JINDAL DRUGS LTD, MUMBAI V. DCIT CEN CIR 8, MUMBAI

ITA 3884/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0662 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 11-05-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 16-05-2013
• Court: TRIBUNAL
• Department Lawyers: MRS AMRITA RANJAN
• Keywords: Business income; Earning of tax free income; Additional evidence
• Section: 14A; 80IB; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE S HRI B.R. BASKARAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 3884 /MUM/20 1 3 ASSESSMENT YEAR: 2005 - 2006 M/S JINDAL DRUGS LTD., BAKHTAWAR, 6 TH FLOOR, B & C, 229, NARIMAN POINT, MUMBAI - 4 00021 PAN: AAACJ1000A VS. THE A.C.I.T. CENTRAL CIRCLE - 8, ROOM NO. 805, 8 TH FLOOR, OLD CGO ANNEX, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) & ITA NO. 4642 /MUM/201 3 ASSESSMENT YEAR: 2005 - 2006 THE D.C.I.T. CENTRAL CIRCLE - 8, ROOM NO. 80 5, 8 TH FLOOR, OLD CGO ANNEX, M.K. ROAD, MUMBAI - 400020 VS. M/S JINDAL DRUGS LTD., BAKHTAWAR, 6 TH FLOOR, B & C, 229, NARIMAN POINT, MUMBAI 400021 PAN: PAN: AAACJ1000A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK MEHTA (AR) RESPONDE NT BY : MRS. AMRITA RANJAN (DR) DATE OF HEARING: 13 /04 /201 7 DATE OF PRONOUNCEMENT: 12 / 0 5 /201 7 O R D E R PER RAM LAL NEGI, JM THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVE NUE AGAINST ORDER DATED 07/03/2013 PASSED BY THE COMMISSIONER OF INCOME TAX 2 ITA NO S . 3884 & 4642/MUM/2013 ASSESSMENT YEAR: 2005 - 2006 (APPEALS) - 37, MUMBAI, WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST PENALTY ORDER PASSED U/S 271 (1) (C) OF THE INCOME TAX ACT, 1961 (FOR SHO RT THE ACT). ITA NO. 3884/MUM/2013 (ASSESSMENT YEAR: 2005 - 2006) 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A PRIVATE COMPANY L TD. ENGAGED IN TRADING AND MANUFACTURING OF DYES, DYE INTERMEDIATE AND MENTHOL ETC. , FILED ITS RETURN OF INCOME DECLARI NG THE TOTAL INCOME OF RS. 9,35,68,252/ - . T HE ASSESSMENT ORDER U/S 143 (3) WAS PASSED AFTER MAKING DISALLOWANCE OF RS. 14,97,38,511/ - U/S 80IB, RS. 21,70,628/ - U/S 14A AND RS. 6,00,129/ - U/S 145A OF THE ACT. IN APPEAL THE LD. CIT (A) UPHELD THE DISALLOWANC E U/S 80IB, ADDITION MADE U/S 145A AND RESTRICTED THE DISALLOWANCE U/S 14A TO RS. 4,29,880/ - . ACCORDINGLY, SHOW CAUSE NOTICE U/S 274 R.W.S. 271 (C) WAS ISSUED AND IN RESPONSE THEREOF THE ASSESSEE SUBMITTED THE WRITTEN REPLY. AF FTER CONSIDERING THE CONTENTI ON OF THE ASSESSEE, AO PASSED PENALTY ORDER U /S 271 (1) (C) OF THE ACT. 3. AGAINST THE SAID ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A) . THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. STILL A GGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL ON THE FOLLOWING EFFECTIVE GROUNDS: - 1. THE LEARNED AO AND CIT (A) - 37 ERRED IN LEAVING PENALTY ON DISALLOWANCE OF RS. 6,00,129/ - UNDER SECTION 145A IN SPITE OF THE BOMBAY HIGH COURT JUDGEMENT IN THE CASE OF LOKNETE BALA SAHEB DESAI SSL LTD 59 DTR 169. 2. THE LEARNED AO AND CIT (A) - 37 ERRED IN LEVYING PENALTY UNDER SECTION 271 (1) (C) ON DISALLOWANCE U/S 14A OF RS. 21,70,628/ - IN SPITE OF THE FACT THAT SUCH DISALLOWANCE WAS REDUCED FROM RS. 3 ITA NO S . 3884 & 4642/MUM/2013 ASSESSMENT YEAR: 2005 - 2006 21,70,628/ - TO RS. 4,29,880/ - INDICATING THAT THE SAID DISALLOWANCE WAS ONLY AN ESTIMATE. 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ITAT HAS DELETED THE ADDITIONS IN QUANTUM APPEAL ITA NO 2592/MUM/2008 DATED 20.5.2015. SINCE, THE ADDITIONS HAVE BEEN D ELETED THE PENALTY ORDER DOES NOT SURVIVE. THE LD. DEPARTMENTAL REPRESENTATIVE DID NOT CONTROVERT THE FACT PRESENTED BY THE LD. COUNSEL . 5. WE HAVE PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. THE FIRST ISSUE PERTAINS TO CONFIRMATION OF PENALTY ON ACCOUNT OF DISALLOWANCE OF RS. 6,00,129/ - UNDER SECTION 145A OF THE ACT. THE COORDINATE BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND DELETED THE ADDITION IN QUANTUM APPEAL HOLDING AS UNDER: 6. NEXT GRIEVANCE OF THE ASSESSEE RELATE TO ADDITION ON ACCOUNT OF EXCISE DUTY TO CLOSING STOCK OF FINISHED GOODS WHICH WERE NOT SUBJECT TO DUTY UNDER EXCISE ACT. THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF L OKNET BALASAHEB DESAI SSK LTD. 339 ITR 288 AND BY THE HONBLE HIGH COURT IN THE CASE OF SPV INDUSTRIES 228 TAXMANN 104. IN THE CASE OF LOKNET BALASAHEB DESAI SSK LTD. (SUPRA), THE HONBLE BOMBAY HIGH COURT HELD THAT EXCISE DUTY LIABILITY CRYSTALLIZES ON TH E DAY OF CLEARANCE OF EXCISABLE GOODS AND NOT ON THE DATE OF MANUFACTURE AND, THEREFORE, EXCISE LIABILITY WAS NOT INCURRED BY THE ASSESSEE IN RESPECT OF UNSOLD SUGAR LYING IN THE STOCK AND CANNOT BE INCLUDED IN THE VALUE OF CLOSING STOCK OF SUGAR. RESPECTF ULLY FOLLOWING THE ORDER OF JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY MERIT IN THE ACTION OF LOWER AUTHORITIES FOR MAKING ADDITIONS ON ACCOUNT OF EXCISE DUTY TO CLOSING STOCK OF FINISHED GOODS WHICH WERE NOT SUBJECT TO DUTY UNDER THE EXCIS E ACT. CONSEQ UENTLY THE GROUND N O. 9, 10,11 & 12 OF ASSESSEES APPEAL ARE ALLOWED. 4 ITA NO S . 3884 & 4642/MUM/2013 ASSESSMENT YEAR: 2005 - 2006 6. SINCE, THE ADDITION MADE U/S 145(A) HAS BEEN DELETED IN QUANTUM APPEAL THE PENALTY ON THE SAID ADDITION DOES NOT S U RVIVE. WE THEREFORE, ALLOW THIS GROUND OF THE APPEAL OF THE ASS ESSEE. 7. THE SECOND GROUND PERTAINS TO PENALTY ON DISALLOWANCE OF RS. 21,70,628/ - MADE U/S 14A OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN QUANTUM APPEAL THE ITAT HAS DELETED THE ADDITION MADE U/S 14A OF THE ACT HOWEVER, UPHELD THE D ISALLOWANCE TO THE EXTENT OF RS. 4,29,880/ - BEING THE ADMINISTRATIVE EXPENSES. SINCE, THE ADDITION IS BASED ON ESTIMATE, NO PENALTY CAN BE LEVIED. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT EV EN THOUGH THE PENALTY HAS BEEN REDUCED TO RS. 4,29,880/ - , THE A SSESSEE IS LIABLE FOR PENALTY U/S 271 (1) (C) OF THE ACT. 8. WE NOTICE THAT THE C OORDINATE BENCH HAS DELETED THE ADDITION OF RS. 2 1,70,628/ - MADE U/S 14A OF THE A CT BY FOLLOWING THE LAW LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 AND THE DECISION RENDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN T HE CASE OF TATA PROJECT LTD. (ITA NO. 5862/MUM/2006) . HOWEVER, THE TRIBUNAL HAS UPHELD THE DISALLOWANCE TO THE EXTENT OF RS. 4,29,880/ - AS ADMINISTRATIVE EXPENSES BY FOLLOWING THE DECISION OF T HE CO - ORDINATE BENCH IN ASSESSEE S OWN CASE FOR THE A.Y. 2004 - 05. THE RELEVANT PORTION OF THE ORDER READS AS UNDER: - 2.4 RESPECTFULLY FOLLOWING THE DECISIONS REFERRED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) DELETING THE DISALLOWANCE OF INTEREST SO MADE. SO FAR AS THE CIT (A) HAS UPHELD THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES U/S 14A IN THE RATIO OF EXEMPT INCOME TO THE TOTAL TURNOVER OF BUSINESS, THE ISSUE IS COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004 - 05. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF CIT (A) TO THIS EXTENT. 5 ITA NO S . 3884 & 4642/MUM/2013 ASSESSMENT YEAR: 2005 - 2006 9. IN VIEW OF THE AFORESAID FACT W E FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE ADDITION OF RS. 4,29,880/ - HAS BEEN CALCULATED AS ADMINISTRATIVE EXPENSES ON THE BASIS OF ESTIMAT E . AS PER THE SETTLED LAW PENALTY U/S 271 (1) (C) CANNOT BE LEVIED ON THE ADDITION MADE ON ESTIMATION BASIS . WE THEREFORE, ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE AND DIRECT THE AO NOT TO LEV Y ANY PENALTY ON THE AFORE SAID ADDITION. ITA NO. 4642 /MUM/2013 (ASSESSMENT YEAR: 2005 - 2006) THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1. ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING PENALTY OF RS. 5,47,065/ - RELATING TO DISALLOWANCE OF DEDUCTION U/S 80IB RELYING ON THE DECISION OF THE HONBLE ITAT WITHOUT APPRECIATING THAT THE HONBLE ITAT HAD SET ASIDE ISSUE TO EXAMINE THE ADDITIONAL EVIDENCE FILED AND PASS A SPEAKING ORDER ON THE ISSUE OF DISALLOWANCE OF DEDUCTION U/S 80IB AND INSPITE OF THE QUANTUM APPEAL FOR THE A.Y. 2005 - 06 STILL PENDING BEFORE THE HONBLE ITAT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING PENALTY U/S 271 (1) (C) OF RS. 5,47,99,065/ - RELATING TO DEDUCTION U/S 80IB WITHOUT APPRECIATING THE FACT THAT SET ASIDE PROCEEDINGS FOR THE A.Y. 2004 - 05 IS STILL PENDING AND WITHOUT CONSIDERING THE DECISION OF THE LE ARNED CIT (A) UPHOLDING THE DISALLOWANCE U/S 80IB FOR BOTH THE A. YRS 2004 - 05 AND 2005 - 06. 2. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION OF RS. 5,47,99,065/ - HAS BEEN DELETED BY THE ITAT IN QUANTUM APPEAL ITA NO. 2592/MUM / 2008 A.Y. 2005 - 06 (SUPRA). THEREFORE, THE PENALTY ON ACCOUNT OF 6 ITA NO S . 3884 & 4642/MUM/2013 ASSESSMENT YEAR: 2005 - 2006 THE AFORE SAID ADDITION DOES NOT SURVIVE. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE FINDINGS OF THE AO . 3. WE NOTICE THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS DELETED THE AFO RE SAID ADDITION IN QUANTUM APPEAL FOLLOWING THE DECISION OF BENCH PASSED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004 - 05. THE RELEVANT PORTION OF THE ORDER READS AS UNDER : - 4.5 IN VIEW OF THE ABOVE DISCUSSION, CONSIDERING THE FACTS AND CIRCUMSTANC E OF THE CASE VIS - - VIS ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004 - 05 AND ALSO THE ORDER OF THE AO GIVING EFFECT TO THE ORDER OF TRIBUNAL ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S 80IB, WE DO NOT FIND ANY MERIT IN THE ACTION OF LOWER AUTHORITIES IN DECLINING ASSESSEES CLAIM FOR DEDUCTION U/S 80IB IN RESPECT OF NEW UNIT SET UP AT DAMAN DURING THE ASSESSMENT YEAR 2005 - 06 AND 2006 - 07. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW ASSESSEES CLAIM FOR DEDUCTION U/S 80IB FOR ASSESSMENT YE AR 2005 - 06 AND 2006 - 07. 4. SINCE, THE ADDITION HAS BEEN DELETED IN QUANTUM APPEAL BY THE CO - ORDINATE BENCH, THE PENALTY ON ACCOUNT OF THE ADDITION AFORESAID DOES NOT SURVIVE. WE THEREFORE, DISMISS THE SOLE GROUND OF THE REVENUES APPEAL . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON12 TH MAY , 2017 . SD/ - SD/ - ( B.R. BASKARAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 12 / 0 5 / 2017 ALINDRA PS 7 ITA NO S . 3884 & 4642/MUM/2013 ASSESSMENT YEAR: 2005 - 2006 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLAN T 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI