M/S EMM KAY INDUSTRIES LIMITED , JALANDHAR V. ASSISTANT COMMISSIONER OF INCOME TAX, JALANDHAR

ITA 675/ASR/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7126 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-03-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 23-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Keywords: Document seized
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CAMP BENCH AT JALANDHAR BEFORE SH. N. K. SAINI, HONBLE VICE PRESIDENT AND SH. RAVISH SOOD, JUDICIAL MEMBER ITA NO.675/ASR./2017 : ASSTT. YEAR : 2009-10 M/S EMM KAY INDUSTRIES LTD., C/O V.P. VIJH & CO., CA, K.K. TOWER, IST & 2 ND FLOOR, OPP. CIRCUIT HOUSE, JALANDHAR VS ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, JALANDHAR (APPELLANT) (RESPONDENT) PAN NO. AAACE3104E ASSESSEE BY : SH. SANDEEP VIJH, CA REVENUE BY : SH. BHAWAN I SHANKAR, DR DATE OF HEARING : 10.01.2019 DATE OF PRONOUNCEMENT : 16.01.2019 ORDER PER N. K. SAINI, VICE PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 25.08.2017 OF LD. CIT(A)-5, LUDHIANA. 2. THE ONLY GROUND RAISED IN THIS APPEAL READS AS U NDER: 1. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS), HAS ERRED IN SUSTAINING THE ORDER U/S 153A WHICH IS BAD IN LAW. NO INCRIMINATING DOCUMENT HAVING BEEN FOUND WH ICH PERTAINED TO THIS YEAR AND CONSEQUENTLY THE ASSESSI NG OFFICER COULD NOT HAVE ASSUMED JURISDICTION U/S 153A. 1. (B) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING ADDITIONS MADE IN THE ORDER U/S 153A REA D WITH SECTION 143(3) (RS.492,812/- AND RS.2,042/- OUT OF A ITA NO. 675/ASR./2017 EMM KAY INDUSTRI ES LTD. 2 DISALLOWANCE OF RS. 20,626/-) WHICH WERE NOT BASED ON ANY INCRIMINATING DOCUMENT SEIZED AT THE TIME OF SEARCH . 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 4,92,81 2/- MADE BY THE ASSESSING OFFICER IN RESPECT OF DAMAGES PAID TO ESI DEPARTMENT BY TREATING IT AS PENALTY NOT ALLOWABLE AS AN EXPENSE. EVEN IF THE SPECIFIC SUBMISSIONS ON THE DI SALLOWANCE WERE NOT ACCEPTED, THE MATTER SHOULD HAVE BEEN REST ORED TO THE FILE OF THE ASSESSING OFFICER TO OBTAIN NECESSA RY CLARIFICATION FROM THE ESI DEPARTMENT, WITH REGARD TO THE EXACT NATURE OF THE AMOUNT IN QUESTION. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING A DISALLOWANCE OF RS. 2,042/- O UT OF A DISALLOWANCE OF RS. 20,626/- FROM OUT OF INTEREST M ADE BY THE ASSESSING OFFICER. THE LEARNED COMMISSIONER OF INCO ME TAX APPEAL) HAS FAILED TO APPRECIATE THAT SUFFICIENT IN TEREST FREE FUNDS WERE AVAILABLE FOR GIVING ADVANCES. 3. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE DID NOT PRESS GROUND NOS. 1 & 3, SO THESE GROUNDS A RE DISMISSED AS NOT PRESSED. 4. VIDE GROUND NO. 2, THE GRIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF DISALLOWANCE OF RS.4,92,812/- MADE BY THE AO IN RESPECT OF DAMAGES PAID TO ESI DEPARTMENT. 5. AS REGARDS TO THIS ISSUE, THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT IT IS SQUARELY COVERED IN ASSESSEES FAVOUR VIDE ORDER DATED 05.07.2018 IN ITA NO. 672/ASR./2017 FOR THE ASSESSMENT YEAR 2006-07 I N ASSESSEES OWN CASE (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLAC ED ON RECORD). 6. IN HIS RIVAL SUBMISSIONS, THE LD. DR ALTHOUGH SU PPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT COULD NOT CONTROVERT THE AFOR ESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. ITA NO. 675/ASR./2017 EMM KAY INDUSTRI ES LTD. 3 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THA T AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEE S APPEAL FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO. 672/ASR./2017 WHEREIN VIDE ORDER DATED 05.07.2018, THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE AO FOR FRESH ADJUDICATION AND THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 5 OF THE SAID ORDER WHICH READ AS UNDER: 5. HAVING HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSE D THE MATERIAL ON RECORD. THE ONLY ISSUE RELATES TO THE CL AIM OF RS.1,78,356/- WHICH HAS BEEN CLAIMED BY THE ASSESSEE ON ACCOUNT OF EST DAMAGES. THIS IS ADMITTED FACT THAT THE ASSESSEE HAS FAI LED TO BRING ANY MATERIAL ON RECORD AS TO WHETHER THE SAID AMOUNT WAS PAID BY WAY OF DAMAGES OR PENALTY OR INTEREST. EVEN THE ASSESSING OFFICER ALSO FAILED TO GIVE DEFINITE FINDING BY ANY CONTRARY MATERIAL TO T HE EFFECT THAT THE SAID AMOUNT WAS PENAL IN NATURE. THE APEX COURT IN THE CASE OF PRAKASH COTTON MILLS PVT. LTD. VS. CIT, DATED ON DECISION 6 TH APRIL, 1993, IN CIVIL APPEAL NO.1279 OF 1977 [1993] 201 ITR 0684 HELD THAT: 'THE QUESTION WHETHER ANY SUCH IMPOST IS IN ESSENCE COMPENSATORY OR IS BY WAY OF PENALTY WILL HAVE TO BE DECIDED HAVING REGARD TO THE RELEVANT PROVISIONS OF THE LAW UNDER WHICH IT IS IMPOSED AND THE CIRCUMSTANCES UNDER WHICH IT HAS BEEN IMPOSED. THE MERE NOMENCLATURE AS INTEREST, PENALTY OR DAMAGES IN THE ACT MAY NOT BE CONCLUSIVE FOR THE PURPOSE OF ALLOWING IT AS A DEDUCTION UNDER THE IT ACT. SIMILARLY, THE CIRCUMSTANCE THAT A FIXED RATE OF INTEREST HAS TO BE PAID ALSO MAY NOT BE CONCLUSIVE. SEC. 14B OF THE ACT PROVIDES FOR LEVY OF DAMAGES FOR DELAYED PAYMENT AS A PERCENTAGE OF THE AMOUNT DUE UP TO A PRESCRIBED MAXIMUM. SUCH A DETERMINATION IS TO BE DONE BY THE APPROPRIATE AUTHORITY AFTER GIVING AN OPPORTUNITY TO THE EMPLOYER. THUS, THE LEVY WILL BE BY A SPEAKING ORDER OF THE AUTHORITY FIXING QUANTUM OF DAMAGES. AS HELD BY THE SUPREME COURT, THE SAID AMOUNT COMPRISES BOTH AN ELEMENT OF PENAL LEVY AS WELL AS COMPENSATORY PAYMENT. IT WILL BE FOR THE AUTHORITY UNDER THE INCOME- TAX ACT TO DECIDE WITH REFERENCE TO THE PROVISIONS OF THE EMPLOYEES' PROVIDENT FUNDS ACT AND THE REASONS GIVEN IN THE ORDER IMPOSING AND QUANTIFYING THE DAMAGES TO DETERMINE WHAT PROPORTION SHOULD BE TREATED AS PENA1 AND WHAT PROPORTION AS ITA NO. 675/ASR./2017 EMM KAY INDUSTRI ES LTD. 4 COMPENSATORY. THE ENTIRE SUM CAN NEITHER BE CONSIDERED AS MERE PENALTY NOR AS MERE INTEREST.' HENCE, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE FEEL IT APPROPRIATE TO REMAND BACK THIS ISSUE TO THE FILE OF THE ASSE SSING OFFICER TO DETERMINE THE PROPORTION OF ANY, AND WHERE SO, WHAT PROPORTION SHOULD BE TREATED AS PENAL AND WHAT PROPORTION AS COMPENSATORY, WHILE CONSIDERING THE EMPLOYEES STATE INSURANCE ACT. HENCE, THE ORDER IMPUGNED HEREIN IS SET ASIDE AND THE CASE I S REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO DE CIDE THE ISSUE UNDER CONSIDERATION IN VIEW OF THE OBSERVATION MADE ABOVE. 8. SO, RESPECTFULLY FOLLOWING THE AFORESAID REFERRE D TO ORDER, THIS ISSUE IS SET ASIDE TO THE FILE OF THE AO TO BE ADJUDICATED AFRES H IN ACCORDANCE WITH LAW BY CONSIDERING THE DIRECTIONS GIVEN VIDE AFORESAID REF ERRED TO ORDER DATED 05.07.2018. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE COURT ON 16/01/2019) SD/- SD/- (RAVISH SOOD) (N. K. SAINI) JUDICIAL MEMBER V ICE PRESIDENT DATED: 16/01/2019 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR