DCIT RG 8(2), MUMBAI V. INDUSTRIAL X-RAY & ALLIED RADIOGRAPHY P.LTD, MUMBAI

ITA 6076/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88022 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 26-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 05-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHIDANAND DUBEY
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

I IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI . , ! '!! !# , $ BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 6076/MUM/2012 (ASSESSMENT YEAR: 2006-07) DY COMMISSIONER OF INCOME TAX, RANGE 8(2), R. NO. 209, AAYAKAR BHAVAN, M K ROAD, MUMBAI -400 020 VS M/S INDUSTRIAL X-RAY & ALLIED RADIOGRAPHY PVT LTD, 102, FIRST FLOOR, FAIZAN APARTMENT, S V ROAD, JOGESHWARI(WEST), MUMBAI-400102 % .: PAN: AAACI 1419 A %' (APPELLANT) ()%' (RESPONDENT) APPELLANT BY : SHRI SACHIDANAND DUBEY RESPONDENT BY : NONE *! + ,- /DATE OF HEARING : 26-11-2014 ./0 + ,- / DATE OF PRONOUNCEMENT : 14-01-2015 ORDER , , , , : :: : PER VIVEK VARMA, JM : THE APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A) 17, MUMBAI, DATED 31.07.2012, WHEREIN THE CIT(A) HAD PARTLY DELETED THE PENALTY LEVIED BY THE AO U/ S 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. AS NONE APPEARED ON BEHALF OF THE ASSESSEE, NOR ANY ADJOURNMENT LETTER HAS BEEN RECEIVED BY OR ON BEHALF OF THE ASSESSEE ON OR BEFORE DATE OF ITS HEARING, HENCE, WE PROC EED TO DECIDE THE APPEAL EX PARTE, IN ABSENCE OF THE ASSESSEE ON MERIT AFTER HEARING DR. 3. THE FACTS ARE THAT THE AO HAD LEVIED PENALTY OF RS. 5,00,000/- ON VARIOUS ISSUES, WHICH INCLUDED EXPENDITURE INCURRED ON REPAIRS, BUSINESS DEVELOPMENT EXPENDITURE AND U/S M/S INDUSTRIAL X-RAY & ALLIED RADIOGRAPHY PVT LTD ITA NO. 6076/MUM/2012 2 40(A)(IA). THE EXPENSES AS CLAIMED HAD BEEN DISALLOWED IN QUANTUM. AS A CONSEQUENCE THERE OF THE AO PROCEEDED T O LEVY THE PENALTY. 3. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT IN SO FA R AS THE FACTUM OF INCURRING OF EXPENSE WAS CONCERNED, THE AO DID NOT DISPUTE. THE ASSESSEE, THEREFORE ARGUED THAT SIMPLY BECAUSE THE ASSESSEE DID NOT FILE THE DETAILS OR WHERE THE AO CHA NGED THE EXPENSE HEAD, THE PENALTY CANNOT BE LEVIED. THE ASSESSEE ALSO SUBMITTED BEFORE THE CIT(A) THAT UNLESS THE AO PROVES TH AT THE ASSESSEE HAD CONCEALED THE INCOME OR FILED INACCURATE PARTICULARS OF INCOME, THE PENALTY PROVISIONS CANNOT BE INVOKED. 4. THE CIT(A), ON THESE SUBMISSIONS OBSERVED, DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR RELIED UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF EAGLE IRON & METAL INDUSTRIES LTD, 1 1 ITR(TRIB.) 384, TO ARGUE THAT ON SIMILAR GROUNDS PENALTY CANNOT BE LEVIED. I HAVE PERUSED THE SAID DECISION, WHEREIN THE TRIBUNAL HAS HELD AS FOLLOWS ON SIMILAR FACTS: 'THE SECOND ADDITION IS ON ACCOUNT OF TREATMENT OF REPAIRS AND MAINTENANCE OF EXPENSES CLAIMED BY THE ASSESSEE AS REVENUE EXPENDITURE. THE AO HAS NOT DOUBTED THE GENUINENESS OF EXPENDITURE BUT HAD TREATED THE SAME AS CAPITAL EXPENDITURE FOR WANT OF BILLS AND VOUCHERS. THERE IS NO FINDING BY THE AO T HAT THE EXPENDITURE INCURRED HAD RESULTED INTO CREATION OF ANY CAPITAL ASSET. THUS THE AO TREATED THE EXPENDIT URE AS CAPITAL EXPENDITURE ONLY ON THE BASIS OF GUESS W ORK. THE ASSESSEE DID NOT DISPUTE THE ADDITION MAY BE BECAUSE THE EXPENDITURE WAS ALLOWABLE FULLY IN THE FORM OF DEPRECIATION IN THE SUBSEQUENT YEARS. THERE BEIN G NO MATERIAL BROUGHT ON RECORD SHOWING THAT THE EXPENDI TURE WAS REALLY OF CAPITAL IN NATURE IN OUR VIEW NO PENA LTY FOR CONCEALMENT OF INCOME CAN BE IMPOSED.' 