MANGALAM SHIPPING & LOGISTICS (INDIA) P.LTD, MUMBAI V. ACIT CIR 6(2), MUMBAI

ITA 7612/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2732 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 27-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SATYARAMAYANA RAJO
• Assessee Lawyers: TASNEEM VARAWALA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.C.SHARMA (AM) AND SHRI RAM LAL NEGI (JM ) ITA NO. 7611 & 7612/MUM/2013 ASSESSMENT YEAR: 2006-07 & 2007-08 MANGALAM SHIPPING & LOGISTICS INDIA PVT. LTD., MANGALAM HOUSE, WALCHAND HIRACHAND MARG, MUMBAI- 400 038. PAN: AACCM3997M VS. THE ADDL. CIT, CIRCLE 2 (2), AAYAKAR BHAVAN, MUMBAI- 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. TASNEEM VARAWALA RESPONDENT BY : SHRI. B. SATYARAMAYANA RAJO DATE OF HEARING: 2 2/04/2016 DATE OF PRONOUNCEMENT: 21/07/20 16 O R D E R PER RAM LAL NEGI, JM THESE APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE A GAINST TWO SEPARATE ORDERS PASSED BY THE LD. CIT(APPEALS)-5, M UMBAI, ON 29/11/2013, FOR THE ASST. YEARS 2006-07 & 2007-08. SINCE BOTH THE APPEALS PERTAIN TO THE SAME ASSESSEE FOR DIFFERENT ASSESSMENT YEARS AND ISSUES INVOLVED ARE COMMON IN BOTH THE APPEALS, THE SAME WERE CLUBBED AND HEARD TOGETHER AND ARE BEING DISPOSED O F BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NO. 7611 & 7612/MUM/2013 ASSESSME NT YEAR: 2006-07 & 2007-08 ITA NO. 7611/MUM/2013 A.Y. 2006-0 7 2. BRIEF FACTS OF THE CASE PERTAINING TO THE ASSES SMENT YEAR 2006-07 ARE THAT THE ASSESSEE BEING A DOMESTIC COMPANY ENGAGED IN TH E BUSINESS OF FREIGHT FORWARDING, PLYING TRAILERS ON HIRE AND FINANCING, FILED ITS RETURN OF INCOME FOR THE A.Y. 2006-07 ON 29/11/2006 DECLARING TOTAL INCO ME OF RS. 1,45,70,277/-. HOWEVER, THE A.O. MADE CERTAIN DISALLOWANCE AND ACC ORDINGLY DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,62,18,606/- U /S 143 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE QUANTUM APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER WAS DISMISSED BY THE FIRST APP ELLATE AUTHORITY. PENALTY PROCEEDINGS U/S 271 (1)(C) WERE ALSO INITIATED ACCO RDINGLY FOR FURNISHING INACCURATE PARTICULARS OF THE INCOME. IN RESPONSE T O THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) TO SHOW CAUSE AS TO WHY PENALTY SH OULD NOT BE LEVIED, THE ASSESSEE COMPANY SUBMITTED A WRITTEN REPLY INTER-ALIA ALLEGING THAT THERE WAS NO CONCEALMENT IN RESPECT OF BROKERAGE AND INTEREST DISALLOWED. AFTER HEARING THE ASSESSEE THE A.O LEVIED THE PENALTY OF RS. 3,43 ,500/- ON THE GROUND THAT THE APPELLANT HAS CONCEALED PARTICULARS OF INCOME IN RESPECT OF ADDITION OF RS. 11,45,000/- MADE ON ACCOUNT OF DISALLOWANCE OF BROK ERAGE PAID TO THREE HUFS AND ADDITION OF RS. 1,61,838/- MADE ON ACCOUNT DISA LLOWANCE OF INTEREST PAID TO RAJ KUMAR MAROO HUF. 3. THE PENALTY ORDER WAS FURTHER CHALLENGED BY THE ASSESSEE BEFORE THE CIT(A) WHO UPHELD THE FINDINGS OF THE AO AND CONFIRMED THE PENALTY LEVIED BY THE A.O. AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) , ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS RAISED THE FO LLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN LEVYING PENALTY, U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 OF RS. 3,43,500 ON THE GROUND THAT THE APPELL ANT CONCEALED PARTICULARS OF INCOME IN RESPECT OF ADDITION OF RS. 11,45,000 MADE TO 3 ITA NO. 7611 & 7612/MUM/2013 ASSESSME NT YEAR: 2006-07 & 2007-08 RETURNED INCOME ON ACCOUNT OF DISALLOWANCE OF BROK ERAGE PAID TO THREE HUFS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN LEVYING PENALTY, U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 OF RS. 48,551 ON THE GROUND THAT THE APPELLANT CONCEALED PARTICULARS OF INCOME IN RESPECT OF ADDITION OF RS. 1,61,838 MADE TO THE RETURNED INCOME ON ACCOUNT DISALLOWANCE OF INT EREST PAID TO RAJ KUMAR MAROO (HUF). 3. IN ANY EVENT, WITHOUT PREJUDICE, ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS NOT JUSTI FIED IN LEVYING PENALTY ON RS. 1,61,638 OUT OF RS. 3,81,083- AS THA T WAS THE AMOUNT PAID TO KAMAL NATH MAROO IN HIS PERSONAL CAP ACITY (WHICH HAD NOT BEEN DISALLOWED IN THE ASSESSMENT)- AND SHO ULD INSTEAD HAVE CALCULATED THE PENALTY ON AN AMOUNT OF RS. 11, 510 OUT OF RS. 27,137 WHICH WAS PAID TO THE HUF. RELIEFS CLAIMED IN APPEAL 1. DELETION OF PENALTY LEVIED U/S 271(1)(C) OF RS. 3,43,500 IN RESPECT OF ADDITION OF RS. 11,45,000 ON ACCOUNT OF DISALLOW ANCE OF BROKERAGE PAID TO THREE HUFS. 2. DELETION OF PENALTY LEVIED U/S. 271(1)(C) OF RS. 48,551 IN RESPECT OF ADDITION OF RS. 1,61,838 ON ACCOUNT OF DISALLOWANCE OF INTEREST PAID. 3. WITHOUT PREJUDICE, RESTRICTING THE PENALTY IN RE SPECT OF ITEM 2 ABOVE TO RS. 11,510. 4. COSTS OF THE APPEAL. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALTHOUGH IN QUANTUM APPEAL THE ITAT HAS CONFIRMED THE DISALLOWANCE OF R S. 11,45,000/- MADE ON ACCOUNT OF BROKERAGE PAID TO THE HUFS, HOWEVER, SIN CE QUANTUM APPEAL AND 4 ITA NO. 7611 & 7612/MUM/2013 ASSESSME NT YEAR: 2006-07 & 2007-08 THE PENALTY APPEAL ARE TWO DIFFERENT AND INDEPENDEN T PROCEEDINGS, THE CONFIRMATION OF DISALLOWANCE DOES NOT IPSO FACTO MAKE THE ASSESSEE LIABLE FOR PENALTY. THE ASSESSEE HAS NEITHER CONCEALED ANY INC OME NOR FURNISHED ANY INACCURATE PARTICULARS. THE LD. COUNSEL FURTHER SUB MITTED THAT IT IS NOT NECESSARY TO HAVE WRITTEN AGREEMENT FOR BROKERAGE. SIMILAR PAYMENTS IN EARLIER YEARS HAVE BEEN ALLOWED BY THE DEPARTMENT. ON THE O THER HAND THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT SINCE TH E LD. CIT(A) HAS PASSED THE PRESENT ORDER AFTER TAKING INTO CONSIDERATION T HE CONTENTION OF THE ASSESSEE, THERE IS NO SCOPE TO INTERFERE WITH THE IMPUGNED O RDER. THE LD. COUNSEL RELIED UPON THE RATIO LAID DOWN BY THE HON,BLE SUPREME COU RT IN COMMISSIONER OF INCOME TAX VS RELIANCE PETRO PRODUCTS P LTD. [2010] 322 ITR 158, PRICE WATERHOUSE COOPERS PVT. LTD. VS CIT [2012] 348 ITR 306 AND DECISION RENDERED BY THE ITAT MUMBAI IN INDUSTRIAL DEVELOPMENT BANK O F INDIA LTD. VS DCIT(2010) 42 SOT325 AND WALTER SALDHANA VS DCIT (2 011)44 SOT 26 IN SUPPORT OF HIS ARGUMENTS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE DOCUMENTS IN THE LIGHT OF RESPECTIVE SUBMISSIONS OF THE PARTIES. WE NOTICE THAT THE ISSUE INVOLVED IN THE FIRST GROUND OF APPEAL HAS BEEN DECIDED BY T HE CO-ORDINATE BENCH OF THE MUMBAI, TRIBUNAL AGAINST THE ASSESSEE MAINLY ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE PROV E THE EXPENDITURE IN QUESTION. THE ASSESSEE HAS RELIED ON THE JUDGMENT PASSED BY T HE HONBLE SUPREME COURT OF INDIA IN COMMISSIONER OF INCOME TAX VS. RELIANCE PETRO PRODUCTS P LTD. (SUPRA), IN WHICH IT HAS BEEN HELD THAT MERELY BECA USE THE ASSESSEE CLAIMED DEDUCTION OF INTEREST EXPENDITURE WHICH HAS NOT BEE N ACCEPTED BY THE REVENUE, PENALTY U/S 271 (1)(C) OF THE ACT IS NOT ATTRACTED. SIMILARLY, MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF, W ILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. BUT THE NATURE OF 5 ITA NO. 7611 & 7612/MUM/2013 ASSESSME NT YEAR: 2006-07 & 2007-08 CLAIM MADE BY THE ASSESSEE IN THE PRESENT CASE IS D IFFERENT FROM THE CLAIM MADE BY THE ASSESSEE IN CASE RELIED UPON. AS PER T HE SETTLED LAW, THE FINDINGS GIVEN IN THE ASSESSMENT PROCEEDINGS WOULD BE RELEVA NT AND ADMISSIBLE MATERIAL IN PENALTY PROCEEDINGS BUT SUCH FINDINGS MAY NOT AL WAYS JUSTIFY PENALTY BECAUSE THE CONSIDERATIONS THAT ARISE IN PENALTY PR OCEEDINGS ARE DIFFERENT FROM THAT ARISE FROM ASSESSMENT PROCEEDINGS. MERE FACT, THAT CERTAIN AMOUNTS CLAIMED BY THE ASSESSEE HAD BEEN DISALLOWED AND TRE ATED AS INCOME, DOES NOT NECESSARILY LEAD TO THE CONCLUSION THAT THE ASSESSE E HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE TRIBUNAL HAS CONFIRM ED THE DISALLOWANCE BECAUSE THE ASSESSEE HAS FAILED TO PRODUCE ANY DOCU MENTARY EVIDENCE TO ESTABLISH THE TRANSACTION. ALTHOUGH THE ITAT HAS CO NFIRMED THE DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSESSEE, STILL IT CANNO T BE HELD CONCLUSIVELY, IN THE LIGHT OF THE SUBMISSIONS MADE BY THE ASSESSEE, THAT THE EXPENDITURE IN QUESTION WAS NOT AT ALL INCURRED BY THE ASSESSEE. I N OUR CONSIDERED VIEW, THIS IS NOT A FIT CASE FOR IMPOSING PENALTY U/S 271(1)(C) O F THE ACT. WE, THEREFORE, DELETE THE PENALTY OF RS. 3,43,500/-IMPOSED ON THE ASSESSEE. 6. AS REGARDS SECOND GROUND OF APPEAL, WE FIND THA T THE ISSUE INVOLVED IN GROUND NO. 2 OF THE APPEAL HAS BEEN DECIDED IN FAVO UR OF THE ASSESSEE BY THE CO-ORDINATE BENCH IN QUANTUM APPEAL ITA NO 5009/MUM /2010, HOLDING AS UNDER:- 14. AFTER CAREFULLY CONSIDERING THE RIVAL CONTENTIO NS, WE FIND THAT INSOFAR AS THE AMOUNT OF LOAN GIVEN AND THE AMOUNT OF BROKERAGE PAID IN THE EARLIER YEARS HAVE NOT BEEN DISPUTED IN THOSE YEARS THAT IS THEY HAVE BEEN ACCEPTED, THEN INTEREST PAID AND PAYABLE ON SUCH AMOUNT CANNOT BE DISALLOWED IN THIS YEAR. ONCE THE PAYMENT ON ACCOUNT OF BROKERAGE PAID TO THE SAID HUF HAVE BEEN ACCEPTED TO BE GENUINE IN THE EARLIER YEARS RATHER THERE IS NO DIS PUTE TO THE FACT THAT THE AMOUNT BELONGING TO THE HUF WAS LYING WITH THE ASSESSEE COMPANY, THEN IN OUR OPINION, INTEREST PAID ON SUCH AMOUNT CANNOT BE DISALLOWED. HERE, IT IS NOT THE CASE WHERE THE B ROKERAGE OF THIS YEAR HAS BEEN TREATED AS LOAN. ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE OF INTEREST OF RS. 1,61,638, IS UNCALL ED FOR AND THE 6 ITA NO. 7611 & 7612/MUM/2013 ASSESSME NT YEAR: 2006-07 & 2007-08 ORDER OF THE LEARNED COMMISSIONER (APPEALS) CONFIRM ING THE SAID DISALLOWANCE IS SET ASIDE. GROUND NO.2, IS ALLOWED. IN VIEW OF THE FACT THAT THE CO-ORDINATE BENCH HAS SET ASIDE THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE CIT(A), WE DE LETE THE PENALTY OF RS. 48,551/- IMPOSED ON THE GROUND THAT THE ASSESSEE HA S CONCEALED PARTICULARS OF INCOME IN RESPECT OF ADDITION OF RS. 1,61,838/- MAD E TO THE INCOME OF THE ASSESSEE ON ACCOUNT DISALLOWANCE OF INTEREST PAID TO RAJ KUMAR MAROO HUF. HENCE, WE ALLOW THIS GROUND OF THE APPEAL OF THE AP PELLANT/ASSESSEE, HOWEVER, ASSESSEE SHALL BEAR THE COST OF LITIGATION. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE AGAI NST IMPUGNED ORDER FOR THE ASST. YEAR 2006-07 IS ALLOWED. ITA NO. 7612/MUM/2013 A.Y. 2007-08 1. THE ISSUE INVOLVED IN THIS APPEAL IS IDENTICAL T O THE ISSUE INVOLVED IN THE ASSESSEES APPEAL FOR THE A.Y. 2006-07. THE FIRST I SSUE PERTAINS TO THE LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT OF RS. 2,02,500/- ON THE GROUND THAT THE APPELLANT CONCEALED PARTICULARS OF INCOME IN RESPECT OF ADDITION OF RS. 6,75,000/- MADE TO THE INCOME OF THE ASSESSEE ON AC COUNT OF DISALLOWANCE OF BROKERAGE PAID TO THREE HUFS. THIS GROUND OF APPEA L IS IDENTICAL TO THE GROUND NO 1 OF THE APPEAL IN ASSESSEES OWN CASE FOR THE A .Y. 2006-07 AFORESAID. SINCE WE HAVE ALLOWED THE IDENTICAL GROUND OF APPEAL IN A SSESSEES CASE FOR THE ASSESSMENT YEAR 2006-07, WE ALLOWED THIS GROUND OF APPEAL OF THE ASSESSEE FOR THE SAME REASONS. 2. SIMILARLY, THE SECOND GROUND OF THIS APPEAL IS I DENTICAL TO THE GROUND NO. 2 OF THE APPEAL FILED BY THE ASSESSEE FOR THE A.Y. 20 06-07. SINCE WE HAVE ALLOWED THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE FOR THE A.Y. 2006-07, IN VIEW OF 7 ITA NO. 7611 & 7612/MUM/2013 ASSESSME NT YEAR: 2006-07 & 2007-08 THE FACTS THAT THE ISSUE INVOLVED HAS ALREADY BEING DECIDED IN FAVOUR OF THE ASSESSEE IN QUANTUM APPEAL ITA NO 5009/MUM/2010, FO R THE A.Y. 2006-07, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE FOR THE SAME REASONS, HOWEVER, THE ASSESSEE SHALL BEAR THE COST OF LITIGATION. 3. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR THE ASST. YEAR 2007-08 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COUR T 21 ST JULY, 2016. SD/- SD/- ( R.C.SHARMA ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 21/07/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA