DCIT 1(1), MUMBAI V. GOODVALUE MARKETING CO. LTD, MUMBAI

ITA 5071/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6212 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-11-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 04-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: S S PHADKAR
• Keywords: Depreciation; Business expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 5071/MUM/2009 (ASSESSMENT YEAR: 2004-05) DCIT (OSD) - 1(1) M/S. GOODVALUE MARKETING CO. LTD. ROOM NO. 536, AAYAKAR BHAVAN 3RD FLOOR, INDL ASSURA NCE BLDG. M.K. ROAD, MUMBAI 400020 VS. CHURCHGATE, MUMBAI 400020 PAN - AAACG 4925 D APPELLANT RESPONDENT APPELLANT BY: SHRI A.K. NAYAK RESPONDENT BY: SHRI S.S. PHADKAR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A)-I, MUMBAI DATED 09.07.2009 CANCELLING THE PENALTY UNDER SECTI ON 271(1)(C) LEVIED BY THE A.O. 2. REVENUE HAS RAISED THE FOLLOWING GROUND: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY OF RS.3,34 ,300/- LEVIED U/S. 271(1)(C) OF THE ACT, WITHOUT PROPER APPRECIATION O F THE FACTS. 3. BRIEFLY STATED, THE ASSESSEE IS A COMPANY WHICH WAS UNDER BIFR HAS CLAIMED EXPENDITURE IN THE RETURN FILED, TOWARDS WA GES AND SALARY EXPENSES AND DEPRECIATION TOTALLING TO ` 9,31,833/-. THE A.O. DISALLOWED THE ENTIRE EXPENDITURE EVENTHOUGH IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE WAGES AND SALARIES WERE TO BE PAID AS PER THE INSTR UCTIONS OF THE LABOUR COURT AND DEPRECIATION AND OTHER EXPENDITURE WERE I NCIDENTAL TO THE NORMAL COMMERCIAL OPERATIONS OF THE COMPANY AND MAINTENANC E OF THE COMPANY AS SUCH. THE ENTIRE EXPENDITURE WAS DISALLOWED IN THE QUANTUM PROCEEDINGS. SINCE THE ASSESSEE WAS INCURRING LOSS THE ASSESSEE DID NOT PREFER ANY APPEAL. THE A.O. CONSIDERED THE ABOVE FOR LEVY OF P ENALTY AND LEVIED PENALTY ITA NO. 5071/MUM/2009 M/S. GOODVALUE MARKETING CO. LTD. 2 OF ` 3,34,300/-. THE CIT(A), AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE DELETED THE PENALTY STATING AS UNDER: - 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AUTHORIZED REPRESENTATIVE AND GONE THROUGH THE ASSESSMENT ORDE R AND THE ORDER IMPOSING PENALTY U/S. 271(1)(C). FOR THE PURPOSE OF IMPOSITION OF PENALTY, THE ALLOWABILITY OR OTHERWISE OF THE EXPENSES CLAIM ED IS NOT A RELEVANT ISSUE. THE ISSUE FOR CONSIDERATION IS WHETHER BY CL AIMING THE EXPENSES THE APPELLANT HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE FACTS OF THE CASE, SEEN IN THE LIGHT OF THE RELEVANT PROVISIONS WILL NOT SUGGEST A CASE OF FURN ISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THE ASSESSING OFFICER NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR DURIN G THE PENALTY PROCEEDINGS HAS DOUBTED THE ACTUAL INCURRING OF THE EXPENDITURE. IT IS NOT THE CASE THAT THE EXPENDITURE HAS NOT BEEN ACTUALLY INCURRED. IT IS ONLY HIS VIEW THAT THE CLAIM OF DEDUCTION OF SUCH EXPEND ITURE ARE NOT ALLOWABLE U/S. 37(1) SINCE THE APPELLANT HAS NOT CA RRIED ON ANY MANUFACTURING ACTIVITY. IN THE PENALTY ORDER THERE IS NO REFERENCE TO ANY APPEAL FILED BY THE APPELLANT AGAINST THE ADDITION AND THE RESULT OF SUCH APPEAL, IF ANY. TO MY MIND, EVEN THE ADDITION ITSEL F IS ERRONEOUS. THE APPELLANT COMPANY DOES EXIST AND EVEN IF THE MANUFA CTURING ACTIVITY WAS NOT CARRIED OUT, THE COMPANY HAS TO PAY FOR ITS RUNNING EXPENSES LIKE SALARY OF THE STAFF ETC. AND IS ENTITLED TO TH E DEDUCTION TOWARDS DEPRECIATION AS PER LAW. EVEN THE APPELLANT HAD DON E SOME BUSINESS ACTIVITY OF DISPOSING OFF ITS BROUGHT FORWARD STOCK . EVEN IF IT IS HELD THAT THE EXPENSES ARE NOT ALLOWABLE AS BUSINESS EXPENSES , IT WILL NOT AUTOMATICALLY CALL FOR IMPOSITION OF PENALTY U/S. 2 71(1)(C). IT CAN AT BEST BE A DEBATABLE OR DISPUTED CLAIM AND BY MAKING A DE BATABLE CLAIM THE APPELLANT CANNOT BE SUBJECTED TO PENALTY U/S. 271(1 )(C). THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF HARSHVARDHA N CHEMICALS LTD. 250 ITR 212 IS APPLICABLE IN THIS REGARD. FURTHER I N THE CASE OF CIT VS. HARYANA WAREHOUSING REPORTED AT 306 ITR 277, THE PU NJAB & HARYANA HIGH COURT HAVE HELD THAT THE ASSESSEE WHO CANVASSE S A CLAIM ON THE BASIS OF ITS INTERPRETATION OF LAWS WILL NOT LIABLE TO PENALTY IF THE REVENUE DOES NOT ACCEPT THE STAND AND NO FETTERS CAN BE PLA CED ON THE ASSESSEES RIGHT TO CLAIM GENUINE CLAIMS IN ITS RETURN OF INCO ME. THE DECISION OF THE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILES, 3 06 ITR 277 HAS BEEN DISTINGUISHED IN THIS CASE. TAKING INTO ACCOUN T THE ENTITY OF FACTS AND PROVISION OF LAW I AM OF THE OPINION THAT THIS IS NOT A CASE FOR IMPOSING OF PENALTY U/S. 271(1)(C). 4. WE HAVE HEARD THE LEARNED D.R. AND THE LEARNED COUN SEL AND ALSO EXAMINED THE PAPER BOOK PLACED ON RECORD WITH REFER ENCE TO THE NATURE OF EXPENDITURE AND FOUND THAT THE CLAIMS WERE MADE GEN UINELY. THE LEARNED COUNSEL ALSO RELIED ON THE PRINCIPLES ESTABLISHED B Y THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS P. LTD. 322 ITR 158. ITA NO. 5071/MUM/2009 M/S. GOODVALUE MARKETING CO. LTD. 3 AFTER CONSIDERING THE SUBMISSIONS AND EXAMINING THE RECORD WE ARE OF THE VIEW THAT THERE IS NO NEED TO INTERFERE WITH THE OR DER OF THE CIT(A) WHICH NOT ONLY CONSIDERED THE FACTS AND CLAIMS MADE IN THE RE TURN BUT ALSO THE LEGAL PROPOSITIONS. IT IS A FACT THAT THE ASSESSEE IS UND ER BIFR AND HAD TO INCUR VARIOUS EXPENDITURES AS PER THE DIRECTIONS OF THE L ABOUR COURT AS WELL AS FOR MAINTENANCE OF THE CORPORATE STRUCTURE. FOLLOWING T HE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE CASE OF RELIANC E PETROPRODUCTS P. LTD. (SUPRA), MERE DISALLOWANCE OF EXPENDITURE DOES NOT CALL FOR PENALTY UNDER SECTION 271(1)(C). ACCORDINGLY THE ORDER OF THE CIT (A) IS CONFIRMED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH NOVEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) I, MUMBAI 4. THE CIT I, MUMBAI CITY 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.