ACIT, New Delhi V. M/s. Kohinoor Foods Ltd., New Delhi

ITA 4355/DEL/2011

• Counselvise Citation: 435520114 RSA 2011
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-03-2014
• Assessment Year: 1999-2000
• Appeal Filed On: 30-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Assessee Lawyers: VARUN GUPTA; SALIL KAPOOR SH ANKIT GUPTA
• Keywords: Depreciation; Wrong claim; Difference of opinion
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI A. D. JAIN, JUDICIAL MEMBER I.T.A .NO.-4355/DEL/2011 (ASSESSMENT YEAR-1999-00) ACIT VS. M/S KOHINOOR FOODS LTD. CENTRAL CIRCLE-22 201, VIPPS CENTRE-2, NEW DELHI. COMMUNITY COMPLEX, MASJID MOTH, G. K.-II NEW DELHI.-110048 PAN: AAACS2470D (APPELLANT) (RESPONDENT) REVENUE BY:-SH. S. N. BHATIA, DR. ASSESSEE BY:- SH. SALIL KAPOOR, SH. ANKIT GUPTA & SH. VARUN GUPTA, ADV. ORDER PER A. D. JAIN, JM : THIS IS DEPARTMENTS APPEAL FOR A. Y. 99-2000, TAKI NG THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN CANCELLING THE PENALTY OF RS.45,95,476/- IMPOSED BY THE ASSESSING OFFICER U/S 271(1) (C) OF THE INCOME TAX ACT, 1961. I.T.A .NO.-4355/DEL/2011 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT CLAIM U/S 80IA AND 80HHC ARE DEBATABLE ISSUES AND WRONG CLAIM OF DEDUCTION DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. THE ORDER OF THE LD. CIT (A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 2. GROUND NOS. 3 & 4 ARE GENERAL. 3. APROPOS GROUND NOS. 1 & 2, DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE COMPANY CLAIMED DEDUCT IONS U/S 80IA ON INCOME I.E. INCOME FROM SALES OF LICENSE, INTEREST, RENT, WEIGH BRIDGE AND SALE OF SCRAP, ETC. THE AO HELD THAT THESE INCOMES ARE N OT DERIVED FROM INDUSTRIAL ACTIVITY AND DISALLOWED RS.1,47,43,956/- ON ACCOUNT OF EXCESS CLAIM OF DEDUCTION U/S 80IA OF THE ACT. IT WAS FURTHER NOTIC ED THAT THE ASSESSEE COMPANY HAD SHOWN A LOSS OF RS.79,32,684/- FROM TRA DING SALES AND WHILE WORKING OUT THE DEDUCTION U/S 80HHC, THE ASSESSEE C OMPANY HAD NOT ADJUSTED THE SAID LOSS AGAINST THE PROFIT FROM MANU FACTURING ACTIVITY, WHICH RESULTED IN EXCESS CLAIM OF DEPRECIATION AND, ACCOR DINGLY, HIGHER DEDUCTION I.T.A .NO.-4355/DEL/2011 3 U/S. 80HHC WAS CLAIMED. THEREFORE, A DISALLOWANCE O F RS.65,54,084/- WAS MADE ON THIS ACCOUNT. ON THESE ISSUES THE ASSESSEE COMPANY PREFERRED AN APPEAL BEFORE CIT (A) AND THE CIT (A), VIDE ORDER DATED 23/11/2004, C ONFIRMED THE DISALLOWANCES MADE BY THE AO ON THE ABOVE ISSUES IN TOTO. THE ITAT, VIDE ORDER DATED 07/08/2009, CONFIRMED T HE SAID DISALLOWANCES, EXCEPT RS.2,40,946/-, BEING MISCELLA NEOUS INCOME FROM SCRAP SALES AND CLAIM FROM FOREIGN BUYERS FOR NON COMMITM ENT OF HONORING THEIR CONTRACTS AND RESTORED THE SAID ISSUE TO THE FILE O F ASSESSING OFFICER. 