M/S HERBICIDES (INDIA) LTD, Jaipur V. ASSISTANT COMMISSIONER OF INCOME TAX, Jaipur

ITA 849/JPR/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6336 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 16-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P P MEENA JCIT DR DHK
• Assessee Lawyers: N S VYAS
• Keywords: Difference of opinion; Tax effect; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,O JH HKKXPUN] YS[KK LNL; LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM VK;DJ VIHY LA-@ ITA NO. 849/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2010-11 M/S. HERBICIDES (INDIA) LTD 12, INDUSTRIAL AREA, JHOTWARA JAIPUR CUKE VS. THE ACIT CIRCLE - 3 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAAFH 6414 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI N.S. VYAS, CA JKTLO DH VKSJ LS@ REVENUE BY:SHRI P.P. MEENA, JCIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/07/2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 20 /07/2018 VKNS'K@ ORDER PER BHAGCHAND, AM THE APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A)-I, JAIPUR DATED 23-10-2017 FOR THE ASS ESSMENT YEAR 2010-11 RAISING THEREIN FOLLOWING GROUNDS OF APPEAL. 1. THAT THE AUTHORITIES BELOW HAVE ERRED IN HOLD ING THAT THE AO WAS JUSTIFIED IN INITIATING THE PROCEEDINGS U/S 147 OF THE I.T. ACT, 1961. 2. THAT THE AUTHORITIES BELOW HAVE FURTHER ERRED IN MAKING ADDITION OF RS. 2,06,530/- ON ACCOUNT OF BONUS PAID BY THE PETITIONER BEFORE DUE DATE OF FILING OF RETURN. ITA NO.849/JP/2017 M/S. HERBICIDES(INDIA) LTD, VS ACIT, JAIPUR 2 3. THAT THE AUTHORITIES BELOW HAVE FURTHER ERRED IN DISALLOWING A SUM OF RS. 3,39,719/- ON ACCOUNT OF E SI PAYMENT AND SERVICE TAX DURING THE YEAR UNDER ASSESSMENT 2.1 APROPOS GROUND NO. 1 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 3.1.2 DETERMINATION : (I) I HAVE DULY CONSIDERED THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT AND THE MATERIA L PLACED ON RECORD. IT IS NOTED THAT IN THIS CASE, ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT WAS PASSED ON 14-03-2013 AND THE NOTICE U/S 148 OF THE ACT WAS ISSUED ON 27-02-2015. IT WAS THE CONTENTION OF THE APPELLANT THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED ON THE BASIS OF CHANGE OF OPINION AN D THUS THE IMPUGNED ASSESSMENT ORDER UNDER CONSIDERATION IS BADE IN LAW. IT WOULD BE APPROPRIA TE TO REPRODUCE THE REASONS RECORDED BY THE AO FOR ISS UE OF NOTICE U/S 148 OF THE ACT AS UNDER:- IN FORM NO. 3CD OF CLAUSE NO. 16(A), IT IS STATED THAT RS. 2,06,530/- HAS BEEN PAID TO AN EMPLOYEE AS BONU S OR COMMISSION FOR SERVICE RENDERED WHEREAS SUCH SUM WA S OTHERWISE PAYABLE TO HIS AS PROFIT OR DIVIDEND. THI S EXPENDITURE IS NOT ADMISSIBLE FOR DEDUCTION AS IT CONTRAVENES P ROVISION OF SECTION 36(1)(II) OF THE I.T. ACT, 1961. FURTHER, COPY OF EXPENSES LEDGER PLACED ON RECORD INCLUDES ESI DEMAND OF RS. 33,195/- AND SERVICE TAX DEMAND RS. 3,39,719/- THESE EXPENSES ARE IN THE NATURE OF FINES AND PENALTY AND THEREFORE, ARE NOT ADMISSIBLE IN COMPUT ING THE TOTAL INCOME. THE ABOVE OMISSION HAVE RESULTS IN UNDER COMPUTATIO N OF INCOME BY RS. 5,79,444/- (2,06,530+33,195+3,39,7 19) INVOLVING TAX EFFECT OF RS. 2,24,458/-. ITA NO.849/JP/2017 M/S. HERBICIDES(INDIA) LTD, VS ACIT, JAIPUR 3 THEREFORE, TO ASSESS THE ESCAPED INCOME REASSESSMEN T PROCEEDINGS WERE INITIATED AS DISCUSSED ABOVE. (II) THE APPELLANT HAS NOT BROUGHT ON RECORD ANY MATERIAL WHICH MAY INDICATE THAT THE ABOVE ISSU ES WERE EXAMINED AND CONSIDERED BY THE AO DURING THE ORIGINAL ASSESSMENT PROCEEDING. THUS, THERE WAS NO QUESTION OF FORMING ANY OPINION AND THUS, NO CHANGE OF OPINION. HENCE IT IS HELD THAT THE AO WAS JUSTIF IED IN INITIATING PROCEEDINGS U/S 147 OF THE ACT. THERE FORE, THESE GROUNDS OF APPEAL ARE HEREBY REJECTED. 2.2 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD INCLUDING THE WRITTEN SUBMISSION OF THE A SSESSEE, WE DO NOT FIND ANY PLAUSIBLE REASON FROM LD. AR OF THE ASSESSEE TH AT THE DEPARTMENT HAS WRONGLY INVOKED THE PROVISIONS OF SECTION 148 OF TH E ACT ON THE ASSESSEE WITHOUT DISPOSING OFF THE OBJECTIONS. IT IS NOTED T HAT IN THIS CASE NOTICE U/S 148 OF THE ACT WAS ISSUED ON 27-02-2015 AFTER RECO RDING REASON WITH THE APPROVAL OF ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-3, JAIPUR AND COPY OF THE REASONS FOR REOPENING OF THE CASE W AS PROVIDED TO THE ASSESSEE BY THE DEPARTMENT. THE PAYMENT MADE TO ES I OF RS. 33,196/- WAS IN THE NATURE OF PENALTY. THIS FACT IS ADMITTED BY THE LD.AR IN THE PLEADING ITSELF. IN SUCH A SITUATION, WE DO NOT FIN D FORCE IN THE ARGUMENTS OF THE LD. AR OF THE ASSESSEE THAT REOPENING IS BAD IN LAW. THUS GROUND NO. 1 OF THE ASSESSEE IS DISMISSED. ITA NO.849/JP/2017 M/S. HERBICIDES(INDIA) LTD, VS ACIT, JAIPUR 4 3.1 APROPOS GROUND NO. 2 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 3.3.2. DETERMINATION THE AO HAS DISALLOWED A SUM OF RS. 2,06,530/- IN VI EW OF THE PROVISION OF SECTION 36(1)(II) OF THE ACT AN D THE SPECIFIC REMARK OF THE AUDITOR IN FORM NO. 3CD. DURING THE ASSESSMENT PROCEEDING AS WELL AS APPELLATE PROCEEDINGS, THE AP PELLANT HAS FAILED TO CONTROVERT THE SPECIFIC REMARK MADE BY TH E AUDITOR IN FORM NO. 3CD AND THEREFORE, THE ADDITION OF RS. 2,0 6,530/- MADE BY THE AO IS HEREBY SUSTAINED. 3.2 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, THE LD.AR OF THE VIDE PAGES 4 TO 6 OF TH E PAPER BOOK FILED THE DETAILS OF DISBURSEMENT OF BONUS TO ITS EMPLOYEES A MOUNTING TO RS. 2,06,350/- FOR THE YEAR 2009-10. THERE IS NO EV IDENCE ON RECORD TO SHOW THAT THESE EMPLOYEES WERE ALSO HOLDING ANY SHA RE OF ASSESSEE COMPANY. IN VIEW OF THESE DETAILS AVAILABLE BEFORE THE BENCH, THE ADDITION MADE BY THE LOWER AUTHORITIES AMOUNTING TO RS. 2,06,530/- TOWARDS BONUS PAYMENT IS DELETED. THUS GROUND NO. 2 OF THE ASSESSEE IS ALLOWED. 4.1 APROPOS GROUND NO. 3, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 3.3.2. DETERMINATION (I) I HAVE DULY CONSIDERED THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT AND THE MATERIAL PLACE D ON RECORD. ITA NO.849/JP/2017 M/S. HERBICIDES(INDIA) LTD, VS ACIT, JAIPUR 5 THE AO HAS DISALLOWED A SUM OF RS. 33,196/- ON ACCO UNT OF ESI DEMAND BY TREATING THE SAME IN THE NATURE OF FI NES AND PENALTIES. IT IS SEEN THAT VIDE LETTER DATED 27-03- 2010 ISSUED BY THE OFFICE OF THE RECOVERY OFFICER, ESI, A SUM OF R S. 20,875/- ALONGWITH INTEREST WAS DUE FROM THE APPELLANT ON AC COUNT OF ESI CONTRIBUTION / INTEREST / DAMAGES. THERE IS NO BREAK UP AVAILABLE ON RECORD OF THE SAID AMOUNT OF RS. 20,87 5/-. FURTHER, THE APPELLANT HAS MADE PAYMENT OF RS. 11,463/- AND RS. 857/- ON ACCOUNT OF DAMAGES AS IS EVIDENT FROM THE COPIES OF CHALLANS SUBMITTED BY THE APPELLANT AND THESE ARE CERTAINLY IN THE NATURE OF FINE/ PENALTY. THEREFORE, IN VIEW OF THE ABOVE D ISCUSSION, IT IS HELD THAT THE AO WAS JUSTIFIED IN MAKING THE DISALL OWANCE OF RS. 33,196/- ON ACCOUNT OF ESI PAYMENTS AND THUS TH E SAME IS HEREBY SUSTAINED. (II) REGARDING THE DISALLOWANCE OF RS. 3,39,719/- O N ACCOUNT OF SERVICE TAX DEMAND, NOTHING HAS BEEN BRO UGHT ON RECORD BY THE APPELLANT REGARDING THE NATURE OF THE SAID DEMAND DESPITE THE FACT THAT THE CASE WAS ADJOURNED TO 19- 06-2017, 03- 07-2017, 20-07-2017, 25-08-2017 AND 23-10-2017 ON T HE REQUEST OF THE APPELLANT COMPANY FOR FURNISHING THE DETAILS OF THE SAID DEMAND. ON 23-10-2017, THE A/R OF THE APPE LLANT COMPANY AGAIN SOUGHT AN ADJOURNMENT AND THE SAME WA S REJECTED AS SUFFICIENT OPPORTUNITIES TO THE APPELLA NT HAS ALREADY BEEN PROVIDED EARLIER. IN FACT NO CHALLAN EVIDENCIN G THE PAYMENT OF THE ABOVE AMOUNT WAS FURNISHED. SINCE, T HE APPELLANT HAS FAILED TO SUBSTANTIATE ITS CLAIMED TH AT THE ABOVE AMOUNT WAS RELATING TO REGULAR DEMAND OF SERVICE TA X AND NOT IN THE NATURE OF FINE/PENALTY, I DO NOT FIND ANY REASO N TO INTERFERE WITH THE FINDNGS OF THE AO AS RECORDED IN THE ASSES SMENT ORDER AND THEREFORE, THE DISALLOWANCE OF RS. 3,39,719/- M ADE BY THE AO IS HEREBY SUSTAINED. 4.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED THAT THE LOWER AUT HORITIES HAVE DISALLOWED A SUM OF RS. 33,196/- AND RS. 3,39,719/- ON ACCOUN T OF ESI PAYMENT AND SERVICE TAX PAYMENT. DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE FILED THE DETAILS OF SERVICE TAX AMOUNT OF RS. 3,39,719/- VIDE PAGE 3 OF THE PAPER BOOK WHICH HAS BEEN CONFIRMED O N 26-07-2006 BY THE ITA NO.849/JP/2017 M/S. HERBICIDES(INDIA) LTD, VS ACIT, JAIPUR 6 SUPDT. CENTRAL EXCISE RANGE-V, JAIPUR. IT IS PERTIN ENT TO MENTION THAT IT IS NOT A PENALTY OR FINE BY THE CENTRAL EXCISE DEPARTM ENT BUT IT WAS THE SERVICE TAX WHICH WAS PAYABLE BY THE ASSESSEE AMOUN TING TO RS. 3,39,719/- FOR THE YEAR 2005-06. HENCE, THE SERVICE TAX PAID BY THE ASSESSEE TO CENTRAL EXCISE DEPARTMENT IS ALLOWABLE EXPENSES. AS REGARDS THE ESI PAYMENTS ON ACCOUNT OF DAMAGES PAYMENTS BY THE ASSESSEE, IT IS NOTED THAT THE LD. CIT(A) HAS RIGHTLY SUSTAINED THE AMOUNT AS IT WAS A PENALTY AND NOT ALLOWABLE EXPENSES. THUS GROUND NO. 3 IS PARTLY ALLOWED. 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 -07-2018 . SD/- SD/- FOT; IKY JKO HKKXPUN (VIJAY PAL RAO) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 20 /07/ 2018 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. HERBICIDES (INDIA) LTD. JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE 3, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.849 /JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR