BOMBAY BARODA ROADWAYS (I) LTD, MUMBAI V. ACIT 10(2), MUMBAI

ITA 3776/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55058 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 11-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Keywords: Transfer pricing; Period of limitation; Fair market value; Wrong claim; Time period of passing order
• Section: 246

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AN D SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 3776/MUM./2010 (ASSESSMENT YEAR : 2003-04 ) BOMBAY BARODA ROADWAYS (I) P. LTD. UNIT NO.4, B-WING, SITA ESTATE GROUND FLOOR, MAHUL ROAD CHEMBUR, MUMBAI 400 074 PAN AAACB1770H .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-10(2), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : NONE REVENUE BY : MR. P.C. MAURYA DATE OF HEARING 16.8.2011 DATE OF ORDER 30.8.2011 O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY THE ASSESSEE, IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 9 TH MARCH 2010, PASSED BY THE COMMISSIONER (APPEALS)-XXI, MUMBAI, FOR ASSESSMENT YEAR 2003-04. 2. ON THE DATE OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE BY THE REGISTERED POST ON 20 TH JUNE 2011. EARLIER, THE ASSESSEE SOUGHT AN ADJOURNMENT AND THE SAME WAS GRANTED. THERE IS NO REQUEST FOR ADJOURNMENT TODAY. THERE IS NO LETTER O F AUTHORITY ON RECORD OF BOMBAY BARODA ROADWAYS INDIA PVT. LTD. ITA NO.3776/M/2010 2 ANY COUNSEL. UNDER THESE CIRCUMSTANCES, WE PROCEED TO DISPOSE OFF THIS APPEAL EX-PARTE, QUA THE ASSESSEE ON MERITS, AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. 3. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATI VE, MR. P.C. MAURYA. 4. FACTS IN BRIEF ARE THAT, THE ASSESSEE IS A PUBLIC L IMITED COMPANY AND CARRIES ON BUSINESS OF TRANSPORTATION OF LPG THROUG H ITS OWN TANKERS. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-0 4 ON 25 TH NOVEMBER 2003, DECLARING INCOME OF ` 98,81,088. THE ASSESSING OFFICER, FOR VARIOUS REASONS MENTIONED IN THE ASSESSMENT ORDER, MADE ON AD-HOC DISALLOWANCE @ 10% OF VEHICLE RUNNING AND MAINTENANCE EXPENDITURE ON ESTIMATE BASIS. ON APPEAL, THE COMMISSIONER (APPEALS) RESTRICTED THE D ISALLOWANCE TO 5%. THE ASSESSING OFFICER ALSO DISALLOWED AN AMOUNT OF ` 3,90,000, UNDER SECTION 40A(2)(B) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) ON THE GROUND THAT THE VEHICLE HIRE CHARGES PAID TO EIGHT PERSONS LISTED OUT AT PARA-10/PG.5 OF THE ASSESSMENT ORDER WAS EXCESSIVE AND UNREASONA BLE HAVING REGARD TO THE FAIR MARKET VALUE. THE ASSESSEE CONTENDED THAT DIFFERENT AMOUNT WAS PAID TO DIFFERENT TANKERS I.E., ` 1,80,000 PAID IN RESPECT OF TWO TANKERS, ` 1,32,000 PAID IN RESPECT OF FIVE TANKERS AND THAT O NLY IN ONE CASE, ` 90,000 WAS PAID AND THE ASSESSING OFFICER UNFAIRLY, PICKED UP THIS PAYMENT OF ` 90,000 AND DETERMINED THE SAME AS A FAIR MARKET VAL UE FOR DETERMINING DISALLOWANCE UNDER SECTION 40A(2)(B). THE COMMISSIO NER (APPEALS) CONFIRMED THIS DISALLOWANCE VIDE HIS ORDER DATED 18 TH DECEMBER 2006. THEREAFTER, THE ASSESSING OFFICER LEVIED PENALTY UN DER SECTION 271(1)(C) OF THE ACT, VIDE HIS ORDER DATED 31 ST JULY 2009. THE COMMISSIONER (APPEALS) CONFIRMED THE SAME, VIDE HIS ORDER DATED 9 TH MARCH 2010. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 5. THE FIRST ISSUE THAT WAS RAISED IS THAT, THE ORDER OF PENALTY IS BARRED BY LIMITATION IN TERMS OF SECTION 275(1)(A) OF THE ACT . IT WAS THE CASE OF THE ASSESSEE THAT THE COMMISSIONER (APPEALS) PASSED THE ORDER IN THE QUANTUM PROCEEDINGS ON 18 TH DECEMBER 2006, AND WHEREAS, THE ASSESSING OFFICER HAS PASSED THE PENALTY ORDER UNDER SECTION 271(1)(C) OF THE ACT ON 31 ST JULY BOMBAY BARODA ROADWAYS INDIA PVT. LTD. ITA NO.3776/M/2010 3 2009. THE CASE OF THE REVENUE IS THAT THE TRIBUNAL HAS PASSED THE ORDER ON 31 ST DECEMBER 2008 AND THE ASSESSING OFFICER HAS, WITHI N THE PERIOD OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE ITAT WAS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, HAD PASSED THE ORDER. SECTION 275(1)(A) READS AS FOLLOWS:- SECTION 275 - BAR OF LIMITATION FOR IMPOSING PENAL TIES (1) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE PASSED (A) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHE R ORDER IS THE SUBJECT MATTER OF AN APPEAL TO THE COMMISSIONER (AP PEALS) UNDER SECTION 246 OR SECTION 246A OR AN APPEAL TO THE APP ELLATE TRIBUNAL UNDER SECTION 253, AFTER THE EXPIRY OF THE FINANCIA L YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, OR SIX MONTHS FR OM THE END OF THE MONTH IN WHICH THE ORDER OF THE COMMISSIONER (APPEA LS) OR, AS THE CASE MAY BE, THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER PERIOD EXPI RES LATER; PROVIDED THAT IN A CASE WHERE THE RELEVANT ASSESSME NT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE COMMISSIO NER (APPEALS) UNDER SECTION 246 OR SECTION 246A, AND THE COMMISSI ONER (APPEALS) PASSES THE ORDER ON OR AFTER THE 1ST DAY OF JUNE, 2 003 DISPOSING OF SUCH APPEAL, AN ORDER IMPOSING PENALTY SHALL BE PAS SED BEFORE THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDIN GS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INI TIATED, ARE COMPLETED, OR WITHIN ONE YEAR FROM THE END OF THE F INANCIAL YEAR IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RE CEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER IS LATER. 6. A PLAIN READING OF THIS SECTION SHOWS THAT UNDER SE CTION 275(1)(A), THE ORIGINAL PROVISION WAS THAT WHEN AN ASSESSMENT ORDE R IS A SUBJECT MATTER OF APPEAL BEFORE THE COMMISSIONER (APPEALS), THEN THE PENALTY ORDER SHOULD BE PASSED WITHIN A PERIOD OF SIX MONTHS FROM THE END O F THE MONTH IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RECEIVED BY THE CHIEF COMMISSIONER / COMMISSIONER. THE PROVISO WAS INSERTED TO EXPAND TH IS TIME PERIOD OF SIX MONTHS TO ONE YEAR IN CASES, WHEREIN THE COMMISSION ER (APPEALS) PASSES AN ORDER ON/AFTER 1 ST JUNE 2003. THE PROVISO DOES NOT DEAL WITH CASES WH ERE THE APPEALS ARE PENDING BEFORE THE ITAT UNDER SECTION 2 53 OF THE ACT. THAT LIMB OF SECTION 275(1)(A), WHICH FIXES THE TIME LIMIT OF SIX MONTHS FROM THE DATE OF RECEIPT OF ORDER OF THE ITAT BY THE COMMISSIONER / CHIEF COMMISSIONER, FOR PASSING AN ORDER OF PENALTY IS NOT DISTURBED IN ANY MANNER BY THE BOMBAY BARODA ROADWAYS INDIA PVT. LTD. ITA NO.3776/M/2010 4 INSERTION OF THE PROVISO. HONBLE MADRAS HIGH COURT IN RAYALA CORPORATION PVT. LTD. V/S UNION OF INDIA & ORS, (2007) 288 ITR 452 (MAD.), HELD AS FOLLOWS:- A READING OF THE ABOVESAID PROVISION MAKES IT CLEA R THAT THE INTERPRETATION PLACED BY LEARNED COUNSEL FOR THE PE TITIONER ON THE SAID PROVISION IS ACCEPTABLE. THERE IS NO DISPUTE IN THI S CASE THAT THE PETITIONER HAS FILED AN APPEAL BEFORE THE TRIBUNAL AND THE SAME IS PENDING. IN SUCH A CASE, THE LIMITATION PERIOD FOR THE LEVY OF PENALTY WILL BE AS PROVIDED FOR UNDER S. 275(1)(A), I.E., S IX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE TRIBUNAL IS RECEIVED BY THE CHIEF CIT. THERE CANNOT BE ANY DOUBT ON THIS ASPECT . ACCORDINGLY, THIS COURT IS OF THE VIEW THAT THE PROVISO TO S. 275 (1) (A) OF THE ACT, DOES NOT NULLIFY THE AVAILABILITY TO THE THIRD RESPONDEN T OF THE PERIOD OF LIMITATION OF SIX MONTHS FROM THE END OF THE MONTH WHEN THE ORDER OF THE TRIBUNAL, CHENNAI, IS RECEIVED BY THE THIRD RES PONDENT HEREIN. 7. WE RESPECTFULLY FOLLOW THIS JUDGMENT OF THE HONBLE MADRAS HIGH COURT AS IT IS THE ONLY JUDGMENT ON THE SUBJECT BY A HIGH COURT. IN VIEW OF THE ABOVE CLEAR POSITION OF LAW, WE UPHOLD THE FINDINGS OF THE COMMISSIONER (APPEALS), THAT THE ORDER OF PENALTY DATED 31 ST JULY 2009, WAS PASSED WITHIN THE PERIOD OF LIMITATION I.E., SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER. THUS, THIS GROUND ON LIMITATION IS DI SMISSED. 8. THE SECOND GROUND IS THAT THE DISALLOWANCE WAS MADE ONLY ON THE BASIS OF ESTIMATE ON AD-HOC BASIS AND, HENCE, NO PE NALTY CAN BE LEVIED. 9. WE FIND THAT THE ASSESSING OFFICER HAD, ON THE GROU ND THAT RELEVANT BILLS AND VOUCHERS HAVE NOT BEEN PRODUCED FOR VERIF ICATION, CAME TO A CONCLUSION THAT THE ASSESSEE COULD NOT SUBSTANTIAT E ITS CLAIM FOR VEHICLE RUNNING AND MAINTENANCE EXPENDITURE. 10% OF THE SAM E HAS BEEN DISALLOWED ON AD-HOC BASIS. IN OUR CONSIDERED OPINION, NO PENA LTY CAN BE LEVIED WHEN EXPENDITURE IS DISALLOWED ON ESTIMATED BASIS. THE C OMMISSIONER (APPEALS) HAD REDUCED THE DISALLOWANCE TO 5% FROM 10% . THIS DISALLOWANCE WAS MADE ON AD-HOC BASIS AND DO NOT PROVE EITHER CONCEALMENT OF FURNISHING OF INACCURATE PARTICULARS. IT IS NOT A CASE WHERE THE ASSESSING OFFICERS FOUND THAT THE ASSESSEE HAS EITHER SUPPRESSED RECEIPTS OR HAS MADE A BOGUS CLAIM. THE CASE OF THE ASSESSING OFFICER IS THAT THE ASSES SEE WAS NOT ABLE TO BOMBAY BARODA ROADWAYS INDIA PVT. LTD. ITA NO.3776/M/2010 5 SUBSTANTIATE ITS CLAIM FOR EXPENDITURE TO THE FULLE ST EXTENT WITH PROPER VOUCHERS AND EVIDENCE. IN VIEW OF THE ABOVE, WE DEL ETE THE PENALTY LEVIED ON THE AD-HOC DISALLOWANCE OF 5% OF THE EXPENDITURE ON VEHICLE MAINTENANCE AND RUNNING EXPENDITURE. 10. COMING TO THE DISALLOWANCE UNDER SECTION 40A(2)(B), THE COMMISSIONER (APPEALS), VIDE ORDER AT PARA-4.1/PAGE -2 OF HIS ORDER DATED 18 TH DECEMBER 2006, IN THE QUANTUM PROCEEDINGS, NOTED T HAT THE ASSESSEE FILED DETAILS OF REGISTRATION OF VEHICLES INDICATIN G CAPACITY OF LOADING, ETC., AND SUBMITTED THAT THE RATE OF ` 90,000 PER VEHICLE FIXED BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. DISALLOWANCE WAS CONFIRMED BY TH E COMMISSIONER (APPEALS) ON THE GROUND THAT THE ASSESSEE COULD NOT JUSTIFY WITH CONCLUSIVE EVIDENCE, THAT THE AMOUNT PAID TO PERSONS WHO ARE C OVERED UNDER SECTION 40A(2)(B) WAS AT ARMS LENGTH. THIS IS ALSO A CASE WHERE THE ADDITION IS MADE BECAUSE THE EXPLANATION FOR THE ASSESSEE WAS N OT CONSIDERED SATISFACTORY. THE EXPLANATION IS BONAFIDE AND, IN O UR OPINION, THIS IS NOT A CASE OF EITHER FURNISHING INACCURATE PARTICULARS OR A CASE OF CONCEALMENT OF INCOME. THIS IS A TECHNICAL DISALLOWANCE FOR THE RE ASON THAT THE ASSESSEE COULD NOT PRODUCE EVIDENCE IN SUPPORT OF HIS CLAIM. IT IS NOT THE CASE THAT THIS IS A FALSE OR BOGUS CLAIM. IT IS NEITHER A CASE OF FURNISHING INACCURATE PARTICULARS NOR A CASE OF CONCEALMENT OF INCOME. TH IS IS A MERE DISALLOWANCE ON THE GROUND THAT ARMS LENGTH PRICE COULD NOT BE ESTABLISHED. ALL THE PARTICULARS WERE FURNISHED. IN SUCH CIRCUMSTANCES, NO PENALTY CAN BE LEVIED UNDER SECTION 271(1)(C). CONSEQUENTLY, WE QUASH THE IMPUGNED PENALTY ORDER. 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST 2011 SD/- VIJAY PAL RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH AUGUST 2011 BOMBAY BARODA ROADWAYS INDIA PVT. LTD. ITA NO.3776/M/2010 6 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, B BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI DATE INITIAL 1. DRAFT DICTATED ON 24.8.2011 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 26.8.2011 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 26.8.2011 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 26.8.2011 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 26.8.2011 SR.PS/PS 6. DATE OF PRONOUNCEMENT 30.8.2011 SR.PS 7. FILE SENT TO THE BENCH CLERK 30.8.2011 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER