DCIT, Agra V. Shri Laxman Singh,Prop. M/s BSA Sales Corp., Agra

ITA 389/AGR/2009

• Counselvise Citation: [2010] 137 COUNSELVISE.COM (IT) 0034 (ITAT-AGRA)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 21-12-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 22-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SAHU
• Assessee Lawyers: SAHRI K K JAIN
• Keywords: Question of law
• Section: 40A(3); 143(3); 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, SMC, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.389/AGR/2009 ASST. YEAR: 2001-02 D.C.I.T. 4(1), AGRA. VS. SHRI LAXMAN SINGH, GWALIOR. PROP. M/S. BSA SALES CORPORATION, 12/15-AA, NAWALGANJ, NUNHAI, AGRA. (PAN : AFPPS 9539 E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.R. SAHU, JR. D.R. RESPONDENT BY : SAHRI K.K. JAIN, ADVOCATE ORDER THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 02.07.2009 BY WHICH THE CIT(A) HAD DELETED THE PENA LTY IMPOSED ON THE ASSESSEE AMOUNTING TO RS.2,62,983/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT HEREINAFTER) WAS COMPLETED ON 29.03.2004 ON A TOTAL INCOME OF RS.14,30,390/- AGAINST THE RETURNED INCOME OF RS.2, 83,686/- BY MAKING THE FOLLOWING ADDITIONS :- A) DISALLOWANCE ON SERVICE AFTER SALES EXPENSES RS .3,95,100/- B) ADVERTISEMENT EXPENSES RS.2,25,741/- C) DISALLOWANCE UNDER SECTION 40A(3) RS.1,28,40 0/- 3. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT( A) DELETED THE DISALLOWANCE IN RESPECT OF SERVICE AFTER SALES EXPENSES AND ADVERTISEMENT E XPENSES. THE ASSESSEE AS WELL AS REVENUE WENT IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL S ET ASIDE THE ORDER OF THE CIT(A) AND RESTORED 2 THE ORDER OF THE A.O. AND THE APPEAL OF THE ASSESSE E WAS DISMISSED. THE A.O. INITIATED PENALTY UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF T HE ADDITIONS AND ASKED THE ASSESSEE TO EXPLAIN AS TO HOW HE HAS NOT CONCEALED THE INCOME AND FURNI SHED INACCURATE PARTICULARS OF THE INCOME. THE ASSESSEE, VIDE LETTER DATED 17.09.2009, SUBMITT ED THAT IT WAS MERELY THE CASE OF DISALLOWANCE OF EXPENDITURE ON WHICH NO PENALTY SHOULD BE LEVIED . THE A.O. LEVIED THE PENALTY BY HOLDING THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME. THE A.O. IMPOSED PENALTY UNDER SECTION 271 (1)(C) OF THE ACT WITH THE APPROVAL OF THE ADDL. CIT, RANGE-4, AGRA BY OBSERVING AS UNDER :- THUS, I HOLD THAT ASSESSEE HAS CONCEALED THE PARTI CULARS OF HIS INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME DURI NG THE MEANING OF SUB-CLAUSE (A) OF EXPLANATION 1 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ON THE FOLLOWING AMOUNTS :- 1. DISALLOWANCE OF SERVICE AFTER SALES EXPENSES RE IMBURSED TO M/S BS AGRICULTURE INDUSTRIES (INDIA) .. RS. 3,95,100/- 2. DISALLOWANCE OF ADVERTISEMENT EXPENSES RS.2,25 ,741/- 3. DISALLOWANCE U/S 40A(3) OF THE I.T. ACT, 1961 R S.1,28,400/- TOTAL RS.7,49,241/- THE AMOUNT OF TAX SOUGHT TO BE EVADED, BY THE REAS ONS OF THE CONCEALMENT OF THE PARTICULARS OF HIS INCOME AND FURNISHING INA CCURATE PARTICULARS OF INCOME COMES TO RS.2,62,983/- ON THE ABOVE AMOUNT. THE MA XIMUM AND MINIMUM PENALTY LEVIABLE IN THIS CASE WORKS OUT AT RS.7,88, 949/- AND RS.2,62,983/- RESPECTIVELY. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE I IMPOSE A PENALTY U/S 271(1)(C) AT RS.2,62,983/- (I.E. AT MINIMUM). THE ASSESSEE IS DIRECTED TO PAY THE AMOUNT OF PENALTY ACCORDINGLY. 4. LD. A.R. BEFORE US VEHEMENTLY CONTENDED THAT AGA INST THE ORDER OF THE TRIBUNAL THE ASSESSEE WENT IN APPEAL UNDER SECTION 260A BEFORE T HE HIGH COURT AND CHALLENGED BEFORE THE HIGH COURT ALL THE THREE DISALLOWANCES ON THE BASIS OF WHICH THE A.O. IMPOSED THE PENALTY UNDER SECTION 271(1)(C). IT WAS ALSO POINTED OUT THAT TH E CIT(A) SINCE HAS DELETED THE DISALLOWANCE 3 MADE IN RESPECT OF THE SERVICE AFTER SALES AND ALSO THE ADVERTISEMENT, THIS ITSELF PROVES THAT THE CLAIM OF THE ASSESSEE WAS A BONAFIDE ONE AND NO PEN ALTY CAN BE MADE IN RESPECT OF MERELY OF DISALLOWANCES. SO FAR THE DISALLOWANCE MADE UNDER SECTION 40A OF THE ACT, IT WAS POINTED OUT THAT THIS IS A FACT THAT NONE OF THE PAYMENT EXCEED ED THE LIMIT AS HAS BEEN PRESCRIBED UNDER SECTION 40A(3) OF THE ACT. THIS DISALLOWANCE HAS B EEN MADE ON THE BASIS THAT THE ASSESSEE HAS SPLITTED THE PAYMENT ONLY FOR THE PURPOSE OF CIRCUM VENTING THE PROVISIONS OF SECTION 40A(3). ATTENTION WAS DRAWN TOWARDS THE PROVISIONS OF SECTI ON 40A(3). THE SECTION 40A(3) HAS BEEN AMENDED W.E.F. 01.04.2009 BY THE FINANCE ACT, 2008 IN WHICH IT HAS BEEN PROVIDED THAT THE AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY HAS TO BE CONSIDERED FOR THE PURPOSE OF LIMIT OF RS.20,000/- AS SPECIFIED UNDER SECTION 40A(3). THI S SECTION HAS NOT BEEN AMENDED RETROSPECTIVELY WHICH CLEARLY SAYS THAT THE ASSESSE E COULD HAVE MADE AGGREGATE PAYMENT MORE THAN RS.20,000/- IN A DAY. RELIANCE WAS PLACED IN THIS REGARD ON THE DECISION OF HONBLE M.P. HIGH COURT IN THE CASE OF SHRI RADHIKA PRAKASHAN (R AIPUR) PVT. LTD. VS. CIT, 257 ITR 675. IT WAS POINTED OUT THAT THE HONBLE ALLAHABAD HIGH COU RT HAS ADMITTED THE APPEAL OF THE ASSESSEE IN ITA NO.467/AGR/2004 VIDE ORDER DATED 25.05.2007. COPY OF THE APPEAL FILED BEFORE THE HIGH COURT AS WELL AS COPY OF THE ORDER OF THE HIGH COUR T DATED 25.05.2007 WERE PRODUCED BEFORE ME. IT WAS CONTENDED THAT ADMISSION OF THE APPEAL BY TH E HIGH COURT ITSELF PROVES THAT THERE CAN BE TWO VIEWS IN RESPECT OF THE CLAIM OF EXPENDITURE BY THE ASSESSEE AND THE CLAIM OF THE ASSESSEE WAS A BONAFIDE ONE. 5. LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER S OF THE AUTHORITIES BELOW. 6. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE MATERIAL ON RECORD ALONGWITH THE ORDERS OF THE TAX AUTHORITIES BELOW. I HAVE ALSO GONE THROUGH THE DECISION OF THE 4 M.P. HIGH COURT IN THE CASE OF RADHIKA PRAKASHAN (R AIPUR) PVT. LTD. VS. CIT, 257 ITR 675 ALONGWITH THE PROVISIONS OF SECTION 40A(3) OF THE A CT WHICH WERE AMENDED W.E.F. 01.04.2009. I HAVE ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL BY WHICH THE DISALLOWANCE MADE BY THE A.O. HAS BEEN CONFIRMED. IT IS AN ADMITTED FACT THAT TH E ASSESSEE HAS MADE THE CLAIM TOWARDS THE EXPENSES OF AFTER SALES SERVICE, ADVERTISEMENT IN T HE EARLIER YEAR ALSO AND THESE EXPENSES HAVE NOT BEEN DISALLOWED IN THE EARLIER YEAR. EVEN THE DISA LLOWANCE MADE BY THE A.O. WAS DELETED BY THE CIT(A). IT IS ONLY IN THIS YEAR WHEN THE A.O. HAS COME WITH THE PLEA THAT IT IS MERELY A PAPER TRANSACTION THE ASSESSEE HAS DULY SUBMITTED THE PAR TICULARS IN RESPECT OF THE EXPENSES CLAIMED BY THE ASSESSEE. THEREFORE, IT CANNOT BE SAID THAT TH E ASSESSEE HAD FURNISHED INACCURATE PARTICULARS. SO FAR DISALLOWANCE MADE UNDER SECTION 40A(3), THE A.O. HAD MADE THE DISALLOWANCE ONLY ON THE BASIS OF THE DETAILS SUBMITTED BY THE ASSESSEE. TH E PROVISIONS OF SECTION 40A(3) HAS BEEN AMENDED W.E.F. 01.04.2009. PRIOR TO 01.04.2009 AGG REGATE PAYMENT WAS NOT TO BE CONSIDERED FOR THE PURPOSES OF DISALLOWANCE UNDER SECTION 40A(3). THE INTERPRETATION AS HAS BEEN TAKEN BY THE ASSESSEE WAS DULY SUPPORTED BY THE DECISION OF THE M.P. HIGH COURT IN THE CASE OF SHRI RADHIKA PRAKASHAN (RAIPUR) PVT. LTD. VS. CIT, 257 ITR 675. NO DOUBT, THE TRIBUNAL HAS CONFIRMED THE DISALLOWANCE IN RESPECT OF ALL THE THREE ITEMS. ON THAT BASIS THE A.O. HAS IMPOSED THE PENALTY UNDER SECTION 271(1)(C) ON THE ASSESSEE. MERELY TH E EXPENDITURE HAS BEEN DISALLOWED AND THE DISALLOWANCE HAS BEEN CONFIRMED BY THE TRIBUNAL SUB SEQUENTLY. THIS DOES NOT MEAN THAT THE ASSESSEE HAS CONCEALED ITS INCOME OR FILED INACCURA TE PARTICULARS OF THE INCOME THEREOF. NO DOUBT, IN VIEW OF EXPLANATION-1 TO SECTION 271(1)(C ) THE ONUS IS ON THE ASSESSEE TO OFFER EXPLANATION IN RESPECT OF THE AMOUNT DISALLOWED IN COMPUTING THE INCOME AND THE CLAIM OF THE ASSESSEE WAS BONAFIDE OR THE ASSESSEE HAS TO SUBSTA NTIATE THE CLAIM. ONCE THE ASSESSEE HAS SUBMITTED THE EXPLANATION ABOUT THE BONAFIDE OF THE CLAIM, THE ONUS GETS SHIFTED ON THE REVENUE TO PROVE THAT THE EXPLANATION OFFERED BY THE ASSESS EE WAS FALSE. THE BONAFIDE OF THE EXPLANATION 5 OF THE ASSESSEE IS CLEARLY PROVED FROM THE FACT THA T THE HONBLE HIGH COURT HAS ADMITTED THE APPEAL OF THE ASSESSEE IN RESPECT OF THE DISALLOWAN CE OF SERVICE AFTER SALES EXPENSES, ADVERTISEMENT EXPENSES AND DISALLOWANCE MADE UNDER SECTION 40A(3) ON THE BASIS OF WHICH THE A.O. HAS IMPOSED THE PENALTY. IF THERE CAN BE TWO OPINIONS ABOUT THE CLAIM OF THE ASSESSEE, THE EXPLANATION OFFERED BY THE ASSESSEE CANNOT BE REGAR DED TO BE A FALSE ONE. FALSE IS OPPOSITE TO TRUE. IT MEANS THE FACTS WHATEVER STATED BY THE AS SESSEE ARE NOT CORRECT. NO MATERIAL EVIDENCE WAS BROUGHT ON RECORD BY THE LD. A.R. WHICH PROVES THAT THE REVENUE HAS DISCHARGED ITS ONUS AND PROVING THE EXPLANATION OF THE ASSESSEE WAS FALSE. I FIND THAT THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF THE THIRD MEMBER IN THE CASE OF ROOPAM MERCANTILE LIMITED, 91 ITD 237 (AHD.) (TM) IN WHICH IT HAS BEEN SPECIFICALLY H ELD BY THE THIRD MEMBER THAT THE CLAIM WHICH IS HELD BY THE HIGH COURT TO GIVE RISE TO SUB STANTIAL QUESTION OF LAW CANNOT BE TREATED TO BE A FRIVOLOUS OR MALAFIDE AS TO ATTRACT LEVY OF PENAL TY UNDER SECTION 271(1)(C) OF THE ACT. I AM OF THE VIEW THAT THE DECISION OF THE THIRD MEMBER IS E QUALLY APPLICABLE TO THE FACTS OF THE PRESENT CASE BEFORE ME BECAUSE IN THIS CASE ALSO IT IS AN A DMITTED FACT THAT APPEAL OF THE ASSESSEE UNDER SECTION 260A HAS BEEN ADMITTED BY THE HIGH COURT ON THE SAME VERY DISALLOWANCE IN RESPECT OF WHICH THE A.O. HAS IMPOSED THE PENALTY UNDER SECTIO N 271(1)(C). EVEN ON MERIT ALSO, I AM OF THE VIEW THAT THE ASSESSEE HAS NOT CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF. THE ASSESSMENT PROCEEDINGS AS WELL AS PENALTY PROCE EDINGS BOTH ARE DIFFERENT PROCEEDINGS AND IF THE ASSESSEE COULD NOT ADDUCE THE EVIDENCE OR COULD NOT TAKE A PLEA DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HE IS FREE TO TAKE THE PLEA OR ADDUCE THE EVIDENCE DURING THE COURSE OF THE PENALTY PROCEEDINGS. THE ASSESSEE HAS ALSO DUL Y DISCHARGED ITS ONUS, IN MY OPINION, AS HAS BEEN CAST ON HIM UNDER EXPLANATION-1 TO SECTION 271 (1)(C) OF THE ACT. THEREFORE, IN MY OPINION, THERE IS NO INFIRMITY OR ILLEGALITY IN THE ORDER OF THE CIT(A) IN DELETING THE PENALTY IMPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C). SIMILAR VIEW HAS BEEN TAKEN BY THE UNDERSIGNED IN THE CASE 6 OF ACIT VS. RELIANCE PETROPRODUCTS PVT. LTD. IN ITA NO.2453/AHD./2006 VIDE ORDER DATED 25.01.2007. I, ACCORDINGLY, CONFIRM THE ORDER OF T HE CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISM ISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 22.01.2010) SD/- (P.K. BANSAL) ACCOUNTANT MEMBER PLACE: AGRA DATE: 22 ND JANUARY, 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, AGRA TRUE COPY