ASST CIT CIR 22(1), MUMBAI V. JALARAM INDIA, MUMBAI

ITA 5498/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71773 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2008-2009
• Appeal Filed On: 31-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P K PANDA
• Keywords: Revenue expenditure
• Section: 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI VIJAY PAL RAO , JM & SHRI D.KARUNAKARA RAO, AM ITA NO. 5498 /MUM/201 2 ( ASSESSMENT YEAR :200 8 - 200 9 ) ACIT CIR - 22(1), MUMBAI VS. M/S JALARAM INDIA, 203, SAI PLAZA, JAWAHAR ROAD, GHATKOPAR (E), MUMBAI - 77 PAN/GIR NO. : A A FFJ 661 7 F ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : MR . B.P.K.PANDA /ASSESSEE BY : MR. SATISH R. MODY DATE OF HEARING : 26 TH NOVEMBER , 201 3 DATE OF PRONOUNCEMENT : 26 TH NOVEMBER,2013 O R D E R PER D.KARUNAKARA RAO ( A .M.) : TH IS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 21 - 6 - 2012 , PASSED BY THE LEARNED CIT(A) - 33 , MUMBAI FOR THE ASSESSMENT YEAR 200 8 - 200 9 . 2 . THE EFFECTIVE GROUND IN APPEAL OF TH E REVENUE READS AS UNDER : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S.271(1)(C) LEVIED ON THE DISALLOWANCE U/S.37(1) OF THE INCOME TAX ACT, 1961 OF THE COMPENSATION PAID OF RS. 72,00,0 00/ - . 3 . SUCCINCTLY STATED FACTS IN THIS CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL LOSS OF RS. 2,69,07,131/ - AND THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT DETERMINING ITA NO. 5498 /201 2 2 ASSESSEES TOTAL LOSS OF RS. 1,72,70,500/ - . THE AO MADE SUCH ADDITIONS IN THE ASSESSMENT AND ONE SUCH ADDITION RELATES TO DISALLOWANCE OF RS. 72,00,000/ - IN REGARD TO THE COMPENSATION PAID BY THE ASSESSEE TO MAHARASHTRA SAFE CHEMISTS & DISTRIBUTORS ALLIANCE LIMITED (HEREINAFTER REFERRED TO AS MSCDA). DURING TH E ASSESSMENT, IN RESPONSE TO THE QUERY FROM THE AO, THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT PAID TO MSCDA WAS ON ACCOUNT OF ARRANGEMENT BETWEEN THE ASSESSEE, M/S SANDOZ PVT. LTD. AND MSCDA. THE ASSESSEE, AN ALL INDIA DISTRIBUTOR FOR THE M/S SANDOZ PVT. LTD. AND THE MSCDA, WAS APPOINTED TO PROMOTE THE PRODUCTS OF M/S SANDOZ PVT. LTD.. THE AO QUESTIONED THE WISDOM OF THE ASSESSEE MAKING THE PAYMENT OF RS. 72 LAKHS AND MENTIONED THAT THE SAME IS UNCALLED FOR PAYMENT AND HE DISALLOWED THE SAME UNDER SECTION 37(1) OF THE ACT. WITHOUT PREJUDICE, THE AO ALSO INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR MAKING PAYMENT WITHOUT MAKING TDS. THE ASSESSEE DID NOT CONTEST THE SAID DISALLOWANCE IN FURTHER APPEALS. HOWEVER, THE AO INITIATED PENALTY PROCEEDI NGS AND LEVIED THE PENALTY VIDE ORDER DATED 22 - 6 - 2011. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AGAINST THE PENALTY ORDER OF AO. THE ASSESSEE SUBMITTED THAT THE SAID PAYMENT CONSTITUTES A BUSINESS DECISION OF THE ASSESSEE AND THE AO SHOULD NOT INTERF ERE IN SUCH COMMERCIAL DECISION. FURTHER, IT IS MENTIONED THAT THE ASSESSEE IS EVEN HAVING A LOSS AND THERE IS A DISPUTE AMONG THE PARTNERS. HE FURTHER MENTIONED REGARDING SECTION 40(A)(IA) , WHICH HAS NO ROLE TO PLAY AS THIS IS MERELY A REVENUE EXPENDITURE INCURRED BY THE ASSESSEE. THE ITA NO. 5498 /201 2 3 CIT(A) CONSIDERED THE SAME AND FOUND THAT THE ISSUES ARE DEBATABLE OR, DEFAULT IF ANY U/S.40(A)(IA) OF THE ACT , CONSTITUTES THE ONE OF TECHNICAL NATURE. AS PER THE DISCUSSION GIVEN BY THE CIT(A) IN PARAS 3.3 & 3.4, THE CIT(A) CAME TO THE CONCLUSION THAT THIS IS NOT A FIT CASE FOR ATTRACTING THE PENAL PROVISIONS. HE, ACCORDINGLY, DELETED THE PENALTY. AGGRIEVED BY THE SAME, THE REVENUE RAISED THE ABOVE GROUND RESTRICTING THE GROUND TO THE PROVISIONS OF SECTION 37(1) OF THE ACT. 4 . BEFORE US, LEARNED DR FOR THE REVENUE RELIED HEAVILY UPON THE PENALTY ORDER OF THE AO AND STATED THAT THE SAID AMOUNT IS NOT REQUIRED TO BE PAID TO MSCDA. THEREFORE, THE AMOUNT OF RS. 72 LAKHS SHOULD NOT HAVE BEEN PAID BY THE ASSESSEE. HE ALSO RELIED ON THE JUDGMENT OF THE HON BLE DELHI HIGH COURT AND MENTIONED THAT THE EXPLANATION GIVEN BY THE ASSESSEE BEING A FAR AND FETCHED ONE IN SUPPORT OF ITS CLAIM, IS NOT SUSTAINABLE AND, THEREFORE, PENALTY SHOULD BE CONFIRMED. 5 . ON THE OTHER HAND, LEARNED AR FOR THE ASSESSEE STATED THAT THE GROUND RAISED BY THE REVENUE IS ONLY ON THE PROVISIONS RELATING TO SECTION 37(1) OF THE ACT. IN EFFECTIVE, THE COMMERCIAL DECISION OF THE ASSESSEE IS THE SUBJECT MATTER ALSO. RELYING ON VARIOUS DECISIONS, HE SUBMITTED THAT THE CLAIM OF ASSESSEE MAY BE WRONG OR RIGHT AND SO LONG AS THE SAME IS NOT A MALAFIDE CLAIM AND THE DETAILS ARE DULY DISCLOSED IN THE RETURN OF INCOME, THEREFORE, SUCH CLAIM SHOULD NOT ATTRACT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT . THE PENALTY IN SUCH CASE LEVIED BY THE AO , IS NOT SUSTAINABLE. ITA NO. 5498 /201 2 4 6 . WE FIND MERIT IN THE ARGUMENT OF THE ASSESSEE. AS SUCH, WHETHER THE PAYMENT OF RS. 72 LAKHS TO MSCDA IS RIGHTLY PAID OR NOT IS A MATTER OF DEBATE. WE ALSO FIND THAT THERE IS NO DEFAULT OF DISCLOSURE BY THE ASSESSEE IN THE RETURN OF INCOME. THE REVENUE HAS TAKEN A VIEW AND PROCEEDED TO DISALLOW THE SAME MERELY RELYING ON THE DISCLOSURES MADE BY THE ASSESSEE IN THE RETURN DURING THE ASSESSMENT. AS SUCH THERE IS NO INCRIMINATING MATERIAL IN POSSESSION OF THE R EVENUE TO ESTABLISH THE CONCEALMENT OF INCOME OR FURNISHING OF THE INACCURATE PARTICULARS BY THE ASSESSEE . THE DEBATABLE CLAIMS SHOULD NOT BE CONFUSED FOR FURNISHING INACCURATE PARTICULARS. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CI T(A). ACCORDINGLY, THE SOLITARY GROUND RAISED BY THE REVENUE IS DISMISSED. 7 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH OF NOV. 201 3 . 26 TH 201 3 SD/ - SD/ - ( ) ( VIJAY PAL RAO ( ) ( D.KARUNAKARA RAO ) / JUDICIALMEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 26 /11/ 2013 /PKM , PS ITA NO. 5498 /201 2 5 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//