M/s. Millenium International, New Delhi V. ACIT, New Delhi

ITA 4956/DEL/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69204 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 25-07-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Assessee Lawyers: VIKAS JAIN S
• Keywords: Business expenditure; Wrong claim
• Section: 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.4956/DEL/2010 ASSESSMENT YEAR : 2001-02 M/S MILLENNIUM INTERNATIONAL, ACIT, 712-ARUNACHAL, CIRCLE-33 (1), 19-BARAKHAMBA ROAD, NEW DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL KAPOOR & SHRI VIKAS JAIN, ADVOCATES. RESPONDENT BY : SHRI SAMEER SHARMA, SR. DR ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD CIT(A) DATED 31.8.2010. THE ASSESSEE HAS TAKEN TWELVE G ROUNDS OF APPEALS. HOWEVER, THE CRUX OF GROUNDS OF APPEAL IS AGA INST UPHOLDING BY LD CIT(A) PENALTY ORDER 271(1)( C) IMPOSED BY ASSESSI NG OFFICER. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PART NERSHIP FIRM ENGAGED IN THE BUSINESS OF CONSULTANCY TO VARIOUS FOREIG N ENTERPRISES. THE ASSESSEE IS INTO THE BUSINESS OF PROVIDING AFTER SALE SER VICES AND FOR THAT SERVICES WAS BEING PAID. THE ASSESSEE IN ITS P&L A CCOUNT HAS SHOWN TOTAL RECEIPTS OF ` .32,49,796/- AND ALSO DECLARED AN AMOUNT OF ` .12,41,831/- AS COMMISSION. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT IN FACT THE ASSESSEE HAD REC EIVED A TOTAL SUM OF ` .17,41,821/- AS COMMISSION OUT OF WHICH IT HAD REDUCE D ` .5,00,000/- AS HAVING BEEN PAID TO M/S JAI POLYPAN (P ) LTD. AS ITA NO4956/DEL/2010 2 COMMISSION FOR PROVIDING AFTER SALE SERVICES ON ITS BEHAL F. THE ASSESSEE WAS ASKED TO FILE CONFIRMED COPY OF ACCOUNT OF P AYEE. FROM THE COPY OF CONFIRMATION, THE ASSESSING OFFICER OBSERVED THAT BESIDES COMMISSION OF ` .5,00,000/-, A SUM OF ` .10,20,000/- WAS ALSO PAID TO THE PAYEE FOR AFTER SALE SERVICES. THE ASSESSING OFFICER OBSERV ED THAT THIS AMOUNT OF ` .10,20,000/- WAS ALSO REDUCED FROM THE GROSS INCOME RATHER THAN DECLARING SEPARATELY IN ITS P&L A/C. THE ASSESSEE WAS ALSO ASKED TO FILE INCOME TAX RETURN OF THE PAYEE AND ON GOING THROUGH THE RETURN THE ASSESSING OFFICER OBSERVED THAT PAYEE HAD PAI D TAX U/S 115JA OF THE ACT AND HAD INCURRED LOSSES. AFTER RECORD ING THE STATEMENT OF DIRECTOR OF PAYEE COMPANY THE ASSESSING OFFICER OBSE RVED THAT THE PAYEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTUR ING OF PVC DOORS, PROFILES, TIN CONTAINERS ETC. THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF ` .15,20,000/- ON THE FOLLOWING BASIS:- A) NO PARTICULARS REGARDING SERVICES RENDERED BY PAYEE COMPANY WERE PROVIDED. B) THE DIRECTOR OF THE COMPANY HAD NO EXPERIENCE IN THE FIELD OF RUBBER INDUSTRY AND PARTICULARLY IN THE FIELD OF PRO DUCTION OR INSTALLATION OF MARINE HOSES IN WHICH THE ASSESSEE WAS OPER ATING AND PROVIDING AFTER SALE SERVICES. 3. THE ASSESSEE FILED APPEAL BEFORE LD CIT(A) IN RESPEC T OF ADDITIONS AND GOT THE RELIEF FROM LD CIT(A) AND ON APPEAL FIL ED BY THE REVENUE, THE TRIBUNAL REVERSED THE RELIEF GIVEN BY LD CIT(A) AND UPHELD THE ORDER OF ASSESSING OFFICER AND AGAINST THE ORDER OF TRIB UNAL, THE ASSESSEE DID NOT FILE ANY APPEAL. IN THE MEAN TIME, THE ASSESSING OFFICER IMPOSED PENALTY U/S 271(1)( C) OF THE ACT. AG AINST PENALTY ORDER, THE ASSESSEE FILED APPEAL BEFORE LD CIT(A). THE LD CIT(A) DID NOT ACCEPT THE CONTENTION OF ASSESSEE AND UPHELD THE PENALT Y ORDER. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO4956/DEL/2010 3 5. AT THE OUTSET, THE LD AR SUBMITTED THAT ASSESSEE HAS BE EN MAKING REGULAR PAYMENTS TO THE PAYEE COMPANY FOR THE LAST THREE YEARS AND ASSESSING OFFICER HAD NOT MADE ANY DISALLOWANC E ON SUCH COMMISSION PAYMENT. MOREOVER, IT WAS NOT A CASE WHERE THE AMOUNTS OF COMMISSION WERE CREDITED ONLY AS ON THE CLOSE OF THE YEAR. THEREFORE, HE SUBMITTED THAT EXPENDITURE WAS GENUINE BUSINESS EXPENDITURE AND CONSIDERING THE SMALL NATURE OF AMOUN T, THE APPEAL BEFORE THE HIGH COURT WAS NOT PREFERRED. HE FURTHER ARGUED THAT LD CIT(A) HAD DELETED THE ADDITION MADE BY ASSESSING OFFIC ER AND HAS GIVEN THE ASSESSEE RELIEF THEREFORE IT BECOMES CLEAR THA T IT WAS A CASE WHERE TWO OPINIONS WERE POSSIBLE. IF TWO VIEWS WERE PO SSIBLE PENALTY U/S 271(1)( C) CANNOT BE IMPOSED. RELIANCE IN THIS RESP ECT WAS PLACED ON THE DECISION OF AMRITSAR BENCH OF ITAT IN I.T.A. N O.171/ASR/2010 (PARA 13 WAS READ). CONTINUING HIS ARGUMENTS HE SUBMITT ED THAT IT WAS NOT A CASE WHERE ASSESSEE HAS NOT FILED EXPLANATION AND I TS EXPLANATIONS WAS BONA FIDE. THERE IS DIFFERENCE BETWE EN UNPROVED CLAIM AND A FALSE CLAIM. HE SUBMITTED THAT IT WAS NOT A FALSE CLAIM AS THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUE S AND ASSESSEE HAS BEEN MAKING PAYMENTS FOR THE LAST THREE YEARS AND IN VIEW OF THE ABOVE HE SUBMITTED THAT IT WAS A CASE OF U NPROVED CLAIM THAT TOO HELD BY ONE OF THE TWO APPELLATE AUTHORITI ES, THEREFORE, IT WAS ARGUED THAT SINCE THERE WERE TWO VIEWS, PENALTY CANNO T BE IMPOSED. 6. THE LD DR, ON THE OTHER HAND, ARGUED THAT ADDITI ONS WERE FINALLY CONFIRMED BY ITAT AND ASSESSEE DID NOT FILE ANY APPEAL BEFORE HON'BLE HIGH COURT AND ONUS WAS ON THE ASSESSEE TO SUBSTANTIATE AS T O WHETHER THE EXPENSES WERE GENUINE OR NOT AS THE ASSESSEE WAS NOT ABLE TO PROVE AS TO WHAT SERVICES WERE PROVIDED TO THE ASSESSEE. THEREFORE, HE SUBMITTED THAT THE HON'BLE ITAT HAD RI GHTLY REVERSED THE DECISION OF LD CIT(A). WITH REGARD TO CLAIM OF LD AR THAT IN EARLIER YEARS ALSO THE PAYMENTS WERE MADE, THE LD DR SUBMITTED THAT IN THE EARLIER ITA NO4956/DEL/2010 4 YEARS ASSESSMENTS WERE COMPLETED U/S 143(1A) AND IT CANNOT BE SAID THAT ASSESSING OFFICER HAD GONE THROUGH SUCH CLAIM MADE BY THE ASSESSEE. MOREOVER, HE ARGUED THAT RULE OF RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS AND EVERY YEAR IS AN INDEPE NDENT YEAR. CONTINUING HIS ARGUMENT HE SUBMITTED THAT ASSESSEE WAS IN FLATING EXPENSES FOR THE LAST THREE YEARS AND WHEN FINALLY THE CASE OF THE ASSESSEE WAS SCRUTINIZED U/S 143(3) OF THE ACT, THE ASSESSING OFFICER CAME TO KNOW ABOUT THE FACT OF EXPENSES BEING INFLATE D. HE FURTHER ARGUED THAT PAYEE WAS NOT IN THE SAME LINE OF BUSINESS A ND WAS NOT IN A POSITION TO UNDERTAKE THE SERVICES. THEREFORE, THE C LAIM OF THE ASSESSEE WAS FALSE. IN VIEW OF THE ABOVE, HE ARGUED THAT LD CIT(A) HAS RIGHTLY UPHELD THE PENALTY. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARING ON THE CONTROVERSY AND, THEREFORE, IT IS SALUTARY UPON US TO TAKE NOTE OF THE RELEVANT PROVISIONS OF SECTION 271(1)(C) ALONG WIT H EXPLANATION 1 WHICH READ AS UNDER: 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICE S, CONCEALMENT OF INCOME, ETC. (1). IF THE ASSESSING OFFICER OR THE COMMISSIONER (APPEAL S) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, I S SATISFIED THAT ANY PERSON (A) AND (B)******** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FUR NISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF P ENALTY. (I) AND (INCOME-TAX OFFICER,)******** ITA NO4956/DEL/2010 5 (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLAUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL N OT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICU LARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURAT E PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1.- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFE RS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR T HE COMMISSIONER(APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT A BLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATE RIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED B Y HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING TH E TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESE NT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONC EALED. 8. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THAT F OR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LE ARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS BEFO RE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INC OME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS T HE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDE R THIS SECTION CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FEAT URES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCOME. THE ITA NO4956/DEL/2010 6 SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE A SSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICU LARS, IN CERTAIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDI CATE SO, STATUTORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FAC TS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATIO N OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEA RNED CIT(APPEALS); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF T HE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND T HE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AN D THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MA TERIAL TO THE COMPUTATION OF THE TOTAL INCOME. UNDER FIRST SITUATIO N, THE DEEMING FICTION WOULD COME TO PLAY IF THE ASSESSEE FAILED TO GI VE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASSESSING OFFICER OR T HE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDING TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MAT ERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FI DE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUT ATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUA TIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1) (C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY I N THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE I N COMPUTING THE TOTAL INCOME OF THE ASSESSEE, FOR THE PURPOSE OF SECTION 271(1)(C) ITA NO4956/DEL/2010 7 WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RES PECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 9. NOW THE PRESENT CASE IS NOT A CASE WHERE THE ASSESSEE HA D NOT FURNISHED EXPLANATION OR HAD NOT SUBSTANTIATED THE EX PLANATION. THE ASSESSEE HAD PRODUCED EVEN DIRECTOR OF THE PAYEE COMPAN Y WHO HAD AGREED TO HAVE RECEIVED THE PAYMENT. THE HON'BLE TR IBUNAL HAD REVERSED THE ORDER OF LD CIT(A) ON THE BASIS THAT THER E WAS NO EVIDENCE IN THE PAPER BOOK ABOUT THE COMPLAINTS RECEIVED BY THE ASSESSEE AND COMMUNICATED TO THE PAYEE COMPANY. FURTHER IT HELD THAT THERE WAS NO RECORD OF VISITS MADE BY THE ENGINEERS AND EMPLOYEES OF THE PAYEE COMPANY TO THE SITE OF RELIANCE PETROCHEMICALS LTD. 10. FROM THE FINDINGS OF ABOVE TRIBUNAL ORDER, IT IS APPARENT THAT IT REVERSED THE DECISION OF LD CIT(A) ON THE BASIS OF LACK OF EVIDENCE IN THE PAPER BOOK. THEREFORE, IT EMERGES THAT IF ASSESSEE C OULD PRODUCE SUCH EVIDENCE, THE FINDINGS OF THE TRIBUNAL MIGHT HAV E BEEN DIFFERENT. THE LD CIT(A) HAD GIVEN RELIEF BY NOT CONSIDERING TH IS ASPECT. THEREFORE, IT IS A CASE WHERE TWO APPELLATE AUTHORITI ES HAS TAKEN DIFFERENT VIEW ON THE SAME SUBJECT BY RELYING UPON DI FFERENT EVIDENCES. THE AMRITSAR BENCH OF THE TRIBUNAL IN I.T.A. NO.171 /ASR/2010 HAS HELD THAT WHERE THERE ARE TWO VIEWS POSSIBLE PENALTY U/S 271 (1)(C ) CANNOT BE INVOKED. THEREFORE, FOLLOWING THE JUDGMENT OF A MRITSAR BENCH WE HOLD THAT PENALTY U/S 271(1)( C) WAS MOT IMPOSABLE. TH EREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IS ALLOWE D. 12. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH DAY OF AUGUST, 2013. SD/- SD/- (RAJPAL YADAV ) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 8.8.2013. HMS ITA NO4956/DEL/2010 8 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 31.7.2013 DATE OF DICTATION 1.8.2013 DATE OF TYPING 1.8.2013 DATE OF ORDER SIGNED BY BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED.