Condor Footware(India) Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 2966/AHD/2011

• Counselvise Citation: 296620514 RSA 2011
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-07-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 30-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL SRDR
• Assessee Lawyers: H V VORA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.2966/AHD/2011 ( / ASSESSMENT YEAR : 2005-06) M/S.CONDOR FOOTWEAR (INDIA)LTD. SHED NO.A-1/3503-04, ROAD NO.3, SUB ROAD NO.35, B/H.DEV REKHA, SACHIN GDIC SURAT 934 230 / VS. THE DCIT CIRCLE-1 SURAT ./ ./ PAN/GIR NO. : AAACC 9540 N ( ' / APPELLANT ) .. ( #' / RESPONDENT ) ' $ / APPELLANT BY : SHRI H.V.VORA, AR #' % $ / RESPONDENT BY : SHRI P.L. KUREEL, SR.DR &'( % ) / DATE OF HEARING 16/07/2015 *+, % ) / DATE OF PRONOUNCEMENT 23/07/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT [CIT(A) IN SHORT] DATED 28/09/2011 PERTAINING TO ASSESSMENT YEAR (AY) 2005-06. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- ITA NO.2966 /AH D/2011 M/S.CONDOR FOOTWEAR (INDIA) LTD. VS. DCIT ASST.YEAR 2005-06 - 2 - 1) THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING LEV Y OF PENALTY OF RS.2,29,891/- U/S.271(1) (C) OF THE ACT. 2) THE APPELLANT RESERVES RIGHT TO ADD, ALTER AND WITH DRAW OF ANY GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 13/12/2007, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION ON ACCOUNT OF ADJUSTMENT U/S.145A OF THE A CT WITH REGARD TO DIFFERENCE IN CLOSING STOCK AND UNUTILIZED MODVAT A MOUNTING TO RS.1,94,760/-, DISALLOWANCE OF FOREIGN TRAVEL EXPEN SES AMOUNTING TO RS.1,35,750/- AND DISALLOWANCE TO BONUS PAYMENT TO LABOURERS AMOUNTING TO RS.2,97,500/-. THE AO ON THESE ADDITIONS ALSO I NITIATED THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT AND SUBSEQUEN TLY IMPOSED A PENALTY OF RS.2,29,891/- VIDE ORDER DATED 26/03/2010. AGAI NST THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DISMISSED THE APPEAL. NOW THE ASSESSEE IS FURTHER IN APPEAL BEFORE THE TRIBUNAL. 3. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT I N AY 2004-05 ON THE SIMILAR ADDITIONS, THE AO HAD IMPOSED PENALTY W HICH WAS CONFIRMED BY THE LD.CIT(A) AND ON APPEAL TO THE TRIBUNAL, THE PENALTY WAS DELETED ON THE ADDITIONS MADE ON ACCOUNT OF UNUTILIZED MODV AT AND FOREIGN ITA NO.2966 /AH D/2011 M/S.CONDOR FOOTWEAR (INDIA) LTD. VS. DCIT ASST.YEAR 2005-06 - 3 - TRAVEL EXPENSES BY THE TRIBUNAL. HOWEVER, THE ISSU E RELATING TO THE PAYMENT TO THE LABOURERS WAS NOT BEFORE THE TRIBUNA L. HE SUBMITTED THAT UNDER THE FACTS OF THE PRESENT CASE, THE AUTHORITIE S BELOW WERE NOT JUSTIFIED IN IMPOSING THE PENALTY AND CONFIRMING TH E SAME. 3.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO DISPUTE WITH R EGARD TO THE FACT THAT IN QUANTUM APPEAL, THE DISALLOWANCE IN RESPECT OF FORE IGN TRAVEL EXPENSES HAS BEEN SUSTAINED BY THE TRIBUNAL. 3.2. IN REJOINDER, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN RESPECT OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF BONUS PAYMENT TO LABOURER AMOUNTING TO RS.2,97,500/- HAS BEEN RESTOR ED BACK TO THE FILE OF AO FOR DECISION AFRESH. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF THE TRIBUNAL. THE AO IM POSED PENALTY U/S.271(1)(C) OF THE ACT ON ADDITION MADE ON ACCOUN T OF ADJUSTMENT U/S.145A OF THE ACT, DISALLOWANCE OF FOREIGN TRAVEL EXPENSES AND DISALLOWANCE TO BONUS PAYMENT TO LABOURERS. OUT OF THESE THREE ITEMS; ONE ITEM, I.E. THE DISALLOWANCE OF FOREIGN TRAVEL E XPENSES HAS BEEN CONFIRMED BY THE COORDINATE BENCH IN QUANTUM APPEAL AND ADDITION ITA NO.2966 /AH D/2011 M/S.CONDOR FOOTWEAR (INDIA) LTD. VS. DCIT ASST.YEAR 2005-06 - 4 - MADE ON ACCOUNT OF DISALLOWANCE OF BONUS PAYMENT TO LABOURER OF RS.2,97,500/- HAS BEEN DELETED IN ITA NO.2991/AHD/2 008 FOR AY 2005- 06 DATED 02/11/2012. SO FAR AS THE IMPOSITION OF P ENALTY FOR ADDITION MADE ON ACCOUNT OF ADJUSTMENT U/S.145A OF THE ACT A ND FOREIGN TRAVEL EXPENSES ARE CONCERNED, THE COORDINATE BENCH OF THI S TRIBUNAL (ITAT C BENCH AHMEDABAD) HAS DELETED THE PENALTY IN ASS ESSEES OWN CASE IN ITA NO.3073/AHD/2009 FOR AY 2004-05 VIDE ORDER DATE D 16/12/2011 BY OBSERVING AS UNDER:-- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS QUITE APPARENT THAT THE ASSESSEE HAS BEEN CONTIN UOUSLY FOLLOWING THE SAME METHOD OF VALUING THE CLOSING STOCK. WE HAVE ALSO T AKEN NOTE OF THE CASE LAWS RELIED ON BY THE ID. A.R. WHEREIN IT WAS HELD IN TH E CASE OF CIT-VS- MAHAVIR ALUMINIUM LTD. (SUPRA) AS UNDER: 'ACCOUNTSVALUATION OF STOCKADJUSTMENT FOR EXCISE DUTY, MODVAT CREDIT, ETC.TO GIVE EFFECT TO S. 145A, IF THERE IS A CHANG E IN THE CLOSING STOCK AS ON 31ST MARCH, 1999, THERE MUST NECESSARILY BE A CORRE SPONDING ADJUSTMENT IN THE OPENING STOCK AS ON 1ST APRIL, 1998, AND SINCE NO ADJUSTMENT WAS MADE BY THE ASSESSEE IN THE P&L A/C FOR THE YEAR ENDING 31S T MARCH, 1998, NO QUESTION OF DOUBLE DEDUCTION ARISESTRIBUNAL WAS CORRECT IN LAW IN ALLOWING THE ADJUSTMENT OF RS.54,83,272 TO THE ASSESSEE IN THE O PENING STOCK FOR THE PREVIOUS ASST. YR. 1998-99 (BEING A TRANSITIONAL YE AR) UNDER S. 145A. ' IN THE CASE OF J.N.PARABIA (TRANSPORT) (P) LTD. (SU PRA) IT WAS HELD AS UNDER: 'PENALTY UNDER SC. 271(1)(C) - CONCEALMENT- WORK-IN -PROGRESS NOT DISCLOSED - SAME SYSTEM FOLLOWING BY ASSESSEE-COMPANY SINCE ITS INCEPTION AND HAS BEEN ACCEPTED BY DEPARTMENT IN THE PAST - NOT A FIT CASE FOR LEVY OF PENALTY.' 9.1 FURTHER, WE HAVE TAKEN NOTE TO THE RECENT DECI SION OF THE HON'BLE APEX COURT CITED BY THE LD.AR IN THE CASE OF RELIANCE PETRO PR ODUCTS PVT. LTD. REPORTED IN 322 ITR 158 (S.C.), WHEREIN IT WAS HELD AS UNDER: , ITA NO.2966 /AH D/2011 M/S.CONDOR FOOTWEAR (INDIA) LTD. VS. DCIT ASST.YEAR 2005-06 - 5 - 'A GLANCE AT THE PROVISIONS OF SECTION 271(L)(C) OF THE I.T. ACT 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSE E MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 271(1)(C) WOULD EMBRA NCE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETUR N IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HEL D GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSE SSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE P ENALTY PROVISIONS CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS - T O ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE , NOR EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE I N LAW, BE ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CA NNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS.' 9.2 FROM THE FACTS AND CIRCUMSTANCE OF THE CASE IT IS APPARENT THAT THE ASSESSEE HAD NOT CONCEALED ANY PARTICULARS OF INCOME OR FURN ISHED INACCURATE PARTICULARS. IT IS ONLY AN INADVERTENT MISTAKE COMMITTED BY THE APPELLANT IN NOT ADOPTING THE CORRECT METHOD OF ACCOUNTING. FURTHER NO ELEMENT OF PROFIT HAD ESCAPED TAX THOUGH IT MAY HAVE SPILLED OVER TO THE SUBSEQUENT Y EAR AND THAT TOO MARGINALLY. FURTHER CONSIDERING THE ABOVE CASE LAWS, WE ARE OF THE CONSIDERED VIEW THAT IT IS NOT A FIT CASE TO LEVY PENALTY ON THIS ISSUE. ACCOR DINGLY, WE DELETE THE LEVY OF PENALTY MADE UNDER THIS ISSUE. 10. IMPOSITION OF PENALTY FOR DISALLOWANCE ON FOREIGN T RAVEL EXPENSES OF RS.3,54,032/-:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ID . A.O. DISALLOWED AN EXPENSES OF RS.3,54,032/- INCURRED BY THE ASSESSEE TOWARDS FOREIGN TOUR EXPENSES OF MR. MURLI ADNANI, WHO WAS NEITHER A DIRECTOR NOR AN EMPLOYEE OF THE COMPANY. THE ASSESSEE HAD CLARIFIED THAT MR. MURLI ADNANI WAS A PROMOTER/SHAREHOLDER OF THE COMPANY AND HAD SOURCED MANY BUYERS/SUPPLIERS FOR THE COMPANY. HE WAS HELPING THE COMPANY IN ITS BUSI NESS AND THE COMPANY HAD INCURRED THESE TRAVEL EXPENSES OF MR. MURLI ADNANI FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY. HOWEVER, ID. A.O. DISBELIEVED THE CONTENTION OF THE ASSESSEE AND MADE THE DISALLOWANCE. THIS DISALLOWAN CE OF EXPENSES WAS ITA NO.2966 /AH D/2011 M/S.CONDOR FOOTWEAR (INDIA) LTD. VS. DCIT ASST.YEAR 2005-06 - 6 - CONFIRMED BY THE ID. CIT(A) AND, THE ITAT. LD. A.O. THEREAFTER LEVIED PENALTY ON THIS ADDITION INVOKING SECTION 271(L)(C) OF THE ACT WHICH WAS SUBSEQUENTLY CONFIRMED BY THE ID. CIT(A). 11. THE ID. A.R. FORCEFULLY ARGUED THAT THE EXPENSE S INCURRED BY THE ASSESSEE WERE GENUINE AND THE DISALLOWANCE WAS MADE BY THE ID. AO DISBELIEVING THE ASSERTION OF THE ASSESSEE. HE PRAYED THAT IN SUCH CIRCUMSTANC ES, PENALTY MAY NOT BE LEVIED BECAUSE THE ASSESSEE HAS NOT CONCEALED ANY INCOME O R FURNISHED INACCURATE PARTICULARS. 12. THE ID. D.R. SUPPORTED THE ORDERS OF THE REVENU E AND PRAYED THAT THE ASSESSEE HAS INCORRECTLY CLAIMED EXPENSES WHICH WERE NOT PER MISSIBLE UNDER THE ACT AND THEREFORE PENALTY LEVIED ON THIS ADDITION MAY BE SU STAINED. 13. AFTER HEARING BOTH THE SIDES AND CAREFULLY GOIN G THROUGH THE RECORDS AVAILABLE WITH US, IT IS EVIDENT THAT THE ASSESSEE HAS DISCLO SED ALL THE DETAILS OF ITS EXPENDITURE EXPLICITLY IN ITS BOOKS OF ACCOUNTS. TH E ASSESSEE HAS ALSO EXPLAINED THE PURPOSE OF SUCH EXPENDITURE. THE DISALLOWANCE W AS MADE BY THE REVENUE AUTHORITIES ON THE ASSUMPTION THAT THE EXPENSES CLA IMED TO BE NOT GENUINE BECAUSE SUFFICIENT EVIDENCE TO THAT EXTENT WAS NOT PRODUCED . HOWEVER, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND PLACING REL IANCE ON THE DECISION OF THE HON'BLE APEX COURT RENDERED IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT PENALTY LEVIED ON THE ABOVE ADDITION IS NOT SUSTAINABLE. THEREFORE, WE HEREBY DELETE THE PE NALTY MADE ON THE DISALLOWANCE OF RS. 3,54,032/- UNDER THE HEAD FOREI GN TRAVEL EXPENSES. 4.1. THE FACTS AND CIRCUMSTANCES ARE IDENTICAL TO T HE FACTS AND CIRCUMSTANCES INVOLVED IN THIS YEAR ALSO, THERE IS NO CHANGE INTO THE FACTS AND CIRCUMSTANCES POINTED OUT BY THE REVENUE. THER EFORE, TAKING A CONSISTENT VIEW, WE HEREBY DIRECT THE AO TO DELETE THE PENALTY ON THE ADDITIONS MADE ON ACCOUNT OF ADJUSTMENT U/S.145A OF THE ACT AND DISALLOWANCE OF FOREIGN TRAVEL EXPENSES. IN RESPEC T OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF BONUS PAYMENT TO LABOURE RS IN QUANTUM APPEAL, THIS COORDINATE BENCH (ITAT D BENCH AHMED ABAD) IN ITA ITA NO.2966 /AH D/2011 M/S.CONDOR FOOTWEAR (INDIA) LTD. VS. DCIT ASST.YEAR 2005-06 - 7 - NO.2991/AHD/2008 FOR AY 2005-06, ORDER DATED 02/11/ 2012, HAD RESTORED THIS ISSUE BACK TO THE FILE OF AO FOR DE N OVO ASSESSMENT. UNDER THESE FACTS, THE PENALTY LEVIED ON THIS AMOUNT DOES NOT SURVIVE. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON THURSDAY, THE 23 RD DAY OF JULY, 2015 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( PRAMOD KUMAR ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23/ 07 /2015 0)..& , '.&../ T.C. NAIR, SR. PS !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 123 4 / CONCERNED CIT 4. 4 ( ) / THE CIT(A)-I, SURAT 5. 5'6 &23 , ) 23 , , 1 / DR, ITAT, AHMEDABAD 6. 689 :( / GUARD FILE. ! / BY ORDER, #5 //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 21.7.15 (DICTATION-PAD 8- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..21.7.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.23.7.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23.7.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER