UNIQUE PHARMACEUTICALS LAB LTD, MUMBAI V. DCIT 7(3), MUMBAI

ITA 337/MUM/2011

• Counselvise Citation: 33719914 RSA 2011
• Duration Of Justice: 3 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 24-12-2013
• Assessment Year: 2000-2001
• Appeal Filed On: 13-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS PARMINDER KAUR
• Assessee Lawyers: SANJAY R PARIKH
• Section: 15

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE HONBLE S/SHRI D. MANMOHAN , VICE-PRESIDENT AND B.R.BASKARAN (AM) , . , . . , ! ./I.T.A. NO.337/MUM/2011 ( '#$ % / ASSESSMENT YEAR : 2000-01) UNIQUE PHARMACEUTICALS LAB. LTD., 83, B & C SHETH GOVINDRAO SMRUTI, ANNIE BESENT ROAD, WORLI, MUMBAI-400018. / VS. DY . COMMISSIONER OF INCOME TAX 7(3), 3 RD FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020. ( !&' / APPELLANT) .. ( ()&' / RESPONDENT) & ./ *+ ./PAN/GIRNO.:AAACU0744J !&' , / APPELLANT BY : SHRI SANJAY R PARIKH ()&' - , /RESPONDENT BY : MRS.PARMINDER KAUR . / - 01 / DATE OF HEARING : 24.7.2014 2 %$ - 01 /DATE OF PRONOUNCEMENT : 20.8.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 29.7.2010 PASSED BY THE LD. CIT(A)-13, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2000-01.THE ASSESSEE IS AGGRIEVED BY THE DECI SION OF LD. CIT(A) IN CONFIRMING THE PENALTY OF RS.1,33,860/- LEVIED BY THE AO U/S 271 (1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE FACTS WHICH LEAD TO THE LEVY OF PENALTY ARE STATED IN BRIEF. THE ASSESSEE IS A MANUFACTURER OF PHARMACEUTICAL FORMUL ATIONS AND BULK DRUGS. I.T.A. NO.337/MUM/2011 2 DURING THE YEAR UNDER CONSIDERATION, IT WAS HAVING TWO UNITS, VIZ., (A) FORMULATIONS DIVISION AND (B) ATENOLOL DIVISION . THE ASSESSEE DECLARED A PROFIT OF RS.86.50 LAKHS IN ATENOLOL DIVISION AND IT DECLARED A LOSS OF RS.6.90 LAKHS IN FORMULATION DIVISION. IN THE ATENOLOL D IVISION, THE ASSESSEE WAS DOING THE JOB WORK FOR M/S J B CHEMICALS AND RECEIVED LAB OUR CHARGES AT THE RATE OF RS.140/- PER KG. . THE ASSESSEE CLAIMED DEDUCTIO N U/S 80IA OF THE ACT IN RESPECT OF THE PROFITS DERIVED FROM ATENOLOL DIV ISION. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE AO TOOK THE VIEW THAT THE JOB WORK CHARGES RECEIVED @ RS.140/- PER KG IS VERY MUCH ON THE HIGHER SIDE AND HENCE THE AO ADOPTED A RATE OF RS.30/- PER KG. AS JOB WORK CHARGES. THE AO ALSO NOTICED THAT THE ASSESSEE DID NOT PROPERLY ALLOCATE CERTAIN EXPENSES LIKE COMMON MANAGEMENT EXPENSES, COMPUTER CHARGES, VEHIC LE EXPENSES, TRAVELLING EXPENSES AND OTHER EXPENSES TO ATENOLOL DIVISION, E VEN THOUGH THEY WERE INCURRED IN COMMON FOR BOTH THE UNITS. THE AO BY CONSIDERING THE NATURE OF EXPENSES ALLOCATED A SUM OF RS.11.60 LAKHS TO ATE NOLOL DIVISION. ACCORDINGLY, THE AO RE-WORKED THE PROFIT DERIVED FROM ATENOLOL DIVISION WHICH RESULTED IN A LOSS OF RS.13.20 LAKHS. SINCE THERE WAS LOSS IN T HE ATENOLOL DIVISION, THE AO REJECTED THE CLAIM FOR DEDUCTION U/S 80IA OF THE AC T. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIRECTED THE AO TO AD OPT THE JOB WORK CHARGES RS.140/- PER KG AND THUS REVERSED THE DECISION OF T HE ASSESSING OFFICER. HOWEVER, WITH REGARD TO THE ISSUE RELATING TO ALLOC ATION OF THE EXPENSES, THE LD CIT(A) CONFIRMED THE ALLOCATION DONE BY THE AO, SIN CE THE ASSESSEE DID NOT PRESS THE SAME BEFORE HIM. AFTER GIVING EFFECT TO THE OR DER OF LD. CIT(A), WHICH RESULTED IN ENHNCEMENT OF INCOME DUE TO REDUCTION O F THE AMOUNT ALLOWED U/S I.T.A. NO.337/MUM/2011 3 80IA OF THE ACT, THE AO ISSUED A FRESH NOTICE TO T HE ASSESSEE U/SS 274 READ WITH SECTION 271(1)(C) OF THE ACT. AFTER HEARING THE ASSESSEE, THE AO LEVIED MINIMUM PENALTY OF RS.1,33,860/-. THE ASSESSEE CHA LLENGED THE ORDER OF PENALTY BY FILING THE APPEAL BEFORE THE LD. CIT(A), BUT COULD NOT SUCCEED. HENCE, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DEDUCTION CLAIMED U/S 80IA OF THE ACT CAME TO BE REDUCED ONLY DUE TO ALLO CATION OF HIGHER AMOUNT OF EXPENDITURE TO THE ATENOLOL DIVISION. THE LD. AR F URTHER SUBMITTED THAT THE ASSESSEE WAS DOING JOB WORK ACTIVITY IN THAT DIVISI ON AND HENCE EFFECTIVELY NO EXPENDITURE WAS REQUIRED TO BE INCURRED IN THAT DIV ISION. ACCORDINGLY, THE ASSESSEE HAD ALLOCATED A SUM OF RS.4,55,707/- OUT O F COMMON MANAGEMENT AND OTHER EXPENSES AND RS.10,000/- OUT OF THE COMPUTER CHARGES. HOWEVER, THE AO ALLOCATED ADDITIONAL AMOUNTS OUT OF COMMON MANAGEME NT AND COMPUTER CHARGES AND ALSO ALLOCATED EXPENSES OUT OF VEHICLE EXPENSES, TRAVELLING EXPENSES AND OTHER EXPENSES AT AN ESTIMATED RATE OF 10% OF THE EXPENSES. THUS THE AO ALLOCATED A SUM OF RS.11.60 LAKHS IN AGGREGATE TO A TENOLOL DIVISION AND HENCE THE PROFIT FROM THAT DIVISION GOT REDUCED BY THE CORRES PONDING AMOUNT. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IA @ 30% OF TH E PROFIT AND DUE TO REDUCTION OF THE PROFIT, THE DEDUCTION UNDER THE AB OVE SAID SECTION CAME TO BE REDUCED BY 30% OF RS.11.60 LAKHS, WHICH RESULTED IN ENHANCEMENT OF TOTAL INCOME BY AN EQUAL AMOUNT. THE LD. AR SUBMITTED TH AT THE AO HAS ALLOCATED THE EXPENSES BY ESTIMATING THE AMOUNT TO BE ALLOCATED O N AN ADHOC BASIS OF 10% AND HE DID NOT BRING ANY MATERIAL TO FIND FAULT WIT H THE ALLOCATION MADE BY THE ASSESSEE. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE AO HAS ONLY ACTED UPON I.T.A. NO.337/MUM/2011 4 PRESUMPTIONS AND SURMISES IN THIS REGARD. THE LD. AR FURTHER SUBMITTED THAT THE AO HAD MADE SUCH KIND OF VARIATIONS IN EARLIER YEAR S ALSO, I.E., IN ASSESSMENT YEARS 1995-96, 1998-99 AND 1999-2000. HOWEVER, HE DID NOT PREFER TO LEVY PENALTY U/S 271(1)(C) OF THE ACT IN THOSE YEARS. B Y PLACING RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. RELIANCE PETRO PRODU C T S 3 22 ITR 15 8 ( SC), THE LD. AR SUBMITTED THAT ANY VARIATION IN THE CLAIM FOR DEDUCTION MADE AS PER THE PROVISIONS OF L AW WOULD NOT GIVE RISE TO PENALTY. FURTHER, THE LD. AR SUBMITTED THAT THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED AN Y INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, HE PRAYED THAT THE IMPUGNED PENALTY SHOULD BE DELETED. 5. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IA OF THE A CT CAME TO BE REDUCED DUE TO ALLOCATION OF ADDITIONAL EXPENSES TO ATENOLOL DIVISION. SUCH REDUCTION HAS RESULTED IN ENHANCEMENT OF INCOME BY CORRESPONDING AMOUNT AND THE PENALTY U/S 271(1)(C) OF THE ACT HAS BEEN LEVIED ON THE SAID ENHANCEMENT. ON A PERUSAL OF THE ASSESSMENT OR DER, WE NOTICE THAT THE AO HAS NOT ADOPTED ANY RATIONAL BASIS FOR DETER MINING THE AMOUNT OF EXPENSES TO BE ALLOCATED TO THE ATENOLOL DIVISION, BUT PROCEEDED TO ALLOCATE THE SAME ON ADHOC BASIS ESTIMATED AT THE R ATE OF 10% OF EACH OF THE EXPENDITURE. IT IS ALSO FACT THAT THE AO HAS NOT GIVEN ANY FINDING TO THE EFFECT THAT THE ASSESSEE HAS CONCEALED PARTICUL ARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS ALSO SUBMITTED THAT THE I.T.A. NO.337/MUM/2011 5 AO HAS CARRIED OUT SIMILAR EXERCISE OF ALLOCATING A DDITIONAL AMOUNT OF EXPENSES AND REDUCING THE AMOUNT OF DEDUCTION ALLOW ABLE U/S 80IA IN THE EARLIER YEARS ALSO, I.E., IN AY 1995-96, 1998-99 AN D 1999-2000, BUT DID NOT INITIAT ANY PENALTY PROCEEDING IN RESPECT OF THE AB OVE SAID ADJUSTMENT. THOUGH THE PRINCIPLE OF RES JUDICATA IS NOT APPLICA BLE TO INCOME TAX MATTERS, YET THE FACT THAT THE AO DID NOT LEVY PENA LTY IN THE EARLIER YEARS IN RESPECT OF SIMILAR KIND OF ADJUSTMENTS WOULD DEF INITELY NEEDS TO BE TAKEN INTO ACCOUNT. CONSIDERING THE FACTS AND CIRC UMSTANCES PREVAILING IN THE INSTANT CASE AND ALSO IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN C ONFIRMING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. ACCORDINGLY, WE S ET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY LEVI ED U/S 271(1)(C) OF THE ACT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20TH AUG, 2014 . 2 %$ . 3 4 5 6 20TH AUG, 2014 - 7/ 8 SD SD ( . / D. MANMOHAN ) ( . . , / B.R. BASKARAN ) / VICE- PRESIDENT / ACCOUNTANT MEMBER . / MUMBAI: 20TH AUG,2014. . ' . ./ SRL , SR. PS I.T.A. NO.337/MUM/2011 6 !'#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. !&' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. . =0 ( ! ) / THE CIT(A)- CONCERNED 4. . =0 / CIT CONCERNED 5. >?7 ('0'@# , !1 !@#$ , . / / DR, ITAT, MUMBAI CONCERNED 6. 7 / / GUARD FILE. A . / BY ORDER, TRUE COPY * (ASSTT. REGISTRAR) !1 !@#$ , . / /ITAT, MUMBAI