DCIT, New Delhi V. M/s. Hotline Glass Ltd., New Delhi

ITA 342/DEL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2740 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-01-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 17-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Keywords: Fair market value

Judgement Text

[ 1 ] INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 342 /DEL/ 2014 (ASSESSMENT YEAR: 2004 - 05 ) DCIT, CIRCLE - 12(1) NEW DELHI VS. HOTLINE GLASS LTD., 52 - A, OKHLA INDUSTRIAL ESTATE, PHASE - III, NEW DELHI PAN:AAACH0561L (APPELLANT) (RESPONDENT) ASSESSEE BY: SH. ROBIN RAWAL, SR DR RESPONDENT BY: NONE DATE OF HEARING 06 . 01.2016 DATE OF PRONOUNCEMENT 13 .01.2016 O R D E R PER PRASHANT MAHARISHI, A. M. 1 . THIS IS AN APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 18.10.2013 OF LD CIT ( A) - NEW DELHI FOR THE ASSESSMENT YEAR 2004 - 05 . THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER THE LD CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING THE PENALTY OF RS.30,00,000/ - LEVIED BY AO ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME. 2 . THE FACTS IN BRIEF OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GLASS PARTS FOR TELEVISION PICTURE TUBE. THE ASSESSEE FILED RETURN OF INCOME DECLARING PROFIT OF RS.NIL AFTER SETTING OF BROUGHT FORWARD LOSSES OF RS.64738665/ - ON 30.10.2004. NOTICE U/S 143(2) WAS ISSUED. IN THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER MADE DISALLOWANCE U/S 40A(2)(B) OF RS.51,79,217/ - AND DISALLOWANCE ON ACCOUNT OF PRELIMINARY EXPENSES U/S 35D OF RS.31,00,000/ - . 2 | P A G E 3 . THE LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN DELETING THE PENALTY OF RS.30,00,000/ - LEVIED BY THE AO ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME. 4 . THE LD AR OF THE ASSESSEE RELIED ON THE ORDER OF THE LEARNED COMMISSIONER OF INCO ME - TAX (APPEALS) AND VARIOUS JUDGMENTS AND SUBMITTED THAT USE OF LITHARGE FROM ANUJAY CORP HAS RESULTED IN A BENEFIT TO THE APPELLANT BY WAY OF COST REDUCTION OF RAW MATERIAL USED IN THE PRODUCTION PROCESS. THE LD AR OF THE ASSESSEE RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD ( 2010) 322 ITR 158 (SC) WHERE IN IT HAS BEEN HELD THAT THE LEGISLATURE DID NOT INTEND TO IMPOSE PENALTY ON EVERY ASSESSEE WHOSE CLAIM WAS REJECTED THE ASSESSING OFFICER . 5 . LD DR RELIED ON THE ORDER OF AO AND VEHEMENTLY SUBMITTED THAT PENALTY IS RIGHTLY LEVIED. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF LOWER AUTHORITIES. IN THIS CASE THE PENALTY HAS BEEN LEVIED ON MERE DISALLOWANCE OF THE EXPENSES OF THE ASSESSEE APPLYING THE PROVISIONS OF SECTION 40A (2) (B) OF THE ACT AND ON WRITING OFF THE EXPENSES APPLYING THE PROVISION OF SECTION 35D OF THE ACT WAS ALSO NEGATIVE BY THE REVENUE. THE LD LEARNED COMMISSIONER OF INCOME - TAX (APPEA LS) OBSERVED THAT THE AO WAS NOT JUSTIFIED IN IMPOSING PENALTY OF RS.30 LAC UPON THE APPELLANT AND DELETED THE SAME BY OBSERVING AS UNDER: - 6 .1. THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. [IT IS OBSERVED THA T ALTHOUGH IN THE ASSESSMENT YEAR UNDER CONSIDERATION, MY PREDECESSOR HAD CONFIRMED THE ADDITIONS/ DISALLOWANCES, THESE 2 ADDITIONS/DISALLOWANCES WERE DELETED REPEATEDLY IN THE EARLIER ASSESSMENT YEARS BY THE APPELLATE AUTHORITIES. TO BE SPECIFIC, THE AO M ADE DISALLOWANCE OF RS. 51,79,270 / - AS IT WAS OBSERVED BY THE AO THAT THE APPELLATE HAD PURCHASED LITHARGE FROM ITS SISTER CONCERN M / S ANUJAY CORPORATION AT A COMPARATIVELY HIGHER PRICE THAN THE OTHER PURCHASES FROM UNRELATED PARTIES MADE BY THE APPELLANT . IN THIS RESPECT, THE APPELLANT AUTHORITY IN HIS ORDER DATED 28.12.207 FOR AY 2002 - 03 IN APPEAL NO. 60/05 - 06 HAS DELETED SUCH DISALLOWANCE OBSERVING AS UNDER: 'IN VIEW OF THE DISCUSSION ANTE, I HOLD THAT THE USE OF LITHARGE FROM ANUJAY CORP. HAS RESULTED I N LOWER PER UNIT CONSUMPTION OF LITHARGE AND IN THAT VIEW THE APPELLANT HAS OBTAINED BENEFIT BY WAY OF REDUCED RAW MATERIAL EXPENDITURE. SECTION 40A(2) IS INVOKED ONLY IF 3 | P A G E THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE O F THE GOODS, SERVICES OR THE FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO THE ASSESSEE. IN THE CASE UNDER APPEAL, USE OF LITHARGE FROM ANUJAY CORP. HAS RESULTED IN A BENEFIT TO THE APPELLANT BY WAY OF COST REDUCTION OF RAW MATERIAL USED IN THE PRODUCTION PROCESS. I HOLD WITH REFERENCE TO DISCUSSION SUPRA THAT THERE IS NO MERIT IN INVOKING THE PROVISIONS OF SECTION 40A(2). THE DECISIONS IN THE CASE OF RECON MACHINE T OOLS PVT. LTD. VS. CIT(2006) 155 TAXMAN 252 (KARJ, DCIT VS. MICROTEX SEPARATORS LTD. (2007) 160 TAXMAN 244 (KAR.), CIT VS. PADMINI PACKING PVT. LTD. (2006) 155 TAXMAN 268 DELHI) CIT VS JAIN CABLE PVT. LTD. (2002) 120 TAXMAN 63 (RAJ.) CIT VS COMPUTER GRAPHI CS LTD. (2006) 155 TAXMAN 612 (MAD.) SUPPORT THE VIEW ABOVE. THE GROUND IS ALLOWED. ' FROM THE ABOVE, IT IS CLEAR THAT THE PURCHASE FROM SISTER CONCERN MADE BY THE APPELLANT WAS FOR NOT EXTENDING UNDUE FAVOR TO ITS SISTER CONCERN. EVEN OTHERWISE ALSO, THE PENALTY U / S 271(L)(C) IN SUCH A SITUATION CANNOT BE INVOKED AS IT IS MERE DISALLOWANCE AND PENALTY CANNOT BE IMPOSED IN VIEW OF THE VARIOUS DECISIONS OF HON'BLE SUPREME COURT. 6.2. REGARDING THE DISALLOWANCE OF RS 30 LACS U/S 35D IN RESPECT OF WRITING O FF OF PRELIMINARY EXPENSES IT IS OBSERVED THAT THE EXPENSES WERE INCURRED BEFORE THE COMMENCEMENT OF THE BUSINESS AND AS PER PROVISIONS OF SECTION 35D(L)(I}( THE SAME WERE ALLOWABLE EXPENDITURE. THE APPELLANT WAS REGULARLY CLAIMING THESE EXPENSES SINCE AY 0995 - 96 AND ID. COUNSEL HAD PRODUCED THE COPIES OF ASSESSMENT ORDERS PERTAINING TO AY 1995 - 96 AS WELL AS AY 1998 - 99, WHERE THE WRITING OFF OF THESE PRELIMINARY EXPENSES HAS BEEN ALLOWED AND ACCEPTED BY THE DEPARTMENT. THEREFORE, THE APPELLANT WAS JUSTIFIED IN CLAIMING THESE EXPENSES IN AY 2004 - 05. THE FACTS BEING SO, SUCH DISALLOWANCE WAS NOT AT ALL PERMISSIBLE IN THE APPELLANT'S CASE. THE PENALTY U/S 271(L)(C) CANNOT BE IMPOSED ON THE BASIS OF THESE SETS OF FACTS EVEN IF THE APPELLATE AUTHO RITY CONFIRM SUC H DISALLOWANCE. 6.3 THE APPELLANT HAS RELIED UP ON VARIOUS CASE LAWS AS ENUMERATED IN THE WRITTEN SUBMISSIONS ABOVE, SUBMITTED BY THE APPELLANT. IN VIEW OF THE CRYSTALLIZED FACTS, THE DECISION OF HONOURABLE SUPREME COURT IN CASE OF CIT V RELIANCE PETRO PRODUCTS LIMITED 322 ITR 158 (SC) IN CLEARLY APPLICABLE IN THE APPELLANTS CASE. THE AO WAS NOT JUSTIFIED IN IMPOSING PENALTY OF RS 30 LACS UP ON THE APPELLANT. THE SAME IS HEREBY CANCELLED. 7 . REVENUE COULD NOT FIND ANY INFIRMITY WITH THE ORDER OF CIT (A) DELETING THE PENALTY . IN THIS CASE THERE IS NO FINDING OTHER THAN THE DISALLOWANCE OF THE ITEMS THAT HOW THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. MERE DISALLOWANCE C ANNOT BURDEN THE ASSESSEE WITH CONCEALMENT 4 | P A G E PENALTY. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD (2010) 322 ITR 158 (SC), WE DO NOT FOUND ANY ERRO R IN THE IMPUGNED ORDER. THEREFORE WE CONFIRM THE ORDERS OF CIT (A) IN DELETING THE PENALTY U/S 271(1) ( C) OF THE ACT OF RS 30 LAKHS. 8 . IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 .01.2016. - SD/ - - SD/ - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:13 /01/2016 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI