ITO 2(3)(3), MUMBAI V. SAMRAT HOLDINGS LTD, MUMBAI

ITA 3391/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49173 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 30-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Keywords: Wrong claim; Tax effect; Revenue expenditure; Capital expenditure
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI V. DURGA RAO , J.M. ITA NO. 3391/MUM/2010 ASSESSMENT YEAR: 2003-04 INCOME TAX OFFICER-2(3)(3), APPELLANT ROOM NO. 555, AAYAKAR BHAVAN, MUMBAI. VS. M/S SAMRAT HOLDING LTD., RESPONDENT 2 ND FLOOR, ORIENT HOUSE, ADI MARZBAN STREET, BALLARD ESTATE, MUMBAI 400 001. (PAN AAACS5185P) APPELLANT BY : MR. G.P. TRIVEDI RESPONDENT BY : NONE . ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF CIT(A)- 6, MUMBAI, PASSED ON 11/02/2010 FOR THE ASS ESSMENT YEAR 2002-03. 2. THE ONLY GROUND RAISED IN THIS APPEAL IS AGAINST THE ACTION OF THE CIT(A) IN DELETING PENALTY OF RS. 2,55,412/- LE VIED U/S 271(1)(C) OF THE ACT. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS IN INVESTMENT IN SHARES AND SECURITIES HAD FILED ITS RETURN OF INCOME ON 31/10/2003 DECLARING NIL INCOME , WHICH WAS PROCESSED U/S 143(3) OF THE ACT DETERMINING NORMAL INCOME AT RS. NIL AND INCOME U/S 115JB OF THE ACT AT RS. 16,73,864/- ON 29/01/2005. ITA NO. 3391/M/2010 SAMRAT HOLDINGS LTD. 2 THE ASSESSEE HAD DEBITED LEGAL AND PROFESSIONAL CHA RGES TO ITS P&L A/C TO THE TUNE OF RS. 3,47,500/- TOWARDS PAYMENTS TO M /S MS BODHANWALA & CO, SOLICITORS IN RELATION TO A PROPER TY CASE. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAD SUB MITTED THAT THE SAID EXPENDITURE WAS INCURRED IN CONNECTION WITH TH E LEGAL MATTER CONCERNING THE PROPERTY AT MODY BAY ESTATE, 45, VAJ U KOTAK MARG BALLARD ESTATE, MUMBAI AS THE ASSESSEE WAS NOT THE OWNER OF THE SAID PREMISES, WHICH WAS OWNED BY THE MUMBAI PORT TRUST AND ACCORDINGLY THE ASSESSEE PAYS A MONTHLY LEASE. HE FURTHER SUBM ITTED THAT THE LITIGATION EXPENSES WERE IN RELATION TO PROTECT THE RIGHT AND TITLE OF THE ASSESSEE IN THE SAID PROPERTY AND AS SUCH THE EXPEN SES WERE ALLOWABLE AS REVENUE EXPENDITURE, THEREFORE, THE SAME COULD N OT BE TREATED AS CAPITAL EXPENDITURE. THE SUBMISSIONS OF THE ASSESSE E WERE NOT FOUND FAVOUR WITH THE AO AND DISALLOWED THE SAID EXPENDIT URE OF RS. 3,47,500/-. THE CIT(A) CONFIRMED THE ACTION OF THE AO. THEREAFTER, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF T HE ACT WITH RESPECT TO THE SAID DISALLOWANCE ON THE GROUND OF FURNISHIN G INACCURATE PARTICULARS OF INCOME. THE AO, THEREFORE, LEVIED A PENALTY @ 200% ON THE ADDITION OF RS. 3,47,500/-, WHICH COMES TO RS. 2,55,412/- U/S 271(1)(C) BY OBSERVING THAT THE ASSESSEE HAD MISREP RESENTED THE FACT OF THE CASE AND DEFAULTED BY MAKING FALSE CLAIMS AN D THERE IS A WILLFUL ATTEMPT TO EVADE TAX BY REDUCING TAXABLE INCOME AND FURNISHED INACCURATE PARTICULARS WITHIN THE MEANING OF PROVIS IONS LAID DOWN IN SECTION 271(1)(C) OF THE ACT. AGGRIEVED, THE ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE AR OF THE ASSESSEE STATED THAT THE DISALLOWANCE WAS MADE NOT ON THE GROUND THAT THE EX PENSES WERE NOT GENUINE BUT CONSIDERING THE SAME AS CAPITAL EXPENDI TURE AS AGAINST THE ASSESSEES CLAIM OF THE SAME BEING REVENUE EXPE NSES. THE AR, THEREFORE, CLAIMED THAT THE SAID DISALLOWANCE OF LE GAL EXPENSES WAS REVENUE NEUTRAL AND, HENCE, THERE WAS NO QUESTION O F ANY ITA NO. 3391/M/2010 SAMRAT HOLDINGS LTD. 3 CONCEALMENT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASESSSEE, THE CIT(A) DELETED THE PENALTY LEVIED BY THE AO OBSERVI NG AS UNDER:- 7. I HAVE CONSIDERED THE FACTS OF THE ISSUE AND THE SUBMISSIONS MADE BY THE AR AND FIND MERIT IN THEM. IT IS AN ADMITTED FACT THAT THE IMPUGNED DISALLOWANCE LF LEG AL EXPENSES IS ONLY ON ACCOUNT OF CONSIDERATION OF THE EXPENSES AS CAPITAL IN NATURE AS AGAINST THE APPELLANTS CLAIM OF THE SAME BEING REVENUE. THE GENUINENESS OF THE SAID EXPENSES IS NO T IN QUESTION. IT IS ALSO CLEAR THAT THE SAID ADDITION HAS NOT INC REASED THE TAX LIABILITY OF THE APPELLANT NOR HAS IT REDUCED ANY L OSSES TO BE CARRIED FORWARD. THE ENTIRE ADDITION MADE BY THE AO GOT ADJUSTED AGAINST THE AVAILABLE DEDUCTION U/S 80M TO WHICH TH E APPELLANT WAS UNDISPUTEDLY ENTITLED. SINCE, THE ADDITION IS T AX NEUTRAL, NO MALA-FIDES COULD BE ATTACHED TO THE ACTION OF THE A PPELLANT IN TREATING THE SAID EXPENSES AS REVENUE IN NATURE. HE NCE, THE PENALTY U/S 271(1)(C) WAS NOT LEVIABLE IN THIS CASE AND THE SAME IS ACCORDINGLY DELETED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE THE ITAT. 6. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE, HOWEVER, WE PROCEED TO DISPOSE OF THIS APPEAL AFTER HEARING THE LEARNED DR AND ON MERITS. 7. AFTER HEARING THE LEARNED DR AND PERUSING THE MA TERIAL ON RECORD AS WELL AS GOING THROUGH THE ORDERS OF THE A UTHORITIES BELOW, IT IS SEEN THAT AS HAS BEEN HELD BY THE CIT(A) THAT TH E IMPUGNED DISALLOWANCE OF LEGAL EXPENSES IS ONLY ON ACCOUNT O F CONSIDERATION OF THE EXPENSES AS CAPITAL IN NATURE AS AGAINST THE AS SESSEES CLAIM OF THE SAME BEING REVENUE IN NATURE. THE GENUINENESS O F THE SAID EXPENSES IS NOT DISPUTED BY THE AO. THE CATEGORICA L FINDING OF THE CIT(A) WAS THAT THE SAID ADDITION HAS NOT INCREASED THE TAX LIABILITY OF THE ASSESSEE NOR HAS IT REDUCED ANY LOSSES TO BE CA RRIED FORWARD AND THE ENTIRE ADDITION MADE BY THE AO GOT ADJUSTED AGA INST THE AVAILABLE DEDUCTION U/S 80M TO WHICH THE ASESSEE WAS UNDISPUT EDLY ENTITLED. WE ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN TH E ORDER OF THE CIT(A) IN DELETING THE PENALTY OF RS. RS. 2,55,412/- LEVIE D BY THE AO U/S ITA NO. 3391/M/2010 SAMRAT HOLDINGS LTD. 4 271(1)(C) OF THE ACT AND, THEREFORE, THE ORDER OF C IT(A) IS HEREBY UPHELD. 8. MOREOVER, THE APPEAL OF THE REVENUE IS TO BE DIS MISSED ON THE GROUND THAT THE TAX EFFECT IN THIS APPEAL IS LESS T HAN RS. 2.00 LAKHS AFTER GIVING APPEAL EFFECT, AS PER THE CBDT CIRCUL ARS/INSTRUCTION NO 1979(F279/126/98 ITJ DATED 27.3.2002), INSTRUCTION NO 1985 DATED 29.6.2000(F279/126/98 ITJ DATED 29.6.2000) AND INST RUCTION NO2/2005(279/MIS-/05-ITJ/2005) DATED 24.10.2005 AND IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. PITHWA ENGG. WORKS (276 ITR 519) AND VARIOUS DECISI ON OF ITAT INCLUDING THE DECISION OF THE ITAT, AHMEDABAD BENCCH, ITA NO 1411/A/2002 AY 1989-90 ORDER DATED 3.11.2006 AND IN DORE BENCH IN THE CASE OF ITO V. DR. DIGPAL DHARKAR & OTHERS IN I TA NO.498/519 AND 496/IND/2003 VIDE ITS CONSOLIDATED ORDER DT.4.7 .2006. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JUNE, 2011. SD/- SD/- (P.M. JAGTAP) (V. DURG A RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 22 ND JUNE, 2011 ITA NO. 3391/M/2010 SAMRAT HOLDINGS LTD. 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, E BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV