DCIT 2(2), MUMBAI V. PARESH CONSTRUCTION & FOUNDATIONS P.LTD, MUMBAI

ITA 6850/MUM/2012

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7554 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Additional evidence
• Section: 37(1); 37

Judgement Text

INCOME-TAX APPELLATE TRIBUNAL C BENCH MUMBAI , , BEFORE S/SH. RAJENDRA, ACCOUNTAN T MEMBER & RAMLAL NEGI, JUDICIAL MEMBER ./I.T.A. NO. 6850/MUM/2012, /ASSESSMENT YEAR:2008-09 ASSTT. CIT, CIRCLE-2(2) MUMBAI VS. M/S. PARESH CONSTRUCTIONS & FOUNDATIONS 5 TH FLOOR, SAVLA CHAMBERS 40, CAWASJI PATEL STREET, FORT MUMBAI 400 001 PAN AAACP2726K ( /APPELLANT ) ( / RESPONDENT ) .C.O. NO. 07/MUM/2014, /ASSESSMENT YEAR:2008-09 M/S. PARESH CONSTRUCTIONS & FOUNDATIONS 40, CAWASJI PATEL STREET, FORT,MUMBAI-1 VS. ASSTT. CIT, CIRCLE-2(2) MUMBAI ( /CROSS OBJECTOR ) ( / RESPONDENT ) REVENUE BY: SHRI RAJAT MITTAL - DR ASSESSEE BY: SHRI VIPUL JOSHI / DATE OF HEARING: 30.01.2017 / DATE OF PRONOUNCEMENT: 04.04.2018 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 23.08.2012 OF THE CIT(A )-5,MUMBAI THE ASSESSING OFFICER(AO)HAS FILED THE PRESENT APPEAL,WHEREAS THE ASSESSEE HAD F ILED CROSS OBJECTION(CO).ASSESSEE-COMPANY,A CIVIL CONTRACTOR,FILED ITS RETURN OF INCOME ON 29/0 9/2008,DECLARING TOTAL INCOME OF RS.1,66,82, 068/-.THE RETURN WAS PROCESSED U/S. 143(1) OF THE A CT ON 17.02.2010. THE AO COMPLETED THE ASSESSMENT U/S.143(3)OF THE ACT,ON 27.12.2010,DETE RMINING ITS INCOME AT RS.8.86 CRORES. ITA/6850/MUM/2012: 2. FIRST EFFECTIVE GROUND (GOA-2)OF APPEAL IS ABOUT DE LETING THE ADDITION ON ACCOUNT OF RETENTION MONEY.IT WAS BROUGHT TO OUR NOTICE THAT THE ISSUE S TANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN INCOME TAX APPEAL NO.1381 OF 2012,DATED 5/3/2014,FOR THE EARLIER ASSESSMENT YEAR.IN ITS ORD ER, THE HONBLE BOMBAY HIGH COURT HAS REFERRED TO THE CASE OF ASSOCIATED CABLES LTD., 286 ITR 596 (BOM.) DECIDED ON 7/8/2006.WE ARE REPRODUCING THE RELEVANT PORTION OF THE JUDGMENT AN D THE SAME READS AS UNDER:- 6.WE HAVE CAREFULLY CONSIDERED ORDERS OF AUTHORITI ES BELOW, SUBMISSION OF LD. REPRESENTATIVES OF PARTIES AND THE CASES RELIED UPON BY LD. CIT(A). WE AGREE WITH LD. CIT(A) THAT THE AMOUNT RETAINED BY CONTRACTEE TO ENSURE PROPER PERFORMANCE OF CONTRACT WILL ACCRUE AS INCOME TO CONTRACTEE ONLY UPON TAKING OVER OF PLANT AND ACCEP TANCE OF PERFORMANCE TEST BY CONTRACTEE. THE M/S. PARESH CONSTRUCTIONS & FOUNDATIONS 2 ABOVE PROPOSITION IS SUPPORTED BY HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS SIMPLEX CONCRETE PILES (INDIA) P. LTD. (SUPRA). ITAT PUNE B ENCH HAS ALSO HELD IN THE CASE OF NATIONAL HEAVY ENGINEERING CO-OPERATIVE LTD., VS DCIT 105 IT D 48 THAT AMOUNT OF RETENTION MONEY DID NOT ACCRUE TO ASSESSEE AS INCOME TILL THE PERFORMAN CE OF THE CONTRACT IS FULFILLED AND ACCEPTED BY CONTRACTEE. IN VIEW OF ABOVE DECISION, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) AND HENCE WE CONFIRM ORDER OF LD. CIT(A) BY REJECTING T HE GROUND OF APPEAL TAKEN BY DEPARTMENT. RESPECTFULLY FOLLOWING THE ABOVE, GROUND NO.2, IS D ECIDED AGAINST THE AO. 3. NEXT GROUND OF APPEAL IS ABOUT UNFINISHED CONTRACTS .DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD CREDITED AN AMOUNT OF R S.38.77 CRORES IN ITS P&L ACCOUNT,THAT IT HAD ADDED OPENING WORK-IN-PROGRESS OF RS.2.40 CRORES AN D HAD REDUCED THE CLOSING WIP OF RS.1.65 CRORES,THAT IT HAD ESTIMATED THE STAGE OF COMPLETIO N OF DIFFERENT PROJECTS BASED ON DIRECT COST INCURRED ON PROJECTS TILL 31/3/2008 AND THE TOTAL C OST OF PROJECT,THAT FOR THAT PURPOSE IT HAD REDUCED PROFIT MARGIN FROM THE TOTAL CONTRACT VALUE ,THAT IT HAD TAKEN PROFIT MARGIN @ 8% WITH RESPECT TO CERTAIN CONTRACTS AND THAT THE RATE OF N IL WITH RESPECT TO OTHER CONTRACTS.AFTER ANALYSING THE P&L ACCOUNT FOR THE EARLIER AND THE CURRENT YEA R,THE AO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AND DIRECTED IT TO EXPLAIN AS TO WHY GP OF 18.26% SHOULD NOT BE TAKEN FOR THE YEAR UNDER CONSIDERATION AND AS TO WHY THE TURNOVER SHOULD NOT BE INCREASED BY RS.4.96 CRORES.ASSESSEE FILED A DETAILED SUBMISSION IN THAT REGARD.HOWEVER, THE AO ADDED AN AMOUNT OF RS.4,96,04,509 TO THE TOTAL INCOME OF THE ASSESSEE. 3.1. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND MADE DETAILED SUBMISSIONS.IT ALS O FILED ADDITIONAL EVIDENCES BEFORE HIM. AFTER CONSIDERING THE REMAND REPORT OF THE AO,DATED 10/4/2012 AND THE REJOINDERS OF THE ASSESSEE,DATED 8/8/2012 AND 9/8/2012, HE HELD THAT THE ASSESSEE WAS MAINTAINING REGULAR BOOKS OF ACCOUNT,THAT IN RESPECT OF INCOME TO BE RECOGNISED FOR INCOMPLETE CONTRACTS IT WAS FOLLOWING THE METHOD AS PER ACCOUNTING STANDARD (AS-7) I.E., PERC ENTAGE COMPLETION METHOD (PCM),THAT IT WAS FOLLOWING THE METHOD CONSISTENTLY FROM EARLIER YEAR S,THAT THE AO HAD NOT DOUBTED THE COMPLETE - NESS OR THE CORRECTNESS OF THE BOOKS OF ACCOUNT OF THE ASSESSEE,THAT THE AO WAS OF THE VIEW THAT GP PERCENTAGE SHOULD BE APPLIED TO ARRIVE AT THE TO TAL ESTIMATED COST AND NOT THE NP MARGIN AS DONE BY THE ASSESSEE,THAT THE METHOD ADOPTED BY IT WAS ACCEPTED BY THE AO IN THE EARLIER YEARS, THAT THERE WAS NO CHANGE IN THE FACTS AND CIRCUMSTA NCES,THAT THE AO APPLIED GP MARGIN WITHOUT GIVING ANY COGENT REASON OR WITHOUT HIGHLIGHTING AN Y CHANGE IN THE FACTS OF THE CASE.HE REFERRED TO THE CASES OF GOPAL PUROHIT(336 ITR 287)OF THE HO NBLE JURISDICTIONAL HIGH COURT AND KOTAK SECURITIES LTD.(15 TAXMANN.COM 77) AND HELD THAT TH E AO WAS NOT JUSTIFIED IN ADOPTING THE DIFFERENT METHOD FOR ESTIMATION OF INCOME IN RESPEC T OF THE INCOMPLETE CONTRACTS;THAT THE FACTS M/S. PARESH CONSTRUCTIONS & FOUNDATIONS 3 AND CIRCUMSTANCES FOR VARIOUS YEARS,INCLUDING THE Y EAR UNDER APPEAL,WERE IDENTICAL.ACCORDINGLY, HE DIRECTED THE AO TO DELETE THE ADDITION. 3.2. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE(DR) RELIED UPON THE ORDER OF THE AO.THE (AR) SUPPORTED THE ORDER OF THE FIRST APPELLATE AUTHORITY (FAA). WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.WE FIND THAT ASSESSEE WAS FOLLOWING PCM FOR THE INCOMPLETE PROJECTS FOR T HE LAST SO MANY ASSESSMENT YEARS,THAT THE AO HAD NEVER OBJECTED TO THE METHOD OF ACCOUNTING,T HAT WHILE REJECTING THE METHOD APPLIED BY THE ASSESSEE,THE AO HAD NOT MENTIONED THE REASONS A S TO WHY THE METHOD COULD NOT BE APPLIED FOR THE YEAR UNDER CONSIDERATION.IT IS TRUE THAT PRINCI PLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME- TAX PROCEEDINGS,BUT IT IS ALSO EQUALLY TRUE THAT RU LE OF CONSISTENCY APPLIES TO INCOME-TAX PROCEED - INGS.HONBLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT(336ITR287)HAS HELD THAT THAT THERE SHOULD BE UNIFORMITY IN TREATMENT AND WHEN F ACTS AND CIRCUMSTANCES FOR DIFFERENT YEARS WERE IDENTICAL PARTICULARLY IN THE CASE OF THE SAME ASSESSEE. IN THE CASE OF GALILEO NEDERLAND BV,(367ITR319),THE HONBLE DELHI HIGH COURT HAS HEL D AS UNDER: DECISION ON AN ISSUE OR QUESTION TAKEN IN EARLIER YEARS THOUGH NOT BINDING SHOULD BE FOLLOWED AND NOT IGNORED UNLESS THERE ARE GOOD AND SUFFICIEN T REASONS TO TAKE A DIFFERENT VIEW. SAID PRINCIPLE IS BASED UPON RULES OF CERTAINTY AND THA T A DECISION TAKEN AFTER DUE APPLICATION OF MIND SHOULD BE FOLLOWED CONSISTENTLY AS THIS LEAD TO CER TAINTY, UNLESS THERE ARE VALID AND GOOD REASONS FOR DEVIATING AND NOT ACCEPTING EARLIER DECISION. THE HONBLE BOMBAY HIGH COURT IN THE MATTER OF ARON I COMMERCIALS LTD.(362 ITR 403) HAS DEALT THE ISSUE OF CONSISTENCY AS FOLLOW: THOUGH THE PRINCIPLE OF RES JUDICATA IS NOT APPLICA BLE TO TAX MATTERS AS EACH YEAR IS SEPARATE AND DISTINCT,NEVERTHELESS WHERE FACTS ARE IDENTICAL FRO M YEAR TO YEAR,THERE HAS TO BE UNIFORMITY AND IN TREATMENT. CONSIDERING THE ABOVE,WE HOLD THAT FAA WAS JUSTIFIE D DELETING THE ADDITION MADE BY THE AO. 3.3. WE FIND THAT THE AO HAS NOT BROUGHT ON RECORD THE F ACTS THAT WERE DIFFERENT FROM THE FACTS OF EARLIER ASSESSMENT YEARS.IF THERE WAS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE,THEN HE WAS NOT JUSTIFIED IN DISTURBING THE BOOK RESULTS OF THE ASSESSEE.THE FAA HAS GIVEN CATEGORICAL FINDING OF FACT THAT THE BOOKS OF ASSESSEE WERE MAI NTAINED AS PER THE MANDATE OF AS-7.THEREFORE, IN OUR OPINION,THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.CONFIRM - ING HIS ORDER,WE DISMISS THE GROUND NO.3 AGAINST TH E AO. CO/07/MUM./2014 4. DURING THE COURSE OF HEARING BEFORE US,THE AR OF TH E ASSESSEE DID NOT PRESS FIRST GROUND OF THE C.O.,HENCE, THE SAME STANDS DISMISSED AS NOT PRESSE D. M/S. PARESH CONSTRUCTIONS & FOUNDATIONS 4 5. SECOND GROUND OF APPEAL IS ABOUT CONFIRMING THE ADD ITION OF RS.2.78 LAKHS. DURING THE ASSESSMENT PROCEEDINGS,THE AO OBSERVED THAT A SURVE Y ACTION U/S 133 OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE, THAT THE ASSESSEE HAD STATED THAT OUTSTANDING CREDITORS FOR A PERIOD OF MORE THAN 3 YEARS WAS OF RS.30 LAKHS.TH E ASSESSEE ADMITTED THAT SOME OF THE CREDITORS WERE VERY OLD AND THE AMOUNTS WERE IN DIS PUTE. IT OFFERED AN ADDITIONAL INCOME OF RS.30,00,000/- OVER AND ABOVE THE REGULAR INCOME FO R THE YEAR UNDER CONSIDERATION UNDER THE HEAD UN-RECONCILED CREDITORS.A STATEMENT OF DIREC TOR OF THE ASSESSEE-COMPANY WAS RECORDED ON 14.02.2008. WHILE FILING THE RETURN OF INCOME,IT OF FERED AN AMOUNT OF RS.27.21 LAKHS ONLY.THE AO DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY AN AM OUNT OF RS.30,00,000/-,AS PER THE STATEMENT OF 14.02.2008, SHOULD NOT BE ADDED TO ITS TOTAL INC OME.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO HELD THAT ASSESSEE HAD NOT OFFERED ANY EXPLANATION OF REDUCED AMOUNT, THAT THE DIRECTOR HAD OFFERED RS.30,00,000/-AS UNDISCLOSED I NCOME DURING SURVEY PROCEEDINGS.AS A RESULT, AN AMOUNT OF RS.2.78 LAKHS [RS.30,00,000/- (-)RS.27 ,21,993/-] WAS ADDED TO THE INCOME OF THE ASSESSEE. 5.1. DURING THE APPELLATE PROCEEDINGS BEFORE THE FAA,THE ASSESSEE MADE DETAILED SUBMISSIONS. CONSIDERING THE AVAILABLE MATERIAL, HE HELD THAT ON E OF THE DIRECTORS OF THE COMPANY HAD OFFERED RS.30,00,000/- FOR TAXATION,THAT AO WAS JUSTIFIED I N MAKING THE ADDITION OF RS.2.78 LAKHS. HE REFERRED TO THE CASES OF HOTEL SAMRAT[3 ITR 353] AN D K.C.K DEBOO [313 ITR 186] AND DISMISSED THE GROUND OF APPEAL,RAISED BY THE ASSESSEE. 5.2. BEFORE US,THE AR SUBMITTED THAT DURING THE COURSE O F SURVEY PROCEEDINGS THE ASSESSEE HAD STATED THAT CREDITORS APPROXIMATELY OF RS.30,00,000 /- WERE APPEARING IN THE BOOKS OF ACCOUNTS WHEREIN THE AMOUNT WAS DUE, THAT THE FIGURE OF RS.3 0,00,000/- WAS NOT BASED ON BOOKS OF ACCOUNTS, THAT THE DIRECTOR HAD STATED THAT HE WOUL D BE SUBMITTING EXACT AMOUNT AFTER CONSULTING THE REGULAR BOOKS OF ACCOUNTS, THAT AT THE TIME OF FILING OF RETURN AND AGE ANALYSIS OF THE CREDITORS APPEARING IN THE BALANCE SHEET AS ON 31.03.2007 WAS CARRIED OUT, THAT EXACT AMOUNT OF THE CREDITORS IN DISPUTE WAS ACCORDINGLY OFFERED TO TAX . HE REFERRED TO THE STATEMENT RECORDED DURING THE COURSE OF SURVEY AND STATED THAT AMOUNT SURREND ERED DURING THE SURVEY PROCEEDINGS WAS ESTIMATED AMOUNT. THE DR SUPPORTED THE ORDER OF THE FAA. 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS BEFORE US.WE FIND THAT A SURVEY ACTION, U/S.133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE, THAT M/S. PARESH CONSTRUCTIONS & FOUNDATIONS 5 ONE OF THE DIRECTORS OFFERED RS.30,00,000/- (APPROX IMATELY)FOR TAXATION ON ACCOUNT OF OLD CREDITORS, THAT WITHIN A FORTNIGHT OF THE SURVEY TH E ASSESSEE FILED A LETTER STATING THAT THE EXACT AMOUNT OF OLD CREDITORS WAS ARRIVED AT, THAT WHILE FILING THE RETURN OF INCOME IT OFFERED RS.27.21 LAKHS AS ADDITIONAL INCOME. IN OUR OPINION,THE ADDI TION SHOULD BE BASED ON SOME EVIDENCE. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE HAD CLEARLY MENTIONED THE ADDITIONAL INCOME OFFERED WAS BASED ON SOME ESTIMATE.DURING THE SURVEY PROCEEDING S,THE DIRECTOR OF THE COMPANY COULD NOT REFER TO THE REGULAR BOOKS OF ACCOUNTS. AFTER RECON CILING THE FINANCIALS THE EXACT AMOUNT OF THE DISPUTED CREDITORS WAS SHOWN IN THE RETURN OF INCOM E.THEREFORE, IN OUR OPINION, THE FAA WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.2.78 LAK HS ESPECIALLY WHEN THE STATEMENTS RECORDED DURING THE SURVEY PROCEEDINGS TALKED OF ESTIMATED I NCOME ONLY.GROUND NO. 2 IS DECIDED IN ASSESSEES FAVOUR. 6. NEXT GROUND OF APPEAL IS ABOUT DISALLOWING THE CLAI M OF RS.84.86 LAKHS ON ACCOUNT OF INTEREST PAID TO THE CUSTOM AUTHORITIES.DURING THE ASSESSMEN T PROCEEDINGS,THE AO FOUND THAT INTEREST EXPENDITURE,AMOUNTING TO RS.84,86,042/- WAS DEBITED TO THE P & L ACCOUNT UNDER THE HEAD ADMINISTRATIVE EXPENSES.HE DIRECTED IT TO FILE TH E DETAILS IN THAT REGARD.HE HELD THAT THE ASSESSEE HAD PAID INTEREST TO CUSTOM AUTHORITIES THAT IT HAD VIOLATED THE LAW WITH REGARD TO IMPORT OF MACHINE, THAT THE PENAL INTEREST/PENALTY PAID BY TH E ASSESSEE FOR VIOLATION OF LAW WAS NOT ALLOWABLE AS A DEDUCTION AS PER THE PROVISIONS OF E XPLANATION TO SECTION 37 (1) OF THE ACT. ALTERN -ATIVELY,IT WAS HELD THAT THE INTEREST PERTAINED TO EARLIER PERIOD, THAT SAME WAS NOT ALLOWABLE. IT WAS ALSO OPINION OF THE AO THAT PENAL INTEREST WAS RELATED TO ACQUISITION OF MACHINERY, THAT SAME WAS TO BE CAPITALISED. 6.1. THE ASSESSEE MADE SUBMISSIONS BEFORE THE FAA DURING THE APPELLATE PROCEEDINGS.HE OBSERVED THAT THE ASSESSEE HAD IMPORTED FOUR MACHIN ES TO CARRY OUT THE JOB WORK OF GOVERNMENT OF INDIA /STATE GOVERNMENTS,THAT INVESTIGATION COND UCTED BY CUSTOM AUTHORITIES REVEALED THAT SAME WERE USED FOR CONSTRUCTION SITES BY OUTSIDE MU MBAI,THAT THE CUSTOM AUTHORITIES SEIZED THE MACHINES FOR VIOLATING THE EXEMPTION CONDITIONS,THA T THE ASSESSEES HAD APPROACHED THE SETTLEMENT COMMISSION WHILE ACCEPTING THE DUTY DEMA ND OF RS.3.21 CRORES,THAT IT HAD DEPOSITED RS.3.21 CRORES TOGETHER WITH INTEREST @13%.HE REFER RED TO THE EXPLANATIONS TO SECTION 37(1) AND HELD THAT THE ASSESSEE HAD USED THE MACHINERY FOR T HE PURPOSE WHICH WAS NOT COMMITTED BY LAW, THAT IT WAS VIOLATION OF ONE OF THE CONCLUSIONS IMP OSED ON IT FOR ACQUIRING MACHINES. WE REFER TO M/S. PARESH CONSTRUCTIONS & FOUNDATIONS 6 THE CASE OF PRAKASH COTTON MILLS (201 ITR 684) AND MEDDI VENKATRAM & COMPANY PVT. LTD., (229 ITR 534) AND CONFIRMED THE ORDER OF AO. 6.2. BEFORE US,THE AR SUBMITTED THE ASSESSEE HAD APPROAC HED THE SETTLEMENT COMMISSION OF CUSTOMS AND CENTRAL EXCISE,THAT THE COMMISSION HAD DELETED THE PENALTY,THAT INTEREST WAS LEVIED FOR THE VIOLATION OF THE CONDITIONS FOR THE IMPORTE D MACHINERY,THAT THE ONE OF THE GROUP ENTITIES HAVE APPROACHED TO THE HONBLE HIGH COURT ON THE SA ME ISSUE, THAT THE HONBLE BOMBAY HIGH COURT HAD HELD THAT INTEREST PAID BY THE ASSESSEE W AS OF COMPENSATORY IN NATURE, THAT EXPLANATION TO SECTION 37(1) OF THE ACT WAS APPLICABLE TO PENAL INTEREST AND NOT TO COMPENSATORY INTEREST.HE RELIED UPON THE CASES OF AHMEDABAD COTTON MFG.CO.LT D.(205 ITR163),BHARAT C GANDHI( 46 SOT 258),ANZ GRINDLAYS BANK LTD.(13 SOT524)AND HP S TATE FOREST CORPORATION(320 ITR 170).THE DR STATED THAT CUSTOM AUTHORITIES HAD SEIZ ED MACHINE, IT WAS CLEAR CUT VIOLATION OF THE MACHINE, THAT EXPENDITURE WAS NOT ALLOWED. 6.3. WE HAVE HEARD THE RIVAL SUBMISSIONS.WE FIND THAT TH E IDENTICAL ISSUE I.E.USE OF MACHINERY OUTSIDE THE STATE OF MAHARASHTRA AND LEVY OF PENALT Y HAD TRAVELLED UP TO SETTLEMENT COMMISSION AND THE HONBLE BOMBAY HIGH COURT.THE COMMISSION DE LETED THE PENALTY AND THE HONBLE COURT (PAGE NO.111 OF THE PAPER BOOK)HELD THAT THE INTERE ST PAID BY THE ASSESSEE WAS OF COMPENSATORY NATURE I.E. IT IS NOT PENAL NATURE.WE ARE OF THE OP INION THAT AFTER THE ORDER OF THE COMMISSION AND THE JUDGMENT OF THE HONBLE COURT THERE IS NO JUSTI FICATION FOR HOLDING THAT THE INTEREST WAS PENAL INTEREST AND THAT THE EXPENDITURE CLAIMED BY THE AS SESSEE SHOULD NOT BE ALLOWED.REVERSING THE ORDER OF THE FAA WE DECIDE THE ISSUE IN FAVOUR OF T HE ASSESSEE.CASES RELIED UPON BY THE ASSESSEE,AS MENTIONED IN THE EARLIER PARAGRAPH,ALSO SUPPORT OUR VIEW THAT EXPLANATION 1 TO SECTION 37 WAS NOT APPLICABLE TO THE FACTS OF THE CASE. AS A RESULT,APPEAL FILED BY THE AO IS DISMISSED AND THE CO OF THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH APRIL,2018. 04 , SD/- SD/- (RAMLAL NEGI) (RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 04.04.2018 ROSHANI, SR. PS /JV, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / M/S. PARESH CONSTRUCTIONS & FOUNDATIONS 7 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI. DATE INITIALS INITIAL 1. DRAFT DICTATED ON-DICTATION SHEETS ATTACHED/DIR ECT ON PC