M/s. Spacevision Impex (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 773/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6637 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 03-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SH. G.D. AGRAWAL V.P. AND SH. C.M. GARG, J.M ITA NO. 773 /DEL/2014 ASSTT. YEAR: 200 6 - 07 APPELLANT BY: SH. RAJ KUMAR GUPTA, CA RESPONDENT BY: SMT. ANIMA BARNWAL, SR. DR DATE OF FINAL HEARING : 0 3 .02.2016 DATE OF PRONOUNCEMENT : 24. 02.2016 O RDER PER C.M. GARG, JM 1. THIS APPEAL BY THE ASSESSEE HAS BEEN FILED AGAINST THE ORDER OF THE COMMISSIONER OF THE INCOME TAX (APPEALS) XI, NEW DELHI ORDER DATED 22.01.2014 PASSED IN FIRST APPEAL NO. 45/11 - 12 (135 /13 - 14) FOR AY 200 6 - 07 . 2. WE HAVE HEAR D ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD BEFORE US. AT THE VERY OUTSET THE LD. ASSESSEE S REPRESENTATIVE (AR) SUBMITTED A COPY OF THE ORDER OF THE ITAT G BENCH DATED 15.05.2015 PASSED IN ASSESSEE S ON APPEA L I.E. ITA NO. 1457/DELHI/2011 FOR AY 2006 - 07 AND SUBMITTED THAT ADDITIONS MADE ON ACCOUNT OF LEGAL CONSULTANCY AND PROFESSIONAL CHARGES AS PRIOR PERIOD EXPENSES & DEEMED INTEREST @15% OF INTEREST FREE ADVANCES HAVE BEEN DELETED BY THE TRIBUNAL THEREFORE, PENALTY IN THIS REGARD CAN NOT BE HELD AS SUSTAINABLE AND THE SAME SHOULD BE DELETED. COPY OF THE TRIBUNAL ORDER FOR AY 2006 - 07 (SUPRA) WAS SUPPLIED TO SPACEVISION IMPEX (P) LTD. C/O RAJ KUMAR & ASSOCIATES, CA 4435/7, ANSARI ROAD, DARYA GANJ NEW DELH I VS DCIT CIRCLE - 9(1) NEW DELHI APPELLANT RESPONDENT PAN NO. AAICS0922Q THE LD. DR AND SHE FAIRLY ACCEPTED THAT ADDITIONS ON BOTH THE COUNTS HAVE BEEN DELETED THEREFORE; PENALT Y HAS NO LEGS TO STAND ON SAID ISSUES. IN VIEW ABOVE, SUBMISSIONS WE HOLD THAT PENALTY LEVIED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) IS NOT IMPOSABLE AND THE AO IS DIRECTED TO DELETE THE SAME. 3. ON OTHER T HREE COUNTS I.E. ADDITION OF INTEREST ON NATIONAL SAVING CERTIFICATES, DISALLOWANCE MADE ON ACCOUNT OF PROFESSIONAL FEE TO LAWYER AND MEDICLAM OF THE DIRECTOR THE AO HAS IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE LD AR SUBMITTED THAT INTEREST ON NSC, WAS ONLY RECEIVED AMOUNTING TO RS. 18,425/ - AND REMAINING INTEREST OF RS. 45,180/ - WAS NOT RECEIVED DURING THE FINANCIAL PERIOD AND THE ASSESSEE COULD NOT DECLARE UN - RECEIVED AMOUNT DUE TO BONA - FIDE ERROR OF THE CA AND DURING THE ASSESSMENT PROCEED INGS THE ASSESSEE ADMITTED THE ERROR AND OFFERED THE SAME TO THE TAXATION. THE LD AR ALSO POINTED OUT THAT TO THE EXTENT OF RS. 18,425/ - THERE IS NO CONCEALMENT BUT IT IS A CASE OF BONA - FIDE ERROR IN THE CALCULATION WHICH DOES NOT ATTRACT PENALTY. IN VIEW OF THE PREPOSITION LAID DOWN BY HON BLE SUPREME COURT IN THE CASE OF M/S INDIA INSURANCE COMPANY LTD. VS SMT NIRMALA DEVI REPORTED AS 118 ITR 507 (SC) AND DECISION OF ITAT MUMBAI IN THE CASE OF PERFECT SCALE COMPANY PVT. LTD. 60SOT 255 (MUM - TRIBUNAL). 4. ON THE ISSUE OF PENALTY IMPOSED ON ACCOUNT OF DISALLOWANCE OF PROFESSIONAL FEE OF RS. 7,500/ - THE LD AR SUBMITTED THAT THE AO OPINED THAT IT WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND THE SAME WAS PAID TO M/S ANIL SAGAR & CO ADVOCATES , FOR MATER RELATING TO M/S SKYLAND IMPEX PVT. LTD . THE LD AR POINTED OUT THAT NO SATISFACTION OF CONCEALMENT HAS BEEN RECORDED BY THE AO IN THE ASSESSMENT ORDER THEREFORE PENALTY IN THIS REGARD CANNOT BE LEVY. HE PLACED RELIANCE ON THE DECISION OF HON BLE HIGH COURT OF DELHI IN THE CASE OF DIWAN ENTERPRISES VS. CIT REPORTED AS 246ITR 571 (DELHI) TO SUPPORT THIS CONTENTION. 5. ON THIRD AND LAST ISSUE THE LD. AR POINTED OUT THAT RS. 13,142/ - WAS UNDISPUTEDLY PAID MEDICLAIM OF THE DIRECTOR OF THE ASSESSEE CO MPANY AND SAME WAS CLAIMED AS BUSINESS EXPENDITURE UNDER THE HEAD OF INSURANCE EXPENSES WHICH IS DISALLOWED BY THE AO BEING NOT FOR BUSINESS PURPOSE OF THE ASSESSEE . THE LD AR POINTED OUT THAT UNDISPUTEDLY SAID EXPENSE WAS INCURRED, DECLARED IN THE RETURN AND ALLOWBILITY OF THE SAME IS A DEBATABLE ISSUE AND IN THIS SITUATION PENALTY IS NOT IMPOSABLE ON THE ASSESSEE . 6. REPLY TO THE ABOVE THE LD . DR STRONGLY SUPPORTED THE PENALTY ORDER AS WELL AS FIRST APPELLANT ORDER AND CONTENDED THAT THE ASSESSEE DID NOT DECLARE COMPLETE ACCRUED INTEREST ON NSC, WHICH IS CLEAR CONCEALMENT OF PARTICULARS OF INCOME. THE LD DR FURTHER POINTED OUT THAT RECORDING OF SATISFACTION IN THE ASSESSMENT ORDER IS NOT A LEGAL REQUIREMENT THEREFORE PENALTY ON OTHER TWO COUNTS CANNOT BE HELD AS UNSUSTAINABLE ON THIS TECHNICAL GROUND. THE LD . DR FURTHER SUBMITTED THAT THE ASSESSEE CLAIMED PROFESSIONAL FEE AND MEDICLAIM OF THE DIRECTOR WHICH WERE NOT INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND THEREFORE THE ASSESSEE SHOULD BE HELD AS GUILTY OF SUBMITTING INACCURATE PARTICULARS OF ITS INCOME WHICH ATTRACTS PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 7. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSIONS AND VIGILANT PERUSAL OF THE PENALTY ORDER AS WELL AS FIRST APPELLANT OR DER WE NOTE THAT THE ASSESSEE SUBMITTED DETAILED EXPLANATION VIDE REPLY DATED 18.02.2014 WHEREIN IT WAS SUBMITTED THAT THE INTEREST OF NSC , WAS CLAIMED AS EXEMPT UNDER SECTION 10(15) OF THE ACT WHICH WAS NOT HELD AS COVERED UNDER THE SAID PROVISION THEREFO RE THE ASSESSEE HIMSELF AGREED FOR THIS ADDITION AND THE ASSESSEE ALSO INFORM THAT THE CORRECT FIGURE IS RS. 63,605/ - WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE . WE ARE IN AGREEMENT WITH THE EXPLANATION AND CONTENTION OF THE LD. AR THAT IT IS A CASE WHE RE CLAIM OF EXEMPTION UNDER SECTION 10(15) OF THE ACT WAS DENIED THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF ITS INCOME AND THUS PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE IMPOSED MERELY BECAUSE CLAIM OF THE ASSESSE E WAS NOT ACCEPTED OR WAS NOT FOUND TO BE ACCEPTABLE BY THE REVENUE AUTHORITIES. THEREFORE, THE AO IS DIRECTED TO DELETE THE PENALTY IN THIS REGARD. 8. THE LD. AR HAS POINTED OUT THAT LEGAL AND PROFESSIONAL FESS OF RS. 7500/ - WAS PAID ON 24.08.2005 TO M/ S ANIL SAGAR & CO ADVOCATES , FOR THE MATTER RELATING TO M/S SKYLAND IMPEX PVT. LTD. AND SINCE THE OUTCOME OF THE LEGAL DISPUTE COULD ADVERSELY EFFECT THE ASSESSEE COMPANY THEREFORE, PART OF LEGAL EXPENSES WERE BORN BY THE ASSESSEE TO SAFEGUARD ANY DAMAGE D UE TO ADVERSE DECISION IN THE BATTLE THEREFORE, THE EXPENSE WAS BONAFIDELY INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE LD AR ALSO POINTED OUT THAT HOWEVER, THE ASSESSEE HAS NOT INCLUDED AS A PARTY TO THAT CASE BUT AS A PRECAUTIONARY MEASURE T HE ASSESSEE INCURRED LEGAL EXPENSES IN THE MATTER WHICH WAS RELATED TO M/S SKYLAND IMPEX PVT. LTD. THE LD DR COULD NOT SHOW US THAT THE REVENUE AUTHORITIES HAD EVER MADE ANY ALLEGATION OF BOGUS OR INCORRECT CLAIM AND THE SOLE BASIS OF THE DISALLOWANCE WAS THAT THE ASSESSEE MADE PAYMENT OF LEGAL PROFESSIONAL FEE TOWARDS A CASE WHICH WAS NOT DIRECTLY CONNECTED WITH THE ASSESSEE THEREFORE, THE EXPENSES WAS NOT INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE . 9. ON CAREFUL CONSIDERATION OF FACT AND C IRCUMSTANCES OF THE PRESENT CASE WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE INCURRED A SMALL AMOUNT OF RS. 7 , 500/ - TOWARDS LEGAL PROFESSIONAL FEE TO SAFEGUARD ITS INTEREST WHICH COULD BE ADVERSELY EFFECTED BY THE AGAINST ORDER IN THE LEGAL CASE. HO WEVER, ADMITTEDLY THE ASSESSEE WAS NOT A DIRECT PARTY IN THAT CASE AND THEREFORE THE AUTHORITIES NOT ONLY DISALLOWED ASSESSEE S CLAIM BUT ALSO IMPOSED PENALTY IN THIS REGARD. IN OUR CONSIDERED VIEW MERELY BECAUSE THE ASSESSEE COULD NOT ESTABLISH ITS DIRECT CONNECTION WITH THAT CASE WHICH WAS APPARENTLY AGAINST M/S SKYLAND IMPEX PVT. LTD. BUT FORE - SIGHTING THE POSSIBILITIES OF THE ADVERSE ORDER THE ASSESSEE DECIDED TO INCUR THIS EXPENSE OF PROFESSIONAL FEE. WHICH WAS NOT ALLOWED BY THE AUTHORITIES BELOW BUT IT CANNOT BE SAID THAT THE ASSESSEE INCURRED AN EXPENSE ON BEHALF OF OTHERS ON CHARITY WHICH WAS EVEN NOT REMOTELY CONNECTED WITH THE ASSESSEE AND FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE . IN THE SITUATION MERELY BECAUSE CLAIM OF THE ASSESSEE WAS NO T FOUND AS ALLOWABLE THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE IMPOSED AND THE AO IS DIRECTED TO DELETE THE PENALTY. 10. ON THE THIRD AND LAST ISSUE THE LD. AR SUBMITTED THAT THE PAYMENT OF MEDICLAIM WAS MADE AS PERQUISITES TO THE DIRECTOR OF THE COMPANY. HOWEVER, DUE TO BONA - FIDE ERROR THE SAME COULD NOT BE BROUGHT AS RESOLUTION IN THE RECORD OF THE COMPANY AND THUS THE AO DID NOT ALLOW THE SAME. THE LD AR ALSO POINTED OUT THAT SINCE THE AMOUNT OF RS . 13,142/ - IS A SMALL AMOUNT THEREFORE, T HE ASSESSEE DID NOT AGITATED THE MATTER FURTHER, BEFORE THE HIGHER FORUM BUT PENALTY IS NOT AUTOMATIC AND THE AO HAS NOT BROUGHT OUT ANY ALLEGATION OF BOGUS OR INCORRECT CLAIM THEREFORE PENALTY CANNOT BE HELD AS SUSTAINABLE. THE LD DR HAS SUBMITTED THAT IF MEDICLAIM WAS OF THE PART OF SALARY AND OTHER PERQUISITES OF THE DIRECTOR THEN THE SAME SHOULD BE BROUGHT ON RECORD AS PER PROVISION OF THE COMPANIES ACT FAILING WHICH CLAIM DESERVED TO BE TAG AS NON - BONAFIDE CLAIM WHICH ATTRACTS PENALTY UNDER SECTION 271 (1)(C) OF THE ACT AS IT IS A CLEAR CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. 11. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS WE ARE OF THE VIEW THAT THE CLAIM OF ASSESSEE WAS NOT SUSTAINABLE AS THE ASSESSEE COULD NOT ESTABLISH THAT THE MED ICLAIM WAS LEGALLY PAYABLE TO THE DIRECTOR BECAUSE THERE WAS NO RECORD TO SHOW ITS ALLOWBILITY OF THE MEDICLAIM. HOWEVER, MERELY BECAUSE IN ABSENCE OF ANY RESOLUTION MEDICLAIM TO THE DIRECTOR WAS NOT ALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE BUT THIS IS NOT A CASE OF CONSCIOUS MALA - FIDE ACT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE MAY FURTHER ADD THAT MERELY BECAUSE THE CLAIM OF THE ASSESSEE OF SMALL AMOUNT OF RS. 13,142/ - WAS NOT ALLOWED DUE TO TECHNICAL REASONS THEN IT CANNOT BE SAID TH AT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF ITS INCOME WHICH ATTRACTS PENALTY UNDER SECTION 271(1)(C) OF THE ACT, HENCE, WE DECLINE TO UPHOLD CONCLUSION OF THE AUTHORITIES BELOW IN THIS REGARD. ACCORDINGLY, AO IS DIRECTED TO DELETE THE PENALTY ON T HIS LAST COUNT. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED IN THE MANNER AS INDICATED ABOVE. ORDER IS PRO NOUNCED IN THE OPEN COURT ON 24/ 02/2016 S D SD/ - (G. D. AGRAWAL) (C.M GARG) VICE PRESIDENT JUDICIAL MEMBER *RES. DESKTOP COP Y FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT (APPEALS) 5 . DR: ITAT