M/s. Pearl Drinks Limited, New Delhi V. ITO, New Delhi

ITA 3712/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3571 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 23-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Keywords: Principle of natural justice
• Section: 143(3); 115JB; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 3712/DEL/2014 A.Y. : 2007-08 M/S PEARL DRINKS LIMITED, 702, ANSAL BHAWAN, 16, KG MARG, NEW DELHI 110 001 (PAN: AAACP1210C) VS. ITO, WARD 14(2), NEW DELHI C.R. BLDG., NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. RAJESH JAIN, CA DEPARTMENT BY : SH. FR MEENA, SR. DR ORDER PER H.S. SIDHU, JM ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER D ATED 05.12.2013 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-XVII, DELHI PERTAINING TO ASSESSMENT YEAR 2007-08 ON THE FOLLOW ING GROUNDS:- 1. THE ORDER PASSED BY THE HON'BLE CIT(A) IS BAD IN LAW, WRONG ON FACTS AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE . 2. (A) THE HON'BLE CIT(A) HAS ERRED IN CONFIRMING T HE PENALTY OF RS.1374742/- LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT AND HAS FAILED TO APPRECIATE THAT THE COMPANY HAS NOT C ONCEALED ITS 2 INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF AND AS SUCH THE PENALTY U/S 271 (1)(C) HAS BEEN WRONGLY IMPOSED AND THE PENALTY DESERVES TO BE DELETED. (B) THAT THE HON'BLE CIT(A) HAS ERRED IN CONFIRMI NG PENALTY OF RS.1374 7 42/- LEVIED BY THE LD. AO @ 100% OF TH E TAX ALLEGEDLY SOUGHT TO BE EVADED BY FILING OF ALLEGED INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME U/S 271 (1 )(C) OF THE INCOME TAX ACT IN RESPECT OF DISALLOWANCE OUT OF ADVERTISEMENT AND PUBLICITY EXP ENSES OF RS. 4059064/- AND OUT OF INTEREST PAID OF RS.25136/-.1H E EXPENSES ARE GENUINE AND INCURRED FOR BUSINESS EXIGENCIES AN D MERELY DISALLOWANCE OF EXPENSES DOES NOT AMOUNT TO CONCEAL MENT OR FURNISHING INACCURATE PARTICULARS. (C) THE HON'BLE CIT(A) HAS GROSSLY ERRED IN CONFI RMING THE PENALTY OF RS.1374742/- LEVIED BY THE LD. AO WITHOU T CONSIDERING THE SUBMISSIONS AND WITHOUT DEALING WIT H THE ISSUE AT ALL THAT IN THE CASE OF THE APPELLANT COMPANY, T HE INCOME WAS ASSESSED U/S 115JB OF THE INCOME TAX ACT WHEREI N NO ADDITION WAS MADE BY THE LD. AO AND THE INCOME AS P ER NORMAL PROVISIONS OF THE INCOME TAX ACT WAS NIL AND THEREF ORE THE RETURNED INCOME AND THE ASSESSED INCOME WAS SAME AN D THE ORDER OF THE HON'BLE DELHI HIGH COURT IN THE CASE O F MIS. NALWA SOILS INVESTMENT LTD. (2010 TIOL 890) SQUARELY COVE RS THE CASE 3 OF THE APPELLANT COMPANY WHEREIN IT HAS BEEN HELD T HAT NO PENALTY U/S 271 (1 )(C) IS LEVIABLE IN SUCH CIRCUMS TANCES. THE APPELLANT CRAVES LEAVE TO ADD, ALTER AMEND, DEL ETE FOREGO OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSMENT WAS C OMPLETED VIDE ORDER PASSED U/S. 143(3) OF THE I.T. ACT, 1961 ON 1 8.12.2009 AT A TOTAL INCOME OF RS. 1,96,93,883/- AS AGAINST THE RETURNED INCOME OF RS. 1,56,09,683/- AND ADDITION OF RS. 40,59,064/- ON AC COUNT OF DISALLOWANCE OF EXPENSES OF ADVT & PUBLICITY AND RS. 25,136/- ON ACCOUNT OF DISALLOWANCE U/S. 40(A)(IA) OF INTEREST PAID TO GET CAPITAL TFS LTD. THEREAFTER, THE AO LEVIED THE PENALTY U/S. 271(1)(C ) OF THE I.T. ACT, 1961 VIDE ORDER DATED 28.3.2012 @100% AMOUNTING TO RS. 1 3,74,742/-. 3. AGGRIEVED WITH THE PENALTY ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER 05.12.2013 DISMISSED THE APPEAL OF THE ASSESSEE. 4. AT THE TIME OF HEARING, LD. AUTHORISED REPRESENT ATIVE OF THE ASSESSEE, SH. RAJESH JAIN, CA STATED THAT THE QUA NTUM ADDITION ON WHICH THE PENALTY HAS BEEN IMPOSED, HAS ALREADY BE EN DELETED BY THE ITAT IN ITA NO. 2123/DEL/2011 (AY 2007-08) VIDE ORD ER DATED 03.08.2016. IN THIS BEHALF HE FILED THE COPY OF TH E TRIBUNALS ORDER DATED 03.08.2016 IN ASSESSEES OWN CASE AND HE REQUESTED THAT PENALTY IN DISPUTE MAY BE DELETED. 4 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT IN ASSESSEES OWN CASE IN IT A NO. 2123/DEL/2011 FOR A.Y. 2007-08 VIDE ORDER DATED 03.8.2016, THE TR IBUNAL HAD ADJUDICATED THE ISSUES VIDE PARA NO. 3 TO 9 AT PAGE S 2 TO 7 AND DELETED THE QUANTUM ADDITIONS IN THIS REGARD. FOR THE S AKE OF CONVENIENCE, WE ARE REPRODUCING THE RELEVANT PORTION OF THE TRIBUNA L ORDER DATED 03.8.2016 AS UNDER:- 3. THE MAIN EFFECTIVE GROUND OF THE ASSESSEE READ AS FOLLOWS:- 2(A). THE HONBLE CIT(A) HAS ERRED IN CONFIRMING T HE DISALLOWANCE OF A SUM OF RS.40,59,064/- OUT OF ADVERTISING AND P UBLICITY EXPENSES REPRESENTING WALL PAINTING AND OTHER ADVER TISEMENT EXPENSES PAID TO M/S VISION & IMAGES ON THE ALLEGED BELIEF THAT THE PARTY WAS MERELY USED AS A CONDUIT FOR PROVIDING FA KE BILLS OF VARIOUS EXPENSES. 3. THE HONBLE CIT(A) HAS ERRED IN CONFIRMING THE D ISALLOWANCE OF A SUM OF RS.25,136/- REPRESENTING INTEREST PAID TO M/S GEE CAPITAL TFS LTD. BEING INTEREST ON ASSETS ON HIRE P URCHASE ON THE GROUND THAT NO TDS HAS BEEN DEDUCTED ON THE AFORESA ID INTEREST. GROUND NO. 2(A) OF THE ASSESSEE:- 5 3. APROPOS ABOVE GROUND, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE MATERIALS PLACED ON THE RECORD OF THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO PAGE 1 & 2 OF THE ASSESSMENT ORDER AND CONTENDED THAT THE A.O MADE DISALLOWANCE AND ADDITION OF RS.40,59, 064/- FOR WALL PAINTINGS AND PEPSI LOGO PAID TO M/S VISION & IMAG ES ONLY ON THE BASIS THAT NOTICE ISSUED TO THIS ENTITY RECEIVED WI TH THE REMARKS LEFT. THE LD. COUNSEL ALSO POINTED OUT THAT THE CIT(A) DISMISSED CLAIM OF THE ASSESSEE BY TAKING A HYPER TECHNICAL A PPROACHES AND WITHOUT PROPER APPRECIATION OF FACTS. THIS IMPUGNE D ORDER WAS BE SET ASIDE. HE DREW OUR ATTENTION TO PARA 2.4 OF TH E ORDER OF THE CIT(A) AND POINTED OUT THAT THE FIRST APPELLATE AUT HORITY WITHOUT PROVIDING OPPORTUNITY TO EXPLAIN ITS CASE PROPERLY. THE LD. COUNSEL POINTED OUT THAT AS PER ASSESSEE PROFIT & LOSS A/C (APB PAGE 11), SCHEDULE 12 TO FINAL ACCOUNTS (APB PAGE 24) THE TOT AL TURNOVER WAS 13 CRORES AND IN THE FIELD OF COLD DRINKS AND BEVER AGES ADVERTISEMENT AND PUBLICITY HAS VITAL ROLE TO PLAY TO BOOST SALE OF THESE ITEMS AND ASSESSEE GENUINELY INCURRED EXPENDI TURE ON LOGO AND WALL PAINTINGS BY MAKING IMPUGNED PAYMENT TO M/ S VISION. THE LD. COUNSEL ALSO SUBMITTED THAT THE ASSESSEE FILED COPY OF THE RETURN OF INCOME OF THE PAYEE AT PAGES 141 TO 142 O F ASSESSEES PAPER BOOK AND EXPLAINED BEFORE CIT(A) THE BASIS OF CLAIM AS NOTED BY THE CIT(A) AT PAGES 3 TO 6 OF THE IMPUGNED ORDER . 6 4. THE LD. COUNSEL ALSO DRAWN OUR ATTENTION TO OPER ATIVE PARA 2- 4 OF THE IMPUGNED ORDER OF CIT(A) AND CONTENDED THA T MERELY BECAUSE NOTICE U/S 133(6) WAS NOT RESPONDED ON ACCO UNT OF SHIFTING OF PAGE FROM EARLIER PLACE IS NOT A LEGALLY TENABLE GROUND FOR MAKING DISALLOWANCE. THE LD. COUNSEL VEHEMENTLY POINTED O UT THAT LACK OF FUNDS FOR BUSINESS PURPOSE AND INCOME OF VERY LOW A MOUNT IN THE HANDS OF THE ASSESSEE CANNOT BE A BASIS FOR MAKING DISALLOWANCE AND ADDITION IN REGARD TO ADVERTISEMENT AND PUBLICI TY EXPENSES GENUINELY INCURRED ON THE ASSESSEE BY MAKING PAYMEN T THROUGH BANKING CHANNELS THUS CLAIM SHOULD BE ALLOWED AND A DDITION MAY FINDING BY DELETED. TO SUPPORT ABOVE CONTENTIONS T HE LD. COUNSEL HAS PLACED RELIANCE ON THE FOLLOWING ORDERS OF THE TRIBUNAL & HONBLE GUJRAT HIGH COURT:- A. FORTE POINT CONSTRUCTION P. LTD 7 ITR 205 [2011] ITAT, DELHI B. ITO VS. HARDROCK ELECTRIC & ENGG CO. ITA NO. 4955/MUM/2008, ITAT MUMBAI C. CIT VS. BMS PROJECTS (P) LTD 44 TAXMANN.COM 206 [2014] GUJARAT HIGH C OURT D. AMITABH BACHCHAN CORPN. LTD VS. DCIT 56 TAXMANN.COM 77 [2015] [MUM-TRI] ITAT, MUMBAI 7 5. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPR ESENTATIVE (DR) STRONGLY SUPPORTED THE ACTION OF THE A.O AND C ONTENDED THAT THE CIT(A) AFTER PROPER APPRECIATION OF FACTS UPHEL D THE ORDER OF THE A.O ON THIS ISSUE WHICH REQUIRES NO INTERFERENCE. 6. ON CAREFUL CONSIDERATION OF ABOVE IN THE PRESENT CASE THE A.O DISMISSED CLAIM OF THE ASSESSEE BY MERELY OBSERVING THAT THE NOTICE ISSUED U/S 133 (6) OF THE ACT COULD NOT BE SERVED O N THE PAYEE (M/S IMAGES) AS IT LEFT THE PREMISES. THE CIT(A) PROCEE DED TO CONFIRM THE SAME BY OBSERVING THAT NO PAYMENT HAS BEEN MADE UP TO 3 RD JULY 2006 AND ALL THE PAYMENTS HAVE BEEN MADE ON TW O DATES I.E ON 5/8/2006 THROUGH 13 CHEQUES OF AROUND FIGURE OF RS. 4,00,000/- EACH. THE CIT(A) FURTHER OBSERVED, FROM THE COPY O F THE FIR OF PAYEE, THAT A SUM OF RS.137,391/- HAS BEEN SHOWN AS INCOME FROM 7 FIRMS. THE CIT(A) ALSO ALLEGED THAT THE BALANCE SHEET AND P & L A/C OF PAYEE HAVE BEEN SUBMITTED AND ONLY RS.25,224 /- HAS BEEN SHOWN AS INCOME FROM THE FIRM VISION AND M/S IMAGES . THE CIT(A) ALSO ALLEGED THAT ONLY A SMALL SUM OF RS.43,557/- H AS BEEN SHOWN UNDUE THE HEAD CASH AND BANK BALANCES WHICH CLEARLY SHOWN THAT IT DID NOT HAVE ANY SOURCE FOR INCURRING HUGE EXPENSES ON SALARY MATERIAL CONSUMED ETC FROM ITS OWN POCKET AND THER E ARE DISCREPANCIES IN THE TDS CLAIM PLACED BY SHRI RAJEN DER KUMAR, THE PROPRIETOR OF PAYEE FIRM. AFTER OBSERVING ABOVE, T HE CIT(A) UPHELD THE DISALLOWANCE BY CONCLUDING THAT MR. RAJENDERA K UMAR HAS BEEN 8 USED AS A CONDUIT FOR PROVIDING FAKE BILLS OF VARIO US EXPENSES IN THE VARIOUS FIELDS. 7. IN OUR CONSIDERED VIEW THE ALLEGATIONS LABELED A GAINST THE PAYEE CANNOT BE HELD AS SUSTAINABLE AND ACCEPTABLE FOR MAKING DO ALLOWANCE WITHOUT BRINGING ON ANY COGENT EVIDENCE O R ALLEGATION TO SHOW THAT THE ASSESSEE SHIFTED FUNDS IN THE GARB OF FAKE BILLS BY USING MR. RAJENDRA KUMAR AS CONDUIT FOR MAKING FALS E CLAIM. IT IS ALSO NOT CASE OF THE CIT(A) THAT MR. RAJENDRA KUMAR AND HIS PAYEE FIRM IS NOT IN THE BUSINESS OF ADVERTISEMENT AND PU BLICITY AND THESE BILLS ARE BOGUS AND THE ASSESSEE RECEIVED THE IMPUG NED AMOUNT OF PAYMENT MAKE FROM MR. RAJENDRA KUMAR AND THUS IT IS NOT ALLOWABLE. WE MAY POINT OUT THAT THE LACK OF FINAN CIAL RESOURCES FOR CONDUCT OF BUSINESS AND MAJOR INCOME OR LOW INCOME BY THE PAYEE CANNOT BE A BASIS FOR MAKING DISALLOWANCE AS TO BAS IS OF DOUBT ONLY. THE PAYEE IS A TAX PAYER AND IF HE LEFT THE EARLIER PLACE OF BUSINESS THEN HE MAY BE CALLED FROM NEW ADDRESS TO EXPLAIN H IS POSITION AND IN THE EXTENT OF RETURN OF NOTICE UNSERVED ON THE O LD ADDRESS CAN BE OBTAINED FROM THE PAYER ASSESSEE TO ESTABLISH ITS C LAIM. WE ARE OF THE CONSIDERED OPINION THAT THE CIT(A) UPHELD THE A DDITION ON WRONG PREMISE AND BY CONSIDERING THE IRRELEVANT FACTS AND THUS WE DECLINE TO ACCEPT CONCLUSION DRAWN IN THE FIRST APPELLATE O RDER. AT THE SAME TIME, FROM THE EXPLANATION AND DOCUMENTS FILED BY T HE ASSESSEE WE CLEARLY OBSERVE THAT THE ASSESSEE SUBMITTED ALL REL EVANT DOCUMENTS, EVIDENCE AND EXPLANATION WITHIN HIS CONTROL TO ESTA BLISH ITS CLAIM 9 AND BY SHOWING THAT THE PAYEE M/S VISION AND IMAGES RECEIVED PAYMENT THROUGH BANKING CHANNELS TOWARDS BILLS RAIS ED FOR LOGO AND WALL PAINTING WHICH IS NOTHING BUT ACTUAL ADVERTISE MENT AND PUBLICS EXPENSES. THE DR DID NOT TAKE THE ASSESSEE TO SUBM IT NEW ADDRESS OF THE PAYEE THUS ADDITION CANNOT BE MADE ONLY BECA USE NOTICE U/S 133(B) OF THE ACT COULD NOT BE SERVED UPON THE ASSE SSEE DUE THE REASONS BEYOND CONTROL. WE MAY ALSO POINT OUT THAT 10 YEARS HAVE BEEN ELAPSED AFTER TRANSACTION THUS AT THIS STAGE W E CANNOT EXPECT THE ASSESSEE TO SUBMIT MORE EVIDENCE S TO SUPPORT I TS CLAIM WHICH IS SUFFICE TO ESTABLISH GENUINENESS OF THE CLAIM WH ICH WAS INCORRECTLY DISALLOWED BY THE AUTHORITIES , IN VIEW OF ABOVE DI SCUSSION, WE DEMOLISH THE CONCLUSION OF THE CIT(A) AND WE DIRECT THE A.O TO ALLOW THE CLAIM OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 2(A) IS ALLOWED. GROUND NO.3 8. WE HAVE HEARD ARGUMENTS OF BOTH SIDES ON THE IS SUE OF DISALLOWANCE OF RS.25,136/- REPRESENTING THE AMOUNT OF INTEREST PAID BY THE ASSESSEE TO M/S GE CAPITAL TFL (H ON HI RE PURCHASE. 9. ON CAREFUL CONSIDERATION OF THE SAME WE ARE OF T HE CONSIDERED OPINION THAT AS PER CBDT, VIDE INSTRUCTION NO. 1425 /CBDT DATED 16/11/87 THE AMOUNT OF PAYMENT OF INTEREST ARE HIRE PURCHASES CANNOT BE CHARACTERIZED AS INTEREST PAYABLE AND THI S PROVISIONS OF SECTION 194A OF THE ACT ARE NOT ATTRACTED IN SUCH T RANSACTIONS. ACCORDINGLY, WE ACCEPT CONTENTIONS OF THE LD. COUNS EL OF THE 10 ASSESSEE AND THERE FROM, GROUND NO. 3 OF THE ASSESS EE IS ALSO ALLOWED. 6.1 KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANC ES OF THE CASE, WE FIND THAT THE ADDITIONS ON WHICH THE PENALTY IN DISPUTE WAS LEVIED, HAS ALREADY BEEN DELETED BY THE ITAT VIDE ORDER DATED 03.8.2016 IN ITA NO. 2123/DEL/2011 (AY 2007-08) IN ASSESSEES OWN CASE A S AFORESAID, HENCE, THE PENALTY IN DISPUTE WILL NOT SURVIVE. ACCORDING LY, WE CANCEL THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE PENALTY IN DISPUTE AND ALLOW THE APPEAL FILED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/04/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 13/04/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY OR DER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES