ACIT 9(1), MUMBAI V. BLBIR ALLOYS P. LTD, MUMBAI

ITA 3606/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55620 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI R.K. PANDA (ACCOUNTANT MEMBER) ITA NO. 3606/MUM/2010 ASSESSMENT YEAR- 2004-05 THE DCIT, RANGE 9(1), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S, BALBIR ALLOYS PVT. LTD., 8, SGUVDARSGABM 33 RD RIADM 15 TH ROAD CORNER, BANDRA (W), MUMBAI-400 050 PAN-AAACB 2171M (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI G.P. TRIVEDI RESPONDENT BY: SHRI SANJIV M. SHAH DATE OF HEARING : 12.10.2011 DATE OF PRONOUNCEMENT:19.10.2011 O R D E R PER B.R. MITTAL, JM : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2004-05 AGAINST ORDER OF LD. CIT(A) DT. 3 RD MARCH, 2010 DISPUTING THE DELETION OF PENALTY OF RS. 3,58,750/- LEVIED BY AO U/S. 271(1)( C) OF THE ACT ON THE GROUND THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. 2. THE RELEVANT FACTS ARE THAT ASSESSEE RECEIVED AN AMOUNT OF RS. 10 LACS AS SPECIAL CAPITAL INCENTIVE SUBSIDY FOR SSI UNITS FROM GOVT. OF MAHARASHTRA UNDER THE NEW PACKAGE SCHEME OF INCENTIVES 1993. T HE ASSESSEE CONSIDERED THE SAID SUBSIDY AS CAPITAL SUBSIDY AND TRANSFERRED IT TO ITS BALANCE SHEET UNDER RESERVES AND SURPLUS AND NOT CREDITED I N THE PROFIT AND LOSS ITA NO. 3606/M/10 2 ACCOUNT. THE ASSESSING OFFICER TREATED THE SAID SU BSIDY AS REVENUE RECEIPT AND TAXED IT AS INCOME OF ASSESSEE. THE ASSESSEE D ID NOT DISPUTE THE SAID ACTION OF AO. IN VIEW OF ABOVE, AO INITIATED PENALT Y PROCEEDINGS U/S. 271(1)(C) OF THE ACT ON THE GROUND THAT ASSESSEE FU RNISHED INACCURATE PARTICULARS OF ITS INCOME AS ASSESSEE MADE WRONG CL AIM. THE AO STATED THAT HAD CLAIM OF ASSESSEE BEEN BONAFIDE IT WOULD HAVE C ERTAINLY CARRIED THE MATTER IN FURTHER APPEAL. THUS, AO LEVIED PENALTY U/S. 271(1)(C) OF THE ACT OF RS. 3,58,750/-. BEING AGGRIEVED, ASSESSEE FILED AP PEAL BEFORE FIRST APPELLATE AUTHORITY. 3. THE LD. CIT(A) OBSERVED THAT ASSESSEE DID NOT CR EDIT THE SAID RECEIPT TO THE PROFIT AND LOSS ACCOUNT AND CREDIT THE CAPITAL ACCOUNT WHICH WERE SHOWN IN BALANCE SHEET IN SCHEDULE 2- RESERVES AND SURPL US ON THE PREMISE THAT THE SAID RECEIPT IS A CAPITAL RECEIPT. HE STATED T HAT THIS IS AN ISSUE WHICH IS DABATABLE AND ON WHICH TWO VIEWS ARE POSSIBLE AS TO WHETHER SUBSIDY RECEIVED IS CAPITAL OR REVENUE. HE STATED THAT IT DEPENDS UPON THE PURPOSE FOR WHICH SUBSIDY IS GRANTED AND WOULD ALSO DEPEND UPON THE SCHEME OF THE SUBSIDY. THE LD. CIT(A) STATED THAT THERE IS NO SP ECIFIC FINDING BY AO THAT SUBSIDY RECEIVED IS REVENUE. HOWEVER, ASSESSEE STA TED THAT THE PURPOSE FOR WHICH THE SUBSIDY WAS GRANTED WAS TO SET UP OR ENCO URAGE INDUSTRIES IN UNDER DEVELOPED/DEVELOPING AREAS OF THE STATE. SINCE ASS ESSEE HAS SHOWN THE SUBSIDY IN THE RETURN OF INCOME, THERE IS NO FAILUR E ON THE PART OF ASSESSEE TO DISCLOSE RELEVANT PARTICULARS OF INCOME. THE LD. C IT(A) STATED THAT ALL RELEVANT MATERIALS FOR THE PURPOSE OF COMPUTATION OF TOTAL INCOME HAS BEEN DISCLOSED AND AN EXPLANATION HAS BEEN OFFERED, WHICH EXPLANAT ION HAS NOT BEEN FOUND TO BE FALSE. IT CANNOT BE STATED THAT ASSESSEE CONCE ALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE LD. CIT(A) AFTER CONSIDERING THE DECISION OF ITAT MUMBAI BENCH IN TH E CASE OF TWIN STAR JUPITER CO-OPERATIVE HOUSING SOCIETY LTD. VS ITO 3 1 SOT 474 HAS DELETED THE PENALTY LEVIED BY AO. HENCE, DEPARTMENT IS IN APPEAL BEFORE TRIBUNAL. ITA NO. 3606/M/10 3 4. ON BEHALF OF DEPARTMENT, LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT SUBSIDY RECEIVED BY ASSESSEE IS ON REVENUE ACC OUNT. THE ASSESSEE DID NOT FURNISH CORRECT PARTICULARS OF ITS INCOME AS IT HAS SHOWN THE SAID RECEIPT OF SUBSIDY IN THE CAPITAL ACCOUNT INSTEAD OF REVENUE A CCOUNT. HE SUBMITTED THAT IF THE CLAIM OF ASSESSEE IS BONAFIDE, ASSESSEE WOUL D HAVE BEEN GONE IN APPEAL AGAINST THE ASSESSMENT ORDER. HE SUBMITTED THAT OR DER OF LD. CIT(A) BE REVERSED BY CONFIRMING THE ACTION OF AO. ON THE OT HER HAND, LD. AR MADE HIS SUBMISSIONS ON THE LINES OF SUBMISSIONS MADE BEFORE LD. CIT(A). HE REFERRED AT PAGE 14 OF THE PAPER BOOK AND SUBMITTED THAT ASS ESSEE RECEIVED RS. 10 LACS AS SUBSIDY UNDER SPECIAL CAPITAL INCENTIVE SCH EME FOR SETTING UP UNIT IN THE DEVELOPED/UNDEVELOPED AREAS OF THE STATE. HE S UBMITTED THAT ASSESSEE CONSIDERED THE SAID RECEIPT AS CAPITAL RECEIPT AND SHOWN IT IN BALANCE SHEET. HE SUBMITTED THAT THERE WAS NO CONCEALMENT OR FURNI SHING OF INACCURATE PARTICULARS OF INCOME BY ASSESSEE. THE LD. AR SUBM ITTED THAT MERELY BECAUSE ASSESSEE DID NOT FILE APPEAL DISPUTING THE ORDER OF AO, DOES NOT MEAN THAT ASSESSEE HAS ACCEPTED THAT IT CONCEALED ITS PARTICU LARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD. AR SUBMI TTED THAT SIMILAR ISSUE WAS ALSO CONSIDERED BY ITAT MUMBAI BENCH IN ITA NO. 914 /M/08 IN THE CASE OF ACIT VS M/S. ENPAK MOTORS PVT. LTD. VIDE ORDER DT. 23.10.2009 AND HELD THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM ASSESSMENT P ROCEEDINGS AND MERELY BECAUSE ASSESSEE HAS NOT FILED APPEAL AGAINST ORDER OF AO, DOES NOT MEAN THAT ASSESSEE FILED INACCURATE PARTICULARS OR CONCE ALED PARTICULARS OF ITS INCOME. HE SUBMITTED THAT THE ORDER OF LD. CIT(A) BE CONFIRMED. 5. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTHO RITIES BELOW AND THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES. WE HAVE ALSO GONE THROUGH THE CASES CITED BEFORE THE AUTHORITIES BELO W AS WELL AS BEFORE US AT THE TIME OF HEARING. WE OBSERVE THAT ASSESSEE RECEI VED SPECIAL CAPITAL INCENTIVES SUBSIDY OF RS. 10 LACS FOR SETTING UP OF INDUSTRIES UNDER DEVELOPED OR DEVELOPING AREAS OF THE STATE. IT IS NOT A CASE THAT THE ASSESSEE HAS NOT SHOWN THE RECEIPT IN ITS BOOKS OF ACCOUNT. THERE I S NO DISPUTE TO THE FACT THAT ASSESSEE HAS SHOWN SAID RECEIPT IN ITS BALANCE SHEE T/RESERVE AND SURPLUS ON ITA NO. 3606/M/10 4 THE PREMISE THAT THE SAID RECEIPT IS A CAPITAL RECE IPT INSTEAD OF CREDITORS IT IN ITS PROFIT AND LOSS ACCOUNT. WE AGREE WITH LD. AR THAT ISSUE AS TO WHETHER SUBSIDY IS A CAPITAL RECEIPT OR A REVENUE RECEIPT I S A DEBATABLE ISSUE AND IT DEPENDS ON THE NATURE OF SUBSIDY BEING RECEIVED BY ASSESSEE. THE LD. CIT(A) HAS RIGHTLY OBSERVED THAT THERE IS NO SPECIFIC FIND ING BY AO IN THE ASSESSMENT ORDER THAT THE SUBSIDY RECEIPT IS REVENUE AS HE HAS NOT GIVEN THE BASIS FOR HOLDING IT AS REVENUE RECEIPT. THE ONLY THING IS T HAT AO CONSIDERED IT AS REVENUE RECEIPT AND THE ASSESSEE DID NOT DISPUTE TH E SAID ACTION OF AO AND THEREFORE PENALTY HAS BEEN LEVIED BY AO CONSIDERING THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME. DURING THE COURSE OF HEARING OF APPEAL, LD. DR ALSO STRESSED ABOVE FACT THAT ASSESS EE DID NOT FILE ANY APPEAL AGAINST ACTION OF AO TO TREAT THE RECEIPT OF SUBSI DY AS REVENUE RECEIPT AND THEREFORE CLAIM OF ASSESSEE WAS NOT BONAFIDE. WE D O NOT FIND MERIT IN THE SAID CONTENTION OF DR MERELY BECAUSE THE ASSESSEE H AD NOT FILED APPEAL AGAINST THE ACTION OF AO AND THEREFORE CLAIM OF ASS ESSEE WAS NOT BONAFIDE. IT DOES NOT CONSTITUTE THAT ASSESSEE CONCEALED ITS PAR TICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. ITAT M UMBAI BENCH VIDE ITS ORDER DT. 23.10.2009 (SUPRA) CONSIDERED SIMILAR ASPECTS A ND IT WAS HELD THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM ASSESSMENT PROCEEDIN GS. MERELY BECAUSE SOME ADDITIONS WERE MADE, AND WERE NOT CHALLENGED B Y ASSESSEE IN APPEAL FOR WHATEVER REASON, MAY NOT BE SUFFICIENT TO ATTRA CT PROVISIONS OF SEC. 271(1)(C) OF THE ACT. THE HONBLE APEX COURT HAS A LSO HELD IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 15 8 THAT MERELY BECAUSE ASSESSEE HAD CLAIMED EXPENDITURE, WHICH WAS NOT ACC EPTED OR WAS NOT ACCEPTABLE TO REVENUE, THAT BY ITSELF WOULD NOT ATT RACT PENALTY U/S. 271(1)(C) OF THE ACT. THE MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICU LARS REGARDING INCOME OF ASSESSEE. CONSIDERING THE FACTS OF THE CASE AND ABO VE DECISION OF HONBLE APEX COURT (SUPRA), WE HOLD THAT LD. CIT(A) HAS RIG HTLY HELD THAT NEITHER THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME NOR ASSESSEE HAS CONCEALED ITS INCOME AND THEREFORE HE HAS RIGHTLY D ELETED THE PENALTY OF RS. ITA NO. 3606/M/10 5 3,58,750/- IMPOSED BY AO. WE UPHOLD THE ORDER OF LD . CIT(A) AND REJECT THE GROUND OF APPEAL TAKEN BY DEPARTMENT. 6. IN THE RESULT, APPEAL FILED BY DEPARTMENT IS DISM ISSED. ORDER PRONOUNCED ON THIS 19 TH DAY OF OCTOBER, 2011 SD/- SD/- ( R.K. PANDA) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 19 TH OCTOBER, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 3606/M/10 6 DATE INITIALS 1. DRAFT DICTATED ON: 14.10.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 17.10.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: