SHIV MARINE INDUSTRIES PVT. LTD., MUMBAI V. I.T.O. 7(2)(3), MUMBAI

ITA 7253/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1708 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 04-03-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 25-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Business expenditure; Wrong claim; Condonation of delay; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 7253/MUM./2011 (ASSESSMENT YEAR : 200506 ) M/S SHIV MARINE INDUSTRIES PVT. LTD., 7, MADINA MANZIL, DR. AMBEDKAR ROAD, PAREL, MUMBAI 400 012. .. APPELLANT V/S THE INCOME TAX OFFICER 7(2)(3) AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 .... RESPONDENT PERMANENT ACCOUNT NUMBER AABCS4096C ASSESSEE BY : MR. M. SUBRAMANIAN REVENUE BY : MR. MANOJ KUMAR DATE OF HEARING 0 4 .0 3 .2013 DATE OF ORDER 08.03.2013 ORDER PER AMIT SHUKLA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST ORDER DATED 03.05.2011, PASSED BY THE CIT (APPEALS)13, MUMBAI, IN RELATION TO PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) FOR THE ASSESSM ENT YEAR 200506. 2. THE APPEAL IS BARRED BY LIMITATION BY ONE DAY. T HE ASSESSEE HAS FILED A PETITION FOR CONDONATION OF DELAY WHICH IS PLACED A T PAGE 1 OF THE PAPER BOOK. FOR THE REASONS STATED THEREIN, DELAY OF ONE DAY IS CONDONED. M/S SHIV MARINE INDUSTRIES PVT. LTD. 2 3. IN THIS CASE, THE PENALTY HAS BEEN LEVIED ON ACC OUNT OF FOLLOWING TWO ADDITIONS/DISALLOWANCES : (I) PLOT PREMIUM WRITTEN OFF ` 1,82,250/ (II) SHORT LDT CHARGES PAID TO GUJARAT MARITI ME BOARD ` 6,44,069/ 4. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIP BREAKING. HOWEVER, DURING THIS YEAR, SHIPBREAKING ACTIVITY WAS NOT CA RRIED OUT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED AN AMOU NT OF ` 1,82,250/ AS PLOT PREMIUM WRITTEN OFF. IN RESPONSE TO THE SHOWC AUSE NOTICE, THE ASSESSEE SUBMITTED THAT HE HAS PAID SUM OF ` 18,22,500/ TO CARRY GUJARAT MARITIME BOARD FOR LEASE OF PLOT FOR 10 YEARS IN TH E YEAR 199596. THIS AMOUNT HAS BEEN CLAIMED OF 1/10 TH OF THE PREMIUM, OVER A PERIOD OF 10 YEARS IN THE BOOKS OF ACCOUNT I.E. IT HAS TREATED T HE PAYMENT AS DEFERRED REVENUE EXPENDITURE ALLOCATED TO 10 YEARS OF THE LE ASE PERIOD. THE LEARNED ASSESSING OFFICER HELD THAT THIS EXPENSE IS REVENUE EXPENDITURE, INCURRED BY THE ASSESSEE IN THE ASSESSMENT YEAR 199697 AND SUC H AN EXPENDITURE CAN BE ALLOWED ONLY, WHEN IT HAS BEEN INCURRED IN THE R ELEVANT PREVIOUS YEAR. ACCORDINGLY, HE DISALLOWED THE AMOUNT OF ` 1,82,250/ CLAIMED AS DEFERRED REVENUE EXPENDITURE. 5. HE, FURTHER NOTED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF ` 6,44,069/ ON ACCOUNT OF SHORT LDT CHARGES. IN RES PONSE TO SHOW CAUSE, IT WAS SUBMITTED BY THE ASSESSEE THAT THE SAID CHARGES WERE PAID TO GUJARAT MARITIME BOARD FOR NOT CUTTING THE REQUIRED TONNAGE OF SHIPS IN THIS YEAR AND SUCH A PAYMENT IS GENUINE EXPENSE. THE ASSESSING OF FICER DISALLOWED THIS EXPENSE ON THE GROUND THAT THE ASSESSEE HAS NOT CAR RIED OUT ANY SHIP BREAKING BUSINESS IN THIS YEAR AND SUCH CHARGES ARE ALSO IN THE NATURE OF PENALTY. THEREFORE, HE DISALLOWED THE SAID AMOUNT C LAIMED BY THE ASSESSEE. 6. THE ASSESSEE DID NOT PREFER ANY APPEAL AGAINST A FORESAID DISALLOWANCES. M/S SHIV MARINE INDUSTRIES PVT. LTD. 3 7. DURING THE COURSE OF PENALTY PROCEEDINGS, THE AS SESSEE REITERATED THE SAME EXPLANATION AND SUBMITTED THAT IT HAS NEITHER CONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED ANY INACCURATE PARTICULAR O F INCOME. THESE EXPENSES CLAIMED WERE LEGITIMATE BUSINESS EXPENSES AND NO PE NALTY CAN BE LEVIED ON DISALLOWANCE OF SUCH EXPENSES. THE ASSESSING OFFICE R, HOWEVER, RELYING UPON THE FINDINGS GIVEN IN THE ASSESSMENT ORDER, LEVIED THE PENALTY ON THESE DISALLOWANCES ON THE GROUND THAT THE ASSESSEE HAS I NTENTIONALLY MADE THE FALSE CLAIM IN PROFIT AND LOSS ACCOUNT, AFTER INVOK ING THE PROVISION OF EXPLANATION1 TO SECTION 271(1)(C). 8. BEFORE THE LEARNED CIT(A), IT APPEARS THAT THE A SSESSEE HAS NOT MADE ANY APPEARANCE BEFORE HIM, ACCORDINGLY, THE LEARNED CIT(A) HAS CONFIRMED THE PENALTY EX PARTE . 9. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT, S O FAR AS THE CLAIM OF DEFERRED REVENUE EXPENDITURE FOR THE PLOT PREMIUM W RITTEN OFF AT ` 1,82,250/ IS CONCERNED, SUCH EXPENDITURE WAS ALSO CLAIMED IN THE EARLIER YEARS AND THE SAME STANDS ALLOWED BY THE DEPARTMENT IN SCRUTINY PROCEEDINGS UNDER SECTION 143(3). IN SUPPORT OF THI S, HE REFERRED TO THE EARLIER ASSESSMENT ORDERS AND THE CLAIM MADE IN RES PECT THE PROFIT AND LOSS ACCOUNTS FOR THOSE YEARS. HE FURTHER SUBMITTED THAT EVEN IN THE STATEMENT OF FACTS FILED BEFORE THE LEARNED CIT(A), THE ASSESSEE HAS MADE A SPECIFIC AVERMENT THAT SUCH AN EXPENDITURE HAS BEEN ALLOWED TO THE ASSESSEE, NOT ONLY IN ASSESSMENT YEAR 200405, WHERE THE ASSESSME NT WAS COMPLETED UNDER SECTION 143(3) BUT ALSO IN THE EARLIER YEARS. SO FAR AS LDT CHARGES PAID TO GUJARAT MARITIME BOARD, HE SUBMITTED THAT T HERE WAS HUGE FLUCTUATION IN TONNAGE RATE OF SHIP IN THE INTERNAT IONAL MARKET AND THE ASSESSEE WAS APPREHENSIVE THAT IT WOULD INCURRED HU GE LOSSES ON ACCOUNT OF FOREIGN CURRENCY FLUCTUATION. THEREFORE, HE DID NOT CARRY OUT THE CUTTING OF SHIPS IN THIS YEAR, FOR WHICH IT HAD TO PAY LDT CHA RGES TO GUJARAT MARITIME BOARD. HE, FURTHER SUBMITTED THAT NOWHERE THE ASSES SEES CLAIM HAS BEEN FOUND TO BE BOGUS. THE ASSESSING OFFICER HAS DISALL OWED THIS EXPENSE MERELY M/S SHIV MARINE INDUSTRIES PVT. LTD. 4 ON THE GROUND THAT IT IS IN THE NATURE OF PENALTY. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDING S OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEES CLAIM HAS N OT BEEN FOUND TO BE GENUINE OR BONA FIDE, THEREFORE, PENALTY HAS RIGHTLY BEEN LEVIED. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW. SO FAR AS DISALLOWANCE OF ` 1,82,250/ ON ACCOUNT OF PLOT PREMIUM WRITTEN OFF, WE FIND THAT ASSESSEE HAS MADE A PAYMENT OR ` 18,22,500/ TO GUJARAT MARITIME BOARD IN THE ASSES SMENT YEAR 199697 FOR LEASED OF PLOT. THIS PAYMENT HAS BEEN CLAIMED A S DEFERRED REVENUE EXPENDITURE FOR THE PERIOD OF 10 YEARS OF LEASE IN THE BOOKS OF ACCOUNT. SUCH A PAYMENT HAS BEEN ALLOWED AS DEFERRED REVENUE EXPE NDITURE IN ALL THE EARLIER YEARS. ON THE PERUSAL OF EARLIER YEARS PROF IT AND LOSS ACCOUNTS AND ASSESSMENT ORDERS, WE FIND THAT SUCH AN EXPENDITURE HAS BEEN ALLOWED BY THE DEPARTMENT. THEREFORE, WE DO NOT FIND ANY REASO N TO CONFIRM THE PENALTY ON SUCH A DISALLOWANCE IN THIS YEAR. 11. NOW COMING TO THE LEVY OF PENALTY ON PAYMENT OF LDT CHARGES OF ` 6,44,069/ WE FIND THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE ON THE GROUND THAT IT IS IN THE NATURE OF PENALTY, AS THE ASSESSEE WAS NOT ABLE TO CUT THE REQUIRE TONNAGE OF SHIPS IN THIS YE AR. HOWEVER, THE ASSESSING OFFICER HAS NOT REFERRED TO ANY RELEVANT PROVISIONS OF THE ACT OR RULES, UNDER WHICH SUCH AMOUNT HAS TO BE CHARGED OR IT IS IN THE NATURE OF PENALTY. IF THE ASSESSEE HAS PAID THE CHARGES ON ACCOUNT OF CERTAIN STIPULATION OR CONDITION LAID DOWN BY THE GUJARAT MARITIME BOARD, WHEREBY IT WAS REQUIRED TO CUT CERTAIN TONNAGE OF SHIPS IN THIS YEAR AND ASSESSEE WAS UNABLE TO DO SO FOR THE REASON THAT THERE WAS HUGE FLUCTUATION OF TONNA GE RATE OF SHIPS IN THE INTERNATIONAL MARKET WHICH COULD HAVE RESULTED IN H EAVY LOSSES, THEN SUCH A PAYMENT CAN BE SAID TO BE FOR BUSINESS PURPOSE, UNL ESS IT IS SHOWN THAT IT IS PENAL IN NATURE OR IN VIOLATION OF STATUTORY ACT OR RULES. THIS EXPLANATION HAS NEITHER BEEN FOUND TO BE FALSE NOR SUCH A PAYMENT O F CHARGES HAS BEEN HELD TO BE BOGUS FOR THE PURPOSE OF LEVY OF PENALTY UNDE R SECTION 271 (1)(C). IT IS M/S SHIV MARINE INDUSTRIES PVT. LTD. 5 NEITHER A CASE OF FURNISHING OF INACCURATE PARTICUL ARS OF INCOME NOR CONCEALMENT OF INCOME. ACCORDINGLY, WE DELETE THE P ENALTY ON SUCH DISALLOWANCE ALSO. IN THE RESULT, DISALLOWANCE/ADDI TIONS MADE BY THE ASSESSING OFFICER DO NOT WARRANT ANY LEVY OF PENALT Y UNDER SECTION 271(1)(C) AND SAME IS DELETED. THUS, THE ASSESSEES APPEAL IS ALLOWED. 12. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH MARCH, 2013 SD/ B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/ AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED: 08 TH MARCH, 2013 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. TRUE COPY BY ORDER S.K. SHARMA (DY./ASSTT. REGISTRAR) ITAT, MUMBAI