CLARIDGE MOULDED FIBRE LITD, MUMBAI V. ITO 6(2)(1), MUMBAI

ITA 5649/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100773 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 13-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 05-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: MANISHA BHONSLE
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ./ I.T.A. NO. 5649/MUM/2013 ( / ASSESSME NT YEAR: 2006 - 07 ) CLARIDGE MOULDED FIBRE LIMITED (FORMERLY KNOWN AS VAN LEER MOULDED FIBRE INDIA LIMITED), 1076, PARIJAT HOUSE, 1 ST FLOOR, DR. E. MOSES ROAD, WORLI, MUMBAI - 400 018 / VS. ITO - 6(2)(1), 5 TH FLOOR, AAYKAR BHAVAN, M. K. ROAD, CHURCHGATE, M UMBAI - 400 021 ./ ./ PAN/GIR NO. AAACV 4454 G ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MS. MANISHA BHONSLE / RESPONDENT BY : SHRI B. S. BIST / DATE OF HEARING : 13.08.2015 / DATE OF PRONOUNCEMENT : 19 .08.2015 / O R D E R PER R. C. SHARMA , A. M.: THIS IS AN A PPEAL FILED BY THE ASSESSEE AGAINST THE O RDER BY THE LD. CIT(A) - 12 , MUMBAI DATED 15.07.2013 , IN THE MATTER OF IMPO SITION OF PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR (A.Y.) 2006 - 07. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PAPER TRAYS FOR APPLES AND EGGS. 2 ITA NO. 5649/MUM/2013 (A.Y. 2006 - 07) CLARIDGE MOULDED FIBRE LIMITED VS. ITO THE ASSESSEE HAD FILED THE RETURN OF TOTAL INCOME ON 28.11.2006 DECLARING NIL INCOME AND CLAIMING REFUND OF ` .2,92,057/ - . IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. DISALLOWED THE ASSESSEES CLAIM OF COMMISSION EXPENSES AMOUNTIN G TO ` .20,53,399/ - . THE A.O. ALSO LEVIED PENALTY OF ` .6,91,174/ - U/S.271(1)(C) FOR THE DISALLOWANCE OF COMMISSION EXPENSES. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. IT WAS CONTENDED BY THE LD. AR, MS. MANISHA BHONSLE THAT THE ASSESSEE HAS FILED FULL DETAILS OF PERSON TO WHOM COMMISSION HAS BEEN PAID ALONG WITH RESPECTIVE CONFIRMATIONS. SHE FURTHER CONTENDED THAT TDS HAS BEEN DEDUCTED ON THE COMMISSION AND ONLY AFTE R SATISFYING THAT THE SERVICES HAVE BEEN RENDERED, THE ASSESSEE HAS PAID COMMISSION. SHE FURTHER SUBMITTED THAT SINCE THE ASSESSEE WAS HAVING HUGE LOSSES, NO SECOND APPEAL WAS FILED AGAINST THE QUANTUM ADDITION SO MADE, THEREFORE, THE SAME SHOULD NOT BE TR EATED AS THE ASSESSEES ACCEPTANCE OF A.O.S ORDER REGARDING THE DISALLOWANCE OF COMMISSION. SHE FURTHER SUBMITTED THAT THE PENALTY PROCEEDINGS ARE INDEPENDENT AND THE ASSESSEE HAS ALL THE RIGHTS TO SUBSTANTIATE ITS CLAIM OF EXPENSES SO THAT NO PENALTY IS LEVIABLE FOR MERE DISALLOWANCE SO MADE. SHE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P.) LTD . [2010] 322 ITR 158 (SC) IN SUPPORT OF THE PREPOSITION THAT MERE DISALLOWANCE OF CLAIM OF EXPENSES CANNOT BE MADE THE REASON FOR LEVY OF PENALTY U/S.271(1)(C). 3. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULLY AND GONE THROUGH THE O RDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE I S COMPANY ENGAGED IN TH E BUSINESS OF MANUFACTURING OF PAPER TRAYS FOR APPLES & EGG S . THE ASSESSEE HAD FILED THE RETURN OF TOTAL INCOME ON NOVEMBER 28, 2006 DECLARING A TOTAL INCOME OF RS. NIL AND AS PER THE RETURN FILED THERE WAS A REFUND OF RS. 2,92,057/ - . THE LEARNED IN COME TAX OFFICER COMPLETED THE ASSESSMENT U / S 143(3) ON DECEMBER 23, 2008 ASSESSING THE TOTAL INCOME A T RS. NIL (AFTER S ETTING OF B /F LOSSES). THE LD. AO HAS MADE FOLLOWING ADDITIONS: 3 ITA NO. 5649/MUM/2013 (A.Y. 2006 - 07) CLARIDGE MOULDED FIBRE LIMITED VS. ITO (I) DISALLOWED THE COMMISSION PAID (SELLING EXP) AMOUNTING TO RS.20,53,399/ - . : THE ABOVE DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(A). NO APPEAL AT HON. ITAT WAS FILED BY THE ASSESSEE (AS THIS IS LOSS MAKING UNIT) THE LEARNED INCOME TAX OFFICER PASSED AN ORDER U/S 271 (1)(C) IMPOSING A PENALTY OF RS.6,91, 174/ - ON ACCOUNT OF DISALLOWANCE OF COMMISSION EXPENSES TO RS.20,53,399/ - . THE LD. C IT(A) HAS ACCEPTED THE CONTENTION OF THE ASSESSING OFFICER AND CONFIRMED THE ORDER OF PENALTY. FROM THE RECORD WE FOUND THAT D URING THE YEAR THE ASS ESSEE HAS PAID COMMISSION ON SALES T O THE FOLLOWING PARTIES: SR. NO. NAME OF PARTY AMOUNT 1 M/S. KARUN CORPORATION, LUDHIANA 7,86,141/ - 2 M /S. KARUN CORPORATION, KALKA (HARIYANA) 6,35,275/ - 3 ACB & SONS (AMAR CHAND BUTIAL & SONS) 6,31,983/ - TOTAL 20,5 3,399/ - THE DETAILS OF THE COMMISSION EXPENSES WERE FILED TO THE L D. A.O. VIDE LETTER DATED 7 TH N OVEMBER, 2008 & 18 TH DECEMBER, 2008 . THE L D. AO HAS ALSO SEND NO T ICE TO SAID PARTIES AND THE PARTIES HAVE REPLIED TO THE LD. AO. T WO PARTIES M/ S KARUN CORPORA TION, KALKA (HARIYANA ) AND M/ S KARUN CORPORATION, LUDHIANA (SR. NO 1 & 2 ABOVE) WERE ALSO MARKED A COPY OF THEIR SUBMISSION TO ASSESSEE. THE ASSESSEE HAS ALSO FILED THE LEDGER ACCOUNT OF M/S. ACB AND SONS. IT WAS ALSO THE CONTENTION OF THE LD. AR THAT T HE COMMISSION HAS BEEN PAID AS PER THE BUSINESS NEED AND EXPENSES HAVE BEEN INCURRED WHOLLY & E XCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE . THE RECIPIENT PARTIES HAVE DULY SHOWN THE COMMISSION IN THEIR INCOME. WE FOUND THAT THE ASSESSEE HAS FIL ED FULL PARTICULARS OF COMMISSION PAYMENT ALONG WITH NAME AND ADDRESS OF THE PARTIES. MERELY BECAUSE THE DEPARTMENT HAS NOT ACCEPTED THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE SAME, DOES NOT IMPUGN THE CASE FIT FOR LEVY OF PENALTY U/S.271(1)(C) OF T HE ACT. AFTER VERIFYING THE CONFIRMATION FILED BY KARUN CORPORATION, LUDHIANA AND KARUN CORPORATION, KALKA 4 ITA NO. 5649/MUM/2013 (A.Y. 2006 - 07) CLARIDGE MOULDED FIBRE LIMITED VS. ITO (HARIYANA), WHEREIN IT WAS CLEARLY STATED THAT KARUN CORPORATION IS AGENT OF THE ASSESSEE FOR SELLING THE PAPER TRAYS FOR APPLES AND EGGS IN THE STAT E OF HARYANA. IT WAS ALSO MENTIONED THAT THE ASSESSEE IS BILLING TO CUSTOMERS INTRODUCED BY IT BUT FOR REALIZATION OF THE PAYMENT TH EY WERE RESPONSIBLE. SINCE THE BILLING WAS DIRECTLY TO CUSTOMERS, THEREFORE, NO RELEVANT PURCHASE AND SALES WERE REFLECTED I N THEIR ACCOUNT AND ONLY AMOUNT OF COMMISSION WAS CONSIDERED IN THEIR BOOKS. THEY FURTHER CONFIRMED THAT THE VALUE OF SA L ES INTRODUCED BY IT DURING THE RELEVANT ASSESSMENT YEAR WAS ` .2,38,67,578/ - ON WHICH COMMISSION OF ` .6,35,285/ - WAS PAID. KARUN CORPORA TION WAS HAVING PAN: AIDPB 7618 N. KARUN CORPORATION ALSO FILED COPY OF AUDITED PROFIT AND LOSS ACCOUNT DULY INDICATING THE AMOUNT OF COMMISSION RECEIVED. THIS FIRM HAS UNDERTAKEN ITS OWN SALES OF ` .11,99,499/ - AND WAS ALSO HAVING BANK INTEREST INCOME OF ` .17,294/ - . NET PROFIT OF ` . 2,07,030 / - WAS DISCLOSED BY KARUN CORPORATION, KALKA. SIMILARLY DETAILS WAS ALSO FILED BY KARUN CORPORATION, LUDHIANA HAVING OWN SALES OF ` .44.07 LACS, INTEREST INCOME OF ` .1.84 LACS AND NET PROFIT OF ` .3.64 LACS AND HAVE CONFIRM ED THE RECEIPT OF COMMISSION OF ` .7,86,144/ - FOR THE SALES EFFECTED ON THE ASSESSEES BEHALF. ITS PAN NUMBER WAS ALSO MENTIONED IN THE CONFIRMATION WHICH WAS AMKPS 6218 J. THUS, WE FOUND THAT THE ASSESSEE HAS FILED EXPLANATION BEFORE THE A.O. WITH REGARD T O THE GENUINENESS OF COMMISSION EXPENDITURE, MERE NOT ACCEPTING THE ASSESSEES EXPLANATION WILL NOT ENTITLE A.O. TO LEVY PENALTY U/S.271(1)(C). KEEPING IN VIEW THE PREPOSITION OF LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODU CTS (P.) LTD . (SUPRA) , MERE DISALLOWANCE OF CLAIM OF EXPENSES WILL NOT ENTITLE THE A.O. TO LEVY PENALTY U/S.271(1)(C). ACCORDINGLY , WE DIRECT THE A.O. TO DELETE THE PENALTY LEVIED WITH RESPECT TO COMMISSION PAID TO KARUN CORPORATION, LUDHIANA AND KARUN COR PORATION, KALKA. HOWEVER, WE FOUND THAT SATISFACTORY EXPLANATION WAS NOT GIVEN WITH RESPECT TO THE COMMISSION PAID TO ACB SONS, ACCORDINGLY , WE CONFIRM THE PENALTY IMPOSED WITH REFERENCE TO THE COMMISSION PAID TO ACB AND SONS . 5 ITA NO. 5649/MUM/2013 (A.Y. 2006 - 07) CLARIDGE MOULDED FIBRE LIMITED VS. ITO 5. IN THE RESULT, THE ASSES SEES APPEAL IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 19 , 201 5 SD/ - SD/ - ( PAWAN SINGH ) ( R. C. SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI ; / DATED : 19 . 0 8 .201 5 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI