SHREE MADHU TEXTILES, MUMBAI V. ITO 18(3)(3), MUMBAI

ITA 7422/MUM/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6814 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 16-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Depreciation; Business expenditure
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH , AM ITA NO. 7422 / MUM/20 1 6 ( ASSESSMENT YEAR : 2010 - 11 ) SHREE MADHU TEXTILES 158/164, LAXMI BHAVAN 4 TH FLOOR, KALBADEVI ROAD MUMBAI 400 002 V S. ITO 18(3)(3) MUMBAI PAN/GIR NO. AAAFS6536R ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI VIMAL PUNMIYA REVENUE BY SHRI CHAUDHARY ARUNKUMAR SINGH DATE OF HEARING 26 / 02 /201 9 DATE OF PRONOUNCEMENT 28 / 02 /201 9 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 29 [HEREINAFTER REFERRED TO AS THE LD CITA] , MUMBAI DATED 24/10/2016 FOR A.Y.2010 - 11 IN THE MATTER OF IMPOSITI ON OF PENALTY U/S.271(1)(C) OF THE IT ACT. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT IN THE SUM OF RS.1,08,469/ - IN THE FACTS AND CIRCUMSTANCES O F THE CASE. ITA NO. 7 422/MUM/2016 SHREE MADHU TEXTILES 2 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM WHO HAD FILED ITS RETURN OF INCOME FOR THE SAME YEAR 2010 - 11 DECLARING LOSS OF RS.5,70,217/ - . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING ACTIVITIES OF SHARES AND ALSO DERIVING COMMISSION INCOME. THE ASSESSEE INCURRED LOSS FROM SHARE TRADING BUSINESS. THE LD. AO OBSERVED THAT ASSESSEE HAD CLAIMED VARIOUS EXPENSES IN THE PROFIT AND LOSS ACCOUNT AMOUNTING TO RS.7,53,609/ - . HE OBSERVED THAT SINCE ASSESSEE HAD DISCO NTINUED THE BUSINESS OF FABRICS AND HAD SHOWN THE TRADING OF SHARES AS THE MAIN BUSINESS ACTIVITY IN THE F.Y.2009 - 10, EVEN IN THIS, THE ASSESSEE HAD ONLY SOLD 300 SHARES OF TIRUMALAI CHEMICALS LTD FOR RS.27,830/ - DURING THE YEAR AND INCURRED A LOSS OF RS.3 9,100/ - FROM SALE OF ABOVE SHARES. THE LD. AO OBSERVED THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE IN THE SUM OF RS.7,53,609/ - FOR THE M INISCULE SHARE TRADING ACTIVITY WAS ON THE HIGHER SIDE AND HENCE, REQUIRES TO BE DISALLOWED. THE ASSESSEE RESPONDED THA T SINCE FABRIC BUSINESS WAS NOT GIVING THEM ADEQUATE INCOME, THEY DECIDED TO WIND UP THE SAID BUSINESS AND GET INTO SHARE TRANSACTIONS. 3.1. THE ASSESSEE ALSO STATED THAT THEY WERE EXPLOR ING MANY FIELDS IN MARKETING PREFAB, ENGINEERING BUILDING WHICH IS V ERY MUCH USED IN MAKING FACTORIES AND WAREHOUSES APART FROM TRYING TO DO MARKETING OF DRY WALLS WHICH IS A GOOD PROJECT FOR HOTELS AND HOSPITALS. THE ASSESSEE ALSO ITA NO. 7 422/MUM/2016 SHREE MADHU TEXTILES 3 SUBMITTED THAT THEY ALSO TRIED MARKETING CENSORS TO THE HOTELS, INDUSTRIES AND OFFICES. IT P LEADED THAT IN ORDER TO EXPLORE THESE VARIOUS FIELDS, LOT OF PERSONS HAD TO BE MET AT VARIOUS OFFICES FOR WHICH NECESSARY TRAVELLING EXPENDITURE NEED TO BE INCURRED TOGETHER WITH CONSUMPTION OF FUEL EXPENSES FOR THE VEHICLE, FOLLOWED BY ENTERTAINING PROSPE CTIVE CUSTOMERS WITH LUNCH, DINNER ETC. IN ORDER TO WIN OVER THE COMPETITION IN THE MARKET. THE ASSESSEE ALSO PLEADED THAT THEY WERE NEGOTIATING TWO DEALS OF PREFAB BUILDING WHICH MAY YIELD RS.10 LAKHS COMMISSION PER DEAL AND THEY WERE HOPEFUL THAT ONE DE AL WOULD BE CLOSED IN THE FY 2012 - 13 AND THE SECOND ONE IN THE FIRST QUARTER OF FY 2013 - 14. ACCORDINGLY, THE ASSESSEE JUSTIFIED IN CURRENCE OF VARIOUS EXPENSES DEBITED IN THE P & L ACCOUNT FOR THE PURPOSE OF BUSINESS. THE LD. AO DID NOT AGREE TO THE CONTENT IONS OF THE ASSESSEE AND PROCEEDED TO DISALLOW 50% OF DEPRECIATION, CAR EXPENSES, CHARITY AND DONATION, INTEREST PAID, SALARY, BONUS, SALES PROMOTION, STAFF WELFARE EXPENSES AND TELEPHONE EXPENSES TO THE TUNE OF RS.3,57,936/ - AND COMPLETED THE ASSESSMENT. IN THE SAID ASSESSMENT, THE L D. AO INITIATED PENALTY PROCEEDINGS U/S.271 (1)(C) OF THE ACT FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ADDITION MADE BY THE LD. AO WAS UPHELD BY THE LD. CIT(A) AND FINALLY BY THIS TRIBUNAL VIDE ITS ORDER DATED 19/09/2016. SINCE THE QUANTUM ADDITION HAD BEEN CONFIRMED UP TO THE TRIBUNAL, THE LD. AO PROCEEDED TO LEVY PENALTY ON THE TAX SOUGHT TO BE EVADED ON THE ADDITION ULTIMATELY SUSTAINED. THE LD. CIT(A) CONFIRMED THE LEVY OF PENALTY FOR T HE SAME REASON. ITA NO. 7 422/MUM/2016 SHREE MADHU TEXTILES 4 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS. AT THE OUTSET, WE FIND THAT THE DISALLOWANCE OF CERTAIN EXPENSES HAS BEEN MADE ON AN ADHOC BASIS BY THE LD. AO WHICH GOT CONFIRMED UP TO THE TRIBUNAL F OR WANT OF EVIDENCES. THE ASSESSEE PLACED ON RECORD THE COMPARATIVE CHART OF VARIOUS EXPENSES FOR THE YEARS ENDING 31/03/2008 TO 31/03/2012 WHEREIN WE FIND THAT THE EXPENDITURE INCURRED DURING THE YEAR HAD NOT VARIED SUBSTANTIALLY WITH THAT IN THE EARLIER YEAR S OR IN THE SUBSEQUENT YEARS. EITHER WAY, THE PENALTY HAS BEEN LEVIED ONLY ON THE DISALLOWANCE OF EXPENSES MADE ON ADHOC BASIS. WE FIND FROM THE LIST OF EXPENSES DEBITED IN THE P & L ACCOUNT THAT THE SAME ARE PURELY REGULAR BUSINESS EXPENDITURE. HENCE, NO PENALTY COULD BE LEVIED FOR CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME THEREON FOR MERE DISALLOWANCE OF CLAIM OF EXPENSES MADE BY THE ASSESSEE. RELIANCE IS PLACED IN THIS REGARD ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F RELIANCE PETRO PRODUCTS PVT. LTD., REPORTED IN 322 ITR 158 (SC) . 5.1. IN VIEW OF OUR AFORESAID FINDINGS AND RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECEDENTS, WE DIRECT THE LD. AO TO CANCEL THE PENALTY LEVIED U/S.271 (1)(C ) OF THE ACT. IN VIEW OF THIS DECISION, THE OTHER ARGUMEN T ADVANCED BY THE LD. AR ON ISSUING OF DEFECTIVE SHOW CAUSE ITA NO. 7 422/MUM/2016 SHREE MADHU TEXTILES 5 NOTICE U/S.274 R.W.S. 271(1)(C) OF THE IT ACT NEED NOT BE ADJUDICATED U PON. ACCORDINGLY, THE GROUND S RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, APPEAL O F THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 / 02 /201 9 SD/ - ( MAHAVIR SINGH ) SD/ - ( M. BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 28 / 02 /201 9 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER , ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//