ITO 9(1)(3), MUMBAI V. DOLLEX INDUSTRIES LTD, MUMBAI

ITA 4069/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4248 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 04-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UDAY B JAKKE
• Keywords: Unexplained expenditure; Depreciation; Difference of opinion; Capital expenditure
• Section: 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , , BEFORE S/SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, J UDICIAL MEMBER ./ I.T.A. NO. 4069 / MUM/ 201 4 ( / ASSESSMENT YEAR : 20 0 7 - 08 ) INCOME TAX OFFICER 9(1)(3, ROOM NO.224, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 4000 20 / VS. M/S DOLLEX INDUSTRIES LTD., 601, LANDMARK RESIDENCY ST. JOHN ROAD, BANDRA (W), MUMBAI - 400050 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AAACD1534D / APPELLANT BY : SHRI UDAY B JAKKE / RESPONDENT BY : SHRI RAKESH JOS HI / DATE OF HEARING : 3 .12. 2015 / DATE OF PRONOUNCEMENT : 6.4. 201 6 O R D E R PER SANDEEP GOSAIN, JM : THIS IS AN APPEAL FILED BY THE REVENUE CHALLENGING THE ORDER DATED 10.3.2014 PASSED BY THE FIRST APPELLATE AUTHORITY CANCELLING THE PENALTY U/S 271(1)( C ) OF THE ACT FOR THE ASSESSMENT YEAR 2007 - 08. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 15.11.2007 DECLARING TOTAL INCOME AT NIL. THE BOOK PROFIT DECLARED U/S 115JB OF THE ACT WAS DISCLOSED AT RS.1,64,48,252. THE ASSESSEE IS IN THE BUSINESS OF SUGAR PRODUCTION. ITA NO. 4069 / MUM/ 201 4 2 3 . ON SCRUTINY, THE AO OBSERVED, THAT THE ASSESSEE CLAIMED AN EXPENDITURE OF RS.2,58,87,665/ - TOWARDS DEFERRED REPAIRS AND MAINTENANCE AND AFTER WRITE OFF OF 1/6 TH THEREOF RS.43,14,611/ - . THE BALANCE AMOUNT OF RS.2,15,73,054/ - SHOWN AS MISCELLANEOUS EXPENSES PENDING WRITE OFF AND CLAIMED AS REVENUE EXPENSES IN THE RETURN OF INCOME. THE AO CALLED FOR THE EXPLANATION FROM THE ASSESSEE AND THE EXPLANATION TENDERED BY THE ASSESSEE DID NOT ACCEPT BY THE AO AND HENCE, IT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) ENHANCED THE DISALLOWANCE TO RS.2,58,87,665/ - . AFTER CIT(A)S ORDER, THE AO INITI ATED PENALTY PROCEEDINGS. 4 . WITH REGARD TO THE CLAIM OF ADDITION OF RS.12,41,497/ - AND DEPRECIATION OF RS. 4,17,567/ - , IN ABSENCE OF BILLS, THE AO DID NOT ALLOW THE CLAIM OF THIS ADDITION IN ASSET AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AND ACCORDINGLY INITIATED PENALTY PROCEEDINGS ALSO. 5 . THE ASSESSING OFFICER ALSO MADE THE ADDITION OF RS.2,39,42,030/ - U/S 40(A)(IA) ON ACCOUNT OF TDS, RS.1,50,19,180/ - ON ACCOUNT OF UNEXPLAINED EXPENDITURE AND RS.4 , 17 , 567/ - ON ACCOUNT OF DISALLOWANCE OF D EPRECIATION ACCORDINGLY, LEVIED PENALTY ON RS.4,64,79,478/ - BEING RS.1,56,44,992/ - BEING 100% OF THE TAX SOUGHT TO BE EVADED. AGGRIEVED BY THIS ORDER, THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A), WHO DELETED THE SAME. AGGRIEVED BY THIS ORDER, THE REV ENUE IS IN APPEAL BEFORE US. 6 . BEFORE US THE LD.DR SUBMITTED THAT ON SCRUTINY OF THE RECORD , THAT THE ASSESSEE HAS NOT DECLARED TRUE INCOME AND FILED RETURN AT NIL INCOME. THE AO AFTER SCRUTINY OF THE RECORD WAS OF THE VIEW THAT THE ASSESSEE HAS FAILED TO FURNISH ACCURATE OF INCOME AND CONCEALED THE PARTICULARS OF INCOME WHILE FILING THE RETURN. THEREFORE, THE ORDER OF AO BE UPHELD THAT THAT OF LD. CIT(A) BE QUASHED. HE RELIED ON THE ORDER OF THE AO. ITA NO. 4069 / MUM/ 201 4 3 7 . THE LD.AR ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS PLACED ALL THE RECORD BEFORE THE AO AND CLAIMED VARIOUS EXPENSES UNDER DIFFERENT HEADS. WITH REGARD TO THE GROUND OF REPAIRS AND MAINTENANCE THE LD.CIT(A) ENHANCED THE AMOUNT TO RS.2,58,87,665/ - , IN THE CASE OF ADDITION OF NEW ASSET AMOUNTI NG TO RS.12,41,497/ - , THE LD. CIT(A) HAS ALLOWED THE CLAIM OF RS.4,17,567/ - . THE CLAIM OF TDS, THE LD. CIT(A) PARTLY ALLOWED THE CLAIM. WITH REGARD TO THE CLAIM OF RS.1,50,19,180/ - ON ACCOUNT OF UNEXPLAINED EXPENDITURE, THE LD.CIT(A) HAS ACCEPTED THE CLAIM AND ALLOWED THIS GROUND ALSO. IN SUM AND SUBSTANCE, THE LD.AR SUBMITTED THAT ALL THE DETAILS WERE ON RECORD. THE AO DID NOT CONSIDERED THIS ASPECT AND WAS OF THE OPINION THAT SINCE THE ASSESSEE CLAIMED DEDUCTION UNDER VARIOUS HEADS HAS SUPPRESSED PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME, THEREFORE, ATTRACT PENALTY PROVISIONS U/S 271(1) (C) OF THE ACT. ACCORDINGLY, PRAYED THAT THE ORDER PASSED BY THE LD.CIT(A) BE CONFIRMED. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIA NCE ON THE ORDER OF LD.CIT(A) AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS . RELIANCE PETROPRODUCTS ( SUPREME COURT ). (2010) 322 ITR 158 ( SC ). 8 . WE HAVE HEARD THE RIVAL CON TENTIONS AND PERUSED THE RECORD. ON PERUSAL OF THE ORDER OF LD. CIT(A) , WE FIND THAT THE LD. CIT(A) HAS CONSIDERED ALL THE ASPECTS IN QUANTUM APPEAL WHILE DECIDING THE ISSUES BEFORE HIM. THE RELEVANT OBSERVATIONS OF THE LD.CIT(A) ARE REPRODUCED BELOW FOR THE SAKE OF CONNIVANCE : 5.1 COMING TO THE FIRST ISSUE VIZ. LE VY OF PENALTY IN CASE OF THE CAPITAL EXPENDITURE, IT IS CLEAR THAT ALL THE FACTS OF THE ISSUE WERE PLACED BY THE APPELLANT QUITE CLEARLY BEFORE THE AO. ACCORDING TO THE APPELLANT, ITS UNIQUE CIRCUMSTANCES ENABLED IT TO CLAIM THE ENTIRE EXPENDITURE INCURRED TOWARDS MAKING THE DEFUNCT FACTORY A VIABLE AND RUNNING ENTITY, WHILE THE AO FELT OTHERWISE. THIS DIFFERENCE IN OPINION HAS BEEN CLEARLY DOCUMENTED BY THE AO HIMSELF IN THE ASSESSMENT ORDER. WHILE IT MERITED AN ADDITION, I AM NOT PERSUADED THAT IT MERITE D LEVY ITA NO. 4069 / MUM/ 201 4 4 OF CONCEALMENT PENALTY. COMING TO THE SECOND ISSUE VIZ. ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE, IT NEEDS TO BE BORNE IN MIND THAT THE EXPENSES IN QUESTION HAVE BEEN ALREADY CLEARED BY THE STATUTORY AUDITORS AND THAT THEY ARE INDEPENDENTLY VE RIFIABLE THROUGH BANKS. THE LACK OF VOUCHERS IS CLEARLY EXPLAINED AS BEING ON ACCOUNT OF A LOCKED OUT FACTORY WHERE THE APPELLANT'S REPRESENTATIVES HAD NO ACCESS TO THE VOUCHERS KEPT IN THE FACTORY PREMISES. IN MY OPINION, AN ADDITION MADE SOLELY ON ACCOU NT OF NON - AVAILABILITY OF INDEPENDENTLY VERIFIABLE VOUCHERS CANNOT BE THE SUBJECT MATTER OF A CONCEALMENT PENALTY ORDER. COMING TO THE THIRD ISSUE OF NON - DEDUCTION OF TAX WHILE MAKING CERTAIN PAYMENTS, I AM UNABLE TO OVERLOOK THE ARGUMENTS OF THE AR. SUBST ANTIAL PAYMENTS HAD BEEN SUBJECTED TO TDS BY THE APPELLANT. ON THE OTHER HAND, TDS HAS NOT BEEN DONE WHERE THE APPELLANT WAS OF THE BELIEF THAT IT WAS NOT NECESSARY . THE ISSUE OF AN ADDITION STANDS ON AN ENTIRELY DIFFERENT FOOTING WHEN COMPARED TO THAT OF LEVY OF PENALTY. I AM HENCE UNABLE TO SUBSCRIBE TO THE AO'S VIEW IN THIS CASE. RELIANCE OF THE AR ON THE RATIO OF THE HON'BLE MUMBAI TRIBUNAL AS LAID DOWN IN THE DECISION IN THE CASE OF ACIT V. VIP INDUSTRIES' LTD. (SUPRA) IS HENCE SEEN TO BE APT. 5.2 COMING TO RATIO OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS LTD. (SUPRA), I FIND THAT THE AR HAS MADE OUT MORE THAN AN ADEQUATE ARGUMENT IN FAVOUR OF ITS A PPLICABILITY TO THE CASE AT HAND. IT HAS BEEN HELD THEREI N THAT THE MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF CANNOT LEAD TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE INSTANT CASE, THE AO HAS DENIED THE APPELLANT ITS CLAIMS. THOUGH SUCH DENIAL ITSELF COULD BE SUSTAINED IN LAW, CONSEQUENT LEVY OF CONCEALMENT PENALTY WOULD NOT BE EQUALLY SUSTAINABLE. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THIS CASE AS NARRATE EARLIER AND AFTER RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS . RELIANCE PET ROPRODUCTS (SUPRA), THE PENALTY LEVIED UNDER SECTION 271 (1)(C) OF THE ACT IN THIS CASE IS DELETED IN ITS ENTIRETY. 5. COMING TO THE GROUND OF APPEAL, ALL THE GROUNDS ARE SEEN TO HAVE PRAYED FOR DELETION OF THE CONCEALMENT PENALTY. AS IT HAS ALREADY BEE N SO DECIDED, ALL THE THREE GROUNDS OF APPEAL ARE ALLOWED 9 . WE HAVE CONSIDERED THE ORDER PASSED BY THE LD. CIT(A). WE FIND THA T THE LD.CIT(A) DEALT WITH THE THIS GROUND IN DETAILED AND THE FINDINGS OF THE LD.CIT(A) ARE ALSO BASED ON SETTLED JUDICIAL PR INCIPLES. IT WAS RIGHTLY CONSIDERED BY THE LD.CIT(A) THAT NON - AVAILABILITY OF INDEPENDENT VERIFIABLE ITA NO. 4069 / MUM/ 201 4 5 VOUCHERS CANNOT B E THE SUBJECT MATTER OF A CONCEALMENT PENALTY ORDER. IT WAS RIGHTLY CONSIDERED THAT MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF CANNOT LEAD TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS NOT CHALLENGED THE ORDER OF LD.CIT(A) PASSED IN QUANTUM ADDITION . THEREFORE, THE ADDITION MADE BY THE AO AND PARTLY SUSTAINED BY THE LD.CIT(A) IN THE EYES OF LAW ARE CORRECT. THIS ACT OF THE ASSESSEE GOES TO SHOW THAT THE ASSESSEE HAS NOT SUPPRESSED ANY MATERIAL FROM THE TAX AUTHORITIES. THE HONBLE SUPREME COURT IN RELIANCE PETROPRODUCTS (SUPRA) HAS OBSERVED AND HELD AS UNDER : (I) S. 271 (1) (C) APPLIES WHERE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE PRESENT WAS NOT A CASE OF CONCEALMENT OF THE INCOME. AS REGARDS THE FURNISHING OF INACCURATE PARTICULARS, NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. THE WORDS INACCURATE PARTICULARS MEAN THAT THE DETAILS SUPPLIED IN THE RETURN ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS . IN THE ABSENCE OF A FINDING BY THE AO THAT ANY DETA ILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF INVITING PENALTY U/S 271(1)(C) . IN VIEW OF THE ABOVE SUBMISSIONS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COU RT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY, WE UPHODLTHE SAME AND DISMISS THE APPEAL FILED BY HE REVENUE. 10 . IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 6 TH APR , 2016. SD SD ( . . / B.R.BASKARAN) ( / SANDEEP GOSAIN) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI ; DATED .. 6 TH AP RIL , 2016 . . ./ SRL , SR. PS ITA NO. 4069 / MUM/ 201 4 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4 . / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI