MANDHANA INDUSTRIES LTD, MUMBAI V. ADDL CIT RG 6(3), MUMBAI

ITA 6099/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88049 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Keywords: Initiation of penalty proceedings; Reasonable cause; Corroborative evidences; Tax effect
• Section: 234B; 145

Judgement Text

I.T.A. NO.6099/MUM/2011 AND ITA NO.4599/MUM/2012 1 , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, M UMBAI BEFORE S/SHRI D. KARUNAKAR RAO, (AM) AND AMIT SHUKLA, (JM) . , , ./I.T.A. NO.6099/MUM/2011 ( ! / ASSESSMENT YEAR :2008-09) M/S MANDHANA INDUSTRIES LIMITED, 205,214, PENINSULA CENTRE. DR.S.S.RAO ROAD, PAREL, MUMBAI-400012 / VS. ASSTT. COMMISSIONER OF INCOME TAX 6(3), AAYAKAR BHAVAN, M K ROAD, NEW MARINE LINE, MUMBAI-400020 ( '# / APPELLANT) .. ( $%'# / RESPONDENT) ./I.T.A. NO.4599/MUM/2012 ( ! / ASSESSMENT YEAR :2007-08) M/S MANDHANA INDUSTRIES PVT.LIMITED, 205,214, PENINSULA CENTRE. DR.S.S.RAO ROAD, PAREL, MUMBAI-400012 / VS. ASSTT. COMMISSIONER OF INCOME TAX 6(3), AAYAKAR BHAVAN, M K ROAD, NEW MARINE LINE, MUMBAI-400020 ( '# / APPELLANT) .. ( $%'# / RESPONDENT) ' ./ &' ./PAN/GIR NO. :AABCM6615M '# ( / ASSESSEES BY SHRI RAJAN VORA $%'# ) ( /REVENUE BY SHRI AKHILENDRA YADAV * ) + / DATE OF HEARING : 27.11.2014 ,-! ) + /DATE OF PRONOUNCEMENT : 14.01.2015 / O R D E R PER AMIT SHUKLA, (JM) THE AFORESAID APPEALS HAVE BEEN FILED BY THE ASSESS EE AGAINST THE TWO SEPARATE IMPUGNED ORDERS DATED 7.1.2011 AND I.T.A. NO.6099/MUM/2011 AND ITA NO.4599/MUM/2012 2 23.6.2011 PASSED BY LD. CIT(A)-12, MUMBAI U/S 143(3 ) OF THE INCOME TAX ACT, 1961 (THE ACT ) FOR THE ASSESSMENT YEARS 2007- 08 AND 2008-09 RESPECTIVELY. 2. AT THE OUTSET, IT IS NOTICED THAT THE APPEAL O F THE ASSESSEE IS TIME BARRED BY 368 DAYS. IN SUPPORT OF CONDONATION OF DELAY, THE ACCOUNTANT OF THE ASSESSEE HAS FILED AN AFFIDAVIT, WHICH IS REPRODUCED HEREINBELOW:- I, KISHOR BANE, SON OF DATTARAM BANE, AGED 42 YEARS RESIDING AT B-11, JAAI KUNJ CHAWL, BHARAT BHOIR NAGAR, RETI BUN DER ROAD, DOMBIVALI (W), DIST. THANE - 421202, DO HEREBY TAKE OATH AND DECLARE ON AFFIRMATION AS UNDER: 1. THAT I AM WORKING AS AN ACCOUNTANT FOR M/S. MANDHAN A INDUSTRIES LIMITED ('MANDHANA') FROM LAST SEVERAL Y EARS AND I AM LOOKING AFTER APPEAL RELATED MATTER OF THE MANDH ANA INDUSTRIES LTD. 2. THAT FOR ASSESSMENT YEAR 2007-08 MANDHANA HAVE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX (APPEAL) ON 5 MAY 2011. 3. THAT ON RECEIPT OF CIT(A)S ORDER MANDHANA HAS FORWARDED A COPY OF THE SAME TO TAX CONSULTANT FOR PREPARATION OF APPEAL. 4. THAT OUR TAX CONSULTANT HAD PREPARED THE DRAFT APP EAL PAPERS AND THE SAME HAVE BEEN RECEIVED BY ME IN TH E MONTH OF JUNE 2011 FOR TAKING SIGNATURE AND FILING IT BEF ORE TRIBUNAL AND LAST DATE FOR FILING APPEAL BEFORE TRIBUNAL WAS 4 TH JULY 2011. 5. THAT DUE MY OVERSIGHT THE APPEAL DOCUMENTS REMAINS WITH ME AND ACTUALLY NOT GOT SIGNED FROM MANAGING DIRECTOR AND IN NATURAL COROLLARY HAD NOT FILLED BEFORE TRIB UNAL. I.T.A. NO.6099/MUM/2011 AND ITA NO.4599/MUM/2012 3 6. THAT OUR TAX CONSULTANT, WHILE GOING THROUGH THE AP PEAL PAPER OF SUBSEQUENT YEAR I.E. AY 2008-09, WHICH IS FIXED BEFORE ITAT ON 25 JULY 2012, ASKED FOR THE APPEAL PAPERS F ILED BEFORE HON'BLE ITAT FOR AY 2007-08 AS ONE OF THE GROUND IN AY 2008- 09 WAS INTER RELATED WITH THE GROUND IN AY 2007-08. 7. THAT WHEN I HAVE GONE THROUGH THE RECORDS, IT CAME TO MY KNOWLEDGE THAT APPEAL WAS REMAINED TO BE FILED DUE TO OVERSIGHT. 8. THAT THERE IS AN UNINTENTIONAL DELAY IN FILING OF A PPEAL AND NO UNDUE BENEFIT OR ADVANTAGE IS TAKEN FROM THE DE LAY IN FILING OF APPEAL. 9. THAT DELAY OF 368 DAYS, WHICH IS ATTRIBUTABLE TO M E, KINDLY BE CONDONED. 10. THAT I WAS REPRIMANDED FOR NOT FILLING THE APPEAL B EFORE THE HONBLE ITAT FOR AY 2007-08 WITHIN THE DUE DAT E PRESCRIBED. 11. THAT THIS AFFIDAVIT IS MADE TO PUT ON RECORD THE FA CTS. I SAY THE WHATEVER IS STATED HEREINABOVE IS TRUE TO MY KNOWLEDGE AND BELIEF 3. IT IS SEEN THAT THE AFFIDAVIT HAS BEEN FILED BY THE ACCOUNTANT OF THE ASSESSEE WHO HAS MADE AN AFFIRMATION ON OATH TH AT DUE TO HIS OVERSIGHT THE APPEAL DOCUMENTS REMAINED WITH HIM A ND COULD NOT GET SIGNED FROM THE MANAGING DIRECTOR AND THEREFORE, APPEAL COULD NOT BE FILED. THE CONTENTS GIVEN IN THE AFFIDAVIT D OES NOT REFLECTS ANY REASONABLE CAUSE FOR CONDONATION OF DELAY, FIRSTLY, THE ASSESSEE HAD NOT TAKEN ANY STEPS FOR PREPARATION OF FILING OF T HE APPEAL WHEN THE DRAFT OF APPEAL WAS PREPARED AS STATED BY ACCOUNTAN T. THE ENTIRE MATTER HAD BEEN LEFT WITH THE ACCOUNTANT FROM WHOM NO INQUIRY WAS I.T.A. NO.6099/MUM/2011 AND ITA NO.4599/MUM/2012 4 DONE AS TO WHY THE APPEAL PAPERS WHICH WERE PREPAR ED WAS NOT PUT UP FOR SIGNING AND FILING IT BEFORE THE TRIBUNAL. THIS ATTITUDE OF THE ASSESSEE ITSELF SHOWS THAT THE ASSESSEE WAS NOT VI GILANT ENOUGH IN PREPARING AND FILING OF THE APPEAL BEFORE THE TRIB UNAL. SECONDLY, THE APPELLATE ORDER FOR SUBSEQUENT THE ASSESSMENT YEAR I.E. 2008-09 WAS PASSED ON 23.6.2011, AGAINST WHICH APPEAL WAS FILED WITHIN TIME LIMIT PRESCRIBED AND IT TOOK MORE THAN ONE YEAR TO THE ASSESSEE TO REALIZE THAT THE APPEAL FOR THE ASSESSMENT YEAR 200 7-08 HAS NOT BEEN FILED. IT APPEARS FROM THE CONTENTS GIVEN IN THE AFFIDAVIT THAT, ONCE THE APPEAL FOR THE ASSESSMENT YEAR 2008-09 WAS FIXED FO R HEARING AND THE LD. COUNSEL BRIEFED WITH THE MATTER REQUIRED TO KNOW ABOUT THE FATE OF APPEAL FOR THE ASSESSMENT YEAR 2007-08, THEN ONLY THE ASSESSEE REALIZED THAT FILING OF THE APPEAL FOR ASSESSMENT YEAR 2007-08 WAS NECESSARY. THIS IS MORE SO IN THIS CASE, BECAUSE AFTER THE EFFECT OF LD.CIT(A)S ORDER WITH REGARD TO THE ADDITION MADE U/S 145A, THERE WAS NO ADDITION AS IT WAS NEUTRALIZED BY THE ADJUST MENT MADE IN THE OPENING STOCK. IT WAS IN THIS BACKGROUND, THE ASSE SSEE DID NOT CHOSE TO FILE ANY APPEAL BEFORE THE TRIBUNAL DUE TO NEUT RALIZATION OF TAX EFFECT. THE REASONS ADVANCED IN THE AFFIDAVIT FIL ED BY THE ACCOUNTANT OF THE ASSESSEE ARE NOT SUPPORTED BY ANY COGENT OR SUPPORTING EVIDENCE, BUT WERE SELF SERVING STATEMENT AND THAT TO BE BY AN ACCOUNTANT. NO MATERIAL HAS BEEN PLACED BEFORE THE TRIBUNAL TO I.T.A. NO.6099/MUM/2011 AND ITA NO.4599/MUM/2012 5 SHOW THAT CONTENTS ARE CORRECT. IT IS A MERE ASSER TION BY AN ACCOUNTANT WHO IS NOT RESPONSIBLE PERSON, THE AFF IDAVIT SHOULD HAVE BEEN FILED BY THE MANAGING DIRECTOR OF THE ASSESSE E-COMPANY. THUS, WE DO NOT FIND ANY BONAFIDE REASONS ON THE BA SIS OF WHICH THE DELAY OF 368 DAYS CAN BE CONDONED. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IS NOT ADMITTED BEING BARRED BY LIM ITATION. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE FOR T HE ASSESSMENT YEAR 2007-08 IS DISMISSED IN LIMINE. 4. NOW COMING TO THE APPEAL FOR THE ASSESSMENT YEA R 2008-09, WHEREIN THE ASSESSEE HAS RAISED FOLLOWING GROUNDS O F APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 12, MUMBAI [ CIT(A)']: 1. DEDUCTION UNDER SECTION 145A OF THE ACT FOR RS.2 8,49,027/- A. ERRED IN NOT ALLOWING THE CORRESPONDING DEDUCTIO N UNDER SECTION 145 A OF THE ACT AS ADDITIONS IN THE VALUE OF OPENING STO CK FOR THE YEAR, AS THE ADJUSTMENT WAS MADE UNDER SECTION 145A OF THE A CT TO VALUE OF CLOSING STOCK FOR THE PRECEDING AY 2007-08 IN THE C OURSE OF ASSESSMENT PROCEEDINGS; B. SHOULD HAVE APPRECIATED THAT CLOSING STOCK OF AY 2007-08 INVARIABLY BECOMES THE OPENING STOCK OF THE AY 2008-09; 2. DEDUCTION OF PROPORTIONATE LAND PREMIUM RS. 8,83 ,402/- A ERRED IN CONFIRMING THE ACTION OF THE AO ON ALLOW ABILITY OF PROPORTIONATE LEASE RENTAL PAID TO MIDC OF RS. 8,83 ,402/-. B. FAILED TO APPRECIATE THAT THE LEASE PREMIUM PAID TO MIDC IS IN THE FORM OF ADVANCE RENT FOR TENURE OF LEASE AND PROPORTIONA TE WRITE OFF IS TOWARDS RENT PAID TO MIDC. C. FAILED TO APPRECIATE THAT THE LAND WAS NOT ACQUI RED BY APPELLANT, THE APPELLANT ONLY ACQUIRED A FACILITY TO CARRY ON BUSI NESS PROFITABLY BY PAYING NOMINAL LEASE RENT. I.T.A. NO.6099/MUM/2011 AND ITA NO.4599/MUM/2012 6 D. ERRED IN NOT APPLYING THE DECISION OF GUJRAT HIG H COURT IN CASE OF SUN PHARMACEUTICAL IND. LTD (2009) 227 CTR 206 WHIC H IS AKIN TO THE CASE OF THE APPELLANT, WHEREIN THE SLP OF DEPARTMEN T WAS DISMISSED BY THE SUPREME COURT 3. NON GRANT OF MAT CREDIT OF RS. 26,47,466/- UNDER SECTION 115AA OF THE ACT A. ERRED IN NOT GRANTING THE MAT CREDIT OF RS. 26,47,4 66/- BEING CARRIED FORWARD FROM AY 2006-07 RS. 11,76,784/- AND FROM AY 2007-08 RS. 14,70,682/-; B. SHOULD HAVE APPRECIATE THAT MAT CREDIT IS CREATED W HEN THE TAX PAYABLE AS PER MAT COMPUTATION IS HIGHER COMPARE TO NORMAL COMPUTATION, CREDIT SO CREATED IS CARRIED FORWARD, AND IS TO BE ALLOWED SET OFF IN A YEAR WHEN THE TAX LIABILITY UNDER THE NORM AL COMPUTATION IS IN HIGHER THAN THAT AS PER MAT WORKING; 4 INTEREST UNDER SECTION 234B & 234C ERRED IN LEVYING INTEREST UNDER SECTION 234B AND 23 4C OF THE ACT; 5 INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 (1)(C) ERRED IN INITIATING PENALTY PROCEEDINGS U/S 271(1)( C) OF THE INCOME TAX ACT. 5. GROUND NO.1 OF THE APPEAL, RELATES TO CORRESPON DING DEDUCTION U/S 145A ON ACCOUNT OF ADDITION IN THE OPENING STO CK FOR THE YEAR. AS ADMITTED BY THE LD.COUNSEL THIS GROUND IS PURELY CONSEQUENTIAL. ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT IN THE EARLIER YEAR THE LD. CIT(A) HAS GIVEN DIRECTION TO THE AO THAT ADJUSTMEN T SHOULD MADE TO THE OPENING STOCK ALSO IN VIEW OF THE DECISION OF T HE HONBLE DELHI HIGH COURT IN THE CASE OF MAHAVIRA ALUMINUM LTD 21 4 CTR (DEL) 45. SUCH A DIRECTION IS TO BE CARRIED OUT BY THE AO AND CONSEQUENTIAL RELIEF SHOULD BE GIVEN. THUS GROUND NO.1 IS DISPO SED OFF IN THE AFORESAID MANNER. 6. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DEDUCTION OF PROPORTIONATE LAND PREMIUM OF RS.8,83,402/- . BEFO RE US, THE LD. I.T.A. NO.6099/MUM/2011 AND ITA NO.4599/MUM/2012 7 COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE DE CISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06. WHEREIN, THIS ISSUE WAS DECIDED AFTER OBSERVING A ND HOLDING AS UNDER: 5. COMING TO GROUND 2, THIS IS AGAINST THE DISALLO WANCE OF LAND PREMIUM WRITTEN OFF. THE ASSESSEE HAD TAKEN A LAND ON LEASE- HOLD BASES IN THE YEAR 1994-95 FOR A PERIOD OF 80 Y EARS FOR A SUM OF RS. 8,35,452/-. EACH YEAR THE ASSESSEE IS CL AIMING 1/80TH PART OF THE LEASE PREMIUM AS A DEDUCTION. TH E ASSESSEE HAD RELIED ON THE DECISION OF THE HON'BLE SUPREME C OURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LT D., (225 ITR 802) AND THE DECISION OF THE HON'BLE GUJARAT HIGH C OURT IN THE CASE OF DCIT VS. SUN PHARMACEUTICAL INDS. LTD. (227 CTR 206). ON A QUERY FROM THE BENCH, THE LEARNED COUNSEL FOR THE ASSESSEE, THOUGH NOT LEAVING HIS GROUND, ADMITTED T HAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISI ON OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MUKUND V. JCIT (106 ITD 231)(SB). THE FIRST APPELLATE AUTHORITY AP PLIED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL AND C ONFIRMED THE DISALLOWANCE. WE RESPECTFULLY FOLLOWING THE DECISIO N OF THE SPECIAL BENCH OF THE TRIBUNAL, UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS GROUND NO.2. 7. IN VIEW OF THE AFORESAID DECISION OF THE TRIBUNA L, WHICH IS APPLICABLE IN THIS YEAR ALSO, WE FOLLOWING THE SAM E, CONFIRM THE ORDER OF LD. CIT(A) ON THIS SCORE AND DISMISS THE GROUND RAISED BY THE ASSESSEE. 8. IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED NON- GRANTING OF MAT CREDIT OF RS. 26,47,466/-. THE LD. CIT(A) HELD THAT THE MAT CREDIT U/S 115JAA IS TO BE ALLOWED ONLY WHEN THE B OOK PROFIT ARE TO I.T.A. NO.6099/MUM/2011 AND ITA NO.4599/MUM/2012 8 BE TAXED. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT SUCH AN OBSERVATION OF THE LD. CIT(A) IS CONTRARY TO THE CL EAR CUT PROVISIONS OF SECTION 115JAA, WHEREIN IT HAS BEEN PROVIDED THAT W HERE TAX IS PAID U/S 115JA(1) THEN TAX CREDIT IS TO BE ALLOWED ON SU CH TAX PAID ON THE AMOUNT OF TAX PAYABLE BY THE ASSESSEE ON HIS TOTAL INCOME WHICH IS COMPUTED IN ACCORDANCE WITH OTHER PROVISIONS OF THE ACT. THUS, THE DIRECTIONS OF THE LD. CIT(A) IS NOT CORRECT. THE L D. DR ALSO ADMITTED TO THIS PROPOSITION OF LAW. 9. AFTER CONSIDERING THE IMPUGNED ORDER AND THE REL EVANT PROVISIONS OF LAW, IT IS SEEN THAT SECTION 115JAA C LEARLY PROVIDES THAT, WHERE ANY AMOUNT OF TAX IS PAID U/S 115JA (1) FOR A NY ASSESSMENT YEAR, THEN CREDIT IN RESPECT OF TAX SO PAID SHALL BE ALLOWED TO HIM IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115JAA. FURTHER SUB- SECTION (2) CLEARLY PROVIDES THAT TAX CREDIT IS TO BE ALLOWED UNDER SUB- SECTION (1) OF SECTION 115JAA ON THE DATE OF TAX PA ID FOR ANY ASSESSMENT YEAR ON BOOK PROFIT AND THE AMOUNT OF TA X PAYABLE BY THE ASSESSEE ON HIS TOTAL INCOME COMPUTED IN ACCORDANCE WITH OTHER PROVISIONS OF ACT. THIS CLEARLY INFERS THAT THE I NCOME FOR ANY OTHER YEARS IF TAXED IN THE NORMAL COMPUTATION IS MORE TH AN TAX PAID UNDER THE BOOK PROFIT FOR ANY OF ASSESSMENT YEARS, CREDIT OF THE TAX PAID UNDER MAT HAS TO BE GIVEN TO THE ASSESSEE. HERE IN THIS CASE, THE TAX ON NORMAL COMPUTATION UNDER THE OTHER PROVISIONS OF THE ACT IS MORE I.T.A. NO.6099/MUM/2011 AND ITA NO.4599/MUM/2012 9 THAN THE TAX COMPUTED ON THE BOOK PROFIT, THEREFORE CREDIT OF MAT I.E. AN AMOUNT OF TAX COMPUTED ON THE BOOK PROFIT U/S 1 15JA(1) IS TO BE GIVEN ON THE AMOUNT OF TAX PAYABLE BY THE ASSESSEE ON ITS INCOME UNDER THE NORMAL PROVISIONS. THE LD. CIT(A) HAS WR ONGLY HELD THAT TAX CREDIT IS TO BE ALLOWED ONLY ON THE TAX COMPUTED UN DER THE BOOK PROFIT. THUS, THE FINDING OF THE LD. CIT(A) IS REVERSED AND THE AO IS DIRECTED TO ALLOW THE MAT CREDIT BEING CARRIED FORWARD FROM ASSESSMENT YEAR 2006-07 AND FROM ASSESSMENT YEAR 2007-08 ON THE TA X PAYABLE UNDER NORMAL PROVISIONS OF THE ACT. ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 10. GROUND NO.4 OF THE APPEAL RELATES TO CHARGING O F INTEREST U/S 234B AND 234C OF THE ACT. THE CHARGING OF INTERES T UNDER THESE SECTIONS AS ADMITTED BY THE PARTIES ARE CONSEQUENTI AL IN NATURE, THEREFORE, THE AO IS DIRECTED TO CALCULATE THE INT EREST AS PER LAW. 11. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YE AR 2007-08 IS DISMISSED WHEREAS THE APPEAL FOR THE ASSESSMENT YE AR 2008-09 IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14TH JAN, 2015. ,-! . /0 JAN, 2015 - ) 1* 2 SD SD ( . / D. KARUNAKAR RAO) ( / AMIT SHUKLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER * MUMBAI: 14TH JAN,2015. I.T.A. NO.6099/MUM/2011 AND ITA NO.4599/MUM/2012 10 . . ./ SRL , SR. PS ' # $%& '&($ / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. ( ) / THE CIT(A)- CONCERNED 4. / CIT CONCERNED 5. 451 $6 , + 6 , * / DR, ITAT, MUMBAI CONCERNED 6. 1 7* / GUARD FILE. / BY ORDER, TRUE COPY 8 & (ASSTT. REGISTRAR) + 6 , * /ITAT, MUMBAI