ACIT, New Delhi V. M/s. Kajaria Ceramics Ltd., New Delhi

ITA 4320/DEL/2014

• Counselvise Citation: 432020114 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 1
• Next Hearing Date: 20-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 07-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL SENIOR
• Assessee Lawyers: V K JAIN
• Keywords: Depreciation; Earning of tax free income; Unabsorbed depreciation
• Section: 143(3); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC DELHI BENCH SMC DELHI BENCH SMC DELHI BENCH SMC- -- -1 : NEW DELHI 1 : NEW DELHI 1 : NEW DELHI 1 : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.4320/DEL/2014 ITA NO.4320/DEL/2014 ITA NO.4320/DEL/2014 ITA NO.4320/DEL/2014 ASSESSMENT YEAR : 2008 ASSESSMENT YEAR : 2008 ASSESSMENT YEAR : 2008 ASSESSMENT YEAR : 2008 - -- - 09 0909 09 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -5(1), 5(1), 5(1), 5(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S KAJARIA CERAMICS LI M/S KAJARIA CERAMICS LI M/S KAJARIA CERAMICS LI M/S KAJARIA CERAMICS LI MITED, MITED, MITED, MITED, J JJ J- -- -1/B 1/B1/B 1/B- -- -1 (EXTENSION), 1 (EXTENSION), 1 (EXTENSION), 1 (EXTENSION), MOHAN CO MOHAN CO MOHAN CO MOHAN CO- -- -OP ESTATE, OP ESTATE, OP ESTATE, OP ESTATE, MATHURA ROAD, MATHURA ROAD, MATHURA ROAD, MATHURA ROAD, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 044. 110 044. 110 044. 110 044. PAN : AABCK1613R. PAN : AABCK1613R. PAN : AABCK1613R. PAN : AABCK1613R. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. JAISWAL, SENIOR DR. RESPONDENT BY : SHRI V.K. JAIN, CA AND SHRI NEM SINGH, ADVOCATE. ORDER ORDER ORDER ORDER THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PA SSED BY THE LEARNED CIT(A) ON 12 TH MAY, 2014 DELETING PENALTY OF `5,32,830/- IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE IN COME-TAX ACT, 1961 IN RELATION TO ASSESSMENT YEAR 2008-09. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CERAMIC G LAZED TILES AND TRADING IN TILES. THE ASSESSEE FURNISHED RETURN DECLARIN G NIL INCOME. THE ASSESSMENT WAS EVENTUALLY COMPLETED AT BOOK PROFIT O F `19.37 CRORE U/S 115JB OF THE ACT AFTER MAKING TOTAL ADDITI ONS OF `2.74 CRORE. CERTAIN RELIEFS WERE ALLOWED BY THE LEARNED CIT(A) I N RESPECT OF THE ADDITIONS MADE BY THE ASSESSING OFFICER. EVENTUALLY, PE NALTY OF `5,32,830/- WAS IMPOSED BY THE ASSESSING OFFICER ON DIS ALLOWANCE OF FOREIGN TRAVELLING EXPENSES OF RELATIVES OF DIRECTORS A MOUNTING TO ITA-4320/DEL/2014 2 `2,60,370/-; DISALLOWANCE U/S 14A AT `13,64,000/-; AN D DISALLOWANCE OUT OF CREDIT CARD EXPENSES TO THE TUNE OF `1,00,000/ -. THE PENALTY SO IMPOSED BY THE ASSESSING OFFICER CAME TO BE DELETED IN T HE FIRST APPEAL. THE REVENUE IS AGGRIEVED AGAINST THE DELETIO N OF SUCH PENALTY. 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE DEC LARED INCOME OF `19.27 CRORE WHICH WAS ADJUSTED AGAINST BROUGHT FO RWARD UNABSORBED DEPRECIATION FOR EARLIER YEAR AND THE NET RESULTANT INCOME WAS NIL. THE ASSESSEE ALSO DISCLOSED BOOK PROFIT U/S 115JB AT `19.37 CRORE AND TAX WAS PAID U/S 115JB AT `2.27 CRORE. EVE N AFTER ORDER U/S 143(3) OF THE ACT, THE NORMAL INCOME OF THE ASSESSEE WA S ASSESSED AT ` NIL AND INCOME U/S 115JB AT `19.37 CRORE. 4. INSOFAR AS THE THREE DISALLOWANCES ARE CONCERNE D, I FIND THAT THE FIRST IS THE DISALLOWANCE OF FOREIGN TRAVELLING EXPENSE S FOR WHICH THE ASSESSING OFFICER MADE AN ADDITION OF `18.41 LAKH AND L EARNED CIT(A) DELETED THE ADDITION TO THE TUNE OF `15.80 LAKH, TH EREBY CONFIRMING THE PART DISALLOWANCE AT `2.60 LAKH. THUS, IT IS APPARENT THAT DISALLOWANCE OF FOREIGN TRAVEL EXPENSES HAS BEEN CONSIDERABLY REDUCE D IN THE FIRST APPEAL. THE ASSESSEE CONSISTENTLY TOOK A STAND THAT SUCH F OREIGN TRAVELLING EXPENSES WERE INCURRED FOR THE BUSINESS PURP OSE, WHICH CONTENTION WAS ALBEIT NOT ACCEPTED BY THE ASSESSING OFFI CER. IT GOES WITHOUT SAYING THAT PENALTY U/S 271(1)(C) OF THE ACT CAN BE IMPOSED ONLY WHEN THE ASSESSEE HAS CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. WHERE A DEDUCTION IS CLAIMED AFTER MAKING A PROPER DISCLOSURE, THE MERE FACT THAT THE DISALLOWANCE HAS BEEN MADE FOR A PART OF SUCH DEDUCTION, IT CANNOT BE CONSTRUED AS A CASE COVERED U/S 271(1)(C) OF THE ACT. THE HON'BLE SUPREME COURT IN THE CASE OF CIT ITA-4320/DEL/2014 3 VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 1 58 (SC) HAS HELD THAT NO PENALTY CAN BE IMPOSED WHERE A PROPER DISCLOSU RE IS MADE BUT THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER. IN MY CONSIDERED OPINION, THE LEARNED CIT(A) WAS JUSTIFIED I N NOT UPHOLDING PENALTY ON THIS AMOUNT OF DISALLOWANCE. 5. THE SECOND COMPONENT OF THE PENALTY IS DISALLOWANCE U/S 14A AMOUNTING TO `13,64,000/-. THIS DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER U/S 14A BY APPLYING RULE 8D. IT IS AN ADMITTED POSITION THAT THE ASSESSEE DID NOT EARN ANY EXEMPT INCO ME DURING THE YEAR IN QUESTION. THE HON'BLE JURISDICTIONAL HIGH CO URT IN A SERIES OF JUDGMENTS INCLUDING CIT VS. HOLCIM INDIA PVT.LTD. (2014) 90 CCH 081 (DEL-HC) HAS HELD THAT IN THE ABSENCE OF ANY EXEMPT INCOME, T HERE CANNOT BE ANY DISALLOWANCE U/S 14A. IN JOINT INVESTMENT PVT.LTD. (2015) 372 ITR 674 (DEL), THE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THAT DISALLOWANCE U/S 14A CANNOT EXCEED THE EXEMPT I NCOME. THESE JUDICIAL PRONOUNCEMENTS MAKE IT AMPLY CLEAR THAT THE RE CANNOT BE ANY DISALLOWANCE U/S 14A IF THERE IS NO EXEMPT INCOME. I AM CONFRONTED WITH A SITUATION IN WHICH THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME BUT THE DISALLOWANCE HAS BEEN MADE TO THE EXT ENT OF `13.64 LAKH BY APPLYING RULE 8D. DESPITE THERE BEING NO CH ALLENGE TO OR SUSTENANCE OF THE DISALLOWANCE U/S 14A, I AM OF THE CON SIDERED OPINION THAT UNDER NO CIRCUMSTANCE, SUCH ILL FOUNDED DISALLOWA NCE, NOT HAVING ANY AUTHORITY OF LAW TO STAND ON, CAN BE CONSIDERED F OR THE PURPOSES OF IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. I, T HEREFORE, APPROVE THE VIEW TAKEN BY THE LEARNED CIT(A) ON THIS SCORE. 6. THE LAST COMPONENT OF THE IMPOSITION OF PENALTY IS DISALLOWANCE OF `1 LAKH OUT OF CREDIT CARD EXPENSES. THIS DISALLOWA NCE WAS MADE BY THE ASSESSING OFFICER ON AD-HOC BASIS WHICH FACT IS BORNE OUT FROM THE ITA-4320/DEL/2014 4 ASSESSMENT ORDER ITSELF. THERE IS HARDLY ANY NEED TO HIG HLIGHT THAT NO PENALTY CAN BE IMPOSED WHERE THE DISALLOWANCE OF EXP ENSES HAS BEEN MADE ON AN AD-HOC BASIS. I, THEREFORE, HOLD THAT THE LEARNED CIT(A) WA S JUSTIFIED IN DELETING THE PENALTY ON THIS ACCOUNT AS W ELL. 7. IN THE RESULT, THE APPEAL IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER, 2015. SD/- (R.S. SYAL) (R.S. SYAL) (R.S. SYAL) (R.S. SYAL) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATED : 21.10.2015 VK. COPY FORWARDED TO: - 1. APPELLANT : ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -5(1), NEW DELHI. 5(1), NEW DELHI. 5(1), NEW DELHI. 5(1), NEW DELHI. 2. RESPONDENT : M/S KAJARIA CERAMICS LIMITED, M/S KAJARIA CERAMICS LIMITED, M/S KAJARIA CERAMICS LIMITED, M/S KAJARIA CERAMICS LIMITED, J JJ J- -- -1/B 1/B1/B 1/B- -- -1 (EXTENSION), MOHAN CO 1 (EXTENSION), MOHAN CO 1 (EXTENSION), MOHAN CO 1 (EXTENSION), MOHAN CO- -- -OP ESTATE, OP ESTATE, OP ESTATE, OP ESTATE, MATHURA ROAD, NEW DELHI MATHURA ROAD, NEW DELHI MATHURA ROAD, NEW DELHI MATHURA ROAD, NEW DELHI 110 044. 110 044. 110 044. 110 044. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR ITA-4320/DEL/2014 5 DATE OF DICTATION 20.10.2015 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20.10.2015 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER I S PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSIS TANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER *