF LOSS MADE BY THE ASSESS EE WAS NEGATED BY THE REVENUE AUTHORITIES AS WELL AS BY THE TRIBUNAL. ON THE BASIS OF ADDITIONS MADE AND CONFIRMED BY THE HIGHER AUTHORITIES, AO IMPOSED PENALTY FOR FURNISHING INACCURATE PARTIC UALRS. APPELLATE AUTHORITIES CANCELLED THE PENALTY. HONBLE DELHI HIGH COURT,WHILE DISMISSING THE APPEAL FILED BY THE DEPARTMENT,HELD THAT JUST BECAUSE SOME ADDITIONS HAVE BEEN MADE TO THE T OTAL INCOME OF THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS PENALTY SHOULD NOT BE IMPOSE D.SIMILARLY,HONBLE HIGH COURT OF MADRAS HELD IN THE CASE OF S.SANKARAN (241ITR825)THAT MERE ADDITION OF INCOME BY DISALLOWING EXPENSES WOULD NOT BE REGARDED AS CONCEALMENT OF INCOME AND THEREFORE LEVY OF PENALTY U/S. 271(1) (C) WAS NOT JUSTIFIED IN SUCH CASES.IN SHORT,IF PENALTY IS IMPOSED SOLELY ON THE BASIS OF DECISION TAKEN DURING ASSESSMENT OR REASSESSMENT PROCEEDINGS,THEN IT HAS TO BE HELD THAT PENALTY IS IMPOSED FOR AN INSUFFICIENT AND UNREASONABLE CAUSE. PENALTY ALSO CANNOT BE IMPOSED, IF A CLAIM OF THE A SSESSEE FOR AN INCURRED EXPENDITURE IS REJECTED. IN THE CASE OF MEHTA ENGINEERS(300ITR 308)ASSESSEE MADE A CLAIM ABOUT AN EXPENDITURE AND IN THE RETURN MENTIONED THE BASIS ON WHICH SUCH CLAIM WAS MADE.AFTER DISALLOWING THE SAID CLAIM AO IMPOSED PENALTY U/S.271(1)(C)FOR CONCEALING PART ICULARS OF INCOME. FAA CANCELLED THE PENALTY AND THE TRIBUNAL UPHELD HIS ORDER. DISMISSING THE D EPARTMENTAL APPEAL HONBLE P&H HIGH COURT HELD THAT THE ASSESSEE HAD CLAIMED CERTAIN EXPENDIT URE INCURRED ON THE BASIS OF A WRITTEN AGREE - MENT.COURT WAS ALSO OF THE VIEW THAT IN SUCH CASES PENALTY COULD NOT BE IMPOSED U/S. 271(1) (C) AND THAT TO IMPOSE PENALTY ON THE BASIS OF DISALLOW ANCE OF AN ITEM OF EXPENDITURE WAS IMPROPER. IN THE MATTER OF CIT V/S.AMTEK AUTO LTD.,HONBLE HI GH COURT OF PUNJAB AND HARYANA (353 ITR 394)HAS HELD AS UNDER: 3 ITA NO. 2904/MUM/2012 KAMAR INFRASTRUCTURE. ..THE ASSESSEE HAD DISCLOSED THE NATURE OF TRANSA CTIONS IN ITS RETURN.IT WAS ON THE BASIS OF THE INTERPRETATION OF THE PROVISIONS OF THE STAT UTE,THAT THE ASSESSING OFFICER HAD FOUND THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS NO T REVENUE EXPENDITURE BUT CAPITAL EXPENSES. THERE IS A FINE DISTINCTION AS TO WHEN AN EXPENDITURE CAN BE TREATED AS REVENUE OR CAPITAL EXPENDITURE. THEREFORE, MERELY FOR THE R EASON THAT THE ASSESSEE HAD CLAIMED THE EXPENDITURE TO BE REVENUE THAT WOULD NOT RENDER THE ASSESSEE LIABLE TO PENALTY PROCEEDINGS. A CLAIM,INCLUDING A DISPUTED CLAIM,CANNOT BE EQUATE D WITH FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE.IN OTHER WORDS PENAL PROVISIONS CANNOT BE INVOKED BECAUSE CLAIMS,INCLUDING CLAIMS FOR SPECIAL DEDUCTIONS,MADE BY THE ASSESSEE HAVE BE EN REJECTED BY THE AO.IN THE MATTER BALAJI VEGETABLE PRODUCTS P.LTD(290ITR172)ASSESSEE SHOWED THE PAYMENT OF RS.12 LAKHS TO THE LICENSOR IN THE RETURN FILED BY IT AND THIS WAS NOT DISPUTED BY THE AO. THOUGH THE AO REFUSED TO ACCEPT THE CLAIM OF THE ASSESSEE AND ADDED THE AMOUNT FOR TAX, YET IT WAS HELD BY THE COURT THAT THIS WOULD NOT AUTOMATICALLY JUSTIFY LEVY OF PENALTY. WHERE AN ARGUABLE, CONTROVERSIAL OR DEBATABLE DEDUC TION IS CLAIMED, THE CLAIM COULD NOT BE SAID TO BE FALSE.IN THE MATTER OF HARSHVARDHAN CHEMICALS AN D MINERALS ASSESSEE HAD MADE CLAIM FOR HIGHER DEDUCTIONS U/S.80HH AND 80-I.AO LEVIED PENAL TY U/S.271(1)(C) THAT WAS DELETED BY THE TRIBUANL.AFFIRMING THE DECISION OF THE TRIBUNAL,HON BLE RAJATHAN HC HELD THAT NO PENALTY WAS LEVIABLE IN VIEW OF THE FINDING OF THE TRIBUNAL THA T WHEN THE ASSESSEE HAD CLAIMED DEDUCTION OF AN AMOUNT THAT WAS DEBATABLE.IT WAS FURTHER HELD THAT IT COULD NOT BE SAID THAT THE ASSESSEE HAD CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTIC ULARS FOR EVASION OF TAX(259ITR212). CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT IN THE CASE UNDER CONSIDERATION ASSESSEE HAD NOT FURNISHED INACCURATE PARTICULARS.AO HAD NOT DOUBTED THE GENUINENESS OF THE TRANSACTION-INCURRING OF EXPENDITURE BY THE ASSESSEE.HE AND THE ASSESSEE HAD DIFFERENT OPINION ABOUT THE NATURE OF THE EXPENDITURE.AO WAS OF THE OPINION THAT EXPENDITURE WAS OF CAPITAL NATURE,WHEREAS ASSESSEE HAD CLAIMED IT A REVENUE EXPENDITURE.IN OUR OPINION,AO MAY OR MAY NOT BE JUSTIFIED IN DISALLOWING THE EXPENDITURE U/S.37 OF THE ACT,BUT THERE WAS NO JUSTIFICATION FOR INVOKING PROVISIONS OF SECTION 271(1)(C) OF THE ACT FOR THE TRANSACTION IN QUESTIO N.THEREFORE, UPHOLDING THE ORDER OF THE FAA,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE A O. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED. * +3 $*+ VF/KDKJH VF/KDKJH VF/KDKJH VF/KDKJH 4 5 - 1 $ !6 - !+ 78 . ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH NOVEMBER,2013 . '2 - /0% ' 9 :$ 6 UOECJ UOECJ UOECJ UOECJ , 2013 0 - 1 ; SD/- SD/- ( . < < < < . . B.R.MITTAL) ( !'# !'# !'# !'# / RAJENDRA) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER / MUMBAI, :$ /DATE: 06 TH NOVEMBER,2013 SK '2 '2 '2 '2 - -- - (+= (+= (+= (+= >'=%+ >'=%+ >'=%+ >'=%+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 4 ITA NO. 2904/MUM/2012 KAMAR INFRASTRUCTURE. 3. THE CONCERNED CIT (A) / ? @ , 4. THE CONCERNED CIT / ? @ 5. DR A BENCH, ITAT, MUMBAI / =A1 (+$ , ,, , , . . . 6. GUARD FILE/ 1 B )=+ )=+ )=+ )=+ (+ (+(+ (+ //TRUE COPY// '2$ / BY ORDER, C / 7 ! DY./ASST. REGISTRAR , /ITAT, MUMBAI