DCIT, New Delhi V. M/s. Sir Shadi Lal Enterprises (P) Ltd., New Delhi

ITA 5148/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6365 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 08-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL SENIOR
• Assessee Lawyers: G N GUPTA I T P
• Keywords: Charitable institution; Bonafide belief; Wrong claim
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.5148/DEL./2013 (ASSESSMENT YEAR : 2009-10) DCIT, CIRCLE 8 (1), VS. M/S. SIR SHADI LAL ENTERP RISE (P) LTD., NEW DELHI. 4 A, HANSALAYA, 15, BARAKHAMBA ROA D, NEW DELHI. (PAN : AAECS3636D) CO NO.46/DEL/2014 (IN ITA NO.5148/DEL./2013) (ASSESSMENT YEAR : 2009-10) M/S. SIR SHADI LAL ENTERPRISE (P) LTD., VS. DCIT, CIRCLE 8 (1), 4 A, HANSALAYA, 15, BARAKHAMBA ROAD, NEW DELHI. NEW DELHI. (PAN : AAECS3636D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.N. GUPTA, ITP REVENUE BY : SMT. ANIMA BARNWAL, SENIOR DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION B Y THE ASSESSEE ARE FILED AGAINST THE ORDER OF THE CIT (APPEALS)-XXXIII , NEW DELHI DATED 28.05.2013 FOR THE ASSESSMENT YEAR 2009-10. ITA NO.5148/DEL./2013 CO NO.46/DEL/2014 2 2. THE SOLE ISSUE IN THE REVENUES APPEAL THAT IS B EFORE US IS DELETION OF PENALTY OF RS.11,64,041/- LEVIED BY AO UNDER SECTIO N 271(1)(C) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT). 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING AND SALE OF SUGAR IN ITS TWO UNITS, NAMELY, UPPER D OAB SUGAR MILLS & UNN SUGAR COMPLEX AND ALCOHOLIC PRODUCTS IN TWO UNITS, NAMELY, SHAMLI DISTILLERY & CHEMICAL WORKS & PILKHANI DISTILLERY & CHEMICAL WORKS AND WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND C LOSED ITS ACCOUNTS ON 31 ST MARCH, 2009 FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE FILED RETURN OF INCOME THOUGH E-FILING U/S 139(1) OF THE ACT ON 29. 09.2009 DECLARING AN INCOME OF RS.53,41,386/-, HOWEVER, THE TAXABLE INCO ME AFTER ALLOWING AND SET OFF OF BROUGHT FORWARD LOSSES WAS NIL. THE ASSESSE E CLAIMED THAT NO TAX WAS DUE ON RETURNED INCOME AND PREPAID TAXES (TDS) OF R S.1,73,133/- WAS CLAIMED REFUNDABLE IN THE RETURN. THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT ON 14.12.2011 DETERMINING THE INC OME AT RS.95,59,885/-, INTER ALIA, BY MAKING THE FOLLOWING ADDITIONS / DIS ALLOWANCES :- (I) PROVISION OF INTEREST ON SDF LOAN RS.14,45,71 0/- (II) COLLECTION OF DHARMADA FOR CHARITABLE PURPOSE AND INTEREST ACCRUED ON ACCUMULATED FUND OF DHARMADA RS.30,84,058/- (III) HOLOGRAM WRITTEN OFF RS. 1,69,655/- HOWEVER, THE AFORESAID ASSESSED INCOME OF RS.95,59, 885/- WAS SET OFF FROM BROUGHT FORWARD LOSSES AND THE INCOME WAS DETERMINE D AT NIL. ITA NO.5148/DEL./2013 CO NO.46/DEL/2014 3 3.1 THE AO ISSUED NOTICE U/S 274 R.W.S. 271 OF THE ACT DATED 14.12.2011 AND AGAIN ON 07.06.2012 DIRECTING THE ASSESSEE TO S HOW CAUSE WHY AN ORDER IMPOSING A PENALTY BE NOT PASSED PURSUANT TO ORDER U/S 143(3) OF THE ACT DATED 14.12.2011. THE ASSESSEE SUBMITTED THE WRITTEN REP LIES DATED 11.01.2012 AND 13.06.2012 CONTAINING THE DETAILED SUBMISSIONS ON E ACH POINT OF ADDITION/ DISALLOWANCE MADE IN THE ASSESSMENT ORDER. HOWEVER , THE AO, BEING NOT SATISFIED WITH THE SUBMISSIONS, LEVIED A PENALTY OF RS.15,97,334/- U/S 271(1)(C) OF THE ACT. 4. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE TH E LD. CIT (A) WHO DELETED THE PENALTY BY OBSERVING AS UNDER :- I HAVE CONSIDERED ENTIRE JUDICIAL PRONOUNCEMENTS ON THIS ISSUE CITED BY LD. AR AND THE ASSESSING OFFICER. AFTER CO NSIDERING THESE JUDICIAL PRONOUNCEMENT, I AM OF THE OPINION THAT UN LESS A CASE IS MADE, THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME, PENALTY U/S 271(1)(C) IS NOT LAVIABLE. IN ORDER TO SATISFY EITHER OF THESE TWO CRITERIA, THE COURT HAS DECIDED THAT FOR LEVY OF PENALTY U/S 271 (L )(C), EITHER THERE SHOULD BE EX- FACIE BOGUS CLAIM OF EXPENSE, DEDUCTION BY THE ASSESSEE OR THERE SHOULD PRIMA FACIE NO TWO DIFFERENT OPINION ON THE ISSUE OF ADDITION. IN THE LIGHT OF ABOVE, I WOULD NOW EXAMINE THE FACT S OF THE CASE, WHETHER EITHER OF THESE TWO CRITERIA IS SATISFIED IN RESPEC T OF THREE ITEM OF ADDITIONS SEPARATELY:- . 1) ADDITION ON ACCOUNT OF PROVISION OF INTEREST ON SUGAR DEVELOPMENT FUND (SDF) FOR RS. 14,45,710/-. THE ASSESSING OFFICER DISALLOWED THE INTEREST PAYAB LE TO IFCI UNDER SECTION 43B OF THE ACT. THE LD. AR HAS ARGUED THAT THE SUGA R DEVELOPMENT FUND WAS CREATED BY GOVERNMENT OF INDIA, MINISTRY OF CON SUMER AFFAIRS, FOOD & PUBLIC DISTRIBUTION DEPARTMENT OF FOOD AND PUBLIC DISTRIBUTION TO PROVIDE LOAN FOR MODERNIZATION OF SUGAR PLANT. DURI NG THE APPELLATE PROCEEDING, ON THE NATURE OF LOAN, LD. AR HAS FILED LETTER NO. 4-1I2005- SDF, GOVERNMENT OF INDIA, DT. 1-07-2005, WHERE IT I S MENTIONED THAT LOAN HAS BEEN SANCTIONED TO THE ASSESSEE COMPANY AFTER C ONSIDERING ITS ITA NO.5148/DEL./2013 CO NO.46/DEL/2014 4 APPLICATION FOR MODERNIZATION/ REPLACEMENT OF TWO N UMBERS OF BOILERS WITH INCIDENTAL EXPANSION OF CRUSTING CAPACITY OF SUGARC ANE. IN THAT LOAN APPROVAL LETTER, IT IS MENTIONED THAT THE AMOUNT OF LOAN WILL BE DISBURSED THROUGH FINANCIAL INSTITUTION I.E. IFCI IN THIS CAS E. THE ASSESSING OFFICER ON SIMILAR ISSUE HAS ACCEPTED THE ALLOWANCE OF DEDUCTION UNDER SECTION 43B FOR THE A.Y 2000-01. AS THE LOAN IS FROM SUGAR DEVELOPMENT FUND AND IFCI IS ONLY DISBURSING AGENCY THE ASSESSEE WAS UNDER REASONABLE BELIEF BEFORE THE ORDER OF ITA T THAT SECTION 43B IS NOT APPLICABLE AS THE LOAN IS SANCTIONED BY THE GOV ERNMENT OF INDIA. THEREFORE, HIS ARGUMENT THAT THERE WAS PRIMA FACIE TWO OPINION AT THE TIME OF FILING RETURN OF INCOME AND IT IS NOT A CASE OF EX-FACIE BOGUS CLAIM OF DEDUCTION APPEARS TO BE CONVINCING. IN VIEW OF THE ABOVE AND CONSIDERING ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT PENALTY U/S 271(1)(C) IS NOT LEVIABLE. 2) ADDITION ON ACCOUNT OF DHRMADA COLLECTION AND IN TEREST ON ACCUMULATED FUND:- LD. AR'S MAIN ARGUMENT AGAINST THE NON LEVY OF PENA LTY U/S 271(1)(C) ON THIS QUANTUM OF ADDITION IS THAT AT THE TIME OF FIL ING OF INCOME TAX RETURN, THERE WAS DIRECT DECISION ON THE ISSUE OF THE APEX COURT IN THE CASE OF CIT VS. BIJLI COTTON MILLS 116 ITR 60 (SC) WHERE IT WAS HELD THAT DHARMADE COLLECTION IS NOT A REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE. FURTHER, THE APPELLANT HAS FILED APPEAL AGAINST THE ORDER OF ITAT ON THIS ISSUE AND UNDER RULE 16 OF I. T.RULE, 1962 READ WITH SEE 158 A( 1) OF THE ACT, THE APPELLANT HAS FILED FORM NO.8 FOR OTHER YEARS AND T HE ASSESSING OFFICER HAS ACCEPTED THE SAME VIDE ORDER DATED 14.12.2011 FOR A .Y 2003-04, CIT(A) HAS GIVEN THE RELIEF TO THE ASSESSEE WHICH WAS REVE RSED BY HON'BLE ITAT VIDE ORDER DT. 4.6.2010. THEREFORE, ON THE DATE OF FILING OF RETURN OF INCOME, THERE WAS TWO OPINIONS AVAILABLE ON THE TAX ABILITY OF DHARAMDA COLLECTION. I, THEREFORE, AM OF THE VIEW THAT CONSIDERING THE F ACTS AND CIRCUMSTANCES, PENALTY U/S 271 (1)(C) IS NOT LEVIABLE. 3) ADDITION OF RS. 1,69,655 ON ACCOUNT OF WRITING O FF UNUSED HOLOGRAM:- LD. AR'S MAIN ARGUMENT AGAINST NON LEVIABILITY OF P ENALTY U/S 27L (L)(C) ON THIS ADDITION IS THAT AS PER UP EXCISE RULES, THE H OLOGRAMS PRINTED AND ISSUED FOR A PARTICULAR YEAR CAN ONLY BE CONSUMED D URING THE YEAR AND THE DISTILLERIES HAVE TO DESTROY THE SAME AFTER THE END OF THE YEAR AS PER RULES AND GUIDELINES FRAMED BY EXCISE DEPARTMENT. THE UNU SED HOLOGRAM IS OF NO USE FOR BUSINESS PURPOSE, THEREFORE, ITS MARKET VALUE IS NIL. THEREFORE, THE ASSESSEE HAS WRITTEN OFF UNUSED HOLOGRAM AT THE END OF THE YEAR CONSISTENTLY. DURING THE INSTANT ASSESSMENT YEAR, T HE ASSESSING OFFICER HAS MADE ADDITION, AT FIRST APPELLATE STAGE, C1T(A) GAV E RELIEF TO THE ASSESSEE. ITA NO.5148/DEL./2013 CO NO.46/DEL/2014 5 HOWEVER, HON'BLE IT A T HELD THAT UNLESS THE HOLOGR AM IS DESTROYED, THE SAME CANNOT BE WRITTEN OFF. THEREFORE, AT THE TIME OF FILING INCOME TAX RETURN, THE DECISION OF ITA T ORDER WAS NOT THERE. HENCE, THE APPELLANT WAS OF BONAFIDE BELIEF THAT WRITING OFF OF UNUSED HOLOG RAM IS LEGAL AT IT CANNOT BE USED NEXT YEAR. LD. AR'S ARGUMENT THAT THE PRESE NT ADDITION CANNOT BE SAID AS EX-FACIE BOGUS-APPEARS TO BE CONVINCING. AC CORDINGLY, I AM OF THE VIEW THAT PENALTY U/S 271(L)(C) IS NOT LEVIABLE ON THIS ADDITION ALSO. 5. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFOR E US AGAINST THE DELETION OF PENALTY U/S 271(1)(C) OF THE ACT. 6. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF TH E AO AND SUBMITTED THAT THE LAW IS VERY CLEAR THAT EVEN IF THERE IS NO CONC EALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS ON THE GROUND OF DISCLOSURE, BUT IT IS A CLAIM APPEARS TO BE EX-FACIE BOGUS, IT WILL STILL A TTRACT PENALTY PROVISIONS. HE SUBMITTED THAT THE AO HAS RIGHTLY LEVIED THE PENALT Y WHICH THE LD. CIT (A) ERRED IN DELETING THE SAME. THEREFORE, HE WANTS US TO SET ASIDE THE ORDER OF THE LD. CIT (A) AND RESTORE THAT OF THE AO. 7. LD. AR FOR THE ASSESSEE, WHILE RELYING ON THE OR DER OF THE CIT (A), SUBMITTED THAT IN THE ASSESSEES OWN CASE FOR AY 20 07-08 IN ITA NO.5147/DEL/2013 DATED 14.11.2014, THE TRIBUNAL HAS DELETED THE PENALTY LEVIED U/S 271(1)(C) AGAINST THE SIMILAR ADDITIONS MADE IN THIS ASSESSMENT YEAR ALSO. THEREFORE, HE PLEADED THAT THE ORDER OF THE LD. CIT (A) BE UPHELD. 8. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. WE NOTE THAT THE AO MADE THE PENALTY U/S 271(1)(C) OF THE ACT AGAINST THE FOLLOWING ADDITIONS / DISALLOWANCES :- ITA NO.5148/DEL./2013 CO NO.46/DEL/2014 6 (I) PROVISION OF INTEREST ON SDF LOAN RS.14,45,710 /- (II) COLLECTION OF DHARMADA FOR CHARITABLE PURPOSE AND INTEREST ACCRUED ON ACCUMULATED FUND OF DHARMADA RS.30,84,058/- (III) HOLOGRAM WRITTEN OFF RS. 1,69,655/- WE FIND THAT THE ITAT IN THE ASSESSEES OWN CASE FO R AY 2007-08 (SUPRA) HAS DELETED THE PENALTY WHEREIN ALSO THE PENALTY WAS LE VIED AGAINST THE ADDITIONS OF PROVISION OF INTEREST ON SDF LOAN AND ADDITION O N ACCOUNT OF DHARMADA ACCOUNT. THEREFORE, THE ISSUE AGAINST THE AFORESAI D TWO ADDITIONS IS COVERED BY THE AFORESAID DECISION OF THE TRIBUNAL. WE FIND THAT IN THIS YEAR, THE ADDITION WAS ALSO MADE ON ACCOUNT OF WRITING OFF UN USED HOLOGRAM. WE NOTE THAT THE LD. AR'S MAIN ARGUMENT AGAINST NON-LEVIABI LITY OF PENALTY U/S 27L (L)(C) ON THIS ADDITION IS THAT AS PER UP EXCISE RU LES, THE HOLOGRAMS PRINTED AND ISSUED FOR A PARTICULAR YEAR CAN ONLY BE CONSUM ED DURING THE YEAR AND THE DISTILLERIES HAVE TO DESTROY THE SAME AFTER THE END OF THE YEAR AS PER RULES AND GUIDELINES FRAMED BY EXCISE DEPARTMENT; AND THE UNU SED HOLOGRAM IS OF NO USE FOR BUSINESS PURPOSE, THEREFORE, ITS MARKET VAL UE IS NIL. THEREFORE, THE ASSESSEE HAS WRITTEN OFF UNUSED HOLOGRAM AT THE END OF THE YEAR CONSISTENTLY. WE FIND THAT DURING THE INSTANT ASSESSMENT YEAR, TH E AO HAS MADE ADDITION AND, AT FIRST APPELLATE STAGE, THE CIT(A) GAVE RELI EF TO THE ASSESSEE. HOWEVER, ITAT HELD THAT UNLESS THE HOLOGRAM IS DESTROYED, TH E SAME CANNOT BE WRITTEN OFF. WE FIND THAT THE LD. CIT (A) OBSERVED THAT AT THE TIME OF FILING INCOME ITA NO.5148/DEL./2013 CO NO.46/DEL/2014 7 TAX RETURN, THE DECISION OF ITAT ORDER WAS NOT THER E, HENCE, THE ASSESSEE WAS OF BONAFIDE BELIEF THAT WRITING OFF OF UNUSED HOLOG RAM IS LEGAL SINCE IT CANNOT BE USED NEXT YEAR AND WE CONCUR WITH THE SAID VIEW OF THE LD. CIT (A) AND ALSO OF THE VIEW THAT THE CLAIM OF THE ASSESSEE IS NOT BOGUS. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT (A) DELETING THE PENALT Y ON THIS ADDITION ALSO. SO, WE UPHOLD THE ORDER OF THE CIT (A) DELETING THE PEN ALTY LEVIED U/S 271(1)(C) OF THE ACT. 9. THE GROUNDS TAKEN IN THE CROSS OBJECTION FILED B Y THE ASSESSEE ARE ONLY SUPPORTIVE OF THE ORDER OF THE LD. CIT (A). AS WE HAVE ALREADY DISMISSED THE APPEAL OF THE REVENUE AND UPHELD THE ORDER OF THE L D. CIT (A), THE CROSS OBJECTION OF THE ASSESSEE HAS BECOME INFRUCTUOUS, H ENCE DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 15 TH DAY OF MARCH, 2016. SD/- SD/- (N.K. SAINI) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 15 TH DAY OF MARCH, 2016/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXXIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.