SONAL ROPES P. LTD, MUMBAI V. ITO 8(3)(2), MUMBAI

ITA 8171/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8257 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2004-2005
• Appeal Filed On: 25-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K R LAKSHMINARAYAN
• Keywords: Depreciation; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 8171/MUM/2010 (ASSESSMENT YEAR: 2004-05) M/S. SONAL ROPES P. LTD. INCOME TAX OFFICER - 8(3) (2) PLOT NO. 28/1A, VILL. EXUTAKA AAYAKAR BHAVAN, M.K. ROAD NEXT TO ADOSI ROAD, KAPOLI PEN VS. MUMBAI 400020 KAPOLI 410203 PAN - AAACS 6292 F APPELLANT RESPONDENT APPELLANT BY: SHRI K.R. LAKSHMINARAYAN RESPONDENT BY: SHRI DINESH KUMAR DATE OF HEARING: 12.11.2012 DATE OF PRONOUNCEMENT: 16.11.2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-18, MUMBAI DATED 07.09.2010. 2. ASSESSEE IS CONTESTING THE LEVY OF PENALTY UNDER SE CTION 271(1)(C) ON DISALLOWANCE MADE ON OCEAN FREIGHT CHARGES OF ` 4,23,000/- AND FOREIGN TRAVEL EXPENSES OF ` 23,01,504/- ON WHICH PENALTY WAS CONFIRMED BY THE CIT(A) WHILE DELETING THE PENALTY ON OTHER AMOUNTS. 3. BRIEFLY STATED, THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE, PURCHASE AND SALE OF HDPE PIPES AND OTHER PRODUCTS. THE AO NOTICED THAT ASSESSEE CLAIMED AM AMOUNT OF ` 2,32,000/- ON ACCOUNT OF OCEAN FREIGHT CHARGES AND AN AMOUNT OF ` 23,01,504/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES WHEN THE ASSESSEE IS NOT IN EXPORT BUSINES S AND ALL THE GOODS ARE SOLD TO SISTER CONCERN. FOR THESE REASONS, THE EXPE NDITURE CLAIMED WAS DISALLOWED. IN THE QUANTUM APPEAL, THE ABOVE AMOUNT S WERE CONFIRMED BY THE LEARNED CIT(A) AND THE APPEAL PREFERRED BY THE ASSESSEE BEFORE THE ITAT ITA NO. 8171/MUM/2010 M/S. SONAL ROPES P. LTD. 2 WAS DISMISSED FOR NON-PROSECUTION. THE AO LEVIED PE NALTY NOT ONLY ON THE ABOVE TWO AMOUNTS BUT ALSO ON OTHER DISALLOWANCES I NCLUDING DISALLOWANCE ON DEPRECIATION ON A TOTAL AMOUNT OF ` 49,35,445/-. THE CIT(A) DELETED THE PENALTY OF THE BALANCE AMOUNTS WHEREAS HE CONFIRMED THE AMOUNT ON THE ABOVE TWO DISALLOWANCES. HENCE THE ASSESSEE IS AGGR IEVED. 4. AT THE OUTSET IT WAS SUBMITTED THAT ON SIMILAR DISA LLOWANCES MADE IN A.Y. 2003-04 THE ITAT, VIDE ITA NO. 2635/MUM/2009 D ATED 08.06.2012 DELETED THE PENALTY HOLDING AS UNDER: - 8. WE HAVE CONSIDERED THE ARGUMENTS AND PERUSED TH E ORDERS OF THE LOWER AUTHORITIES. IT IS NOT IN DISPUTE THAT THE EX PENSE WERE DEBITED BY THE APPELLANT IN ITS BOOKS. THOUGH THE EXPENSES WER E INCURRED FOR THE BENEFIT OF THE BUSINESS OF ITS SISTER CONCERN M/S. SONAL IMPEX LTD., WE FIND THAT THE APPELLANT HAS ACTUALLY INCURRED THESE EXPENSES AND CONSIDERING THE NATURE OF THE APPELLANTS BUSINESS AND THE BUSINESS OF ITS SISTER CONCERN WE FIND THAT THE EXPENSES WERE A CTUALLY INCURRED ON THE GROUNDS OF COMMERCIAL EXPEDIENCY. AS THE A.O. H AS DISALLOWED THIS CLAIM OF EXPENSES, SUCH DISALLOWANCE ISPO FACTOR CA NNOT BE A GROUND FOR THE LEVY OF PENALTY U/S. 271(1)(C) OF THE I.T. ACT. OUR VIEW FINDS SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD. REPORTED IN 322 ITR 158 (SC), WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT REJ ECTING THE CLAIM OF THE ASSESSEE CANNOT BE A GROUND FOR LEVY OF PENALTY . RESPECTFULLY, FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE SUPREM E COURT, THE PENALTY LEVIED AT ` 9,46,310/- IS DELETED. THE FINDINGS OF THE LD. CIT( A) ARE REVERSED. 5. SINCE THE FACTS ARE SIMILAR AND THE DISALLOWANCES A RE ALSO BEING SIMILAR, RESPECTFULLY FOLLOWING THE COORDINATE BENC H DECISION, WE DELETE THE PENALTY ON THE ABOVE TWO AMOUNTS. WE REVERSE THE OR DER OF THE LEARNED CIT(A) AND ALLOW ASSESSEES GROUNDS. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2012. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 16 TH NOVEMBER, 2012 ITA NO. 8171/MUM/2010 M/S. SONAL ROPES P. LTD. 3 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 18, MUMBAI 4. THE CIT 8, MUMBAI CITY 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.