BIOMIX NETWORK LTD. (FORMERLY KNOWN AS CHAITANYA HEALTHCARE ECOM LTD.), THANE V. A.C.I.T. CIR-1, THANE

ITA 7636/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9288 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRADR
• Assessee Lawyers: RAVI MULCHANDANI
• Keywords: Unexplained expenditure; Bonafide belief; Wrong claim
• Section: 69C

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , ,, , , ! '# ! '# ! '# ! '#, ,, , $ $ $ $ BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 7636/MUM./2011 ( & ' (' / ASSESSMENT YEAR : 200708 ) M/S. BIOMIX NETWORK LTD. (FORMERLY KNOWN AS CHAITANYA NEALTHCARE ECOM LTD.),A/2001, MANSAROVAR, NEELKHANTH HEIGHTS, POKHARAN ROAD NO.1 THANE (W)-400 601 .. )* / APPELLANT & V/S ACIT , CR. 1 , VARDAN LOWER GROUND FLOOR, M.I.D.C. WAGLE INDL. ESTATE THANE .... +,)* / RESPONDENT ) . / PERMANENT ACCOUNT NUMBER AABCC5926F & '.! / 0 / ASSESSEE BY : SHRI. RAVI MULCHANDANI / 0 / REVENUE BY : SHRI. VIVEK BATRA (DR) & / !1 / DATE OF HEARING 19.02.2015 ' 2( / !1 / DATE OF ORDER 11.3.2015 ' ' ' ' / ORDER ! '# ! '# ! '# ! '#, ,, , 3 3 3 3 / PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 15 TH JULY 2011, PASSED BY THE LEARNED COMMISSIONER M/S. BIOMIX NETWORK LTD. 2 (APPEALS)II, THANE, IN RELATION TO THE PENALTY PROC EEDINGS U/S.271(1)(C) OF THE ACT, FOR THE ASSESSMENT YEAR 2007 -08. THE ASSESSEE IS MAINLY AGGRIEVED BY THE LEVY OF PENALTY OF RS.5,56,200/- ON ACCOUNT OF REMUNERATION PAYABLE TO DIRECTORS WHIC H HAVE BEEN STATED TO BE INADVERTENTLY AND ERRONEOUSLY DEBITED TO THE PROFIT & LOSS ACCOUNT. 2. THE ASSESSEE IS A COMPANY, ENGAGED IN THE BUSINE SS OF RESEARCH OF MEDICINAL PRODUCTS USING NANOTECHNOLOGY. THE ASSES SEES TURNOVER DURING THE YEAR HAS BEEN SHOW AT NIL AND INCOME SHOW N IN THE RETURN OF INCOME WAS MAINLY ON ACCOUNT OF INTEREST INCOME. AFTER CLAIMING VARIOUS OVERHEAD EXPENSES, NET LOSS HAS BEEN ARRIVED AT RS.3,33,86,709/-. THE ASSESSEE HAD IN THE PROFIT AND LOSS ACCOUNT DEBITED AN AMOUNT OF RS.18,00,000/- TOWARDS DIRECTO RS REMUNERATION PAYABLE TO TWO OF ITS DIRECTORS, NAMELY, DR. PAWAN O. S AHARAN AND SMT. SANDHYA P. SAHARAN FOR RS.9,00,000/- EACH. IN O RDER TO VERIFY THE CLAIM MADE BY THE ASSESSEE, THE AO REQUIRED THEIR COPIES OF INCOME TAX RETURNS FOR THE YEAR UNDER CONSIDERATION. ON VERIFICATION OF THE COMPUTATION OF INCOME OF THE DIRECTORS, THE AO NO TED THAT, THEY HAD NOT DECLARED THE SAID REMUNERATION IN THEIR COMPU TATION OF INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASS ESSEE SUBMITTED AS UNDER; M/S. BIOMIX NETWORK LTD. 3 THE PROVISIONS FOR DIRECTORS REMUNERATION WAS ERRON EOUSLY AND INADVERTENTLY MADE IN THE COMPANIES BOOKS OF ACCOUNTS WHERE NO REMUNERATION WAS DUE OR PAID TO THE DIRECTORS. NEITHE R DIRECTORS HAD ANY INTENTION TO DRAW REMUNERATION FROM THE COMPA NY CONSIDERING THE LOSSES SUFFERED BY THE COMPANY. THE COMPANY HAS PASSED RESOLUTION TO REVERSE THE REMUNERATION PA YABLE IN ITS ACCOUNTS AND THE SAME HAS BEEN RECORDED IN THE ACCOUN TING YEAR ENDED 31.3.2009. IT IS THEREFORE, REQUEST TO MAKE TO C OMPUTATION OF INCOME BY NOT CONSIDERATION THE EXPENDITURE OF RS.1 8 LACS DEBITED TO P & L ACCOUNT. 3. THUS, ON THE BASIS OF ASSESSEES ADMISSION, THE A O ADDED BACK THE AMOUNT OF REMUNERATION SHOWN AS PAYABLE TO THE DIRE CTORS AT RS.18,00,000/-, CLAIMED AS EXPENSES IN THE PROFIT AND LOSS AMOUNT AS INCOME OF THE ASSESSEE. ON THIS DISALLOWANCE AGREED BY THE ASSESSEE, THE ASSESSING OFFICER HAS LEVIED THE PENAL TY OF RS. 6,12,000/- U/S.271(1)(C), MAINLY ON THE GROUND THAT I T IS AN UNEXPLAINED EXPENDITURE U/S.69C. 4. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT T HE ASSESSEE COMPANY DID NOT INTEND TO FURNISH ANY INACCURATE PARTIC ULARS SOLELY TO CLAIM THE EXPENSES OF RS.18,00,000/- AS THE ASSESS EE COMPANY HAD ALREADY SUFFERED HUGE LOSS OF RS.3,33,17,230/-. EVE N, THE SUBSEQUENT YEARS ALSO THERE WERE HUGE LOSSES AND THEREFORE, THE ASSESSEE WILL NOT DERIVE ANY BENEFIT FOR DEBITING ANY FURTHER EXPENSES . THE PROVISION FOR DIRECTORS REMUNERATION WAS ERRONEOUSLY AND INADVERTE NTLY MADE IN THE COMPANY BOOKS OF ACCOUNTS, AS NO REMUNERATION WAS DUE OR M/S. BIOMIX NETWORK LTD. 4 PAYABLE TO THE DIRECTORS. NEITHER THE DIRECTORS HAD AN Y INTENTION TO DRAW ANY REMUNERATION FROM THE COMPANY EVEN THOUGH THE Y WERE ENTITLED TO, DUE TO HEAVY LOSSES. LATER ON THE COMPAN Y HAS PASSED RESOLUTION TO REVERSE THE ENTRY OF THE SAID REMUNER ATION. IT WAS FURTHER SUBMITTED THAT IT IS NOT LEGALLY CORRECT TO HOLD THAT THE AMOUNT OF RS.18,00,000/- IS AN UNEXPLAINED EXPENDITURE AND THE REBY APPLYING THE DEEMING PROVISION OF SECTION 69C AS IT CANNOT BE TERMED AS UNEXPLAINED EXPENDITURE. THE ASSESSEES EXPLANATION IN THIS REGARD HAS BEEN INCORPORATED BY THE CIT(A) FROM PAGE 4 TO 7 OF TH E APPELLATE ORDER. HOWEVER, THE LD. CIT(A) CONFIRMED THE SAID PEN ALTY ON THE GROUND THAT, THE ASSESSEE ITSELF HAS ACCEPTED THE MIST AKE AND AGREED FOR THE DISALLOWANCE OF EXPENDITURE, WHICH ITSELF ESTA BLISHES THE FACT OF CONCEALMENT OF INCOME AND ALSO FURNISHING INACCU RATE PARTICULARS. THE ASSESSEE COMPANY HAD AGREED FOR SUCH A DISALLOW ANCE, ONLY WHEN THE AO CALLED FOR THE RECORDS AND EXAMINED THE EXPEN SES CLAIMED AND FOUND THE CLAIM TO BE FALSE. THUS, SUCH AN OFFER OF DISALLOWANCE CANNOT BE HELD TO BE SUO MOTO OR VOLUNTARY BY THE ASSESSEE. AF TER REFERRING TO VARIOUS DECISIONS, HE CONFIRMED THE PENALTY LEVIED B Y THE AO. 5. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT THE COMPANY WAS INCURRING HUGE LOSSES YEAR AFTER YEAR AND IT HAD NO I NTENTION TO DEBIT ANY FURTHER EXPENDITURE ON ACCOUNT OF PAYMENT TO THE DI RECTORS TO M/S. BIOMIX NETWORK LTD. 5 INCREASE LOSSES. ONCE IT WAS POINTED OUT TO THE ASSES SEE COMPANY, IT IMMEDIATELY PASSED THE RESOLUTION TO REVERSE THE REMU NERATION PAYABLE TO THE DIRECTORS IN THE SUBSEQUENT YEAR. ON TH E QUERY MADE BY THE BENCH AS TO WHETHER IN THE SUBSEQUENT YEAR ALSO T HE ASSESSEE HAS DEBITED ANY SUCH EXPENDITURE, THE LEARNED COUNSEL IN FORMED THAT IN THE ASSESSMENT YEAR 2008-09 ALSO, THE REMUNERATION PAYAB LE TO THE DIRECTORS FOR THE SAME AMOUNT WAS DEBITED, HOWEVER TH E SAME HAS ALSO BEEN REVERSED SIMULTANEOUSLY. HE FURTHER SUBMITTE D THAT THE ASSESSEE COMPANY HAD NO INTENTION TO FURNISH ANY INA CCURATE PARTICULARS OF INCOME OR OF CONCEALMENT OF INCOME AT THE TIME OF MAKING THE CLAIM FOR REMUNERATION TO THE DIRECTORS, A S THE SAME WAS INADVERTENTLY DEBITED TO THE PROFIT AND LOSS ACCOUNT. LA STLY; HE SUBMITTED THAT THE AO HAD MADE THE ADDITION U/S.69C OF THE ACT, WHICH ADMITTEDLY CANNOT BE HELD TO BE APPLICABLE ON THE FACTS OF PRESENT CASE THEREFORE, PENALTY LEVIED ON SUCH A ADD ITION SHOULD BE DELETED. 6. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF CIT(A) AND SUBMITTED THAT, IT HAS BEEN CATEGORICALLY AD MITTED BY THE ASSESSEE THAT IT HAS MADE WRONG CLAIM OF PAYMENT OF DIR ECTORS REMUNERATION IN THE PROFIT AND LOSS ACCOUNT AND ONLY WHEN THE AO CONFRONTED TO THE ASSESSEE THAT TOO AFTER INQUIRY FRO M THE ASSESSEE, IT M/S. BIOMIX NETWORK LTD. 6 HAD AGREED TO OFFER THE SAID DISALLOWANCE TO BE ADDE D IN THE INCOME. THUS, IT IS CLEAR CUT CASE OF FURNISHING OF INACCURAT E PARTICULARS INTENTIONALLY AND THEREFORE, PENALTY SHOULD BE CONFIR MED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE R ELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AND ALSO THE MATE RIAL PLACED ON RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS DEB ITED AN AMOUNT OF RS.18,00,000/- PAYABLE TO TWO OF ITS DIRECTORS IN TH E PROFIT AND LOSS ACCOUNT, NOT ONLY FOR THE YEAR RELEVANT ASSESSMENT Y EAR 2007-08 BUT ALSO IN THE ASSESSMENT YEAR 2008-09. WHEN THE ASSESSI NG OFFICER ON THE VERIFICATION OF RETURN OF INCOME OF THE DIRECTORS FOUND THAT THE SAID AMOUNT OF REMUNERATION HAS NOT BEEN OFFERED AS INCOME, THE ASSESSEE CAME FORWARD AND SUBMITTED THAT THE PROVISION FOR DI RECTORS REMUNERATION HAS BEEN ERRONEOUSLY AND INADVERTENTLY DE BITED TO PROFIT & LOSS ACCOUNT. THAT DIRECTORS HAD NO INTENTION TO DRA W THE REMUNERATION FROM THE COMPANY, AS IT WAS SUFFERING H UGE LOSSES YEAR AFTER YEAR. AFTER BEING CONFRONTED BY THE AO, THE ASS ESSEE REVERSED THE ENTRY NOT ONLY FOR THE ASSESSMENT YEAR 2007-08 BUT AL SO FOR THE ASSESSMENT YEAR 2008-09. THUS, THE DISALLOWANCE OFF ERED AS INCOME CANNOT BE SAID TO BE VOLUNTARILY BECAUSE THE ASSESSEE HAS MADE CLAIM OF AN EXPENDITURE WHICH HAD NOT BEEN INCURRED. ON THE FACTS AND CIRCUMSTANCES IT IS VERY WELL ESTABLISHED THAT THE ASS ESSEE HAS M/S. BIOMIX NETWORK LTD. 7 FURNISHED INACCURATE PARTICULARS OF INCOME BY DEBITIN G AN EXPENDITURE WHICH HAS NOT BEEN PAID OR WAS PAYABLE. EXPLANATION- 1 TO SECTION 271(1)(C) RAISES A REBUTTABLE PRESUMPTION, HOWEVER IN THIS CASE THERE CAN BE NO PRESUMPTION IN FAVOUR OF THE ASSESSEE. THE ASSESSEE NEITHER COULD SUBSTANTIATE ITS CLAIM, NOR ITS OFFER FOR DISALL OWANCE CAN BE HELD TO BE VOLUNTARY. NOTHING HAS BEEN BROUGHT ON RECORD EITHER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS OR IN THE COURSE OF THE PENALTY PROCEEDINGS, AS TO WHAT LED TO THE BONAFIDE BELIEF FO R CLAIMING/DEBITING SUCH AN EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. TH E ASSESSEES INTENTION OR BONAFIDE CANNOT BE GAUGED FROM THIS FAC T ALONE THAT IT HAD INCURRED HUGE LOSSES IN THIS YEAR AS WELL AS IN THE SUBSEQUENT YEARS. MERELY BECAUSE THE ASSESSEE WAS INCURRING LOSSES WI LL NOT ABSOLVE THE ASSESSEE FROM PENAL PROVISION SANS ANY BONAFIDE BEL IEF FOR MAKING A CLAIM OF EXPENDITURE ENTERTAINED AT THE TIME OF FILING OF RETURN OF INCOME. THUS, PENALTY HAS RIGHTLY, BEEN CONFIRMED BY THE CIT(A). 8. NOW CLAIMING TO THE CONTENTION OF THE ASSESSEE TH AT ADDITION HAS BEEN MADE U/S 69C BY THE AO AND THEREFORE, NO PENAL TY SHOULD BE LEVIED AS THE SAID SECTION HAS NO APPLICABILITY, WE A RE UNABLE TO ACCEPT SUCH A CONTENTION AS ADMITTEDLY THE ASSESSEE HAS MADE A WRONG CLAIM OF EXPENSES, WHICH TOO HAS BEEN FOUND TO BE LEGALLY AND FACTUALLY UNTENABLE BY THE AO. MERE QUOTING OF A WRONG SECTION IN THE M/S. BIOMIX NETWORK LTD. 8 ASSESSMENT ORDER WILL NOT OBLITERATE THE FACTUM OF FU RNISHING OF INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, PENALTY U/S.271(1)(C) HAS RIGHTLY BEEN CONFIRMED. THE GROUNDS THUS RAISED BY THE ASSESSEE AR E DISMISSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DAY OF MARCH 2015. SD/- SD/- SD/ - SANJAY ARORA ACCOUNTANT MEMBER SD/ - ! ! ! ! '# '# '# '# AMIT SHUKLA JUDICIAL MEMBER MUMBAI, 4& 4& 4& 4& DATED: 11. 03.2015 PATEL ' / +!5 65(! / COPY OF THE ORDER FORWARDED TO : (1) & '.! / THE ASSESSEE; (2) / THE REVENUE; (3) 7() / THE CIT(A); (4) 7 / THE CIT, MUMBAI CITY CONCERNED; (5) 5 :; +!& , , / THE DR, ITAT, MUMBAI; (6) ;<' = / GUARD FILE. ,5! +! / TRUE COPY '& / BY ORDER > / ? / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI