The DCIT, Baroda Circle- 4, Baroda V. Tyco Valves & Controls (India) Pvt. Ltd., Baroda

ITA 321/AHD/2009

• Counselvise Citation: 32120514 RSA 2009
• Duration Of Justice: 3 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-03-2012
• Assessment Year: 1998-1999
• Appeal Filed On: 30-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: J P SHAH
• Keywords: Business income
• Section: 143(3); 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT, JM AND SHRI A. MOHA N ALANKAMONY, AM) ITA NO.321/AHD/2009: A. Y.: 1998-99 THE D. C. I. T., CIRCLE-4, 4 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA 390 007 VS M/S. TYCO VALVES & CONTROL INDIA PVT. LTD., (FORMERLY KEUSONE INDIA PVT. LTD.), 302, IVORY TERRACE, R. C. DUTT ROAD, BARODA PA NO. AAACK 8809 L (APPELLANT) (RESPONDENT) APPELLANT BY SHRI B.L. YADAV, SR. DR RESPONDENT BY SHRI J.P. SHAH, AR DATE OF HEARING: 14-03-2012 DATE OF PRONOUNCEMENT: 23-03-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A)-III, B ARODA DATED 17 TH JANUARY, 2008, FOR ASSESSMENT YEAR 1998-99 IN APPEA L NO. CIB/III- 81/07-08 ON THE FOLLOWING GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S 271 (1) ( C ) OF RS.10,00,000/- OVERLOOKING THE RATIO LAID DOWN BY T HE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS 306 ITR 2 77 (SC) WHEREIN IT WAS LAID DOWN THAT PENALTY U/S 271 (1) ( C) WAS CIVIL WRONG & MENS REA IS NOT REQUIRED TO BE ESTABLISHED. ITA NO.321/AHD/2009 (AY 1998-99): DCIT, AHMEDABAD V S M/S. TYCO VALVES & CONTROLS INDIA P. LTD. 2 2. BRIEFLY, THE FACTS OF THE CASE THAT ASSESSMENT I N THIS CASE WAS FINALIZED U/S 143(3) OF THE IT ACT ON 29-12-2000 DE TERMINING TOTAL INCOME AT RS.1,50,13,520/-. IN VIEW OF EXPLANATION 1 OF SE CTION 271 (1) (C ) OF THE ACT THE AO LEVIED 100% PENALTY OF RS.10,00,000/- ON THE FOLLOWING ADDITION/DISALLOWANCES: (I) ADDITION ON ACCOUNT OF INTEREST INCOME TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES RS.4,49,000/-. (II) DEDUCTION U/S. 80 IA WAS ALLOWED AT RS.39,39,1 97/- AS AGAINST THE CLAIM AT RS.55,87,000/- THE AO LEVIED PENALTY ON BOTH THE ABOVE ADDITIONS S INCE THE ASSESSEE FAILED TO OFFER SATISFACTORY EXPLANATION. BEING AG GRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A). 2.1 BEFORE THE LEARNED CIT(A), REGARDING INTEREST I NCOME THE ASSESSEE SUBMITTED THAT COMPLETE DISCLOSURE WAS MADE BY THE ASSESSEE IN COMPUTING THE TOTAL INCOME AND HENCE HAS NOT CONCEA LED ANY INCOME OR HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF INC OME. IT WAS FURTHER SUBMITTED THAT AS PER PROVISIONS OF SECTION 275 OF THE ACT LEVY OF PENALTY IS BARRED BY LIMITATION AND THAT THE AO SHOULD NOT HAVE LEVIED PENALTY U/S 271 (1) (C) OF THE ACT. 2.2 WITH RESPECT TO DEDUCTION U/S 80 IA OF THE ACT, IT WAS SUBMITTED THAT THE DISALLOWANCE WAS MADE TO THE RETURNED INCO ME ON DIFFERENT LEGAL INTERPRETATIONS AND THAT THE AO HAS NOT ARRIVED AT ANY FINDING WHICH IS DIFFERENT FROM THE FACTS DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME OR IN RESPECT OF THE DETAILS SUBMITTED DURING ASSES SMENT PROCEEDINGS. IT WAS FURTHER SUBMITTED THAT SINCE THE LEARNED CIT(A) HAS CONFIRMED THE DISALLOWANCE, IT DOES NOT GIVE AUTOMATIC RISE TO LE VY PENALTY. IN SUPPORT ITA NO.321/AHD/2009 (AY 1998-99): DCIT, AHMEDABAD V S M/S. TYCO VALVES & CONTROLS INDIA P. LTD. 3 OF THE ABOVE CONTENTIONS THE ASSESSEE RELIED UPON T HE FOLLOWING DECISIONS: ITO VS BURMA CELL OIL STORAGE CO. OF INDIA LTD., 16 3 ITR 496 (CAL.) CIT VS INDIAN METALS, 211 ITR 35 (ORI.) CIT VS. DELHI CLOTH MILLS P. LTD., 157 ITR 822 (DEL .) CIT VS AJAIB SINGH & CO., 253 ITR 630 (PUN. & HAR.) CIT VS HARSHVARDHAN CHEMICALS, 259 ITR 212 (RAJ.) A ND NATIONAL TEXTILES VS CIT, 249 ITR 125, (GU.) 2.3 THE LEARNED CIT(A) CONSIDERING THE FACTS OF THE CASE AND SUBMISSIONS OF THE LEARNED AR DELETED THE PENALTY O N BOTH THE ABOVE ADDITIONS. HIS FINDINGS IN PARA 2.3 ARE REPRODUCED AS UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNS EL AND FACTS OF THE CASE. THE ASSESSING OFFIC ER LEVIED PENALTY ON TWO ADDITIONS. THE FIRST ADDITION IS INTEREST INCOME OF RS.4,49,000/-EANED ON SURPLUS FUND INVESTED WHICH WERE PERTAINING TO NEW EOU. ASSESSING OFFICER TAXED THE INTEREST INCOME RELYING ON SUPREME COURT'S DECISION IN THE CASE OF TUTICORIN ALKALIES REPORTED IN 227 ITR. PRIOR TO THIS DECISIO N, THERE WERE DECISIONS BOTH IN FAVOUR OF THE APPELLANT AS W ELL AS IN FAVOUR OF THE DEPARTMENT. THE APPELLANT MADE DISCLOSURE OF INTEREST INCOME IN SCHEDULE-9 OF THE BALANCE SHEET WHICH IS AT PAGE 24 OF THE PAPER BOOK FILED. CONSIDERING THIS, IT IS CLEAR THAT THE ASSES SING OFFICER FOUND THE DETAILS ABOUT THE INCOME FROM THE DISCLOSURE MADE BY THE APPELLANT ONLY. THE SAME W AS REDUCED FROM PROJECT WORK IN PROGRESS AS PER ACCOUN TING STANDARDS. CONSIDERING FACT THAT THE APPELLANT DISC LOSED FULL FACTS IN THE RETURN AND THERE WERE CONFLICTING DECISIONS ON THE ISSUE BY VARIOUS JUDICIAL AUTHORIT IES, ADDITION ON SUCH ISSUE WILL, NOT CALL FOR PENALTY U /S, 271(L)(C). THEREFORE PENALTY LEVIED BY THE ASSESSIN G OFFICER ON THIS ISSUE IS DELETED. OTHER ARGUMENTS M ADE BY THE APPELLANT ARE NOT DISCUSSED SINCE THE PENALT Y ON THIS ISSUE IS FOUND NOT LEVIABLE. ITA NO.321/AHD/2009 (AY 1998-99): DCIT, AHMEDABAD V S M/S. TYCO VALVES & CONTROLS INDIA P. LTD. 4 ON THE SECOND ADDITION, THE APPELLANT SUBMITTED THAT THE ASSESSING OFFICER DID NOT ALLOW DEDUCTION U/S. 80IA ON AGENCY COMMISSION, SCRAP SALE, INSPECTION CHARGES AND MISC. INCOME. ON INTEREST INCOME THE APPELLANT HAD NEVER CLAIMED DEDUCTION U/S. 80IA. TH E APPELLANT SUBMITTED MANY DECISIONS IN SUPPORT OF IT S CLAIM THAT PENALTY CANNOT BE LEVIED ON SUCH DISALLOWANCES. WHEREVER THE ASSESSEE HAS BONA FIDE BELIEF WHILE CLAIMING ANY EXPENSES OR DEDUCTION, TH E DISALLOWANCE OF SUCH EXPENSE OR DEDUCTION WILL NOT AUTOMATICALLY RESULT IN LEVY OF PENALTY. ALL THE DE CISIONS SUBMITTED BY THE APPELLANT SUPPORTED ITS VIEWS. THE VARIOUS CLAIMS MADE BY THE APPELLANT ARE BASED ON LEGAL DECISIONS IN ITS FAVOUR. IN THE CASE OF INSPECTION CHARGES AND SCRAP INCOME, CIT(A) IN A.Y 1997-98 AND 2001-02 HAD ALLOWED DEDUCTION U/S. 80IA . AS REGARDS AGENCY COMMISSION, THE SAID ORDERS WERE BOOKED BY THE APPELLANT BUT GOODS ARE MANUFACTURED BY OTHER GROUP COMPANIES. THIS BUSINESS IS REGULARLY CARRIED OUT BY THE APPELLANT. SINCE THESE BUSINESS HAS DIRECT NEXUS WITH THE BUSINESS OF INDUSTRIAL UNDERTAKINGS THE DEDUCTION WAS CLAIMED. AS REGARDS MISC. INCOME, THE SAME REPRESENTS INCOME DIRECTLY LINKED WITH INDUSTRIAL UNDERTAKING. REGARDING INTER EST INCOME THE SAME IS IN THE NATURE OF BUSINESS INCOME AS HELD BY MANY DECISIONS. CONSIDERING THESE FACTS, TH E APPELLANT'S CLAIM OF DEDUCTION U/S. 80IA CANNOT BE CONSIDERED TO BE MALA FIDE IN VIEW OF THE JUDICIAL DECISIONS AND THE PRACTICE FOLLOWED BY APPELLANT SI NCE MANY YEARS. SINCE THE NATURE OF INCOME HAS BEEN DISCLOSED, CLAIM OF DEDUCTION U/S 80IA ON THESE INC OME ARE ONLY DISPUTED. ON SUCH ADDITION, PENALTY CANNOT BE LEVIED NEITHER IN EXPLANATION 1 NOR U/S. 271 (1) (C ). CONSIDERING THIS, I DELETE THE PENALTY ON THIS ADDI TION ALSO. 3. BEING AGGRIEVED AND DISSATISFIED WITH THE ABOVE FINDINGS OF THE LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. ITA NO.321/AHD/2009 (AY 1998-99): DCIT, AHMEDABAD V S M/S. TYCO VALVES & CONTROLS INDIA P. LTD. 5 4. THE LEARNED DR VEHEMENTLY ARGUED IN SUPPORT OF T HE ORDER PASSED BY THE LEARNED AO AND THE LEARNED AR RELIED UPON TH E ORDER OF THE LEARNED CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, CAREFULLY P ERUSED THE MATERIALS PRODUCED BEFORE US AND THE ORDERS OF THE AUTHORITIES BELOW. THE LEVY OF PENALTY WITH RESPECT TO ADDITION MADE O N ACCOUNT OF INCOME SHOWN UNDER A WRONG HEAD INSTEAD OF INCOME UNDER TH E HEAD INCOME FROM OTHER SOURCES FOR RS.4,49,000/- WAS DEBATABLE EARLIER TO THE DECISION RENDERED BY THE HONBLE APEX COURT IN THE CASE OF TUTICORIN ALKALIES REPORTED IN 227 ITR 172. THE APPELLANT IS A PRIVATE LIMITED COMPANY WHOSE ACCOUNTS ARE DULY AUDITED BY QUALIFIE D CHARTERED ACCOUNTANTS AND CERTIFIED BY COMPANY SECRETARY. THE APPELLANT HAS DULY DISCLOSED ITS INTEREST INCOME UNDER THE HEAD PRE-OPERATIVE EXPENDITURE AND THE SAME IS REDUCED FROM THE TOTAL PRE-OPERATIVE EXPENDITURE. THEREFORE, THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INCORRECT PARTICULARS OF INCOME IN THE STATEMENT S OF ACCOUNTS FURNISHED BY THE APPELLANT. THE LEARNED CIT(A) CONSIDERING AL L SUCH FACTS HAS RIGHTLY DELETED THE PENALTY LEVIED U/S 271 (1) ( C ) OF THE ACT ON THIS COUNT. FROM THESE REASONS STATED HEREIN ABOVE BROUGHT OUT BY THE LEARNED CIT(A), WE DO NOT HAVE ANY HESITATION TO UPHOLD THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE. ON THE SECOND ADDITION MADE B Y THE LEARNED AO WITH RESPECT TO CLAIM OF DEDUCTION U/S 80IA OF THE ACT WHEREIN THE LEARNED AO GRANTED RELIEF FOR RS.39,39,197/- INSTEA D OF CLAIM BY THE ASSESSEE FOR RS.55,87,000/-, THE LEARNED AO HAD INI TIATED AND LEVIED PENALTY. THE LEARNED CIT(A) DELETED THE SAME SINCE THE DEDUCTION CLAIMED U/S 80 IA OF THE IT ACT ON AGENCY COMMISSIO N, SCRAP SALES, INSPECTION CHARGES AND MISC. INCOME WERE DEBATABLE DUE TO VARIOUS DECISIONS OF THE APPELLATE AND JUDICIAL FORUM. WE D O NOT FIND ANY ITA NO.321/AHD/2009 (AY 1998-99): DCIT, AHMEDABAD V S M/S. TYCO VALVES & CONTROLS INDIA P. LTD. 6 INFIRMITY IN THE DECISION OF THE LEARNED CIT(A). TH EREFORE, WE HEREBY CONFIRM THE ORDER OF THE LEARNED CIT(A) ON BOTH THE ISSUES. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23RD DAY OF MARCH, 2012 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LA LALA LAKSHMIKANT DEKA/ KSHMIKANT DEKA/ KSHMIKANT DEKA/ KSHMIKANT 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