POWERTEL INDIA P.LTD, MUMBAI V. DCIT RG 8(2), MUMBAI

ITA 6384/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2299 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 16-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 27

Judgement Text

ITA NO.6384/M/2014 POWERLET INDIA 1 IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SH. R.C.SHARMA, ACCOUNTANT MEMBER AND SH. PAWAN SINGH, JUDICIAL MEMBER ITA NO.6384/MUM/2014 FOR ASSESSMENT YEAR: 2010-11 POWERLET INDIA PVT. LTD. UNIT 94/95, SDFIII, SEEPZ, ANDHERI (EAST) MUMBAI-400096 PAN: AABCP4490K VS. DEPUTY COMMISSIONER OF INCOME TAX, 8(2) AAYAKAR BHAWAN, M.K. ROAD, MUMBAI-400020. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAMESH S. IYER AR RESPONDENT BY SHRI K. MOHANDAS- DR DATE OF HEARING 02.08.2016 DATE OF PRONOUNCEMENT 26.10.2016 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER: 1. THE PRESENT APPEAL U/S 253 OF THE INCOME TAX ACT ( CT) IS DIRECTED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-17, MUMBAI DAT ED 27.07.2014 (CORRECTED VIDE CORRIGENDUM DT 08.08.2014), ARISING OUT OF PENALTY ORDER LEVIED U/S 271(1)(C) OF THE ACT DATED 29.08.2013 IN RESPECT OF ASSESSMENT YEAR (AY) 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED HIS RETURN OF INCOME ON FOR RELEVANT ASSESSMENT YEAR AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 5 TH FEB 2013 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.1,58,60,730/-. WHILE FRAMING ASSESSM ENT THE AO DISALLOWED EXPENDITURE CLAIMED UNDER SECTION 37(1)O F THE ACT OF TOTAL AT RS. 46,04,396/- AND INITIATED PENALTY. NO APPEAL WA S FILED BY ASSESSEE AGAINST THE QUANTUM ASSESSMENT. THE AO ISSUED NOTIC E UNDER SECTION 274 READ WITH SECTION 271(1) (C )DATED 25 TH FEB 2013, WHICH FOLLOWED A FURTHER NOTICE DATED 5 AUGUST 2013. THE ASSESSEE FI LED ITS REPLY VIDE REPLY DATED 27.08.2013. IN THE REPLY ASSESSEE CONTE NDED THAT THE DISALLOWANCE WAS MADE ONLY ON THE BASIS OF MATERIAL AND INFORMATION ITA NO.6384/M/2014 POWERLET INDIA 2 FURNISHED BY ASSESSEE ON THE FACT OF COMPUTATION OF INCOME AND THERE WAS NO QUESTION OF FURNISHING INACCURATE PARTICULAR OF INCOME. THE ASSESSEE FURTHER CONTENDED THAT THE ASSESSEE COMPAN Y HAS CLOSE DOWN ITS MANUFACTURING OPERATION IN DECEMBER 2008. THE OPERA TION OF THE COMPANY WAS CLOSE TO AVOID FURTHER LOSSES IN FUTURE DUE TO THE INCURRING OF FIXED COSTS LIKE WAGE AND SALARIES TO THE WORKE RS SINCE THE TURNOVER HAD DROPPED DOWN BY MORE THAN 80%. AS THE ASSESSEE DID NOT HAVE A BUSINESS AND THE ENTIRE EXPENSES WERE ELIGIBLE FOR CLAIMING DEDUCTION FROM THE INCOME OF THE BUSINESS. THE ASSESSEE DID N OT CONTEST THE DISALLOWANCE AS IT WAS NOT A MATERIAL AMOUNT AND TH E ASSESSEE DID NOT WANT TO STRESS THE MATTER FURTHER. THE CONTENTION O F THE ASSESSEE WAS NOT ACCEPTED BY THE AO, AND THE AO LEVIED THE PENALTY UNDER SECTION 271(1)(C ) ON THE AMOUNT OF RS.46,04,396 BEING THE AMOUNT OF DISALLOWANCE ON WHICH A MINIMUM PENALTY @ 100% WHI CH IS MINIMUM AT RS. 15,65,450/- WAS LEVIED. AGGRIEVED BY THE ORD ER OF AO THE ASSESSEE FILED APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS) WHICH WAS DISMISSED VIDE ORDER IMPUGNED IN THE PRES ENT APPEAL. 3. WE HAVE HEARD LD AR FOR BOTH THE PARTIES AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE LD AR FOR THE ASSESSEE AR GUED THAT THE ORDER OF PENALTY IS NOT SUSTAINABLE. IT WAS ARGUED THAT MAIN BUSINESS OF THE ASSESSEE COMPANY WAS MANUFACTURING OF SWITCHING POW ER SUPPLIES, MAGNETIC TRANSFORMERS AND INDUCTORS. THE MANUFACTUR ING ACTIVITIES WAS CARRIED OUT AT SEEPZ ANDHERI (EAST) MUMBAI 92. DURI NG THE COURSE OF ASSESSMENT THE AO MADE THE DISALLOWANCE OF CLAIM OF THE ASSESSEE IN RESPECT OF DEDUCTION OF RS. 4604396/- WHICH CONSIST OF EXPENSES INCURRED ON UPKEEP OF THE PREMISES LIKE ELECTRICITY CHARGES, RENT AND WATER CHARGES TILL THE DATE OF SURRENDER OF THE PR EMISES AND OTHER ADMINISTRATIVE EXPENSES LIKE AUDIT FEES, LEGAL AND PROFESSIONAL CHARGES. THESE WERE THE EXPENSES WHICH WERE HAVE NECESSARY T O BE INCURRED BY THE ASSESSEE IN RESPECT OF THE FACT WHETHER MANUFAC TURING ACTIVITIES WAS CARRIED OR NOT. THE ASSESSEE HAS NOT FILED ANY APPE AL AGAINST THE ITA NO.6384/M/2014 POWERLET INDIA 3 ASSESSMENT ORDER AS THE LOSS FOR THE RELEVANT YEAR IS NOT TO BE CARRIED FORWARD AS THE ASSESSEE HAS CLOSED DOWN ITS BUSINES S OPERATION. THE LD AR OF THE ASSESSEE FURTHER RELIED UPON THE DECISION OF HONBLE APEX COURT IN UOI VS RAJASTHAN SPINNING AND WEAVING MIL LS (2009) 23 DTR 158, CIT VERSUS RELIANCE PETRO PRODUCT PRIVATE LIM ITED 322 ITR 158 AND HINDUSTANI STEEL LTD VERSUS THE STATE OF ORISSA 83 ITR 26. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE LD A T FOR THE PARTIES AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE AS SESSEE FURNISHED ALL THE PARTICULARS OF INCOME ALL THE DETAILS IN THE RE TURN OF INCOME. SINCE THE ASSESSEE WAS NOT ALLOWED THE DEDUCTIONS BY AO HOLDI NG THAT THE ASSESSEE HAS NOT CONDUCTED THE BUSINESS ACTIVITY THUS THE AS SESSEE IS NOT ENTITLED FOR SUCH DEDUCTION. THE ASSESSEE MERELY CLAIMED THE DEDUCTIONS WHICH WERE NOT ALLOWED. THERE IS NO FINDING OF AO THAT TH ERE ATTEMPT ON THE PART OF ASSESSEE TO HIDE INCOME OR FURNISHING SOME THING INACCURATE PARTICULAR OF INCOME OR THE INCOME WAS NOT RECORDED IN THE BOOKS IN THE CASE OF DILIP AND SHROFFS VS. JT.CIT(2007) 6 SCC 329 THE HONBLE SUPREME COURT EXPLAINED THE TERM (CONCEALME NT OF INCOME) AND (FURNISHING INACCURATE PARTICULAR). THE COURT WENT TO HOLD THAT IN ORDER TO ATTRACT PENALTY U/S 271(1)(C), MENSREA WAS NECESSARY , THE WORD INACCURATE SIGNIFIED THE DELIBERATE ACT OR OMISSI ON ON BEHALF OF THE ASSESSEE. THE HONBLE COURT FURTHER HOLD THAT CLAUS E-3 OF SECTION 271(1)(C) PROVIDED FOR DISCRETIONARY JURISDICTION U PON THE ASSESSING AUTHORITY AS MUCH AS THE AMOUNT OF PENALTY COULD NO T BE LEVIED LESS THAN THE AMOUNT SOUGHT TO BE EVADED BY THE REASONS OF CO NCEALMENT OF PARTICULARS OF INCOME AND FURTHER HELD THAT FURNISH ING OF AN ASSESSMENT OF VALUE OF PROPERTY MAY NOT ITSELF BE FURNISHED IN ACCURATE PARTICULAR AND THE AO MUST BE FOUND TO HAVE FAILED TO PROVE THAT H IS EXPLANATION IS NOT ONLY BONAFIDE TO ALL FACTS RELATING TO THE SAME AND MATERIAL OUGHT TO THE COMPUTATION OF INCOME WERE NOT DISCLOSED. ITA NO.6384/M/2014 POWERLET INDIA 4 FURTHER THE HONBLE SUPREME COURT IN CASE OF CIT VS . RELIANCE PETRO CHEMICAL LTD. REPORTED VIZ 322 ITR 158, IT WAS HELD BY HONBLE APEX COURT THAT : IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 27 1(1)(C), THERE HAS TO BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF HIS INCOME BY THE ASSESSEE. ...... . MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INA CCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEE CLAIMED D EDUCTION WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE, PENALTY U/S. 271( 1)(C) IS NOT ATTRACTED . 5. IN VIEW OF THE ABOVE DISCUSSION, WET FIND THAT NO I NACCURATE PARTICULAR WAS FILED NOR THE INCOME WAS E CONCEALED BY THE ASS ESSEE AND THE LEVY OF THE PENALTY WAS WRONGLY INFLICTED UPON THE ASSESSEE HENCE THE ORDER PASSED BY AO DATED 29/08/2009 WHICH WAS CONFIRMED B Y CIT(A) IS SET- ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH OCT 2016. SD/- SD/- (R.C.SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDIC IAL MEMBER MUMBAI; DATED 26/10/2016 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) (/ THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# /GUARD FILE. //// $ //TRUE COPY/