Super Cassettes Industries Ltd., Noida V. JCIT, New Delhi

ITA 5376/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58584 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 1995-1996
• Appeal Filed On: 01-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEVINDER SINGH
• Assessee Lawyers: SANJEEV KWATRA
• Keywords: Depreciation; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A NO. 5376/DEL/11 ASSTT. YEAR 1995-96 SUPER CASSETTES INDUSTRIES LTD. PLOT NO. 1, FILM CENTRE, SECTOR-16A, NOIDA 201301 AABCS4712P VS. JCIT CIRCLE-9 (1) ROOM NO. 163, C.R. BUILDING, I.P. ESTATE, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SANJEEV KWATRA, CA RESPONDENT BY: DR. DEVINDER SINGH, DR ORDER PER RAJPAL YADAV, JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LD. CIT(A) DATED 14 TH SEPTEMBER, 2011. THE SOLITARY GRIEVANCE RAISED BY THE ASSESSEE READ AS UNDER :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)-12, NEW DELHI, ERRED IN CONFIRMING THE PENALTY LEVIED B Y THE LD. ASSESSING OFFICER ON A/C OF ALLEGED FURNISHING OF I NACCURATE PARTICULARS OF INCOME TO THE EXTENT OF RS. 4,30,383 /- PERTAINING TO ALLEGED DISALLOWANCE OF EXPENSES FOR THE FLAT NO. 21F-2, MAGNUM TOWER. MUMBAI, WHICH INCLUDES :- ITA NO. 5376/DEL/11 ASSTT. YEAR 1995-96 2 A. MAINTENACE EXPENSES RS. 3,00,997/- B. ELECTRICITY EXPENSES RS. 1,00,702/- C. REPAIR & MAINTENANCE EXPENSES RS. 7,732/- THAT THE APPELLANT CRAVES TO ADD, ALTER, AMEND OR M ODIFY ANY OF THE ABOVE GROUNDS OF APPEAL OR TAKE UP ANY ADDIT IONAL GROUNDS OF APPEAL AT THE TIME OF HEARING OR EARLIER . 2. LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT FOR SIMILAR DISALLOWANCE ON FLAT NO. 21F-2, MAGNUM TOWE R, MUMBAI A PENALTY WAS IMPOSED U/S 271(1)(C) IN ASSTT. YEAR 1 996-97. THE DISPUTE TRAVELED UP TO THE TRIBUNAL AND THE TRIBUNAL HAS DE LETED THE PENALTY. HE PLACED ON RECORD COPY OF THE TRIBUNALS ORDER IN IT A NO. 788/D/2011. LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF REVENUE AUTHORITIES BELOW. 3. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE HA VE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT AN IDENTICAL GRO UND WAS TAKEN BY THE ASSESSEE IN ASSTT. YEAR 1996-97. EXCEPT VARIATION I N THE QUANTUM, THERE IS NO DISPARITY ON FACTS. THE ORDER OF THE TRIBUNAL IN ITA NO. 788/D/2011 READ AS UNDER :- THIS IS ASSESSEES APPEAL. FOLLOWING GROUNDS ARE RAISED:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LEARNED CIT (APPEALS)-XII, NEW DELHI, ERRED IN SUSTAINING THE PENALTY OF RS.2,38,475/- IMPOSED BY THE ASSESSING O FFICER ON ACCOUNT OF DISALLOWANCE EXPENSES OF RS.5,18,423/- W HICH WAS CLAIMED IN PROFIT AND LOSS ACCOUNT PERTAINING TO FL AT NO.21F-2, MAGNUM TOWER, MUMBAI. ITA NO. 5376/DEL/11 ASSTT. YEAR 1995-96 3 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE ACTION OF THE LEARNED CIT(APPEALS) XII, NEW DELHI IS BAD IN LAW AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COUNSEL FOR THE ASSESSEE REFERS TO T HE RELEVANT PORTION OF ASSESSING OFFICERS ORDER LEVYING THE PENALTY WHICH HAS BEEN CONFIRMED BY THE CIT(A) AS UNDER:- 4. THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.5,18,4 23/- ON ACCOUNT OF RESIDENTIAL FLAT USED BY THE DIRECTORS. OUT OF THIS AMOUNT THE ELECTRICITY, REPAIR AND MAINTENANCE AND TELEPHO NE EXPENSES AMOUNTING TO RS.1,82,800/-, RS.24,100/- AND RS.3,11 ,447/- RESPECTIVELY WERE INCURRED IN RESPECT OF THE RESIDE NTIAL FLAT LOCATED IN GROUP HOUSING SOCIETY AT BOMBAY. THE ASSESSEE H AD ADMITTED THAT THE SAID PREMISES WAS UTILIZED BY THE MANAGING DIRECTOR FOR HIS PERSONAL USE. ACCORDINGLY, THE A.O. DISALLOWED THE SE EXPENSES TREATING THE SAME AS PERSONAL EXPENSES UNDER THE PR OVISION OF SECTION 37(4) OF THE ACT AND ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. IN ITS REPLY THE ASSESSEE HA S SUBMITTED THAT IT WAS NEVER ADMITTED BY THE ASSESSEE THAT THE FLAT IN QUESTION WAS USED BY THE MANAGING DIRECTOR FOR HIS PERSONAL PURP OSES, THAT ONE OF THE MAIN BUSINESS OF THE ASSESSEE IS BY FILM MUS IC RIGHTS AND TO SELL RECORDED CASSETTES THEREOF, THAT THE MANAGING DIRECTOR AND OTHER DIRECTORS OF THE COMPANY WHO ARE BASED IN DEL HI HAD TO MAKE FREQUENT VISITS TO MUMBAI AND DURING THE COURSE OF SUCH VISITS THE FLAT UNDER REFERENCE WAS USED BY THEM FOR THE PURPO SE OF STAY. THE ASSESSEE FURTHER SUBMITTED THAT THERE WAS NO GROSS OR WILLFUL NEGLECT AND HENCE HE WOULD NOT COME WITHIN THE MISC HIEF OF SECTION 271(1)(C) OF THE ACT. THE CONTENTIONS RAISED BY TH E ASSESSEE HAVE BEEN CONSIDERED BUT NO FORCE HAS BEEN FOUND THEREIN . THE FLAT IN QUESTION IS ADMITTEDLY BEING USED AS A GUEST HOUSE AND THEREFORE THE EXPENDITURE INCURRED BY THE ASSESSEE ON ITS MAI NTENANCE IS NOT ADMISSIBLE BY VIRTUE OF THE BAR ON THE ALLOWANCE OF SUCH EXPENDITURE CONTAINED IN SECTION 37(4) OF THE ACT. SECTION 37(4) LAYS DOWN THAT ANY ACCOMMODATION, BY WHATEVER NAME CALLED, MAINTAINED HIRE, RESERVED OR OTHERWISE ARRANGED BY THE ASSESSEE FOR THE PURPOSE OF PROVIDING LODGING OR BOARDING AND LO DGING TO ANY PERSON (INCLUDING ANY EMPLOYEE OR, WHERE THE ASSESS EE IS A COMPANY, ALSO ANY DIRECTOR OF, OR THE HOLDER OF ANY OTHER OFFICE IN, THE COMPANY), ON TOUR OR VISIT TO THE PLACE AT WHIC H SUCH ACCOMMODATION IS SITUATED, IS ACCOMMODATION IN THE NATURE OF A GUEST-HOUSE WITHIN THE MEANING OF SUB-SECTION (4). IT IS ALSO TO BE NOTICED THAT THE ADDITION MADE BY THE A.O. ON THIS ACCOUNT WAS CONFIRMED BY THE LD.CIT(A) AND FURTHER APPEAL FILED BY THE ASSESSEE WAS ALSO DISMISSED BY THE HONBLE ITAT AND IN THIS WAY THE STAND TAKEN BY THE A.O. HAS BEEN UPHELD BY THE APPELLATE AUTHORITIES. IN ITA NO. 5376/DEL/11 ASSTT. YEAR 1995-96 4 VIEW OF ALL THE FACTS THE EXPLANATION OFFERED BY TH E ASSESSEE IS NOT ACCEPTABLE AND THERE IS NO DOUBT THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME RELATING TO THE CL AIM OF MAINTENANCE EXPENSES OF GUEST HOUSE IN MUMBAI AMOUN TING TO RS.5,18,423/-. ACCORDINGLY A PENALTY OF RS.2,38,47 5/- BEING 100% OF TAX SOUGHT TO BE EVADED ON THIS INCOME OF RS.5,18,4 23/- IS HERE BY IMPOSED AS PER THE FOLLOWING CALCULATION. 3. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS TH AT THE ASSESSING OFFICER HAS IMPOSED THE PENALTY ONLY BECAUSE THE ASSESSEES APPEAL HAS BEEN DISMISSED BY THE ITAT. THE FACT OF THE MATTER IS THAT THE AS SESSEE DID NOT PRESS THIS GROUND BEFORE THE TRIBUNAL. BESIDES, ASSESSING OFFICER HA S NOT GIVEN ANY REASON OR JUSTIFICATION AS TO HOW ASSESSEE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME RELATING TO THE CLAIM OF EXPENSES ON GUEST HOUSE. ALL THE RELEVANT DETAILS WERE FILED ALONGWITH THE RETURN OF INCOME. RELIANCE HAS BEEN PLACED ON HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS. RELIA NCE PETROPRODUCTS PVT.LTD. 322 ITR 158 FOR THE PROPOSITION THAT UNLESS THE ASS ESSEE FILES INACCURATE PARTICULARS IN THE RETURN OF INCOME, IT CANNOT BE H ELD TO HAVE FILED INACCURATE PARTICULARS AND MAKING A CLAIM WHICH IS NOT ACCEPTE D BY THE ASSESSING OFFICER. FURTHER RELIANCE IS PLACED ON HON'BLE DELHI HIGH CO URT JUDGMENT IN THE CASE OF CIT VS. BRAHMAPUTRA CONSORTIUM LTD. ITA NO.1582 O F 2010. IN THIS CASE, ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE MA DE A WRONG CLAIM OF DEPRECIATION ON PLANT & MACHINERY AND BUILDING AND FEES PAID TO ROC FOR INCREASE IN AUTHORIZED SHARE CAPITAL. THE ASSESSIN G OFFICER LEVIED THE PENALTY IN THE CASE OF DEPRECIATION AND IN RESPECT OF ROC CHAR GES, IT WAS HELD THAT THE SAME WAS CONTRARY TO HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF PSIDC LTD. VS. CIT 225 ITR 792 AND THE CLAIM WAS FALSE. THE PENALTY WAS CONFIRMED BY THE CIT(A) AND WAS DELETED BY THE ITAT. 4. AGGRIEVED, REVENUE WENT IN APPEAL BEFORE THE HON 'BLE DELHI HIGH COURT. HON'BLE DELHI HIGH COURT, AFTER CONSIDERING THE JUD GMENT IN THE CASE OF CIT VS. ESCORTS FINANCE LTD. 328 ITR 44 UPHELD THE ORDER OF THE ITAT AND DELETED THE PENALTY ON THE GROUND THAT THE OTHER ELEMENT PRESEN T IN THIS CASE GIVES A STRONG INDICATION THAT THE ERROR WAS GENUINE AND BONA-FIDE AND RELYING ON HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF RELIANCE PETR OPRODUCTS PVT.LTD. (SUPRA). ITA NO. 5376/DEL/11 ASSTT. YEAR 1995-96 5 5. IT IS PLEADED THAT THE ASSESSEE BONA-FIDELY BELI EVED THAT IT WAS A RESIDENTIAL FLAT; NO CARETAKER WAS APPOINTED, NO OU TSIDER WAS ALLOWED; USED BY DIRECTORS ON BUSINESS VISIT TO SAVE EXORBITANT HOTE L COST; WAS NOT MAINTAINED AS A GUEST HOUSE, THEREFORE, IT WAS NOT IN THE NATURE OF A GUEST HOUSE. THE EXPENDITURE INCURRED ON ONLY ELECTRICITY, TELEPHONE AND SOCIETY MAINTENANCE CHARGES WERE ALLOWABLE. THE CLAIM MADE BY THE ASSE SSEE WAS NEITHER MALA-FIDE NOR IN ORDER TO MISLEAD THE ASSESSING OFFICER. NO INACCURATE PARTICULARS HAVING BEEN GIVEN IN THE RETURN OF INCOME, THE CLAIM MADE BY THE ASSESSEE WAS ON A BONA-FIDE BELIEF THAT IT WAS ALLOWABLE ON A RESIDEN TIAL FLAT USED BY DIRECTORS FOR THE ASSESSEES BUSINESS ONLY. THE SAME WAS NOT PRO VIDED TO OUTSIDERS, THERE WAS NO CARETAKER AND IN ASSESSEES BONA-FIDE BELIEF , IT WAS NOT A GUEST HOUSE. THE MAKING OF A LEGAL CLAIM BASED ON A BONA-FIDE BE LIEF CANNOT BE SUBJECT TO PENALTY U/S 271(1)(C), LOWER AUTHORITIES HAVE FAILE D TO CONSIDER THIS EXPLANATION AND VIEW IT IN THE LIGHT OF HON'BLE SUPREME COURT J UDGMENT IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA). 6. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T SECTION 37(4) CLEARLY PROVIDES THAT ANY EXPENDITURE INCURRED BY THE ASSES SEE ON THE MAINTENANCE OF A GUEST HOUSE IS NOT ALLOWABLE. THE ASSESSEE DID NOT PRESS THE GROUND BEFORE THE ITAT IN THE APPEAL. HON'BLE SUPREME COURT ALSO IN THE CASE OF BRITANNIA INDUSTRIES LTD. VS. CIT 278 ITR 546 HELD THAT SUC H EXPENSES ARE NOT ALLOWABLE. THE SAME WAS AVAILABLE BEFORE THE ASSESSEE FILED IT S RETURN OF INCOME. THERE WAS NO DOUBT ABOUT THE DISALLOWANCE OF SUCH EXPENDI TURE, THE ASSESSEE HAS MADE A PRIMA-FACIE DISALLOWABLE CLAIM, THE PENALTY U/S 271(1)(C) HAS BEEN RIGHTLY LEVIED. RELIANCE IS FURTHER PLACED ON HON'BLE DELH I HIGH COURT JUDGMENT IN THE CASE OF ZOOM COMMUNICATIONS 191 TAXMAN 179 FOR TH E PROPOSITION THAT IF THE CLAIM MADE BY THE ASSESSEE IS UNSUSTAINABLE IN LAW, THE PENALTY IS LEVIABLE. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, IN THE REJ OINDER, CONTENDS THAT EVEN IN THE CASE OF ZOOM COMMUNICATIONS (SUPRA) CITED BY THE LEARNED DR, IT HAS BEEN HELD THAT THE ASSESSEES CLAIM SHOULD NOT ONLY BE U NSUSTAINABLE IN LAW BUT THE SAME SHOULD BE HELD TO BE NOT BONA-FIDE. IN THIS C ASE, ASSESSEE MADE BONA-FIDE CLAIM ON THE BASIS OF BELIEF THAT IT WAS NOT MAINTA INING A GUEST HOUSE. IT WAS A COMPANY OWNED FLAT USED BY THE DIRECTORS ONLY FOR T HE PURPOSE OF BUSINESS STAY DURING MUMBAI VISITS, THERE BEING NO CARETAKER, THE SAME WAS NOT A GUEST HOUSE. FURTHER, THE EXPENSES WHICH ARE DISALLOWED ARE ELEC TRICITY, REPAIRS, SOCIETY MAINTENANCE AND TELEPHONE EXPENSES. THUS, NO FOOD, COOKING OR STAFF ITA NO. 5376/DEL/11 ASSTT. YEAR 1995-96 6 EXPENDITURE WAS INVOLVED. THE ASSESSEE CANNOT BE P ENALIZED FOR A BONA-FIDE BELIEF UNDER SECTION 271(1)(C) AS CLEARLY LAID DOWN BY RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA) JUDGMENT. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US. IN THE CASE OF RELIANCE PETROPRODUCTS P VT.LTD. (SUPRA), THE HON'BLE SUPREME COURT HAS CLEARLY HELD THAT IF THE ASSESSEE HAS FURNISHED WRONG PARTICULARS IN THE RETURN OF INCOME, THE PENALTY CA N BE IMPOSED. HOWEVER, IN CASE THE ASSESSEE MAKES A BONA-FIDE LEGAL CLAIM, TH E SAME CANNOT BE HELD FOR PENALTY. ON THIS PRINCIPLE, HON'BLE SUPREME COURT DELETED THE PENALTY IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA). 9. LEARNED DR HAS RELIED ON HON'BLE DELHI HIGH COUR T JUDGMENT IN THE CASE OF ZOOM COMMUNICATIONS (SUPRA). IN THIS CASE:- (A) THERE WAS NO FINDING BY THE TRIBUNAL ABOUT THE BONA-FIDE OF THE ASSESSEE. (B) THE OBSERVATION OF THE TRIBUNAL WAS HELD TO BE SUFFERING FROM PERVERSITY. (C) EVERY CASE IS TO BE DECIDED CONSIDERING THE FAC TS AND CIRCUMSTANCES IN WHICH DEDUCTION IS CLAIMED TOGETHER WITH THE EXPLAN ATION. 10. IN OUR CONSIDERED VIEW, THE ASSESSEES EXPLANAT ION CANNOT BE HELD TO BE LACKING IN BONA-FIDES. THE EXPENDITURE INCURRED HA S BEEN DETAILED ABOVE AND THERE IS NO EXPENDITURE WHICH INDICATES MAINTAINING ANY FACILITIES WHICH CAN BE STRICTLY TERMED AS A GUEST HOUSE. THE EXPENSES DEB ITED ARE ELECTRICITY, REPAIRS, SOCIETY MAINTENANCE AND TELEPHONE. THE REGULAR FEA TURES OF A GUEST HOUSE I.E. EXPENDITURE RELATING TO COOKING, MESSING, SALARY OF CARETAKING STAFF IS NOT CLAIMED. THIS IS FURTHER CORROBORATED BY THE FACT THAT THE TAX AUDIT REPORTS DID NOT CONSIDER THIS ACCOMMODATION AS A GUEST HOUSE IN NATURE AS CONTEMPLATED UNDER DISALLOWABLE SECTION 37(4). IN OUR VIEW, IF THE TAX AUDITORS FAILED TO QUALIFY THIS EXPENDITURE, IT AMOUNTS TO PROFESSIONAL ADVISE ABOUT THE BELIEF OF THE ASSESSEE. IT HAS NOT BEEN DISPUTED THAT THE ASSESS EE DISCLOSED ALL THE FACTS ABOUT THIS CLAIM IN THE RETURN OF INCOME WHICH WAS SUBJECT TO LEGAL DEBATE AND LATER SETTLED BY HON'BLE SUPREME COURT IN THE CASE OF BRITANNIA INDUSTRIES LTD. (SUPRA). LOOKING AT THE ENTIRETY OF FACTS AND CIRC UMSTANCES, NATURE OF EXPENSES AND THE FACT THAT THE AUDITORS DID NOT DISALLOW THI S EXPENDITURE IN THE AUDIT ITA NO. 5376/DEL/11 ASSTT. YEAR 1995-96 7 REPORT, WE HOLD THE ASSESSEES EXPLANATION TO BE BO NA-FIDE. THE SAME IS TO BE TERMED AS MALA-FIDE AND IS TO BE HELD AS BONA-FIDE. IN VIEW THEREOF, RESPECTFULLY FOLLOWING THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA), WE DELETE THE PENAL TY. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 4. RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINA TE BENCH ON A SIMILAR ISSUE, WE ALLOW THE APPEAL OF ASSESSEE AND DELETE THE PENALTY. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND FEBRUARY, 2012. SD/- SD/- [SHAMIM YAHYA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2.2.2012 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT