PRATIBHA SHIPPING COMPANY LTD, MUMBAI V. ACIT 5(2), MUMBAI

ITA 4701/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100692 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-08-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 10-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion; Revenue expenditure
• Section: 143(3); 5(2)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PAWAN SINGH , JUDICIAL MEMBER /. ITA NO. 4701 & 4702 /MUM/201 1 , / ASSESSMENT YEAR - 2000 - 01 AND 2002 - 03 M/S. PRATIBHA SHIPPING COMPANY LIMITED, 1201/02, ARCADIA BUILDING 12 TH FLOOR, NCPA ROAD NARIMAN POINT , M UMBAI - 400 021. PAN:AAACP 7179 E VS A.C.I.T - 5(2) AAYAKAR BHAVAN MUMBAI. ( / ASSESSEE ) ( / RESPONDENT ) /ASSESSEE BY : NONE / REVENUE BY :SHRI SATYA PAL KUMAR - DR / DATE OF HEARING : 17 - 08 - 2015 / DATE OF PRONOUNCEMENT : 21 - 08 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 15/3/2011 OF THE CIT(A) - 9, MUMBAI,THE ASSESSEE HAD RAISED FOLLOWING GROUNDS OF APPEAL: 1.THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS. 4,91,338/ - U/S. 271(L)(C) OF THE INCOME TAX ACT, 1961 FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND , DELETE, VARY ANY OR ALL THE ABOVE GROUNDS. BRIEF FACTS: 2. RETURN OF INCOME FOR ASSESSMENT YEAR UNDER CONSIDERATION WAS FILED ON 30.11.2000 DECLARING TOTAL LOSS OF RS. 3,38,88,620/ - .THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S.147 COMPLETED ON 30.03.2005 ASSESSING TOTAL LOSS AT RS. 3,19,96,051/ - .DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER(AO)THAT THE ASSESSEE HAD MADE CLAIM OF RS.15,95,253/ - ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION ON PRINCIPAL TREATING IT AS R EVENUE EXPENDITURE. THIS CLAIM OF THE ASSESSEE WAS DISALLOWED. THE AO OBSERVED THAT DURING THE RELEVANT PREVIOUS YEAR ONE OF THE VESSELS OF THE COMPANY M. T. PRATIBHA GODAVARI WAS REPOSSESSED AS PER THE TERMS AND CONDI TIONS OF BBCD AGREEMENT FOR NON PAYME NT OF HIGHER CHARGES. ,THAT IT HAD NOT PAID THE HIGHER CHARGES INCLUSIVE OF PRINCIPLE AMOUNT FOR TH E PERIOD AMOUNTING USD 13,46,205/ - AND INTEREST OF USD 12,12,195.THAT O N THE OUTSTANDING PRINCIPLE AND INTEREST THE EXCHAN GE FLUCTUATION AS ON 31.03.2000, AMO UNTING TO R S .15,95,253/ - AND RS. 14,36,451/ - RESPECTIVELY WAS CLAIMED BY THE ASSESSEE COMPANY AS REVENUE EXPENDITURE. THE ASSESSEE EXPLAINED THAT THIS EXCHANGE FLUCTUATION AMOUNTING TO RS.54,68,161/ - IS ON REVENUE ACCOUNT. THE ASSESSEE'S CONTENTION WAS REJ ECTED AND ADDITION WAS MADE AND SIMULTANEOUSLY PENALTY UNDER SECTION 271(1)(C ) INITIATED FOR FURNISHED OF INACCURATE PARTICULARS OF ITS INCOME AND NOTICE UNDER SECTION 274 R.W. S . 271 WAS ISSUED ON 31.3.2005.MEANWHILE,AGGRIEVED BY THE DISALLOWANCE,THE ASSE SSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA),WHO UPHELD THE DISALLOWANCE MADE IN THE ASSESSMENT ORDER . AFTER GIVING EFFECT TO THE ORDER OF THE FAA , THE EFFECTIVE DISALLOWANCE WAS CALCULATED TO RS. 12,76,202/ - . THE ASSESSEE WAS GIVEN ONE MORE OP PORTUNITY OF BEING HEARD VIDE AO'S LETTER DT. 5.3.2010. THE QUERY WAS REPLIED VIDE LETTER DATED 24.03.2010 AND IT WAS STATED THAT T HE DIFFERENCE IN THE 4701 & 4702 /1 1 ; PRATIBHA SHIPPING 2 RETURNED INCOME AND INCOME AS FINALLY ASSESSED UNDER THE NORMAL PROVISIONS WAS MAINLY ON ACCOUNT OF DISAL LOWANCE OF FOREIGN EXCHA NGE LOSS WHICH HAD BEEN HELD TO BE CAPITAL IN NATURE BY THE FAA AND DISALLOWANCE OF BUSINESS PROMOTION EXPENSES ON AN ESTIMATED BASIS ,THAT T HE EXPENDITURE PER SE HAD NOT BEEN DISPUTED EITHER BY THE AO OR BY THE FAA,THAT T HE VARIATI ON WAS ON ACCOUNT OF A DIFFERENT VIEW TAKEN BY THEM,THAT IT HAD NOT FURNISHED ANY INACCURATE PARTICULARS OF ITS TOTAL INCOME . THE AFORESAID EXPLANATION WAS NOT ACCEPTED BY THE A O. HE WAS OF THE VIEW THAT ASSESSEE HAD MADE MIS - STAT EMENT AND SUPPRESSED THE FA CTS. HE WAS SATISFIED THAT ASSESSEE HAD DELIBERATELY AND CONSCIOUSLY ATTEMPTED TO CONCEAL THE TRUE PARTICULARS OF ITS INCOME AND CONSEQUENTLY ATTEMPTED TO EVAD E THE PAYMENT OF TAXES THEREON. RELIANCE WAS PL ACED ON THE DECISION OF HON'BLE APEX COURT IN THE CA SE OF DHARMENDRA TEXTILES PROCESSORS ( 306 IT R 277 ) AND M /S GOLD COIN. THE AO HELD THAT THE ASSESSEE HAD CONCEALED THE INCOME BY FURNISHING THE INACCURATE PARTICULARS AND HAD COMM ITTED DEFAULT UNDER SECTION 271(1 )(C ) OF THE ACT. HE IMPOSED A PENALT Y,BEING 1 00% OF THE TAX SOUGHT TO BE EVADED, ON INCOME OF R S .12,76,202 / - WHICH WORKED OUT TO RS. 4,91,338/ - . 3. IN APPELLATE PROCEEDINGS, THE ASSESSEE HAD FILED WRITTEN SUBMISSIONS AND VARIOUS CASE LAWS PROTESTING AGAINST THE AFORESAID ACTION OF THE AO.IT WAS STATED THAT THOUGH THE LIABILITY WAS CAPITAL LIABILITY WHEN SHIPS WERE TAKEN ON HIRE, UPO N TERMINATION OF THE BBCD AGREEMENT, THE SAID LIABILITY CEASED TO BE IN RESPECT OF AC QUISITION OF SHIP AND THE LIABILITY BECAME PART OF CIRCULATING CAPITAL OF THE APPELLA NT AND NOT FIXED CAPITAL. ACCORDINGLY, THE APPELLANT CLAIMED THE EXCHANGE LOSS AS REVENUE LOSS. RELIANCE WAS PLACED IN THIS REGARD ON THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF WOODWARD GOVERNOR INDIA P. LTD. ( 312 ITR 254 ). BUT,THE FAA DISMISSED THE APPEAL FILED BY THE ASSESSEE HOLDING THAT THE EXPENDITURE WAS CAPITAL IN NATURE AND THE ASSESSEE HAD INACCURATE PARTICULARS OF INCOME. 4. AS STATED EARLIER,NO ONE APPEARED BEFORE US ON BEHALF OF THE ASSESSEE .THE DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE FAA AND STATED THAT QUANTUM APPEAL FOR THE YEAR UNDER CONSIDERATION WAS DECIDED BY THE TRIBUNAL,THAT THE TRIBUNAL HAD HELD THAT EXPENDITURE CLAIMED BY THE ASSESSEE AS REVENUE WAS CAPITAL IN NATURE.WE HAVE PERUSED THE MATERIAL O N RECORD.WE FIND THAT THE RE WAS DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE ABOUT TREATING THE LOSS ON FOREIGN E XCHANGE FLUCTUATION,THAT THE ASSESSEE HAD FURNISHED ALL THE DETAILS ABOUT THE CLAIM MADE BY IT AND HAD STATED THAT AFTER THE REPOSSESS ION OF THE SHIP THE TRANSACTION HAD BECOME PART OF THE WORKING CAPITAL.THUS,ALL THE DETAILS OF ABOUT THE CLAIM WERE AVAILABLE ON FILE.IN OUR OPINION,CONFIRMATION OF AN ADDITION BY HIGHER JUDICIAL FORUM DO NOT LEAD TO AUTOMATIC IMPOSITION OF PENALTY U/S.271 (1)(C)OF THE ACT. DECISION IN QUANTUM APPEAL IS ONE OF THE DECISIVE FACTOR FOR ADJUDICATING PENALTY PROCEEDINGS,BUT THAT IS NOT THE SOLE BASIS.IF A CLAIM MADE BY AN ASSESSEE IS NOT FOUND TO BE ALLOWABLE IT CAN BE DISALLOWED AND ADDED TO ITS TAXABLE INCOME. BUT,IT WOULD NOT MEANT THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME OR HAD FILED INACCURATE PARTICULARS. IN OTHER WORDS,IT IS A DIFFERENT MATTER THAT THE AMOUNT WAS BROUGHT UNDER THE ASSESSMENT. HOWEVER, AS LONG AS THERE IS POSSIBILITY TO UNDER STAND THE PROVISION IN DIFFERENT WAYS AND THE ASSESSEE HAS CHOSEN ONE, THE OCCASION TO INVOKE SECTION 271 OF THE ACT DOES NOT ARISE. COURTS ARE OF THE VIEW THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM THE ASSESSMENT PROCEEDINGS AND THAT ISSUE OF LEVY OF PE NALTY SHOULD BE DECIDED AFTER CONSIDERING THE EXPLANATION FURNISHED BY THE ASSESSEE IN RESPONSE TO THE NOTICES ISSUED U/S.271(1) (C)OF THE ACT. IN ITS REPLY TO THE PENALTY NOTICE THE ASSESSEE HAD FILED AN EXPLANATION AND WE ARE OF THE OPINION THAT IT WAS A PLAUSIBLE 4701 & 4702 /1 1 ; PRATIBHA SHIPPING 3 EXPLANATION. IF ANY INFORMATION I S SUPPRESSED BY THE ASSESSEE AND BUT FOR THE ATTENTIVENESS OF THE AO,IT WOULD HAVE ESCAPED TAXATION, THE ASSESSEE HAS TO BE DEALT WITH STERNLY ,BUT NOT IN A CASE WHERE THE ASSESSEE HAS FILED AN EXPLANATION THAT IS PR IMA FACIE REASONABLE. IN THE CASE UNDER CONSIDERATION T HE REPLY FILED BY IT WAS NEITHER FANCIFUL NOR TOTALLY UNACCEPTABLE. WE FIND THAT IN THE CASE OF RELIANCE PETRO PRODUCTS P.LTD.(322ITR158)THE HONBLE SUPREME COURT HAS HELD THAT MERELY BECAUSE AN ASSESSE E RAISES A CLAIM WHICH IS EVENTUALLY DISALLOWED, THAT DOES NOT MEAN THAT THE INGREDIENTS OF CLAUSE (C) OF SECTION 271(1)OF THE ACT ARE SATISFIED OR FULFILLED SO AS TO JUSTIFY IMPOSITION OF A PENALTY. THEREFORE,CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCE S OF THE CASE AND FOLLOWING THE ABOVE JUDGMENT OF THE HONBLE APEX COURT, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE AND REVERSE THE ORDER OF THE FAA. ITA NO . 4702/ M UM/2011 (AY.02 - 03) : 5. THE FACTS OF THE CASE UNDER APPEAL ARE IDENTIC AL TO THE FACTS OF THE EARLIER YEAR . THEREFORE FOLLOWING THE SAME WE REVERSE THE ORDER OF THE FAA AND DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT APPEALS FILED BY THE ASSESSEE FOR BOTH THE A.Y.S STAND ALLOWED. . . . ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST,2015. 21 ST , 2015 SD/ - SD/ - ( / PAWAN SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 21 .08.2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.