JCIT (OSD), New Delhi V. M/s. Super Cassettes Industries Ltd., Noida

ITA 5665/DEL/2011

• Counselvise Citation: 566520114 RSA 2011
• Duration Of Justice: 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 08-08-2012
• Assessment Year: 1995-1996
• Appeal Filed On: 16-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURJANI MOHANTY
• Keywords: Depreciation; Wrong claim; Difference of opinion; Revenue expenditure; Capital expenditure
• Section: 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G NEW DELHI) BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.5665/DEL/2011 ASSESSMENT YEAR : 1995-96 JCIT (OSD), M/S SUPER CASSETTES INDS. CIRCLE-9(1), LTD. PLOT NO.3 & 3A, FILM CITY, NEW DELHI. V. SECTOR-16A, NOIDA, UP. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. SURJANI MOHANTY, SR. DR. RESPONDENT BY : SHRI HIREN MEHTA, C.A. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORD ER OF LD CIT(A) DATED 14.9.2011. THE GROUNDS RAISED BY THE RE VENUE ARE AS UNDER:- 1. THE LD CIT(A) ERRED IN CANCELLING THE PENALTY AGGRE GATING TO ` .55,81,654/-ON ACCOUNT OF EXCESS CLAIM OF DEDUCTION U /S 80HH, 80I & 80IA OF ` .10742661/-, UNDER VALUATION OF CLOSING WIP OF ` .338136/-, EXPENDITURE TREATED AS CAPITAL IN NATURE OF ` .762068/-, UNDER VALUATION OF POLYSTYRENE OF ` .68917/-, UNDISCLOSED CLOSING STOCK OF ` .73575/-, DISALLOWANCE OF FOREIGN TRAVEL EXPENSES OF ` .41966/- AND DISALLOWANCE OF LICENSE FEES TREATED AS CAPITAL EXPENDITURE OF ` .106714/- WHICH WAS IMPOSED BY THE ASSESSING OFFICER U/S 271(1)( C) OF THE INCOME TA X ACT, 1961 DESPITE THE FACT THAT DURING THE PENALTY PROCE EDINGS THE ITA NO5665/DEL/2011 2 ASSESSEE DID NOT FURNISH ANY EXPLANATION ON MERITS OF TH ESE INDIVIDUAL ITEMS. 2. THE APPELLANT CRAVES TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE H EARING OF THIS APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN IN THIS CASE WAS FILED ON 30.11.1995. THE CASE WAS SELECTED FOR SCRUTINY AND AUTHORIZED REPRESENTATIVE OF THE COMPANY ATTENDED THE PROCEEDIN GS FROM TIME TO TIME AND FILED DETAILS REQUIRED BY THE ASSESSING OFFICER . THE ASSESSING OFFICER KEEPING IN VIEW THE COMPLEXITY OF ACCOUNTS AND INTEREST OF REVENUE REFERRED THE CASE FOR SPECIAL AUDIT U/S 142(2A ) OF THE ACT. THE ASSESSMENT ORDER WAS COMPLETED AFTER OBSERVING THE DEFICI ENCIES POINTED OUT BY SPECIAL AUDITOR. THE ASSESSMENT WAS COMPL ETED AFTER MAKING FOLLOWING ADDITIONS/DISALLOWANCES:- A) EXCESS CLAIM OF DEDUCTION U/S 80HH,80-I & 80IA. 10762661/- B) UNDER VALUATION OF CLOSING WIP 338136/- C) DISALLOWANCE OF CAPITAL EXPENSES. 762 068/- D) UNDER VALUATION OF POLYSTYRENE POW DER. 68917/- E) UNDISCLOSED CLOSING STOCK. 73575/- F) DISALLOWANCE OF FOREIGN TRAVEL. 41966/- G) DISALLOWANCE OF LICENSE FEE BEING TR EATED AS CAPITAL EXPENDITURE. 106714/- 3. THE ASSESSING OFFICER IN VIEW OF DISALLOWANCES/ADDITI ONS MADE ABOVE PROCEEDED U/S 271(1)( C) OF THE INCOME TAX ACT , 1961 FOR IMPOSITION OF PENALTY FOR CONCEALMENT OF INCOME AND VIDE ORDER DATED 26.2.2010 IMPOSED A PENALTY OF ` .5802212/-. 4. THE ASSESSEE FILED APPEAL BEFORE LD CIT(A) AND SUBMIT TED AS UNDER:- ITA NO5665/DEL/2011 3 A) THAT THE APPELLANT CLAIMED CERTAIN DEDUCTIONS U/S 80H H, 80HHC, 80I & 80IA ON PROFITS OF ELIGIBLE UNDERTAKING. THESE DEDUCTIONS WERE INITIALLY DISALLOWED IN ITS ENTIRETY. HOWEVER, I N APPEAL, THE LD CIT(A) HELD THAT ALL THE DEDUCTIONS ARE ALLOWABL E. HOWEVER, CERTAIN ADJUSTMENTS WERE DONE IN RESPECT OF QUANTUM OF DEDUCTIONS. ON PERUSAL OF PENALTY ORDER IT WOULD REV EAL THAT THE ONLY REASON STATED THEREIN FOR IMPOSITION OF PENALTY W AS THAT BY CLAIMING EXCESS DEDUCTION, THE APPELLANT ATTEMPTED TO REDUCE ITS TAX LIABILITY AND THEREBY FURNISHED INACCURATE PARTI CULARS OF INCOME. IN THE BACKGROUND OF ABOVE FACTUAL POSITION , IT WAS SUBMITTED THAT WHERE QUANTUM OF DEDUCTIONS CLAIMED U/ S 80IA & 80IB ARE REDUCED DUE TO ALLOCATION OF CERTAIN OVER HEAD EXPENSES BETWEEN HEAD OFICE & UNITS, THE PENALTY U/S 271(1 (C) WAS NOT LELVIABLE. RELIANCE WAS PLACED IN THE CASE OF CIT V. DHARAM PAL PREM CHAND 329 ITR 572 (DEL.). SIMILARLY, THE DEDUC TION U/S 80HHC WAS REDUCED AS CERTAIN EXPORT RECEIPTS WERE EXCL UDED FROM THE EXPORT TURNOVER AS AMOUNTS WERE NOT RECEIVED WITHIN 180 DAYS. THIS FACT COULD NOT HAVE BEEN KNOWN AT THE TIME OF FILING OF THE RETURN. THEREFORE, THE ASSESSEE CANNOT B E SAID TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. B) THAT THE CLOSING STOCK OF WIP WAS DECLARED IN THE BAL ANCE SHEET AS ON 31.3.1995 AND IT WAS DECLARED IN THE BALANCE SHE ET THAT CLOSING STOCK HAS BEEN VALUED AT COST OF RAW MATERIAL + CONVERSION COST WHEREVER AVAILABLE. THEREFORE, A PRO PER DISCLOSURE WAS MADE IN THE BALANCE SHEET REGARDING MANN ER AND METHOD OF VALUATION OF CLOSING STOCK OF WIP. THE ADDI TION WAS GOT REDUCED IN APPELLATE PROCEEDINGS TO A VERY SMALL AMOU NT WHICH ITSELF PROVES THAT MATTER OF VALUATION OF WIP WAS A SUB JECTIVE ITA NO5665/DEL/2011 4 MATTER. THEREFORE, IT CANNOT BE SAID THAT THE INACC URATE PARTICULARS WERE FURNISHED. C) THAT THE EXPENDITURE OF ` .10,16,088/- WAS ON ACCOUNT OF THE DEVALUATION OF INDIAN RUPEE AND WAS ON ACCOUNT OF IN CREASE IN LIABILITY OF VARIOUS FOREIGN SUPPLIERS DUE TO DEPRECIA TION OF RUPEE. THE ASSESSING OFFICER HAD CONSIDERED THIS INCREASE IN LIAB ILITY AS A CAPITAL EXPENDITURE AND HAD ALLOWED ONLY THE AMOU NT OF ` .254020/- AS DEPRECIATION THEREON AND MADE AN ADDITI ON OF REMAINING AMOUNT OF ` .762068/- AS CAPITAL EXPENDITURE. IN THE BACKGROUND OF THE ABOVE STATED FACTUAL POSITION, THE FINDINGS RECORDED IN ASSESSMENT PROCEEDINGS CANNOT MECHANICALLY CARRIED OVER TO PENALTY PROCEEDINGS FOR IMPOSITION OF PENALTY WITHOUT FURTHER APPLICATION OF MIND. FURTHER THE ASSESSING OFFI CER HAD MERELY RELIED UPON THE FINDINGS RECORDED IN THE QUAN TUM PROCEEDINGS WITHOUT MAKING OUT ANY CASE THAT THE CLA IM OF THE APPELLANT WAS A FALSE CLAIM. RELIANCE WAS PLACED IN TH E CASE OF CIT V. RELIANCE PETROPRODUCTS LTD. 320 ITR 158 (SC) WHEREIN IT WAS HELD THAT MERELY BECAUSE THE CLAIMED EXPENDITURE OF THE ASSESSEE WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO REVENU E WOULD NOT ATTRACT PENALTY U/S 271(1)( C) OF THE ACT. D) THAT ASSESSEE HAD PAID LICENSE FEES OF ` .106714/- FOR IMPORT OF MACHINERY AT 15% CONCESSIONAL RATE OF DUTY. THE ASSESSIN G OFFICER DISALLOWED THE SAID EXPENDITURE BY HOLDING IT TO BE OF CAPITAL NATURE. IT IS SUBMITTED THAT MERE SUSTENANCE OF ADDITION WOULD NOT IPSO FACTO LEAD TO THE IMPOSITION OF PENAL TY. E) THAT ASSESSING OFFICER DISALLOWED A SUM OF ` .41966/- OUT OF FOREIGN TRAVEL EXPENSES UNDERTAKEN BY VARIOUS EMPLOYEE S OF THE COMPANY. THE ONLY REASON FOR SUSTENANCE OF THIS DISALLO WANCE AS STATED IN THE ASSESSMENT ORDER IS THAT THE PURPOSE OF VI SIT OF EMPLOYEE WAS NOT STATED. THEREFORE, THE ISSUE BECOME S ITA NO5665/DEL/2011 5 CONTENTIONUS AND DEBATABLE AND WOULD NOT WARRANT ANY LEVY OF PENALTY. F) THAT THE ADDITION OF ` .73,575/- WAS MADE BY THE ASSESSING OFFICER BECAUSE OF THE FACT THAT CERTAIN REJECTED MA TERIAL WHICH WAS LYING WITH THE SUPPLIERS, PENDING REPLACEMENT WAS O MITTED TO BE TAKEN INTO CLOSING STOCK. 5. THE LD CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASS ESSEE, DELETED THE PENALTY TO THE EXTENT OF ` .55,81,654/- 6. AGGRIEVED, THE REVENUE FILED APPEAL BEFORE THIS T RIBUNAL. 7. AT THE OUTSET, THE LD AR SUBMITTED THAT THE CASE OF THE ASSESSEE IS COVERED BY THE HON'BLE TRIBUNAL ORDER FOR ASSESSMENT YEARS 1997- 98, 1998-99, 2001-02 WHERE SIMILAR PENALTY WAS DELETE D BY THE HON'BLE ITAT WHICH WAS IMPOSED UNDER SIMILAR FACTS AND CIRCUMSTANCES. IN RESPECT OF FIRST ADDITION, HE INVITED OUR ATTENTION TO PAGES 11 TO 15 OF I.T.A.NO.4893 & 4894/DEL/2011 IN R ESPECT OF ASSESSMENT YEAR 1997-98 & 1998-99. IN RESPECT OF SECOND A DDITION, OUR ATTENTION WAS INVITED TO ITAT ORDER FOR ASSESSMENT Y EAR 1997-98, 1998-99 & 2001-02 AT PAGE NO.3, 6 & 9 & 19 TO 22 OF PAPER BOOK. IN RESPECT OF THIRD ADDITION, OUR ATTENTION WAS INVITED AT PAGES 11,12 & 14 OF THE SAME ORDER IN I.T.A. NO.4893 & 4894/DEL/11. S IMILARLY LD AR STATED THAT NEXT TWO ADDITIONS OF ` .68,917/- AND ` .73,575/- WERE COVERED BY THE SAME ORDER OF THE TRIBUNAL AT PAGES 2 & 4 TO 6 AND 6 TO 9. IN RESPECT OF REMAINING TWO ADDITIONS I.E. ` .41,966/- IN RESPECT OF FOREIGN TRAVEL EXPENSES AND ` .106714/- ON ACCOUNT OF DISALLOWANCE OF LICENSE FEES, THE LD AR SUBMITTED THAT THE DISALLOWANC E OF FOREIGN TRAVEL WAS JUST MADE AS THE PURPOSE OF VISIT WAS NOT EXPL AINED TO THE ASSESSING OFFICER AND IN RESPECT OF LICENSE FEE, THE LD A R SUBMITTED ITA NO5665/DEL/2011 6 THAT THE AMOUNT WAS OF REVENUE EXPENDITURE AND ASSESSIN G OFFICER TREATED IT AS OF CAPITAL NATURE. THEREFORE, THE ADDI TION HAD OCCURRED DUE TO DIFFERENCE OF OPINION AND IN NO WAY, THERE W AS INACCURATE FURNISHING OF PARTICULARS OF INCOME. THEREFORE, IN VI EW OF THE ABOVE, HE PLEADED THAT LD CIT(A) HAD RIGHTLY DELETED THE PENA LTY. 8. THE LD DR, ON THE OTHER HAND, ARGUED THAT THERE WERE SEVEN DISALLOWANCES ON WHICH PENALTY WAS IMPOSED AND ONE OF T HEM WAS LICENSE FEES WHICH WAS OF CAPITAL NATURE AND WAS NOT AL LOWABLE. RELIANCE WAS PLACED IN THE CASE OF ZOOM COMMUNICATION PVT. LTD. REPORTED IN 327 ITR 510. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES A ND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FRO M THE COPY OF TRIBUNAL ORDER RELATING TO THE ASSESSEE FOR THE ASSESSMENT YEARS 1997- 98, 1998-99 IN RESPECT OF I.T.A. NO.,4893 & 4894/DEL /2011 WE OBSERVE THAT THE HON'BLE ITAT UNDER SIMILAR FACTS AND CIRCUM STANCES HAD DELETED THE PENALTY U/S 271(1)( C) OF THE ACT. WE AL SO OBSERVE THAT PENALTY WAS INITIATED AND WAS IMPOSED BECAUSE OF MERE ADDITIONS MADE BY THE ASSESSING OFFICER AND THERE WAS NO FURNISHIN G OF INACCURATE PARTICULARS OF INCOME. THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS LTD (SUPRA) HAS CLEARLY HELD THAT WHERE MERELY BECAUSE THE CLAIMED EXPENDITURE OF THE ASSESSEE WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO REVENUE THEN T HAT WOULD NOT ATTRACT PENALTY U/S 271(1)( C) OF THE ACT. THEREFOR E, FOLLOWING THE ABOVE AND FOLLOWING THE HON'BLE TRIBUNAL ORDER AS STATED A BOVE IN ASSESSEES OWN CASE WE ARE OF THE OPINION THAT LD CIT(A) HAD R IGHTLY DELETED THE PENALTY. THEREFORE, WE DO NOT SEE ANY REASON TO INTER FERE IN THE ORDER OF LD CIT(A). ITA NO5665/DEL/2011 7 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH DAY OF SEPTEMBER, 2012. SD/- SD/- (I.C. SUDHIR) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 28.9.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 8.8.2012 DATE OF DICTATION 26.9.2012 DATE OF TYPING 27.9.2012 DATE OF ORDER SIGNED BY 28.9.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 28.9.2012 & SENT TO THE BENCH CONCERNED.