THE DCIT 9(2), MUMBAI V. M/S. MTZ POLYFILMS LTD, MUMBAI

ITA 4321/MUM/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4357 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 28-09-2010
• Assessment Year: 1995-1996
• Appeal Filed On: 06-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Difference of opinion; Revenue expenditure; Set aside
• Section: 271(1)(c); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI A.L. GEHLOT, A.M. AND SHRI R.S. PADVEKA R, J.M. ITA NO. 4321/M/2007 ASSESSMENT YEAR: 1995-96 DY. COMMISSIONER OF INCOME-TAX, APPELLANT AAYAKAR BHAVAN, R.NO. 218, 2 ND FLOOR, M.K. ROAD, MUMBAI 20. VS. M/S MTZ POLYFILMS LTD., RESPONDENT SARNATH CENTRE, GROUND FLOOR, UPVAN AREA, MALAD (E), MUMBAI 400 097 (PAN AAACT0193N) APPELLANT BY : MR. S.K. SINGH RESPONDENT BY : MR. VIJAY MEHTA ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A) IX, MUMBAI, DATED 06.03.2007 FOR THE A SSESSMENT YEAR 1995-96 WHEREIN THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DELETING PENALTY OF RS. 15 ,59,211/- LEVIED U/S 271(1)(C) OF THE I.T. ACT. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ITO/AC/DC BE R ESTORED. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE HAD DEBITED CERTAIN EXPENDITURE AMOUNTING TO RS. 33,89,590/- A ND CLAIMED THE SAME AS REVENUE EXPENDITURE. THE AO EXAMINED THE EX PENDITURE AND FOUND THAT THE SAME WAS INCURRED FOR SETTING UP A NEW PROJECT WHICH WAS NOT STARTED DURING THE F.Y. RELEVANT TO A Y 1995-96. THE AO TREATED THE ENTIRE EXPENDITURE AS CAPITAL EXPEND ITURE. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A), WHICH HAS BEEN DISMISSED ITA NO. 4321/M/07 M/S MTZ POLYSTERS LTD. 2 BY THE CIT(A). THE ASSESSEE CARRIED THE MATTER TO T HE ITAT AND THE ITAT GAVE CERTAIN RELIEF TO THE ASSESSEE VIDE THEIR ORDER DATED 19/10/04. AFTER GIVING EFFECT TO THE ORDER OF ITAT, THE TOTAL INCOME WAS REDUCED TO RS. 32,79,108/-. THE AO LEVIED PENAL TY ON THE GROUND THAT THE ASSESSEE HAS FILED INACCURATE PARTI CULARS TO THE EXTENT OF RS. 33,89,590/-. THE SAID AMOUNT DISALLOW ED BY THE AO HAS BEEN CONFIRMED BY THE ITAT. THE AO LEVIED MINIM UM PENALTY @ 100% ON THE AMOUNT, ON WHICH TAX SOUGHT TO BE EVADE D OF RS. 15,59,211/-. THE CIT(A) CANCELLED PENALTY OBSERVING THAT THE ASSESSEE NEITHER CONCEALED INCOME NOR FILED INACCUR ATE PARTICULARS OF INCOME MERELY ON THE BASIS THAT THE ASSESSEE CLA IMED REVENUE EXPENSES, WHICH WAS TREATED AS CAPITAL EXPENSES BY REVENUE. 3. THE LEARNED DR RELIED UPON THE ORDER OF AO AND S UBMITTED THAT THE ASSESSEE CLAIMED THE EXPENDITURE AS REVENU E EXPENSES BUT FAILED TO SUPPORT BY ANY DECISION THAT THE EXPENSES WERE INCURRED WERE REVENUE IN NATURE WHEREAS THE VIEW OF THE AO H AS BEEN CONFIRMED BY THE ITAT AND, THEREFORE, THERE WAS NO TWO POSSIBLE VIEWS. THE LEARNED DEPARTMENTAL REPRESENTATIVE IN S UPPORT OF HIS CONTENTION RELIED UPON THE JUDGMENT OF APEX COURT I N THE CASE OF UNION OF INDIA & ORS V. DHARMENDRA TEXTILE PROCESSO RS & ORS (SC) 306 ITR 277 (SC). 4. THE LEARNED AR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF CIT(A) AND SUBMITTED THAT THE ASSESSEE FURNISHED CO MPLETE DETAILS ALONG WITH NATURE OF EXPENSES, WHICH HAVE BEEN RECO RDED BY THE AO IN HIS ORDER. THE LEARNED AR FURTHER SUBMITTED THAT THE EXPENSES WERE ADMINISTRATIVE IN NATURE AND NOT DIRECTLY RELA TED TO NEW UNIT TO BE ESTABLISHED. THE LEARNED AR WHILE REFERRING I TAT ORDER IN QUANTUM APPEAL, OF WHICH COPY HAS BEEN PLACED AT PA GE 42 OF PAPER BOOK VIDE ITA NO. 399/M/2000 ORDER DATED 19 TH OCTOBER, 2004 SUBMITTED THAT GROUND NO. 9 RAISED BY THE ASSESSEE IN THE SAID APPEAL RELATED TO DISALLOWANCE OF EXPENSES OF RS. 3 3,89,590/- HAS NOT BEEN DECIDED BY THE ITAT AND THE ASSESSEE DID N OT FILE ANY MISCELLANEOUS APPLICATION AGAINST THAT ORDER OF ITA T. HE, THEREFORE, CONTENDED THAT IT CANNOT BE SAID THAT THE VIEW OF T HE AO HAS BEEN ITA NO. 4321/M/07 M/S MTZ POLYSTERS LTD. 3 CONFIRMED BY THE ITAT AFTER CONSIDERING THE ISSUE O N MERIT. THE LEARNED AR SUBMITTED THAT THE JUDGMENT OF DHARMENDR A TEXTILES (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION AS THE CIT(A) HAS NOT CANCELLED THE P ENALTY CONSIDERING MEN-SREA, BUT, HE CANCELLED THE PENALTY ON MERIT BY HOLDING THAT THE ASSESSEE NEITHER CONCEALED ANY INC OME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME. THE LEARNED AR SUBMITTED THAT THE ASSESSEE DID NOT FILE ANY INACCU RATE PARTICULARS, BUT, AT THE MOST, IT CAN BE SAID THAT THE CLAIM OF THE ASSESSEE WAS INCORRECT AND NOT FURNISHING OF INACCURATE PARTICUL ARS OF INCOME. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE JUDGMENT OF TH E APEX COURT IN THE CASE OF DHARMENDRA TEXTILES (SUPRA) DOES NOT AP PLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION AS THE CIT(A) HAS DECIDED THE ISSUE ON MERIT THAT THE ASSESSEE DID NOT CONCEAL AN Y PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCO ME. FOR THE PURPOSE OF READY REFERENCE, THE RELEVANT FINDING OF THE CIT(A) IS REPRODUCED BELOW:- 5. BEFORE REACHING TO A CONCLUSION, IT NEEDS TO BE EXAMINED AS TO WHAT CONSTITUTE THE OFFENCE OF CONCEALING PAR TICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. AS ALREADY STATED IN THE ABOVE PARAGRAPH THAT THE APPE LLANT HAS NEITHER CONCEALED THE PARTICULARS OF INCOME NOR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE APPELLANTS C LAIM WAS MERELY REJECTED BY THE AO AS HE WAS NOT AGREEABLE T O THE VIEWS OF THE APPELLANT. THE DISALLOWANCE WAS NOT BA SED ON ANY INDEPENDENT EVIDENCE BROUGHT ON RECORD BY THE AO. THE DISALLOWANCE WAS DUE TO THE DIFFERENCE IN OPINION O F THE AO AND NOT DUE TO CONCEALMENT OF PARTICULAR OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREF ORE, NO INFERENCE CAN BE DRAWN AS REGARDS THE LEVY OF PENAL TY SOLELY BECAUSE THE ASSESSEES CLAIM WAS REJECTED BY THE AO . COURTS AND TRIBUNAL HAD UNANIMOUS VIEW THAT NO CASE FOR LE VY OF PENALTY CAN BE MADE WHERE TWO OPINIONS ARE POSSIBLE . THE ASSESSEE CANNOT BE PENALIZED FOR CANVASSING A VIEW DIFFERENT FROM THE DEPARTMENTAL VIEW AND WHERE THE ASSESSEE I S MERELY CONTENDING FOR A POSITION CONTRARY TO THE VIEW TAKE N BY THE AO. THE DISALLOWANCE MADE ARE DEBATABLE ISSUE, THEREFOR E, I HOLD THAT THE AO WAS NOT JUSTIFIED IN LEVYING PENALTY. ITA NO. 4321/M/07 M/S MTZ POLYSTERS LTD. 4 6. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY TH E JUDGMENT OF THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LD. (322 ITR 158) WHEREIN THE APEX COURT HAS CONSIDERED SOME OTHER CASES OF THE APEX COURT ON THE ISSUE AT PAGE 164 AND 165 AND OBSERVED AS UNDER:- IN DILIP N. SHROFF V. JT. CIT [2007] 6 SCC 329, TH IS COURT EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND 'FU RNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT THE PENALTY UNDER SECTION 271(1)( C), MENS REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD 'INACCURATE' SIGNIFIED A DELIBERATE ACT OR OMISSION ON BEHALF O F THE ASSESSEE. IT WENT ON TO HOLD THAT CLAUSE (III) OF SECTION 271 (1) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUT HORITY, INASMUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF SU CH CONCEALMENT OF PARTICULARS OF INCOME, BUT IT MAY NO T EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TE RM 'INACCURATE PARTICULARS' WAS NOT DEFINED ANYWHERE IN THE ACT AN D, THEREFORE, IT WAS HELD THAT FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING ACCURATE PARTICULARS. IT WAS FURTHER HELD THAT THE ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT THE EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER, THE ASSESSEE HAD FURNISHED THE PARTICU LARS OF HIS INCOME. THE COURT ULTIMATELY WENT ON TO HOLD THAT T HE ELEMENT OF MENS REA WAS ESSENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THAT THE JUDGMENT IN DILIP N. SHROFFS CASE (SUPRA) WAS UPSET. IN DHARAMENDRA TEXTILE PROCESSORS CASE (SUPRA), AFTER QUOTING FROM SECTION 271 EXTENSIVELY AND ALSO CONSIDERING SECTIO N 271(1)( C), THE COURT CAME TO THE CONCLUSION THAT SINCE SECTION 271(1)( C) INDICATED THE ELEMENT OF STRICT LIABILITY ON THE AS SESSEE FOR THE CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WH ILE FILING RETURN, THERE WAS NO NECESSITY OF MENS REA. THE COU RT WENT ON TO HOLD THAT THE OBJECTIVE BEHIND ENACTMENT OF SECT ION 271(1)( C) READ WITH EXPLANATIONS INDICATED WITH THE SAID SECT ION WAS FOR PROVIDING REMEDY FOR LOSS OF REVENUE AND SUCH A PEN ALTY WAS A CIVIL LIABILITY AND, THEREFORE, WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C OF THE ACT. THE BASIC REASON WHY DECISION IN DILIP N. SHROFFS CASE (SUPRA) WAS OVERRULED BY THIS COURT IN DHARAMENDRA TEXTILE PROC ESSORS CASE (SUPRA), WAS THAT CCORDING TO THIS COURT THE EFFEC T AND DIFFERENCE BETWEEN SECTION 271(1)(C) AND SECTION 27 6C OF THE ACT WAS LOST SIGHT OF IN CASE OF DILIP N.SHROFF (SUPRA) . HOWEVER, IT MUST BE POINTED OUT THAT IN DHARAMENDRATEXTILE PROC ESSORS CASE (SUPRA), NO FAULT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N. SHROFFS CASE (SUPRA), WHERE T HE COURT EXPLAINED THE MEANING OF THE TERMS 'CONCEAL' AND 'I NACCURATE'. IT ITA NO. 4321/M/07 M/S MTZ POLYSTERS LTD. 5 WAS ONLY THE ULTIMATEINFERENCE IN DILIP N. SHROFFS CASE (SUPRA) TO THE EFFECT THAT MENS REA WASAN ESSENTIAL INGREDI ENT FOR THE PENALTY UNDER SECTION 271(1)(C) THAT THE DECISION I N DILIP N. SHROFFS CASE (SUPRA) WAS OVERRULED. 7. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE HA S CLAIMED CERTAIN AMOUNT OF EXPENSES AS REVENUE EXPENSES AND ACCORDING TO THE AO THESE EXPENSES WERE CAPITAL IN NATURE. THERE FORE, WE CAN COME TO A CONCLUSION THAT IT IS A CASE OF IN CORREC T CLAIM OF EXPENSES AND NOT A CASE OF CONCEALMENT OF PARTICULA RS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. WHEN T HESE BASIC CONDITIONS U/S 271(1)(C) ARE NOT SATISFIED, PENALTY U/S 271(1)(C) CANNOT BE LEVIED, THEREFORE, WE DO NOT FIND ANY INF IRMITY IN THE ORDER OF CIT(A). ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) ON THIS COUNT. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF OCTOBER, 2010. SD/- SD/- (R.S. PADVEKAR) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 8 TH OCTOBER, 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, I BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV