M/s. Ess Ess Kay Engg. P. Ltd., Kapurthala V. The Deputy Commissioner of Income tax, Jalandhar

ITA 334/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5713 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 28-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R D CHATRATH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NO. 334(ASR)/2010 ASSESSMENT YEAR:2004-05 PAN :AAACE5057G M/S. ESS ESS KAY ENGG. P. LTD. VS. THE DY. COMMR. O F INCOME-TAX, KAPURTHALA. RANGE-IV, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH.R.D. CHATRATH, CA RESPONDENT BY: SH. TARSEM LAL, DR ORDER PER MEHAR SINGH, AM, THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A), JALANDHAR, DATED 28.05.2010, PASSED UNDER S ECTION 250(6) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO IN SH ORT THE ACT) RELATING TO ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THAT THE ORDER PASSED BY THE CIT(A) IS AGAINST THE FACTS & LAW. 2. THE CIT(A), HAS GROSSLY ERRED IN SUSTAINING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR A SUM OF RS.1,28,6 25/- THEREBY IGNORING THE SUBMISSION OF THE ASSESSEE. 3. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT TH AT THE DISALLOWANCE OF THE EXPENSES WOULD NOT TANTAMOUNT CONCEALMENT OF INCOME. HE HAS FURTHER ERRED IN CONF ORMING THE 2 ACTION OF THE ITO PARTLY WHO HAS PASSED THE ORDER W ITHOUT APPLICATION OF MIND. 4. THE ASSESSEE CRAVES TO LEAVE TO ADD, AMEND, ALTE R OR DELETE ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING OF APPEAL. 3. GROUND NOS. 1 & 3 ARE GENERAL IN NATURE, HENCE THE SAME DO NOT NEED ANY ADJUDICATION. 4. THE GROUND NOS. 2 & 3 ARE INTER-CONNECTED AND TH E MAIN GRIEVANCE RAISED BY THE ASSESSEE IN THESE GROUNDS RELATE TO C ONFIRMATION OF PENALTY OF RS.46,105/- BY THE CIT(A), UNDER SECTION 271(1)(C) OF THE ACT. 5. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE LD. COUNSEL FOR THE ASSESSEE, ADMITTED THAT THE BOOKS OF ACCOUNT OF TH E ASSESSEE-COMPANY ARE AUDITED ONE AND DULY VOUCHED. HE EMPHASIZED THAT ME RE DISALLOWANCE OF EXPENSES ON THE BASIS OF SURMISES AND CONJECTURES W OULD NOT INVITE THE RIGOR OF PROVISIONS OF SECTION 271(1)(C). HE FURTHER PLEA DED THAT ALL THE PAYMENTS HAVE BEEN MADE THROUGH BANKING INSTRUMENT. HE HAS A LSO FILED WRITTEN SUBMISSIONS, WHICH ARE REPRODUCED HEREUNDER: (A) THE DISALLOWANCE OF RS.36,599/- OUT OF THE TA P AID TO THE DIRECTOR IS THE PAYMENT MADE ON ACCOUNT OF THE EXPE NSES INCURRED BY HIM ON BEHALF OF THE COMPANY THROUGH HI S CREDIT CARD. THE CREDIT CARD PAYMENT WAS MADE BY DD NO. TO SBI/N.DELHI DD.278297 DT. 21/08/03. SINCE, THIS PAY MENT HAS BEEN MADE BY THE DEMAND DRAFT FOR USING THE CRE DIT CARD WHILE BEING AWAY ON THE COMPANIES BUSINESS. THUS, T HE QUESTION OF SUPPORTING DOCUMENTS ATTACHED WITH THE VOUCHERS WOULD NOT ARISE. (B) SIMILARLY, DISALLOWANCES OF RS,24,500 HAS BEEN MADE OUT OF THE TRAVELLING BILL OF THE DIRECTOR OF THE COMPANY FOR A FOREIGN TOUR FOR RS.99,446/-. THIS ADHOC DISALLOWANCE HAS B EEN MADE FOR THE EXPENSES INCURRED FOR NON-BUSINESS PURPOSE IS TOTALLY INCORRECT. SINCE THIS AMOUNT REPRESENTS THE AMOUNT OF FOREIGN PURCHASED BY THE ASSESSEE. THE A.O. HAS NOT TAKEN T HE TROUBLE 3 TO GO INTO THE DETAIL OF HIS DISALLOWANCE AND THUS THE PENALTY IS NOT LEVIABLE ON THIS AMOUNT. IT IS SUBMITTED THAT AS REGARDS, THE FOLLOWING DISL LOWANCES: MACHINERY EXPENSES 10,087/- BUILDING EXPENSES 19,992/- MISCELLANEOUS EXPENSES 22,447/- MEDICAL EXPENSES 15,000/- THE ABOVE EXPENSES HAVE BEEN DISALLOWED FOR WANT OF THE EVIDENCE. IT PLEADED BEFORE YOUR OWNER AS STATED ABOVE THAT BECAUSE OF THE VOLUMINOUS NATURE OF THE RECORD MAINTAINED, THE POSSIBILITY OF THE EVIDENCE NOT REMAINING INTACT WITH THE VOUCH ERS CANNOT BE RULED OUT. HOWEVER, THESE EXPENSES HAVE BEEN INC URRED FOR THE PURPOSES OF THE BUSINESS AND NO CASH PAYMENT IN RESPECT OF ANY OF THESE EXPENSES HAVE BEEN MADE BY THE ASSESSE E. ALL THESE EXPENSES HAVE BEEN BOOKED AGAINST THE RE SPECTIVE ACCOUNTS AND THE PAYMENTS HAVE BEEN AGAINST THE ACC OUNTS. FROM THE ABOVE SUBMISSIONS, IT IS ABUNDANTLY CLEAR THAT THOUGH THE A.O. HAS DISALLOWED THESE EXPENSES FOR WANT OF THE EVIDENCE. HOWEVER, THESE EXPENSES ALSO HAVE BEEN IN CURRED FOR THE PURPOSES OF BUSINESS AND THIS FACT WAS EXPLAINE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 6. THE LD. DR, ON THE OTHER, HAD FILED BRIEF WRIT TEN SUBMISSIONS DATED 13.09.2010 AND PLACED RELIANCE ON THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILES (P) LTD. REPORTED AT 212 CTR 432. 7. A PERUSAL OF THE RECORD REVEALS THAT THE AO LEVI ED PENALTY ON THE PLEA THAT NO PLAUSIBLE EXPLANATION WAS FILED BY THE ASSE SSEE. HE WAS OF THE OPINION THAT THE ADDITION OF RS.1,98,077/- WAS MAD E, AS EX-GRATIA PAYMENT PAID TO THE OUTGOING DIRECTOR OF THE COMPANY AND TH E ADDITION OF RS. 5000/- DEBITED UNDER THE HEAD ADVERTISEMENT EXPENSES WIT HOUT ANY EXPLANATION HAVE BEEN CONFIRMED BY THE LD. CIT(A) IN QUANTUM AP PEAL VIDE ORDER DATED 28.03.2007. THE LD. CIT(A), IN PARA 4.8 OF HIS OR DER, CONFIRMED THE LEVY OF 4 PENALTY, IN RESPECT OF CLAIM OF EXPENSES TOTALING R S.1,04,125/- FOR WHICH NO SUPPORTING BILLS OR VOUCHERS WERE FURNISHED AND IN RESPECT OF DISALLOWANCE OF RS.24,500/- OUT OF FOREIGN TRAVELING EXPENDITURE, W HEREBY NO EXPLANATION HAVE BEEN FILED BY THE ASSESSEE. THE FINDINGS GIVEN BY THE LD. CIT(A0 IN PARA 4.8. ARE REPRODUCED HEREUNDER: 4.8. TO SUMP UP, LEVY OF PENALTY U/S 271(1)(C) FO R FURNISHING OF INACCURATE PARTICULARS OF INCOME IS UPHELD IN RE SPECT OF CLAIM OF EXPENSES TOTALING RS.1,04,125/- FOR WHICH NO SUPPOR TING BILLS/VOUCHER OR EXPLANATION WAS FURNISHED, AND IN RESPECT OF DIS ALLOWANCE OUT OF RS.24,500/- OUT OF FOREIGN TOUR EXPENDITURE SINCE N O EXPLANATION HAS BEEN FURNISHED AS TO WHY THE CLAIM WAS MADE. THE AO , IS, DIRECTED TO RECOMPUTED THE PENALTY U/S 271(1)(C) OF THE ACT, AC CORDINGLY. PENALTY U/S 271(1)(C) IS DELETED IN RESPECT OF OTHER ADDITI ONS/DISALLOWANCES AS DISCUSSED ABOVE. 8. WE HAVE CAREFULLY PERUSED THE FACT SITUATION OF THE CASE, RIVAL SUBMISSIONS AND RELEVANT MATERIAL PLACED ON RECORD, INCLUDING THE DECISION RELIED UPON BY THE LD. DR IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILES (P) LTD. 212 CTR 432 (SC), WHICH IS NOT AP PLICABLE TO THE FACTS OF THE CASE, WHERE MERE DISALLOWANCE OF CERTAIN EXPENS ES HAS BEEN ALLOWED. IT IS NOT THE CASE OF THE REVENUE, HAVING REGARD TO TH E AUDITED BOOKS OF ACCOUNT OF THE COMPANY THAT THE ASSESSEE-COMPANY CLAIMED FA LSE EXPENSES. MERE DISALLOWANCE OF EXPENSES WILL NOT PER SE AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS LEGALLY WELL SETTLED P OSITION THAT MERELY BECAUSE THE ASSESSEE HAS CLAIMED EXPENDITURE, WHICH WERE DI SALLOWED BY THE AO, WOULD NOT BY ITSELF, CONSTITUTE CONCEALMENT WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. THIS VIEW IS SUPPORTED AND F ORTIFIED BY THE DECISION OF THE HONBLE SUPREME COURT, IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. 322 ITR 158 (SC). IT IS ALSO SETTLED LEGAL POSITION THAT PENALTY UNDER SECTION 271(1)(C) OF THE ACT, CA NNOT BE LEVIED IN A FACT 5 SITUATION OF THE CASE, WHERE THE ASSESSEE HAD MADE BONAFIDE CLAIM OF EXPENSES AND PAYMENTS WERE MADE THROUGH ACCOUNT BY WAY OF BANKING INSTRUMENT. 8.1. THUS, HAVING REGARD TO THE ABOVE LEGAL AND FAC TUAL DISCUSSION OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT IT IS N OT A FIT CASE FOR SUSTAINING THE LEVY OF PENALTY BY THE CIT(A). 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 21ST J UNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 21ST JUNE, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: M/S. ESS ESS KAY ENGG. PVT. LTD. KAPU RTHALA. 2. THE DCIT, RANGE-IV, JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.