RUGBY PHARMA PRIVATE LIMITED, MUMBAI V. ACIT 1(3)(1), MUMBAI

ITA 4841/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5414 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PHARMA PVT LTD CO M L SHARMA
• Assessee Lawyers: S M BANDI SMT RIDDHI MISHRA
• Keywords: Proportionate interest
• Section: 271(1)(c); 143(3)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI M. BAL A GANESH ( A M) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 4841 /MUM/ 2017 (ASSESSMENT YEAR 20 09 - 10 ) M/S. RUGBY PHARMA PVT. LTD. C/O.M.L. SHARMA & CO. 107, CHARTERED HOUSE 297/299, DR. C.H. S TREET, MARINE LINES MUMBAI - 400 002. PAN : AABCR9843C V S . ACIT 1(3)(1) ROOM NO. 540 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI S.M. BANDI DEPARTMENT BY SMT. RIDDHI MISHRA DATE OF HEARING 2 1 .1 . 201 9 DATE OF PRONOUNCEMENT 29 . 1 . 201 9 O R D E R PER M. BAL A GANESH (AM) : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - 3, MUMBAI DATED 5.5.2017 FOR A.Y. 2009 - 10. 2. THE ONLY ISSUE TO BE DECIDED IN THIS A PPEAL IS WHETHER LEARNED CIT(A) WAS JUSTIFIED IN UPHOLDING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS ON THIS ISSUE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 29.9.2 009 DECLARING TOTAL INCOME AT RS.80,44,178/ - . ASSESSMENT FOR A.Y. 2009 - 10 WAS COMPLETED U/S. 143(3) OF THE ACT DATED 30.11.2011 DETERMINING THE TOTAL INCOME AT RS. 87,17,930/ - . IN THE SAID ASSESSMENT , THE DISALLOWANCE WAS MADE ON ACCOUNT OF PROFESSIONAL CH ARGES TO THE TUNE OF RS. 2,80,900/ - IN RESPECT OF CONSULTANCY FEES PAID TO NNE PHARMA PLAN INDIA LIMITED FOR THE REASON THAT BILL DID NOT CONTAIN NATURE OF SERVICE RENDERED BY THE SAID PARTY TO THE ASSESSEE - COMPANY. SIMILARLY, THE ASSESSING OFFICER ALSO D ISALLOWED PROPORTIONATE INTEREST EXPENDITURE TO THE TUNE OF RS. 2 3,92,848/ - ON THE GROUND THAT UNSECURED LOAN BORROWED BY THE ASSESSEE ON WHICH INTEREST WAS PAID, WAS PARTIALLY UTILIZED FOR CAPITAL WORK - IN - PROGRESS OF THE ASSESSEE - COMPANY AND ACCORDINGLY, I NTEREST THEREON NEEDS TO BE CAPITALIZED. 4. FROM THE READING OF THE PENALTY ORDER U/S. 271(1)(C) OF THE ACT DATED 28.3.2016, THE ASSESSING OFFICER LEVIED PENALTY TO THE TUNE OF RS. 86,798/ - ONLY ON THE DISALLOWANCE OF CONSULTANCY FEES PAID TO N NE PHARMA PLAN INDIA LTD. TO THE TUNE OF RS. 2,80,900/ - 5. LEARNED AR BEFORE US SUBMITTED THAT DESCRIPTION OF BILLS SPECIFICALLY CONTAINED THAT THE PAYMENT WAS MADE BY THE ASSESSEE FOR CONDUCTING GOODS MANUFACTURING PRACTICE AUDIT (GMP AUDIT) AND COPY OF THE AUDIT REPORT WAS ALSO PLACED ON RECORD BEFORE THE LOWER AUTHORITIES DURING THE COURSE OF PENALTY PROCEEDINGS. HENCE, IT WAS PLEADED THAT SERVICE RENDERED BY THE SAID PARTY TO THE ASSESSEE - COMPANY WAS PROVED BEYOND DOUBT. HE ALSO STATED THAT THE SAID DETAILS COU LD NOT BE FURNISHED BEFORE THE LOWER AUTHORITIES DURING THE QUANTUM APPEAL WHICH RESULTED IN UPHOLDING OF DISALLOWANCE MADE BY THE ASSESSING OFFICER. HE FURTHER SUBMITTED THAT AGAINST THE ORDER PASSED BY LEARNED CIT(A) CONFIRMING THE DISALLOWANCE IN QUANTU M APPEAL, ASSESSEE CHOSE NOT TO PREFER ANY APPEAL BEFORE THIS TRIBUNAL IN VIEW OF THE SMALLNESS OF THE AMOUNT. 6. LEARNED DR ON THE OTHER HAND STATED THAT SINCE QUANTUM HAS BEEN UPHELD BY LEARNED CIT(A) AND THE ASSESSEE NOT BEING IN APPEAL BEFORE THIS TR IBUNAL AGAINST THE SAME, LEVY OF PENALTY ON THE SAID QUANTUM BECOME AUTOMATIC AND HENCE HAS BEEN RIGHTLY LEVIED PENALTY BY THE ASSESSING OFFICER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT PENALTY U/S. 271(1)(C) OF THE ACT HAS BEEN LEVIED IN THE INSTAN T CASE ON THE GROUND THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. WE FIND THAT THE ASSESSEE HAD FURNISHED ENTIRE DETAILS INDICATING NATURE OF SERVICES RENDERED BY NNE PHARMA PLAN INDIA LTD. TOGETHER WITH COPY OF G MP AUDIT REPORT THEREON DURING THE COURSE OF PENALTY PROCEEDINGS . WE HOLD THAT THESE DETAILS WERE NOT 3 APPRECIATED BY THE AUTHORITIES BELOW DURING THE PENALTY PROCEEDINGS. WE FURTHER HOLD THAT LEVY OF PENALTY IS NOT AUTOMATIC. THE ASSESSEE HAD DULY FURNISHE D ALL RELEVANT DETAILS DURING THE COURSE OF PENALTY PROCEEDINGS. MOREOVER, MERE DISALLOWANCE OF EXPENDITURE FOR NON APPRECIATION OF RELEVANT FACTS WOULD NOT RESULT IN LEVY OF PENALTY. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. REPORTED IN 322 ITR 158(SC). RESPECTFULLY FOLLOWING THE SAID DECISION, WE HAVE NO HESITATION IN DIRECTING THE AO TO CANCEL THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT IN THE FACTS AND CIRCUMSTAN CES OF THE INSTANT CASE. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 29 . 1 . 201 9 . SD/ - SD/ - (AMARJIT SINGH ) (M. BALGANESH ) J U DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 29 / 1 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR P RIVATE S ECRETARY ) PS ITAT, MUMBAI