SUMMIT SECURITIES LTD ( SUCCESSOR TO M.S, BRABOURNE ENTERPRISES LTD. FORMERLY KNOWN AS M.S, RPG LIFE SCIENCES LTD), MUMBAI V. ACIT 7(2), MUMBAI

ITA 781/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83504 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 31-07-2014
• Assessment Year: 1998-1999
• Appeal Filed On: 27-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KRISH B DESAI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 781/MUM/2011 ( / ASSESSMENT YEAR: 1998-99) SUMMIT SECURITIES LTD. (SUCCESSOR TO M/S. BRABOURNE ENTERPRISES LTD. FORMERLY KNOWN AS M/S. RPG LIFE SCIENCES LTD.) 463, CEAT MAHAL, DR. ANNIE BESANT ROAD, WORLI, MUMBAI-400 030 / VS. ASST. CIT-7(2), MUMBAI ' ./# ./PAN/GIR NO. AAACS 9978 A ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) '$ ' ( / APPELLANT BY : SHRI KRISH B. DESAI %&'$ ' ( / RESPONDENT BY : SHRI SOMANATH S. UKKALI )* + ' , / DATE OF HEARING : 31.07.2014 -./ ' , / DATE OF PRONOUNCEMENT : 06.08.2014 / 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)-13, MUMBAI (CIT(A) FOR SH ORT) DATED 28.07.2010, CONTESTING AS WELL AS LEVYING PENALTY U/S.271(1)(C) OF THE INC OME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 1998-99 , LEVIED VIDE ORDER DATED 30.09.2009. 2 ITA NO. 781/MUM/2011 (A.Y. 1998-99) SUMMIT SECURITIES LTD. VS. ASST. CIT 2. THE APPEAL CONCERNS THE MAINTAINABILITY OF THE P ENALTY U/S. 271(1)(C) OF THE ACT LEVIED AT RS.4,05,212/-, HAVING BEEN SINCE, I.E., S UBSEQUENT TO ITS ORIGINAL LEVY AT RS. 44,654/-, ENHANCED BY THE LD. CIT(A) IN APPEAL. 3. VIDE ITS GD. #1, THE ASSESSEE ASSAILS THE LEVY O F PENALTY ON THE GROUND OF IT BEING TIME-BARRED. THE LD. AUTHORIZED REPRESENTATIVE (AR) , THE ASSESSEES COUNSEL, AT THE VERY OUTSET, FAIRLY CONCEDED TO THE SAID GROUND BEING CO VERED AGAINST THE ASSESSEE BY A SERIES OF DECISIONS, FURNISHING A LIST THEREOF, DECIDING T HE MATTER THUS. THE ASSESSEES SAID GROUND IS, RELYING ON THE SAID CASE LAW, DETAILED A S UNDER, ACCORDINGLY HELD IN FAVOUR OF THE REVENUE, SO THAT THE ASSESSEES CHALLENGE IS RE STRICTED TO THE MERITS OF THE LEVY: CIT VS. MOHAIR INVESTMENT & TRADING CO. (P.) LTD. [2012] 345 ITR 51 (DEL); RAYALA CORPORATION (P.) LTD. VS. UNION OF INDIA [2007] 288 ITR 452 (MAD); MAHENDRA INTERTRADE LTD. VS. DY. CIT [2011] 133 ITD 597 (MUM); AND VLCC HEALTHCARE LTD. VS. ASST. CIT [2010] 3 ITR (AT) 51 (DEL) 4. IT WOULD BE RELEVANT TO RECOUNT THE BACKGROUND F ACTS OF THE CASE, WHICH ARE SIMPLE AND LARGELY UNDISPUTED. THE ASSESSEE COMPANY, ENGAG ED IN THE MANUFACTURE OF PHARMACEUTICS AND AGRO-CHEMICALS, CLAIMED DEDUCTION IN THE COMPUTATION OF ITS BUSINESS INCOME OF RS.11,57,750/- QUA THE PAYMENT OF SALES-TAX UNDER THE SALES TAX DEFERR AL SCHEME AVAILED OF BY IT. IN TERMS OF THE SAID SCHEM E, IT WAS ALLOWED TO COLLECT SALES-TAX ON SALES FOR THE TAX HOLIDAY PERIOD, WHICH IN ITS CASE EXTENDED TO THE PREVIOUS YEARS RELEVANT TO A.YS. 1984-85 TO 1989-90, WITHOUT BEING CORRESPONDINGLY OBLIGED TO PAY IT TO THE CREDIT OF THE STATE GOVERNMENT. THE ENTIRE SALE S-TAX COLLECTED DURING THE SAID SIX YEARS, AGGREGATING TO RS.69.46 LACS, WAS TO BE DEPO SITED IN SIX INSTALLMENTS OF RS.11,57,750/- EACH OVER SIX YEARS, BEGINNING WITH THE PREVIOUS YEAR RELEVANT TO A.Y. 1997-98. THE ASSESSEES CLAIM ON SUCH PAYMENT FOR T HE RELEVANT YEAR WAS, HOWEVER, DISALLOWED BY THE ASSESSING OFFICER (A.O.) ON THE G ROUND THAT IT HAD IN FACT CLAIMED THE LIABILITY TO SALES-TAX FOR THE YEAR/S OF ITS COLLEC TION. THERE WAS, AS SUCH, NO OCCASION TO CLAIM THE SAME AGAIN ON PAYMENT BASIS. THE ASSESSEE DISPUTING THE SAME, THE FIRST APPELLATE AUTHORITY FOUND THAT THE ASSESSEES CLAIM FOR A.YS. 1985-86 TO 1989-90, AMOUNT COLLECTED FOR WHICH PERIOD WORKED TO RS.61.81 LACS, HAD BEEN DISALLOWED. THAT BEING THE 3 ITA NO. 781/MUM/2011 (A.Y. 1998-99) SUMMIT SECURITIES LTD. VS. ASST. CIT CASE, THERE WAS NO GROUND OF A DOUBLE DISALLOWANCE QUA THIS SUM, WHICH ONLY WOULD QUALIFY FOR DEDUCTION U/S.43B ON ITS PAYMENT. ACCOR DINGLY, 1/6 TH THEREOF, I.E., RS.10,30,166/-, WAS DIRECTED FOR DELETION, AS AGAINST THE ASSESSEE S CLAIM FOR RS.11,57,750/-, BEING 1/6 TH OF RS.69.46 LACS, VIDE ORDER DATED 14.03.2005 (PB PGS.35-38). THE APPEALS BY THE ASSESSEE AND THE REVENUE AGAINST THE SAID DIRECTION BY THE FIRST APPELLATE AUTHORITY WERE DISMISSED BY THE TRIBUNAL VIDE ITS SEPARATE ORDERS (IN ITA NO. 3998/MUM(H)/2005 DATED 20.02.2009 AND 4399/MUM(H)/2 005 DATED 22.01.2009/PB PGS. 39-52). PENALTY WAS, ACCORDINGLY, LEVIED WITH REFER ENCE TO THE DISALLOWANCE SUSTAINED, I.E., FOR THE BALANCE RS.1,27,584/- (RS.11,57,750/- - RS.10,30,166/-), AT 100% OF THE TAX THEREON. THE LD. CIT(A), IN APPEAL, HOWEVER, TOOK E XCEPTION TO THE FACT THAT THE ASSESSEE HAD DISPUTED ITS CLAIM IN QUANTUM PROCEEDINGS FOR A .YS. 1984-85 AND 1986-87. HOW COULD THE SUM ALREADY CLAIMED AND ALLOWED SURVIVE F OR DEDUCTION ON PAYMENT BASIS ? PENALTY WAS ACCORDINGLY DIRECTED FOR BEING LEVIED W ITH REFERENCE TO THE ENTIRE AMOUNT CLAIMED BY THE ASSESSEE, I.E., RS.11,57,750/-. AGGR IEVED, THE ASSESSEE IS IN SECOND APPEAL. 5.1 BEFORE US, IT WAS EXPLAINED BY THE LD. AR, THAT THE DISALLOWANCE FOR A.Y. 1984-85, ALLOWED IN PRINCIPLE BY THE TRIBUNAL, WAS NEVER EFF ECTUATED IN-AS-MUCH AS THE TRIBUNAL HAD ONLY SET ASIDE THE MATTER FOR RECONSIDERATION, AND THE CONSEQUENT ORDER HAD NOT BEEN PASSED, SO THAT THE DISALLOWANCE AS MADE OBTAINS. I N FACT, ON THIS BEING DEMONSTRATED, THE A.O. ALLOWED RELIEF ALSO FOR THE BALANCE SUM OF RS. 1,27,584/- FOR THE SUBSEQUENT YEAR (A.Y. 1999-2000) VIDE ORDER DATED 15.06.2012 (PB PG .105). THERE WAS, ACCORDINGLY, NO BASIS FOR THE LEVY OF PENALTY QUA ANY SUM COMPRISING THE ASSESSEES CLAIM. 5.2 THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD, ON THE OTHER HAND, RELY ON THE IMPUGNED ORDER. 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 6.1 THE FIRST THING THAT NEEDS TO BE ASCERTAINED AN D CLARIFIED IS AS TO HOW A DOUBLE CLAIM IN RESPECT OF SALES-TAX, DEDUCTION QUA WHICH IS MANDATORILY SUBJECT TO PAYMENT, COULD AT ALL ARISE IN-AS-MUCH AS THE PAYMENT HAS BE EN MADE, IN TERMS OF THE SCHEME, ONLY 4 ITA NO. 781/MUM/2011 (A.Y. 1998-99) SUMMIT SECURITIES LTD. VS. ASST. CIT FROM A.Y. 1997-98 ONWARDS, IN EQUAL INSTALLMENTS AT THE RATE OF 1/6 TH OF THE AMOUNT COLLECTED DURING THE TAX HOLIDAY PERIOD, I.E., THE PREVIOUS YEARS RELEVANT TO A.Y.S. 1984-85 TO 1989-90. THIS IS AS, APART FROM BEING QUIZZICAL, THIS ONLY WOULD INFORM ONE OF THE GENESIS OF THE CONTROVERSY OR THE STARTING POINT OF THE DISPUTE BETWEEN THE ASSESSEE AND THE REVENUE. AS EXPLAINED BY THE LD. AR DURING HEAR ING, THE DEFERRAL SCHEME ENVISAGED THE CONVERSION OF THE SALES-TAX INTO A LOAN, SO THA T THERE IS A DEEMED PAYMENT (OF SALES- TAX) IN THE YEAR OF CONVERSION. WHAT STANDS PAID SU BSEQUENTLY, I.E., A.Y. 1997-98 ONWARDS, IS THE SAID LOAN. IT IS THIS ASPECT WHICH WAS HIGHLIGHTED BY THE TRIBUNAL IN THE ASSESSEES APPEAL FOR A.Y. 1984-85, STATING THAT IF THERE HAS INDEED BEEN A CONVERSION, I.E., IN TERMS OF THE SCHEME ITSELF, THE ASSESSEE S HALL STAND TO BE ALLOWED ITS CLAIM IN THE YEAR OF CONVERSION ITSELF IN-AS-MUCH AS THERE HAS B EEN AN EXTINGUISHMENT OF LIABILITY TO TAX, AND WHAT OUTSTANDS IS A LOAN TO THE ASSESSEE B Y THE GOVERNMENT. THAT BEING THE CASE, IN OUR VIEW, THERE HAS THUS BEEN, I.E., TO THE EXTE NT PURSUED, WHICH WE FIND TO BE FOR A.YS. 1984-85 AND 1986-87 (REFER THE ORDER OF THE FIRST A PPELLATE AUTHORITY IN THE QUANTUM PROCEEDINGS/PB PGS.35-38), DEFINITELY A DOUBLE CLAI M BY THE ASSESSEE. WE ARE ALSO NOT IN AGREEMENT WITH THE ASSESSEE WHEN IT SAYS THAT THE O RDER BY THE TRIBUNAL (FOR A.Y. 2004-05) HAVING NOT BEEN GIVEN EFFECT TO BY THE REVENUE, ITS CLAIM ABATES. ON THE CONTRARY, IN OUR VIEW, IT IS THE ASSESSMENT THAT IS SET ASIDE (TO TH AT EXTENT), SO THAT THE ASSESSEES CLAIM HOLDS IN THE ABSENCE OF ANY ACTION BY THE DEPARTMEN T FOLLOWING AND IN PURSUANCE TO THE ORDER BY THE TRIBUNAL, WHICH ABSENCE IS ITSELF SURP RISING INDEED. ALL THAT THE ASSESSEE IS REQUIRED TO DO IS TO EXHIBIT NON-ALLOWANCE OF ITS C LAIM FOR A.YS. 1984-85 AND 1986-87, I.E., THE TWO YEARS FOR WHICH IT PURSUED THE APPELL ATE PROCEDURE AGAINST THE DISALLOWANCE OF ITS CLAIM OF SALES-TAX ON ITS COLLECTION (AND CO NVERSION TO A LOAN), THE AMOUNT FOR WHICH IS AT RS.7.655 LACS AND RS.18.37 LACS RESPECTIVELY. FOR THE OTHER YEARS, THE DISALLOWANCE HAVING NOT BEEN APPEALED AGAINST, THERE IS NO QUEST ION OF A DOUBLE DEDUCTION, SO THAT THE ASSESSEES CLAIM IS TO THAT EXTENT PERFECTLY VALID IN-AS-MUCH AS THE ONLY REASON FOR THE DISALLOWANCE; THE DEDUCTION ADMITTEDLY TO BE ON PAY MENT, IS A DOUBLE CLAIM. 5 ITA NO. 781/MUM/2011 (A.Y. 1998-99) SUMMIT SECURITIES LTD. VS. ASST. CIT 6.2 WE SHALL THEREFORE RESTRICT OURSELVES TO THE CL AIM RESPECTING TAX FOR A.YS. 1984-85 AND 1986-87; THERE BEING NO DISPUTE QUA THE CLAIM PERTAINING TO THE OTHER YEARS. WE HAVE ALREADY OBSERVED A PRIMA FACIE CASE OF DOUBLE CLAIM QUA THE SALES-TAX PERTAINING TO THE SAID YEARS FOR THE CURRENT YEAR, I.E., AT RS.4,33,7 50/- @ 1/6 TH . THE ASSESSEE HAS NOT EXHIBITED THE NON-ALLOWANCE OF THE CLAIM FOR THE RE LEVANT YEARS BY PRODUCING A COPY OF THE APPELLATE ORDER OR THE ORDER GIVING APPEAL EFFE CT FOR THE SAID YEARS, I.E., A.YS. 1984-85 AND 1986-87, WHICH ONLY WOULD BE A FINAL PROOF OF T HE CLAIM HAVING NOT BEEN ALLOWED. THE ASSESSEE HAS ALSO NOT CLARIFIED AS TO WHAT TRAN SPIRED FOR A.Y. 1997-98, I.E., THE FIRST YEAR FOR WHICH THE CLAIM QUA THE IMPUGNED SUM CAME TO BE MADE, AND ASSESSMENT F OR WHICH YEAR WOULD HAVE PRECEDED THAT FOR THE CURRENT YEAR. SO HOWEVER, THE REVENUE HAS ITSELF ALLOWED THE ASS ESSEES CLAIM FOR RS.10.30 LACS, WHICH INCLUDES RS.3,06,166/- QUA A.Y. 1986-87, IN THE QUANTUM PROCEEDINGS FOR THE CURRENT YEAR. COULD ANY PENALTY BE LEVIED, MUCH LESS SUSTAINED, Q UA A DISALLOWANCE THAT STANDS CONFIRMED FOR DELETION ? THE REVENUES ACTION IS UNFORTUNATE. THE PROPOSIT ION IS AXIOMATIC, EVEN AS THE ASSESSEE HAS CITED ABUNDANT CASE LAW IN THE MATTER, TO SOME OF WHICH WE MAY ADVERT TO: CIT VS. BABUL HARIVADAN PARIKH [2013] 37 TAXMANN.COM 52 (GUJ); CIT VS. SANJIV KUMAR [2008] 300 ITR 348 (P & H); CIT VS. BEDI & CO. (P.) LTD. [1990] 183 ITR 59 (KER.); CIT VS. MADANLAL SOHANLAL [1989] 176 ITR 189 (CAL); AND CIT VS. BASUMATI (P.) LTD. [1989] 180 ITR 175 (CAL) SIMILARLY, THE CLAIM FOR THE BALANCE RS.1,27,584/- HAS ALSO BEEN ALLOWED BY IT IN ASSESSMENT FOR A.Y. 1999-2000 CONSEQUENT TO THE TRI BUNALS ORDER FOR THAT YEAR. HOW, THEN, WE WONDER, COULD PENALTY QUA THE SAID CLAIM ARISE EVEN IF THE AMOUNT STANDS DISALLOWED IN ASSESSMENT FOR THE CURRENT YEAR ? RATHER, THE ALLOWANCE OF THIS SUM (RS.1,27,584/-) WOULD BECOME A SUBJECT MATTER OF RE CTIFICATION, I.E., WITH REFERENCE TO THE ASSESSMENT FOR A.Y. 1999-2000. WE SAY SO AS, IRRESP ECTIVE OF THE YEAR FOR WHICH THE CLAIM FOR RS.1,27,584/-, BEING 1/6 TH OF THE SALES-TAX FOR A.Y. 1984-85 (RS.7.655 LACS), HAS BEEN ALLOWED, THE SAME WOULD INURE ONLY WHERE THE D EDUCTION IN ITS RESPECT HAS NOT BEEN ALLOWED FOR THE INITIAL YEAR, I.E., A.Y. 1984-85. 6 ITA NO. 781/MUM/2011 (A.Y. 1998-99) SUMMIT SECURITIES LTD. VS. ASST. CIT 6.3 IN VIEW OF THE FOREGOING, WE FIND NO BASIS FOR THE LEVY OF PENALTY QUA ANY PART OF THE IMPUGNED SUM OF RS.11,57,750/-. WE DECIDE ACCOR DINGLY, ANSWERING THE ASSESSEES GROUNDS 2 & 3 IN ITS FAVOUR. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 0/ 1 )2 30 ' * 4 ' 56 ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 06, 20 14 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 7+ MUMBAI; 8) DATED : 06.08.2014 *.)../ 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/ , 7+ / DR, ITAT, MUMBAI 6. = ?3 @ + / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , 7+ / ITAT, MUMBAI