M/s Amartex Industries Ltd., Chandigarh V. DCIT, Chandigarh

ITA 809/CHANDI/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8401 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Bonafide belief; Difference of opinion; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.809/CHD/2013 (ASSESSMENT YEAR : 2007-08) M/S AMARTEX INDUSTRIES LTD., VS. THE D.C.I.T., SCO 18-19,SECTOR 9-D, CIRCLE-1(1), CHANDIGARH. CHANDIGARH. PAN: AABCA2243H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARIKSHIT AGGARWAL RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 17.02.2016 DATE OF PRONOUNCEMENT : 08.03.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGARH DATED 27.5.2013 FOR ASSESSMEN T YEAR 2007-. 2. THE GROUND NO.1 RAISED BY THE ASSESSEE IS GENERAL, THEREFORE, NEEDS NO ADJUDICATION. 3. THE GROUND NO.2 IS WITH REGARD TO LEVY OF PENAL TY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON AN ADDITION OF RS.2,87,500/- ON 2 ACCOUNT OF CLAIM OF EXPENSES TOWARDS PAYMENT TO ROC FOR INCREASE OF AUTHORIZED SHARE CAPITAL OF THE ASSESSE E COMPANY. 4. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED BEFORE US THAT THE ISSUE IS COVERED AGAINS T THE ASSESSEE BY THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. ESCORTS FINANCE LTD. (2009) 28 DTR 293 (DEL). THE SAID JUDGMENT HAD ALSO BEEN FOLLOWED BY THE DELHI BENCH OF THE I.T.A.T. IN THE CASE OF TRINITY TOURCH PVT. LTD. (2011) 132 ITD 88. SINCE THE ISSUE IS C OVERED BY THESE ORDERS, RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE ACTION OF THE LEARNED CIT (APPEALS) IN CONFIRMI NG THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF EXPENSES INCURRED FOR PA YMENT OF ROC FEE. 5. THE GROUND NO.3 IS AGAINST THE ACTION OF THE LEARNED CIT (APPEALS) IN CONFIRMING THE PENALTY UND ER SECTION 271(1)(C) OF THE ACT OF ADDITION OF RS.1,07 ,49,523/- IN RESPECT OF CONSTRUCTIONS EXPENSES INCURRED BY TH E ASSESSEE CLAIMED AS REVENUE EXPENSES. 6. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE HAD TAKEN A PLOT OF LAND ON LEASE FROM ITS MANAGING DIR ECTOR AND HAD CONSTRUCTED ITS HEAD OFFICE ON THIS PLOT OF LAND. AN AMOUNT OF RS.1,07,49,523/- WAS INCURRED ON CONSTRUCTION OF THIS BUILDING. THE ASSESSEE CLAIM ED THIS AMOUNT AS REVENUE EXPENDITURE, WHILE THE ASSESSING 3 OFFICER HELD IT A CAPITAL EXPENDITURE. THE DETAIL ED SUBMISSIONS WERE MADE BY THE ASSESSEE IN THE PENALT Y PROCEEDINGS. HOWEVER, REJECTING THE SAME, THE ASSE SSING OFFICER LEVIED PENALTY ON THE SAID DISALLOWANCE. 7. BEFORE THE LEARNED CIT (APPEALS), IT WAS SUBMITTED THAT THE ASSESSEE HAD CARRIED OUT RENOVAT ION OF ITS HEAD OFFICE, WHICH IS ON A RENTED PREMISES AND ALSO VARIOUS RETAIL OUTLETS, WHICH ARE ALSO IN RENTED PR EMISES. A TOTAL EXPENSES OF RS.1,19,99,523/- WAS INCURRED D URING THE YEAR ON THE SAME. SINCE THE ASSESSEE HAD DISCL OSED EACH AND EVERY FACT IN ITS RETURN OF INCOME, THERE WAS NO CONCEALMENT AND NOT FURNISHING OF ANY INACCURATE PARTICULARS LEADING TO LEVY OF PENALTY UNDER SECTIO N 271(1)(C) OF THE ACT. RELIANCE WAS PLACED ON A NUM BER OF JUDGMENTS OF VARIOUS HIGH COURTS AND BENCHES OF THE I.T.A.T. AFTER CONSIDERING THE SUBMISSION OF THE A SSESSEE, THE LEARNED CIT (APPEALS) HELD THAT THE ASSESSEE HA D DELIBERATELY CLAIMED THE IMPUGNED EXPENDITURE AS RE VENUE EXPENDITURE, WHICH WAS CLEARLY A CAPITAL EXPENDITUR E. NO PERSON OF ORDINARY PRUDENCE WOULD HAVE CLAIMED ITS EXPENDITURE AS REVENUE EXPENDITURE. IT CANNOT BE TREATED AS A GENUINE MISTAKE ON THE PART OF THE ASSESSEE AN D IN THIS WAY, THE PENALTY WAS CONFIRMED BY THE LEARNED CIT (APPEALS). 8. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT (APPEALS). HE SUBMITTED THAT SINCE THE RENOVATION WAS 4 MADE ON THE LEASE HOLD PREMISES, THE ASSESSEE WAS U NDER THE BELIEF THAT IT WAS A CAPITAL EXPENDITURE. THER EFORE, IT WAS TREATED AS REVENUE EXPENDITURE. THIS MAY LEAD TO DISALLOWANCE OF EXPENDITURE BUT IT CAN NEVER BE SAI D TO BE CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. RELIANCE WAS PLACED ON THE JUDGMENT O F THE HON'BLE APEX COURT IN THE CASE OF RELIANCE PETRO P RODUCTS VS. CIT, 322 ITR 158 (SC). 9. THE LEARNED D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THAT OF THE LEARNED CI T (APPEALS). 10. SPECIFIC RELIANCE WAS PLACED ON THE JUDGMENT O F THE HON'BLE APEX COURT IN THE CASE OF DHARMENDRA T EXTILE (2008) 306 ITR 277 (SC) AND THAT OF THE HON'BLE DEL HI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION (2010 ) 327 ITR 580 (DEL) 11. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSES SEE HAS INCURRED CERTAIN RENOVATION EXPENDITURE ON LEASE HO LD PREMISES AND CLAIMED THE SAME AS REVENUE EXPENDITUR E. THE EXPENDITURE DISALLOWED BY THE ASSESSING OFFICER HOLDING IT TO BE A CAPITAL EXPENDITURE, HAS BEEN C ONFIRMED TILL THE STAGE OF I.T.A.T. HOWEVER, IT IS ALSO A F ACT THAT IT IS NOT A CASE OF CONCEALMENT OF INCOME AS ALL THE F ACTS AND 5 FIGURES ON THE BASIS OF WHICH DISALLOWANCE HAS BEEN MADE ARE TAKEN BY THE ASSESSING OFFICER FROM THE RETURN FILED BY THE ASSESSEE ONLY. THIS IS ALSO NOT A CASE OF F URNISHING OF INACCURATE PARTICULARS OF INCOME SINCE NO PARTIC ULARS FILED IN RELATION TO RENOVATION EXPENSES ARE INACCU RATE. THE ASSESSEE HAS GIVEN THE CORRECT INFORMATION WITH REGARD TO RENOVATION EXPENSES. THIS IS JUST A MATT ER OF DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER AS THE ASSESSEE CONSIDERED THE EXPENDITURE TO BE REVENUE IN NATURE, WHILE THE ASSE SSING OFFICER HELD THE SAME AS CAPITAL IN NATURE. THE FA CT THAT THE RENOVATION WAS CARRIED OUT ON LEASED PREMISES A ND NOT ON OWN PREMISES OF THE ASSESSEE STRENGTHENS THE CAS E OF THE ASSESSEE THAT IT WAS ITS BONAFIDE BELIEF THAT T HE EXPENDITURE WAS REVENUE IN NATURE. IN THESE CIRCUMSTANCES, WE HEREBY DIRECT THE ASSESSING OFFIC ER TO DELETE THE PENALTY UNDER SECTION 271(1)(C) OF THE A CT IMPOSED ON THE SAID ADDITION. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF MARCH, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 8 TH MARCH, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6