The ACIT, (OSD), Circle-5, Ahmedabad V. Palitana Sugar Mills Pvt. ltd., Ahmedabad

ITA 2961/AHD/2010

• Counselvise Citation: 296120514 RSA 2010
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-11-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 29-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA SRDR
• Assessee Lawyers: U S BHATI
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD , , , , BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND .., !' # # # # SHRI T.R. MEENA, ACCOUNTANT MEMBER $%.. , &' ( & ' ) & ' ) & ' ) & ' ) ITA NO. 2961/AHD/2010 ASSESSMENT YEAR :2003-04 ACIT(OSD), CIRCLE-5, AHMEDABAD V/S . PALITANA SUGAR MILLS PVT LTD. C-2, DIVYA APPARTMENT NR. MITHAKHALI GARNALA, NAVRANGPURA, AHMEDABD PAN NO. A A ACP9273F (APPELLANT) .. (RESPONDENT) *+ , - & BY APPELLANT SHRI O. P. BATHEJA, SR. D.R. ./*+ , - & /BY RESPONDENT SHRI U. S. BHATI, A.R. 0 , 1%' /DATE OF HEARING 11.11.2013 234 , 1%' /DATE OF PRONOUNCEMENT 10.01.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE CIT(A)-XI, AHMEDABAD, ORDER DATED DECEMBER 08.09.2010 FOR A.Y. 2003-04. THE SOLE GROUND OF APPEAL OF THE REVENUE IS AGAINST DELETING THE PENALTY OF RS.8,27,315/- LEVIED U/S. 271(1)(C) OF THE IT ACT. 2. THE A.O. OBSERVED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL BUILDING. THE RETURN O F INCOME FOR A.Y. 03-04 WAS FILED BY THE ASSESSEE ON 19.11.2003, DECLARING TOTA L LOSS OF RS.23,55,750/-. IN ITA NO. 2961/AHD/2010 A.Y. 03-04 PAGE 2 THIS CASE, ASSESSMENT U/S. 143(3) WAS PASSED ON 16. 03.2006 AND DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. NIL AFTER ADJUS TING EARLIER YEARS BUSINESS LOSS. IN THE ASSESSMENT, DISALLOWANCE OUT OF LEGAL AND PROFESSION EXPENSES OF RS.37,54,803/- OUT OF PRINTING AND STATIONERY EXPEN SES OF RS.12 LACS WERE MADE. PENALTY PROCEEDINGS U/S. 271(1)(C) WAS INITI ATED FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INC OME. THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AGAINST THE QUAN TUM ADDITION, WHICH WAS CONFIRMED BY THE CIT(A) OUT OF DISALLOWANCE OF PRIO R PERIOD EXPENSES MADE BY THE A.O. AT RS.22,51,199/-. THE LD. CIT(A) HAD RES TRICTED THE DISALLOWANCE OF EXPENDITURE OF RS.22,51,199/- HOLDING THAT OUT OF R S.70,21,638/-, THE EXPENDITURE PERTAINED TO JAMNAGAR VENTURE AT RS.47, 70,439/- WAS CARRY FORWARDED TO WORK-IN-PROGRESS OF THE SAID VENTURE. THE EXPENDITURE OF RS.22,51,199/- WAS PERTAINED TO BARODA VENTURE WHIC H ACTUALLY BELONGED TO PREVIOUS ASSESSMENT YEAR BUT WAS DEBITED IN P&L ACC OUNT OF THIS YEAR. THEREFORE, THE ACTUAL EXPENDITURE CLAIMED BY THE AP PELLANT IS ONLY RS.22,51,199/- AND NOT ENTIRE RS.70,71,638/-. THER EFORE, OUT OF RS.70,21,638/-, AN AMOUNT OF RS.47,70,439/- WAS TAK EN TO WORK-IN-PROGRESS , HENCE NOT CLAIMED AS AN EXPENDITURE. HOWEVER, EXPE NDITURE TO THE TUNE OF RS.22,51,199/- WAS PERTAINED TO PREVIOUS YEAR WHICH IN FACT WAS TREATED AS WORK-IN-PROGRESS FOR PREVIOUS YEAR IS TREATED NOW F OR THIS YEAR AS AN EXPENDITURE, HENCE DEBITED TO P&L ACCOUNT. THE LD. CIT(A) HELD THAT THE A.O. AT MOST COULD HAVE DISALLOWED AN EXPENDITURE OF RS. 22,51,199/- AND HENCE HE DELETED THE AMOUNT OF RS.15,03,604/- FROM THE TOTAL DISALLOWANCE, CONFIRMING ITA NO. 2961/AHD/2010 A.Y. 03-04 PAGE 3 THE ADDITION OF RS.22,51,199/-. THE A.O. GAVE REAS ONABLE OPPORTUNITY OF BEING HEARD BEFORE IMPOSING PENALTY U/S. 271(1)(C). AFTE R CONSIDERING THE ASSESSEES REPLY, HE LEVIED 100% PENALTY AT RS.8,27 ,315/- ON TAX SOUGHT TO BE EVADED ON CONCEALED INCOME OF RS.22,51,199/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD DELETED THE ADDITI ON BY OBSERVING AS UNDER: 3. I HAVE CONSIDERED THE FACTS OF THE CASE, A.O'S OBSERVATION IN THE ASSESSMENT ORDER AS WELL AS REMAND REPORT AND SUBMI SSIONS MADE BY THE APPELLANT. IT WOULD BE EVIDENT FROM THE AUDITED ACC OUNTS OF THE COMPANY FILED ALONG WITH ITS RETURNS OF INCOME THAT THE APP ELLANT COMPANY HAS BEEN REGULARLY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND AS PER THE ACCEPTED ACCOUNTING STANDARDS, IT HAD BEEN ALSO SHO WING EXPENSES INCURRED IN RESPECT OF PROFESSIONAL FEES AND PRINTI NG AND STATIONERY ETC., AS 'WORK IN PROGRESS' TILL THE COMPLETION OF ITS PROJE CTS. ACCORDINGLY, THE APPELLANT COMPANY HAD SHOWN THE LEGAL EXPENSES INCU RRED IN RESPECT OF ITS BARODA PROJECT UNDER THE HEAD 'WORK IN PROGRESS ' TILL THE FINANCIAL YEAR 2001-02. IT WAS ONLY AFTER THE RECEIPT OF THE ADVER SE DECISION OF THE HON'BLE SUPREME COURT, WHEN THE IMPLEMENTATION OF T HE BARODA PROJECT BECAME IMPOSSIBLE, THE IMPUGNED EXPENSES WERE TRANS FERRED TO THE PROFIT AND LOSS ACCOUNT AND CLAIMED BY THE APPELLANT COMPA NY. IN THIS CONNECTION, AN EXPLANATORY NOTE NO. 5 WAS GIVEN IN SCHEDULE 'C' OF THE ANNUAL REPORT. MOREOVER, THE APPELLANT COMPANY HAD ALSO PLACED BEFORE ME COMPLETE DETAILS ALONG WITH COPIES OF VOUCHERS R ELATING TO THE ABOVE EXPENSES AND THE SAME WERE FORWARDED TO THE A. O. F OR HIS COMMENTS VIDE THIS OFFICE LETTER DATED 22-03-2010. THE REMAN D REPORT OF THE A.0. WAS RECEIVED ON 28-06-2010 AND THE SAME HAS BEEN REPROD UCED AT PAGE NO. 17 AND 18 OF THE ORDER. THE MAINSTAY OF THE REMAND REPORT WAS THAT PROPER OPPORTUNITY BEING ALLOWED TO THE APPELLANT COMPANY, THE EVIDENCE NOW PLACED BY THE APPELLANT OUGHT TO BE REJECTED BEING IN CONTRAVENTION OF RULE 46A OF THE INCOME-TAX RULES, 1961. HOWEVER, THE A. O. DID NOT CHOOSE TO GIVE ANY COMMENT ON THE VERACITY OF THE EVIDENCE. ITA NO. 2961/AHD/2010 A.Y. 03-04 PAGE 4 3.1. I FIND FORCE IN SUBMISSIONS OF THE APPELLANT C OMPANY THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE OF TRA NSFERRING THE EXPENSES FROM 'WORK IN PROGRESS A/C' TO 'PROFIT AND LOSS A/C ' AFTER RECEIPT OF THE VERDICT FROM THE HON'BLE SUPREME COURT AND BECAUSE OF THE CHANGE IN MANAGEMENT OF THE COMPANY, THE APPELLANT COMPANY SU O MOTO COULD NOT PLACE THESE EVIDENCE BEFORE THE A. O. DURING THE AS SESSMENT / PENALTY PROCEEDINGS. THE ABOVE TREATMENT WAS MENTIONED IN T HE FORM OF A NOTE IN AUDITED ANNUAL ACCOUNTS. IT IS TRUE THAT NEITHER TH E A. O. SPECIFICALLY CALLED UPON THE APPELLANT TO PRODUCE THE VOUCHERS NOR DID THE APPELLANT SUO 'MOTO FURNISHED THE VOUCHERS. DURING THE COURSE OF APPELLATE PROCEEDINGS THE VOUCHERS WERE FURNISHED. IN VIEW OF THESE FACTS AND IN THE INTERESTS OF JUSTICE, I AM INCLINED TO ADMIT THE EVIDENCE AS ADM ISSIBLE UNDER RULE 46A OF THE INCOME-TAX RULE, 1962. 3.1.2. IT IS NOT THE CASE OF THE A. O. THAT APPELLA NT COMPANY HAD DEBITED ANY BOGUS EXPENSES IN FORM OF PRIOR PERIOD EXPENSES . THE APPELLANT MADE TDS ON THE EXPENSES. THE METHOD OF ACCOUNTING FOLLO WED BY THE APPELLANT COMPANY IS ONE OF THE ACCEPTED METHODS OF ACCOUNTING IN THE FIELD OF THE CONSTRUCTION. I AGREE WITH THE LEARNED A.R'S CONTENTION THAT THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PRIVATE LIMITED 322 ITR 158 WOULD SQ UARELY APPLY TO THE FACTS OF THIS CASE. THEREFORE, IN MY CONSIDERED OPI NION, THIS IS NOT A FIT CASE FOR THE LEVY OF PENALTY U/S. 271(1)(C) OF THE I. T. ACT, 1961. THE ORDER LEVYING PENALTY U/S. 271(1)(C) OF THE ACT, IS HEREB Y CANCELLED. 4. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. VEHE MENTLY RELIED UPON THE ORDER OF THE A.O. AT THE OUTSET, LD. COUNSEL FOR T HE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A) AND ARGUED THAT THE ASSESSEE HA D ALREADY SHOWN THESE EXPENSES IN WORK-IN-PROGRESS. THE A.O. DID NOT ASK TO FURNISH THE RELEVANT EVIDENCE FOR CLAIMING EXPENDITURE. HE FURTHER RELI ED IN CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 AND REQUESTED TO CONFIRM THE ORDER OF THE CIT(A). ITA NO. 2961/AHD/2010 A.Y. 03-04 PAGE 5 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE DISCLOSED ALL THE PARTICULARS OF INCOME AS WELL AS EXPENDITURE INCURRED BY IT IN RETURN AS WELL AS ASS ESSMENT PROCEEDING. WHATEVER ADDITION HAS BEEN CONFIRMED BY THE CIT(A) IS OUT OF WORK-IN- PROGRESS, IS DEBITED IN P&L ACCOUNT IN THIS YEAR. NOTHING HAS BEEN CONCEALED BY THE ASSESSEE IN FURNISHING PARTICULARS. THE GEN UINENESS OF THE EXPENDITURE HAS NOT BEEN DOUBTED BY THE A.O. THEREFORE, WE CON FIRM THE ORDER OF THE CIT(A). 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 10.01.2014 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA &5 &5 &5 &5 , ,, , .16 .16 .16 .16 7&641 7&641 7&641 7&641 / COPY OF ORDER FORWARDED TO:- 1. *+ / APPELLANT 2. ./*+ / RESPONDENT 3. ## 1 ; / CONCERNED CIT 4. ;- / CIT (A) 5. 6? .1 , , / DR, ITAT, AHMEDABAD 6. A BC / GUARD FILE. BY ORDER/ &5 &, / # , )