Sakal Paper Ltd., Pune V. DCIT, Cir.-6, Pune

ITA 497/PUN/2010

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9493 (ITAT-PUNE)
• Duration Of Justice: 7 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-10-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 08-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK AGGARWAL
• Assessee Lawyers: ASHOK KOTHARI
• Keywords: Question of law; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.497/PUN/2010 / ASSESSMENT YEAR : 2004-05 SAKAL PAPERS LTD., 595, BUDHWAR PETH, PUNE 411 002. PAN : AACCS7605Q. . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, CIRCLE 6, PUNE. . / RESPONDENT ASSESSEE BY : SHRI ASHOK KOTHARI REVENUE BY : SHRI VIVEK AGGARWAL. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE O RDER OF COMMISSIONER OF INCOME TAX (A)-III, PUNE DT. 17.12.200 9 FOR THE ASSESSMENT YEAR 2004-05. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF PRINTING AND PUBLISHING OF NEWSPAPERS AND PERIODICALS. ASSES SEE FILED ITS RETURN OF INCOME FOR A.Y. 2004-05 ON 30.10.2004 DECLARING TOTAL INCOME OF RS.25,92,74,910/-. THE CASE WAS SELECTED FOR SCR UTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT V IDE ORDER / DATE OF HEARING : 24.10.2017 / DATE OF PRONOUNCEMENT: 17.01.2018 2 DT.30.08.2006 AND THE TOTAL INCOME WAS DETERMINED AT RS.28,54,84,860/- INTER-ALIA BY DISALLOWING LEGAL EXPENSES OF RS.90,70,080/-, EXPENSES TOWARDS REPAIRS AND MAINTENANCE OF RS.1,08,89,864/- AND EXPENSES TOWARDS PUBLICITY EXPENSES RS.62,50,000/-. ON THE DISALLOWANCE OF LEGAL EXPENSES (RS.90,70,080/-) AND EXPENSES OF REPAIRS AND MAINTENANCE (RS.1,8,89,864/-), AO VIDE ORDER DT.31.03.2009 LEVIED PENALTY U/S 271(1)(C) OF THE ACT AT RS.71,60,630/-. AGGRIEVED BY THE ORD ER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORD ER DT.17.12.2009 (IN APPEAL NO.PN/CIT(A)-III/CIR.6/430/09-10) DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAIS ED THE FOLLOWING GROUNDS : ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CA SE THE LEARNED ASSESSING OFFICER AND CIT APPEALS ERRED IN : 1. HOLDING THAT THE ASSESSEE CONCEALED THE INCOME A ND /OR CONCEALED THE PARTICULARS OF INCOME ATTRACTING PROVISIONS OF SEC . 271(1)( C) OF THE INCOME TAX ACT , 1961 AND LEVYING THE PENALTY OF RS . 71,60,630/- . THIS ACTION BEI N G BAD IN LAW IT IS PRAYED THAT THE PENALTY OF RS.71 ,60,630/- BE DELETED . 2. I NVOKING THE PROVISIONS OF SEC. 271(1) ( C) AND LEVY ING PENALTY OF RS. 71,60,630/ -. THE ACTION BEING BAD IN LAW IT IS SUBMITTED THAT TH AT THE PENALTY BE DELETED . 3. NOT ACCEPTING AND / OR NOT CONSIDERING AND / OR HOL DING THAT THE ARGUMENTS THE EXPLANATION GIVEN SUBMISSIONS MADE, A ND ARGUMENTS ADVANCED BY THE ASSESEE ARE NOT CONVINCING AND AS S UCH ARE NOT ACCEPTABLE AND THEREBY LEVYING PENALTY OF RS. 71 , 60,630/- U/S 271(1) (C). IT IS SUBMITTED THAT THE EXPLANATIONS GIVEN B Y THE ASSESEE BE CONSIDERED AND ACCEPTED AND THE PENALTY BE DELETED . 4. HOLDING THAT THE DISALLOWANCE OF LEGAL EXPENSES OF RS . 90,70,080/-- ON THE GROUND THAT THEY ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, AS FURNISHING OF INACCURATE PA RTICULARS OF INCOME AND / OR CONCEALMENT OF INCOME ATTRACTING PROVISION S OF SEC. 271(1)( C) AND THEREBY LEVYING PENALTY U/S 271(1)(C) . THE ACTION BEING BAD IN LAW IT IS SUBMITTED THAT THE PENALTY LEVIED BE DELE TED . 3 5. H OLDING THAT THE TREATMENT OF REPAIRS AND MAINTENANC E EXPENSES OF RS. 1,08 , 89,854/- AS CAPITAL EXPENDITURE BY THE AO AMOUNTS T O FURNISHING OF I NACCURATE PARTICULARS AND / OR CONCEALMENT OF INCOME ATTRACTING PROVISIONS OF SEC . 271(1) (C) AND THEREBY LEVYING PENALTY U/S 271(1) (C) . THE ACTION BEING BAD IN LAW IT IS SUBMITTED THAT TH E PENALTY LEV I ED BE DELETED. 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT THOUG H ASSESSEE HAS RAISED SEVERAL GROUND BUT THE SOLE CONTRO VERSY IS WITH RESPECT TO LEVY OF PENALTY ON THE EXPENSES DISALLOWED BY AO. 4. BEFORE US, LD.A.R. SUBMITTED THAT OUT OF THE EXPENSES T OWARDS REPAIRS AND MAINTENANCE THE AO DISALLOWED RS.1,08,89,864/- A S HE WAS OF THE VIEW THAT THE EXPENDITURE WAS ON CAPITAL ACCO UNT AND THEREFORE NOT ALLOWABLE AS REVENUE EXPENDITURE. HE SUBMI TTED THAT AGAINST THE ORDER OF AO, WHEREBY THE EXPENSES WERE DIS ALLOWED, THE MATTER WAS CARRIED BEFORE TRIBUNAL. HE SUBMITTED THAT TH E CO- ORDINATE BENCH OF THE TRIBUNAL WHILE DECIDING THE APPEAL IN ITA NOS.724 AND 736/PUN/2008 ORDER DT.13.06.2014 HAS DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE. HE PLACED ON RECORD THE COPY OF THE AFORESAID DECISION AND POINTED TO THE RELEVANT FINDINGS OF T HE TRIBUNAL. HE THEREFORE SUBMITTED THAT SINCE THE ADDITION ITSELF HAS B EEN DELETED AND THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE, NO PENALTY ON SUCH ADDITION SURVIVES. WITH RESPECT TO THE PENALTY O N THE DISALLOWANCE OF LEGAL EXPENSES, LD.A.R., SUBMITTED THAT THE E XPENSES WERE INCURRED ON SUITS FILED AGAINST THE ASSESSEE RELATING TO SHARE TRANSFER. THE SUBMISSION OF THE ASSESSEE THAT THE EXPEN DITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINES S WAS NOT FOUND ACCEPTABLE TO THE AO. LD.A.R. FURTHER SUBMITTED THA T THE ALLOWABILITY OF LEGAL EXPENSES IS A DEBATABLE ISSUE IN VIEW OF TH E FACT 4 THAT AGAINST THE QUANTUM DISALLOWANCE MADE AND CONFIRMED BY THE APPELLATE AUTHORITIES, ASSESSEE HAS FILED APPEAL BEFORE THE H ONBLE BOMBAY HIGH COURT AND THE HONBLE BOMBAY HIGH COURT HAS ADMIT TED THE APPEAL OF ASSESSEE VIDE APPEAL NO.2403 OF 2011. HE PLACED ON RECORD THE COPY OF THE AFORESAID ORDER OF HONBLE HIGH CO URT AT PAGE 18 OF THE PAPER BOOK. HE THEREFORE SUBMITTED THAT WHEN THE ISSUE OF LEGAL EXPENSES IS DEBATABLE IN NATURE, THE QUESTION OF PENA LTY ON SUCH DEBATABLE ADDITION DOES NOT ARISE. HE THEREFORE SUBMITTED THAT THE PENALTY BE DELETED. LD.D.R. ON THE OTHER HAND, DID NOT CON TROVERT THE SUBMISSIONS MADE BY LD.A.R. BUT HOWEVER SUPPORTED THE OR DER OF LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPEC T TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT ON THE ADDITION OF RS.1,08,89 ,864/- ON ACCOUNT OF REPAIRS AND MAINTENANCE AND RS.90,70,080/- ON ACCOUNT OF LEGAL EXPENSES. AS FAR AS THE ISSUE OF DISALLOWA NCE OF REPAIRS AND MAINTENANCE OF RS.1,08,89,864/- IS CONCERNED, W E FIND THAT THE QUANTUM ISSUE HAS BEEN DECIDED BY THE CO-ORD INATE BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. ONCE THE QUANTUM ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THE PENALTY ON SU CH ADDITION DOES NOT SURVIVE. AS FAR AS THE LEVY OF PENALTY ON DISALLOW ANCE OF LEGAL EXPENSES IS CONCERNED, WE FIND THAT THE DISALLOWANCE MADE BY THE AO WAS UPHELD BY THE APPELLATE AUTHORITIES. AGAINST THE ORDE R OF APPELLATE AUTHORITIES, ASSESSEE CARRIED THE MATTER BEFORE HONBLE BOMBAY HIGH COURT AND THE HONBLE BOMBAY HIGH COURT VID E ORDER DT.04.03.2013 IN ITA NO.2403 OF 2011 HAS ADMITTED THE ISSU E AS 5 BEING A SUBSTANTIAL QUESTION OF LAW. WHEN THE HONBLE HIGH COURT H AS ADMITTED THE ISSUE BEING AS SUBSTANTIAL QUESTION OF LAW, T HEN IT BECOMES APPARENT THAT THE ADDITION IS CERTAINLY DEBATAB LE AND IN SUCH A SITUATION, PENALTY CANNOT BE LEVIED U/S 271(1)(C) OF T HE ACT ON SUCH DEBATABLE ADDITION AND FOR THIS PROPOSITION, WE FIND SUP PORT BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF C IT VS. NAYAN BUILDERS AND DEVELOPERS REPORTED IN 368 ITR 722 (BOM). IN VIEW OF THE AFORESAID FACTS, WE DIRECT THE DELETION OF PENALTY ON BOTH THE ISSUES. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 17 TH DAY OF JANUARY, 2018. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 17 TH JANUARY, 2018. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-III, PUNE. CIT-III, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.