Deputy Commissioner of Income-tax, V. Atlas Copco (India) Ltd., Pune

ITA 426/PUN/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2117 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-07-2019
• Assessment Year: 2003-2004
• Appeal Filed On: 09-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IS DIRECTED AGAINS T PASSED
• Keywords: Gift; Wrong claim; Revised return
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NO.426/PUN/2015 / ASSESSMENT YEAR : 2003-04 DCIT, CIRCLE-8, PUNE VS. ATLAS COPCO (INDIA) LIMITED, MUMBAI-PUNE ROAD, DAPODI, PUNE 411 012 PAN : AAACA4074D (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 21-01-2015 DELETING THE PENALTY OF RS.5,22,06,833/- IMPOS ED BY THE ASSESSING OFFICER (AO) U/S.271(1)(C) OF THE INCOME-TAX A CT, 1961 (HEREINAFTER CALLED THE ACT) IN RELATION TO THE ASSESSMENT YE AR 2003-04. ASSESSEE BY SHRI R. MURLIDHAR & SHRI PRASHANT GANDHI REVENUE BY MS. KESANG Y. SHERPA, CIT DATE OF HEARING 19-07-2019 DATE OF PRONOUNCEMENT 19-07-2019 ITA NO.426/PUN/2015 ATLAS COPCO (INDIA) LIMITED 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSM ENT ORDER IN THIS CASE WAS PASSED U/S 144 OF THE ACT ON 31-07 -2006 DETERMINING TOTAL INCOME AT RS.73,02,28,900/- AS AGAINST THE DECLARED INCOME OF RS.54,64,90,594/-. THEREAFTER, THE AO IMPOSED PENALTY WITH REFERENCE TO CERTAIN ADDITIONS. THE ASSESSEE C HALLENGED THE SAME BEFORE THE LD. CIT(A), WHO PREFERRED TO DELETE TH E PENALTY. THE REVENUE IS AGGRIEVED BY THE DELETION OF PENALTY. CHALLE NGE TO THE DELETION OF THE PENALTY IS IN RESPECT OF CERTAIN ITEMS OF ADDITIONS/DISALLOWANCES, WHICH WE WILL TAKE UP FOR CONSIDERATION AND DECISION. 3. THE AO MADE DISALLOWANCE TOWARDS EXPENSES INCURRED F OR INCREASE IN SHARE CAPITAL AFTER AMALGAMATION U/S.35DD OF THE ACT. HE ALSO MADE AN ADDITION ON ACCOUNT OF DISALLOWANCE OF WARR ANTY CLAIM. HE FURTHER MADE AN ADDITION U/S.35DDA OF THE ACT. PENALTY WAS IMPOSED W.R.T. SUCH ADDITIONS, WHICH CAME TO BE DELETED IN THE FIRST APPEAL. 4. IT IS PERTINENT TO MENTION THAT THE QUANTUM CROSS APPEALS OF THE ASSESSEE AS WELL AS THE REVENUE FOR THE YEAR UNDER CONS IDERATION CAME UP FOR ADJUDICATION BEFORE THE TRIBUNAL IN ITA NO.1676/PUN/2011 AND ITA NO.54/PUN/2012. VIDE ORDER DATED ITA NO.426/PUN/2015 ATLAS COPCO (INDIA) LIMITED 3 18-07-2019, THE TRIBUNAL HAS DELETED THE ABOVE THREE ADDITION S. SINCE THE VERY FOUNDATION FOR THE IMPOSITION OF PENALTY, BEING THE ADDITIONS MADE IN THE ASSESSMENT, CEASES TO EXIST, THERE CAN BE NO QUESTION OF IMPOSITION OF ANY PENALTY THEREON. WE, THEREFOR E, ACCORD OUR IMPRIMATUR TO THE VIEW TAKEN BY THE LD. CIT(A) ON THE ABOVE ISSUE. 5. THE NEXT ITEM ON WHICH THE AO IMPOSED PENALTY IS DISALLOWANCE OUT OF CERTAIN MISCELLANEOUS EXPENSES. THE ASSE SSEE CLAIMED DEDUCTION OF RS.8,91,41,639/- UNDER THE HEAD MISCELLANEOUS EXPENSES. THE AO MADE DISALLOWANCE AT 50 % OF SUCH EXPENSES. THE LD. CIT(A) CONFIRMED THE ADDITION IN R ESPECT OF EXPENSES ON WARRANTY PROVISION, EXPENSES ON GIFTS, DONA TIONS AND FEES FOR HANDLING SHARES IN ENTIRETY. FOR THE REMAINING EXP ENSES, HE RESTRICTED THE DISALLOWANCE TO 25% AS AGAINST 50% MADE BY THE AO. THIS MATTER CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL. THE DEDUCTION IN RESPECT OF WARRANTY EXPENSES HAS BEEN HELD TO HAVE BEEN RIGHTLY SUSTAINED. SIMILAR IS THE POSITION REGARDING EXPE NSES ON GIFTS AND DONATIONS. HOWEVER, DEDUCTION ON ACCOUNT OF SHARE HANDLING EXPENSES HAS BEEN ALLOWED BY THE TRIBUNAL. OUT OF THE REMAINING ADDITIONS SUSTAINED BY THE LD. CIT(A) AT 25%, THE ITA NO.426/PUN/2015 ATLAS COPCO (INDIA) LIMITED 4 TRIBUNAL RESTRICTED SUCH DISALLOWANCE TO 15%. FROM THE ABOVE NARRATION OF FACTS, IT IS CLEAR THAT THE AUTHORITIES BELOW HAVE MA DE DISALLOWANCE PRIMARILY ON AD HOC BASIS. EVEN IN RESPECT OF CERTAIN SPECIFIC EXPENSES FOR WHICH THE LD. CIT(A) AND THE TRIBUN AL SUSTAINED THE DISALLOWANCES, THE REASON IS NOT THE CONCEALME NT BY THE ASSESSEE OR FURNISHING OF ANY INACCURATE PARTICULARS B Y THE ASSESSEE, BUT NON-AVAILABILITY OF RELEVANT EVIDENCE TO SUBSTAN TIATE THE CLAIMS. IN SUCH CIRCUMSTANCES, WE ARE SATISFIED THAT NO FAULT CAN BE FOUND WITH THE LD. CIT(A) IN DELETING THE PENALTY ON ADDITION TOWARDS DISALLOWANCE OUT OF MISCELLANEOUS EXPENSES. 6. THE NEXT ADDITION WHICH WAS THE SUBJECT MATTER OF PENALTY BY THE AO IS THE CLAIM MADE BY THE ASSESSEE FOR REDUCTION IN SA LE PRICE OF SHARES BY RS. 7.50 CRORE LODGED IN REVISED RETURN TH EREBY REDUCING THE AMOUNT OF CAPITAL GAIN ALREADY SHOWN FROM THE TR ANSFER OF SHARES IN THE ORIGINAL RETURN. PURSUANT TO THE SALE OF SHA RES, SOME DISPUTE AROSE BETWEEN THE ASSESSEE AND THE BUYER ON THE S ALE PRICE OF SHARES. ACCORDINGLY, REDUCTION IN SALE PRICE OF SHARES CA ME TO BE ACCEPTED BY THE ASSESSEE IN A SUCCEEDING YEAR BY MEANS OF AN AGREEMENT. PURSUANT TO SUCH PROCEEDINGS TAKING PLACE IN A LATER YEAR WHEN THE ASSESSMENT PROCEEDINGS FOR THE CURRENT YEAR WER E GOING ITA NO.426/PUN/2015 ATLAS COPCO (INDIA) LIMITED 5 ON, THE ASSESSEE FILED A REVISED RETURN CLAIMING REDUCTION IN CAPITAL GAIN IN THE YEAR UNDER CONSIDERATION. THE AO DID NOT ALLOW CLAIM. IT IS A MATTER OF RECORD THAT SUCH DEDUCTION WAS ALLOWED BY TH E AO IN THE ASSESSMENT FOR A.Y. 2005-06 WHEN AGREEMENT FOR R EDUCTION IN SALE PRICE WAS FINALIZED. THUS, IT IS OVERT THAT THOUGH THE ASS ESSEE REDUCED THE AMOUNT OF SALE CONSIDERATION OF SHARES DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY MEANS OF A REVISED RETURN, HOWEVER, THE FACT WAS APPROPRIATELY BROUGHT TO THE NOTICE OF THE DEPAR TMENT. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE LODGED A FALSE CLAIM OR ATTEMPTED TO REVISE ITS INCOME IN A FRIVOLOUS MANNER. RATHER, THE ASSESSEE AGREED FOR REDUCED SALE PRICE OF S HARES IN A SUCCEEDING YEAR BY MEANS OF AN AGREEMENT, FOR WHICH DEDUCTION HAS BEEN ADMITTEDLY GRANTED BY THE AO HIMSELF IN SUCH A LATE R YEAR. THIS MANIFESTS THAT THE ASSESSEE CANNOT BE CONSIDERED TO H AVE EITHER CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF ITS INCOME ON THIS ITEM. AS SUCH, WE ARE SATISFIED THAT THE LD. CI T(A) WAS JUSTIFIED IN DELETING THE PENALTY ON THIS SCORE. 7. THE NEXT ITEM ON WHICH THE AO IMPOSED PENALTY IS DISALLOWANCE OF LEGAL EXPENSES FOR WANT OF NECESSARY EVIDE NCE. THE ASSESSEE CLAIMED DEDUCTION OF RS.15,11,694/- AND RS.7, 11,325/- ITA NO.426/PUN/2015 ATLAS COPCO (INDIA) LIMITED 6 TOWARDS LEGAL CHARGES PAID TO CRAWFORD BAYLEY, ADVOCATES A ND SOLICITORS. THE ASSESSEE WAS REQUIRED TO PRODUCE THE BILLS IN RESPECT OF THE AFORESAID PAYMENTS. THE ASSESSEE COULD PRODUCE THE BILL FOR RS.15,11,694/-. SINCE THE REMAINING BILL OF RS.7,11,325/- COULD NOT BE PRODUCED, THE AO MADE THE ADDITION. THIS LED TO THE IMP OSITION OF PENALTY ON SUCH DISALLOWANCE. THE LD. CIT(A) DELETED THE PENALTY. 8. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEV ANT MATERIAL ON RECORD, IT IS FOUND AS AN ADMITTED POSITION THAT THE ASSESSEE DID MAKE PAYMENT OF RS.7,11,325/- TO CRAWFORD BAYLEY BY CHEQUE. SIMPLY BECAUSE THE RELEVANT BILL COULD NOT BE PRODU CED, MAY BE A GROUND FOR MAKING DISALLOWANCE, BUT CANNOT CONS TITUTE BEDROCK FOR THE IMPOSITION OF PENALTY. WE, THEREFORE, HO LD THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY ON THIS COUNT. 9. THE LAST ITEM IS DIFFERENCE IN CAPITAL GAIN ON ACCOUNT OF SALE OF MUTUAL FUNDS UNITS, TREATED BY THE AO AS `INCOME FROM O THER SOURCES. THE AO NOTICED THAT THE CLAIM OF THE ASSESSEE FOR CAPITAL GAIN WAS NOT RECONCILING WITH PROFIT FROM REDEMPTION OF MUTUAL FUND UNITS. HE, THEREFORE, ADDED THE DIFFERENTIAL AMOUNT OF RS. 7.98 ITA NO.426/PUN/2015 ATLAS COPCO (INDIA) LIMITED 7 LAKH. THIS WAS VISITED WITH PENALTY, WHICH CAME TO BE DELETED BY THE LD. CIT(A) IN THE FIRST APPEAL. 10. HERE AGAIN, WE FIND THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY. THE ADDITION WAS MADE SIMPLY BECAUSE OF NON-RECONCILIATION OF THE AMOUNT OF CAPITAL GAIN. IT IS NOT A C ASE AS IF THE ASSESSEE FRAUDULENTLY LOWERED THE AMOUNT OF CAPITAL GAIN FOR THE PURPOSE OF TAXATION. IN SUCH CIRCUMSTANCES, WE UPHOL D THE IMPUGNED ORDER IN DELETING THE PENALTY. 11. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JULY, 2019. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 19 TH JULY, 2019 ITA NO.426/PUN/2015 ATLAS COPCO (INDIA) LIMITED 8 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-I, NASHIK 4. 5. 6. THE CIT-V, PUNE , , / DR C, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 19-07-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 19-07-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *