VINATI ORGANICS LTD, MUMBAI V. DCIT RG 8(3), MUMBAI

ITA 3790/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0820 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-02-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 10-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR B
• Keywords: Difference of opinion; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE MS.SUSHMA CHOWLA, JM & SHRI N K BILLAIYA, AM ITA NO.3790/MUM/2011 : ASST.YEAR 2004-2005 M/S. VINATI ORGANICS LTD. C/O. KARNAVAT & CO., 2A, KITAB MAHAL, 1 ST FLOOR, 192, DR. D N ROAD, MUMBAI- 400001 . APPELLANT PAN : AAACV6538K VS. DCIT RG 8(3), MUMBAI . RESPONDENT APPELLANT BY : SHRI SUNIL HIRAWAT RESPONDENT BY : SHRI PAWAN KUMAR B DATE OF HEARING : 2 7 .0 7 .201 5 DATE OF PRONOUNCEMENT: 31. 0 7 .2015. O R D E R PER SUSHMA CHOWLA (JM) : THE PRESENT APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS), DATED 22.02.2 011, RELATING TO ASSESSMENT YEAR 2004-2005 AGAINST ORDER PASSED U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. 2. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST THE PENALTY LEVIED U/S. 271(1)(C) AMOUNTING TO RS.67,310/-. BR IEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD INCURRED EXPENDI TURE OF RS.3,77,000/- ON ACCOUNT OF RESEARCH & DEVELOPMENT, WHICH WAS DISALLOWED BY THE AO. FURTHER THE LEASEHOLD EXPENS ES OF RS.1,87,627/ BEING SPREAD OVER A PERIOD OF LEASE WAS ALSO DISALL OWED. THE CIT(A) CONFIRMED THE DISALLOWANCE OF EXPENDITURE IN THE HA NDS OF THE ASSESSEE. ITA NO.3790/MUM/2011. VINATI ORGANICS LTD 2 THE TRIBUNAL IN ITA NO.644/MUM/2008 VIDE CONSOLIDAT ED ORDER DATED 05.06.2013 WITH LEAD ORDER IN ITA NO.3015/MUM/2006 RELATING TO A.Y. 2002-03 RESTORED BACK THE ISSUE OF RESEARCH & DEVEL OPMENT EXPENSES TO THE AO. IN RESPECT OF THE DISALLOWANCE OF RS.1 .87 LACS BEING LEASEHOLD LOAN WRITTEN OFF, THE TRIBUNAL HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE SAID DEDUCTION IN RESPECT OF PLOTS OF LAND WHICH WAS LEASED FOR A PERIOD OF 95 YEARS. HOWEVER, IN RESPE CT OF OTHER PLOTS THE MATTER WAS SET ASIDE TO THE FILE OF THE AO. CONSEQ UENT TO THE ORDER OF THE CIT(A) PASSED IN THE QUANTUM PROCEEDINGS, THE A O HELD THE ASSESSEE TO HAVE FURNISHED INACCURATE PARTICULARS O F INCOME AND LEVIED PENALTY U/S. 271(1)(C) OF THE ACT AT RS. 2,02,560/- . 3. THE CIT(A) PARTLY DELETED THE PENALTY IN RESPECT OF RESEARCH & DEVELOPMENT EXPENSES ON THE GROUND THAT THE ASSESSE E HAS DISCLOSED ALL MATERIAL FACTS WITH RESPECT TO ITS CLAIM OF EXP ENSES ON RESEARCH & DEVELOPMENT AND PARTLY CONFIRMED THE IMPOSITION OF PENALTY IN SO FAR AS IT RELATES TO THE EXPENSES DISALLOWED ON ACCOUNT OF LEASEHOLD EXPENSES BY OBSERVING AS UNDER: IN THE PRESENT CASE, THE TAX AUDITOR OF THE APPELL ANT CLEARLY INFORMED THE COMPANY THAT IT HAS INCORRECTLY CLAIME D CAPITAL EXPENDITURE AS REVENUE IN ITS P & L ACCOUNT YET THE APPELLANT CHOSE TO IGNORE THAT THE EXPLANATION OF THE APPELLANT BY NO STRETCH OF IMAGINATION CAN BE TREATED AS BONA FIDE. BUT FOR S CRUTINY OF RETURN OF INCOME, THE MATTER OF LEASE HOLD EXPENSES BEING CLAIMED AS REVENUE EXPENDITURE WOULD HAVE NOT COME TO LIGHT. WHAT WAS DISCLOSED BY THE APPELLANT WAS NOT THE MATERIAL FAC T OR TRUE FACT. AS THE APPELLANT HAS SUPPRESSED THE FACTS IN ITS RETUR N OF INCOME THAT IT HAS CLAIMED REVENUE EXPENDITURE WHICH WAS BASICA LLY CAPITAL IN NATURE, THUS THE APPELLANT IS CONCEALED THE PARTICU LARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF SUCH INCOME WITH RESPECT TO LEASEHOLD LAND WRITTEN OFF. THE PENALTY WITH RESPE CT TO LEASE HOLD EXPENDITURE OF RS.1,87,626/- IS, THEREFORE, CONFIRM ED. ITA NO.3790/MUM/2011. VINATI ORGANICS LTD 3 4. THE ASSESSEE IS IN APPEAL IN RESPECT OF THE SAID PENALTY LEVIED U/S. 271(1)(C) OF THE ACT AGAINST THE DISALLOWANCE OF EX PENDITURE OF RS.1,87,626/-. 5. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THA T THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL RELAT ING TO A.Y. 2003-04, WHEREIN AS AGAINST SIMILAR DISALLOWANCE OF THE CLAI M OF EXPENDITURE, THE TRIBUNAL HELD THAT NO PENALTY IS LEVIABLE U/S. 271( 1)(C) OF THE ACT. 6. THE LEARNED DR FOR THE REVENUE PLACED RELIANCE O N THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. SO FAR AS THE ISSUE RELATING TO IMPOSITION OF PENALTY QUA LEASE HOLD EXPENSES IS CONCERNED, THE SAME HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE IN ITA NO. 431/MUM/2012 RE LATING TO A.Y. 2003-04, VIDE ORDER DATED 05.06.2013 WITH LEAD ORDE R IN ITA NO. 3015/MUM/2006 RELATING TO A.Y. 2002-03, HELD AS UND ER: S FAR AS CLAIM OF LEASE HOLD WRITTEN OFF IS CONCE RNED WE HAVE UPHELD THE ADDITION MADE/CONFIRMED BY THE AO/FAA FO R FOUR PLOTS OF LAND. WE HAVE HELD THAT EXPENDITURE INCURRED UN DER THAT PARTICULAR HEAD COULDNOT BE TREATED REVENUE EXPENDI TURE. BUT, UPHOLDING AN ADDITION IN QUANTUM PROCEEDINGS DOES N OT RESULT IN AUTOMATIC LEVY OF PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. ASSESSEE HAD NOT FURNISHED DETAILS OF LEAS ED PLOTS AND IT WAS ON THAT BASIS AO HAD MADE THE ADDITION. THERE WAS DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE ABOUT TH E TREATMENT TO BE GIVEN TO THE SAID EXPENDITURE. ASSESSEE CLAI MED IT WAS AN EXPENDITURE OF REVENUE NATURE, WHEREAS AO AND THE F AA HELD IT TO BE OF CAPITAL NATURE. BUT, ON THE BASIS OF SUCH DI FFERENCE PROVISIONS OF SECTION 271(1)(C) CANNOT BE INVOKED. ITA NO.3790/MUM/2011. VINATI ORGANICS LTD 4 8. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDENT ICAL TO THE ISSUE BEFORE THE TRIBUNAL AND FOLLOWING THE SAME PARITY O F REASONING, WE HOLD THAT THERE IS NO MERIT IN LEVY OF PENALTY U/S. 271( 1)(C) OF THE ACT. MERELY BECAUSE THE EXPENDITURE WAS GIVEN A DIFFEREN T TREATMENT BY THE AUTHORITIES BELOW, DOES NOT ESTABLISH THAT THE ASSE SSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. CONSEQUENTLY, WE DIRECT THE AO TO DELETE THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT . 9. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF JULY, 2015. SD/- SD/- ( N K BILLAIYA ) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 31 ST JULY, 2015. SA COPY OF THE ORDER FORWARDED TO : BY ORDER, //TRUE COPY// ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT, MUMBAI. 4. CIT(A) - CONCERNED , MUMBAI 5. DR, ITAT, MUMBAI 6. GUARD FILE.