Sh. Jagjit Singh, Chandigarh V. ITO, Chandigarh

ITA 536/CHANDI/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9828 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 536/CHD/2014 ASSESSMENT YEAR: 2009-10 SHRI JAGJIT SINGH, VS. THE ITO, WARD-3(2), CHANDIGARH CHANDIGARH PAN NO. APGPS2394E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI R.K.GUPTA DATE OF HEARING : 15/06/2015 DATE OF PRONOUNCEMENT : 19/06/2015 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A),CHANDIGARH DATED 26.3.2014 IN CONFIRMING THE PENALTY OF RS. 1,08,452/- IMPOSED U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 ( IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETU RN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 31 ST MARCH, 2010 DECLARING A TOTAL INCOME A RS. 7,67,760/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS, ON THE BASIS OF AIR INFORMATION. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE WORKED AS AN EXHIBITOR AND INFRASTRUCTURE PROVIDER. DURING THE COURSE OF EXAMINATION OF THE CASE, THE ASSESSING OFFICER NOTI CED THAT ASSESSEE HAD DEBITED 2 AN AMOUNT OF RS. 1,01,999/- ON ACCOUNT OF BUILDING MATERIAL AND RS. 75,000/- AS PROCESSING CHARGES IN THE TRADING / PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER DISALLOWED THE ABOVE EXPENSES STATING THAT THEY ARE OF CAPITAL NATURE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. WHILE SCRUTINIZING THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, THE ASSESSING OFF ICER ALSO NOTED THAT ASSESSEE HAS DEBITED AN AMOUNT OF RS. 66,405/- AS INTEREST O N OVER DRAFT (HEREIN REFERRED TO O.D.). THE ASSESSING OFFICER ALSO NOTICED THA T THE ASSESSEE HAD WITHDREW FUNDS OF RS. 9 LAKHS FROM THE BUSINESS AS IMPREST. THE ASSESSING OFFICER DISALLOWED RS. 66,405/- STATING THAT THIS IS NOT AN ALLOWABLE EXPENSE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE A SSESSING OFFICER FURTHER OBSERVED THAT ASSESSEE HAD DEBITED AN AMOUNT OF RS. 34,663/- UNDER THE HEAD CREDIT CARD PAYMENTS. THE ASSESSING OFFICER DISAL LOWED THE SAME HOLDING THAT THE SAME WAS NOT RELATED TO THE BUSINESS. SINCE T HE ASSESSEE HAS FAILED TO DISCLOSED FULLY AND TRULY PARTICULARS OF HIS INCOME , PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED. A SHOW CAUSE NOTICE WAS I SSUED TO THE ASSESSEE ON 28.12.2011 AND IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE SUBMITTED WRITTEN REPLY ON 14.2.2012 STATING, INTER ALIA THAT THE IMP UGNED ADDITIONS WERE MADE ON ESTIMATE BASIS AND HE HAS NOT SUBMITTED ANY INACCUR ATE PARTICULARS AND CONCEALED ANY FACTS AND ALL THE PARTICULARS OF INCOME AND EXP ENSES ARE SHOWN IN THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET OF THE ASSES SEE. THUS THE BONAFIDE OF THE ASSESSEE CANNOT BE DOUBTED. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE EXPLANATION OF THE ASSESSEE AND IMPOSED PENAL TY OF RS. 1,08,452/- U/S 271(1)(C) OF THE ACT. 3. ON APPEAL THE CIT(A) CONFIRMED THE PENALTY FOR T HE REASONS STATED IN PARA 5 TO 5.2 OF THE IMPUGNED ORDER AND, HENCE, THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3 4. I HAVE HEARD SHRI TEJ MOHAN SINGH LD. COUNSEL FO R THE ASSESSEE AND SHRI R.K. GUPTA, LD. DR AT LENGTH AND ALSO HAVE PERUSED THE MATERIALS AVAILABLE ON RECORD. 5. IT APPEARS FROM THE RECORD THAT ABOVE ADDITIONS MADE BY THE ASSESSEE IN THE ASSESSMENT ORDER WAS NEVER CHALLENGED BY FILING AN APPEAL BEFORE THE CIT(A). AS PER RECORDS, THE ASSESSEE HAD DEBITED RS . 1,01,999/- ON ACCOUNT OF BUILDING MATERIAL AND RS. 75,000/- ON ACCOUNT OF TR ADING CHARGES TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER HAS DISALLO WED THESE EXPENSES MERELY STATING THAT AS THESE EXPENSES WERE OF CAPITAL NATU RE. HE HAS NOT GIVEN ANY DETAILED FINDING ON THIS ISSUE. IT IS TRUE THAT IN THE COURSE OF PENALTY PROCEEDINGS, FINDINGS RECORDED IN QUANTUM PROCEEDIN G CAN BE REFERRED TO AND RELIED UPON, BUT CONFIRMATION OF THE QUANTUM ADDITI ON BY ITSELF CANNOT BE REASON ENOUGH FOR IMPOSING PENALTY U/S 271(1)(C) OF THE A CT. IN THE INSTANT CASE THE ASSESSING OFFICER HAD NOT GIVEN ANY INDEPENDENT REA SONS FOR IMPOSING PENALTY BUT HAD MERELY RELIED UPON THE FACT THAT IN THE QUA NTUM PROCEEDINGS, THE EXPENSES CLAIMED BY THE ASSESSEE WERE HELD TO BE OF CAPITAL NATURE. IN MY CONSIDERED OPINION, ON THIS SCORE ALONE THE PENALTY LEVIED IN RESPECT TO THE ABOVE AMOUNT BY THE ASSESSING OFFICER CAN BE HELD B AD IN LAW AND DESERVES TO BE CANCELLED. IT IS TRUE THAT PENALTY PROCEEDINGS A ND THE QUANTUM PROCEEDINGS ARE DIFFERENT AND INDEPENDENT PROCEEDINGS. AS PER L AW, THE ASSESSING OFFICER WAS OBLIGED TO GIVE INDEPENDENT REASONS FOR IMPOSIN G PENALTY U/S 271(1)(C). THE ASSESSEE CLAIMED THESE EXPENSES AS REVENUE EXPE NSES IN THE PROFIT AND LOSS ACCOUNT. HOWEVER, THE ASSESSING OFFICER TREATED THE SE EXPENSES OF CAPITAL NATURE. THUS, THERE WAS DIFFERENCE OF OPINION BETWE EN THE ASSESSING OFFICER AND THE ASSESSEE. EVEN OTHERWISE ALSO THIS ISSUE IS DE BATABLE IN THE SENSE THAT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE WHETHER T HESE EXPENSES CAN BE TREATED AS REVENUE EXPENSES OR CAPITAL EXPENSES WHICH CAN B E ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY BE CONCEIVABLY TWO 4 OPINIONS. THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER ON T HIS ISSUE EXCEPT ONE LINE IS WRITTEN WHICH READS: THESE EXPENSES ARE OF CAPITAL NATURE SHOULD HAVE BEEN CAPITALIZED . HE HAS NOT ASSIGNED ANY REASON AS TO WHY THESE EXPENSES CAN BE CONSIDERED AS OF CAPITAL NATURE. O N THE CONTRARY THE ASSESSEE HAS CLAIMED THESE EXPENSES AS REVENUE EXPENDITURE. SUCH ISSUES ARE NEVER FREE FROM CONTROVERSY AND, THEREFORE, NO PENALTY U/S 271 (1)(C) OF THE ACT CAN BE LEVIED ON THE ABOVE AMOUNT. 6. THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS. 66,405 /- ON ACCOUNT OF INTEREST ON OVERDRAFT. THE ASSESSING OFFICER NOTICE D THAT ASSESSEE HAD WITHDRAWN FUNDS OF RS. 9 LAKHS FROM BUSINESS AS IMP REST AND SO HE DISALLOWED THIS INTEREST OF RS. 66,405/- AND IMPOSED PENALTY U /S 271(1)(C) OF THE ACT ON AN AMOUNT OF RS. 66,405/- ALSO. 7. SHRI TEJ MOHAN SINGH, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULA RS OF INCOME AND CONCEALED ANY FACTS. ALL THE PARTICULARS OF INCOME AND EXPEN SES ARE SHOWN IN THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET OF THE ASSES SEE. IT IS OBSERVED THAT THIS AMOUNT HAS BEEN DISALLOWED OUT OF THE INTEREST EXPE NSES WHICH WERE CLAIMED ON OVERDRAFT ACCOUNT. SHRI TEJ MOHAN SINGH, LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT THIS AMOUNT HAS BEEN ROUTED THROUGH BOOKS OF ACCOUNT. ACCORDING TO LD. COUNSEL FOR THE ASSESSEE, THE ISSU E IS DEBATABLE IN THE SENSE THAT WHETHER THE AMOUNT OF INTEREST CLAIMED IS ALLO WABLE OR NOT, IT IS NOT FREE FROM CONTROVERSY AND, HENCE, THERE IS NO CONCEALMEN T OF INCOME OR FILING OF ANY INACCURATE PARTICULARS OF INCOME. 8. IT IS APPARENT FROM THE RECORD THAT ASSESSEE HA D WITHDRAWN RS. 9 LAKHS FROM THE BUSINESS AS IMPREST. THE ASSESSING OFFIC ER HAS MADE DISALLOWANCE OF RS. 66,405/- WITHOUT ASSIGNING ANY REASON WHICH IS CLEAR FROM PARA 3.3 OF THE ASSESSMENT ORDER. PARA 3.3 OF THE ASSESSMENT ORDER READS AS UNDER:- 5 3.3 INTEREST ON O.D. WHILE SCRUTINIZING THE PROFIT AND LOSS ACCOUNT OF T HE ASSESSEE IT IS NOTICED THAT THE ASSESSEE HAS DEBITE D AN AMOUNT OF RS. 66,405/- AS INTEREST ON O.D. HOWEVER , WHILE FURTHER EXAMINING THE CASE IT IS NOTICED THAT THE ASSESSEE HAS WITHDREW FUNDS OF RS. 9 LACS FROM THE BUSINESS AS IMPREST. KEEPING THIS FACT IN VIEW, TH IS IS NOT AN ALLOWABLE EXPENSE. AS SUCH AN ADDITION OF RS. 66 ,405/- IS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 9. EVEN IN THE PENALTY ORDER THE ASSESSING OFFICER HAS NOT GIVEN INDEPENDENT REASONS FOR IMPOSING PENALTY BUT MERELY RELIED UPON THE FINDINGS GIVEN IN THE ASSESSMENT ORDER. IN FACT THE ASSESSI NG OFFICER DISALLOWED RS. 66,405/- WITHOUT ASSIGNING ANY REASON. HE HAS SIMP LY OBSERVED THAT THIS AMOUNT IS NOT AN ALLOWABLE EXPENSE. THE PENALTY ORD ER PASSED BY ASSESSING OFFICER IS NON-SPEAKING AND THE ASSESSING OFFICER H AS NOT GIVEN ANY INDEPENDENT REASON FOR IMPOSING PENALTY. IT IS WEL L SETTLED LAW THAT CONFIRMATION OF QUANTUM ADDITION BY ITSELF CANNOT B E REASON ENOUGH FOR IMPOSING CONCEALMENT PENALTY U/S 271(1)(C) OF THE A CT. I HAVE ALREADY OBSERVED HEREINABOVE THAT ISSUE IS DEBATABLE IN THE SENSE THAT THE AMOUNT OF INTEREST CLAIMED ON OVERDRAFT IS ALLOWABLE OR NOT, IS NOT FREE FROM CONTROVERSY. SECONDLY, THE ASSESSING OFFICER HAS NOT GIVEN ANY I NDEPENDENT REASON WHILE IMPOSING PENALTY U/S 271(1)(C) OF THE ACT. ON BOTH COUNTS, PENALTY U/S 271(1)(C) IS NOT LEVIABLE ON THE AMOUNT OF DISALLOW ANCE OF RS. 66,405/-. ACCORDINGLY, I CANCEL THE IMPUGNED PENALTY. 10. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD DISALLOWED RS. 34,663/- BEING CREDIT CARD PAYMENTS OBSERVING AS UN DER:- 3.4 FURTHER , WHILE EXAMINING THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE IT IS NOTICED THAT ASSESSEE HAS DEBITED TH E FOLLOWING AMOUNTS:- 6 I) CREDIT CARD PAYMENT : RS. 34,663/-:- THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 34,663/- UNDER THE HEAD CREDIT CARD PAYMENTS. THE SAME ARE DISALLOWED BEING NOT RELATED TO BUSINESS. 11. THE ASSESSING OFFICER LEVIED PENALTY U/S 271(1) (C) OF THE ACT OF ABOVE AMOUNT STATING THAT THE ADDITION OF RS. 34,663/- WA S MADE BY HIS PREDECESSOR AS THE SAME WAS NOT RELATED TO BUSINESS. HE, THEREFOR E, HELD THAT IT IS A FIT CASE WHERE PENALTY U/S 271(1)(C) OF THE ACT SHOULD BE IM POSED. THE LD. CIT(A) CONFIRMED THE PENALTY. 12. SHRI TEJ MOHAN SINGH LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THERE IS NO QUESTION OF CONCEALMENT OF INCOME OR FILING O F INACCURATE PARTICULARS OF INCOME BECAUSE AMOUNT HAS BEEN ROUTED THROUGH THE B OOKS OF ACCOUNT. THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER AND ALSO IN T HE PENALTY ORDER AS TO HOW THESE EXPENSES ARE NOT RELATED TO BUSINESS. THE ASS ESSING OFFICER HAS NOT POINTED OUT ANY SINGLE ITEM OF EXPENSES WHICH WAS N OT RELATED TO BUSINESS. THERE ARE NO SUCH FINDINGS THAT THESE EXPENSES ARE NON-GENUINE OR BOGUS OR WAS CLAIMED TO REDUCE THE TAX LIABILITY. IN THE ABSEN CE OF SUCH FINDINGS, I AM OF THE OPINION THAT LEVY OF PENALTY U/S 271(1)(C) OF THE A CT IS NOT CORRECT. IN THE CASE OF DCIT V ABHISHEK EXPORTS (2014) 148 ITD 20 (AHD.) , THE TRIBUNAL HELD THAT MERELY BECAUSE SUCH AN EXPENSES CLAIMED BY THE ASSE SSEE HAVE INCURRED IN CASH BUT NOT SUPPORTED BY DOCUMENTARY EVIDENCE TO THE SA TISFACTION OF REVENUE AUTHORITIES, IT COULD NOT BE SAID THAT REVENUE HAS PROVED THAT EXPENSES CLAIMED WERE NOT GENUINE. THE RELEVANT OBSERVATIONS MADE BY THE ITAT, AHMEDABAD BENCH ARE AS UNDER (HEAD NOTE PAGE 22) :- IN THE ABSENCE OF COMPLETE AND CONVINCING CORROBOR ATIVE EVIDENCE, THE REVENUE MAY JUSTIFIABLY DISALLOW CERT AIN PART OF THE EXPENSES CLAIMED BY THE ASSESSEE, BUT IN THE MA TTER OF 7 PENALTY PROCEEDINGS, THE ONUS LIES HEAVILY ON THE R EVENUE TO PROVE THAT THE ASSESSEE HAD CONCEALED ITS INCOME OR HAS FILED INACCURATE PARTICULARS OF ITS INCOME. IN THIS CASE, THE REVENUE HAS FAILED TO PROVE THAT THE CLAIM OF THE EXPENSES UNDER THE HEAD WAGES TO WORKERS WERE NON-GENUINE OR WERE IN FLATED BY THE ASSESSEE. MERELY BECAUSE CERTAIN EXPENSES HA VE BEEN CLAIMED BY THE ASSESSEE TO HAVE INCURRED IN CASH AN D WERE NOT SUPPORTED BY DOCUMENTARY EVIDENCE TO THE SATISFACTI ON OF THE REVENUE AUTHORITIES, IT COULD NOT BE SAID THAT THE REVENUE HAS PROVED THAT THE EXPENSES CLAIMED WERE INFLATED OR N ON- GENUINE. THE TRIBUNAL FURTHER OBSERVED AS UNDER (HEAD NOTE P AGE 22):- IT IS WELL SETTLED THAT THE PARAMETERS OF JUDGING THE JUSTIFICATION FOR ADDITION MADE IN THE ASSESSMENT C ASE OF THE ASSESSEE IS DIFFERENT FROM THE PENALTY IMPOSED ON A CCOUNT OF CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTI CULARS OF INCOME AND THAT CERTAIN DISALLOWANCE/ADDITION COULD LEGALLY BE MADE IN THE ASSESSMENT PROCEEDING ON THE PREPOND ERANCE OF PROBABILITIES, BUT NO PENALTY COULD BE IMPOSED U NDER SECTION 271(1)(C) OF THE ACT ON THE PREPONDERANCE O F PROBABILITIES AND REVENUE HAS TO PROVE THAT THE CLA IM OF THE EXPENSES BY THE ASSESSEE WAS NOT GENUINE OR WAS INF LATED TO REDUCE ITS TAX LIABILITY. NO SUCH MATERIAL HAS BEEN PRODUCED BY THE ASSESSING OFFICER TO SUGGEST THAT THE ASSESS EE HAS INFACT INFLATED ITS EXPENSES OR NON-GENUINE EXPENSE S WERE CLAIMED UNDER THE HEAD WAGES TO WORKERS. THE DECI SIONS RELIED UPON BY THE REVENUE ARE DISTINGUISHABLE SINC E IN THESE CASES SOME CORROBORATIVE EVIDENCE TO SUPPORT THE CH ARGE OF CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTI CULARS OF INCOME WAS PRODUCED. THUS, IT IS NOT A FIT CASE TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT, WHICH WAS RIGHT LY CANCELLED BY THE COMMISSIONER (APPEALS) AND THE GRO UNDS OF THE APPEAL OF THE REVENUE BEING WITHOUT ANY MERIT A RE DISMISSED . 8 13. CONSIDERING THE FACTS OF THE PRESENT CASE AND A LSO KEEPING IN VIEW THE DECISION OF ITAT, AHMEDABAD BENCH REFERRED TO ABOVE , I AM OF THE CONSIDERED OPINION THAT NO PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE ON AN AMOUNT OF RS. 34,663/-. 14. IN VIEW OF THE ABOVE, I CANCEL THE PENALTY OF R S. 1,08,452/- IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY CIT(A). 15 IN THE RESULT APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.06.2015 SD/- (H.L.KARWA) VICE PRESIDENT DATED : 19 TH JUNE, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR