M/s Transcon Industries, Hyderabad V. ACIT, Hyderabad

ITA 823/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66124 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-07-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Keywords: Corroborative evidences
• Section: 14A; 80IB; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.823/HYD/2010 ASSESSMENT YEAR : 2005-06 M/S. TRANSCON INDUSTRIES, HYDERABAD. .... APPELLANT PAN: AADFT 1744 M VS. ASST.. CIT, CIRCLE-6(1), HYDERABAD. RESPONDENT APPELLANT BY : SHRI A. SRINIVAS RESPONDENT BY : SHRI B.V. PRASAD REDDY DATE OF HEARING : 04-06-2012 DATE OF PRONOUNCEMENT : 03-08-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 12-3-2010 OF CIT (A), GUNTUR PASSED IN ITA NO.0122/CIT(A)/GNT/2009-10 AND IT PERTAINS TO THE A SSESSMENT YEAR 2005-06. 2. BRIEFLY THE FACTS ARE, THE ASSESSEE IS ENGAGED I N THE BUSINESS OF MANUFACTURE OF ELECTRICAL EQUIPMENTS AN D TRANSFORMERS. FOR THE ASSESSMENT YEAR UNDER DISPUT E THE ASSESSEE FILED ITS RETURNS OF INCOME CLAIMING DEDUC TION OF AN 2 ITA NO. 823 OF 2010 TRANSCON INDUSTRIES, HYDERABAD. AMOUNT OF RS.11,75,889/- U/S 80IB OF THE ACT AS A S SI UNIT. IN COURSE OF THE ASSESSMENT PROCEEDING THE ASSESSING O FFICER FOUND THAT AS PER THE PERMANENT REGISTRATION CERTIFICATE ISSUED BY THE INDUSTRIES DEPARTMENT, GOVT. OF ANDHRA PRADESH THE ASSESSEE COMMENCED ITS PRODUCTION ON 15-3-2003. WHEREAS SEC. 80IB (II) PRESCRIBES THAT THE SSI UNIT SHOULD HAVE STARTED PR ODUCTION WITHIN THE PERIOD BEGINNING ON 1-4-1995 AND ENDING ON 31-3 -2002. THE ASSESSEE EXPLAINED BEFORE THE AO THAT THE PARTNERSH IP FIRM WAS FORMED ON 15-11-2001 AND AGREEMENT FOR RENT WAS SIG NED BY THE FIRM ON 1-12-2001. THE ASSESSEE ALSO PRODUCED SOME INVOICES CLAIMING THAT IT HAS STARTED SELLING ON 31-1-2002 A ND 16-2-2002. THE AO HOWEVER COMPLETED THE ASSESSMENT DISALLOWING DEDUCTION CLAIMED U/S 80IB. THE ASSESSEE CHALLENGED THE DISA LLOWANCE BY FILING AN APPEAL BEFORE THE CIT (A). THE CIT (A) A LSO REJECTED THE CLAIM MADE BY THE ASSESSEE AND SUSTAINED THE DISALL OWANCE. AS A RESULT OF DISALLOWANCE OF DEDUCTION CLAIMED U/S 80I B THE AO INITIATED PROCEEDING FOR IMPOSING PENALTY U/S 271(1 )(C) ALLEGING FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN RESPONSE TO THE NOTICE ISSUED BY THE AO THE ASSESSEE EXPLAINED THAT IT HAS STARTED MANUFACTURING ACTIVITIES DURING THE FINANCIAL YEAR 2001-02. IN SUPPORT OF SUCH CLAIM THE ASSESSEE SUBMITTED DEED O F PARTNERSHIP DATED 15-11-2001, RENTAL AGREEMENT OF THE PREMISES DATED 1-12- 2001 AND COPIES OF INVOICES FOR SALE EFFECTED IN TH E FINANCIAL YEAR 2001-02. THE AO CAME TO CONCLUSION THAT THE ASSESSE ES CLAIM OF MANUFACTURE DURING THE FINANCIAL YEAR 2001-02 IS WI THOUT ANY SUPPORTING EVIDENCE. ON THE CONTRARY THE PERMANENT REGISTRATION CERTIFICATE ISSUED BY THE DEPARTMENT OF INDUSTRIES, GOVERNMENT OF ANDHRA PRADESH MENTIONED THE DATE OF PRODUCTION AS 15-3-2003 WHICH WAS VERY MUCH IN THE KNOWLEDGE OF THE ASSESSE E AND HE ASSESSEE HAS DELIBERATELY FURNISHED INACCURATE PART ICULARS OF HIS INCOME. ON THE AFORESAID CONCLUSION THE AO IMPOSED PENALTY AT 3 ITA NO. 823 OF 2010 TRANSCON INDUSTRIES, HYDERABAD. 200% AMOUNTING TO RS.19,95,770.00 U/S 271(1)(C). T HE ASSESSEE CHALLENGED THE IMPOSITION OF PENALTY BY FILING AN A PPEAL BEFORE THE CIT (A). IT IS SEEN FROM THE ORDER OF THE CIT (A) T HAT IN SPITE OF AVAILING SEVERAL ADJOURNMENTS NO ONE ON BEHALF O TH E ASSESSEE APPEARED BEFORE THE CIT (A) ON THE LAST DATE FIXED ON 5-3-2010. THE CIT (A) THEREFORE PROCEEDED TO DECIDE THE APPEA L EX PARTE. THE CIT (A) ALSO RELYING UPON THE PERMANENT REGISTR ATION CERTIFICATE CONCLUDED THAT THE ASSESSEE HAD COMMENC ED PRODUCTION AFTER THE CUT OFF DATE PROVIDED U/S 80IB (3). THE CIT (A) HELD THE ASSESSEE BEING CONSCIOUS OF THIS FACT HAS FILED THE RETURN CLAIMING DEDUCTION U/S 80IB, THEREFORE IT IS A CLEAR CASE OF FILING INACCURATE PARTICULARS OF INCOME INVITING LE VY OF PENALTY. THE CIT (A) HOWEVER REDUCED THE PENALTY TO 100% WHI CH IS RS.9,97,885.00/-. 3. THE LEARNED AR SUBMITTED BEFORE US THAT THE CLAI M OF DEDUCTION U/S 80IB MADE BY THE ASSESSEE WAS GENUINE AND DISALLOWANCE WAS MADE BY REJECTING THE EVIDENCES SU BMITTED BY THE ASSESSEE. THE LD. AR FAIRLY SUBMITTED BEFORE US THAT THE DISALLOWANCE HAS ALSO BEEN CONFIRMED BY THE ITAT IN ITS ORDER DATED 16-7-2009 PASSED IN ITA 354/HYD/2009 AND ALSO PRODUCED A COPY OF THE ORDER. THE LD. AR SUBMITTED THAT DIS ALLOWANCE OF A DEDUCTION CLAIMED WILL NOT LEAD TO THE CONCLUSION T HAT INACCURATE PARTICULARS OF INCOME HAS BEEN FURNISHED SO AS TO IMPOSE PENALTY U/S 271(1)C). THE LD. AR SUBMITTED THAT FOR IMPOSI NG PENALTY U/S 271(1)(C) THE AO MUST BE SATISFIED THAT THERE IS A DELIBERATE ACT ON THE PART OF THE ASSESSEE IN CONCEALING HIS INCO ME OR FURNISHING INACCURATE PARTICULARS OF HIS INCOME. IN SUPPORT OF HIS CONTENTION THE LD. AR RELIED UPON THE JUDGMENT OF H ONBLE SUPREME COURT IN CASE OF CIT VS. RELIANCE PETRO PRO DUCTS PVT. LIMITED REPORTED IN 322 ITR 158 (SC). 4 ITA NO. 823 OF 2010 TRANSCON INDUSTRIES, HYDERABAD. 4. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED THE IMPOSITION OF PENALTY. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS A FACT THAT THE ASSESSEE HAS CLAI MED DEDUCTION U/S 80IB OF THE ACT. EVEN THOUGH THE ASSESSEE HAD SUBMITTED SOME EVIDENCE IN SUPPORT OF ITS CLAIM THAT PRODUCTI ON COMMENCED DURING THE FINANCIAL YEAR 2001-02 THE SAME WERE NOT FOUND TO BE ADEQUATE OR ACCEPTABLE BY THE AO LEADING TO THE DIS ALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE. HOWEVER, THIS B Y ITSELF CANNOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS A FACT THA T THE PERMANENT REGISTRATION CERTIFICATE ON THE BASIS OF WHICH THE DISALLOWANCE WAS MADE WAS SUBMITTED BY THE ASSESSEE ITSELF ALONG WI TH THE RETURN OF INCOME. HAD THE ASSESSEES INTENTION WOULD HAVE BEEN TO CONCEAL FACTS OR FURNISHING INACCURATE PARTICULARS, HE WOULD NOT HAVE SUBMITTED THE PERMANENT REGISTRATION CERTIFICA TE WHICH WAS ULTIMATELY USED AGAINST HIM FOR DISALLOWING THE CLA IM OF DEDUCTION. ASSESSMENT PROCEEDING AND PROCEEDING FO R IMPOSITION OF PENALTY U/S 271(1)(C) ARE TWO DISTINCT AND SEPAR ATE PROCEEDINGS. THEREFORE, AN ADDITION MADE IN THE AS SESSMENT AND I SUSTAINED IN APPEAL CANNOT IPSO FACTO LEAD TO THE INFERENCE THAT THERE HAS BEEN CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE HONBLE SUPREME COURT I N CIT VS. RELIANCE PETRO PRODUCTS PVT. LIMITED (SUPRA) HAS OB SERVED THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM M ADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTI CULARS. THE HONBLE SUPREME COURT HELD IN THE FOLLOWING MANNER: - 5 ITA NO. 823 OF 2010 TRANSCON INDUSTRIES, HYDERABAD. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF T HE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME,. IT WAS, THEREFORE, REITERATED BEFORE US THAT THE AO HAD COR RECTLY REACHED THE CONCLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORREC T; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITH ER OF THE TWO FORMS; (I) AN ITEM OF RECEIPT MAY BE SUPPRE SSED FRAUDULENTLY; (II) AN ITEM OF EXPENDITURE MAYBE FAL SELY (OR IN AN EXAGGERATED AMOUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE , BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONES INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURNS, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT O F INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES T O ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT AC CEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSEL F WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY U/S 271(1) (C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE O F EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY U/S 27 1(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATU RE. 6 ITA NO. 823 OF 2010 TRANSCON INDUSTRIES, HYDERABAD. CONSIDERING THE FACTS OF THE PRESENT APPEAL IN THE LIGHT OF THE AFORESAID JUDGMENT OF THE HONBLE SUPREME COURT, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE VISITED WITH PENAL TY U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF ITS INCOME AS ALLEGED BY THE AO. WE THEREFORE DIRECT THE AO TO D ELETE THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 3 - 8-2012. SD/- SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 3 RD AUGUST, 2012. COPY TO:- 1) C/O V. SRIDHAR & CO., CAS, GEETA APARTMENTS, SANTOSHNAGAR COLONY, MEHDIPATNAM, HYDERABAD. 2) ACIT, CIRCLE-6(1), HYDERABAD.. 3) THE CIT (A), GUNTUR. 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 7 ITA NO. 823 OF 2010 TRANSCON INDUSTRIES, HYDERABAD.