M/s Shiva Mint industries, Jammu V. The Dy Commissioner of Income Tax, Jammu

ITA 649/ASR/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7986 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-01-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 26-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR LD
• Assessee Lawyers: SOMIL AGARWAL LD
• Keywords: Question of law; Speculation loss
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.649 & 650(ASR)/2016 ASSESSMENT YEAR:2007-08 & 20 09-10 M/S SHIVA MINT INDUSTRIES, 99-B, BIRPUR INDUSTRIAL ESTATE, BARI BRAHMANA, JAMMU, (J&K) PAN:ABBFS4825N VS. DY. CIT, CIRCLE-1, JAMMU (J&K) (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SOMIL AGARWAL, (LD. A DV.) RESPONDENT BY: SH. BHAWANI SHANKAR (LD. DR) DATE OF HEARING: 17.01.2018 DATE OF PRONOUNCEMENT: 05.04.2018 ORDER PER N.K.CHOUDHRY, JM: THE ASSESSEE HAS FILED THE AFORESAID TWO APPEALS U/S. 253 OF THE ACT (HEREINAFTER CALLED AS 'THE ACT'), ON FEEL ING AGGRIEVED AGAINST THE ORDERS DATED 9.9.2016 PASSED BY THE LD. CI T(A)-1, AMRITSAR CAMP AT JAMMU (J&K), QUA ASST. YEARS:2007-08 A ND 2009-10 RESPECTIVELY, BY WHICH, THE LD. CIT(A) CONFIRM ED THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER. 2. IN BOTH THE APPEALS, SIMILAR AND IDENTICAL ISSUES HAV E BEEN RAISED, THEREFORE, FOR THE SAKE OF CONVENIENCE AND BRE VITY GROUNDS AND FACTS OF ITA NO.649(ASR)/2016 HAVE BEEN TAK EN INTO ITA NO.649 & 650/ASR/2016 (A.Y.2007-08 & 200 9-10) M/S SHIVA MINT INDUSTR IES VS. DCIT 2 CONSIDERATION FOR ADJUDICATION AND THE RESULT OF THE SAM E WOULD ALSO BE APPLICABLE IPSO FACTO TO ITA NO.650(ASR)/2016. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL I N ITA NO.649(ASR)/2016. 1. THAT ON THE FACTS AND UNDER THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME -TAX (A) HAS ERRED IN CONFIRMING THE ORDER OF THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, JAMMU PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 2. THAT ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME -TAX (A) ERRED IN CONFIRMING THE PENALTY OF RS.7,36,250/ - UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT BY REJECTIN G THE SUBMISSIONS OF THE ASSESSEE IN SUMMARY MANNER AND T HUS THE PENALTY ORDER IS ILLEGAL, INVALID, BAD IN LAW A ND IS LIABLE TO BE SET ASIDE. 3. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (A) HAS COMPLETELY FAILED TO UNDERSTAND THAT THE ASSESSEE H AS NEITHER CONCEALED THE PARTICULARS OF ITS INCOME NOR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME AND THAT IT WAS DEBATABLE ISSUE THAT THE SPECULATIVE LOSSES AND ITS EXPENSES AMOUNTING TO RS.23,82,700/- WERE REQUIRED TO BE DEDUCTED FROM THE ELIGIBLE MANUFACTURING PROFITS UN DER SECTION 80IB(4) OF THE INCOME TAX ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM, ENGAGED IN THE BUSINESS OF MANUFACTUR ING OF MENTHOL AND VARIOUS OTHER ALLIED PRODUCTS, WHICH ARE U SED AS RAW MATERIAL BY VARIOUS DRUGS, PHARMACEUTICALS AND OTHER SIMI LAR UNITS. THE ASSESSING OFFICER, WHILE COMPUTING THE INCOME OF THE ASSESSEE, DISALLOWED THE AMOUNTS UNDER SIX HEADS. HOWEVER, T HE LD. CIT(A), ON APPEAL CONFIRMED THE ADDITIONS OF RS.23 ,37,393/- AND RS.45,307/- UNDER THE HEADS OF SPECULATIVE LOSS IN COMMODITIES AND MCX COMMODITY EXCHANGE EXPENSES ITA NO.649 & 650/ASR/2016 (A.Y.2007-08 & 200 9-10) M/S SHIVA MINT INDUSTR IES VS. DCIT 3 RESPECTIVELY, WHICH RESULTED INTO LEVY OF PENALTY ON ACCO UNT OF FURNISHING OF INACCURATE PARTICULARS IN RESPECT OF INCOME, WHICH WAS CONFIRMED BY THE LD. CIT(A) VIDE ITS ORDER DATED 09.06.2016. 5. ON FEELING AGGRIEVED AGAINST THE ORDER IMPUGNED HERE IN PASSED BY THE LD. CIT(A), THE ASSESSEE PREFERRED THE INSTA NT APPEALS AND IN SUPPORT OF ITS CASES SUBMITTED THAT THE ASSE SSEE IN THE FINAL COMPUTATION OF INCOME, ADDED MCX COMMODI TY EXCHANGE EXPENSES AND SPECULATIVE LOSSES IN THE COMMODITIES T O THE TUNE OF RS.23,37,393/- AND RS.45,307/- WHILE ARRI VING AT ELIGIBLE PROFITS FOR CALCULATION OF DEDUCTION U/S 80IB O F THE ACT, HOWEVER, THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE SAME HAS RESULTED INTO INF LATING ELIGIBLE PROFITS FOR DEDUCTION U/S 80IB OF THE ACT AND THE ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT(A), HOWEVER, T HE ASSESSEE PREFERRED THE APPEALS AGAINST THE ORDERS PASSED BY THE ITAT, BEFORE THE HONBLE HIGH COURT OF J&K AND THE SA ME HAVING BEEN ADMITTED BY FRAMING SUBSTANTIAL QUESTION OF LAW VIDE ITS ORDER DATED 18.02.2015. FURTHER IT WAS ALSO ARGUED BY THE LD. AR EVEN OTHERWISE ON THE MERIT OF THE CASE, THE ASSESSEE CA SE IS STRENGTHENED ON THE GROUNDS THAT THE AMOUNT OF MCX COMMODITY EXCHANGE EXPENSES AND SPECULATIVE LOSS IN COMMODITIES AS STATED ABOVE, HAVE BEEN DEBITED IN THE P ROFIT & LOSS ACCOUNT AND SINCE THESE TRANSACTIONS DO NOT RELATE TO T HE ACTIVITIES OF THE ELIGIBLE BUSINESS, THEREFORE, THE SAME HAVE BEEN ADDED BACK WHILE ARRIVING AT THE CORRECT PROFIT OF THE ELIGIBLE UNIT FOR CLAIMING DEDUCTION U/S 80IB. FINALLY, IT WAS SUBMI TTED THAT IN ITA NO.649 & 650/ASR/2016 (A.Y.2007-08 & 200 9-10) M/S SHIVA MINT INDUSTR IES VS. DCIT 4 VIEW OF THE JUDGMENT PASSED BY THE APEX COURT IN THE CASE OF ANANTHARAM VEERASINGAIAH & CO. VS COMMISSIONER OF INCOME TAX VS. CIT, 123 ITR 457(SC), THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDING ARE ALL TOGETHER DIFFERENT AND ME RELY BECAUSE AMOUNT WAS DISALLOWED DOES NOT IPSO FACTO LEAD TO LEVY O F PENALTY. 6. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDERS PASSED BY THE AUTHORITIES BELOW AND SUBMITTED THAT ORDE R IMPUGNED HEREIN ARE BASED ON LOGICAL REASONING AND DOE S NOT SUFFER FROM ANY ILLEGALITY, PERVERSITY AND IMPROPRIET Y. 7. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE, AND RIVAL SUBMISSIONS OF THE PARTIES, AS WE REAL IZED THAT IN THE INSTANT CASE, THE ASSESSEE IN THE FINAL COMPUT ATION OF INCOME, WHILE ARRIVING AT ELIGIBLE PROFITS FOR CALCULAT ION OF DEDUCTION U/S 80IB OF THE ACT, ADDED BACK THE AMOUNT U NDER THE HEADS OF SPECULATIVE LOSS IN COMMODITIES AND MCX COMMODITY EXCHANGE EXPENSES TO THE TUNE OF RS.23,37,393 /- AND RS.45,307/- RESPECTIVELY, HOWEVER THE SAME WAS DISALL OWED BY THE AO, AND ON CONFIRMATION BY THE LD. CIT(A) AND ITAT, THE AO LEVIED THE PENALTY AT THE RATE OF 100% TAX SOUGHT TO EVADED ON THE GROUND OF FURNISHING INACCURATE PARTICULARS OF I NCOME. THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (PVT.) LTD. (2010) 322 ITR 158 (SC) HA S HELD THAT PENALTY U/S 271(1)(C) IS NOT ATTRACTED MERELY BECAUSE THE ASSESSEE HAS CLAIMED DEDUCTION OF INTEREST EXPENDITURE WHICH ITA NO.649 & 650/ASR/2016 (A.Y.2007-08 & 200 9-10) M/S SHIVA MINT INDUSTR IES VS. DCIT 5 HAS NOT BEEN ACCEPTED BY THE REVENUE AND MERE MAKING O F CLAIM, WHICH IS NOT MAINTAINABLE BY LAW, BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. EVEN HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. M/S. RAJ OVERSEAS ( {2011} 336 ITR 261 {P&H} ) H ELD THAT NO PENALTY U/S 271(1) (C) WAS LEVIABLE IN RESPECT O F THE DEDUCTION WRONGLY CLAIMED BY THE ASSESSEE U/S 80IB OF TH E ACT IN RESPECT OF INCOME FROM DUTY DRAW BACK. WHILE COMING TO THE INSTANT CASE, AS THE REVENUE DEPARTMENT DID NOT FIND THE CLAIM OF THE ASSEEEE AS MAINTAINABLE, HOWEVER MERE MAKING CLAIM BY THE ASSEEEE WHICH OTHERWISE NOT ACCEPTED BY REVENUE DEPARTMENT, BY ITSELF DOES NOT LEADS TO FURNISHING OF INACCURATE PARTICULARS OF IN COME AND THEREFORE NO BASE TO ENTAIL THE PENALTY UNDER SECTION 271(1) OF THE ACT, IN VIEW OF JUDGMENTS PASSED BY APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (PVT.) LTD. (SUP RA) AND PUNJAB AND HARYANA HIGH COURT JUDGMENT, IN THE CASE OF CIT VS. M/S. RAJ OVERSEAS (SUPRA). ON THE AFORESAID CONSIDERATIONS, DELIBERATIONS AND OBSERVATIONS, WHILE RESPECTFULLY FOLLOWING THE PROPOSITI ONS LAID DOWN BY THE APEX COURT AND THE VARIOUS HIGH COURTS AND CONSIDERING THE ARGUMENT OF THE ASSESSEE TO THE EFFECT THA T THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE ALTOGETH ER DIFFERENT AND MERELY BECAUSE AMOUNT WAS DISALLOWED DOES NOT IPSO FACTO, LEAD TO LEVY OF PENALTY, WE ARE OF THE CON SIDERED ITA NO.649 & 650/ASR/2016 (A.Y.2007-08 & 200 9-10) M/S SHIVA MINT INDUSTR IES VS. DCIT 6 OPINION THAT THE PENALTY LEVIED BY THE ASSESSING OFFICE R AND CONFIRMED BY THE LD. CIT(A) DOES NOT SURVIVE AND HENCE LIABLE TO BE SET ASIDE. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE A RE ALLOWED. SD/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED: 05.04.2018 9 . I HAVE PERUSED THE PROPOSED ORDER BY MY LD. BRO THER, JM. MY REASON/S FOR THE CONCLUSION ARRIVED AT THEREIN, HOWEV ER, IS DIFFERENT, AND FOR WHICH A BRIEF REFERENCE TO THE FACT S OF THE CASE WOULD BE REQUIRED. THE ASSESSEE-COMPANY OWNS AND OPERATES AN INDUSTRIAL UNIT AT BARI BRAHMANA, JAMMU, MANUFAC TURING MENTHOL (AND OTHER ALLIED PRODUCTS), WHICH UNIT IS AN ELIGIBLE UNDERTAKING U/S. 80IB. THE CONSOLIDATED FINAL ACCOUNTS OF THE ASSESSEE-COMPANY (FOR THE PREVIOUS YEAR RELEVANT TO AY 20 07- 08), HOWEVER, BORE A DEBIT IN A SUM OF RS. 23.83 LACS T O THE PROFIT & LOSS ACCOUNT (P&L A/C) ON ACCOUNT OF SPECULATION L OSS OF RS. 23.37 LACS, SUFFERED ON SPECULATIVE TRADING IN COMMODI TIES, AND MCX COMMODITY EXCHANGE EXPENSES (UNDERTAKEN AT HO/B O AT LUCKNOW). THE SAME WERE ACCORDINGLY ADDED BACK IN IT S RETURN OF INCOME BY THE ASSESSEE WHILE COMPUTING THE PROF IT OF ITS ELIGIBLE UNDERTAKING FOR THE PURPOSE OF DEDUCTIO N U/S. 80IB (PB PAGE 1). AS, THEREFORE, DEDUCTION U/S. 80IB WAS CLA IMED IN A SUM IN EXCESS OF THE REPORTED PROFIT BY RS. 23.83 LACS, TH E ITA NO.649 & 650/ASR/2016 (A.Y.2007-08 & 200 9-10) M/S SHIVA MINT INDUSTR IES VS. DCIT 7 ASSESSING OFFICER (AO) INFERRED THE SAME TO BE IN EXCESS BY THE SAID AMOUNT AND DISALLOWED THE SAME, ALSO INITIATING PE NALTY PROCEEDINGS U/S. 271(1)(C). THE ASSESSMENT STOOD CONFIRMED IN QUANTUM PROCEEDINGS UP TO THE APPELLATE TRIBUNAL. PEN ALTY WAS ACCORDINGLY LEVIED, AND CONFIRMED BY THE FIRST APPELLAT E AUTHORITY, SO THAT, AGGRIEVED, THE ASSESSEE IS IN SECOND AP PEAL BEFORE US. THE ISSUE IS AS TO A PLAUSIBLE EXPLANATION FOR THE CLAIM UNDER REFERENCE, I.E., DEDUCTION U/S. 80IB, STATED TO BE IN EXCESS BY RS. 23.83 LACS, ON ACCOUNT OF EXCLUSION OF SPECULATIVE LOSS AND COMMODITY EXCHANGE EXPENSE, AN ACTIVITY CLEARLY INDEPEND ENT OF THE MANUFACTURING ACTIVITY. THE QUESTION OF AN EXCESS CLAI M, GIVEN THE FACT OF THE SAID EXCLUSION A PURE MATTER OF FACT, EVEN AS ADMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, SH. SOMIL AGGARWAL, ADVOCATE, DOES NOT ARISE. I RESPECTFULLY, FIND THE ASSESSEES CLAIM AS WITHOUT ANY FLAW, MUCH LESS LIABLE FOR PE NALTY U/S 271(1)(C). THE REASON IS SIMPLE. SPECULATION LOSSES ARE NOT A PART OF THE BUSINESS OF THE ELIGIBLE UNDERTAKING, WHOSE PROFITS ARE SUBJECT TO DEDUCTION U/S. 80IB. PROFIT AND LOSS OF SUCH BU SINESS, STATED TO BE BY ITS TRADING UNIT (AT HO/BO), HAVE, THE REFORE, TO BE EXCLUDED WHILE COMPUTING THE PROFIT OF THE ELIGIBL E UNDERTAKING. IN FACT, AS A READING OF THE ASSESSMENT ORD ER; THE PENALTY ORDER; AND THE IMPUGNED ORDER REVEAL, THE R EVENUE ITSELF CLAIMS OF THE SAID LOSS/EXPENSES AS NOT DERIVED FROM THE INDUSTRIAL ACTIVITY, SO THAT IT IS NOT TO BE CONSIDERED WHILE COMPUTING THE PROFIT OF THE ELIGIBLE UNDERTAKING. TH IS IS PRECISELY WHAT THE ASSESSEE HAS DONE, EXCLUDING THE SAME. THE DISALLOWANCE, IT APPEARS, HAS BEEN EFFECTED ON ACCOUNT OF A ITA NO.649 & 650/ASR/2016 (A.Y.2007-08 & 200 9-10) M/S SHIVA MINT INDUSTR IES VS. DCIT 8 MISUNDERSTANDING OF THE SPECULATION BUSINESS YIELDING AN INCOME, IN WHICH CASE THE PROFIT OF THE ELIGIBLE UNDER TAKING WOULD BE LESS THAN THE AGGREGATE (CONSOLIDATED) PROFIT OF THE ASSESSEE- COMPANY. THE FACTS ARE ADMITTED, AND THE LD. DEPARTME NTAL REPRESENTATIVE (DR) COULD NOT REBUT ANY OF THE SAID CO NTENTIONS BY THE LD. AR, WHICH ARE EVEN OTHERWISE BORNE OUT BY THE RECORD. ACCORDINGLY, I FIND NO MERIT WHATSOEVER IN THE REVENUE S CASE, AND DIRECT FOR THE DELETION OF THE PENALTY. I DECIDE ACCORDINGLY FOR BOTH THE YEARS; THE FACTS FOR AY 2009-10 BEING THE SAME (REFER PB PG. 10). 10 . IN THE RESULT, THE ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.04.2018. SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATED:05.04.2018 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) M/S SHIVA MINT INDUSTRIES, JAMMU (J&K) (2) THE DY. CIT, CIRCLE-1, JAMMU (3) THE CIT(A)-1, AMRITSAR (4) THE CIT CONCERNED. (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER