D.C.I.T. 9(2), MUMBAI V. OTIS ELEVATOR CO. (I) LTD., MUMBAI

ITA 4509/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70722 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 03-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C TRIPURA SUNDARI
• Assessee Lawyers: FIROZE ANDHYARUJINA
• Keywords: Non-deduction of tax; Wrong claim; Revenue expenditure; Capital expenditure

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. . . , , BEFORE S/SH. B.R. MITTAL, JUDICIAL MEMBER & RA JENDRA, ACCOUNTANT MEMBER ./ ITA NO.4509/MUM/2012, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2007-08 DCIT 9(2) R.NO. 218, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.MARG, MUMBAI- 400020 VS. OTIS ELEVATOR CO. (I) LTD. 9 TH FLOOR, MAGNUS TOWER, LINK ROAD, MALAD(W) MUMBAI- 400064 PAN: AAACO0481E ( #$ / APPELLANT ) ( %&#$ / RESPONDENT ) #$ #$ #$ #$ ' ' ' ' / APPELLANT BY : MS. C.TRIPURA SUNDARI %&#$ ( ' / RESPONDENT BY : SHRI FIROZE ANDHYARUJINA ! ! ! ! ( (( ( )* )* )* )* / DATE OF HEARING : 13-08-2013 +,' ( )* / DATE OF PRONOUNCEMENT : 21-08-2013 ! ! ! ! , 1961 ( (( ( 254(1) )-) )-) )-) )-) . . . . ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. CHALLENGING THE ORDER DATED 13.04.2012 OF THE CIT(A )-20, MUMBAI ASSESSING OFFICER (AO) HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT(A) IS JUSTIFIED IN LAW IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE I.T. ACT, 1961 OF RS. 2,47,59,926/- ON ADVANCES OF DORMANT CONTRACTS RECEIVED PRIOR TO THE YEAR 200 4 AMOUNTING TO RS. 7,35,58,890/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT(A) IS JUSTIFIED IN LAW IN DELETING THE PENALTY LEVIED U/S 271(1)(C) DISREG ARDING THE FACT THAT, THE ADVANCES RECEIVED BY THE ASSESSEE ON DORMANT CONTRACTS WAS SHOWN UNDER T HE HEAD CURRENT LIABILITIES AND WERE ONLY OFFERED TO TAX IN SUBSEQUENT ASSESSMENT YEAR 2008-09 AND 2009-10 AFTER THE OBJECTION WAS RAISED BY THE ASSESSING OFFICER. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) O N THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF MANUFAC TURING AND SALE OF ELEVATORS AND LIFTS,FILED ITS RETURN OF INCOME ON 02.04.2007DECLARING INCOME OF RS.89.04CRORES.ON 29.12.2010,AO FINALISED THE ASSESSMENT U/S.143(3)OF THE ACT,DETER MINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 156.05 CRORES.IN THE SAID ASSESSMENT ORDER AN ADDIT ION OF RS.7.35 CRORES ON ACCOUNT OF ADVANCES RECEIVED FROM CUSTOMERS WAS MADE.AO ISSUED NOTICE U /S.274 R.W.S.271(1)(C)FOR LEVYING PENALTY.AFTER CONSIDERING THE SUBMISSION OF THE ASS ESSEE,AO LEVIED PENALTY OF RS.2,47,59,926/- FOR FURNISHING INACCURATE PARTICULARS OF INCOME.HE HELD THAT THE OFFERING OF ADVANCES FOR TAXATION IN SUBSEQUENT YEAR WAS AN AFTER-THOUGHT,THAT ASSESS EE OFFERED THE SAID INCOME ONLY AFTER ISSUE WAS PICKED UP BY THE HIM DURING THE ASSESSMENT PROC EEDINGS FOR AY.2007-08,THAT ASSESSEE DID NOT BRING THE FACT OF OFFERING THE INCOME IN LATER YEARS TO THE NOTICE OF THE AO DURING THE ASSESSMENT PROCEEDINGS OF YEAR UNDER CONSIDERATION. 2. AGAINST THE PENALTY-ORDER DATED 30.06.2011ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND THE ASSESSMENT ORDER HE HELD THAT ASSESSEE WAS SHOWING ADVANCES AS CURRENT LIABILITIES, THAT SAME WERE OFFERED FOR TAXES IN THE AY 2008-09 AND 2009-10, THAT AO WAS NOT SATISFI ED WITH THE ORDER IN WHICH THE INCOME WAS OFFERED, THAT HE TAXED THE ADVANCES AS INCOME FOR T HE AY 2007-08, THAT RETURNS FOR AY 2008-09 AND 2009-10 WERE FILED ON 29.09.2008 AND 30.09.2009 RESPECTIVELY, THAT ISSUE OF ADVANCES ATTRACTED THE ATTENTION OF THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS INITIATED IN NOVEMBER,2010,THAT THE ASSESSEE HAD SUO MOTO OFFERED THE ADVANCES RECEIVED FROM THE CUSTOMERS IN THE SUBSEQUENT ASSESSMENT YEARS, THE ASSESSEE HA D TAKEN THIS STEP BEFORE THE AO TOOK COGNISANCE OF THE ISSUE WHILE FINALISING THE ASSESS MENT FOR THE AY 2007-08, THAT THE ACT OF OFFERING THE ADVANCES OF SUBSEQUENT ASSESSMENT YEAR S WAS NOT DICTATED BY COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2007-08,THAT IT WAS NOT FAIR TO LEVY PENALTY WHEN DISPUTE BETWEEN ASSESSEE AND THE AO WAS ONLY ABOUT THE TAXABILITY O F THE INCOME AND NOT ABOUT DEDUCTION OF ANY INCOME WHICH HAD NOT BEEN OFFERED FOR TAXATION AT A LL.RELYING UPON THE ORDER OF AISHWARIYA RAI (12SOT114), FAA HELD THAT FACTS OF THAT CASE WERE A PPLICABLE IN THE CASE UNDER CONSIDERATION, THAT MUMBAI TRIBUNAL HAD DELETED THE PENALTY LEVIED IN THAT CASE.HE FURTHER HELD THAT EVERY ADDITION MADE IN COURSE OF ASSESSMENT PROCEEDINGS S HOULD NOT BE TREATED AS THE BASIS FOR IMPOSING THE PENALTY, THAT IN THE CASE UNDER CONSID ERATION ONLY ADJUSTMENT OF INCOME WAS DONE BY THE ASSESSEE, THAT ADJUSTMENT WAS MADE PRIOR TO THE RAISING OF THE ISSUE BY THE AO, THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS BONAFIDE.FI NALLY HE CANCELLED THE PENALTY LEVIED BY THE AO. 3. BEFORE US, DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ORDER OF THE AO, WHERE AS AUTHORISED REPRESENTATIVE RELIED UPON THE ORDER OF THE FAA.HE RELIED UPON THE DECISION OF AISHWARYA RAY (SUPRA). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.COURTS HAVE LAID DOWN CERTAIN PRINCIPLES THAT DEAL WITH THE SITUATIONS WH ERE PENALTY U/S.271(1)(C) OF THE ACT SHOULD NOT BE LEVIED.WE WOULD LIKE TO SUMMARISE THESE BROAD PR INCIPLES : I. IMPOSITION OF PENALTY IS NOT AUTOMATIC.BEFORE IMPOS ING PENALTY IT HAS TO BE SEEN THAT ASSESSEE HAS CONTRAVENED THE PROVISIONS OF CHAPTER XXI OF TH E ACT.NOT ONLY THE PROVISIONS OF LEVY OF PENALTY ARE DISCRETIONARY IN NATURE, BUT THE DISCRE TION IS ALSO REQUIRED TO BE EXERCISED JUDICIOUSLY. II. PENALTIES UNDER THE ACT ARE IMPOSED FOR SOME OMISSI ONS AND COMMISSIONS OF THE ASSESSEE,BUT HIS SUCH OMISSIONS/COMMISSIONS HAVE TO SPECIFICALLY SPELT OUT IN THE SHOW CAUSE NOTICE AS WELL AS IN THE PENALTY ORDER.AO/FAA HAS TO SPECIFICALLY MEN TION AS WHICH OF THE PARTICULARS WERE FALSE OR HOW HE HAS CONCEALED PARTICULARS OF HIS INCOME.SO,W HERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT /ERRONEOUS/FALSE THERE IS NO QUESTION OF IMPOSITION OF PENALTY U/S.271(1) (C). III. EVIDENCES PRODUCED AND ISSUES DECIDED DURING ASSESS MENT PROCEEDINGS ARE NOT FINAL OR BINDING IN PENALTY PROCEEDINGS.PROVISIONS FOR FINALISING AS SESSMENT PROCEEDINGS AND FOR IMPOSING PENALTY HAVE BEEN INCORPORATED IN TAX LAWS FOR DIFF ERENT PURPOSES.DURING THE ASSESSMENT OR APPELLATE PROCEEDINGS AO OR THE FAA CAN DRAW A CONC LUSION THAT PARTICULAR ITEM FORMS PART OF INCOME OF THE ASSESSEE.BUT, SUCH CONCLUSION OR FIND ING CANNOT OR SHOULD NOT BECOME SOLE BASIS FOR IMPOSING PENALTY.IN OTHER WORDS CONFIRMATION OF ANY DISALLOWANCE OR ADDITION DURING THE ASSESSMENT OR APPELLATE PROCEEDINGS CANNOT BE BASIS FOR INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. IV. CLAIMING OR NOT CLAIMING PARTICULAR ITEM UNDER A PA RTICULAR HEAD OF INCOME IS NOT A VALID BASIS FOR IMPOSING PENALTY UNDER CONCEALMENT PROVISIONS. V. A DISPUTED CLAIM CANNOT BE EQUATED WITH FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE.IN OTHER WORDS PENAL PROVISIONS CANNOT BE INVOKED BECA USE CLAIMS,INCLUDING CLAIMS FOR SPECIAL DEDUCTIONS, MADE BY THE ASSESSEE HAVE BEEN REJECTED BY THE AO. VI. IF THE EXPLANATION FILED BY THE ASSESSEE ABOUT NOT IMPOSING PENALTY IS NOT REBUTTED BY THE AO, PROVISIONS OF CONCEALMENT WILL NOT BE APPLICABLE. VII. CONCEALMENT OF INCOME AND FURNISHING INACCURATE PAR TICULARS ARE DIFFERENT CONCEPTS.A MERE MAKING OF A CLAIM,WHICH IS NOT SUSTAINABLE IN LAW,B Y ITSELF,WILL NOT AMOUNT TO FURNISHING OF INACC -URATE PARTICULARS. VIII. WHERE ESTIMATE MADE BY THE ASSESSEE IS REPLACED BY THE ESTIMATE OF AN AO PENALTY SHOULD NOT BE LEVIED FOR FILING INACCURATE PARTICULARS. IX. THERE IS A DIFFERENCE BETWEEN A FALSE CLAIM AND A G ENUINE CLAIM.IN THE FIRST CASE,THE FACT OF INCURRING OF EXPENDITURE IS MISSING, WHERE AS IN TH E SECOND SITUATION, INCURRING OF EXPENDITURE IS NEVER IN DISPUTE.THE ONLY DISPUTE IS HOW TO TREAT T HAT EXPENDITURE -REVENUE EXPENDITURE OR CAPITAL EXPENDITURE.IN SUCH A CASE,PENALTY CANNOT BE IMPOSE D U/S. 271(1)( C ) OF THE ACT. X. PENALTY ALSO CANNOT BE IMPOSED,IF A CLAIM OF THE AS SESSEE FOR AN INCURRED EXPENDITURE IS REJECTED. XI. NON-DEDUCTION OF TAX AS PER THE PROVISIONS OF CHAPT ER XVII OF THE ACT,SHOULD NOT RESULT IN IMPOSITION OF PENALTY U/S.271(1)(C) OF THE ACT.NON DEDUCTION OF TAX SOURCE CAN RESULT IN OTHER CONSEQUENCES,BUT IMPOSITION OF CONCEALMENT PENALTY IN SUCH CASES IS IMPERMISSIBLE. XII. SIMILARLY,NOT GETTING THE BOOKS OF ACCOUNTS AUDITED CANNOT BE EQUATED WITH CONCEALING THE PARTICULARS OF INCOME/FURNISHING INACCURATE PARTICU LARS OF INCOME.THERE ARE SEPARATE PENAL PROVISIONS IN THE ACT FOR NOT GETTING THE BOOKS AUD ITED AS PER THE PROVISIONS OF SEC. 44AD.BUT, FOR VIOLATION OF THOSE PROVISIONS,ASSESSEE CANNOT B E VISITED BY THE PROVISIONS OF SECTION 271(1) (C)OF THE ACT. XIII. PENALTY CANNOT BE IMPOSED WHERE ARGUABLE/CONTROVERS IAL/DEBATABLE ISSUES ARE INVOLVED. XIV. DISALLOWANCE OF CLAIM AND IMPOSITION OF PENALTY ON BASIS OF SUBSEQUENT SUPREME COURT DECISION IS NOT PERMISSIBLE UNDER THE PROVISIONS O F THE ACT. APPLYING THE ABOVE PRINCIPLES,WE CAN SAFELY HOLD TH AT FAA HAS RIGHTLY DELETED THE PENALTY. ASSESSEE HAD OFFERED THE ADVANCES FOR TAXATION IN S UBSEQUENT AYS.,BEFORE AO MADE ANY INQUIRY ABOUT THEM.FAA HAS GIVEN A CATEGORICAL FINDING ABOU T THE DATES OF INQUIRY INITIATED BY THE AO AND OFFERING OF ADVANCES FOR SUBSEQUENT YEARS AND F ROM HIS ORDER IT IS CLEAR THAT THE ASSESSEE HAD ON ITS OWN PAID TAX ON THE AMOUNTS-IN-QUESTION.IT I S NOT THE CASE WHERE ASSESSEE HAD CONCEALED THE FACTS OF EARNING OF INCOME-RATHER IT IS A CASE WHERE YEAR OF TAXABILITY OF INCOME WAS IN DISPUTE.AO AND THE ASSESSEE HAD DIFFERENT OPINIONS ABOUT THE YEAR IN WHICH SAME SHOULD BE TAXED.IN OUR OPINION,IN SUCH MATTERS PENALTY U/S.27 1(1)(C)CANNOT BE LEVIED. THEREFORE, UPHOLDING THE ORDER OF THE FAA,WE DECIDE ALL THE GROUNDS OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED. / )0 !/) * 1 2 ( - !3 ( ) 45 . ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 21 ST AUGUST,2013 . . ( +,' 6 7! 21 -) , 2013 , ( - 8 SD/- SD/- ( . 9 9 9 9 . . B.R.MITTAL ) ( / RAJENDRA ) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 7! /DATE: 21 ST AUGUST,2013 SK . . . . ( (( ( %): %): %): %): ;:') ;:') ;:') ;:') / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT (A) / < = , 4. THE CONCERNED CIT / < = 5. DR C BENCH, ITAT, MUMBAI / :>- %)! , . . . 6. GUARD FILE/ - ? &:) &:) &:) &:) %) %)%) %) //TRUE COPY// .! / BY ORDER, @ / 4 DY./ASST. REGISTRAR , /ITAT, MUMBAI