TEMA INDIA LTD, NAVI MUMBAI V. ADDL CIT 10(2), MUMBAI

ITA 7703/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75902 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-03-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 10-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M SUBRAMANIAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 7703/MUM/2010 ( / ASSESSMENT YEAR: 2005-06) TEMA INDIA LTD. B-607, BSEL TECH TOWER, OPP. TO VASHI RAILWAY STATION NAVI MUMBAI-400 705 / VS. ADDL. CIT RANGE 10(2), 4 TH FLOOR, ROOM NO.432, AAYAKAR BHAVAN, NEW MARINE LINES, MUMBAI-400 020 # ./$ ./PAN/GIR NO. AAACT 1735 C ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) #% ( ) / APPELLANT BY : SHRI M. SUBRAMANIAN &'#% ( ) / RESPONDENT BY : SHRI RAVI PRAKASH *+ ( , / DATE OF HEARING : 05.03.2014 - ./ ( , / DATE OF PRONOUNCEMENT : 14.03.2014 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-22, MUMBAI (CIT(A) FOR SH ORT) DATED 19.08.2010, CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2005-06 VIDE ORDER DATED 26.03.2010. 2.1 OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE ASSESSEE, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSESSEES COUNSEL, THAT THE ONLY ISSUE ARISING PER THE INSTANT APPEAL IS THE MAINTAINABILITY IN LAW AN D IN THE FACTS AND CIRCUMSTANCES OF THE 2 ITA NO. 7703/MUM/2010 (A.Y. 2005-06) TEMA INDIA LTD. VS. ADDL. CIT CASE OF THE PENALTY LEVIED U/S.271(1)(C) OF THE ACT . THE SAME ARISES ON ACCOUNT OF AN ADJUSTMENT TO THE RETURNED INCOME BY WAY OF REDUCTI ON IN ITS CLAIM U/S.80-IB(1) R/W S. 80- IB(4). THE ASSESSEE DURING THE RELEVANT YEAR, HE CO NTINUED, OPERATES THREE UNITS, I.E., AT (I) SILVASA, D & NH, (II) ACHHAD, TALASARI, THANE, AND (III) PANOLI, ANKLESHWAR, WITH THE FIRST ONE BEING AN ELIGIBLE UNIT U/S.80-IB(4). THE ASSESSEE, AS IN THE PAST, ALLOCATED THE LEGAL & PROFESSIONAL EXPENSES, INCURRED FOR THE YEA R IN THE SUM OF RS.128.91 LACS, BY CHARGING THE SAME TO THE RESPECTIVE UNITS, I.E., WH ERE IT RELATES THERETO, WHILE THE BALANCE, COMMON EXPENDITURE STANDS ALLOCATED ON THE BASIS OF THE RATIO OF THE TURNOVER, I.E., OF THE RESPECTIVE UNIT TO THE TOTAL TURNOVER. THE ASSESSIN G OFFICER (A.O.) CONSIDERED THE ENTIRE EXPENDITURE AS COMMON AND REALLOCATED THE SAME ON T HE BASIS OF THE TURNOVER, RESULTING IN A REDUCTION IN THE CLAIM FOR DEDUCTION U/S.80-IB(1) AND, CORRESPONDINGLY, INFLATION IN ITS INCOME FOR THE YEAR BY RS.49,17,606/-. ALL THE FACT S MATERIAL TO THE COMPUTATION OF INCOME BEING ON RECORD, NO CASE FOR LEVY OF PENALTY IS MADE OUT. WHAT ARE THE INACCURATE PARTICULARS OF INCOME FURNISHED BY THE ASSESSEE, HE ASSEVERATED . 2.2 THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ON TH E OTHER WOULD, WOULD RELY ON THE ORDERS OF THE AUTHORITIES BELOW. 3. WE HAVE HEARD THE PARTIES, PERUSED THE MATERIAL ON RECORD, AND GIVEN OUR CAREFUL CONSIDERATION TO THE MATTER. 3.1 OUR FIRST OBSERVATION IN THE MATTER, EVEN AS EX PRESSED DURING THE COURSE OF HEARING ITSELF, IS THAT THE ASSESSEES STATED METHOD OF ALL OCATION, I.E., TO THE RESPECTIVE UNIT THE ASSESSEE MAINTAINING SEPARATE ACCOUNTS QUA EACH UNIT, WHERE IN RELATION THERETO, AND ON A PRO-RATA BASIS (OF TURNOVER) FOR THE COMMON EXPENDITURE, AS THAT INCURRED AT THE HEAD OFFICE (H.O.) LEVEL OR FOR THE ASSESSEE-COMPANY AS A WHOLE, COULD NOT LEAD TO ANY ADJUSTMENT TO ITS RETURNED INCOME, MUCH LESS LEVY O F PENALTY. NO DETAILS, HOWEVER, FOR THE SO CALLED DIRECT EXPENDITURE HAVING BEEN FURNISHED AT ANY STAGE DESPITE GRANT OF ABUNDANT OPPORTUNITY TOWARD THE SAME, LED TO THE CONFIRMATIO N OF THE DISALLOWANCE OF ITS CLAIM U/S.80-IB IN THE QUANTUM PROCEEDINGS, WHICH HAVE SI NCE ATTAINED FINALITY. THE PRIMARY FACTS ARE IN ANY CASE NOT IN DISPUTE OR IN DOUBT. F URTHER, NO IMPROVEMENT WHATSOEVER 3 ITA NO. 7703/MUM/2010 (A.Y. 2005-06) TEMA INDIA LTD. VS. ADDL. CIT STANDS MADE BY THE ASSESSEE TO ITS CASE IN THE PENA LTY PROCEEDINGS. HOW, WE WONDER, THEN, PENALTY IS NOT LEVIABLE IN THE CLEAR, UNDISPUTED FA CTS OF THE CASE ? IN FACT, AS WE SEE IT, THE ASSESSEE BEING UNABLE TO FURNISH ANY DETAILS IN RES PECT OF THE EXPENDITURE CLAIMED, WHICH WOULD ITSELF AT ONCE REVEAL THE NATURE OF THE EXPEN DITURE AND, THUS, INFORMATION AS TO WHETHER OR NOT THE SAME STANDS INCURRED IN RELATION TO A SPECIFIC UNIT, EXCLUDES THE VERY BASIS OF THE EXPENDITURE, SO THAT NO CLAIM IN ITS R ESPECT BECOMES MAINTAINABLE. THAT IS, THE ABSENCE OF ANY MATERIAL OR EVIDENCE BEING LED BY TH E ASSESSEE TOWARD ITS CLAIM COULD HAVE RATHER LED TO A DENIAL OF ITS CLAIM IN TOTO , I.E., AS AGAINST A LIS ONLY IN RESPECT OF ITS ALLOCATION, WHICH AGAIN THE ASSESSEE DISPUTES, ALBE IT WITHOUT ANY BASIS IN FACT/S. THE REVENUE, IN FACT, HAS FOLLOWED THE SAME BASIS OF AL LOCATION AS BEING ADOPTED BY THE ASSESSEE IN RESPECT OF THE COMMON EXPENDITURE, TREA TING IT AS SO IN THE ABSENCE OF ANY DETAILS. ON WHAT BASIS OR PREMISES WE WONDER DOES THE ASSESS EE THEN DISPUTE THE REVENUES ACTION ? THE ASSESSEE WOULD BEFORE US, WHEN QUESTIONED IN TH E MATTER, RELY ON ITS BOOKS OF ACCOUNT, BEING MAINTAINED, AS AFORE-MENTIONED, SEPA RATELY QUA EACH UNIT. THE BOOKS OF ACCOUNT PURPORT TO REPRESENT THE TRUE STATE OF AFFA IRS, SO THAT THE ASSESSEES CLAIM/S, BASED THEREON, WOULD NO DOUBT WARRANT A PRIMA FACIE ACCEPTANCE. THE SAME, HOWEVER, CANNOT OPERATE TO BIND OR OTHERWISE PLACE ANY RESTRICTION ON THE A.O. TO VERIFY THE FACTS, OR RESTRICT OR LIMIT THE ASSESSEES OBLIGATION TO PROV E ITS CLAIMS AS PREFERRED PER ITS RETURN. THE BOOKS OF ACCOUNT BY ITSELF CANNOT BE REGARDED A S SACROSANCT, SO THAT WHERE AN EXPENDITURE IS STATED THEREIN THE SAME CANNOT BE SU BJECT TO VERIFICATION AND HAS TO BE NECESSARILY ACCEPTED. THE ASSESSEE IN THE INSTANT C ASE HAVING FAILED, AND ABYSMALLY AT THAT, IN DISCHARGING THE ONUS CAST ON IT UNDER LAW, I.E., BOTH IN THE QUANTUM AND THE PENALTY PROCEEDINGS, WE FIND NO INFIRMITY IN THE LEVY OF TH E PENALTY IN THE INSTANT CASE. 3.2 THE ASSESSEE HAS BEFORE US HAS PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P.) LTD. [2010] 322 ITR 158 (SC) AND ITO VS. HEAVEN DISTILLERY (P.) LTD. [2010] 41 SOT 88 (MUM). THE LAW IN THE MATTER IS T RITE, AND THE ASSESSEE IN THE PENALTY PROCEEDINGS IS OBLIGED TO F URNISH A REASONABLE EXPLANATION, JUSTIFYING THE SAME, AND TOWARD WHICH WE MAY ADVERT TO A HOST OF CASE LAW BY THE HONBLE 4 ITA NO. 7703/MUM/2010 (A.Y. 2005-06) TEMA INDIA LTD. VS. ADDL. CIT APEX COURT EXPOUNDING THE SAME, VIZ. CIT VS. ATUL MOHAN BINDAL [2009] 317 ITR 1 (SC); UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277 (SC); GULJAG INDUSTRIES VS. CTO [2007] 293 ITR 584 (SC); K.P. MADHUSUDHANAN VS. CIT [2001] 251 ITR 99 (SC); B.A. BALASUBRAMANIAM AND BROS VS. CIT [1999] 236 ITR 977 (SC); ADDL. CIT VS. JEEVAN LAL SHAH [1994] 205 ITR 244 (SC); CIT VS. K. R. SADAYAPPAN [1990] 185 ITR 49 (SC); AND CIT VS. MUSSADILAL RAM BHAROSE [1987] 165 ITR 14 (SC). AS SUCH, IF THE ASSESSEE SO DOES, ITS CLAIM, EVEN THOUGH NOT S USTAINABLE IN LAW, SHALL NOT ATTRACT PENALTY. THE MATTER IN THE INSTANT CASE IS PRIMARILY FACTUAL , WITH NO FACTS IN THE MATTER BEING BROUGHT ON RECORD BY THE ASSESSEE, MUCH LESS ESTABL ISHING THE SAME ON THE STRENGTH OF ANY MATERIAL. ALL THAT IT DOES IS TO ISSUE A BALD STATE MENT, WHICH HAS THUS NO BASIS IN FACTS OR, TO PUT IT DIFFERENTLY, IS UNABLE TO SHOW IT AS BASE D ON FACTS. THE ASSESSEE THUS CANNOT BE CONSIDERED TO HAVE FURNISHED ANY EXPLANATION, SO TH AT ITS CASE FALLS UNDER EXPLANATION (1A) TO SECTION 271(1)(C) AND, IN ANY CASE, UNDER EXPLANATION (1B) THERETO. RELIANCE ON THE DECISION IN THE CASE OF RELIANCE PETROPRODUCTS (P.) LTD. (SUPRA) IS, THUS, MISCONCEIVED. ALL THAT THE APEX COURT CLARIFIES THE REBY IS THAT A DENIAL OF CLAIM OR MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW WOULD NOT BY ITSELF LEAD TO LEVY OF PENALTY. THE DECISION STANDS EXPLAINED BY THE HONBLE COURTS IN A NUMBER OF DECISIONS. IN CIT VS. ESCORTS FINANCE LTD. [2010] 328 ITR 44 (DEL), THE HONBLE COURT FOUND TH E ASSESSEES CLAIM U/S.35D, SAID TO BE BASED ON THE OPINION OF I TS CHARTERED ACCOUNTANT, A TAX EXPERT, AS WITHOUT BASIS IN VIEW OF THE CLEAR LANGUAGE OF T HE PROVISION, EXTENDING THE BENEFIT OF THE SAID DEDUCTION TO AN INDUSTRIAL COMPANY, WHILE THE ASSESSEE-RESPONDENT WAS ADMITTEDLY A FINANCE COMPANY. IN CIT VS. ZOOM COMMUNICATION (P.) LTD. [2010] 327 ITR 510 (DEL.), THE CLAIM WAS QUA INCOME-TAX, BARRED BY SECTION 40(A)(II), SO THAT T HE PLEA OF OMISSION WAS CONSIDERED AS NOT ACCEPTABLE. IN CIT VS. USHA INTERNATIONAL LIMITED [2013] 212 TAXMAN 519 (DEL), AGAIN, THE CLAIM WAS U /S.35CCA, WHICH WAS FOUND AS DE HORS ANY BASIS. PENALTY U/S.271(1)(C) OF THE ACT WAS AC CORDINGLY CONFIRMED IN ALL THESE CASES BY THE HONBLE COURT, CONFIRMING THUS THAT FU RNISHING OF A PLAUSIBLE EXPLANATION FOR A DEFAULT CONTINUES TO BE THE BUILDING BLOCK OR AN ESSENTIAL INGREDIENT FOR SAVING LEVY 5 ITA NO. 7703/MUM/2010 (A.Y. 2005-06) TEMA INDIA LTD. VS. ADDL. CIT PENALTY U/S.271(1)(C) OF THE ACT, AND WOULD APPLY E VEN IN RESPECT OF LEGAL CLAIMS AND, FURTHER, EVEN AFTER THE DECISION IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA), WHICH DECISION WAS CONSIDERED IN THESE CASES. WE, O N THE OTHER HAND, HAVE FOUND THE ASSESSEES CLAIM TO BE WITHOUT BASIS ON FACTS. THE SAID DECISION WOULD, THUS, THEREFORE, HAVE NO APPLICATION IN THE FACTS OF THE INSTANT CAS E. THE DECISION IN THE CASE OF HEAVEN DISTILLERY (P.) LTD. (SUPRA) WOULD ALSO BE OF NO ASSISTANCE TO THE ASSES SEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE; THE ASSESSEE BEING ABLE TO SECURE RELIEF FROM THE TRIBUNAL ONLY QUA THE ADDITION/DISALLOWANCES TOWARD WHICH IT HAD A PL AUSIBLE EXPLANATION, SO THAT THE SAME WAS NOT JUSTIFIED; THE TRIBUNAL UPHOLDING THE PENALTY FOR THE REST. 3.3 IN VIEW OF THE FOREGOING, WE CONFIRM THE LEVY O F PENALTY, WHICH STANDS LEVIED AT THE MINIMUM RATE OF 100% OF THE TAX SOUGHT TO BE EV ADED. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. 0/ 1 *2 30 ( 0 ( 45 ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 14, 201 4 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 6 MUMBAI; 7* DATED : 14.03.2014 +.*../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. :+; < &*=2 , , =2/ , 6 / DR, ITAT, MUMBAI 6. < >3 ? / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , 6 / ITAT, MUMBAI