A.C.I.T. C.C.-22, MUMBAI V. ASHAPURA VOLCLAY LTD., MUMBAI

ITA 8296/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70864 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-09-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 08-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Assessee Lawyers: HARISH N MOTIWALA
• Keywords: Business expenditure
• Section: 153A; 115JB; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . ! , '# ' $ BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 8296/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR: 2003-04 ./ I.T.A. NO. 8307/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR: 2004-05 ./ I.T.A. NO. 8308/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR: 2005-06 ./ I.T.A. NO. 8355/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR: 2006-07 ./ I.T.A. NO. 8309/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR: 2007-08 THE ASTT. COMMISSIONER OF INCOME TAX, CC-22, ROOM NO.403, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 % % % % / VS. M/S. ASHAPURA VOLCLAY LTD., JEEVAN UDYOG BLDG., 3 RD FLOOR, 278, D.N.ROAD, FORT, MUMBAI 400 001. ' '# ./ ( ./ PAN/GIR NO. : AAACA 9472H ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ') , '/ APPELLANT BY SHRI SURINDER JIT SINGH *+') 7 , ' /RESPONDENT BY SHRI HARISH N. MOTIWALA % 7 8# / DATE OF HEARING : 03/09/2013 9 & 7 8# / DATE OF PRONOUNCEMENT : 03/09/2013 ': / O R D E R PER BENCH: ALL THESE APPEALS ARE FILED BY THE REVENUE AND TH EY ARE DIRECTED AGAINST FIVE SEPARATE ORDERS PASSED BY LD. CIT(A)-39, MUMBAI DAT ED 30/09/2011 FOR ASSESSMENT YEARS 2003-04, 2004-05,2005-06, 2006-07 AND 2007-08 RESPECTIVELY. ./ I.T.A. NO. 8296/M/11 & OTHERS ( % % % % & & & & / ASSESSMENT YEARS: 2003-04 TO 2007-08 2 GROUNDS OF APPEAL IN ALL THE APPEALS ARE IDENTICAL EXCEPT DIFFERENCE IN FIGURES. FOR THE SAKE OF CONVENIENCE GROUNDS OF APPEAL IN I TA NO.8296/MUM/2011 READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO DELETE THE PENALTY LEV IED UNDER SECTION 271(1)(C) OF I.TT. ACT, 1961, OF RS.4,00,000/- WITHOUT APPRECIATING TH E FACT THAT THE ASSESSEE ADMITS THE ADDITIONAL INCOME NOT VOLUNTARILY BUT ONLY AFTE R SEARCH & SEIZURE ACTION UNDER SECTION 132 O THE I.T.ACT. 2. THE APPELLANT CRAVES TO LEAVE TO ADD, TO AMEND AND/OR ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 3. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROU NDS STATED ABOVE, THE ORDER OF CIT(A)-39, MUMBAI MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2. FOR OTHER ASSESSMENT YEARS THE FIGURES ARE AS U NDER: A.Y. 2004-05 - RS. 1 6.00 LACS A.Y.2005-06 - RS. 2 5.00 LACS A.Y 2006-07 - RS. 29.00 LACS A.Y.2007-08 - RS. 34.00 LACS. 3. IN RESPECT OF ASSESSMENT YEARS FROM 2004-05 TO 2 007-08 CONCEALMENT PENALTY HAS BEEN DELETED BY LD. CIT(A) ON ONE GRO UND THAT THE ADDITION ON WHICH CONCEALMENT PENALTY HAS BEEN LEVIED WAS NOT S UBJECT MATTER OF COMPUTATION OF INCOME UNDER SECTION 115JB OF THE IN COME TAX ACT, 1961(THE ACT) ON THE BASIS OF WHICH TAX HAS BEEN LEVIED UPON TH E ASSESSEE. FOR HOLDING SO LD. CIT(A) HAS RELIED UPON THE DECISION OF ITAT, MUMBAI IN THE CASE OF RUCHI STRIPS ALLOYS LTD., MUMBAI VS. DCIT, MUMBAI IN ITA NO. 694 0 &6941/MUM/2008 IN RESPECT OF ASSESSMENT YEARS 2003-04 AND 2005-06, WH EREIN FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NALWA SONS INVESTMENT LTD., 327 ITR 543 IT WAS HELD THAT WHEN COMPUTATION OF INCOME WAS MADE UNDER SECTION 115JB, AND THERE WAS LOSS UNDER THE NORMAL PROVISIONS, CONCEALMENT, IF ANY, DID NOT LEAD TO TAX EVASION AT ALL AND, THEREF ORE, PENALTY UNDER SECTION 271(1)(C) OF THE ACT COULD NOT BE IMPOSED. THIS IS THE SOLE GROUND ON WHICH LD. CIT(A) HAS DELETED THE CONCEALMENT PENALTY IN RESPE CT OF ASSESSMENT YEARS 2004- 05 TO 2007-08. HOWEVER, FOR THE SAKE OF COMPLETENE SS, THE FACTS LEADING TO LEVY OF CONCEALMENT PENALTY, BRIEFLY STATED ARE THAT ASS ESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF BLEACHING CLAY W HICH IS USED FOR REFINING ./ I.T.A. NO. 8296/M/11 & OTHERS ( % % % % & & & & / ASSESSMENT YEARS: 2003-04 TO 2007-08 3 EDIBLE OIL. A SEARCH ACTION WAS CARRIED OUT IN THE CASES OF ASSESSEES GROUP COMPANIES ON 20/02/2008. THE ASSESSEE WAS ONE OF T HE ENTITY COVERED BY THE SAID SEARCH ACTION. IN RESPONSE TO NOTICE UNDER SE CTION 153A THE ASSESSEE FILED RETURN OF INCOME DECLARING LOSS THEREIN UNDER THE NORMAL PROVISIONS AND INCOME UNDER SECTION 115JB. SOME ADDITIONAL INCOME WAS ALSO DECLARED BY THE ASSESSEE. AFTER SHOWING THAT INCOME THERE WAS A L OSS. THE AO COMPUTED THE INCOME AS PER PROVISIONS OF SECTION 115JB WHICH DID NOT INCLUDE THE INCOME ON WHICH CONCEALMENT PENALTY HAS BEEN LEVIED. 4. AFTER NARRATING THE FACTS LD. DR RELIED UPON THE ORDER PASSED BY AO. HOWEVER, LD. DR DID NOT DISPUTE TO THE FACT THAT IN THE COMPUTATION MADE UNDER SECTION 115JB THERE IS NO COMPONENT OF INCOME ON W HICH CONCEALMENT HAS BEEN LEVIED. HE ALSO DID NOT DISPUTE THAT TAX WHICH IS CHARGED TO INCOME TAX- ACT IS DETERMINED ON THE BASIS OF COMPUTATION MADE UNDER S ECTION 115JB AND AS PER NORMAL COMPUTATION THERE IS LOSS. 5. IN THIS VIEW OF THE SITUATION, AFTER HEARING BO TH THE PARTIES, AS THE ISSUE IS DIRECTLY COVERED BY THE AFOREMENTIONED DECISION OF HONBLE DELHI HIGH COURT, WHICH HAS BEEN FOLLOWED BY MUMBAI TRIBUNAL AND ALS O BY LD. CIT(A), IN ABSENCE OF ANY CONTRARY DECISION, WE DECLINE TO INTERFERE I N THE RELIEF GRANTED BY LD. CIT(A). WE, THEREFORE, DISMISS DEPARTMENTAL APPEAL S IN RESPECT OF ASSESSMENT YEARS 2004-05 TO 2007-08, WHICH ARE ITA NOS. 8307,8 308,8355 & 8309/MUM/2011. 6. NOW COMING TO ITA NO.8296/MUM/2011, IN THIS CASE PENALTY HAS BEEN LEVIED IN RESPECT OF AN ADDITION OF RS.10.00 LACS. IT IS ALSO MADE CLEAR THAT FOR THE PRESENT CASE THERE IS ONLY REGULAR COMPUTATION OF INCOME AND THERE IS NO COMPUTATION OF INCOME UNDER SECTION 115JB OF THE A CT. THE ASSESSEE HAS BEEN ASSESSED AT A LOSS OF RS.9,84,33,845/-. THE ASSESS EE RETURNED A LOSS OF RS.9,94,33,845/-. AFTER REDUCING THE INCOME OFFERE D BY THE ASSESSEE AT RS.10.00 LACS AS WAS DISCLOSED UNDER SECTION 132(4), THE F INAL LOSS IS ASSESSED AT RS.9,84,33,845/-. CONCEALMENT PENALTY OF RS.4.00 L ACS HAS BEEN LEVIED ON ./ I.T.A. NO. 8296/M/11 & OTHERS ( % % % % & & & & / ASSESSMENT YEARS: 2003-04 TO 2007-08 4 AFOREMENTIONED ADDITION OF RS.10.00 LACS. THE BASI S OF INCOME OFFERED BY THE ASSESSEE AS MENTIONED IN THE ORDER OF LD. CIT(A) I S AS FOLLOWS: A. ADDITIONAL INCOME ARISING OUT OF ADHOC DISALLO WANCES OUT OF BUSINESS EXPENDITURE CLAIMED IN VARIOUS YEARS. THE ASSESSEE COMPANY OFFERED A SUM OF RS.68.68 LAKS FOR VARIOUS ASSESSMENT YEARS BY WAY OF LIKELY OR PROBABLE ADHOC DISALLOWAN CES WHICH THE COMPANY MAY NOT BE ABLE TO SUBSTANTIATE FULLY. THE DISCLOSURE RELEVANT TO THE INSTANT ASSESSMENT YEAR IS RS.8 LAKHS. B. DISCLOSURE ON ACCOUNT OF LIKELY ERRORS OR OMISS IONS: THE ASSESSEE COMPANY OFFERED A SUM OF RS.20 LAKHS F OR VARIOUS ASSESSMENT YEARS IN ORDER TO COVER UP ANY ERRORS OR OMISSIONS. IT D ISCLOSED A SUM OF RS.2 LAKHS IN THE INSTANT ASSESSMENT YEAR. 7. BEFORE LD. CIT(A), IT WAS CONTENDED THAT THERE WAS ACTUALLY NO DISALLOWANCE ON BUSINESS EXPENDITURE AND ASSESSEE C OULD SUBSTANTIATE ALL EXPENSES INCURRED. THE AMOUNT OFFERED WAS NOT INTE NDED TO BE CAPITALIZED. THIS WAS AN ADHOC AMOUNT OFFERED FOR TAXES ON ACCOUNT OF LIKELY ERROR AND OMISSION AND WAS TO BUY PEACE AND TO AVOID LITIGATIONS. TH ERE WAS NO ERROR OR OMISSION IN CLAIMING EXPENDITURE AS THE ASSESSEE WAS ABLE TO ES TABLISH THE CORRECTNESS AND GENUINENESS OF THE EXPENDITURE. THUS IT WAS SUBMIT TED THAT IT DOES NOT WARRANT LEVY OF CONCEALMENT PENALTY. REFERENCE WAS MADE T O THE FOLLOWING DECISIONS TO CONTEND THAT ON SUCH ADDITION PENALTY CANNOT BE LEV IED. 1. HINDUSTAN STEEL LTD. VS. STATE OF ORISSA 83 ITR 26 (SC) 2. PUNE BENCH OF ITAT IN THE CASE OF KANBAY SOFTWA RE INDIA PVT. LTD. 3. DECISION OF HONBLE SUPREME COURT IN THE CASE O F RELIANCE PETRO PRODUCTS LTD. 7.1 IT WAS FURTHER CONTENDED THAT THE AFOREMENTIONE D OFFER WAS NEITHER IN PURSUANCE TO ANY DETECTION DURING THE SEARCH PROCEE DINGS NOR FROM ANY EMANATING SEIZED MATERIAL. FOR CONTENDING SO THE ASSESSEE PLACED RELIANCE ON VARIOUS DECISIONS WHICH ARE FOUND MENTIONED IN PARA 5.75 TO 5.8 OF THE ORDER OF LD. CIT(A). ON THESE SUBMISSIONS OF THE ASSESSEE, AFTER PERUSING THE FALL OUT OF SEARCH PROCEEDINGS, LD. CIT(A) HAS RETURNED A FIND ING THAT JUST TO HONOUR THE DECLARATION MADE DURING THE COURSE OF SEARCH PROCEE DINGS THE ASSESSEE HAD DISCLOSED AN AMOUNT OF RS.10.00 LACS. SUCH AMOUNT OF RS.10.00 LACS DOES NOT REPRESENT ANY UNDISCLOSED ASSET OR INCOME IN THE SE IZED MATERIAL AND SUCH ./ I.T.A. NO. 8296/M/11 & OTHERS ( % % % % & & & & / ASSESSMENT YEARS: 2003-04 TO 2007-08 5 FINDING OF LD. CIT(A) ARE RECORDED IN PARA 7.3 AND 7.3.1. ON THESE FACTS LD. CIT(A) HAS HELD THAT OFFER OF THE ASSESSEE OF RS.10 .00 LACS AS INCOME WAS BONAFIDE AND GENUINE. THERE IS NO SEIZED MATERIAL TO SUBST ANTIATE SUCH ADDITION. EXPLANATION 5A TO SECTION 271(1)(C) IS NOT ATTRACTE D. THE MAIN PROVISIONS OF SECTION 271(1)(C) IS ALSO NOT ATTRACTED AS THERE IS NO MATERIAL ON RECORD TO INDICATE THAT ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOME WITH REGARD TO A SUM OF RS. 10.00 LACS. THEREFORE, LD. CIT(A) HAS DELET ED THE PENALTY. REVENUE IS AGGRIEVED, HENCE, HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 8. AFTER NARRATING THE FACTS LD. DR RELIED UPON THE ORDER PASSED BY A.O. 9. ON THE OTHER HAND, LD. AR RELIED UPON THE FINDIN GS RECORDED BY LD. CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. LD. DR WAS NOT ABLE TO SHOW THAT THE A MOUNT OF RS.10.00 LACS RELATED TO ANY SEIZED MATERIAL FOUND DURING THE COU RSE OF SEARCH OR ANY DOCUMENT WAS THERE TO SUBSTANTIATE SUCH INCOME OFFERED BY TH E ASSESSEE, WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. IN THIS VIEW OF THE SITUATION, AS THERE IS NO MATERIAL TO CONTROVERT THE FINDINGS RECORDED BY LD . CIT(A), WE DECLINE TO INTERFERE IN THE RELIEF GRANTED BY HIM. THEREFORE, WE UPHOLD THE ORDER OF LD. CIT(A) AND APPEAL FILED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, ALL THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/09/2013 . ': 7 & #' ; <%= 03/09/2013 7 > SD/- SD/- ( SANJAY ARORA) (I.P.BANSAL) /ACCOUNTANT MEMBER '# /JUDICIAL MEMBER MUMBAI; <% DATED 03/09/2013 ./ I.T.A. NO. 8296/M/11 & OTHERS ( % % % % & & & & / ASSESSMENT YEARS: 2003-04 TO 2007-08 6 ': ': ': ': 7 77 7 *8?@ *8?@ *8?@ *8?@ A'@&8 A'@&8 A'@&8 A'@&8 / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. B ( ) / THE CIT(A)- 4. B / CIT 5. @C> *8% , , / DR, ITAT, MUMBAI 6. >D E / GUARD FILE. ':% ':% ':% ':% / BY ORDER, +@8 *8 //TRUE COPY// F FF F / G G G G (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . % . .VM , SR. PS