The ACIT, Circle-4, Baroda V. M/s. Shroff Engineering Ltd., Baroda

ITA 398/AHD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76725 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: YASH BHATT
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.398/AHD/2013 A.Y. 2006-07 ASST. COMMISSIONER OF INCOME, CIRCLE-4, BARODA. VS M/S. SHROFF ENGINEERING LTD. BARODA. PAN: AAECS 9056J (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.C. MATHEWS, SR.D.R., ASSESSEE(S) BY : SHRI YASH BHATT, A.R. / DATE OF HEARING : 12/05/2014 / DATE OF PRONOUNCEMENT: 16/05/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(A)-III, BARODA, DATED 06.05.2011 AND TH E ONLY GROUND IS ABOUT THE DELETION OF PENALTY OF RS.5,43,426/- LEVI ED U/S. 271(1)(C) OF IT ACT. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) DATED 18.12.2008 AND THE PENALTY ORDER PASSED U/S.271(1)(C) DATED 31 ST MARCH, 2011 WERE THAT THE ASSESSEE COMPANY HAD MADE A PAYMENT OF RS.1,07,63,055/- AS LABOUR CHARGE S TO ONE M/S. S.J. CLEARWATER PUMPS LTD. ACCORDING TO AO, THE SAID COM PANY HAD FALLEN UNDER THE CATEGORY OF SECTION 40A(2)(B) OF IT ACT. THE AO HAS CONCLUDED THAT THE SIMILAR DISALLOWANCE WAS MADE IN THE PAST FOR A.Y. 2004-05 AND 2005-06; HENCE, HELD THAT THERE WAS AN EXCESSIVE AS ALSO ITA NO.398/AHD/2013 ACIT, CIR-4, BARODA VS. M/S. SHROFF ENGINEERING LTD . BARODA. A.Y.2006-07 - 2 - UNREASONABLE PAYMENT OF LABOUR CHARGES WHICH WAS ES TIMATED AT 15%, THEREUPON A DISALLOWANCE OF RS.16,14,458/- WAS MADE . 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, LEARNED CIT(A) HAS NOTED THAT THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF MANUFACTURING OF SUBMERSIBLE PUMPS. HE HAS REPRODUC ED AN EARLIER ORDER OF LEARNED CIT(A) AND THEREUPON FINALIZED THAT BEIN G IN FULL AGREEMENT WITH THE FINDING OF HIS LEARNED PREDECESSOR THE GRO UND WAS DISMISSED. WITH THIS BRIEF FACTUAL BACKGROUND, WE HAVE BEEN IN FORMED THAT IN THE PAST YEARS FOR A.YS. 2004-05 AND 2005-06 ITAT D B ENCH AHMEDABAD IN ITA NO.125 AND 126/AHD/2009 VIDE AN ORDER DATED 31 ST OF OCTOBER, 2012, THE ISSUE WAS DECIDED IN ASSESSEES FAVOUR, V IDE PARAGRAPH 27, REPRODUCED BELOW: HEARD BOTH PARTIES, PERUSED THE RECORD AND THE CAS E LAWS AND FIND THAT ASSESSEE HAS MADE A PAYMENT OF RS.52,48,459/- TO M/ S. S.J. CLEAR WATER PUMPS LTD. TOWARDS JOB WORK CHARGES. THE AO HAS MAD E DISALLOWANCE OF RS.8,03,556/- BEING 15% OF THESE EXPENSES CLAIMED B Y THE ASSESSEE ON THE GROUND THAT ASSESSEE HAS MADE EXCESSIVE PAYMENT TO ITS SISTER CONCERN BY INVOKING THE PROVISION OF SECTION 40A(2)(B) OF THE ACT, SIMPLY COMPARING THE LABOUR CHARGES PAID TO ITS SISTER CONCERN DURING TH E YEAR UNDER APPEAL THAN THE LABOUR CHARGES PAID TO THEM DURING THE IMMEDIAT ELY PRECEDING YEARS WITHOUT BRINGING ANY MATERIAL ON RECORD TO SHOW THA T PAYMENT IS IN EXCESS OF FAIR MARKET VALUE OF JOB WORK DONE BY M/S S.J. CLEA R WATER PUMP LTD. AND IGNORING THE FACT THAT TIN THE EARLIER YEAR THE JOB WORK WAS DONE ONLY FOR THE LAST QUARTER WHILE IN THE YEAR UNDER APPEAL THE JOB WORK HAS BEEN DONE FOR THE ENTIRE YEAR. IN THE ABSENCE OF SUCH MATERIAL ON REC ORD NO ADDITION U/S.40A(2)(B) FOR EXCESSIVE OR UNREASONABLE PAYMENT CAN BE MADE IN VIEW OF VARIOUS DECISIONS RELIED BY THE ASSESSEE. AS THE ON US OF PROVING THAT THE PAYMENT IS EXCESSIVE OR UNREASONABLE IS ON THE REVE NUE AND NOT ON THE ASSESSEE AS PER THE PROVISION OF SECTION 40A(2)(B) OF THE ACT AND THE SAME HAS NOT BEEN DISCHARGED IN THIS CASE BY THE REVENUE, TH E ADDITION MADE BY THE AO AND SUSTAINED BY LEARNED CIT(A) IS HEREBY DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. 4. WHEN THE LEVY OF PENALTY WAS CHALLENGED BEFORE L EARNED CIT(A), HE HAD TAKEN THE COGNIZANCE OF THE AFORECITED DECIS ION OF THE TRIBUNAL ITA NO.398/AHD/2013 ACIT, CIR-4, BARODA VS. M/S. SHROFF ENGINEERING LTD . BARODA. A.Y.2006-07 - 3 - AND THEREUPON HELD THAT IN A SITUATION WHEN ON IDEN TICAL FACTS, THE QUANTUM ADDITION WAS DELETED IN THE PAST YEARS, THE REFORE, THE QUESTION OF CONCEALMENT FOR THE YEAR UNDER CONSIDERATION HAD BE COME DOUBTFUL. RESULTANTLY, HE HAS DIRECTED TO DELETE THE PENALTY. 5. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED OPINION THAT CONSIDERING THE PAST HISTOR Y OF THE CASE IN RESPECT OF THE QUANTUM ADDITION, WHICH WAS DELETED BY THE R ESPECTED CO- ORDINATE BENCH, THE PENALTY FOR THE YEAR DOES NOT S URVIVE. ALTHOUGH, WE HAVE BEEN INFORMED BY LEARNED DR THAT AGAINST THE O RDER OF LEARNED CIT(A) FOR THE YEAR UNDER CONSIDERATION WHO HAD CON FIRMED THE QUANTUM ADDITION, THE ASSESSEE HAD NOT PREFERRED AN APPEAL BEFORE THE TRIBUNAL, BUT STILL MERE NOT FILING OF AN APPEAL BEFORE THE TRIBU NAL DO NOT ALTER THE LEGAL POSITION IN RESPECT OF THE INVOCATION OF THE PROVIS IONS OF SECTION 40A(2)(B) AS DECIDED BY THE RESPECTED CO-ORDINATE B ENCH (SUPRA) IN THE PAST YEARS IN FAVOUR OF THE ASSESSEE. MOREOVER, THE FACTS RELATING TO THE PAYMENT OF LABOUR CHARGES TO THE SAID CONCERN WERE VERY MUCH ON RECORD AND THEREFORE THE GENUINENESS WAS NOT DOUBTED BY TH E AO BUT ONLY HELD THAT THE PAYMENT WAS UNREASONABLE; HENCE, ESTIMATED AT 15%, THEREFORE, WE HEREBY HOLD THAT THE ADDITION BEING MADE MERELY ON ESTIMATION DO NOT ATTRACT THE PENAL PROVISIONS. BY ASSIGNING THESE RE ASONS, WE HEREBY AFFIRM THE FINDINGS OF LEARNED CIT(A) AND DISMISS THIS GRO UND OF THE REVENUE. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . SD/- SD/- (T.R. MEENA) ( MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 16/05/2014 PRABHAT KR. KESARWANI, SR. P.S. ITA NO.398/AHD/2013 ACIT, CIR-4, BARODA VS. M/S. SHROFF ENGINEERING LTD . BARODA. A.Y.2006-07 - 4 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD