ACIT 2(1), MUMBAI V. DALMIA DYECHEM INDUSTRIES LTD, MUMBAI

ITA 6021/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9433 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 07-11-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 29-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Proportionate interest; Wrong claim; Difference of opinion
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI P.M.JAGTAP (ACCOUNTANT MEMBER) ITA NOS.6021 & 6017/MUM/2011 ASSESSMENT YEARS: 2001-02 AND 2003-04 ACIT 2(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. DALMIA DYECHEM IND. LTD., 202, VENKA TESH CHAMBERS, PRESCOT ROAD, FORT, MUMBAI-01. PA NO.AAACD 5406 E (APPELLANT) VS (RESPONDENT) APPELLANT BY : SHRI A.B.KOLI RESPONDENT BY: SHRI PRAKASH K JOTWANI DATE OF HEARING: 8.11.2012 DATE OF PRONOUNCEMENT: 21. 11.2012 ORDER PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THESE APPEALS FOR ASSESSME NT YEARS 2001-02 AND 2003- 04 AGAINST SEPARATE ORDERS OF LD CIT(A) BOTH DATED 10.6.2011 ON IDENTICAL GROUND WHICH IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD CIT(A) HAS ERRED IN DELETING THE PENALTY ORDER IN SPITE OF THE FACT THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM DURING TH E ASSESSMENT PROCEEDINGS AND ALSO LOST OPPORTUNITY IN PENALTY PR OCEEDINGS BY REMAINING ABSENT. 2. SINCE FACTS AND ISSUE INVOLVED IN BOTH THE APPEA LS ARE MOSTLY COMMON, WE HEARD THESE APPEALS TOGETHER AND DISPOSE OF THEM BY A COM MON ORDER FOR THE SAKE OF CONVENIENCE. 3. IT IS RELEVANT TO STATE THAT LD CIT(A) HAS PASSE D A DETAILED ORDER FOR ASSESSMENT YEAR 2001-02 IN DELETING THE PENALTY LEVIED BY THE AO AND SAME ORDER HAS BEEN FOLLOWED BY HIM FOR ASSESSMENT YEAR 2003-04. 2 4. IT IS RELEVANT TO STATE THAT FOR ASSESSMENT YEAR 2001-02, THE PENALTY HAS BEEN LEVIED BY THE AO ON ACCOUNT OF FOLLOWING TWO ADDITI ONS, (I) INTEREST ATTRIBUTABLE TO LOANS AND ADVANCES TO SISTER CONCERN OF RS.67,70,646 AND (II) INTEREST PAYABLE TO BANK AND FINANCIAL INSTITUTIONS OF RS.5,46,043. THE AO HAS LEVIED THE PENALTY @ 100% OF TAX SOUGHT TO BE EVADED OF RS.73,16,689 (RS.67,70,646 + RS.5,46,043) WHICH COMES TO RS.28,16,925. ACCORDINGLY, AO HAS LEVIED PENALTY O F RS.28,50,000 FOR ASSESSMENT YEAR 2001-02. 5. FOR ASSESSMENT YEAR 2003-04, AO HAS LEVIED PENAL TY ON ACCOUNT OF ADDITIONS MADE ON ACCOUNT OF INTEREST ATTRIBUTABLE TO LOANS A ND ADVANCES TO SISTER CONCERNS AMOUNTING TO RS.89,98,018 AND WORKED OUT THE PENALT Y @ 100% OF TAX SOUGHT TO BE EVADED THEREON, WHICH COMES TO RS.31,49,306 AND, AC CORDINGLY, LEVIED PENALTY OF RS.32,00,000. 6. FOR ASSESSMENT YEAR 2001-02, AO HAS STATED THAT ASSESSEE HAD SHOWN BORROWED FUNDS AND INTEREST FREE ADVANCES TO SISTER CONCERNS . AO DISALLOWED PROPORTIONATE INTEREST OUT OF INTEREST PAID FOR THE REASON OF INT EREST FREE ADVANCES GIVEN TO SISTER CONCERNS. IN VIEW OF SAID DISALLOWANCE OF RS.67,70 ,464 TOWARDS INTEREST ATTRIBUTABLE TO LOANS AND ADVANCES TO SISTER CONCERNS, ASSESSEE STA TED DURING PENALTY PROCEEDINGS THAT THE AMOUNT WAS ADVANCED FOR BUSINESS EXPEDIENCY. I T WAS STATED THAT THERE WAS A DIFFERENCE OF OPINION BETWEEN ASSESSEE AND AO AND H ENCE, CLAIM WAS DISALLOWED. THERE WAS NO MALAFIDE INTENTION ON THE PART OF ASSESSEE T O CONCEAL ANY INCOME OR TO EVADE TAX. THE INTEREST AMOUNT PAID WAS SHOWN IN THE BOO KS AND ADEQUATE DETAILS REGARDING THE SAME WERE PROVIDED TO THE AO DURING THE ASSESSM ENT PROCEEDINGS. AO HAS STATED THAT THE EXPLANATION OF THE ASESSEE IS DULY CONSIDE RED BUT SAME IS NOT ACCEPTABLE. ASSESSEE HAS MADE WILLFUL CLAIM OF INTEREST TO EVAD E TAX , THOUGH THERE IS DIRECT NEXUS BETWEEN ASSESSEES BORROWED FUNDS AND THE DIVERSION OF SAID FUNDS FOR NON-INTEREST PURPOSES. FURTHER, AO HAS STATED FOR ASSESSMENT YE AR 2001-02 THAT INTEREST PAYABLE TO BANKS AND FINANCIAL INSTITUTIONS OF RS.5,46,043 IS COVERED BY THE PROVISIONS OF SECTION 43B OF THE ACT AND SAME WAS ALSO CONFIRMED BY LD CI T(A) AND TO THIS EXTENT, ASSESSEE HAS CONCEALED ITS PARTICULARS OF INCOME. THUS, ASS ESSEE HAS WILLFULLY COMMITTED THE 3 DEFAULT BY CLAIMING INTEREST EXPENSES. IN VIEW OF ABOVE, AO HAS LEVIED PENALTY @ 100% OF TAX ON THE AMOUNT OF RS.73,16,689 FOR ASSESSMENT YEAR 2001-02 OF RS.28,50,000. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD CI T(A). LD CIT(A) CONSIDERING THE SUBMISSIONS OF ASSESSEE VIDE PARAS 5 TO 11 OF THE I MPUGNED ORDER QUASHED THE PENALTY ORDER. HENCE, DEPARTMENT IS IN APPEAL BEFORE THE T RIBUNAL. 7. AT THE TIME OF HEARING, LD D.R. SUBMITTED THAT A SSESSEE BORROWED CERTAIN FUNDS OF WHICH LIABILITY TO PAY INTEREST IS OCCURRED ON THE ONE HAND AND ON THE OTHER HAND, CERTAIN AMOUNTS WERE ADVANCED TO SISTER CONCERNS WITHOUT CA RRYING ANY INTEREST. ASSESSEE COULD NOT ESTABLISH THAT THE BORROWED FUNDS WERE MA DE FOR BUSINESS PURPOSES TO SISTER CONCERNS. THEREFORE, BY ADVANCING THE BORROWED FUN DS TO ITS SISTER CONCERNS, REDUCED ITS INCOME BY MAKING WRONG CLAIM OF INTEREST. LD D .R. SUBMITTED THAT IN SPITE OF SEVERAL OPPORTUNITIES GIVEN TO ASSESSEE, ASSESSEE COULD NOT PROVE THAT THE ADVANCES TO THE SISTER CONCERNS WERE GIVEN OUT OF OWN FUNDS. THERE FORE, ASSESSEE HELPS THE SISTER CONCERNS WITH BORROWED FUNDS AND REDUCED ITS INCO ME. LD D.R. SUBMITTED THAT AO RIGHTLY IMPOSED THE PENALTY U/S.271(1)(C) OF THE AC T. LD D.R. FURTHER SUBMITTED THAT ASSESSEE ALSO CLAIMED INTEREST PAYABLE TO BANKS AND FINANCIAL INSTITUTIONS OF RS.5,46,043 THOUGH THE SAME WAS NOT PAID BEFORE THE DUE DATE OF FILING OF RETURN. HENCE, ASSESSEE FILED WRONG PARTICULARS OF INCOME BY CLAIMING DEDUC TION IN RESPECT OF SAID INTEREST PAYMENT TO BANKS AND FINANCIAL INSTITUTIONS. ACCOR DINGLY, AO RIGHTLY LEVIED THE PENALTY ON ACCOUNT OF SAID ADDITIONS U/S.271(1)(C) OF THE A CT. 8. ON THE OTHER HAND, LD A.R. SUBMITTED THAT ASSESS EE HAS MADE FULL DISCLOSURE IN RESPECT OF INTEREST FREE ADVANCES MADE TO SISTER CO NCERNS. HE FURTHER SUBMITTED THAT THE ADVANCES WERE GIVEN AS A MEASURE OF COMMERCIAL EXPE DIENCY AND TO CARRY ON BUSINESS OPERATION. AO HAS DISALLOWED INTEREST MERELY ON TH E GROUND THAT CLAIM IS NOT SUBSTANTIATED. LD A.R. SUBMITTED THAT THERE IS NO WILLFUL CLAIM OF INTEREST TO EVADE TAX AS RETURNED INCOME WAS A LOSS AND ASSESSED INCOME IS A LSO LOSS. HE FURTHER SUBMITTED THAT A LEGAL CLAIM PER SE RIGHT OR WRONG CANNOT AMOUNT TO FURNISHING OF INA CCURATE PARTICULARS OF INCOME AND PLACED RELIANCE ON THE DECISION OF IT AT MUMBAI IN THE CASE OF IDBI LTD VS. DCIT, 43 SOT 325(MUM). LD A.R. FURTHER SUBMITT ED THAT ITAT HAS FOLLOWED THE DECISION IN THE CASE OF STRIDES ARCOLAB LTD VS. ACI T, 40 SOT 398(MUM) THAT MERELY 4 BECAUSE ASSESSEE MADE SOME LEGAL CLAIM WHICH HAD N OT BEEN ACCEPTED BY THE AO, IT WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTIC ULARS OF INCOME BY THE ASSESSEE SO AS TO JUSTIFY LEVY OF PENALTY. LD A.R. FURTHER SUB MITTED THAT ITAT IN THE CASE OF EQUEST INDIA (P) LTD VS. ITO, 41 SOT 225 (MUM) HAS HELD TH AT MAKING A LEGAL CLAIM, WHICH IS FOUND TO BE UNACCEPTABLE IN LAW, CANNOT BE TREATED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. LD A.R. ALSO REFERRED THE D ECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS P. LTD., 32 2 ITR 158(SC) THAT MERE MAKING A CLAIM WHICH IS DISALLOWED BY THE AO DOES NOT AMOUNT TO CONCEALMENT OF INCOME. LD A.R. SUBMITTED THAT THE DISALLOWANCE OF INTEREST HA S BEEN MADE BY THE AO ON ADHOC BASIS AND SUBMITTED THAT HONBLE P&H HIGH COURT IN THE CASE OF CIT VS. SANGRUR VANSPATI MILLS LTD., 122 TAXMAN 831(P&H), HELD THA T WHERE ADDITION IS MADE ON ESTIMATE BASIS AND NOT ON ANY CONCRETE EVIDENCE OF CONCEALMENT FOR FURNISHING OF INACCURATE PARTICULARS, LEVY OF PENALTY IS NOT JUS TIFIED. LD A.R. SUBMITTED THAT AO HAS NOT PROVED ANY NEXUS BETWEEN THE BORROWED FUNDS AND THE INTEREST FREE ADVANCES AND, THEREFORE, LEVY OF PENALTY IS NOT JUSTIFIED. HE SU BMITTED THAT ORDER OF LD CIT(A) BE UPHELD. 9. IN RESPECT OF ADDITION OF DISALLOWANCE OF INTERE ST PAYABLE TO BANKS AND FINANCIAL INSTITUTIONS OF RS.5,46,043, LD A.R. SUBMITTED THAT THE ENTIRE AMOUNT WAS DUE TO BANKS BUT SAME WAS NOT PAID DUE TO FINANCIAL CONSTRAINTS. HE SUBMITTED THAT ASSESSEE MADE PART PAYMENT TO THE BANKS AND FINANCIAL INSTITUTION S AND AO ALLOWED THE INTEREST TO THE EXTENT THE AMOUNT WAS PAID TO BANKS AND FINANCIAL I NSTITUTIONS UPTO THE DATE OF FILING OF RETURN AND RS.5,46,043 WERE DISALLOWED. HE SUBMITT ED THAT THERE WAS NO CONCEALMENT OF FACTS IN THE RETURN FILED AND, THEREFORE, LEVY O F PENALTY IS NOT JUSTIFIED. HE SUBMITTED THAT ORDER OF LD CIT(A) BE CONFIRMED. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD REPRESENTATIVES OF PARTIES AND CASES CITED BEFORE US BY LD A.R. AT THE TIME OF HEARING. 11. WE AGREE WITH LD A.R. THAT MERE ADDITION OR ITS CONFIRMATION IN THE ASSESSMENT PROCEEDINGS OF A CLAIM CANNOT BE THE BASIS FOR LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. WE ALSO OBSERVE THAT AO HAS MADE DISALLOWANCE OF IN TEREST ATTRIBUTABLE TO LOANS AND 5 ADVANCES GIVEN BY ASSESSEE TO ITS SISTER CONCERNS T HAT COMES TO RS.67,70,648 FOR ASSESSMENT YEAR 2001-02. IT HAS BEEN HELD BY HONB LE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD (SUPRA) THAT MERE R EJECTION OF A CLAIM MADE BY THE ASSESSEE DOES NOT AMOUNT TO FURNISHING OF INACCURAT E PARTICULARS OF INCOME OR CONCEALMENT OF INCOME BY THE ASSESSEE. IT HAS BEEN HELD BY THEIR LORDSHIPS THAT THE MEANING OF THE WORD PARTICULARS USED IN SECTION 2 71(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. TO ATTRACT PENALTY, THE DETAILS SU PPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TH E TRUST OR ERRONEOUS. A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITS ELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. THEREFORE, WE HOLD THAT LEVY OF PENALTY IN RESPECT OF DISALLOWANCE OF INTER EST OF RS.67,70,646 MADE ON ACCOUNT OF INTEREST ATTRIBUTABLE TO LOANS AND ADVANCES TO S ISTER CONCERNS HAS RIGHTLY BEEN DELETED BY LD CIT(A). 12. HOWEVER, IN RESPECT OF ADDITION OF RS.5,46,043 MADE BY AO ON ACCOUNT OF INTEREST PAYABLE TO BANKS AND FINANCIAL INSTITUTION S, WE OBSERVE THAT LD CIT(A) HAS NOT DISCUSSED ANYTHING IN THE IMPUGNED ORDER AND HAS D ELETED THE PENALTY IMPOSED BY THE AO, WITHOUT GIVING ANY REASON. IN VIEW OF THIS, WE RESTORE THE MATTER TO LD CIT(A) ON THIS ISSUE AND DIRECT HIM TO ADJUDICATE THE SAME BY A SPEAKING ORDER AS TO WHETHER LEVY OF PENALTY ON DISALLOWANCE OF RS.5,46,043 ON THE FA CTS AND CIRCUMSTANCES, IS JUSTIFIED OR NOT. IN VIEW OF ABOVE, WE UPHOLD THE ORDER OF LD CIT(A) IN REGARD TO DELETING THE PENALTY OF RS.67,70,646 AND RESTORE ISSUE OF LEVY O F PENALTY IN RESPECT OF ADDITION OF RS.5,46,043 TO THE FILE OF LD CIT(A) FOR HIS ADJUDI CATION. THEREFORE, GROUND OF APPEAL TAKEN BY DEPARTMENT FOR A.Y. 2001-02 IS ALLOWED IN PART. 13. NOW COMING TO APPEAL FOR ASSESSMENT YEAR 2003-0 4, PENALTY HAS BEEN LEVIED BY THE AO OF RS.32 LAKHS ON ACCOUNT OF INTEREST ATTRIB UTABLE TO LOANS AND ADVANCES TO SISTER CONCERN. THE FACTS AND ISSUE ARE IDENTICAL TO A.Y. 2001-02 WHICH WE HAVE DISCUSSED HEREINABOVE. LD CIT(A) HAS DELETED THE PENALTY LEV IED BY AO GIVING SAME REASONS AS FOR A.Y. 2001-02. SINCE WE HAVE UPHELD THE ORDER OF LD CIT(A) FOR A.Y. 2001-02 IN CANCELING THE PENALTY ON THE SAID AMOUNT AND FOR THE SAME REA SONS AS STATED IN PARA 11 HEREINABOVE, WE UPHOLD THE ORDER OF LD CIT(A) FOR A SSESSMENT YEAR 2003-04 TO CANCEL 6 PENALTY LEVIED BY AO ON ACCOUNT OF INTEREST ATTRIBU TABLE TO LOANS AND ADVANCES TO SISTER CONCERNS OF RS.89,98,018 BY REJECTING GROUND OF APP EAL TAKEN BY REVENUE. 14. IN THE RESULT, APPEAL FOR ASSESSMENT YEAR 2001- 02 IS PARTLY ALLOWED AND WHEREAS APPEAL FOR ASSESSMENT YEAR 2003-04 IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2012 SD/- (P.M.JAGTAP) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 21 ST NOVEMBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),4, MUMBAI 4. COMMISSIONER OF INCOME TAX, 2 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI