UNITED FREIGHT CARRIERS, MUMBAI V. ACIT 20(3), MUMBAI

ITA 6219/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6364 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2005-2006
• Appeal Filed On: 11-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 271(1)(c); 143(3); 40(a)(ia); 194C; 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER ITA NO. 6219 / MUM/2017 ( ASSESSMENT YEAR : 20 05 06 ) M/S UNITED FREIGHT CARRIERS, B - 11, ARCHANA JUHU, VERSOVA LINK ROAD, ANDHERI (W), MUMBAI - 400061 PAN AAAFU1384K . APPELLANT V/S ASSISTANT COMMISSIONER OF INCOME TAX 20(3), ROOM NO. 506, 5 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012 . RESPONDENT ASSESSEE BY : MS. DINK LE HARIA (AR) REVENUE BY : MS. DEEPIKA ARORA (DR) DATE OF HEARING 10 .0 1 .201 9 DATE OF ORDER 30.01.2019 O R D E R PER SAKTIJIT DEY, J.M. ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 21.07.2017 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 37, MUMBAI CONFIRMING THE PENALTY IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT , 1961 (IN SHORT, ACT) AMOUNTING TO RS. 2,97,568/ - FOR THE A.Y . 2005 - 06. 2 UNITED FREIGHT CARRIERS 2. BRIEFLY THE FACTS ARE , THE ASSESSEE A PARTNERSHIP FIRM , IS ENGAGED IN THE BUSINESS OF CARGO CLEARING AND FORWARDING SUB - AGENT . F OR THE ASSESSMENT YEAR UNDER DISPUTE T HE ASSESSEE FILED ITS RETURN OF INCOME ON 11.10.2005 DECLARING TOTAL INCOME OF RS. 24,50,902/ - . A SSESSMENT IN CASE OF THE ASSESSEE WAS COMPLETED U/S 143(3) OF THE ACT ON 26.12.2007 DETERMINING THE TOTAL INCOME AT RS. 82,48,530/ - . T HE VARIANCE BETWEEN THE INCOME RETURNED AND IN COME ASSESSED WAS DUE TO THE FOLLOWING ADDITION S: - 1. DISALLOWANCE U/S 40(A)(IA) RS. 36,06,785/ - 2. DISALLOWANCE OF BUSINESS RS. 49,130/ - PROMOTION EXPENSES 3. DISALLOWANCE OF MOTOR CAR EXPENSES RS. 1,21,377/ - AND DEPRECIATION ON MOTOR CAR 4. DISALLOWANCE OF COMMISSIONER PAYMENT RS. 18,20,334/ - 5. DISALLOWANCE OF SUNDRY EXPENSES RS. 2,00,000/ - 3. THE ADDITIONS/DISALLOWANCE S MADE BY THE ASSESSING OFFICER WAS CHALLENGED BY THE ASSESSEE IN APPEAL PREFERRED BEFORE THE L D. COMMISSIONER (APPEALS) AND THEREAFTER BEF ORE THE TRIBUNAL. THE TRIBUNAL WHIL E DECIDING ASSESSEES APPEAL IN ITA NO. 506/MUM/2011 DATED 19.04.2013 DELETED THE DISALLOWANCE MADE OF BUSINESS PROMOTION EXPENSES, MOTOR CAR EXPENSES AND DEPRECIATION OF MOTOR CAR AND SUNDRY EXPENSES . WHEREAS, ISSUES REL ATING TO DISALLOWANCE U/S 40(A)(IA) OF THE 3 UNITED FREIGHT CARRIERS ACT AND COMMISSION PAYMENT WERE RESTORED BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION . W HILE GIVING EFFECT TO THE DIRECTIONS OF THE TRIBUNAL IN ORDER DATED 10.01.2014 , T HE ASSESSING OFFICER , OUT OF THE DIS ALLOWANCE MADE U/S 40(A)(IA) OF THE ACT INITIALLY , CONFIRMED DISALLOWANCE OF RS. 5,17,328/ - . FURTHER, O UT OF DISALLOWANCE MADE OF RS. 1 8,20,334/ - ON ACCOUNT OF COMMISSION PAYMENT , THE ASSESSING OFFICER CONFIRMED DISALLOWANCE OF RS. 2,95,865/ - . O N THE BASIS OF AFORESAID ADDITIONS/DISALLOWANCES MADE IN THE ORDER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL , T HE ASSESSING OFFICER INITIATED PROCEEDINGS FOR IMPOSI TION OF PENALTY AND ULTIMATELY PASSED AN ORDER IMPOSING PENALTY OF RS. 8,92,704/ - , AT THE MAXIMUM RATE OF 300% , ALLEGING CONCEALING/FURNISH INACCURATE PARTICULARS OF INCOME. ASSESSEE CHALLENGED THE IMPOSITION OF PENALTY BEFORE THE COMMISSIONER (APPEALS). LD. COMMISSIONER (APPEALS) WHILE DECIDING THE APPEAL OF THE ASSESSEE , THOUGH , CONFIRMED THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT , HOWEVER, HE REDUCED THE QUANTUM OF PENALTY TO 100% OF THE TAX , WHICH WORKED OUT TO RS. 2,97,568/ - . 4. THE L D. A UTHORISED R EPRESENTATIVE SUBMITTED , AGAINST THE DISALLOWANCE MADE U/S 40(A) (IA) OF THE ACT NO PENALTY U/S 271 (1) (C) CAN BE LEVIED AS THERE IS NEITHER CONC EALMENT OF INCOME NOR FURNISH ING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. SHE SUBMITTED , THE DISALLOWANCE IS DUE TO A TECHNICAL BREACH AS THE GENUINENESS OF 4 UNITED FREIGHT CARRIERS EXPENDITURE CLAIMED IS NE VER DOUBTED . I N SUPPORT OF SUCH CONTENTION LD. AUTHO RISED REPRESENTATIVE RELIED UPON THE FOLLOWING DECISION S: - 1. SHARMILLA VAZ V/S ITO [ITA NO. 5722/M/2013, ORDER DATED 29.08.2016 (MUMBAI TRIB)]. 2. ITO V/S WESTERN OUTDOOR MEDIA TECH PVT. LTD. [I.T.A. NO. 5400/M/2014 ORDER DATED 20.07.2016 (MUMBAI - TRIB)] 3. SYNDICATE LABELS V/S ACIT [I.T.A. NO. 4386/DEL/2014, ORDER DATED 21.10.2015 (DELHI - TRIB) ] 4. RUSHI BUILDER AND DEVELOPERS V/S CIT [I.T.A. NO. 6684/M/2012, ORDER DATED 04.03.2015 (MUMBAI TRIB)] 5. T ANUSHREE BASU V/S ACIT [I.T.A. NO. 2922/M/2012, ORDER DATED 22.05.13 (MUMBAI TRIB)] 5 . AS REGARDS PENALTY IMPOSED ON THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF COMMISSION PAYMENT , THE L D. AUTHORISED R EPRESENTATIVE SUBMITT ED , THE ASSESSEE HAS PAID COMMISSION OF RS. 9,48,687/ - TO MS. JANET DSOUZA. SHE SUBMITTED , THE PAYEE HAS ALSO CONFIRMED RECEIPT OF THE AFORESAID AMOUNT WHICH WAS FILED BEFORE THE ASSESSING OFFICER. IN THIS CONTEXT, SHE D REW OUR ATTENTION TO COPIES OF THE CONFIRMATION AND BANK STATEMENT INDICATING THE PAYMENT MADE . S HE ALSO DREW OUR ATTENTION TO THE AFFIDAVIT OF MS. JANET DSOUZA CONFIRMING RECEIPT OF RS. 9,48,687/ - AS COMMISSION FROM THE ASSESSEE. THE L D. A UTHORISED R EPRESENTATIVE SUBMITTED , WHILE MAKING S UCH PAYMENT ASSESSEE HAS ALSO DEDUCTED TAX AT SOURCE . S HE SUBMITTED , ONLY BECAUSE DUE TO A 5 UNITED FREIGHT CARRIERS DIFFERENT METHOD OF ACCOUNTING THE PAYEE HAS S HOW N A PART OF THE COMMISSION RECEIVED IN THE IMPUGNED ASSESSMENT YEAR AND OTHER PART IN THE NEXT ASSESSMENT YEAR , T HE ASSESSING OFFICER HAS ACCEPTED A PART OF THE COMMISSION AMOUNTING TO RS. 7,47,984/ - WHILE DISALLOWING THE OTHER PART AMOUNTING TO RS. 2,97,588/ - . THUS, SHE SUBMITTED , NEITHER THERE IS CONCEALMENT O F INCOME N OR FURNISHING OF INACCURATE PARTICULARS OF INCOME , HENCE, PENALTY U/S 271 (1) (C) CANNOT BE IMPOSED. FURTHER, THE LD. AR SUBMITTED , IN THE ORDER GIVING EFFECT TO THE ITAT ORDER THE ASSESSING OFFICER HAS NOT SPECIFICALLY INITIATED PROCEEDING FOR IMPOSITION OF PENALTY U/S 271 (1) (C) OF THE ACT. THEREFORE, THE PENALTY ORDER PASSED IS INVALID. FURTHER, SHE SUBMITTED , IN THE SHOW CAUSE NOTICE ISSUED U/S 274 READ WITH SECTION 271(1)(C) OF THE ACT , T HE ASSESSING OFFICER HAS NOT INDICATED THE EXACT CHARGE FOR WHICH HE WANTS TO IMPOSE PENALTY U/S 271(1)(C) OF THE ACT , T HEREFORE, THE PENALTY ORDER IS INVALID. 6 . THE L D. DEPARTMENTAL REPRESENTATIVE RELIED UPON OF THE OBSERVATIONS OF THE COMMISSIONERS (APPEALS ) . 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AT THE OUTSET, WE PRO POSE TO DECIDE THE ISSUE RELATING TO THE IMPOSITION OF PENALTY ON MERIT . A S COULD BE SEEN FROM THE FACTS ON RECORD THE ASSESSING OFFICER HAS IMPOSED PENALTY U/S 271 (1) (C) OF THE ACT ON THE BASIS OF FOLLOWING TWO ADDITIONS: - 1. DISALLOWANCE U/S 40(A)(IA) OF THE ACT RS. 5,17,328/ - 2. DISALLOWANCE OF COMMISSION PAYMENT RS. 2,95,865/ - 6 UNITED FREIGHT CARRIERS 8 . AS REGARDS DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT , UNDISPUTEDLY THE ASSESSEE HAS CLAIMED THE AFORESAID AMOUNT AS EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER HAS N EITHER DOUBTED THE GENUINENESS OF THE EXPENDITURE CLAIMED NOR THE FACT THAT IT WAS FOR THE PURPOSE OF BUSINESS. T HE ONLY REASON FOR WHICH THE ASSESS ING OFFICER HAS DISALLOWED THE EXPENDITURE IS , THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE WHILE MAKING SUCH PAYMENT . IT IS THE CONTENTION OF THE L D. A UTHORISED R EPRESENTATIVE BEFORE US THAT NON DEDUCTION OF TAX WAS ON ACCOUNT OF THE FACT THAT , ACCORDING T O THE ASSESSEE , THE PAYMENT MADE DO ES NOT COM E WITHIN THE PURVIEW OF THE SECTION 194C OF THE ACT. BE THAT AS IT MA Y , NEITHER LD. COMMISSION ER (APPEALS) NOR THE ASSESSING OFFICER HA VE DOUBTED THE GENUINENESS OF THE PAYMENT MADE OR THE FACT THAT IT WAS NOT M ADE FOR THE PURPOSE OF BUSINESS . T HE DISALLOWANCE , AS COULD BE SEEN , WAS MADE ONLY FOR THE REASON THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE WHILE MAKING THE PAYMENT. THAT BY ITSELF, I N OUR VIEW, DOES NOT RESULT IN EITHER CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE, IMPOSITION OF PEN A LTY U/S 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT IS NOT VALID . THE DECISIONS CITED BY L D. A UTHORISED R EPRESENTATIVE CLEARLY SUPPORT THE AFORESAID VIEW. THEREFORE, WE DELETE THE PENALTY IMPOSED ON THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT . AS REGARDS THE DISALLOWANCE MADE OUT OF THE COMMISSION PAID , THE EVIDENCES AVAILABLE ON RECORD CLEARLY DEMONSTRATE THAT AN AMOUNT OF R S. 7 UNITED FREIGHT CARRIERS 9,48,687/ - WAS PAID TO MS. JANET DSOUZA IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE. IN FACT, CONFIRMATION FROM THE PAYEE ALONG WITH AN AFFIDAVIT AS WELL AS BANK STATEMENT INDICATING THE PAYMENT MADE WERE FURNISHED BEFORE THE ASS ESSING OFFICER. THE DISALLOWANCE OF RS. 2,95,865/ - OUT OF THE AFORESAID AMOUNT WAS PURELY DUE TO A PARTICULAR METHOD OF REVENUE RECOGNITION FOLLOWED BY THE PAYEE. HOWEVER, THAT DOES NOT L EAD TO THE CONCLUSION THAT THE ASSESSEE HAS EITHER CONCEALED THE INC OME OR FURNISHED INACCURATE PARTICULARS OF INCOME . IT IS FURTHER EVIDENT, ALL THE MATERIAL FACTS RELATING TO THE PAYMENT MADE , INCLUDING THE CONFIRMATION FROM THE PAYEE, WERE AVAILABLE BEFORE THE ASSESSING OFFICER AND GENUINENESS OF THE PAYMENT MADE IS ALS O ESTABLISHED. THAT BEING THE CASE, I N OUR CONSIDERED OPINION, IMPOSITION OF PENALTY ON THE PART DISALLOWANCE OF COMMISSION PAYMENT CANNOT BE SUSTAINED. ACCORDINGLY, WE DELETE THE SAME. IN A NUTSHELL, THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT IS DELETED . IN VIEW OF OUR AFORESAID DECISION, WE DO NOT FIND THE NEED TO DELIBERATE FURTHER ON THE OTHER PROPOSITION S ADVANCE D BY L D. AUTHORISED R EPRESENTATIVE CHALLENGING THE VALIDITY OF THE PENALTY ORDER. 9 . IN THE RESULT, ASSESSEE S APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30.01.2019 . 8 UNITED FREIGHT CARRIERS SD/ - SD/ - RAMIT KOCHAR ACCOUNTANT MEMBER SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 30.01.2019 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER ALINDRA PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI