M/s JET Knitwear Pvt. Ltd., Kanpur V. Income Tax Officer-6(1), Kanpur

ITA 296/LKW/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1077 (ITAT-LUCKNOW)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 03-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Wrong claim
• Section: 143(3); 14A

Judgement Text

I.T.A. NO.296/LKW/2017 ASSESSMENT YEAR:2004-05 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.296/LKW/2017 ASSESSMENT YEAR:2004-05 M/S JET KNITWEAR PVT. LTD., 119/410-B, DARSHANPURWA, KANPUR. PAN:AAACH 3534 B VS. INCOME TAX OFFICER-6(1), KANPUR. (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 01/03/2007. 2. THE ONLY GRIEVANCE RAISED BY THE ASSESSEE BY MEA NS OF GROUNDS OF APPEAL IS THE ACTION OF LEARNED CIT(A) BY WHICH HE HAS CONFIRMED THE PENALTY OF RS.75,665/- IMPOSED BY THE ASSESSING OFF ICER U/S 271(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME AND ASSESSMENT WAS COMPLETED U/S 143(3) OF T HE ACT VIDE ORDER DATED 28/12/2006. IN THE ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER MADE SEVERAL DISALLOWANCES AND TWO OF THE DISALLOWA NCE MADE WERE APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY S HRI AJAY KUMAR, D. R. DATE OF HEARING 21/03/2018 DATE OF PRONOUNCEMENT 21 / 03 /201 8 I.T.A. NO.296/LKW/2017 ASSESSMENT YEAR:2004-05 2 EXPENSES INCURRED ON AWARD COLLECTION AND DISALLOWA NCE OF DONATIONS. THE ASSESSING OFFICER IMPOSED PENALTY FOR CONCEALMENT O F INCOME BY PASSING ORDER U/S 271(1)(C) OF THE ACT FOR THESE DISALLOWAN CES. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) WHO ALSO UP HELD THE PENALTY IMPOSED BY THE ASSESSING OFFICER. AGGRIEVED THE AS SESSEE IS IN APPEAL BEFORE US. 4. AT THE OUTSET, LEARNED A. R. SUBMITTED THAT THE ASSESSING OFFICER HAD MADE AD HOC DISALLOWANCE AND THE ADDITIONS WERE MAD E ON ESTIMATED BASIS THEREFORE, IMPOSITION OF PENALTY WAS NOT JUSTIFIED. ARGUING UPON SPECIFIC DISALLOWANCE OF AWARD EXPENSES AND DONATIONS, LEARN ED A. R. SUBMITTED THAT THE ASSESSEE WAS AWARDED BY GOVERNMENT OF INDI A FOR ACHIEVING THE DESIRED QUALITY AND PRODUCTION IN ITS CATEGORY AND TO COLLECT AWARD THE ASSESSEE HAD INCURRED EXPENSES ON HIS STAY AT DELHI HOTEL. THE ASSESSING OFFICER HELD THAT SINCE THE AWARD INCOME WAS EXEMPT THEREFORE, EXPENSES INCURRED IN RELATION TO AWARD WERE NOT ALLOWABLE. LEARNED A. R. SUBMITTED THAT THE AWARD EXPENSES INCURRED BY THE ASSESSEE WE RE ITS BUSINESS EXPENSES AS THE AWARD WAS GIVEN WITH RESPECT TO THE BUSINESS OF THE ASSESSEE COMPANY. AS REGARDS DONATIONS, LEARNED A. R. SUBMITTED THAT THESE DONATIONS WERE MADE FOR THE PURPOSE OF KEEPIN G HARMONIOUS BUSINESS RELATION IN THE AREA OF OPERATION AND THEREFORE, WA S NECESSARILY A BUSINESS EXPENDITURE. WITHOUT PREJUDICE LEARNED A. R. ARGUE D THAT THE ASSESSEE HAD CLAIMED THESE EXPENSES IN ITS PROFIT & LOSS ACCOUNT AND FROM THE DETAILS OF THE PROFIT & LOSS ACCOUNT THE ASSESSING OFFICER DIS ALLOWED THE SAME THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAD CONCEALED ANY PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS O F INCOME. RELYING ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS. RELIANCE PETROPRODUCTS (P.) LTD. [2010] 189 TAXMAN 322 (SC), LEARNED A. R. SUBMITTED THAT HON'BLE SUPREME COURT HAD HELD THAT THAT EVERY WRONG CLAIM I.T.A. NO.296/LKW/2017 ASSESSMENT YEAR:2004-05 3 MADE BY THE ASSESSEE CANNOT TANTAMOUNT TO FURNISHIN G OF WRONG PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. RELIANCE WAS A LSO PLACED IN THE CASE OF ACIT VS. ASHOK GRIH UDYOG KENDRA PVT. LTD. IN I. T.A. NO.118/LKW/2007 ORDER DATED 11/04/2018, CIT VS. CAFCO SYNDICATE SHI PPING CO. [2008] 174 TAXMAN 406 (MAD) AND STAR INTERNATIONAL PVT. LTD. V S. ACIT [2009] 308 ITR (AT) 33 ORDER DATED 25/01/2008. IN VIEW OF THE ABO VE JUDICIAL PRECEDENTS, IT WAS PRAYED THAT THE PENALTY SUSTAINED BY LEARNED CIT(A) BE DELETED. 5. LEARNED D. R., ON THE OTHER HAND, HEAVILY PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSESSEE HAD CLAIME D THESE EXPENSES IN THE PROFIT & LOSS ACCOUNT AND FROM THE PROFIT & LOSS AC COUNT ITSELF THE ASSESSING OFFICER CAME TO CONCLUSION THAT THESE EXPENSES WERE NOT ALLOWABLE. HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P.) LTD. (SUPRA) HAS HELD THAT A WRONG CLAIM WHICH IS NOT SUSTAINABLE IN LAW IN ITSELF WILL NOT AMOUNT TO FURNISHING OF WRONG PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THE HON'BLE SUPREME COURT HAS HELD AS UND ER: 10. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF THE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THER EFORE, REITERATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CONCLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORREC T; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF T HE TWO FORMS; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENT LY; (II) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN EXAGGE RATED AMOUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE T HE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEAL MENT OF I.T.A. NO.296/LKW/2017 ASSESSMENT YEAR:2004-05 4 PARTICULARS OF ONE'S INCOME AS WELL AS FURNISHING O F INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSE SSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WEL L AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT O F INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAI MED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NO T ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT , IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271(1)(C ). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE O F EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY ASSE SSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PE NALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDME NT OF THE LEGISLATURE. 6.1 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AN D IN VIEW OF JUDICIAL PRECEDENTS, WE DELETE THE PENALTY SUSTAINED BY LEAR NED CIT(A) AND THEREFORE, THE APPEAL OF THE ASSESSEE STANDS ALLOWE D. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 21/03/2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:21/03/2018 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. R EGISTRAR