ACIT, Chandigarh V. M/s A.B. Sugars Ltd., Chandigarh

ITA 789/CHANDI/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9825 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 15-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Rectification of order; Non-deduction of tax; Notional interest
• Section: 143(3); 14A; 194C; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 789/CHD/2013 ASSESSMENT YEAR: 2006-07 THE A.C.I.T., VS M/S A.B. SUGARS LTD., CIRCLE 1(1), HOUSE NO. 77, CHANDIGARH. SECTOR 11-A, CHANDIGARH. PAN: AABCG3045M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL RESPONDENT BY : SHRI T.N.SINGLA DATE OF HEARING : 01.07.2015 DATE OF PRONOUNCEMENT : 03.07.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS) CHANDIGARH DATED 01.04.2013 FOR ASSESSMENT YEAR 2006-07 CHALLENGING THE CANCELLATIO N OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT. 2. BRIEFLY THE FACTS AS NOTED IN THE IMPUGNED ORDER ARE THAT THE ASSESSING OFFICER WHILE FRAMING THE A SSESSMENT 2 UNDER SECTION 143(3) OF THE ACT MADE THE FOLLOWING ADDITIONS : I) RS. 4,35,457/- ON ACCOUNT OF DISALLOWANCE OF CERTAIN EXPENSES UNDER SECTION 40(A)(IA) OF THE ACT. II) TOTAL DISALLOWANCE OF RS. 7,85,336/- ( RS. 7,19,513/- + RS. 65,823/-) UNDER SECTION 14A OF THE ACT. NOTIONAL INTEREST OF RS. 20,40,000/- WAS ALSO ADDED BY PASSING RECTIFICATION ORDER UNDER SECTION 154 OF THE ACT. 3. THE ASSESSING OFFICER HAS LEVIED PENALTY UNDER S ECTION 271(1)(C) OF THE ACT ON ALL THESE ADDITIONS WHICH W ERE CHALLENGED BEFORE LD. CIT(APPEALS). 4. THE ASSESSEE, AS REGARDS DISALLOWANCE OF EXPENSE S UNDER SECTION 40(A)(IA) OF THE ACT AND LEVY OF THE PENALTY SUBMITTED THAT SEVERAL BENCHES OF THE TRIBUNAL HAVE GIVEN DECISION FOR AND AGAINST THE ASSESSEES AND SO THE I SSUE HAS BECOME DEBATABLE. THE LD. CIT(APPEALS) NOTED THAT IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAD NOT DEDUCTED TAX ON CERTAIN PAYMENTS, SO THE ADDITION WAS MADE UNDER SE CTION 40(A)(IA) OF THE ACT. THEREFORE, ASSESSEE CANNOT B E SAID TO HAVE DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD. CIT(APPEALS) RELIED UPON DECISION OF ITAT DELHI BENCH IN THE CASE OF AT & T COMMUNICATION SER VICES (INDIA) PVT. LTD. 42 DTR 22 IN WHICH IT WAS HELD TH AT THE DISALLOWANCE MADE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) CANNOT BE A GROUND TO LEVY PENALTY UNDER SECTION 3 271(1)(C) OF THE ACT. THE ASSESSEE HAS NOT FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THERE FORE, RATIO OF THE ABOVE JUDGEMENT SQUARELY APPLY AND THAT SINC E ENTIRE AMOUNT WAS ADDED FOR NON-DEDUCTION OF TAX, THEREFORE, IT IS NOT A CASE OF CONCEALMENT OF INCOM E OR FURNISHING INACCURATE PARTICULARS OF INCOME. ACCOR DINGLY, PENALTY ON THIS ITEM WAS CANCELLED AND APPEAL OF TH E ASSESSEE WAS ALLOWED. 5. ON DISALLOWANCE UNDER SECTION 14A OF THE ACT, TH E ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT NOT IONAL EXPENDITURE WAS DISALLOWED UNDER SECTION 14A OF THE ACT SO NO PENALTY WAS LEVIABLE AND RELIED UPON DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (S.C). THE LD. CIT(APPEALS) FOUND THAT THE DISALLOWANCE OF EXPENSE S UNDER SECTION 14A OF THE ACT HAS BEEN MADE BY THE ASSESSI NG OFFICER ON PROPORTIONATE/ESTIMATED BASIS. THE ASSE SSEE HAD NOT CONCEALED THE PARTICULARS OF ITS INCOME OR HAD NOT FURNISHED INACCURATE PARTICULARS OF INCOME SO AS TO LEVY THE PENALTY. THE LD. CIT(APPEALS) RELIED UPON DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) AND CANCELLED THE P ENALTY. 6. WITH REGARD TO DISALLOWANCE OF NOTIONAL INTEREST AND SECURITY DEPOSIT TO NHAI, ON WHICH PENALTY WAS ALSO LEVIED, LD. CIT(APPEALS) NOTED THAT THE DISALLOWANCE MADE B Y ASSESSING OFFICER UNDER SECTION 154 OF THE ACT HAS BEEN DELETED BY HIM VIDE ORDER DATED 28.06.2012, THEREFO RE SINCE 4 ADDITION HAS BEEN DELETED, PENALTY WOULD NOT SURVIV E. THE LD. CIT(APPEALS), ACCORDINGLY, CANCELLED THE PENALT Y AND ALLOWED THE APPEAL OF THE ASSESSEE. 7. THE LD. DR RELIED UPON ORDER OF THE ASSESSING OFFIC ER, ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REI TERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND A LSO PLACED ON RECORD COPY OF ORDER OF ITAT CHANDIGARH B ENCH IN THE CASE OF THE SAME ASSESSEE FOR ASSESSMENT YEA R 2006-07 AND 2007-08 DATED 27.11.2013 IN ITA 1120/20 10 ETC. THE LD. COUNSEL FOR THE ASSESSEE, REFERRING TO THE ORDER OF THE TRIBUNAL ON QUANTUM SUBMITTED THAT WIT H REGARD TO ADDITION OF RS.4,35,457/- UNDER SECTION 4 0(A)(IA) OF THE ACT, THE TRIBUNAL HELD THAT SECTION 194C WOU LD APPLY ONLY IF THE PAYMENT MADE EXCEEDS RS. 20,000/- AND S INCE FREIGHT PAYMENT HAS BEEN MADE ONLY FOR RS. 20,000/- , THEREFORE TDS PROVISION UNDER SECTION 194C OF THE A CT WOULD NOT APPLY WITH RESPECT TO THIS PAYMENT OF FRE IGHT. 7(I) THE LD. COUNSEL FOR THE ASSESSEE WITH REGARD T O DISALLOWANCE UNDER SECTION 14A OF THE ACT ON THE AM OUNT OF RS. 7,19,512/- SUBMITTED THAT THE TRIBUNAL IN THE S AME ORDER DATED 27.11.2013 RESTRICTED THE DISALLOWANCE TO RS. 1 LAC ONLY BY HOLDING THAT RULE 8D WOULD BE APPLICABL E FROM ASSESSMENT YEAR 2008-09. HE HAS ALSO SUBMITTED THA T WITH REGARD TO ADDITION OF RS. 656,823/- UNDER SECTION 1 4A, THE TRIBUNAL HAS DELETED THE ADDITION HOLDING THAT ON E ARNING AGRICULTURE INCOME HARDLY ANY ADMINISTRATIVE EXPENS ES WOULD BE REQUIRED TO BE SPENT. THE LD. COUNSEL FOR THE 5 ASSESSEE, THEREFORE, SUBMITTED THAT SINCE SUBSTANTI AL ADDITIONS HAVE ALREADY BEEN DELETED BY THE TRIBUNAL AND THAT ONLY SMALL ADDITIONS ARE LEFT ONLY ON ESTIMATE BASIS, THEREFORE, LD. CIT(APPEALS) WAS JUSTIFIED IN CANCEL ING THE PENALTY. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS) IN CANCELING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE LD. COUNSEL FOR THE ASSE SSEE BY REFERRING TO THE ORDER OF TRIBUNAL ON QUANTUM IN TH E CASE OF THE ASSESSEE SUBMITTED THAT THE TRIBUNAL HAS DEL ETED PART OF THE ADDITION UNDER SECTION 40(A)(IA) OF THE ACT AND SUBSTANTIALLY REDUCED THE DISALLOWANCE UNDER SECTIO N 14A OF THE ACT. THE ASSESSEE HAS DISCLOSED ALL THE FAC TS IN THE RETURN OF INCOME AND DISALLOWANCE UNDER SECTION 40( A)(IA) WAS MADE BECAUSE NO TDS WAS DEDUCTED AND THAT TRIBU NAL HELD THAT PROVISIONS OF SECTION 14A READ WITH RULE 8D WOULD BE APPLICABLE FROM ASSESSMENT YEAR 2008-09 AN D MADE REASONABLE ESTIMATED DISALLOWANCE OF RS. 1 LAC . THE NOTIONAL INTEREST HAS ALREADY BEEN DELETED BY THE L D. CIT(APPEALS). 9. CONSIDERING THE FACTS AND CIRCUMSTANCES NOTED AB OVE, IT IS CLEAR THAT PENALTY WAS LEVIED FOR MERE DISALL OWANCE OF EXPENSES ON ESTIMATE BASIS WHICH WOULD NOT LEAD TO INFERENCE THAT ASSESSEE HAS CONCEALED THE PARTICULA RS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. THE LD. CIT(APPEALS) RIGHTLY PLACED RELIANCE UPON THE D ECISION 6 OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANC E PETROPRODUCTS PVT. LTD. (SUPRA) FOR CANCELING THE P ENALTY. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE DEPARTM ENTAL APPEAL. THE SAME IS ACCORDINGLY, DISMISSED. 10. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JULY,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 3 RD JULY,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH