MAYUR LEATHER PRODUCTD LTD., Jaipur V. ACIT, Jaipur

ITA 840/JPR/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5374 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 08-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P R MEENA JCIT DHK
• Assessee Lawyers: MADHUKAR GARG
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 840/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 . M/S. MAYUR LEATHER PRODUCTS., G-60-62, 65-70, JAITPURA INDUSTRIAL ESTATE, JAITPURA, JAIPUR. CUKE VS. THE ACIT, CIRCLE-7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCM 1848A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MADHUKAR GARG (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI P.R. MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 09.03.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 29/04/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORD ER OF LD. CIT (A)-III, JAIPUR DATED 30.08.2013 FOR THE ASSESSMENT YEAR 2006-07. T HE GROUNDS RAISED IN THE ASSESSEES APPEAL ARE AS UNDER :- 1. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN HO LDING THAT THE APPELLANTS CASE IS OF FURNISHING OF INACCURATE PARTICULARS OF INCOME IN AS MUCH AS CLAIM TO THE EX TENT OF RS. 6,97,610/- WAS WRONGLY MADE. THE SAID FINDING I S ILLEGAL AND UNJUSTIFIED. 2. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN HOLD ING THAT IN APPELLANTS CASE ACTUAL INCURRENCE OF SUCH EXPENSES/GENUINE PAYMENTS FOR BUSINESS PURPOSE IS I TSELF NOT PROVED AND HENCE, IT IS A FIT CASE FOR LEVY OF PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE IT ACT. THE SAID FINDING IS ILLEGAL AND UNJUSTIFIED. 2 ITA NO. 840/JP/2013 MAYUR LEATHER PRODUCTS LTD. VS. ACIT 3. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN CONF IRMING PENALTY OF RS. 2,34,816/- IMPOSED BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 271(1)(C) O F THE ACT. IMPOSITION OF PENALTY IS ILLEGAL AND UNJUSTIFI ED. 2. BRIEFLY THE FACTS IN THIS CASE ARE THAT THE ASSE SSEE IS A PUBLIC LIMITED COMPANY AND ASSESSMENT WAS COMPLETED BY THE ACIT, CIRCLE-7, JAIPUR UNDER THE PROVISIONS OF SECTION 143(3) VIDE ORDER DATED 26.12.2008. WHILE C OMPLETING THE ASSESSMENT THE ASSESSING OFFICER HAS MADE CERTAIN ADDITIONS/DISALL OWANCES AND ASSESSED THE INCOME AT RS. 2,08,85,790/-. 2.1. THE ASSESSEE HAD PREFERRED AN APPEAL AGAINST T HE SAID ORDER AND THE LEARNED CIT (A)-III, JAIPUR HAD DELETED ALL THE ADDITIONS A ND DISALLOWANCES AND HAD CONFIRMED THE ADDITION ONLY WITH REGARD TO DISALLOW ANCE OF RS. 6,97,610/-. THE ASSESSEE AND THE DEPARTMENT HAD PREFERRED APPEAL BE FORE THE HONBLE ITAT, JAIPUR BENCH AND THE APPEAL OF THE ASSESSEE AS WELL AS THE DEPARTMENT WAS DISMISSED BY THE HONBLE ITAT VIDE THEIR ORDER DATED 30 TH SEPTEMBER,2010. 3.2. THE ASSESSING OFFICER HAS ISSUED A SHOW CAUSE NOTICE IN CONNECTION WITH PENALTY PROCEEDINGS AND THE ASSESSEE HAS FILED A RE PLY VIDE LETTER DATED 17.3.2011. HOWEVER, THE ASSESSING OFFICER HAS IMPOSED A PENALT Y OF RS. 2,34,816/- IN RESPECT OF ADDITION CONFIRMED BY ITAT AND THE BASIS OF IMPOSIT ION OF PENALTY IS AS UNDER :- IT IS RELEVANT TO MENTION HERE THAT ASSESSEES CLA IM THAT HE FURNISHED ALL THE RELEVANT DETAILS DURING THE COURSE OF ASSESSMENT IS NOT TRUE BECAUSE IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HIMSELF POIN TED OUT THAT THE ASSESSEE COULD NOT FURNISH NECESSARY EVIDENCE REGARDING THE ADDITION MADE UNDER THE HEAD LABORATORY AND TESTING DEVELOPMENT CHARGES. FURTHER, THE CASE LAWS RELIED UPON BY THE LEARNED A/R ARE NOT OF ANY HELP IN APPELLANTS CASE BECAUSE 3 ITA NO. 840/JP/2013 MAYUR LEATHER PRODUCTS LTD. VS. ACIT THE FACTS OF THIS CASE ARE QUITE DIFFERENT FROM THE CASE RELIED UPON BY THE ASSESSEE. THEREFORE, ASSESSEE IS LIABLE TO PENALTY U/S 271(1)(C) OF THE IT ACT. KEEPING IN VIEW THE ABOVE, I IMPOSE A PENALTY OF RS . 2,34,816/- UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE IT ACT .. . 4. THE LD. A/R FOR THE ASSESSEE SUBMITTED THAT THER E IS NO JUSTIFICATION FOR LEVY OF ANY PENALTY. IT WAS SUBMITTED THAT SHRI R.K. PODDAR , MANAGING DIRECTOR OF THE COMPANY HAD GONE ON TRIP TO MIDDLE EAST COUNTRIES A ND A SUM OF RS. 8,07,800/- WAS DEBITED TO THE FOREIGN TRAVELLING ADVANCES ON 14.12 .2005 THROUGH JOURNAL ENTRY IN RESPECT OF FOREIGN CURRENCY PURCHASE VIDE BILL NO. 2997 DATED 3.12.2005 OF THOMAS COOK INDIA LIMITED. WHEN HE HAD RETURNED FROM THE T RIP AND HAD GIVEN DETAILS OF EXPENDITURE INCURRED BY HIM AND THE AMOUNT HAD BEEN DEBITED UNDER RESPECTIVE HEADS. FROM THE PERUSAL OF THE DETAILS PLACED AT PB P NO. 5 IT WOULD BE OBSERVED THAT THE AMOUNT OF 54757 DIRHAM WERE PAID TO M/S. SCHEFF ERVILLE SHARJAH U.A.E. AS MARKETING AND DEVELOPMENT EXPENSES AGAINST THE BILL OF THE SAID COMPANY FOR US DOLLAR 15001. COPY OF THE INVOICE WAS ALSO PRODUCED BEFORE THE ASSESSING OFFICER AND THE SAME IS PLACED AT PBP NO. 6. FROM THE PERUS AL OF THE DETAILS IT WOULD BE OBSERVED THAT MARKETING AND DEVELOPMENT CHARGES EXP ENSES HAVE BEEN PAID FOR VISIT TO ABU DHABI, SAUDI ARABIA, SOUTH AFRICA AND MISCEL LANEOUS EXPENSES. THE ASSESSEE HAS PURCHASED TRAVELER CHEQUES OF 15000 DOLLARS WHI CH WERE CONVERTED INTO 54757 DIRHAM. FURTHER, THE ASSESSEE HAS ALSO TAKEN 1200 D OLLARS AND 500 EUROS IN CASH WHICH WERE ALSO RESPECTIVELY CONVERTED TO DIRHAM AM OUNTING TO 4380 AND 21930. THUS, THE ASSESSEE WAS HAVING TOTAL DIRHAM AMOUNTIN G TO 61269 OUT OF WHICH THE PAYMENT OF 54757 DIRHAM HAD BEEN MADE. 4 ITA NO. 840/JP/2013 MAYUR LEATHER PRODUCTS LTD. VS. ACIT FROM THE ABOVE MENTIONED FACTS IT WOULD BE VERY CL EAR THAT THE EXPENDITURE HAS DULY BEEN INCURRED BY THE COMPANY FOR WHICH WHA TEVER EVIDENCE WAS AVAILABLE HAD DULY BEEN GIVEN. THE ASSESSING OFFICER HAS ALSO NOT DOUBTED THE EXPENDITURE BUT HE IS ONLY DOUBTING THE BUSINESS PURPOSE OF THE SAME. 4.1. IT IS SUBMITTED THAT THE ASSESSEE IN THIS CASE IS A PUBLIC LIMITED COMPANY LISTED ON STOCK EXCHANGE AND ITS ACCOUNTS ARE REQUIRED TO BE STATUTORILY AUDITED AND THE ACCOUNTS WERE AUDITED AND DULY APPROVED IN THE ANNU AL GENERAL MEETING. THERE CAN BE NO PERSONAL PURPOSE FOR MAKING THE PAYMENT AND T HE SAME IS ALSO NOT THE CASE OF THE ASSESSING OFFICER. IN VIEW OF THESE FACTS AN D CIRCUMSTANCES, IT IS SUBMITTED THAT THE ASSESSE HAS NEITHER CONCEALED HIS INCOME NOR FURNISHED INACCURATE PARTICULARS OF HIS INCOME AND HE IS NOT LIABLE TO A NY PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE IT ACT. 4.2. THE LEARNED CIT (A) HAS MENTIONED THAT HONBLE ITAT HAS EVEN DOUBTED THE GENUINE INCURRENCE OF SUCH EXPENDITURE. IN THIS REG ARD IT IS SUBMITTED THAT WE HAVE ALREADY REPRODUCED THE FINDING OF THE HONBLE ITAT AND THERE IS NO SUCH OBSERVATION BY THE HONBLE ITAT. IT HAS ONLY BEEN MENTIONED THA T WITHOUT PROVIDING ANY MATERIALS THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTI ON. THUS, INCORRECT OBSERVATION HAS BEEN MADE BY THE LEARNED CIT (A) FOR CONFIRMING THE PENALTY. 4.3. PENALTY UNDER THE PROVISIONS OF SECTION 271(1) (C) IS IMPOSABLE IN CASE THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INAC CURATE PARTICULARS OF INCOME AND MERELY BECAUSE AN EXPENDITURE HAS BEEN DISALLOWED I N THE HANDS OF THE ASSESSEE DOES NOT AUTOMATICALLY MAKE THE ASSESSEE EXIGIBLE T O LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT. 5 ITA NO. 840/JP/2013 MAYUR LEATHER PRODUCTS LTD. VS. ACIT 4.4. THE HONBLE SUPREME COURT IN CIT VS. RELIANCE PETROPRODUCTS P. LTD. (2010)322 ITR 158 (SC) FURTHER HELD AS UNDER :- READING THE WORDS INACCURATE AND PARTICULARS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN TH IS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RE TURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1)(C). A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSE LF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACC URATE PARTICULARS .. 4.5. RELIANCE IN THIS REGARD IS FURTHER PLACED ON T HE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF A.R. ENTERPRISES (P) LTD. ., VS. CIT REPORTED IN 300 ITR 96 (PBP NO. 17-22). IN THE SAID CASE ALSO ADDITION WA S MADE TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF PAYMENT OF CERTAIN AMOUNTS W HICH WERE DISALLOWED ON THE GROUND THAT THEY WERE OF OTHER THAN BUSINESS CONSID ERATION. THE HONBLE RAJASTHAN HIGH COURT AFTER TAKING INTO CONSIDERATION THE FACT S OF THE CASE HAS HELD THAT : WHEN THE PAYMENT HAS FACTUALLY BEEN MADE BY THE AS SESSEE, THE QUESTION ONLY WAS AS TO WHETHER HE IS ENTITLED TO DEDUCTION OR NOT AND MAY BE THAT THE AUTHORITIES FOUND THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION, RESULTING THE ADDITION IN THE INCOME WAS MADE BUT THEN, FOR INITI ATING PENALTY PROCEEDINGS, THAT BY ITSELF, IS NOT ENOUGH; AND BEYOND THAT, NAM ELY THE DEDUCTION CLAIMED BY THE ASSESSEE HAS NOT BEEN ALLOWED, THERE IS NOTH ING MORE TO SHOW AS TO WHY THE PENALTY PROCEEDINGS SHOULD BE INITIATED AGA INST THE ASSESSEE. 4.6. RELIANCE IS ALSO PLACED ON THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. ORIENTAL POWER CABLE LIMITED REPORTED IN 303 ITR 49. IN THE SAID CASE ALSO THERE WERE DISALLOWANCES OUT OF CERTAIN EXPENSES AN D THE HONBLE HIGH COURT HAS SUSTAINED THE ORDER OF THE TRIBUNAL WHERE IT WAS HE LD THAT IT IS WELL SETTLED THAT MERE DISALLOWANCE OF THE CLAIM FOR MAKING AN ADDITION IN THE ASSESSMENT IS NOT SUFFICIENT TO ATTRACT PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C). 6 ITA NO. 840/JP/2013 MAYUR LEATHER PRODUCTS LTD. VS. ACIT THE LD. A/R CONCLUDED HIS SUBMISSION BY PRAYING THA T THE PENALTY MADE AND SUSTAINED BY THE LOWER AUTHORITIES BE DELETED. 5. ON THE OTHER HAND, LD. D/R SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE PENALTY HAS BEEN LEVIED IN RESPECT OF CLAIM OF MARKETING, DEVELOPMENT AND R&D EXPENSES AMOUNTING TO RS 6,97,610, THE DISA LLOWANCE IN RESPECT OF WHICH HAS BEEN SUSTAINED BY THE COORDINATE BENCH IN QUANT UM PROCEEDINGS. THE COORDINATE BENCH HAS GIVEN A FINDING THAT THE ASSES SEE HAS NOT BEEN ABLE TO SUBMIT THE NECESSARY DETAILS OF EXPENSES. THE EXPENDITURE IS ALLOWABLE IN CASE THE SAME IS LAID FOR THE PURPOSES OF BUSINESS AND HENCE, WITHOU T PROVIDING ANY MATERIALS, THE ASSESSEE WAS HELD NOT ENTITLED FOR DEDUCTION OF THE SAID EXPENSES. THE SAID FINDINGS OF THE COORDINATE BENCH HAS THUS FORMED THE BASIS F OR LEVY OF PENALTY AS PER THE AO WHICH HAS SUBSEQUENTLY BEEN CONFIRMED BY THE LD CIT (A). IN RESPONSE, THE LD AR HAS SUBMITTED THAT AN AMOUNT OF 54,757 DIRHAM WERE PAID TO M/S SCHEFFERVILLE SHARJAH U.A.E AS MARKETING AND DEVELOPMENT EXPENSES AGAINST THE INVOICE NO. 501 DATED 8.12.2005 AND THE SAID EXPENSES HAVE BEEN INC URRED FOR VISITS TO ABU DHABI, SAUDI ARABIA, AND SOUTH AFRICA. WE FOUND MERIT IN CONTENTION OF THE LD AR THAT TRIBUNAL HAS NOT DOUBTED THE INCURRENCE OF THE EXPE NDITURE BUT IN ABSENCE OF DETAILS, HAS DOUBTED THE BUSINESS PURPOSE OF THE EXPENDITURE . GIVEN THAT THE NECESSARY DETAILS HAVE BEEN SUBMITTED BY THE APPELLANT AND EV EN IF THE SAME ARE HELD TO BE INSUFFICIENT, MERE DISALLOWANCE OF CLAIM OF AN EXPE NDITURE CANNOT FORM THE BASIS FOR LEVY OF PENALTY. WE ALSO FIND MERIT IN CONTENTION OF THE LD AR THAT THE APPELLANT, BEING A PUBLIC LIMITED COMPANY WHOSE ACCOUNTS ARE D ULY AUDITED, THERE CANNOT BE ANY PERSONAL PURPOSE FOR WHICH THE SUBJECT PAYMENT HAS MADE AND THE SAME IS ALSO 7 ITA NO. 840/JP/2013 MAYUR LEATHER PRODUCTS LTD. VS. ACIT NOT THE CASE OF THE REVENUE. THE DECISIONS OF HONB LE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS 322 ITR 158 AND HONBLE RAJA STHAN HIGH COURT DECISION IN CASE OF A.R. ENTERPRISES 300 ITR 96, WHERE IT HAS B EEN HELD THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF WI LL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME SUPPORT THE CASE O F THE APPELLANT. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULL Y FOLLOWING THE DECISIONS (SUPRA), WE ARE OF THE VIEW THAT DISALLOWANCE OF MARKETING, DEVELOPMENT AND R&D EXPENSES AMOUNTING TO RS 6,97,610 CANNOT FORM THE BASIS FOR LEVY OF PENALTY WHICH IS HEREBY DELETED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 /04/2 016. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 29 /04/ 2016 DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. MAYUR LEATHER PRODUCTS LTD., JAIPUR. 2. THE RESPONDENT- THE ACIT CIRCLE -7, JAIPUR. 3. THE CIT(A).III, JAIPUR 4. THE CIT, III, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO.840/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 8 ITA NO. 840/JP/2013 MAYUR LEATHER PRODUCTS LTD. VS. ACIT