4.1.3. AS THE FACTS OF THE PRESENT CASE ARE SQUARELY COVERED BY THE RATIO OF THE ABOVE CITED DECISION OF THE JURISDICTIONAL TRIBUNAL, PENALTY ON THE ADDITION OF RS. 13,66,000/- CANNOT BE SUSTAINED AND THEREFORE, THE SAME IS DELETED. BUSINESS DEVELOPMENT EXPENDITURE - IN THE ASSESSMENT ORDER, THE AO HAS DISALLOWED BUSINESS DEVELOPMENT EXPENDITURE OF RS. 7,30,551/-, ON THE GROUNDS THAT THE APPELLANT WAS UNABLE TO FILE NECESSARY DETAILS. DUR ING THE COURSE OF APPELLATE PROCEEDINGS, THE MATTER WAS REMANDED TO THE AO FOR FRESH INVESTIGATION. THE AO AFTER MAKING NECESSARY INVESTIGATION, CAME TO THE M/S INDUSTRIAL X-RAY & ALLIED RADIOGRAPHY PVT LTD ITA NO. 6076/MUM/2012 3 CONCLUSION THAT ONLY EXPENDITURE AMOUNTING TO RS. 2.50,000/-, WAS UNVERIFIED. AFTER ALLOWING BENEFIT OF FBT @ 20%, THE AO PROPOSED A NET ADDITION OF RS. 2,00,000/-. THE CIT(A) CONCURRED WITH THE AO AND SUSTAINED ADDITION TO THE EXTENT OF RS. 2 LACS. 4.2.2 I HAVE EXAMINED THE DETAILS. THE AO HAD DISALLOWED THE SAID EXPENDITURE ON THE GROUNDS THAT IT IS NOT FOR THE PURPOSES OF BUSINESS. THE AO HAS NOT QUESTIONED THE GENUINENESS OF THE EXPENDITURE. THE SOLE BASIS FOR COMING TO THIS CONCLUSION IS THE APPELLANT'S INABILITY TO PRODUCE NECESSARY DOCUMENTS. I FIND THAT ON THESE GROUNDS PENALTY CANNOT BE SUSTAINED, AS HELD IN THE ABOVE CITED DEC ISION OF EAGLE IRON & METAL INDUSTRIES LTD. HENCE, PENALT Y, ON ADDITION OF RS. 2 LACS, IS DELETED. 5. THE CIT(A), THEREFORE, DELETED THE PENALTY AGGREGATING TO RS. 4,83,850/-. 6. AGAINST THIS ORDER OF THE CIT(A), THE DEPARTMENT IS IN APPEAL. 7. BEFORE US, THE DR RELIED ON THE ORDER OF THE AO AND QUANTUM ORDER OF THE REVENUE AUTHORITIES. 8. AFTER HEARING THE ARGUMENTS, WE FIND THAT NEITHER THE DR NOR THE AO IN ANY OF THE ORDERS BROUGHT OUT ANY MATER IAL TO SHOW/PROVE THAT THIS PARTICULAR ITEM OF EXPENDITURE HAD BEEN INCURRED UNLAWFULLY. THE ONLY GRIEVANCE WITH THE REVENUE AUTHORITIES HAD BEEN CHANGE OF HEAD FROM CLAIM OF REVENUE EXPENDITURE TO CAPITAL EXPENDITURE ON REPAIR AND NOT PR OVIDING WITH THE DETAILS OF EXPENSES OR BUSINESS DEVELOPMENT EXPENSES. 9. WE ARE AWARE OF THE CATEGORICAL FINDING OF FACT BY THE CIT(A), WHEREIN, HE HAD OBSERVED, 4.3.1 DISALLOWANCE U/S. 40(A)(IA) IN THE ASSESSME NT ORDER THE AO HAS DISALLOWED A SUM OF RS. 3,51,038/- , U/S. 40(A)(IA), ON THE GROUNDS THAT TDS HAS NOT BEE N DEDUCTED AS PER THE PROVISION OF SECTION 194. IN TH E COURSE OF APPELLATE PROCEEDINGS, THE MATTER WAS REMANDED TO THE AO FOR VERIFICATION. THE AO, AFTER RE- EXAMINING THE ISSUE, HELD THAT DISALLOWANCE U/S. 40(A)(IA) IS TO BE RESTRICTED TO RS. 47,979/-, AS N O TDS HAS BEEN DEDUCTED ON THE SAID EXPENDITURE. THE CIT( A) UPHELD THE DISALLOWANCE OF RS. 47,979/- ON THE GROU NDS THAT THE APPELLANT HAD FAILED TO DEDUCT TDS ON CONT RACT M/S INDUSTRIAL X-RAY & ALLIED RADIOGRAPHY PVT LTD ITA NO. 6076/MUM/2012 4 PAYMENT MADE TO M/S. LAMBRIT TECHNICAL SERVICES. 4.3.2 AS MENTIONED SUPRA, THE AO HAS RELIED UPON TH E DECISION OF THE DELHI HIGH COURT IN THE CASE OF ZOO M COMMUNICATIONS, WHEREIN IT HAS BEEN HELD AS FOLLOWS : ADMITTEDLY, IN VIEW OF THE PROVISIONS CONTAINED IN SECTION 40(II, THE AMOUNT OF INCOME TAX COULD NOT H AVE BEEN CLAIMED AS A DEDUCTION WHILE COMPUTING INCOME OF THE ASSESSEE. IT WAS, THEREFORE, AN UNDISPUTED PROPOSITION THAT THE ASSESSEE WAS NOT ENTITLED TO E XCLUDE THE AMOUNT OF INCOME-TAX WHILE COMPUTING ITS INCOME FOR THE PURPOSE OF INCOME-TAX. THE COURT CANNOT OVERLOO K THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW, BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNIS HED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE B ONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD ST ILL NOT BE LIABLE TO PENALTY UNDER SECTION 271(1)(C). IF ONE T AKES THE VIEW THAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE M ADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF P ENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO THE UNSCRUPULOUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETURN WOULD NO T BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED O N THE BASIS OF SELF-ASSESSMENT UNDER SECTION 143(1) A ND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY C AN GET AWAY MERELY BY PAYING THE TAX, WHICH, IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS, WHO MAKE CLAIMS OF THIS NATURE, ACTUATED B Y A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM, WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP F OR SCRUTINY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT , WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. ADMITTEDLY, IN VIEW OF THE PROVISIONS CONTAINED IN 40(II), THE AMOUNT OF INCOME TAX COULD NOT HAVE BEEN CLAIME D AS A DEDUCTION WHILE COMPUTING INCOME OF THE ASSESSEE. IT WAS, THEREFORE, AN UNDISPUTED PROPOSITION THAT THE ASSESSEE WAS NOT ENTITLED TO EXCLUDE THE AMOUNT OF INCOME-TAX WHILE COMPUTING ITS INCOME FOR THE PURPO SE OF INCOME-TAX. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMAL L PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NO T ONLY INCORRECT IN LAW, BUT IS ALSO WHOLLY WITHOUT ANY BA SIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUC H A CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIF FICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UN DER SECTION 271(1)(C). IF ONE TAKES THE VIEW THAT A CLA IM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF TH IS NATURE, THAT WOULD GIVE A LICENCE TO THE UNSCRUPULO US ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABL E M/S INDUSTRIAL X-RAY & ALLIED RADIOGRAPHY PVT LTD ITA NO. 6076/MUM/2012 5 CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THE M, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP F OR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF-ASSESSMENT UNDER SECTION 143(1) AND EVEN IF TH EIR CASE IS SELECTED FOR SCRUTINY, THEY CAN GET AWAY ME RELY BY PAYING THE TAX, WHICH, IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS, WH O MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM, W OULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP FOR SCRUTINY . THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. 4.3.3 KEEPING IN VIEW THE RATIO OF THE ABOVE CITED DECISION, AND THE FACT THAT THE APPELLANT SHOULD HA VE ADDED BACK THE SUM OF RS. 47,979/- U/S. 40(A)(IA) I N HIS COMPUTATION OF INCOME, THE APPELLANT IS CLEARLY GUI LTY OF FILING OF INACCURATE PARTICULARS OF INCOME. THUS, P ENALTY U/S. 271(1)(C), ON THE SAID ADDITION, IS UPHELD. 10. THIS PROVES THE FACT THAT THE AO DID NOT DISPUTE TH E ACTUAL INCURRING OF EXPENDITURE AND ALSO THAT HE DID NOT HOLD TH EM TO BE FOR NON BUSINESS PURPOSES AND ALSO THAT THERE WAS N O INACCURATE PARTICULARS OF SUCH EXPENSES. IT WAS ONLY TH E CASE OF CHANGE IN THE HEAD OF EXPENSE. 11. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT T HERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE PENALTY, W HICH WE SUSTAIN. CONSEQUENTIALLY THE GROUNDS AS RAISED BY THE DEPARTMENT ARE REJECTED. 12. IN THE RESULT, THE APPEAL AS FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JANUARY, 2015. SD/- SD/- (RAJENDRA) ( VIVEK VARMA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 14 TH JANUARY, 2015 M/S INDUSTRIAL X-RAY & ALLIED RADIOGRAPHY PVT LTD ITA NO. 6076/MUM/2012 6 (,/ COPY TO:- 1) %' / THE APPELLANT. 2) ()%' / THE RESPONDENT. 3) THE CIT(A) -17, MUMBAI. 4) THE CIT-8, MUMBAI. 5) '!23 (,* I , , / THE D.R. I BENCH, MUMBAI. 6) 34# 5 COPY TO GUARD FILE. 6* / BY ORDER / / TRUE COPY / / 7 / 8 , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN, SR.PS