M/s. Giesecke & Devrient India Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 6127/DEL/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5313 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 30-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VED PRAKASH MISHRA
• Keywords: Capital asset; Transfer pricing; Additional evidence; Revenue expenditure; Capital expenditure; TDS
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER I.T.A. NO.6127/DEL/2016 ASSESSMENT YEAR: 2006-07 GIESECKE & DVERIENT INDIA PVT. LTD., CORPORATE OFFICE PLOT # 57, SECTOR 44, GURGAON, HARYANA. VS. DCIT, CIRCLE-12(1), NEW DELHI. TAN/PAN: AABCG4223D (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI HARPREET SINGH, ADV. & SHRI ROHAN KHARE, ADV. RESPONDENT BY: SHRI VED PRAKASH MISHRA, SR.D.R. DATE OF HEARING: 12 01 2020 DATE OF PRONOUNCEMENT: 5 02 2021 O R D E R PER AMIT SHUKLA, JM: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 29.09.2016, PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXXVII, NEW DE LHI IN RELATION TO PENALTY PROCEEDINGS U/S. 271(1)(C) FOR THE ASSESSMENT YEAR 2006-7. 2. THE ASSESSEE IS MAINLY AGGRIEVED BY LEVY OF PENALTY U/S. 271(1)(C) ON ACCOUNT OF DISALLOWANCE OF LEGAL AND PROFESSIONAL EXPENSES FOR SUM OF RS.36,11,832/- AND DISALLOWANCE ACCOUNT OF BUILDING REPAIR EXPENSES OF RS.19,93,239 /-. THE RELEVANT OBSERVATION FOR MAKING THE DISALLOWANCE OU T OF LEGAL I.T.A. NO.6127/DEL/2016 2 AND PROFESSIONAL CHARGES BY THE ASSESSING OFFICER W AS AS UNDER:- 5. DISALLOWANCE OUT OF LEGAL & PROFESSIONAL CHARGES ON PERUSAL OF LEGAL & PROFESSIONAL CHARGES IT IS SE ES THAT ASSESSES HAS DEBITED RS. 2,50,32,832/ AND PAID TO H OLDING COMPANY. REGARDING MANAGEMENT CONSULTANCY OF RS. 2,14,21,000/- THE AMOUNT HAS BEEN ADDED BY TPO. IN THE TRANSFER PRICING ORDER DATED 27-10-2009, TPO HAS RE COMMENDED ENHANCEMENT OF RS. 2,14,20,000/- ON THE BASIS THAT NO SUCH SERVICE HAS BEEN PROVIDED BY EARLIER OF AES TO ALLO W THIS PAYMENT. REMAINING AMOUNT OF RS. 36,11,832/-, IF OB SERVATION OF TPO IS TAKEN INTO CONSIDERATION THIS AMOUNT CANN OT BE ALLOWED AS TPO HAS OBSERVED THAT, NO SUCH CONSULTANCY WAS G IVEN BY HOLDING COMPANY. AR WAS ASKED TO JUSTIFY GENUINENES S AND BUSINESS CONNECTION OF THIS PAYMENT. AR HAS SUBMITT ED THAT THE PAYMENT WAS MADE FOR CERTAIN CONSULTANCY SERVICES P ROVIDED BY HOLDING COMPANY. WITH THE SUBMISSIONS DATED 30-11-2 009, ASSESSEE FILED INVOICE FOR THE PAYMENT OF SAID AMOU NT. ON PERUSAL OF INVOICE, IT IS SEEN THAT ASSESSEE HAS RE CEIVED AN ITEM I.E. 1 PC - ITEM NO. 10001669 WHICH CLEARLY INDICAT ES THAT THIS EXPENDITURE IS OF CAPITAL NATURE AND CANNOT BE ALLO WED AS REVENUE EXPENDITURE. THEREFORE, THE WHOLE AMOUNT OF RS.36,11,832/- IS HELD TO BE CAPITAL EXPENDITURE AN D DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. SINCE THE ASSESSEE HAS FILED INCORRECT PARTICULARS OF ITS INC OME, PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) HAVE BEEN INITI ATED SEPARATELY. (ADDITION OF RS.36,11,832/-) I.T.A. NO.6127/DEL/2016 3 2.1 WHEREAS THE DISALLOWANCE OUT OF BUILDING AND R EPAIR EXPENSES, THE OBSERVATION AND FINDING OF THE ASSESS ING OFFICER ARE AS UNDER:- THE ASSESSEE HAS DEBITED AN AMOUNT OF RS,61,65,544 /- TOWARDS REPAIR & MAINTENANCE (OTHERS). THE ASSESSEE , VIDE QUESTIONNAIRE LETTER DATED 05,11.2009, WAS ASKED TO FURNISH THE DETAILS OF REPAIR & MAINTENANCE, THE ASSESSEE, VIDE ITS REPLY DATED 2741.2009, HAS FURNISHED THE DETAILS, PERUSAL OF WHICH REVEALS THAT AN AMOUNT OF RS, 19,93,239/- HAS BEEN PAID TO M/S. SARVMANGAL BUILDERS & DEVELOPERS P. LTD. ON ACCOUNT OF MISC. PETTY EXPENSES INCURRED FOR OFFICE REPAIRS BUT NO D ETAILS ON EVIDENCE FOR SUCH PETTY EXPENSES HAVE BEEN FURNISHE D: FURTHER PERUSAL OF THE DETAILS SHOWS THAT THE ASSESSEE HAS ALSO: INCURRED AN AMOUNT OF RS.L2,00,000/-(RS.900000 + RS.300000) FOR THE REPAIR OF M.'DS HOUSE. IN ABSENCE OF ANY DETAILS O R EVIDENCE, THE AMOUNT OF RS. 19,93,239/- CANNOT BE SAID TO BE REVE NUE EXPENDITURE. FURTHER, THE MAINTENANCE EXPENSES OF M .DS HOUSE CANNOT BE SAID TO BE FOR BUSINESS PURPOSES, HENCE, THE TOTAL AMOUNT OF RS,81,93,239/- (RS, 19,93,239 + RS. 12,00 ,000) IS DISALLOWED AND ADDED TO TOTAL INCOME. SINCE THE ASS ESSEE HAS FILED INCORRECT PARTICULARS OF ITS INCOME, PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) HAVE BEEN INITIATED SEPARAT ELY, (ADDITION - RS.31,93,239/-) 3. THESE ADDITIONS HAVE BEEN CONFIRMED BY THE TRIBU NAL IN THE QUANTUM PROCEEDINGS. BOTH THE ASSESSING OFFICER AND LD. CIT (A) HAS CONFIRMED THE PENALTY ON THESE ADDITION S MERELY ON THE GROUND THAT THE QUANTUM PROCEEDINGS STANDS CONFIRMED. I.T.A. NO.6127/DEL/2016 4 4. THE LEARNED COUNSEL FOR THE ASSESSEE, IN SO FAR AS THE BUILDING AND REPAIR EXPENSES ARE CONCERNED SUBMITTE D THAT THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEED INGS HAS FILED ADDITIONAL EVIDENCES IN THE FORM OF LEASE AGR EEMENT AS PROPERTY WAS ON RENT, COPY OF LEDGER ACCOUNT, VOUCH ERS FOR REPAIR AND MAINTENANCE EXPENSES, DETAILS OF CONTACT OR SARVAMANGLAM BUILDERS PRIVATE LIMITED WHO HAS CARRI ED OUT THE WORK WITH DETAILS OF DEDUCTION OF TDS, ETC. THE LD. CIT (A) REJECTED THE ADDITIONAL EVIDENCES WHICH WERE FILED DURING THE COURSE OF PENALTY PROCEEDINGS BEFORE HIM IN SUPPORT OF THE EXPENDITURE WHICH COULD NOT BE FILED EARLIER. SIMIL ARLY WITH REGARD TO LEGAL AND PROFESSIONAL CHARGES, THE ASSES SEE HAS FILED THE BILLS AND COPY OF ORIGINAL INVOICES DATED 21 ST DECEMBER, 2005 FOR CONSULTANCY CHARGES AMOUNTING TO RS.36,11,832/- RAISED BY M/S. GEISECKE & DIVRIENT G MBH GERMANY. THE ADDITION WAS MADE ON THE GROUND THAT T HESE INVOICES AND CONSULTANCY SERVICES WAS WITH RESPECT TO CAPITAL ASSET AND HENCE IT WAS CAPITAL IN NATURE. THE FACTU M OF INCURRING AND PAYMENT OF SUCH EXPENDITURE HAS NOT B EEN DOUBTED. 5. ON THE OTHER HAND, LD. DR HAS STRONGLY RELIED UP ON THE ORDER OF THE ASSESSING OFFICER AND LD. CIT (A). 6. AFTER CONSIDERING THE AFORESAID SUBMISSIONS AND ON PERUSAL OF THE RELEVANT MATERIAL PLACED ON RECORD, WE FIND THAT, IN SO FAR AS THE DISALLOWANCE OF LEGAL AND PR OFESSIONAL CHARGES OF RS.36,11,832/- IS CONCERNED, SAME HAS BE EN PAID BY THE ASSESSEE TO ITS AE FOR CONSULTANCY SERVICES FOR WHICH I.T.A. NO.6127/DEL/2016 5 INVOICE WAS ALSO FILED. THE DISALLOWANCE HAS BEEN M ADE MERELY ON THE GROUND THAT THE INVOICE MENTIONS THAT THE ASSESSEE HAS RECEIVED AND ITEM, IPC ITEM NO. 10001669 AND HENCE IT WAS TREATED AS CAPITAL IN NATURE AND N OT REVENUE IN NATURE. SIMPLY BECAUSE, THE CONSULTANCY SERVICES HAS BEEN TREATED AS CAPITAL IN NATURE BY THE ASSESSING OFFIC ER THAT DOES NOT MEAN THAT ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS OF INCOME SO AS TO WARRANT LEVY OF PENA LTY U/S.271(1)(C), ESPECIALLY WHEN THERE IS NO DOUBT AB OUT THE FACTUM OF INCURRING OF SUCH EXPENDITURE AND THE GEN UINENESS OF WHICH STANDS ESTABLISHED. IN THESE FACTS, THE PE NALTY ON SUCH DISALLOWANCE IS DIRECTED TO BE DELETED. 7. NOW IN SO FAR AS BUILDING REPAIR EXPENSES ARE CO NCERN, THE ASSESSEE HAS CARRIED OUT REPAIR AND MAINTENANCE FOR WHICH IT HAS PAID TO THIRD PARTY M/S. SARVAMANGLAM PVT. LTD. AND THESE REPAIR AND MAINTENANCE WAS CARRIED OUT ON THE RENTED PLACE TAKEN BY THE ASSESSEE FOR ITS BUSINESS . HOWEVER, OUT OF TOTAL DISALLOWANCE OF RS.31,93,239/- THE AMO UNT FINALLY SUSTAINED IN THE QUANTUM PROCEEDINGS WAS RS.19.93 L ACS. THUS, PART OF THE SAME EXPENDITURE HAS BEEN ALLOWED . DURING THE COURSE OF PENALTY PROCEEDINGS, BEFORE THE LD. C IT (A), ASSESSEE HAS FILED ALL THE DETAILS AND EVIDENCES FO R THE AMOUNT OF RS.19,93,239/- FOR WHICH LD. CIT(A) HAS REFUSED TO ADMIT. IT IS A TRITE LAW THAT PENALTY PROCEEDINGS ARE SEPARAT E AND DISTINCT FROM ASSESSMENT PROCEEDINGS AND THE ASSESS EE DURING THE COURSE OF PENALTY PROCEEDINGS CAN SUBSTA NTIATE ITS CLAIM BY PROVIDING EVIDENCES OR EXPLAINATION THAT I T IS NOT I.T.A. NO.6127/DEL/2016 6 GUILTY FOR FURNISHING OF ANY INACCURATE PARTICULARS OF INCOME. IF THE ASSESSEE COULD NOT FURNISH THE EVIDENCES DUR ING THE ASSESSMENT PROCEEDINGS THEN IT DOES NOT PRECLUDE TH E ASSESSEE TO FURNISH THOSE EVIDENCES TO SUBSTANTIATE ITS CLAIM DURING THE COURSE OF PENALTY. PENALTY IS NOT ADJUNC T TO ASSESSMENT, ITS A SEPARATE PROCEEDINGS AND ASSESSE E HAS RIGHT TO REBUT THE CHARGES LEVIED ON HIM WHICH HE M AY NOT HAVE IN QUANTUM DUE TO ANY CIRCUMSTANCES. ACCORDING LY, THE ACTION OF THE LD. CIT (A) TO REJECT THESE EVIDENCES WHICH GOES TO PROVE THE INCURRING OF EXPENDITURE BY THE ASSESSEE WHICH IS OSTENSIBLY REVENUE IN NATURE, AND THEREFORE, IN THE SE CIRCUMSTANCES IN THE LIGHT OF THE EVIDENCES PLACED ON RECORD, IT CANNOT BE HELD THAT THE ASSESSEE HAD FURNISHED A NY INACCURATE PARTICULARS OF INCOME SO AS TO WARRANT A NY LEVY OF PENALTY U/S. 271(1)(C). ACCORDINGLY, THE SAME IS DI RECTED TO BE DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2021 SD/- SD/- [B.R.R. KUMAR] [AMIT SHUKLA] [ACCOUNTANT MEMBER] JUDICIAL MEMBER DATED: 5/02/2021 PKK: