DRESSER RAND INDIA P. LTD, MUMBAI V. DCIT RG 6(2), MUMBAI

ITA 3558/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3704 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-05-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VARUN SANKHESARA
• Keywords: Depreciation; Wrong claim; Difference of opinion; Corroborative evidences; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI .. , ! '#$ % % % % & . '.'. .%( ) '#$ '* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM './ I.T.A. NO. 3558/MUM/2010 ( )( , %-, )( , %-, )( , %-, )( , %-, / / / / ASSESSMENT YEAR : 2004-05) DRESSER-RAND INDIA PRIVATE LIMITED, LOTUS BUSINESS PARK, 11 TH FLOOR, VEERA DESAI ROAD, OFF ANDHERI-LINK ROAD, OPP. FUN REPUBLIC, ANDHERI (W), MUMBAI 400 053. ( ( ( ( / VS. DY. COMMISSIONER OF INCOME TAX- RG. 6(2), AAYAKAR BHAVAN, M. K. ROAD, MUMBAI 400 020. $. ! './ PAN : AAACD9897P ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ' / APPELLANT BY : SHRI PRASHANT MAHESHWARI & SHRI VARUN SANKHESARA 01./ 2 3 ' / RESPONDENT BY : SHRI RAJARSHI DWIVEDY '(% 2 ! / // / DATE OF HEARING : 06-05-2013 45- 2 ! / DATE OF PRONOUNCEMENT : 08-05-2013 # 6 / O R D E R PER P.M. JAGTAP, A.M . : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) 12, MUMBAI DTD. 15-12-2009 WHEREBY HE PART LY SUSTAINED THE ITA 35587/MUM/2010 2 PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE IN COME TAX ACT, 1961 (THE ACT). 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING VARIOUS TYPES OF PROCESS GAS COMPRESSORS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 28-10-2004 DECLARING TOTAL INCOME OF RS. 18,31,88, 230/-. IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT VIDE AN ORDER DTD. 27-12-2006, THE TOTAL INCOME OF THE ASSESSEE WAS COMPUTED BY THE A.O. AT RS. 22,11,87,370/- AFTER MAKING CERTAIN ADDITIONS WHICH WERE SUSTAINED BY TH E LD. CIT(A) IN THE QUANTUM PROCEEDINGS TO THE FOLLOWING EXTENT:- (I) DISALLOWANCE OF REPAIRS AND MAINTENANCE EXPENSE S TREATING THE SAME AS CAPITAL IN NATURE RS. 20,73,464/-. (II) DISALLOWANCE OF TECHNICAL AND ADMINISTRATIVE E XPENSES REPRESENTING ADHOC PROVISION MADE BY THE ASSESSEE W ITHOUT ANY BASIS RS. 42,22,348/-. (III) DISALLOWANCE OUT OF MISCELLANEOUS EXPENSES TO THE EXTENT OF 10% FOR WANT OF SUPPORTING VOUCHER RS. 27,89,623/-. (IV) DISALLOWANCE ON ACCOUNT OF LEAVE ENCASHMENT EX PENSES. 3. AS A RESULT OF THE SUSTENANCE OF THE VARIOUS ADD ITIONS MADE BY THE LD. CIT(A) IN THE QUANTUM PROCEEDINGS AS ABOVE, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED BY THE A.O. IN REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE A.O., IT WAS EXPLAINED BY THE ASSESSEE THAT THE REPAIRS AND MAINTENANCE EXPENSES TREATED AS CAPITAL IN NATU RE WERE INADVERTENTLY CLAIMED BY IT AS REVENUE EXPENDITURE AND THERE WAS NO ATTEMPT TO MAKE ANY ITA 35587/MUM/2010 3 FALSE CLAIM IN RESPECT OF THE SAID EXPENSES WHICH O THERWISE WERE GENUINE EXPENSES RELATING TO THE BUSINESS. AS REGARDS THE T ECHNICAL AND ADMINISTRATIVE EXPENSES, IT WAS EXPLAINED BY THE ASSESSEE THAT THE PROVISION FOR THE SAID EXPENSES WAS MADE ON ADHOC BASIS AND ALTHOUGH THE S AME WAS DISALLOWED IN THE QUANTUM PROCEEDINGS, THERE WAS NO CASE OF FURNI SHING INACCURATE PARTICULARS. AS REGARDS THE DISALLOWANCE MADE OUT O F MISCELLANEOUS EXPENSES, IT WAS SUBMITTED THAT THE SAID DISALLOWANCE TO THE EXTENT OF 50% WAS MADE BY THE A.O. FOR WANT OF SUPPORTING EVIDENCE WHICH WAS RESTRICTED BY THE LD. CIT(A) TO 10%. IT WAS CONTENDED THAT ADDITION ON T HIS ISSUE THUS WAS MADE ON ESTIMATED BASIS FOR WHICH IMPOSITION OF PENALTY WAS NOT JUSTIFIED. AS REGARDS LEAVE ENCASHMENT EXPENSES, IT WAS EXPLAINED THAT THE SAID EXPENSES WERE CLAIMED ON THE BASIS OF PAYMENT U/S 43-B OF TH E ACT AND SINCE THE DISALLOWANCE THEREOF WAS MADE MERELY ON THE BASIS O F DIFFERENCE OF OPINION, PENALTY U/S 271(1)(C) OF THE ACT WAS NOT ATTRACTED. THE SUBMISSIONS MADE BY THE ASSESSEE WERE NOT FOUND ACCEPTABLE BY THE A.O. ACCORDING TO HIM, ALL THE ADDITIONS MADE TO THE TOTAL INCOME OF THE ASSESSEE REPRESENTED DISALLOWANCE OF HIGHER CLAIM FOR DEDUCTION MADE BY THE ASSESSEE AND SINCE THE HIGHER CLAIM WERE MADE BY FURNISHING INACCURATE PARTICULARS OF I NCOME BY THE ASSESSEE, PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIABLE. ACC ORDINGLY HE IMPOSED PENALTY OF RS. 3907,835/- U/S 271(1)(C) OF THE ACT BEING 10 0% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE IN RESPECT OF ADDITIONS MADE TO THE TOTAL INCOME OF THE ASSESSEE. ITA 35587/MUM/2010 4 4. THE PENALTY IMPOSED BY THE A.O. U/S 271(1) OF TH E ACT WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LD. C IT(A) AND THE SUBMISSIONS MADE BEFORE THE A.O. WERE REITERATED ON BEHALF OF T HE ASSESSEE BEFORE THE LD. CIT(A) IN SUPPORT OF ITS STAND THAT THERE WAS NO CA SE OF FURNISHING OF ANY INACCURATE PARTICULARS OF ITS INCOME IN RESPECT OF ADDITIONS/DISALLOWANCES MADE IN THE QUANTUM PROCEEDINGS. THE LD. CIT(A) FOU ND MERIT IN THE SUBMISSION MADE BY THE ASSESSEE IN SO FAR AS THE SA ME WAS IN RESPECT OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF TECHNIC AL AND ADMINISTRATIVE CHARGES AND LEAVE ENCASHMENT EXPENSES AND CANCELLED THE PENALTY IMPOSED BY THE A.O. IN RESPECT OF THE SAID ADDITIONS. AS R EGARDS THE ADDITION MADE ON ACCOUNT OF REPAIRS AND MAINTENANCE EXPENSES AMOUNTI NG TO RS. 20,73,464/- TREATING THE SAME AS CAPITAL IN NATURE AND DISALLOW ANCE OUT OF MISCELLANEOUS EXPENSES AMOUNTING TO RS. 27,89,623/- FOR WANT OF S UPPORTING EVIDENCE, THE LD. CIT(A) HOWEVER AGREED WITH THE A.O. THAT THE SA ID EXPENSES WERE WRONGLY CLAIMED BY THE ASSESSEE BY FURNISHING INACCURATE PA RTICULARS OF INCOME AND ACCORDINGLY PENALTY IMPOSED BY THE A.O. ON THE SAID TWO ADDITIONS WAS CONFIRMED BY HIM. AGGRIEVED BY THE ORDER OF THE LD . CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT CERTAIN EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD REPAIRS AND MAINTENANCE WERE DISALLOWED IN THE QUANTUM PROCEEDINGS TREATING THE SAME AS CAPITAL IN NATURE MAINLY ON THE GROUND THAT THERE WAS A FAILURE ON TH E PART OF THE ASSESSEE TO ITA 35587/MUM/2010 5 ESTABLISH THAT THE SAME WERE REVENUE IN NATURE. HE CONTENDED THAT THE GENUINENESS OF THE SAID EXPENDITURE, HOWEVER, WAS N OT DISPUTED AND DEPRECIATION THEREON WAS ALLOWED BY THE A.O. AFTER CAPITALIZING THE SAID EXPENSES. HE CONTENDED THAT THE DISALLOWANCE ON ACC OUNT OF REPAIRS AND MAINTENANCE EXPENSES THUS WAS BASED ON DIFFERENCE O F OPINION AND THE ISSUE INVOLVED RELATING TO THE EXACT NATURE OF EXPENSES B EING A DEBATABLE ONE, PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE IMPOSED. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE DECISION OF CO-ORDINAT E BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. SHIVALIK GLOBAL LTD. (2011) 8 ITR 761(DELHI) AND DCIT VS. EAGLE IRON AND METAL INDUSTRIES REPORTED IN (2011) 11 ITR 384(MUM.) (TRIB). AS REGARDS THE ADDITION MADE BY WAY OF DISALLOWANCE OF MISCELLANEOUS EXPENSES, HE SUBMITTED THAT THE RELEVANT RECORD WAS MISPLACED DURING THE COURSE OF SHIFTING OF THE OFFICE OF THE ASSESSEE AN D THE ASSESSEE, THEREFORE, COULD NOT PRODUCE THE RELEVANT DETAILS AND DOCUMENT S TO SUPPORT AND SUBSTANTIATE ITS CLAIM FOR MISCELLANEOUS EXPENSES. HE SUBMITTED THAT THE A.O., THEREFORE, DISALLOWED 50% OF THE TOTAL MISCEL LANEOUS EXPENSES CLAIMED BY THE ASSESSEE FOR WANT OF SUPPORTING VOUCHERS AND DETAILS WHICH THE LD. CIT(A) RESTRICTED TO 10%. HE CONTENDED THAT THE DI SALLOWANCE OUT OF MISCELLANEOUS EXPENSES THUS WAS MADE ON ESTIMATED B ASIS FOR WHICH PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE IMPOSED AS HELD BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF EAGLE IRON AND METAL INDUSTRIES (SUPRA). ITA 35587/MUM/2010 6 6. THE LD. D.R., ON THE OTHER HAND, STRONGLY SUPPOR TED THE IMPUGNED ORDER OF THE LD. CIT(A) CONFIRMING THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT IN RESPECT OF ADDITION MADE ON ACCOUNT OF R EPAIRS AND MAINTENANCE EXPENSES AND DISALLOWANCE OUT OF MISCELLANEOUS EXPE NSES. HE CONTENDED THAT AS RIGHTLY HELD BY THE LD. CIT(A), WRONG CLAIM FOR THE ABOVE EXPENSES WAS MADE BY THE ASSESSEE BY FURNISHING INACCURATE PARTI CULARS AND IT WAS THEREFORE A FIT CASE TO IMPOSE PENALTY U/S 271(1)(C ) OF THE ACT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT T HE TOTAL REPAIRS AND MAINTENANCE EXPENSES IN RESPECT OF PLANT & MACHINER Y AND BUILDING WERE CLAIMED BY THE ASSESSEE AMOUNTING TO RS. 58,43,979/ - AND RS. 23,63,343/- RESPECTIVELY. ACCORDING TO THE A.O., THE SAID EXPE NSES TO THE TUNE OF RS. 14,48,341/- AND RS. 6,25,123/- WERE CAPITAL IN NATU RE AND THIS VIEW OF THE A.O. WAS ACCEPTED BY THE ASSESSEE APPARENTLY BECAUS E THE A.O. ALLOWED DEPRECIATION ON THE SAID EXPENSES TREATED AS CAPITA L. THE ACTION OF THE A.O. IN ALLOWING THE DEPRECIATION ON THE SAID EXPENSES CLEA RLY SHOWS THAT GENUINENESS OF THE SAME WAS NOT DISPUTED BY HIM AND THE FACT THAT THE SAID EXPENSES WERE RELATED TO THE BUSINESS OF THE ASSESS EE WAS ALSO ACCEPTED BY HIM. IN THE SIMILAR FACTS AND CIRCUMSTANCES INVOLV ED IN THE CASE OF DCIT VS. SHIVALIK GLOBAL LTD. (SUPRA), DELHI BENCH OF THIS T RIBUNAL HAS CANCELLED THE PENALTY IMPOSED BY THE A.O. HOLDING THAT PENALTY U/ S 271(1)(C) OF THE ACT WAS NOT JUSTIFIABLE BECAUSE THE ISSUE AS TO WHETHER THE PARTICULAR REPAIR EXPENSES ITA 35587/MUM/2010 7 ARE OF REVENUE NATURE OR OF CAPITAL NATURE WAS HIGH LY DEBATABLE ONE AND THERE WAS NO CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE IN TREATING REPAIR EXPENSES TO BE OF REVENUE IN NAT URE. KEEPING IN VIEW OF THE SAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIB UNAL IN THE CASE OF SHIVALIK GLOBAL LTD. (SUPRA) AND HAVING REGARD TO THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE PENALTY IMPOSED BY THE A.O. AND CONFI RMED BY THE LD. CIT(A) IN RESPECT OF ADDITION MADE BY WAY OF DISALLOWANCE OF REPAIRS AND MAINTENANCE EXPENSES TREATING THE SAME AS CAPITAL IN NATURE IS NOT JUSTIFIED. 8. AS REGARDS THE ADDITION MADE BY WAY OF DISALLOWA NCE OUT OF MISCELLANEOUS EXPENSES, IT IS OBSERVED THAT 50% OF THE TOTAL MISCELLANEOUS EXPENSES CLAIMED BY THE ASSESSEE WERE DISALLOWED BY THE A.O. FOR THE FAILURE OF THE ASSESSEE TO FURNISH THE RELEVANT DETAILS AND DOCUMENTS TO SUPPORT AND SUBSTANTIATE THE SAME. THE REASON FOR ITS FAILURE T O PRODUCE THE RELEVANT DETAILS AND DOCUMENTS IN SUPPORT OF ITS CLAIM FOR M ISCELLANEOUS EXPENSES WAS EXPLAINED BY THE ASSESSEE BY SUBMITTING THAT THE RE LEVANT RECORD WAS LOST/MISPLACED DURING THE COURSE OF SHIFTING OF ITS OFFICE AND KEEPING IN VIEW OF THE SAID EXPLANATION AS WELL AS OTHER RELEVANT ASPE CTS OF THE MATTER, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE OF 50% MADE BY T HE A.O. TO 10%. IT IS THUS CLEAR THAT ADHOC DISALLOWANCE OF 50% OUT OF MISCELL ANEOUS EXPENSES WAS MADE BY THE A.O. ON ESTIMATED BASIS AND THE SAID ES TIMATE WAS REVISED BY THE LD. CIT(A) WHILE RESTRICTING THE DISALLOWANCE TO 10 %. IT WAS THUS A CASE OF DISALLOWANCE MADE ON ESTIMATED BASIS FOR WANT OF SU PPORTING VOUCHER AND ITA 35587/MUM/2010 8 THERE WAS NO CASE THAT ANY BOGUS EXPENSES NOT RELAT ING TO ITS BUSINESS WERE CLAIMED BY THE ASSESSEE UNDER THE HEAD MISCELLANEOU S EXPENSES. IN THE SIMILAR FACTS AND CIRCUMSTANCES INVOLVED IN THE CAS E OF DCIT VS. EAGLE IRON AND METAL INDUSTRIES LTD. (SUPRA), THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD THAT WHERE DISALLOWANCE HAD BEEN MADE PURELY O N THE BASIS OF DIFFERENCE OF OPINION AND ON ADHOC BASIS, THERE WAS NO CASE MA DE OUT FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME TO JUSTIFY IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. KEEPING IN VIEW OF THE SAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND HAVING REGAR D TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT PENALTY IMPOSED BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) IN RESPECT OF ADDITION MADE BY WAY OF DISALLOWANCE OUT OF MISCELLANEOUS EXPENSES IS NOT J USTIFIED. ACCORDINGLY WE CANCEL THE PENALTY IMPOSED BY THE A.O. AND CONFIRME D BY THE LD. CIT(A) IN RESPECT OF BOTH THE ADDITIONS MADE ON ACCOUNT OF DI SALLOWANCE OF REPAIRS EXPENSES AND DISALLOWANCE OUT OF MISCELLANEOUS EXP ENSES AND ALLOW THE APPEAL FILED BY THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . 7 8 )( ,7 2 $% 9 2 :; ORDER PRONOUNCED IN THE OPEN COURT ON 08-05-2013. . # 6 2 45- ! <#(8 08-05-2013 5 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) '#$ JUDICIAL MEMBER ! '#$ / ACCOUNTANT MEMBER MUMBAI ; <#( DATED 08-05-2013 ITA 35587/MUM/2010 9 %.)(.'./ RK , SR. PS # 6 2 0)=> ? >- # 6 2 0)=> ? >- # 6 2 0)=> ? >- # 6 2 0)=> ? >-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. @ () / THE CIT(A)12, MUMBAI. 4. @ / CIT CITY-6, MUMBAI 5. >%C 0))( , , / DR, ITAT, MUMBAI D BENCH 6. , D / GUARD FILE. # 6(' # 6(' # 6(' # 6(' / BY ORDER, '1> 0) //TRUE COPY// E E E E/ // /': ': ': ': ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI