The ITO, Ward-1(1), Surat V. Ankur Motors Pvt.Ltd., Surat

ITA 3053/AHD/2009

• Counselvise Citation: 305320514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 23-02-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 13-11-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Proportionate interest; Wrong claim; Difference of opinion; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.3053/AHD/2009: A. Y.: 2005-06 THE INCOME TAX OFFICER, WARD 1 (1), SURAT VS M/S. ANKUR MOTORS PVT. LTD., INDRALOK APARTMENT, BHATTAR CHAR RASTA, UDHNA MAGDALLA ROAD, SURAT PA NO. AACCA 3043L (APPELLANT) (RESPONDENT) APPELLANT BY SHRI VINOD TANWANI, SR. DR RESPONDENT BY NONE DATE OF HEARING: 23-02-2012 DATE OF PRONOUNCEMENT: 27-03-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A)-I, SUR AT DATED 10-09-2009 FOR ASSESSMENT YEAR 2005-06 IN APPEAL NO.CAS-I/269/ 08-09, ON THE FOLLOWING GROUND: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS. 2,29,384 LEVIED U/S. 271 (1) (C), FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME IN RESPECT OF COMMISSION INCOME, CAPITAL EXPENDITURE WRONGLY CLAIMED AS REVENUE EXPENDITURE AND DISALLOWANCE OF INTEREST FOR ADVANCING INTEREST FRE E LOANS OUT OF INTEREST BEARING FUNDS. ITA NO.3053/AHD/2009 (AY 2005-06): ITO, W-1(1), SUR AT VS M/S. ANKUR MOTORS PVT. LTD. 2 2. THE FACTS IN BRIEF, AS EMERGED FROM THE ORDER OF THE LEARNED CIT(A) ARE THAT IN THE PENALTY ORDER THE AO STATED THAT TH E PENALTY HAS BEEN LEVIED IN RESPECT OF THE FOLLOWING THREE AMOUNTS: COMMISSION INCOME OF RS.61,100/- RECEIVABLE FROM HDFC BANK BY MISTAKE CLAIMED AS SALES PROMOTION EXPENSES RS.1,22,200 EXPENSES INCURRED ON ELECTRIC ACCESSORIES CLAIMED AS REPAIRS AND MAINTENANCE WAS TREATED AS CAPITAL EXPENDITURE RS.70,720 PROPORTIONATE INTEREST EXPENSES DISALLOWED FOR THE REASONS ASSESSEE HAD ADVANCED INTEREST FREE ADVANCES TO SISTER CONCERNS RS.4,33,943 TOTAL RS.6,26,863 IN RESPECT OF THE ADDITIONS OF RS.70,720/- AND RS.4 ,33,943/- PENALTY U/S 271(1) ( C) OF THE IT ACT WAS INITIATED AND THE ABO VE ADDITIONS WERE CONFIRMED BY THE LEARNED CIT(A). WITH RESPECT TO TH E ADDITION OF RS.1,22,200/-, THE AO STATED THAT IN THE ASSESSMENT ORDER IT WAS FOUND THAT THE ASSESSEE HAD ACTUALLY EARNED COMMISSION IN COME OF RS.61,100/- WHICH INSTEAD OF CREDITING TO THE INCO ME WAS DEBITED BY THE ASSESSEE AS EXPENDITURE. THESE FACTS WERE BEING NOT DENIED BY THE ASSESSEE AND IN RESPECT OF THIS AMOUNT NO APPEAL WA S ALSO FILED BEFORE THE LEARNED CIT(A).THE AO STATED THAT THIS AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME, AND THEREFORE, HE LEVIED THE PENALTY BY REJECTING THE PLEA OF THE ASSESSEE THAT IT WAS A BO NA FIDE MISTAKE. 2.1 WITH RESPECT TO DISALLOWANCE OF RS.70,720/- BEI NG REPAIR EXPENSES CLAIMED AS REVENUE EXPENSES BY THE ASSESSEE, THE AO TREATED THE SAME AS CAPITAL EXPENDITURE AND HELD IT TO BE FURNISHING OF INACCURATE PARTICULARS OF INCOME. ITA NO.3053/AHD/2009 (AY 2005-06): ITO, W-1(1), SUR AT VS M/S. ANKUR MOTORS PVT. LTD. 3 2.2 WITH RESPECT TO DISALLOWANCE OF INTEREST OF RS. 4,33,943/-, THE AO STATED THAT THE ASSESSEE HAD GIVEN INTEREST FREE AD VANCES TO ITS SISTER CONCERNS AND THEREFORE, THIS DISALLOWANCE OF INTERE ST WAS MADE AS THE ASSESSEE HAD BORROWED FUNDS AND HAS PAID INTEREST W HEREAS IT HAD ADVANCED LOANS WITHOUT CHARGING INTEREST. THE ASSES SEE STATED THAT NO PENALTY SHOULD BE LEVIED AS THERE IS NO FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. THE AO DID NO T ACCEPT THE EXPLANATION OF THE ASSESSEE AND LEVIED PENALTY. 3. WHILE CARRYING ON THE MATTER IN APPEAL, IT WAS S UBMITTED BEFORE THE LEARNED CIT(A) THAT THE ADDITION OF RS.1,22,000/- W AS MADE ON ACCOUNT OF BONA FIDE MISTAKE OF COMMISSION INCOME OF RS.61, 100/- WRONGLY DEBITED AS SALES PROMOTION EXPENSES AND ARGUED THAT FOR SUCH A SMALL AMOUNT THE ASSESSEE WOULD NOT RESORT TO CONCEALING THE INCOME OR FURNISHING ANY INACCURATE PARTICULARS. IT WAS FURTH ER ARGUED BY THE ASSESSEE THAT IT WAS GENUINE AND BONA FIDE MISTAKE AND HENCE NO PENALTY SHOULD BE LEVIED. 3.1 WITH RESPECT TO THE REVENUE EXPENDITURE OF RS.7 0,720/- TREATED AS CAPITAL EXPENDITURE, THE ASSESSEE SUBMITTED THAT TH IS AMOUNTS TO DIFFERENCE OF OPINION AND HENCE IT IS A DEBATABLE I SSUE AND NO PENALTY SHOULD BE LEVIED. 3.2 WITH RESPECT TO THE DISALLOWANCE OF INTEREST EX PENSES OF RS.4,33,943/- IT WAS SUBMITTED BY THE ASSESSEE THAT IT IS A TECHNICAL DISALLOWANCE AND THAT THE AO HAD NOT PROVED THAT TH E INTEREST EXPENDITURE WAS NOT PAID. IT WAS ALSO FURTHER SUBMI TTED THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RE WAS CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME A ND THAT THE DISALLOWANCE HAS BEEN MADE BECAUSE OF THE OPINION O F THE AO THAT THE ITA NO.3053/AHD/2009 (AY 2005-06): ITO, W-1(1), SUR AT VS M/S. ANKUR MOTORS PVT. LTD. 4 LOANS GIVEN TO SISTER CONCERNS WERE NOT FOR BUSINES S PURPOSES AND HENCE THE LOAN TAKEN FROM BORROWER TO THAT EXTENT, NOT FOR THE PURPOSE OF BUSINESS. IT WAS FURTHER ARGUED THAT THIS AMOUNTS T O DIFFERENCE OF OPINION AND NO PENALTY SHOULD BE LEVIED. 4. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS M ADE BY THE ASSESSEE AND THE OBSERVATION OF THE AO FOUND THAT W ITH RESPECT TO ADDITION OF RS.1,22,200/- FACTS HAVE NOT BEEN DENIE D BY THE ASSESSEE THAT INTEREST INCOME HAS BEEN DEBITED AS EXPENDITUR E. THE EXPLANATION GIVEN BY THE ASSESSEE WAS FOUND TO BE CORRECT BY TH E LEARNED CIT(A) AND THE SAME HAS NOT BEEN FOUND TO BE FALSE BY THE AO. THEREFORE, THIS CANNOT BE A CASE OF DEEMED CONCEALMENT OR FURNISHIN G OF INACCURATE PARTICULARS OF INCOME IN TERMS OF EXPLANATION (1) T O SECTION 271(1) OF THE IT ACT AND HELD THAT PENALTY CANNOT BE LEVIED IN R ESPECT OF THIS ADDITION. 4.1 IN RESPECT OF DISALLOWANCE OF RS.70,720/- ON AC COUNT OF REPAIR EXPENDITURE TREATING AS CAPITAL EXPENSES, THE LEAR NED CIT(A) HELD IT TO BE CLEARLY A CASE OF DIFFERENCE OF OPINION AND DEBA TABLE ISSUE AND HENCE, AS PER SETTLED POSITION OF LAW NO PENALTY CA N BE LEVIED. 4.2 REGARDING DISALLOWANCE OF INTEREST EXPENSES, CO NSIDERING THE INTEREST FREE LOAN WAS NOT TAKEN FOR THE PURPOSE OF BUSINESS, THE LEARNED CIT(A) HELD THAT THIS IS A TECHNICAL DISALLOWANCE A ND THERE IS NO QUESTION OF FURNISHING OF INACCURATE PARTICULARS OR CONCEALM ENT OF INCOME AND THAT THE AO HAS BROUGHT NOTHING ON RECORD TO SHOW THAT T HERE WAS CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT WAS, THEREFORE, HELD BY THE LEARNED CIT(A) THAT PENALTY IN THIS RESPECT ALSO CANNOT BE LEVIED. 5. BEING AGGRIEVED AND DISSATISFIED WITH THE ABOVE FINDINGS OF THE LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. ITA NO.3053/AHD/2009 (AY 2005-06): ITO, W-1(1), SUR AT VS M/S. ANKUR MOTORS PVT. LTD. 5 6. WE HAVE HEARD THE LEARNED DR, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. HOWEVER, NONE APPEARED BEFORE US FROM THE SIDE OF THE ASSESSEE AT THE TIME OF HEARING OF THE APPEAL. THE LEARNED CIT(A) ON PROPER APPRECIATION OF THE FACTS ON RECORD AND CONS IDERING THE SUBMISSIONS OF THE ASSESSEE FOUND THAT THE ASSESSEE HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE P ARTICULARS OF ITS INCOME WITH REGARD TO ADDITIONS OF RS.1,22,200/- ON ACCOUNT OF COMMISSION INCOME, RS.70,720/- IN RESPECT OF REPAIR S AND MAINTENANCE AND RS.4,33,943/- IN RESPECT OF INTEREST EXPENSES D ISALLOWED AND THAT THE AO HAS BROUGHT NOTHING ON RECORD TO SHOW THAT T HERE WAS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND TREATED THE INTEREST EXPENSES TO BE TECHNICAL D ISALLOWANCE. WITH RESPECT TO LEVY OF PENALTY FOR CLAIMING EXPENDITURE UNDER THE HEAD REPAIRS AND MAINTENANCE, IT COULD BE ARGUED THAT TH E ISSUE IS DEBATABLE BECAUSE THE ASSESSEE HAS INCURRED THESE EXPENSES IN REGARD TO INSTALLATION OF ELECTRIC ACCESSORIES IN SHOW ROOM AND WORKSHOP. FURTHER, WITH RESPECT TO LEVY OF PENALTY IN REGARD TO DISALLOWANCE OF EXPENDITURE OF RS.4,33,943/- DUE TO ADVANCEMENT OF INTEREST FREE LOAN TO SISTER CONCERN MAY ALSO BE CONSIDERED TO BE DEBATAB LE SINCE THE ISSUE INVOLVED IS THE NEXUS AND COMMERCIAL CONNECTION BET WEEN BOTH THE CONCERNS. ACCORDINGLY, WE UPHOLD THE DECISION OF TH E LEARNED CIT(A) IN DELETING PENALTY U/S 271 (1) (C) OF THE IT ACT IN R ESPECT TO BOTH THE ISSUES. HOWEVER, WE DO NOT UNDERSTAND THE GROSS OVERSIGHT O F THE ASSESSEE IN PASSING WRONG ACCOUNTING ENTRIES THEREBY TREATING T HE COMMISSION INCOME OF RS.61,100/- AS SALES PROMOTION EXPENSES O F RS.1,22,200/-. ON THIS ISSUE WE ARE OF THE AFFIRMED VIEW THAT IT A MOUNTS TO FURNISHING OF INACCURATE PARTICULARS AS ENVISAGED UNDER THE ACT A ND, THEREFORE, WE SUSTAIN THE LEVY OF PENALTY BY THE LEARNED AO ON TH IS COUNT. ITA NO.3053/AHD/2009 (AY 2005-06): ITO, W-1(1), SUR AT VS M/S. ANKUR MOTORS PVT. LTD. 6 6. TO SUM UP:- (A) PENALTY LEVIED ON ACCOUNT OF WRONGLY CLAIMING E XPENSES UNDER THE HEAD REPAIRS AND MAINTENANCE FOR RS.70,72 0/- AND DISALLOWANCE OF INTEREST OF RS.4,33,943/- ON ACCOUN T OF INTEREST FREE LOAN TO SISTER CONCERNS ARE DELETED. (B) PENALTY LEVIED ON ACCOUNT OF WRONG CLAIM OF SAL ES PROMOTION EXPENSES OF RS.1,22,200/- IS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF MARCH, 2012 SD/- SD/- (D.K.TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD