Shri Pawan K Katia, Bathinda V. The Income Tax Officer, Bathinda

ITA 314/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8795 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL
• Assessee Lawyers: P N ARORA
• Keywords: Business expenditure; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (SMC). BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NOS.314 & 315(ASR)/2014 ASSESSMENT YEARS:2008-09 & 2009-10 PAN: ACLPK6018P SHRI PAWAN KUMAR KATIA PROP. VS. INCOME TAX OFFICER , M/S. LAXMI OIL MILLS, WARD 1(1), AMRIK SINGH ROAD, BATHINDA. BATHINDA. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.P.N. ARORA, ADVOCATE RESPONDENT BY: SH.S.S. KANWAL, DR DATE OF HEARING: 12/01/2016 DATE OF PRONOUNCEMENT: 17/03/2016 ORDER THESE ARE THE ASSESSEES APPEALS FOR THE ASSESSMEN T YEARS 2008-09 & 2009-10 AGAINST THE ACTION OF THE LD. CIT(A) IN U PHOLDING THE PENALTIES OF RS.98,000/- (FOR AY 2008-09) AND RS. 4,17,333/- (FOR AY 2009-10) LEVIED ON THE ASSESSEE U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 ( IN SHORT, THE ACT), ON ACCOUNT OF EXPENSES INCURRED WITH REGARD TO SUSPENDED BUSINESS. 2. THE ASSESSEE, DURING THE YEAR, CLAIMED VARIOUS E XPENSES LIKE POWER & FUEL (RS.61,782/-) REPAIR TO BUILDING (RS.22,318/ -), SALARY & WAGES (RS.1,70,000), OTHER INSURANCE (RS.62,702/-), SERVI CE TAX (RS.28,327/-), ETC., ON ACCOUNT OF BUSINESS EXPENSES, THOUGH NO BU SINESS OF COLD STORAGE WAS CARRIED OUT DURING THE YEAR, AS WELL AS DURING THE PRECEDING ITA NOS. 314 & 315(ASR)/2014 ASSESSMENT YEAR: 2008-09 & 2009-10 2 YEAR. THE AO, HOWEVER, WAS OF THE OPINION THAT THE ASSESSEE HAD ADJUSTED HIS BUSINESS LOSS AGAINST RENTAL INCOME WITH A VIE W TO REDUCE ITS TAX LIABILITY. THE CLAIM WAS DISALLOWED. IT WAS IN PURS UANCE OF THIS, THAT THE PENALTIES WERE LEVIED. THE LD. CIT(A) CONFIRMED THE SAME. 3. BEFORE US, THE LD. COUNSEL HAS SUBMITTED THAT TH E EXPENSES IN QUESTION WERE INCURRED FOR THE PURPOSES OF MAINTEN ANCE OF THE BUSINESS PREMISES; THAT THEY WERE NECESSARY FOR THE PURPOSE OF CARRYING ON BUSINESS; THAT THE BUSINESS WAS NOT DISCONTINUED BU T WAS MERELY SUSPENDED AND ALTHOUGH NO TURNOVER COULD BE ACHIEV ED DURING THE YEAR, THESE EXPENSES WERE REQUIRED TO BE INCURRED TO MAI NTAIN THE BUSINESS PREMISES SO THAT AS AND WHEN THE RIGHT OPPORTUNITY AROSE, THE BUSINESS COULD BE STARTED FROM WHERE IT WAS SUSPENDED; THAT HENCE, THE ASSESSEE WAS CLEARLY JUSTIFIED TO CLAIM THE SAID EXPENSES IN THE INCOME TAX RETURN; THAT IT IS THUS EVIDENT THAT THE EXPENSES WERE IN CURRED WHICH WERE GENUINE EXPENSES AND WERE NECESSARY TO MAINTAIN THE BUSINESS FOR FUTURE AND TO PRESERVE THE ASSETS OF THE ASSESSEE; THAT THE TAXING AUTHORITIES HAD NOT DENIED THE SAME; AND THAT IT IS NOT THE CASE OF THE DEPARTMENT THAT THESE EXPENSES WERE NOT INCURRED, O R THAT THE CLAIM OF THE ASSESSEE WAS FALSE. COPIES OF COMPUTATION OF IN COME, PROFIT & LOSS ACCOUNT, BALANCE SHEET AND DETAILS OF THE DISALLOWE D EXPENSES CLAIMED HAVE BEEN FILED IN THE PAPER BOOK. THESE DOCUMENTS WERE ALSO FILED BEFORE THE TAXING AUTHORITIES. IT HAS BEEN STATED THAT THE SE EXPENSES WERE CLAIMED OUT OF RENTAL INCOME & LEASE INCOME RECEIVE D, BESIDES INTEREST ITA NOS. 314 & 315(ASR)/2014 ASSESSMENT YEAR: 2008-09 & 2009-10 3 INCOME; THAT THE AO ALLOWED CERTAIN EXPENSES LIKE I NTEREST, HOUSE TAX AND SERVICE TAX AGAINST THE PROPERTY INCOME, WHEREAS THE BALANCE EXPENSES CLAIMED WERE DISALLOWED; THAT THE AO, IN THE PENAL TY ORDER , ERRED IN CONCLUDING THAT THE ASSESSEE HAD FURNISHED INACCURA TE PARTICULARS OF HIS INCOME; THAT THE ASSESSEE GENUINELY AND BONAFIDE BELIEVES THAT THESE EXPENSES ARE NECESSARY TO BE INCURRED FOR MAINTAI NING HIS COLD STORAGE BUSINESS PREMISES SO AS TO REVIVE THE BUSINESS AT THE OPPORTUNE TIME; THAT THEY WERE INCURRED FOR THE PERIOD OF SUSPENSI ON OF BUSINESS; AND THAT THE BUSINESS OF THE ASSESSEE IS UNDER SUSPENSI ON AND IT HAS NOT BEEN CLOSED. THE FOLLOWING CASE LAWS HAVE BEEN REL IED ON: 1) PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT, 34 8 ITR 306 (SC) 2) CIT VS. RELIANCE PETROPRODUCTS (P) LTD., 322 ITR 158 (SC) 3) ACIT VS. TORQUE PHARMACEUTICALS (P) LTD., 173 TTJ 96 (CHD.) 4) CIT VS. USHA MARKETING (P) LTD., 332 ITR 334 ( DELHI) 5) CIT VS. INDEN BISLERS, 240 ITR 943 (MADRAS) 6) M/S. HOLY SHRINE HOTESL (PVT.) LTD. VS. DCIT, C IRCLE, JAMMU, ORDER DATED 14.12.2015. PASSED BY THE AMRITSAR (SMC ) BENCH OF THE TRIBUNAL IN ITA NOS. 274 TO 276(ASR)/2 015, FOR THE ASSESSMENT YEARS 2001-02 TO 2003-04. 4. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN FURTHER STATED THAT TIL L DATE, THE COLD STORAGE BUSINESS HAS NOT BEEN RE-STARTED BY THE A SSESSEE AND SO, OBVIOUSLY, IT HAS BEEN DISCONTINUED. ITA NOS. 314 & 315(ASR)/2014 ASSESSMENT YEAR: 2008-09 & 2009-10 4 5. I HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERU SED THE MATERIAL AVAILABLE ON RECORD. THE FACTS ARE NOT DISPUTED. TH E AO OBSERVED IN THE PENALTY ORDER THAT THE ASSESSEE HAD WRONGLY CLAIME D A BUSINESS LOSS WITH A VIEW TO REDUCE ITS TAX LIABILITY AND THAT TH E ASSESSEE HAD THEREBY FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE LD. CIT(A), WHILE CONFIRMING THE LEVY OF PENALTIES, FAILED TO TAKE I NTO CONSIDERATION THAT IN ORDER TO MAINTAIN THE BUSINESS PREMISES, EVEN WHEN NO BUSINESS IS BEING TRANSACTED, THE EXPENSES ARE NECESSARILY REQUIRED T O BE INCURRED. THERE IS NO FINDING OF EITHER OF THE AUTHORITIES BELOW, THAT ANY OF THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS NOT REQUIRED TO BE INCU RRED FOR MAINTAINING THE BUSINESS PREMISES. ALL RELEVANT NECESSARY DETAI LS WERE FILED BY THE ASSESSEE. NONE OF THEM HAS BEEN DISPUTED. IT IS ALS O NOT THE DEPARTMENTS CASE THAT THESE EXPENSES WERE NOT INCU RRED, OR THAT THE ASSESSEES CLAIM WAS FALSE. 6. IN THE CASE OF HOLY SHRINE HOTELS PVT. LTD., JA MMU VS. DCIT, CIRCLE-1, JAMMU (SUPRA), THE FACTS ARE NOT DISPUTE D. IN THIS CASE, THE ASSESSEE COMPANY WAS INCORPORATED FOR THE SOLE PURP OSE OF CONSTRUCTION OF HOTEL. HOWEVER, THE PROPERTY COULD NOT BE UTILIZ ED AS SUCH, FOR DENIAL OF BAR LICENSE. IT WAS, THEREFORE, THAT THE ASSESSE E HAD TO LET OUT THE DIFFERENT SPACES TO THE GOVERNMENT AND OTHERS ON RE NT. IT IS A CASE OF WRONG CLAIM HAVING BEEN MADE BY THE ASSESSEE. 7. IN THIS REGARD, THE HONBLE SUPREME COURT, IN C IT VS. RELIANCE PETRO PRODUCTS (P) LTD. (SUPRA), HAS HELD THAT MAK ING OF AN INCORRECT ITA NOS. 314 & 315(ASR)/2014 ASSESSMENT YEAR: 2008-09 & 2009-10 5 CLAIM CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS. AS PER THIS DECISION, MERELY BECAUSE THE ASSESSEE CLAIMED A DEDUCTION WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE, PENALTY U/S 2 71(1)(C) OF THE ACT IS NOT ATTRACTED. IT IS PERTINENT TO NOTE THAT THE HONBLE APEX COURT HELD THAT IF THE CONTENTION OF THE REVENUE IN THIS REGAR D WERE TO BE ACCEPTED, THE ASSESSEE WOULD BE LIABLE FOR PENALTY U/S 271(1) (C) OF THE ACT, IN EVERY CASE, WHERE THE CLAIM MADE BY THE ASSESSEE IS NOT ACCEPTED BY THE AO FOR ANY REASON, WHICH CLEARLY IS NOT THE INTENDMEN T OF THE LEGISLATURE. IN THE PRESENT CASE, AS IN RELIANCE PETRO PRODUCTS (P ) LTD. (SUPRA), NO INFORMATION GIVEN IN THE RETURN OF INCOME FILED WAS FOUND TO BE INCORRECT OR INACCURATE. THE HONBLE SUPREME COURT HAS HELD T HAT MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSE LF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE IN COME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO INAC CURATE PARTICULARS. IN THE PRESENT CASE, THE ASSESSEE HAS FURNISHED ALL THE DETAILS OF ITS EXPENDITURE IN ITS RETURN, WHICH DETAILS, IN THEMSE LVES, WERE NOT FOUND TO BE INACCURATE, NOR COULD BE VIEWED AS CONCEALMENT OF INCOME. IT IS UPTO THE AUTHORITIES TO ACCEPT THE CLAIM IN THE RETURN O R NOT. MERELY BECAUSE THE ASSESSEE HAS CLAIMED THE EXPENDITURE, WHICH CL AIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT, BY ITSE LF, WOULD NOT ATTRACT THE PENALTY U/S 271(1)(C) OF THE ACT. 8. APROPOS RELIANCE OF THE DEPARTMENT OF RELIANCE PETRO PRODUCTS (P) LTD. (SUPRA), THE SAME IS ENTIRELY UNCALLED FOR. T HE VERY ARGUMENTS ITA NOS. 314 & 315(ASR)/2014 ASSESSMENT YEAR: 2008-09 & 2009-10 6 STRESSED BY THE DEPARTMENT HERE WERE NOT AGREED TO BY THE HONBLE SUPREME COURT AND FOR THE FACT THAT THE ASSESSEE HA D FURNISHED ALL THE DETAILS FOR ITS EXPENDITURE AS WELL AS INCOME IN IT S RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE, NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON THE ASSESSEES PART, A S HELD BY THEIR LORDSHIPS. 9. RELIANCE PETRO PRODUCTS (P) LTD. (SUPRA), HAS BEEN REFERRED TO AND CONSIDERED IN CIT VS. BAL KISHAN DHAWAN HUF, 86 C CH 065 (P&H). IN THIS LATTER DECISION RENDERED BY THE HONBLE P & H HIGH COURT, CIT VS. ZOOM COMMUNICATION PVT. LTD., 327 ITR 510(DEL.), R ELIED ON BY THE DEPARTMENT HAS ALSO BEEN TAKEN INTO CONSIDERATION. THEREIN, IT HAS BEEN HELD THAT IF AN ASSESSEE IS UNABLE TO EXPLAIN AS T O IN WHAT CIRCUMSTANCES OR ON ACCOUNT OF WHOSE MISTAKE, DEDUCTIONS WERE CLA IMED, IT WOULD AMOUNT TO RAISING A MALAFIDE CLAIM THAT WOULD INVIT E A PENALTY. THIS WAS AGREED TO IN BAL KISHAN DHAWAN HUF (SUPRA). HOWEV ER, ON FACTS, CIT VS. ZOOM COMMUNICATION PVT. LTD. (SUPRA), WAS HELD TO BE NOT APPLICABLE. HERE ALSO, FIRSTLY, ALL NECESSARY PARTI CULARS WERE DULY FURNISHED BY THE ASSESSEE IN THE RETURN OF INCOME, AS NOTICED. THEN, IT WAS A CASE WHERE, UNLIKE HEREIN, THE ASSESSEE WAS UNABLE TO EXPLAIN THE CIRCUMSTANCES IN WHICH, OR THE MISTAKE ON WHOSE CO UNT, THE WRONG CLAIM WAS MADE. ITA NOS. 314 & 315(ASR)/2014 ASSESSMENT YEAR: 2008-09 & 2009-10 7 10. FURTHER, THE HONBLE P & H HIGH COURT, IN CIT VS. THE SHAHABAD CO-OP. SUGAR MILLS (SUPRA), HAS HELD THAT MAKING OF WRONG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING OF INACCURATE INF ORMATION, WHICH MAY CALL FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 11. MY ABOVE OBSERVATIONS ARE EQUALLY APPLICABLE, M UTATIS MUTANDIS, FOR BOTH THE YEARS UNDER CONSIDERATION. 12. FOR THE ABOVE DISCUSSION, FINDING FORCE IN THE GRIEVANCE SOUGHT TO BE RAISED BY THE ASSESSEE, THE SAME IS ACCEPTED. TH E LEVY OF PENALTIES, AS CONFIRMED BY THE LD. CIT(A), ARE SET ASIDE AND CANC ELLED. 13. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/03/ 2016. SD/- (A.D. JAIN) JUDICIAL MEMBER DATED: 17/03/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH. PAWAN KUMAR KATIA, BATHINDA. 2. THE ITO WARD 1(1), BATHINDA. 3. THE CIT(A), BATHINDA. 4. THE CIT, BATHINDA. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.