HITECH PLAST LTD, MUMBAI V. DCIT CEN CIR 32, MUMBAI

ITA 5542/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0939 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 26-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 09-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MAHAPATRA
• Assessee Lawyers: D H SHAH
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI A.L. GEHLO T ,(AM) ITA NO.5542/MUM/2009 ASSESSMENT YEAR : 2004-05 HITECH PLAST LIMITED C/130 SOLARIS 1, OPP. L&T GATE NO.6, POWAI MUMBAI-400 072. ..( APPELLANT ) P.A. NO. (AAACH 5161 N) VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-32 AAYAKAR BHAVAN MUMBAI-20. ..( RESPONDENT ) APPELLANT BY : SHRI D.H. SHAH RESPONDENT BY : SHRI S. K. MAHAPATRA O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 20.7.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF PL ASTIC CONTAINERS, FILED RETURN DECLARING NIL INCOME. HOWEVER THE ASSESSMENT WAS COMPLETED AT AN INCOME OF ` NIL UNDER NORMAL PROVISIONS OF THE ACT ITA NO.5542/M/09 A.Y:04-05 2 AND ` 1,57,62,996/- U/S.115JB OF THE INCOME TAX ACT, 1961(TH E ACT). WHILE MAKING THE ASSESSMENT THE ASSESSING OFFICER HAS MADE CER TAIN DISALLOWANCES INCLUDING GOODWILL EXPENSES ` 26,77,644/- AND MISCELLANEOUS EXPENSES ` 57,374/- AND ALSO INITIATED PENALTY PROCEEDING BY ISSUING A NOTICE U/S.271(1)(C) OF THE ACT. AGAINST THE ASSESSMENT ORDER THE ASSESSEE FILED APPEAL BEFORE THE LD. C IT(A) WHO PARTLY ALLOWED THE APPEAL VIDE ORDER DATED 16.4.200 7. IN RESPONSE TO NOTICE TO SHOW CAUSE AS TO WHY PENALTY U/S.271(1)(C) MAY NOT BE IMPOSED, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE H AS FURNISHED ALL THE DETAILS IN THE RETURN OF INCOME AND HAS NOT CONCEALED ANY PARTICULARS OF INCOME AND THERE IS NO DELIBERATE AT TEMPT TO FILE ANY INACCURATE PARTICULARS OF INCOME, THEREFORE, THE ASSESSEE REQUESTED TO DROP THE PENALTY. HOWEVER, THE ASSESSING OFFICER WAS OF T HE VIEW THAT GOODWILL EXPENSES, EXCESS PROVISION AND MISCELLANEOUS EXPENSE S HAVE BEEN CONFIRMED BY THE LD. CIT(A), HENCE, THE ASSESSEE HA S MADE A CONSCIOUS ATTEMPT TO EVADE TAXES BY FILING INACCURATE PART ICULARS OF INCOME THEREBY CONCEALING ITS INCOME AND, HENCE, IT IS A F IT CASE TO LEVY PENALTY U/S.271(1)(C) READ WITH EXPLANATION (1) OF THE ACT AND ACCORDINGLY HE IMPOSED A PENALTY OF ` 12,49,050/- VIDE ORDER DATED 31.3.2009 PASSED U/S.271(1)(C) OF THE ACT. ON APPEAL, T HE LD. CIT(A) WHILE HOLDING THAT THE ASSESSING OFFICER IS JUSTIFIED IN L EVY OF PENALTY U/S.271(1)(C) ON THE DISALLOWANCE OF GOODWILL EXPENSES ` ITA NO.5542/M/09 A.Y:04-05 3 26,77,644/- AND MISCELLANEOUS EXPENDITURE ` 57,374/- DELETED THE LEVY OF PENALTY ON THE ADDITION OF EXCESS PROVISION OF ` 7,46,662/- AND ACCORDINGLY PARTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUND OF APPEAL: 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENA LTY IN RESPECT OF GOODWILL EXPENSES OF RS.26,77,644/- A ND MISCELLANEOUS EXPENSES OF RS.57,374/- EVEN THOUGH THE APPELLANTS HAD NOT CONCEALED ANY PARTICULARS OF THE SAID EXPENSES WHILE FILING THE RETURN OF INCOME AND THE SAID AMOUNTS WERE DISCLOSED IN ACCOUNTS AND IN RETURN OF INCOME. THE APPELLANT SUBMITS THAT THE FACT THAT T HE EXPENSES WERE NOT ALLOWABLE WAS A DEBATABLE POINT A ND THEREFORE EVEN THOUGH THE DISALLOWANCE OF EXPENSES CONFIRMED IN APPEAL NO PENALTY SHOULD HAVE BEEN LEV IED ON THE SAME CONSIDERING IT AS CONCEALMENT OF INCOME/PARTICULARS 4. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT WITH REGARD TO THE CLAIM OF GOOD WILL EXPENSES ` 26,77,644/-, THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING VIDE LETTE R DATED 10.10.2006 ITSELF SUBMITTED THAT GOODWIL L ON AMALGAMATION ` 26,77,644/- IS, THROUGH OVERSIGHT, NOT ADDED TO THE P ROFIT AS PER P&L ACCOUNT I.E. ` 2,84,40,430/- IN THE STATEMENT OF TOTAL INCOME, THEREFORE, THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE ON THIS ACCOUNT. IN SUPPORT HE ALSO PLACED ON RECORD THE COPY OF THE LETTER DATED 10.10.2006 APPEARING AT PAGE 1 TO 3 OF THE ASSE SSEE'S PAPER BOOK. WITH REGARD TO THE LEVY OF PENALTY ON THE DI SALLOWANCE OF ITA NO.5542/M/09 A.Y:04-05 4 MISCELLANEOUS EXPENSES ` 57,374/- HE SUBMITS THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING HAS FILED DETAIL S OF EXPENSES WHICH CONSIST OF DONATION AND INTEREST ON TAXES. SINCE THE ASSESSEE HAS NOT FILED RECEIPTS OF DONATION PAID, THEREFOR E, IT WAS DISALLOWED BY THE ASSESSING OFFICER WHICH DOES NOT MEAN THA T THE ASSESSEE HAS CONCEALED ITS PARTICULARS OF INCOME. THE RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS: 1) ACIT VS. VIP INDUSTRIES LTD. 30 SOT 254 (MUM.) 2) ACIT VS. MAHINDRA SHUBHLAB SERVICES LTD. 31 SOT 361(MU M.) 3) BANYAN TOURS & TRAVELS (P) LTD. VS. ITO 120 ITD 404(MU M.) 4) KANBOUY SOFTWARE INDIA (P) LTD. VS. DCIT 31 SOT 153 (PUNE) 5) DCIT VS. NOKIA INDIA (P) LTD. 124 TTJ 145 (DEL.) HE THEREFORE, SUBMITS THAT THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) BE DELETED. 5. ON THE OTHER HAND THE LD. DR WHILE RELYING ON TH E ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT THE AMOUNT OF DISALLOWANCE OF GOODWILL EXPENSES WAS DISPUTED BY THE ASSESSE E IN THE QUANTUM APPEAL BEFORE THE LD. CIT(A), THEREFORE, TH ERE IS NO MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SA ME HAS BEEN OFFERED AS INCOME BY THE ASSESSEE ITSELF DURING THE COURSE OF ASSESSMENT PROCEEDING. HE, THEREFORE, SUBMITS THAT THE PEN ALTY IMPOSED BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) BE UPHELD. ITA NO.5542/M/09 A.Y:04-05 5 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSING OFFICER WHILE DEA LING WITH THE ISSUE OF GOODWILL EXPENSES HAS OBSERVED AT PAGE- 2 OF THE ASSESSMENT ORDER THAT VIDE REPLY DATED 10.10.2006 AT THE CONCLUDING PARA OF THE SAID REPLY IT HAS BEEN ADMITTED THAT GOODWIL L ON AMALGAMATION AMOUNTING TO RS.26,77,644/- HAS NOT BEEN ADDED BACK IN THE COMPUTATION SHEET THROUGH OVERSIGHT. IN VIEW OF THE ADMISSION MADE, AS ASSESSEE HAS NOTHING TO SAY IN THIS REGARD, EXPENSES CLAIMED IN RESPECT OF THIS ACCOUNT AMOUNTING TO RS.26,77,644/- IS BEING DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. WE FURTHER FIND THAT WITH REGARD TO THE DISALLOWANCE OF MISCELLANEOUS EXPENDITURE IT HAS BEEN O BSERVED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE ASSESSEE H AS FILED DETAILS OF DONATION OF ` 17,700/- WHICH DO NOT EVEN QUALIFY FOR EXEMPTION U/S.80G AND SIMILARLY INTEREST ON TAXES HAVE BEEN PAID ON THREE OCCASIONS AS DIRECTED BY EXCISE INSPECTOR AFTER EXCISE AUDIT WHICH IS NOT ANY AUTHORITY FOR CHARGING OF SUCH INTEREST AND FURTHER SUCH PAYMENTS ARE PENAL IN NATURE AND HENCE, HE DISALLOW ED ` 57,374/-. SINCE THE ABOVE AMOUNTS HAVE BEEN CONFIRME D IN APPEAL, IN QUANTUM PROCEEDING, THE ASSESSING OFFICER HAS IMPOSED PENAL TY ON THE SAME AND THE LD. CIT(A) HAS ALSO UPHELD THE LEVY OF TH E PENALTY ON SUCH DISALLOWANCE. IN ORDER TO APPLY THE PROVISIONS OF SE CTION ITA NO.5542/M/09 A.Y:04-05 6 271(1)(C), THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCU RATE PARTICULARS OF HIS INCOME. 7. IN A RECENT JUDGMENT OF THE HONBLE APEX COURT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158(SC ) THEIR LORDSHIPS, AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DI LIP N. SHROFF VS. JCIT (2007) 291 ITR 519(SC) AND UNION OF INDIA V S. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC) HAVE OBSERVED AND HELD (PAGE 158 HEADNOTES) AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) O F THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER T O BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDL Y, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS F OUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN OR DER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING A N INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHI NG WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUC H PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLI ED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCOR RECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A ITA NO.5542/M/09 A.Y:04-05 7 CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE R ETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 8. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HONBLE APEX COURT AND KEEPING IN VIEW THAT IT IS NOT THE CASE OF THE RE VENUE THAT THE ASSESSEE HAS NOT FILED THE DETAILS OF THE ABOVE CLAIMS OR T HE CLAIM MADE BY THE ASSESSEE WAS FOUND TO BE FALSE. MERELY BECAUSE THE ASSESSEE HAS DISPUTED THE ABOVE DISALLOWANCES IN QUANTUM AP PEAL BEFORE THE LD. CIT(A) DOES NOT MEAN THAT THE ASSESSEE HA S CONCEALED ITS PARTICULARS OF INCOME U/S.271(1)(C) READ WITH EXPLANA TION-1 OF THE ACT. THIS BEING SO WE ARE OF THE VIEW THAT THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE WHICH MAY CALL FOR LEVY OF PENAL TY U/S.271(1)(C) OF THE ACT. ACCORDINGLY THE PENALTY IMPO SED BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) IS DELETE D. THE GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, ALLOWED. 9. IN THE RESULT, ASSESSEE'S APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.7.2010. SD/- SD/- (A.L. GEHLOT) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.7.2010. JV. ITA NO.5542/M/09 A.Y:04-05 8 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.