4. VIDE ORDER DATED 28.7.10, THE AO IMPOSED PENALTY ON THE ASSESSEE BY HOLDING THAT THE ASSESSEE COMPANY HAD A LL THE KNOWLEDGE ABOUT THE DEDUCTIONS TO BE CLAIMED AND AS TO WHAT AMOUNT OF DEDUCTION IS ALLOWABLE, THAT WHERE THE AMOUNT OF INCOME, IN RESP ECT OF WHICH PARTICULARS HAVE BEEN CONCEALED, OR INACCURATE PARTICULARS HAVE BEEN FURNISHED, HAS THE EFFECT OF REDUCING THE INCOME, IT MEANS THAT THE TA X WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF WHICH PARTIC ULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNI SHED, HAD SUCH INCOME BEEN THE TOTAL INCOME, THAT FURTHER, WHEN THE ASSES SEE HAD NOT OFFERED ANY BONA FIDE EXPLANATION IN HIS SUBMISSION, IT LED TO A CONCLUDE THAT HE HAD I.T.A .NO.-4355/DEL/2011 4 NOTHING TO SAY IN THE MATTER, AND THAT HENCE, IT WA S A FIT CASE FOR LEVY OF PENALTY. IN THIS MANNER, TOTAL PENALTY OF RS.4595476/- WAS I MPOSED ON THE ASSESSEE. 5. BY VIRTUE OF THE IMPUGNED ORDER DATED 22.7.11, T HE LD. CIT (A) ALLOWED THE APPEAL FILED BY THE ASSESSEE AND DELETE D THE PENALTY IMPOSED BY THE AO. 6. BEFORE US, THE LD. DR, CHALLENGING THE IMPUGNED ORDER, HAS CONTENDED THAT THE LD. CIT (A) HAS ERRED IN CANCELLING THE PE NALTY RIGHTLY IMPOSED BY THE AO; AND THAT THE LD. CIT (A) HAS ERRED IN HOLDI NG THAT THE ASSESSEES CLAIMS UNDER SECTIONS 80IA AND 80HHC OF THE ACT ARE DEBATABLE ISSUES AND THAT WRONG CLAIM OF DEDUCTION DOES NOT AMOUNT OF FU RNISHING OF INACCURATE PARTICULARS OF INCOME. IT HAS ALSO BEEN SUBMITTED T HAT THE LD. CIT (A) HAS FAILED TO TAKE INTO CONSIDERATION THE FACT THAT BY MAKING SUCH UNSUSTAINABLE CLAIMS, THE ASSESSEE DELIBERATELY CHOSE TO REDUCE T HE INCIDENCE OF TAX. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN SUBMITT ED THAT A MERE DIFFERENCE OF OPINION TAKING A POSITION CONTRARY TO THE VIEW T AKEN BY THE AO CANNOT AMOUNT TO THE ASSESSEE COMPANY CONCEALING FACTS MAT ERIAL TO THE COMPUTATION OF INCOME; THAT REJECTION OF THE EXPLAN ATION / CONTENTION RAISED I.T.A .NO.-4355/DEL/2011 5 BY THE ASSESSEE COMPANY CANNOT LEAD TO THE CONCLUSI ON THAT THERE HAS BEEN ANY CONCEALMENT OF MATERIAL FACTS; THAT ADDITION TO INCOME REJECTION OF CLAIM FOR CERTAIN EXPENDITURE/DISALLOWANCE OF DEBATABLE C LAIM ITSELF DOES NOT LEAD TO AN INFERENCE OF CONCEALMENT OF FURNISHING OF INA CCURATE PARTICULARS OF INCOME; AND THAT FURTHER, FULL FACTS AND MATERIAL H AVE BEEN DISCLOSED IN THE RETURN OF INCOME AND FULLY EXPLAINED DURING THE COU RSE OF ASSESSMENT PROCEEDINGS; AND THAT THE LD. CIT (A) HAS ALLOWED T HE ASSESSEES APPEAL BY PASSING AN ELABORATE SPEAKING ORDER, WHICH DOES NOT REQUIRE ANY INTERFERENCE AT OUR HANDS. IT HAS BEEN ARGUED THAT AS SUCH, THER E BEING NO MERIT WHATSOEVER THEREIN THE APPEAL FILED BY THE DEPARTME NT BE ORDERED TO BE DISMISSED. 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. THE ASSESSEE COMPANY CLAIMED DEDUCTION U/S 80IA OF THE ACT ON INCOME FROM SALE OF LICENSE, INTEREST, RENT, WEIGH BRIDGE AND SALE OF SCRAPS, ETC. THESE CLAIMS WERE DISALLOWED AND SUCH DISALLOWANCE WAS UPHELD TILL THE 2 ND APPELLATE STAGE, I.E., BY THE TRIBUNAL. FURTHER, TH E ASSESSEE HAD SHOWN LOSS FROM TRADING SALES, WHICH LOSS HAD NOT BEEN ADJUSTE D AGAINST PROFIT FROM ITS MANUFACTURING ACTIVITY AND DEDUCTION U/S 80HHC OF T HE ACT WAS WORKED OUT WITHOUT SUCH ADJUSTMENT. THIS WAS HELD TO HAVE RESU LTED INTO EXCESS CLAIM OF DEPRECIATION AND CLAIM OF HIGHER DEDUCTION U/S 80HH C OF THE ACT. SUCH I.T.A .NO.-4355/DEL/2011 6 EXCESS CLAIM WAS DISALLOWED AND THIS DISALLOWANCE W AS UPHELD UPTO THE ITAT LEVEL. 9. CONFIRMATION OF DISALLOWANCE, AS ABOVE, PER SE, HOWEVER, BY ITSELF, DOES NOT RESULT INTO AUTOMATIC LEVY OF PENALTY AND IT HAS TO BE EXAMINED WHETHER THE ASSESSEE HAD EITHER CONCEALED THE PARTI CULARS OF ITS INCOME, OR IT HAD FURNISHED INACCURATE PARTICULARS THEREOF. 10. IN THE PENALTY ORDER IT WAS HELD THAT THE ASSES SEE HAD ALL THE KNOWLEDGE ABOUT THE DEDUCTIONS TO BE CLAIMED AND AB OUT THE AMOUNT OF DEDUCTION ALLOWABLE AND THAT IN KEEPING WITH DILIP N. SHROFF VS. CIT, RENDERED BY THE HONBLE SUPREME COURT, WHERE THE AM OUNT OF INCOME, IN RESPECT OF WHICH, PARTICULARS HAVE BEEN CONCEALED O R INACCURATE PARTICULARS HAVE BEEN FURNISHED, HAS THE EFFECT OF REDUCING THE INCOME, IT MEANS THAT THE TAX WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RES PECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTI CULARS HAVE BEEN FURNISHED, HAD SUCH INCOME BEEN THE TOTAL INCOME. T HE QUESTION, HOWEVER, IS AS TO WHETHER THE ASSESSEE HAD, IN FACT, EITHER CON CEALED THE PARTICULARS OR HAD FURNISHED INACCURATE PARTICULARS WITH REGARD TO ITS CLAIMS UNDER SECTIONS 80IA AND 80HHC OF THE ACT. 11. CONCERNING THE CLAIM U/S 80IA, AS RIGHTLY NOTED BY THE LD. CIT (A), THE ISSUE HAS DEFINITELY BEEN A CONTENTIOUS ONE, SINCE IT WAS A SUBJECT MATTER OF I.T.A .NO.-4355/DEL/2011 7 HOTLY CONTESTED LITIGATION IN THE FOLLOWING CASES, AMONGST OTHERS:- ASSOCIATED CAPSULES P. LTD. 197 TAXMAN 84; NEO SACK P. LTD. 18 6 TAXMAN 294; METALMAN AUTO P. LTD. 11 TAXMAN.COM 51; AND DHARAMP AL PREMCHAND LTD. 11 TAXMAN.COM 437. IT IS, THUS, OBVIOUS THAT THE IS SUE REGARDING THE CLAIM OF DEDUCTION U/S 80IA WAS A DEBATABLE ISSUE AND NO CON CEALMENT PENALTY WAS LEVIABLE WITH REGARD TO DISALLOWANCE OF SUCH A DEBA TABLE CLAIM. 12. LIKEWISE, THE LD. CIT (A) HAS FURTHER CORRECTLY OBSERVED THAT THE ISSUE REGARDING EXCESS CLAIM OF DEDUCTION U/S 80HHC OF TH E ACT, INVOLVING NON- ADJUSTMENT OF LOSS AGAINST PROFIT FROM MANUFACTURIN G ACTIVITY, WAS ALSO NOT FREE FROM DOUBT AT THE RELEVANT TIME, I.E. , ON 30. 12.99, WHEN THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION, MAKING SUCH CLAIM OF DEDUCTION. THE MATTER GOT FINALLY SETTLED ONLY WITH THE PASSING OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CA SE OF IPCA LABORATORIES LATER IN POINT OF TIME, I.E., IN THE YEAR 2004. THEREFORE, WITH REGARD TO THIS ISSUE ALSO, NO CONCEALMENT PENALTY I S LEVIABLE. 13. IN ADDITION TO THE ABOVE, THESE CLAIMS WERE DUL Y REFLECTED IN THE COMPUTATION OF INCOME FILED BY THE ASSESSEE AND THA T BEING SO, IT WAS WRONG ON THE PART OF THE AO TO CONCLUDE IN THE PENALTY OR DER THAT THE ASSESSEE HAD DELIBERATELY AND CONSCIOUSLY CLAIM WRONG/EXCESSIVE DEDUCTIONS. I.T.A .NO.-4355/DEL/2011 8 14. THEN, THE DEPARTMENT HAS NOT MADE OUT ANY CASE THAT THE CLAIMS MADE BY THE ASSESSEE WERE MALA FIDE CLAIMS. NOTHING HAS BEEN BROUGHT ON RECORD TO THIS EFFECT. IN FACT, FROM THE FACTS AS AVAILABL E ON RECORD, AS DISCUSSED HEREINABOVE, IT IS EVINCED THAT THE ASSESSEE MADE S UCH CLAIMS UNDER A PERFECTLY BONA FIDE BELIEF THAT THE DEDUCTIONS BEIN G CLAIMED WERE ALLOWABLE DEDUCTIONS. ALSO, IT NO-WHERE STANDS DISPUTED THAT ALL THE RELEVANT FACTS HAD BEEN DULY DISCLOSED BY THE ASSESSEE IN ITS RETURN O F INCOME AND COMPLETE BONA FIDE EXPLANATION WAS OFFERED BY IT BEFORE THE TAXING AUTHORTIES. THE AO DID NOT POINT OUT ANY INACCURACY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 15. IN THE CASE OF RELIANCE PETRO PRODUCTS, 189 T AXMAN 322 (SC), IT HAS BEEN, INTER ALIA, HELD THAT EVERY ADDITION MADE IN THE ASSESSMENT CANNOT AUTOMATICALLY LEAD TO LEVY OF PENALTY FOR CONCEALME NT OF INCOME. THE LD. CIT(A) HAS CORRECTLY PLACED RELIANCE ON THIS DECISI ON. NO DECISION TO THE CONTRARY HAS BEEN CITED BEFORE US BY THE DEPARTMENT . 16. IN MIMOSA INVESTMENT CO. P. LTD. VS. INCOME TA X OFFICER, AN ORDER DATED 15.1.09, PASSED BY THE MUMBAI BENCH OF THE TR IBUNAL, IN ITA NO. 2983/MUM/2007, IT WAS HELD THAT WHERE THE ASSESSEE HAS FURNISHED ALL THE MATERIAL FACTS FOR THE PURPOSE OF COMPUTATION OF TO TAL INCOME, THE AO IS BOUND TO CALCULATE THE CORRECT INCOME IN ACCORDANCE WITH LAW, WHICH MAY BE I.T.A .NO.-4355/DEL/2011 9 DIFFERENT FROM THE TOTAL INCOME CALCULATED BY THE A SSESSEE; AND THAT MERELY BECAUSE THE AO HAS RE-CALCULATED THE TOTAL INCOME A ND THE SAME IS NOT THAT CALCULATED BY THE ASSESSEE, IT CANNOT BE HELD THAT THE ASSESSEE HAS EITHER CONCEALED THE PARTICULARS OF HIS INCOME, OR HAS FUR NISHED INACCURATE PARTICULARS THEREOF. 17. IN VIEW OF THE ABOVE DISCUSSION, FINDING NO ERR OR WHATSOEVER THEREIN, THE ORDER UNDER APPEAL IS UPHELD AND THE GROUNDS RA ISED BY THE DEPARTMENT, BEING SHORN OF MERIT, ARE REJECTED. 18. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/04/2014. SD/- SD/- (R. S. SYAL) (A. D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04/04/2014 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR I.T.A .NO.-4355/DEL/2011 10 DATE INITIAL 1. DRAFT DICTATED ON 26/03/2014 PS 2. DRAFT PLACED BEFORE AUTHOR 26/03/2014 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 04/04/2014 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 04/04/2014 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.