Hariom Projects Pvt. Ltd., RAJKOT-GUJARAT V. The Dy. Commr. Income Tax, Circle-1, RAJKOT-GUJARAT

ITA 667/RJT/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6720 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-02-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 20-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND SONTAKKE SR DR
• Assessee Lawyers: DM RINDANI
• Keywords: Business expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.667/RJT/2014 ( / ASSESSMENT YEAR : 2006-07) HARIOM PROJECTS PVT.LTD. 17/2, GALAXY COMMERICAL CENTRE JAWAHAR ROAD, RAJKOT / VS. THE DY.CIT CIRCLE-1 RAJKOT ./ ./ PAN/GIR NO. AABCH 4446 B ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI D.M. RINDANI, AR ! / RESPONDENT BY : SHRI ARVIND SONTAKKE, SR.DR ' #$% ! & / DATE OF HEARING 02/02/2017 '( ! & / DATE OF PRONOUNCEMENT 08/02/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, RAJKOT [CIT(A) IN SHORT] DATED 13/10/2014 AGAINST IMPOSITION OF P ENALTY OF RS.3,14,440/- UNDER S.271(1)(C) RELEVANT TO ASSESSMENT YEAR (AY) 2006-07. ITA NO.667/RJT/2014 HARIOM PROJECTS P.LTD. VS. DCIT ASST.YEAR 2006-07 - 2 - 2. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE R EADS AS UNDER: THE LEARNED COMMISSIONER OF INCOME TAX APPEALS)-I, RAJKOT HAS ERRED IN DISMISSING THE APPEAL AND THEREBY CONFIRMING THE IMPOSITION OF PENALTY OF RS.3,14,440/- LEVIED U/S.271(1)(C) BY TH E DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, RAJKOT IS UNW ARRANTED, UNJUSTIFIED AND BAD IN LAW. 3. BRIEFLY STATED, THE ASSESSEE-COMPANY IS ENGAGED IN CARRYING ON ACTIVITIES OF MILITARY CIVIL CONSTRUCTION WORK. TH E RETURN OF INCOME RELEVANT TO AY 2006-07 WAS FILED DECLARING A TOTAL INCOME OF RS.22,07,370/-. THE BOOKS OF ACCOUNTS OF THE ASSES SEE WERE DULY AUDITED. RETURN OF INCOME FILED ACCOMPANIED STATUTORY AUDIT REPORT UNDER COMPANIES ACT, 1956 AND ALSO TAX AUDIT REPORT UNDER S.44AB OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT'). THE RETURN WAS SUBJECTED TO SCRUTINY ASSESSMENT. THE ASSESSIN G OFFICER (AO) WHILE ASSESSING THE TOTAL INCOME INTER ALIA MADE ADDITIONS/DISALLOWANCES ON ACCOUNT OF (I) INADMISSIBLE EXPENSES UNDER S.40A(3) OF RS.8,61,789/- AND (II) ON ACCOUNT OF INADMISSIBLE EXPENSES UNDER SECT ION 40(A)(III) R.W.RULE 6DD OF THE INCOME TAX RULES, 1962 FOR A SUM OF RS.9 1,055/-. THE ASSESSMENT WAS FOLLOWED BY PENALTY ORDER DATED 12/0 3/2013. THE ASSESSEE OBJECTED TO THE IMPOSITION OF PENALTY ON T HE AFORESAID ADDITIONS/DISALLOWANCES BEFORE THE CIT(A). THE CIT (A) HOWEVER, DID NOT FIND MERIT IN VARIOUS PLEAS RAISED BY THE ASSES SEE. ACCORDINGLY, PENALTY WAS SUSTAINED BY THE CIT(A). ITA NO.667/RJT/2014 HARIOM PROJECTS P.LTD. VS. DCIT ASST.YEAR 2006-07 - 3 - 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE PREFERRED APPEAL BEFORE THE TRIBUNAL. 5. THE LD.AR FOR THE ASSESSEE MR.D.M. RINDANI, AT T HE OUTSET, SUBMITTED THAT THE APPEAL HAS BEEN FILED AGAINST TW O TYPES OF DISALLOWANCES. FIRST DISALLOWANCE OF RS.8,61,789/- IS ON ACCOUNT OF PROVISION OF INCOME TAX ETC. WHICH IS NOT AN ADMISS IBLE BUSINESS EXPENDITURE. THE SECOND DISALLOWANCE OF RS.91,055/ - REPRESENTS DISALLOWANCE TOWARDS EXPENDITURE INCURRED IN CASH I N EXCESS OF THE PRESCRIBED LIMITS. IT WAS SUBMITTED THAT BOTH THE DISALLOWANCES HAVE BEEN DISCLOSED IN COLUMN NO.12(F) OF THE TAX AUDIT REPOR T. THE AUDITOR HAS ALSO PUT A NOTE TO THE EFFECT AT RELEVANT COLUMN IN HIS AUDIT REPORT. THE LD.AR ADVERTED OUR ATTENTION TO THE INCOME TAX FILE D BY THE ASSESSEE AND SUBMITTED THAT THE AFORESAID DISALLOWANCES HAVE BEE N DULY CARRIED OUT IN THE RETURN OF INCOME AND TAXABLE INCOME OF RS.22,07 ,370/- WAS DETERMINED WHICH AMOUNT IS THE STARTING POINT FOR D ETERMINATION OF THE ASSESSED INCOME. HOWEVER, IN THE ASSESSMENT PROCEE DINGS AND IN THE FIRST APPELLATE PROCEEDINGS THE ASSESSEE SOMEHOW CO ULD NOT EXPLAIN TO THE AO OR TO THE CIT(A) THAT THE DISALLOWANCES HAVE ALR EADY BEEN CARRIED OUT. THUS, PROCEEDING ON THE MISCONCEPTION OF THE FACTS, THE AO MADE ADDITION TOWARDS IMPUGNED DISALLOWANCES WHICH WERE ALREADY CARRIED OUT ITA NO.667/RJT/2014 HARIOM PROJECTS P.LTD. VS. DCIT ASST.YEAR 2006-07 - 4 - WHILE FILING THE RETURN OF INCOME. THE LD.AR ACCOR DINGLY SUBMITTED THAT THE ASSESSEE, IN FACT, HAS SUFFERED TAXATION ON THE DISALLOWANCE TWICE. HOWEVER, THESE FACTS COULD NOT BE BROUGHT TO THE NO TICE OF THE REVENUE AND THEREFORE REMEDIAL ACTION COULD NOT BE TAKEN AT THE LOWER LEVEL. IN THESE FACTS, ON THE FACE OF FULL DISCLOSURE OF DISA LLOWANCES IN THE TAX AUDIT REPORT AND COUPLED THEREWITH, ACTUAL DISALLOW ANCE IN THE COMPUTATION OF INCOME, THERE IS NO WARRANT TO IMPOS E PENALTY UNDER S.271(1)(C) OF THE ACT. 6. THE LD.DR MR.ARVIND SONTAKKE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A). 7 . ON CAREFUL CONSIDERATION OF THE FACTS PLACED ON RE CORD, WE FIND THAT IT IS UNDISPUTABLE FACT THAT THE DISALLOWANCES MADE IN THE ASSESSMENT ORDER GIVING RISE TO THE PENALTY WERE PROPERLY DISC LOSED THE TAX AUDIT REPORT. THE TAX AUDIT REPORT WAS DULY PLACED BEFOR E THE AO. THUS, THE AO WAS MADE PRIVY TO THE RELEVANT FACTS IN THIS REG ARD WITHOUT ANY SUPPRESSION OF FACTS. SECONDLY, AS CLAIMED BY THE ASSESSEE, THE DISALLOWANCES WERE ACTUALLY CARRIED OUT IN THE RETU RN OF INCOME AND THEREFORE QUANTUM ADDITION ITSELF IS AT ODDS WITH T HE TRUE INCOME. WE TAKE NOTE OF THE ARGUMENTS OF THE ASSESSEE THAT THE ADDITION ITSELF IS NOT JUSTIFIED SINCE THE DISALLOWANCES WERE ALREADY CARR IED OUT WHILE FILING THE RETURN WHICH REMAINED UNEXPLAINED IN THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS IN PENALTY PROCEEDINGS. ON THESE FACTS, IT IS ITA NO.667/RJT/2014 HARIOM PROJECTS P.LTD. VS. DCIT ASST.YEAR 2006-07 - 5 - CRYSTAL CLEAR THAT CIRCUMSTANCES STIPULATED FOR IMP OSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT ARE CLEARLY ABSENT. IN THE ABSENCE OF ANY CONCEALMENT OF INCOME, THE IMPOSITION OF PENALTY UN DER S.271(1)(C) IS NOT SUSTAINABLE IN LAW. ACCORDINGLY, WE ARE INCLINED T O SET ASIDE AND CANCEL THE ORDER OF THE CIT(A) AND QUASH THE PENALTY SO IM POSED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 08/02/2 017 AT AHMEDABAD. SD/- SD/- ( MAHAVIR PRASAD) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD ; DATED 08/02/2017 ..#, $.,#../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. - & ' .& / CONCERNED CIT 4. ' .& ( ) / THE CIT(A)-I, RAJKOT 5. 2$34 ,&,# , , /DR,ITAT, RAJKOT 6. 4?@ A% / GUARD FILE. / BY ORDER, 2& ,& //TRUE COPY// / ( DY./ASSTT.REGISTRAR) %&, / ITAT, RAJKOT