Harisons Diamonds P.Ltd, New Delhi V. DCIT, Circle-11(1), New Delhi

ITA 7388/DEL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4653 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 22-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Depreciation
• Section: 271(1)(c)

Judgement Text

1 ITA NO. 7388/DEL/2018 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH. R.K PANDA, ACCOUNTANT MEMBER ITA NO.7388/DEL/2018 ASSESSMENT YEAR: 2014-15 HARISONS DIAMONDS P. LTD. 2606/4, SHOP NO. 101, 1 ST FLOOR, SOLIATOR PLAZA, KAROL BAGH, NEW DELHI-110005 PAN: AACCH1163N VS DCIT CIRCLE-11(1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. PRANSHU SINGHAL, CA & MS. MANSI JAIN, CA RESPONDENT BY SH. S. L. ANURAGI, SR. DR DATE OF HEARING: 06/05/2019 DATE OF PRONOUNCEMENT: 2 1 /05/2019 ORDER PER R.K. PANDA, AM: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 15 TH SEPTEMBER, 2018 OF THE CIT(A)-4, NEW DELHI FOR A. Y 2014-15. 2 ITA NO. 7388/DEL/2018 2. LEVY OF PENALTY OF RS.82,000/- LACS U/S 271( 1)(C) BY THE ASSESSING OFFICER AND UPHELD IN THE CIT(A) IS THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE VARIOUS GROUNDS OF APPEAL:- 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF JEWE LLERY ITEMS LIKE GOLD, DIAMONDS ETC. IT FILED ITS RETURN OF IN COME ON 24 TH SEPTEMBER, 2014, DECLARING TOTAL INCOME OF RS. 40,7 6,950/-. THE A.O DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBS ERVED FROM THE DETAILS FILED BY THE ASSESSEE THAT IT HAS DEBIT ED INTEREST EXPENSES INCURRED IN RELATION TO A CAR WHICH WAS PU RCHASED IN THE NAME OF THE DIRECTOR. FURTHER, ASSESSEE ALSO DEBITE D MOTOR CAR REPAIRS AND MAINTENANCE AND DEPRECIATION. THE TOTA L OF SUCH EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT WAS RS.2,51,941/-. SINCE, THE VEHICLE WAS NOT REGISTERED IN THE NAME O F THE COMPANY, THE A.O ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SE EXPENSES SHOULD NOT BE DISALLOWED. THE ASSESSEE AGREED FOR THE ABOVE DISALLOWANCE FOR WHICH THE A.O MADE THE ADDITION OF RS. 2,51,941/. SIMILARLY, OUT OF TOTAL BUSINESS PROMOTION EXPENSES OF RS.10,23,919/-, THE A.O DISALLOWED AN AMOUNT OF RS. 1,02,392/- ON AD-HOC BASIS @ 10% OF SUCH EXPENSES ON THE GROUN D THAT THE ASSESSEE FAILED TO JUSTIFY WITH DOCUMENTARY EVIDENC E REGARDING THE CLAIM OF SUCH EXPENSES FOR THE PURPOSE OF BUSINESS. 4. THE ASSESSEE DID NOT CHALLENGE THE ABOVE ADDITIONS. THE A.O INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY TH E ASSESSEE, THE 3 ITA NO. 7388/DEL/2018 A.O LEVIED PENALTY OF RS. 82,000/- BEING 100 % OF T AX SOUGHT TO BE EVADED U/S 271(1)(C) OF THE I.T ACT. WHILE DOING S O, HE RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD REPORTED IN 327 ITR 510 DEL. 5. BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE BUSINESS WAS CARRIED ON BY MR. ASHWANI SINGLA (PROPRIETOR) UNDER THE NAME AND STYLE OF M/S HARISONS DIAMONDS, WHICH WAS TAKEN OVE R BY THE ASSESSEE COMPANY, M/S HARISONS DIAMONDS PRIVATE L IMITED ON 1/11/2009. UPON SUCH TAKE OVER, THE PROPRIETOR MR. ASHWANI SINGLA BECAME THE DIRECTOR OF THE ASSESSEE COMPANY. ALTHOUGH ALL THESE DETAILS WERE FURNISHED BEFORE THE A.O, HOWEVE R, HE IGNORED SUCH DETAILS AND LEVIED PENALTY. SO FAR AS, THE DI SALLOWANCE OF EXPENSES ON AD-HOC BASIS IS CONCERNED IT WAS ARGUED THAT PENALTY CANNOT BE LEVIED ON ESTIMATED ADDITION. THE ASSESS EE DREW THE ATTENTION OF THE CIT(A) TO THE NOTICE ISSUED BY THE A.O AND IT WAS SUBMITTED THAT NO SPECIFIC CHARGE HAS BEEN MENTIONE D IN THE SHOW CAUSE NOTICE AS THE INAPPROPRIATE WORDS HAVE NOT B EEN STRUCK OFF. THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY REPORTE D IN 359 ITR 565, THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS WHEREIN THE HON'BLE SUPREME C OURT HAS DISMISSED THE SLP FILED BY THE REVENUE AND VARIOUS OTHER DECISIONS WERE BROUGHT TO BE NOTICE OF THE CIT(A). 4 ITA NO. 7388/DEL/2018 6. HOWEVER, THE LD.CIT (A) WAS NOT SATISFIED WI TH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE PENALTY LEV IED BY THE A.O U/S 271(1)(C) OF THE I.T ACT. 7. AGGRIEVED OF SUCH ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. I HAVE CONSIDERED THE RIVAL ARGUMENTS MAD E BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS AGREED FOR THE ADDITION OF THE MOTO R CAR EXPENSES, DEPRECIATION AND INTEREST ON SUCH LOAN TOTALING TO RS.2,51,941/-. FURTHER, THE A.O HAS MADE ANOTHER ADDITION OF RS. 1 ,02,392/- ON ACCOUNT OF AD-HOC DISALLOWANCE OF BUSINESS PROMOTIO N EXPENSES BEING 10% OF THE TOTAL EXPENDITURE FOR WHICH THE AS SESSEE IS NOT IN APPEAL. I FIND ASSESSEE DURING THE COURSE OF ASSESS MENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS HAD CA TEGORICALLY STATED THAT THE BUSINESS OF THE ASSESSEE WHICH WAS EARLIER CARRIED ON BY THE PROPRIETOR IN THE NAME AND STYLE OF M/S H ARISONS DIAMONDS WAS TAKEN OVER BY THE ASSESSEE COMPANY M/S HARISONS DIAMONDS PVT. LTD ON 1/11/2009. UPON SUCH TAKE OVE R THE PROPRIETOR MR. ASHWANI SINGLA BECAME THE DIRECTOR O F THE ASSESSEE COMPANY W.E.F. 1/11/2009. THERE IS NO SUCH DISALLO WANCE OF SUCH DEPRECIATION AND MOTOR CAR EXPENSES AND INTEREST ON LOAN FROM ASSESSMENT YEAR 2010-11 TO 2013-14. ALTHOUGH, THE VEHICLE WAS REGISTERED IN THE NAME OF THE DIRECTOR OF THE ASSES SEE COMPANY, HOWEVER, THE EXPENSES WERE INCURRED BY THE ASSESSEE COMPANY 5 ITA NO. 7388/DEL/2018 ITSELF AND THE VEHICLE WAS USED FOR THE BUSINESS OF THE ASSESSEE COMPANY. FURTHER, ALL PARTICULARS WERE MADE AVAIL ABLE BEFORE THE A.O AND THERE WAS NO SUCH CONCEALMENT. HON'BLE SUP REME COURT IN THE CASE OF CIT (A) VS. RELIANCE PETRO PRODUCTS PVT. LTD. 321 ITR 158 HAS HELD THAT MERELY BECAUSE THE ASSESSEE HAS C LAIMED THE EXPENDITURE WHICH CLAIM WAS NOT ACCEPTABLE OR WAS N OT ACCEPTED BY THE REVENUE THAT BY ITSELF COULD NOT ATTRACT THE PENALTY U/S 271(1)(C) OF THE I.T ACT. IN MY OPINION MERELY BEC AUSE THE ASSESSEE IN THE INSTANT CASE, HAS ACCEPTED THE DISALLOWANCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT BY ITSELF WIL L NOT PRECLUDE THE ASSESSEE FROM TAKING AN ALTERNATE ARGUMENT BEFO RE THE TRIBUNAL DURING PENALTY PROCEEDINGS. IN VIEW OF THE ABOVE D ISCUSSION AND SINCE FULL PARTICULARS ARE AVAILABLE BEFORE THE A.O DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THEREFORE, PENALTY U/S 2 71(1)(C) IN MY OPINION IS NOT ATTRACTED ON MOTOR CAR EXPENSES AND DEPRECIATION OF RS.2,51,941/-. 9. SO FAR AS THE OTHER ADDITION IS CONCERNE D, I.E. DISALLOWANCE OF AD-HOC EXPENSES OF RS. 1,02,392 OUT OF THE BUSIN ESS PROMOTION EXPENDITURE, I FIND, THE SAME IS ON AD-HOC BASIS. IT HAS BEEN HELD IN VARIOUS DECISIONS THAT PENALTY U/S 271(1)(C) OF THE I.T ACT IS NOT SUSTAINABLE ON AD-HOC DISALLOWANCE OF EXPENSES. I N VIEW OF THE ABOVE DISCUSSION, I AM OF THE CONSIDERED OPINION TH AT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1) (C) OF THE I.T ACT. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 6 ITA NO. 7388/DEL/2018 10. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT AT T HE TIME OF HEARING ITSELF I.E., ON 21 .05.2019. SD/- (R.K PANDA) ACCOUNTANT MEMBER R.N* DATE:- 21 .05.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 08.05.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 08.05.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 21.05.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 21.05.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.0 5.2019 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 7 ITA NO. 7388/DEL/2018