M/s. Hotel Saravana Bhavan, CHENNAI V. ACIT, CHENNAI

ITA 81/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4624 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 20-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 271(1)(c); 154; 15

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI B BENCH, CHENNAI. BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER & SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A. NO. 81/MDS/2010 ASSESSMENT YEAR: 2006-07 M/S. HOTEL SARAVANA BHAVAN, 19, VADAPALANI ANDAVAR KOIL STREET, VADAPALANI, CHENNAI 600 026. [PAN:AABFH3049M] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE III, CHENNAI 600 034. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.S. JAYAKUMAR REVENUE BY : SHRI P.B. SEKARAN ORDER PER U.B.S. BEDI, J.M. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE LD. CIT(A) VIII, CHENNAI DATED 14.12.2009 RELEVANT TO T HE ASSESSMENT YEAR 2006-07, WHEREBY CONFIRMATION OF THE PENALTY OF RS.5,89,240/ - IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) HAS BEEN CHALLENGED . 2. FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSING OFFICER HAS ADDED A SUM OF RS.19,64,131/- TOWARDS INTEREST PAID ON LOAN, TR EATING IT AS CAPITAL IN NATURE AS AGAINST THE CLAIM OF THE ASSESSEE AS INTEREST DEDUC TION ALONG WITH THE RETURNED INCOME OF RS.3,19,46,510/- AND AFTER ADDING VARIOUS ITEMS, FINALLY, THE ASSESSING OFFICER ARRIVED AT ASSESSED INCOME AT RS.3,63,96,64 0/-. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE ALSO INITIA TED WHILE COMPLETING THE ASSESSMENT ORDER DATED 31.12.2008. SUBSEQUENTLY, TH E ASSESSING OFFICER HAS LEVIED PENALTY OF RS.5,89,240/- AS THE ASSESSEE HAS CLAIMED INTEREST PAID AS ITA NO.81/MDS/10 2 REVENUE EXPENDITURE AND THE EXPENDITURE A SUCH IS C APITAL IN NATURE, AS PER VERSION OF THE ASSESSEE FIRM ITSELF. 3. AGAINST SUCH PENALTY ORDER, THE ASSESSEE TOOK U P THE MATTER IN APPEAL AND SUBMITTED BEFORE THE FIRST APPELLATE AUTHORITY THAT THE FIRM HAS VOLUNTARILY OFFERED RA.19,64,131/-, WHICH WAS INADVERTENTLY INCLUDED AS REVENUE EXPENDITURE INSTEAD OF CAPITALIZATION OF SAME AND PLEADED FOR DELETION OF THE PENALTY LEVIED, TAKING A PLEA THAT THE ASSESSEE IS RUNNING A BIG RESTAURANT CHAIN WITH A TURNOVER OF ABOUT RS.94.51 CRORES. IN THE ASSESSMENT YEAR, THOUGH THE ASSESSING OFFICER HAS DISALLOWED THE INTEREST OF RS.19,64,131/- TREATING THE SAME AS CAPITAL IN NATURE, HE DID NOT GIVE DEDUCTION TOWARDS DONATION AND DEPR ECIATION. LATER ON, THE ASSESSING OFFICER HAS PASSED ORDER UNDER SECTION 15 4 OF THE ACT GRANTING RELIEF FOR DONATION OF RS.4.86 LAKHS AND DEPRECIATION OF R S.1,23,207/-. SO, IT WAS PLEADED FOR DELETION OF PENALTY. 4. THE LD. CIT(A), WHILE CONSIDERING AND DISCUSSIN G THE ISSUE ABOUT LEVY OF PENALTY FROM PARA 3.3 TO 3.9, HAS CONCLUDED TO CONF IRM THE PENALTY AS PER PARA 3.10, WHICH IS REPRODUCED HERE UNDER: 3.10 FOR LEVYING PENALTY, TWO CONDITIONS VIZ. (A) FURNISHING OF INACCURATE PARTICULARS AND (B) CONCEALMENT OF INCOME ARE TO BE SEEN. IN THE INSTANT CASE, IT IS VERY CLEAR THAT, THE APPELLANT IS INTEN T TO MISLEAD THE REVENUE INTO ACCEPTING ITS RETURN FOR AND INCOME OFFERED FOR TAX ATION WHICH IS LESSER THAN THE INCOME ACTUALLY EXIGIBLE TO TAX. BY CLAIMING RS .2.44 CRORES AS DEDUCTION IN THE P&L ACCOUNT ALONG WITH RS.19,64,131 WHICH IS NOT SUPPOSED TO BE DEDUCTED AS DEDUCTION IN THE P&L A/C, BUT IT HAS CL AIMED. BY DOING THIS CLAIM, IT HAS FILED INACCURATE PARTICULARS. SIMILAR LY, WHAT LEGALLY IT IS ELIGIBLE TO GET RS.1,23,207 VIDE REVISION ORDER U/S 154 OF THE ACT DATED 27.02.2009 MADE BY THE LEARNED AO, WHEREAS, THE APP ELLANT CLAIMED THIS RS.19,64,131 AS DEDUCTION WHICH LEADS TO SUPPRESSIO N OF INCOME. THE ABOVE TWO FACTS CLEARLY INDICATES THAT THE APPELLANT HAS CONCEALED THE PARTICULARS OF ITS INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME VIDE SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. ACCORDINGLY, I AM OF THE OPINION ITA NO.81/MDS/10 3 THAT, THE LEARNED AO HAS RIGHTLY LEVIED PENALTY OF RS.5,89,240 U/S 271(1)(C) OF INCOME TAX ACT, 1961 AND THE PENALTY IS CONFIRME D. 5. STILL AGGRIEVED, THE ASSESSEE HAS FILED FURTHER APPEAL BEFORE THE TRIBUNAL AND IT WAS CONTENDED THAT THE ORDER OF THE LD. CIT( A) IS NOT ONLY CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE, HE HAS ALSO ER RED IN HOLDING THAT THE ASSESSEE HAS MISLEAD THE REVENUE INTO ACCEPTING THE RETURN OF INCOME FILED BY IT AND FURTHER IN HOLDING THAT THE CLAIM OF DEDUCTION MADE IN THE P&L ACCOUNT IS NOT SUPPOSED TO BE SO DEDUCTED HENCE, THE ASSESSEE HAS FILED INACCURATE PARTICULARS WARRANTING LEVY OF PENALTY UNDER SECTION 271(1)(C). FURTHER, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE HAS CLAIMED AN H IGHER AMOUNT OF RS.19,64,131/- INSTEAD OF ELIGIBLE AMOUNT OF RS.1,2 3,207/- ALLOWED UNDER SECTION 154 AND THIS AMOUNTS TO A SUPPRESSION OF INCOME. WH EREAS, AS PER AR OF THE ASSESSEE, IT HAS VOLUNTARILY CHANGED/MODIFIED ITS C LAIM WITH REGARD TO THIS AMOUNT, WHICH WAS SHOWN AND INCLUDED AS REVENUE EXPENDITURE EARLIER, BY AGREEING FOR CAPITALIZING IT DURING ASSESSMENT PROC EEDINGS IN ORDER TO GET BENEFIT IN NUMBER OF YEARS THAN IN ONE YEAR ON THE SAME MAT ERIAL. SINCE NOTHING HAS BEEN SUPPRESSED, CONCEALED OR DETECTED AND NOR TH ERE IS ANY ADDITIONAL INCOME FOUND OR DETECTED, AND ASSESSEES ACTION HAD ALL AL ONG BEEN BONAFIDE AND MOREOVER, THERE WAS ALSO TWO VIEWS POSSIBLE ON THIS ISSUE, HENCE IT CANNOT BE SAID THAT THE PENAL PROVISIONS ARE ATTRACTED IN THE INSTANT CASE. IT WAS THUS, PLEADED WHILE RELYING UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS (P) LTD. [2010] 322 I TR 158 (SC) TO STRESS THE POINT THAT IF SOME WRONG OR NON-ALLOWABLE CLAIM IS MADE, IT DOES NOT ATTRACT PENALTY AND SINCE THERE WAS NO INTENDMENT EFFECT ON THE PART OF THE ASSESSEE FOR OMITTING THE AMOUNT AND DURING THE ASSESSMENT PROCE EDINGS ITSELF THE ASSESSEE ITA NO.81/MDS/10 4 HAS VOLUNTARILY SOUGHT TO INCLUDE SUCH AMOUNT INTO INCOME AND RELIANCE IN THIS REGARD HAS BEEN PLACED IN THE CASE OF CIT V. SSP LT D. [2010] 189 TAXMAN 282 (P&H) AND ALL OTHER DETAILS AND MATERIAL FACTS WERE VERY MUCH THERE IN THE AUDITED ACCOUNT, THERE WAS NO CASE FOR PENALTY, WHI CH HAS WRONGLY BEEN LEVIED AND UNJUSTIFIABLY BEEN CONFIRMED BY THE LD. CIT(A). IT WAS, THUS PRAYED FOR DELETION OF IMPUGNED PENALTY IMPOSED BY THE ASSESSI NG OFFICER AND CONFIRMED BY THE LD. CIT(A). 6. THE LD. DR SUBMITTED THAT THERE IS CLEAR MANDAT E IN THE ACT AS CONTAINED UNDER SECTION 36(1)(III) THAT SUCH EXPENDITURE WERE TO BE CAPITALIZED AND NOT TO BE DEDUCTED FROM INCOME OF THE ASSESSEE AND SINCE THE ASSESSEE HAS OMITTED TO INCLUDE SUCH AMOUNT AS CAPITAL EXPENDITURE AND ONLY DURING THE ASSESSMENT PROCEEDINGS HAS AGREED FOR TREATING IT AS CAPITAL E XPENDITURE, THEREFORE, IT IS A FIT CASE FOR IMPOSING PENALTY. BY RELYING UPON THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA AND OTHERS V. D HARMENDRA TEXTILES PROCESSORS AND OTHERS [2008] 306 ITR 277, IT WAS PL EADED FOR CONFIRMATION OF THE IMPUGNED ORDER. 7. AFTER HAVING HEARD BOTH THE SIDES AND CONSIDERI NG THE MATERIAL ON RECORD AS WELL AS PRECEDENTS RELIED UPON BY THE RIVAL SIDE S, WE FIND IT AS A MATTER OF FACT, THAT THE ASSESSEE DID NOT INCLUDE RS.19,64,131/- TO WARDS INTEREST PAID ON LOAN AS CAPITAL EXPENDITURE AND THE ASSESSING OFFICER ADDED THE SAME, WHILE FRAMING ASSESSMENT, ON ASSESSEES HAVING OFFERED TO CAPIT ALIZE SUCH AMOUNT IN ORDER TO GET BENEFIT IN NUMBER OF YEARS THEN IN ONE YEAR. SO THERE IS NO DISPUTE THAT THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS HAS OF FERED RS.19,64,131/- TO BE CAPITALIZED, WHICH WAS STATED TO HAVE BEEN INCLUDED AS REVENUE EXPENDITURE ITA NO.81/MDS/10 5 EARLIER IN ORDER TO GET BENEFIT NOT IN ONE YEAR BU T IN NUMBER OF YEARS WHEN IT HAS NOT OFFERED OR SURRENDERED ANY ADDITIONAL INCOME A ND IS STATED TO HAVE MODIFIED ITS CLAIM AND THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY ASSESSEE IN ITS RETURN, WERE INCORRECT OR FALSE, THEREFORE, CONSID ERING THE ENTIRETY OF THE FACTS, AS BROUGHT OUT AND NOT DISPUTED BY THE LD. DR AND MATE RIAL ON RECORD, WE ARE OF THE OPINION THAT THE PENALTY IN SUCH CIRCUMSTANCES IS N OT LEVIABLE IN THIS CASE. AS SUCH, WHILE ACCEPTING THE APPEAL OF THE ASSESSEE, W E DIRECT TO DELETE THE IMPUGNED PENALTY IMPOSED BY THE ASSESSING OFFICER A ND CONFIRMED BY THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE GETS ACCEPTED. ORDER PRONOUNCED ON 28.07.2011. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER VM/- DATED : 28.07.2011. COPY TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.