JT CIT (OSD) RG 8(3), MUMBAI V. SCHINDLER INDIA P. LTD, MUMBAI

ITA 6655/MUM/2011

• Counselvise Citation: 665519914 RSA 2011
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 05-02-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 04-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Assessee Lawyers: MANISH V SHAH
• Keywords: Depreciation; Wrong claim; Difference of opinion; Revenue expenditure; Capital expenditure

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , ! ' ' ' ' #$ , # ! BEFORE S/SH.JOGINDER SINGH, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.6655/MUM/2011, % % % % & & & & / ASSESSMENT YEAR-2003-04 ACIT-8(3), R. NO. 217, AAYAKAR BHAVAN, M.K.MARG, MUMBAI-400020 % VS. SCHINDLER INDIA PVT. LTD. SOLITAIRE CORPORATE PARK, BUILDING NO.6, FIRST FLOOR, ANDHERI-KURLA ROAD, ANDHERI(EAST), MUMBAI-400093 PAN: AAECS1548J ( '( / APPELLANT) ( )*'( / RESPONDENT) ! + , # / REVENUE BY : SHRI VIJAY KUMAR BORA % -. % -. % -. % -. , , , , # ## # / ASSESSEE BY :SHRI MANISH V. SHAH % % % % + ++ + . / . / . / . / / DATE OF HEARING :05 -02-2015 0& + . / / DATE OF PRONOUNCEMENT :05 -02-2015 % % % % , 1961 + ++ + 254(1) # ## # .. .. .. .. #1 #1 #1 #1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. # ! #$ # % : CHALLENGING THE ORDER DATED 28.07.2011 OF THE CIT(A )-18, MUMBAI, THE ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY OF RS.18,53,630/- LEVIED U/S.271(1)(C) WITH OUT APPRECIATING THE FACT THAT THE ADDITIONS ON WHICH PENALTY WAS LEVIED HAVE BEEN SUSTAINED BY THE HON'BLE ITAT. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S.271(1)(C) OF THE ACT WITHOUT APPRECIATI NG THAT THE ASSESSEE HAD FAILED TO REBUT THE PRESUMPTIONS OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 IN THE CONTEXT OF INADMISSIBLE CLAIMS OF EXPENSES MADE BY THE ASSESSE E IN ITS RETURN OF INCOME.' THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON T E ABOVE GROUND BE SET ASIDE AND THAT OF THE ITO/ACIT/DCIT BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF SUPPLY, INSTALLATION, COMMISSIONING AND MAINTENANCE OF ELEVATORS AND ESCALATORS, HAD FILED ITS RETURN OF INCOME ON 28.11.2003,DECLARING LOSS OF RS.18.27 LAKHS.THE AO FINALIZED THE ASSESSM ENT ON 23.02.2006,U/S.143(3)OF THE ACT, DETERMINING THE INCOME OF THE ASSESSEE AT RS. (-)17 ,47,40,287/-. 2 .DURING THE ASSESSMENT PROCEEDINGS,CERTAIN ADDITION S WERE MADE TO THE INCOME OF THE ASSESSEE,NAMELY DEVELOPMENT EXPENDITURE (RS. 46.41 LAKHS), DISALLOWANCE OF CLUB SUBSCRIPTION (RS. 2.38 LAKHS) AND DEPRECIATION ON CAR (RS.1.64 L AKHS).DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CHANGED ITS METHOD OF ACCOUNTING,THAT RESULTED IN LOSS BY RS. 46.41 LAKHS . HE DIRECTED THE ASSESSEE AS TO HOW THE DEVELOPMENT EXPENSES DEBITED TO P&L ACCOUNT WERE AL LOWABLE AS REVENUE EXPENDITURE.HE HELD THAT DEVELOPMENT CHARGES WERE NOTHING BUT CAPITAL E XPENDITURE INCURRED FOR THE INCOMPLETE PROJECT, THE AO REJECTED THE CLAIM OF THE ASSESSEE AND ADDED BACK IT TO THE TOTAL INCOME, THE MATTER TRAVELLED UP TO THE TRIBUNAL AND APPEAL FILED BY TH E ASSESSEE IN THIS REGARD WAS DISMISSED, SIMILAR WAS THE CASE ABOUT THE OTHER TWO ADDITIONS MADE BY THE AO.THE APPEAL FILED BY THE ASSESSEE BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT WAS NO T ADMITTED. THE AO ISSUED NOTICE, DATED 22.03.2006, U/S. 274 R.W.S. 271(1)(C) OF THE ACT AS KING THE ASSESSEE AS TO WHY THE PENALTY SHOULD 2 ITA NO. 6655/M/2011 SCHINDLER INDIA PVT. LTD. NOT BE LEVIED FOR FILING INACCURATE PARTICULARS OF INCOME. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE TH E AO HELD THAT CLAIMING EXCESSIVE DEDUCTION AMOUNTED TO CONCEALMENT OF INCOME,THAT SUPPRESSION TO RECEIPT OR EXAGGERATION OF EXPENDITURE WERE ATTEMPT TO REDUCE THE TAXABLE INCOME AND PENAL TY COULD BE IMPOSED FOR EITHER OR BOTH SUCH ATTEMPTS. HE RELIED UPON THE DECISIONS OF INDIA SEA FOODS (105 ITR 708), NAGINCHAND SHIV SAHAI (61 ITR 534)AND GATES FOAM & RUBBER & CO. (91 ITR 4 67).HE FURTHER OBSERVED THAT THE ASSESSEE BEING A COMPANY WAS REQUIRED TO MAINTAIN ITS BOOKS OF ACCOUNTS WHICH REFLECTED TRUE PICTURE OF THE TRANSACTIONS, THAT THE ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE EXPENSES OR JUSTIFICATION OF THE ALLOWANCES CLAIMED IN THE RETU RN OF INCOME, THAT THE ASSESSEE HAD FAILED TO DO SO BEFORE THE AO OR THE FIRST APPELLATE AUTHORITY ( FAA), THAT IT DID NOT PRODUCE ANY EVIDENCE IN ITS SUPPORT DURING THE PENALTY PROCEEDINGS, THAT NO N-FURNISHING OF EVIDENCES AND JUSTIFICATION TO THE EXPENSES CLAIMED IN THE RETURN OF INCOME AMOUNT ED TO FURNISHING OF INACCURATE PARTICULARS. THE AO REFERRED TO THE DECISION OF DHARMENDRA PROCE SSORS (306 ITR 277) DELIVERED BY THE HON'BLE SUPREME COURT AND HELD THAT ASSESSEE HAD FI LED INACCURATE PARTICULARS AND HAD SOUGHT TO EVADE TAX OF RS. 50.43 LAKHS. INVOKING THE PROVISIO NS OF EXPLANATION 4 OF SECTION 271(1)(C) OF THE ACT, HE HELD THAT THE ASSESSEE HAD TRIED TO EVADE T AX AND PENALTY WAS LEVIABLE ON IT. FINALLY, HE LEVIED MINIMUM PENALTY OF RS. 18.53 LAKHS. 4 .AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE FAA. IT WAS ARGUED BEFORE HIM THAT DISALLOWANCE WERE MADE BY TH E AO ON THE BASIS OF THE DISCLOSURE MADE BY THE ASSESSEE IN ITS RETURN OF INCOME/ANNUAL REPORT/ TAX AUDIT REPORT, THAT IT HAD MADE FULL DISCLOSURE OF RELEVANT TAX, THAT THE DISALLOWANCE WERE MADE ME RELY ON ACCOUNT OF NON-ACCEPTANCE OF LEGAL STAND TAKEN BY THE ASSESSEE, THAT THERE HAD BEEN NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS.WITH REGARD TO DISALLOWANCE OF EXPENDITURE OF IOB PROJECT (RS. 46.14 LAKHS) IT WAS STATED THAT SAME WAS MENTIONED IN THE ANNUAL ACCOUNT IN NOTE 2(A) TO SCHEDULE 12 TO NOTES TO ACCOUNTS,THAT THERE WAS NO ATTEMPT TO EVADE TAX AS THE SAID EXPENDITURE WOULD OTHERWISE BE ALLOWED IN THE FORM OF DEPRECIATION ALLOWANCE. WITH REGARD TO DISALLOWANCE OF SUBSCRIPTION TO CLUB THE ASSESSEE STATED THAT COMPLETE DISCLOSURE O F THE SAID EXPENSES WAS GIVEN IN THE P&L ACCOUNTS AND TAX AUDIT REPORT THAT THE CLAIM MADE B Y IT SHOULD BE TREATED AS DEBATABLE CLAIM BUT THERE WAS NO CONCEALMENT OF FACT OR FURNISHING OF I NACCURATE PARTICULARS OF INCOME. AS ABOUT THE DISALLOWANCE OF DEPRECATION IT WAS ARGUED THAT THE ASSESSEE HAD TREATED THE MOTORCARS PRODUCED BY IT FOR USE BY ITS DIRECTORS AND EMPLOYEES FOR THE PURPOSE OF ITS BUSINESS AS CO MMERCIAL VEHICLES AND HAD CLAIMED DEPRECIATION 40% IN ACCORDANCE WITH 3RD PROVISO TO SECTION 32(1) OF THE ACT AND EXPLAIN THERETO, THAT COMPLETE DISCLOSURE OF THE DE PRECIATION CLAIMED BY IT WAS GIVEN IN THE TAX AUDIT REPORT, THAT THE CLAIM MADE BY IT WAS BONANFI DE. THE ASSESSEE RELYING UPON THE CERTAIN CASE LAWS INCLUDING THE JUDGMENT OF SUPREME COURT DELIVE RED IN THE CASE OF RELIANCE PTEROPRODUCTS PVT. LTD. (322 ITR 158) AND JUDGMENT OF DHARAMPAL P REMCHAND LTD. (322 ITR 572 OF DELHI HIGH COURT) . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE PENALTY ORDER,THE FAA HELD THAT ALL THE THREE ISSUES OF WHICH PENALTY HAD BEEN IMPOSED RELA TED TO MATTERS WHICH WERE DISCLOSED FULLY IN THE RETURN OF INCOME FILED BY THE ASSESSEE, THAT TH ERE COULD BE TWO CONCEIVABLE OPINIONS ABOUT THE AMOUNTS IN QUESTION, THAT THE ASSESSEE HAD CHOSEN O NE OF THE OPTIONS FOR THE DISALLOWANCE COULD BE MADE IN LAW, THAT IMPOSITION OF PENALTY WAS NOT PRO PER FOR THE SAID ADDITIONS. RELYING UPON THE JUDGMENTS OF RELIANCE PTEROPRODUCTS PVT. LTD. (SUPR A) AND DHARMENDRA PROCESSORS (SUPRA) HE DELETED THE ADDITION MADE BY THE AO. 5 .BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR)STATED T HAT ADDITIONS MADE BY THE AO WERE CONFIR- MED BY THE FAA AND THE TRIBUNAL,THAT CLAIMING THE E XPENDITURE OF IOP PROJECT AS REVENUE EXPENDITURE THE ASSESSEE HAD TRIED TO EVADE TAX,THA T IT WAS CLEAR CASE OF FILING OF INACCURATE 3 ITA NO. 6655/M/2011 SCHINDLER INDIA PVT. LTD. PARTICULARS RESULTING IN CONCEALMENT OF INCOME.AUTH ORISED REPRESENTATIVE (AR) SUPPORTED THE ORDER OF THE FAA AND STATED THAT ALL THE PARTICULAR S WERE FILED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS, THAT THERE WAS DIFFERENCE OF OPINION, THAT ADDITIONS UPHELD BY THE TRIBUNAL DID NOT DESERVE AUTOMATIC LEVY OF CONCEALING PENALTY. HE RE LIED UPON THE CASES OF RELIANCE PTEROPRODUCTS PVT. LTD.(SUPRA) AND DELOITTE CONSULTING INDIA P. L TD. (31 (31 TAXMANN.COM 29 OF BOMBAY HIGH COURT) HE REFERRED TO PAGE NO. 12, 9 AND 14 OF THE PAPER BOOK. 6 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.PENALTY WAS LEVIED U/S.271(1)(C)FOR THREE ITEM.CLUB SUBSCRIPTION,DEVEL OPMENT EXPENDITURE (RS.46.41 LAKHS), AND DEPRECIATION ON CAR. IT IS SAID THAT FOR LEVYING PENALTY U/S.271(1)(C) TWO FACTS SHOULD CO-EXIT-FIRST THAT AMOUNT IN QUESTION SHOULD PART AND PARCEL OF THE INCOME OF THE ASSESSEE.SECONDLY,THE ASSESSEE SHOULD HAVE FILED INACCURATE PARTICULARS/CONCEALED PART ICULARS OF SUCH INCOME.ONE OF THE ACCEPTED RULE OF THE CONCEALMENT PENALTY IS THAT THE EVIDENCES P RODUCED AND ISSUES DECIDED DURING ASSESSMENT PROCEEDINGS ARE NOT FINAL OR BINDING IN PENALTY PRO CEEDINGS.PROVISIONS FOR FINALISING ASSESSMENT AND FOR IMPOSING PENALTY HAVE BEEN INCORPORATED IN TAX LAWS FOR DIFFERENT PURPOSES.DURING THE ASSESSMENT/APPELLATE PROCEEDINGS,THE AO /THE FAA CA N DRAW A CONCLUSION THAT PARTICULAR ITEM FORMS PART OF INCOME OF THE ASSESSEE.BUT, SUCH CONC LUSION OR FINDING CANNOT OR SHOULD NOT BECOME SOLE BASIS FOR IMPOSING PENALTY.IN OTHER WORDS CONF IRMATION OF ANY DISALLOWANCE OR ADDITION DURING THE ASSESSMENT OR APPELLATE PROCEEDINGS CANN OT BE BASIS FOR INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT.THERE IS A DIFFERENCE BETWEEN A FALSE CLAIM AND A GENUINE CLAIM.IN THE FIRST CASE,THE FACT OF INCURRING OF EXPENDITURE IS MISSING, WHERE AS IN THE SECOND SITUATION, INCURRING OF EXPENDITURE IS NEVER IN DISPUTE.THE ON LY DISPUTE IS HOW TO TREAT THAT EXPENDITURE - REVENUE EXPENDITURE OR CAPITAL EXPENDITURE.IN SUCH A CASE,PENALTY IMPOSED U/S.271(1) (C)CANNOT BE OF THE ACT.IN THE MATTER OF KARAN RAGHAV EXPORTS P. LTD.(349 ITR 112) HONBLE DELHI HIGH COURT HAS HELD IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961,IS NOT AKIN TO OR LIKE CRIMINAL PROCEEDING,THAT IT IS NOT MANDATORY THAT I N EACH CASE WHERE ADDITION OR DISALLOWANCE IS MADE BY THE AO,PENALTY MUST AND SHOULD BE IMPOSED,T HAT WHEN AN ASSESSEE ESTABLISHES THAT HE HAD ACTED BONA FIDE AND ALL FACTS AND MATERIAL WERE DIS CLOSED BY HIM PENALTY SHOULD NOT BE IMPOSED.ON THE BASIS OF THE ABOVE DECISION IT CAN S AFELY SAID THAT THE CAVEAT,WITH REGARD TO IMPOSITION OF PENALTY U/S.271(1)(C)OF THE ACT,IS TH AT THE ASSESSEE MUST HAVE PLACED ALL HIS CARDS ON THE TABLE BY DISCLOSING EACH AND EVERY FACT TO THE DEPARTMENTAL AUTHORITIES.IF THE ASSESSEE DOES SO,THEN MERELY BECAUSE THE DEPARTMENTAL AUTHORITIES CONCERNED DOES NOT CONCUR WITH THE LEGAL STAND ADOPTED BY THE ASSESSEE THAT WILL NOT BE REAS ON ENOUGH TO HOLD THAT THE ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OR OF FURNISHING INACCURATE D ETAILS. AFTER CONSIDERING THE ABOVE PRINCIPLES WE WOULD LIK E TO MENTION THE FACTS OF THE CASE.WE FIND THAT THERE WAS DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE AS TO HOW TO TREAT THE CLUB SUBSCRIPTION. THE AO WANTED TO TAX IT UNDER A PARTI CULAR HEAD AND HIS VIEW WAS CONFIRMED BY THE HIGHER AUTHORITIES.AN ADDITION DURING QUANTUM PROCE EDINGS CAN BE JUSTIFIABLE FOR AN ITEM.BUT,THAT DOES NOT MEAN THAT PENALTY SHOULD BE LEVIED FOR CON CEALMENT.INCURRING OF EXPENDITURE IS NOT IN DISPUTE. THEREFORE,PENALTY LEVIED FOR CLUB SUBSCRIP TION IS DELETED.THE DIFFERENCE OF OPINION ABOUT THE DEVELOPMENT CHARGES WAS HEAD UNDER WHICH-CAPITA L OR REVENUE-IT HAD TO BE TAXED.THUS,IT CANNOT BE CATEGORISED AS CONCEALMENT.SIMILARLY,THE THIRD ADDITION,CONFIRMED BY THE FAA AND THE TRIBUNAL,WAS PART OF THE RETURN FILED BY THE ASSESS EE.IN SHORT THE ASSESSEE HAD PLACED ALL HIS CARDS ON THE TABLE BY DISCLOSING EACH AND EVERY FACT TO T HE DEPARTMENTAL AUTHORITIES,AS REQUIRED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF KARAN RAGHA V EXPORTS P.LTD.(SUPRA).CASES RELIED UPON BY THE AR ALSO SUPPORT THE STAND TAKEN BY HIM.THERE FORE,CONFIRMING HIS ORDER,WE DECIDE EFFECTIVE GROUND IN FAVOUR OF THE ASSESSEE. 4 ITA NO. 6655/M/2011 SCHINDLER INDIA PVT. LTD. AS A RESULT, APPE AL FILED BY THE AO STANDS ALLOWED. 2.3 % -. 4 5 + 6 + . 7 . ORDER PRONOUNCED IN THE OPEN COURT ON 5TH,FEBRUARY, 2015. #1 + 0& # 8 9% 5 2/ , ,, , 201 5 + = SD/- SD/- ( /JOGINDER SINGH) ( #$ / RAJENDRA) ! / JUDICIAL MEMBER # # # # ! ! ! ! / ACCOUNTANT MEMBER / MUMBAI, 9% /DATE: 05.02.2015 SK #1 #1 #1 #1 + ++ + ).> ).> ).> ).> ?#>&. ?#>&. ?#>&. ?#>&. / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '( 2. RESPONDENT / )*'( 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR E BENCH, ITAT, MUMBAI / >B ).% , . . . 6. GUARD FILE/ 2 * >. ). //TRUE COPY// #1 % / BY ORDER, C / DY./ASST. REGISTRAR , /ITAT, MUMBAI