ACIT, Ludhiana V. M/s Abhishek Industries Limited, Ludhiana

ITA 451/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77185 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business income; Question of law; Capital receipt; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.451/CHD/2014 ASSESSMENT YEAR 2008-09 THE A.C.I.T., VS M/S ABHISHEK INDUSTRIES LTD., CIRCLE 1, E-212, LUDHIANA. KICHLU NAGAR, LUDHIANA. PAN : AABCA4139J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, DR RESPONDENT BY : SHRI ASHWANI KUMAR DATE OF HEARING : 09.07.2014 DATE OF PRONOUNCEMENT : 15.07.2014 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, LUDHIAN A DATED 06.02.2014 AGAINST THE PENALTY ORDER PASSED UNDER S ECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF A PPEAL : WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(A) ERRED IN DELE TING THE PENALTY AMOUNTING TO RS. 4,14,45,686/- LEVIED BY T HE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT,1961 FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 3. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS COVERED BY THE ORDER OF THE T RIBUNAL IN 2 ASSESSEE'S OWN CASE IN RELATION TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 4. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDER OF THE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS IN R ELATION TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE T REATMENT OF SALES TAX SUBSIDY AS REVENUE RECEIPT AS AGAINST CAPITAL R ECEIPT SHOWN BY THE ASSESSEE. WHILE COMPLETING THE ASSESSMENT, ASSESSI NG OFFICER HAD MADE TWO OTHER ADDITIONS I.E. ON ACCOUNT OF DISALLO WANCE OF INTEREST PERTAINING TO INTEREST FREE ADVANCES MADE BY THE AS SESSEE FOR NON- BUSINESS PURPOSE AND ALSO ON ACCOUNT OF INTEREST IN COME SHOWN BY THE ASSESSEE AS BUSINESS INCOME WHICH WAS ASSESSED AS I NCOME FROM OTHER SOURCES. THE ASSESSING OFFICER IN THE PENALT Y PROCEEDINGS INITIATED AGAINST THE ASSESSEE LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE ADDITION MADE ON ACCOUNT OF TREAT MENT OF SALES TAX SUBSIDY, DISALLOWANCE OF INTEREST ADVANCED TO ASSES SEE'S CONCERNS AND LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE A CT AT RS.4,14,45,686/-. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT ON BOTH T HE ACCOUNTS I.E. THE TREATMENT OF SATES LAX SUBSIDY AS REVENUE RECEI PT AND DISALLOWANCE OF INTEREST ON ACCOUNT OF INTEREST FRE E ADVANCES MADE BY THE ASSESSEE. 7. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CO MMISSIONER OF INCOME TAX (APPEALS). 3 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE OF LEVY OF PENALTY UNDER SECTION 271(1)(C ) OF THE ACT ON THE TREATMENT OF SALES TAX SUBSIDY AS REVENUE RECEIPT A ROSE BEFORE THE TRIBUNAL IN ASSESSEE'S OWN CASE RELATING TO ASSESS MENT YEAR 2004-05. THE TRIBUNAL IN CONSOLIDATED ORDER PASSED IN ITA NO . 1445/CHD/2010 IN APPEAL FILED BY THE ASSESSEE AND ITA NO. 290/CHD /2011 IN THE APPEAL FILED BY THE REVENUE, VIDE ORDER DATED 06.03 .2014 DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT O N THE SAID ISSUE OF SALES TAX SUBSIDY OBSERVING AS UNDER : 43. THE NEXT ITEM OF ADDITION IS THE ASSESSABILITY OF SALES TAX SUBSIDY OF RS.6,80,61,977/- RECEIVED BY T HE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAD TREATED THE SAID SUBSIDY AS CAPITAL R ECEIPT IN ITS RETURN OF INCOME, BUT THE SAME WAS ASSESSED AS REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE FOLLOW ING THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIG H COURT IN ASSESSEES OWN CASE REPORTED IN 286 ITR 1 (P&H). THE TRIBUNAL (SUPRA) FOR THE INSTANT ASSESS MENT YEAR ALSO HELD THE SAID SUBSIDY TO BE REVENUE IN NA TURE. HOWEVER, THE ASSESSEE HAD PREFERRED SLP AGAINST THE ORDER OF THE HON'BLE PUNJAB & HARYANA HIGH COURT AN D THE QUESTION OF LAW HAS BEEN ADMITTED AND THE SLP I S PENDING BEFORE THE HON'BLE SUPREME COURT OF INDIA. THE ISSUE RAISED VIDE THE PRESENT APPEAL IS IN RELATION TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON S UCH DEBATABLE ISSUE. IN CASES WHERE THE ASSESSEE HAD C LAIMED THE EXPENDITURE AS REVENUE IN NATURE BUT THE SAME H ELD TO BE CAPITAL EXPENDITURE IN THE HANDS OF THE ASSESSEE , THE ISSUE RELATABLE TO SUCH DISALLOWANCE OF EXPENDITURE IS A DEBATABLE ISSUE AND ADDITION MADE ON THE BASIS OF S UCH DEBATABLE ISSUE CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE CLAIM OF THE ASSESSEE BEING REJECTED IN THE INSTANT CASE I.E. TH E DEBATE BEING WHETHER THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE WAS CAPITAL IN NATURE OR NOT WAS A DEBATAB LE ISSUE. 44. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. TEK RAM (HUF) 300 ITR 354 (P&H) HAD HELD THAT WHERE THE ISSUE IS HIGHLY DEBATABLE IN AS MUCH AS T WO VIEWS WERE POSSIBLE ON THE SAID ISSUE AND WHERE THE CLAIM OF THE ASSESSEE ON THE ISSUE WAS BASED ON ONE POSSI BLE VIEW, THE MAKING OF SUCH BONAFIDE CLAIM ON THE BASI S OF A POSSIBLE VIEW COULD NOT BE TREATED AS CONCEALMENT O F ITS INCOME BY THE ASSESSEE OR FURNISHING OF INACCURATE PARTICULARS OF INCOME SO AS TO ATTRACT THE PENAL PROVISIONS OF SECTION 271 (1)(C) OF THE INCOME TAX ACT. 4 45. FURTHER SIMILAR ISSUE OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AROSE BEFORE THE CHAND IGARH BENCH OF TRIBUNAL IN THE CASE OF DCIT VS. M/S BHUSH AN POWER & STEEL LTD. (SUPRA) AND THE TRIBUNAL VIDE OR DER DATED 25.9.2013 ON SIMILAR ISSUE OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON ISSUE OF HOLDING TH E SALES TAX SUBSIDY AS CAPITAL IN NATURE HELD AS UNDER: 18. THE ISSUE ARISING VIDE PRESENT APPEAL IS IN RELATION TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT ON SUCH DEBATABLE ISSUE. THE PLEA OF THE ASSESSEE IN THE PRESENT CASE WAS ADMITTED FOR ADJUDICATION BEFORE THE HIGHER FORUMS, MAKES THE ISSUE DEBATABLE ISSUE. THE ADDITION IN THE PRESENT CASE HAS BEEN MADE ON THE BASIS OF SUCH DEBATABLE ISSUE THAT WHETHER THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE WAS CAPITAL IN NATURE OR NOT. WE FURTHER FIND THAT SIMILAR ISSUE OF RECEIPT OF SUBSIDY UNDER THE WEST BENGAL INCENTIVE SCHEME HAS BEEN HELD TO BE CAPITAL RECEIPT IN THE CASE OF CIT VS. RASOI LTD.(SUPRA) BY THE HON'BLE CALCUTTA HIGH COURT. THE UNIT OF THE ASSESSEE HAD BEEN ESTABLISHED IN THE STATE OF WEST BENGAL AND THE CASE OF THE ASSESSEE IS THAT IT IS GOVERNED BY THE SAID SCHEME AS BEFORE THE HON'BLE CALCUTTA HIGH COURT. IN VIEW THEREOF, THE ISSUE RAISED BEFORE US IS WHERE ADDITION HAS BEEN MADE IN RELATION TO SUCH DEBATABLE ISSUE, THE ASSESSEE COULD BE SAID TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME MAKING IT EXIGIBLE TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 19. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. M/S GURDASPUR COOPERATIVE SUGAR MILLS (SUPRA) ON THE ISSUE WHETHER THE AMOUNT OF GRANT-IN-AID WAS CAPITAL RECEIPT OR REVENUE RECEIPT BEING DEBATABLE ISSUE HELD THAT THE PENALTY U/S 271(1)(C) OF THE ACT WAS NOT IMPOSABLE. THE RELEVANT FINDINGS OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. M/S GURDASPUR COOPERATIVE SUGAR MILLS (SUPRA) ARE AS UNDER: 3. WE FIND THAT THE RELIANCE ON THE ABOVESAID JUDGMENT IS NOT TENABLE, AS IN THE AFORESAID CASE, THE DEDUCTIONS UNDER SECTION 80-O OF THE ACT WAS DECLINED FOR THE REASON THAT THE ASSESSEE HAS NOT PRODUCED ANY DETAILS OF THE EXPENSES ALLEGEDLY INCURRED BY IT. THE DELHI HIGH COURT OBSERVED (PAGE 170): 'THE ASSESSEE, FOR CLAIMING DEDUCTION UNDER SECTION 80-O OF THE ACT, WANTED THE SAME AT 50 PER CENT OF THE GROSS INCOME RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE IN INDIA PROVIDED BY IT TO ITS FOREIGN CLIENTS. THE ASSESSING OFFICER, HOWEVER, WAS OF THE 5 VIEW THAT ON CORRECT INTERPRETATION UNDER SECTION 80-O, DEDUCTION IS RESTRICTED TO THE NET INCOME AND , THEREFORE, EXPENDITURE INCURRED IN INDIA FOR EARNIN G THE FOREIGN EXCHANGE HAD TO BE DEDUCTED. THE ASSESSING OFFICER, THEREFORE, WANTED THE ASSESSEE T O FURNISH THE DETAILS OF EXPENSES. AS THE ASSESSEE FA ILED TO DO THE NEEDFUL IN RESPECT OF VARIOUS PARTICULARS DEMANDED, THE ASSESSING OFFICER WAS LEFT WITH NO ALTERNATIVE BUT TO ESTIMATE SUCH EXPENDITURE IN THE RATIO OF PROPORTION OF FOREIGN INCOME TO THE TOTAL INCOME.' 4. IN THE PRESENT CASE, THERE IS NO DISPUTE ABOUT THE QUANTUM OF RECEIPT OF GRANT-IN-AID FROM THE STATE GOVERNMENT. THE ASSESSEE REFLECTED THE SAME AS CAPITAL RECEIPT, WHEREAS IT HAS BEEN TREATED AS TO BE REVENUE RECEIPT. THE ISSUE WHETHER THE AMOUNT OF GRANT-IN-AID IS CAPITAL RECEIPT OR A REVENUE RECEIP T, IS A DEBATABLE ISSUE. THE FINDINGS RETURNED IN THE JUDGMENT RELIED UPON IS ON FEET OF NON-FURNISHING O F DETAILS OF EXPENSES. THE ISSUE WAS NOT DEBATABLE AS IN THE PRESENT CASE. THEREFORE, THE RELIANCE ON THE DIVISION BENCH JUDGMENT IS MISCONCEIVED. 5. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY ERROR IN THE FINDINGS RECORDED BY THE TRIBUNAL WHILE SETTING ASIDE THE PENALTY. CONSEQUENTLY, WE DO NOT FIND THAT THE ORDER OF THE TRIBUNAL GIVES RISE TO ANY SUBSTANTIAL QUESTION OF LAW FOR THE OPINION OF THIS COURT. 20. SIMILAR PROPOSITION HAS ALSO BEEN LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. TEK RAM (HUF) (SUPRA). 21, THE HON'BLE SUPREME COURT IN CIT, AHEMDABAD VS. RELIANCE PETROPRODUCTS PVT. LTD (SUPRA) HAVE LAID DOWN THE PROPOSITION THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LA W, BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. 22. IN THE TOTALITY OF THE ABOVE SAID FACTS AND FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT, AHEMDABAD VS. RELIANCE PETROPRODUCTS PVT. LTD (SUPRA) AND THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. M/S GURDASPUR COOPERATIVE SUGAR MILLS (SUPRA) AND CIT VS. TEK RAM (HUF) (SUPRA) WE HOLD THAT IN VIEW OF THE DEBATABLE ISSUE RAISED, THE ASSESSEE IS NOT EXIGIBLE TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN THE FACTS OF THE PRESENT CASE WHERE THE CLAIM OF THE ASSESSEE THAT THE RECEIPTS WERE CAPITAL IN NATURE WAS REJECTED AND THE RECEIPTS WERE HELD TO BE REVENUE IN NATURE AND HENCE TAXABLE. UPHOLDING HE ORDER OF THE CIT 6 (APPEALS) WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITA NO.70/CHD/2012. 46. FOLLOWING THE SAME FINDING, WE FIND NO MERIT IN HOLDING THE ASSESSEE TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF SUCH DEBATABLE ISSUE. THE ASSESSEE IS NOT EXIGIBLE TO LEVY OF PENALTY UND ER SECTION 271(1)(C) OF THE ACT ON THE AFORESAID TREAT MENT OF SALES TAX SUBSIDY AS REVENUE IN THE HANDS OF THE AS SESSEE AND WE UPHOLD THE ORDER OF THE CIT (APPEALS) IN DIR ECTING THE ASSESSING OFFICER TO DELETE THE SAME. 9. FURTHER, THE DISALLOWANCE WORKED OUT UNDER SECTI ON 36(1)(III) OF THE ACT ON INTEREST FREE ADVANCES MADE AND WHERE THE ASSESSEE WAS EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS CONSIDERED BY THE TRIBUNAL VIDE PARA 47 WHICH READS AS UNDER 47. THE NEXT ITEM OF DISALLOWANCE IS THE DISALLOWANCE MADE UNDER SECTION 36(1)(III) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF INTEREST PAID ON SECURED LOANS BEING RELATABLE TO INTEREST FREE ADVANCES MADE BY THE ASSESSEE. THE SAID ISSUE OF DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT WAS MADE IN THE CASE OF THE ASSESSEE FOLLOWING THE OBSERVATION MADE IN THE EARLIER YEARS WHICH HAS BEEN CONFIRMED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN ASSESSEES OWN CASE REPORTED IN 286 ITR 1. THE ASSESSEE HAS PREFERRED SLP BEFORE THE HON'BLE SUPREME COURT OF INDIA, WHICH HAS BEEN ADMITTED AND QUESTION OF LAW HAS BEEN FRAMED ON THIS ACCOUNT. FOLLOWING THE PARITY OF REASONING IN RESPECT OF THE TREATMENT TO SALES TAX SUBSIDY AND THE QUESTION OF LAW PENDING ADJUDICATION BEFORE THE HON'BLE SUPREME COURT OF INDIA, WE CONFIRM THE ORDER OF THE CIT (APPEALS) IN HOLDING THAT IN VIEW OF THE DEBATABLE ISSUE RAISED THE ASSESSEE CANNOT BE HELD TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME AND HENCE NOT EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 10. THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS AND CIRCUMSTANCES ARISING IN THE APPEAL R ELATING TO ASSESSMENT YEAR 2004-05 AND FOLLOWING THE SAME PARI TY OF REASONING, WE HOLD THAT THE ASSESSEE IS NOT EXIGIBLE TO LEVY O F PENALTY ON THE 7 TREATMENT OF SALE TAX SUBSIDY AS REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE AND ALSO ON THE DISALLOWANCE MADE UNDER SE CTION 36(1)(III) OF THE ACT. UPHOLDING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS),WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY,2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15 TH JULY,2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR ITAT/CHD