Pollutech Engineering, Bhubaneswar V. ACIT, Bhubaneswar

ITA 420/CTK/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6322 (ITAT-CUTTACK)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 16-07-2013
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: B R PATTNAIK
• Keywords: Gift; Business expenditure
• Section: 143(3); 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . . , . . , BEFORE SHRI P.K.BANSAL , AM & SHRI D.T.GARASIA , JM ./ ITA NO. 420 / C TK /20 1 3 ( / ASSESSMENT YEAR : 200 8 - 0 9 ) POLLUTECH ENGINEERING, PLOT NO. S - 3/18, SECTOR - A, ZONE - B, MANCHESWAR INDUSTRIAL ESTATE, RASULGARH, BHUBANESWAR - 751010 VS. ACIT,CIRCLE - 2(2), BHUBANESWAR - 751007 ./ ./ PAN/GIR NO. : A A JFP 0613 K ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI B.R.PATTNAIK /REVENUE BY : SHRI S.C.MOHANTY / DATE OF HEARING : 2 4 TH APRIL , 201 4 / DATE OF PRONO UNCEMENT : 01/05 /2014 / O R D E R PER BENCH : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 7 - 3 - 2013 , BY WHICH THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO TO THE EXTENT OF 100% TAX SOUGHT TO BE EVADED ON 80% CLAIMED OF THE GIFT MADE BY THE ASSESSEE. 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF SALES AND REPAIRS OF VOLVO EARTH MOVING MACHINES, SANDVIK MACHINES ETC.. THE ASSESSMENT WAS COM PLETED U/S. 143(3) DETERMINING THE TOTAL INCOME AT RS. 71,91,510/ - . THE AO NOTED THAT THE ASSESSEE HAS INCURRED A SUM OF RS. 11,23,482/ - ON 2 ITA NO. 4 20 /201 3 ACCOUNT OF MARKETING EXPENSES. THE EXPENSES INCURRED ARE MOSTLY ON ACCOUNT OF PURCHASE OF GIFTS AND GIVING THEM IN KIND TO THE PARTNERS. THE DRAWING ACCOUNTS OF THE PARTNERS ARE ALSO INCLUDED AS EVIDENT FROM THE NARRATION IN THE LEDGER ENTRY SUCH AS PURCHASE OF GIFTS , ACCESSORIES AND MEDICINES. IN THE ABSENCE OF ANY COGENT EXPLANATION OR BUSINESS EXPEDIENCY, THE AO DISALLOW ED THE SAME AND TREATED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS EVADING TAX WITHIN THE MEANING OF SECTION 271(1)(C) . A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE. THE ASSESSEE SUBMITTED HIS WRITTEN EXPLANATION AS PRODUCED IN THE PENALTY ORDER MAINLY CONTENDING THAT BESIDES PURCHASE OF GIFT ITEM, THERE ARE OTHER EXPENSES INCURRED FOR PROMOTING SALES OF THE ASSESSE E BOOKED UNDER THE ACCOUNT MARKETING EXPENSES AND ALL THE AMOUNTS BOOKED TO THE DEBIT OF THE LEDGER ACCOUNT I.E. MARKETING EXPENSES ARE D ULY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS AND NONE OF THE EXPENDITURE IS OF A CAPITAL OR PERSONAL NATURE. THE AO WAS NOT SATISFIED WITH THE EXPLANATION AND LEVIED PENALTY AT THE RATE OF 100% OF THE TAX SOUGHT TO BE EVADED AMOUNTING TO RS. 3,4 7,160/ - . T HE MATTER WENT BEFORE THE CIT(A) , WHEREIN THE ASSESSEE SUBMITTED THE LEDGER COPY OF THE MARKETING EXPENSES ALONG WITH THE EXPLANATORY CHART SHOWING DETAILS OF THE EXPENDITURE. THE CIT(A) TOOK THE VIEW THAT NON FILING OF THE APPEAL PER SE CANNOT C ONSTITUTE A GROUND OF IMPOSITION OF PENALTY U/S. 271(1)(C) BUT NOTED THAT MAJOR EXPENDITURE FOR WHICH THE FIRM HAS PAID WAS FOR PURCHASE OF COSTLY GIFTS LIKE JEWELLERY, LCD TVS, WATCHES, AIR CONDITIONERS, ETC. HE 3 ITA NO. 4 20 /201 3 ALSO NOTED THAT THERE IS NO EVIDENCE THAT GIFTS WERE REALLY GIVEN EITHER TO MIDDLEMEN OR AGENTS OR TO THE END CUSTOMERS IN THE INTEREST OF BUSINESS BUT TOOK A VIEW THAT 100% OF THE EXPENDITURE BOOKED UNDER MARKETING EXPENS ES HEAD DID NOT REPRESENT GIFT AND ALSO TOOK A VIEW THAT 20% OF RS. 11,23,482 / - COULD BE REGARDED AS BUSINESS EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS AND, THEREFORE, CONFIRMED THE PENALTY ON TAX SOUGHT TO BE EVADED AT THE RATE OF 100% ON 80% CLAIM OF THE GIFTS. 3 . LEARNED AR BEFORE US VEHEMENTLY CONTENDED THAT IT IS A C ASE OF DISALLOWANCE ON EXPENDITURE ON ESTIMATE BASIS. THE AO HAS MERELY IMPOSED THE PENALTY AT THE RATE OF 100% WITHOUT POINTING ANY SPECIFIC DETAIL FOR WHICH THE PENALTY IS BEING IMPOSED. NOW DOUBT, THE PENALTY HAS BEEN INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND MERELY INCOME ON EXPENDITURE IS DISALLOWABLE THAT DOES NOT MEAN THAT THE ASSESSEE HAS FILED ANY INACCURATE PARTICULARS. 4. LEARNED DR ON THE OTHER HAND, RELIED ON THE ORDER OF THE CIT(A) . 5. WE HEARD RIVAL SUBMISSIONS AND CARE FULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED FROM THE PROVISIONS OF SECTION 271(1)(C) THAT THE PENALTY CAN BE IMPOSED ON THE ASSESSEE IF THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCUR ATE PARTICULARS OF SUCH INCOME. EXPLANATION 1 TO SECTION 271(1) (C) IS APPLICABLE ONLY IN RESPECT OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THIS IS NOT THE CASE OF THE 4 ITA NO. 4 20 /201 3 REVENUE. THE ASSESSEE, WE NOTED IN THIS CASE, HAS FURNISHED ALL THE PARTICULARS AS IS APPARENT FROM THE ORDER IN RESPECT OF THE MARKETING EXPENSES, WHICH HAS BEEN DISALLOWED BY THE AO. THE PARTICULARS FURNISHED BY THE ASSESSEE MAY NOT BE ALLOWABLE U/S. 37 BUT IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED INACCURATE PART ICULARS, EVEN WHILE IMPOSING THE PENALTY, WE NOTED THAT THE AO HAS NOT MADE OUT ANY SPECIFIC CHARGE ON THE ASSESSEE, HE HAS MERELY HELD THAT, I AM SATISFIED THAT IT IS A FIT CASE FOR IMPOSING PENALTY U/S. 271(1) (C) OF THE ACT ENUMERATED IN THE SAID SECTION . IN SECTION 271(1)(C) IT HAS SPECIFICALLY BEEN MENTIONED THAT PENALTY CAN BE IMPOSED ON THE ASSESSEE IF THE ASSESSEE IS CONCEALING THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. T HERE MUST BE A SPECIFIC CHARGE AGAINST THE ASSESSEE. WHILE LEVYING THE PENALTY THE AO HIMSELF COME TO THE CONCLUSION AS TO WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. CONCEALMENT IN THE PARTICULARS OF INCOME IS SUCH A SITUATION WHERE THE ASSESSEE HIDES THE PARTICULARS OF THE INCOME AND HAS NOT SHOWN IN THE INCOME. F URNISHING OF THE INACCURATE PARTICULARS OF THE INCOME ARE THAT THE ASSESSEE HAS NOT CORRECTLY STATED THE PARTICULARS OF SUCH INCOME. THERE IS NO ALLEGATION EITHER BY THE CIT(A) OR BY HE AO THAT THE ASSESSEE HAS NOT FILED THE CORRECT PARTICULARS OF MARKETING EXPENSES. THE MARKETING EXPENSES MAY BE DISALLOWABLE UNDER THE PROVISIONS OF THE INCOME TAX ACT, BUT IT CANNOT BE REGARDED THAT THE PARTICULARS HAVE BEEN INCORRECTLY FURNISHED. NO SUCH COGENT MATERIAL OR 5 ITA NO. 4 20 /201 3 EVIDENCE HAS BEEN BROUGHT BY THE AO. IN CASE DEFAULT IS CHARGES FOR FURNISHING INACCURATE PARTICULARS, IN OUR OPINION, THE ONUS IS ON THE REVENUE TO PROVE THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME. IN CASE CHARGE IS OF THE CONCEALMENT OF THE PARTICULARS OF INCOME, THE ONUS LIES ON THE ASSESSEE IN VIEW OF THE EXPLANATION 1 TO SECTION 271(1)(C) . OUR VIEW IS DULY SUPPORTED BY THE DECISION OF THE HON BL E SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD., (2010) 322 ITR 158 (SC) , CONFIRMING THE ORDER OF T HE TRIBUNAL ( WHICH WAS WRITTEN BY THE UNDERSIGNED WHEN HE WAS POSTED AT AHMEDABAD ), IN WHICH THE HON BLE SUPREME COURT AT PAGE 166 HAS HELD A S UNDER : - MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271 (1)(C) . IF WE ACCEPT THE CONTENTION OF TH E REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C) . THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. RESPECTFULLY FOLLOWING T HE AFORESAID DECISION OF THE HONBLE SUPREME COURT IN THE AFORESAID CASE, WE DELETE THE PENALTY IMPOSED U/S. 271(1)(C) . 6 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01/05 / 201 4 . 01/05 /2014 SD/ - SD/ - ( . . ) ( D.T.GARASIA ) ( . . ) ( P.K.BANSAL ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 6 ITA NO. 4 20 /201 3 CUTTACK ; DATED 01/05 /2014 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) , BHUBANESWAR 4. / CIT , BHUBANESWAR 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//