WELLA INDIA HAIRCOSMETICS P. LTD, MUMBAI V. DCIT 8(3), MUMBAI

ITA 852/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8784 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2001-2002
• Appeal Filed On: 06-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: HARESH G BUCH
• Keywords: Opportunity of being heard; Initiation of penalty proceedings
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI PAWAN SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 852/MUM/2017 ASSESSMENT YEAR: 2001 - 02 M/S WELLA INDIA HAIRCOSMETICS PVT. LTD., P&G PLAZA, CARDINAL GRACIAS ROAD, CHAKALA, ANDHERI (EAST), MUMBAI - 400099 VS. THE ASSTT. COMMISSIONER OF INCOME TAX - CIRCLE11(3)(2), MUMBAI. PAN NO. AAACG2468D APPELLANT RESPONDENT ASSESSEE BY : MR. HARESH G. BUCH , AR REVENUE BY : MR. CHAUDHARY ARUN KUMAR SINGH , DR DATE OF HEARING : 20/11 /2018 DATE OF PRONOUNCEMENT : 27/12/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2001 - 02 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 18 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE PENALTY LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL READ AS UN DER: 1) THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE IN CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT ON THE FOLLOWING ADDITIONS: M/S WELLA INDIA HAIRCOSMETICS ITA NO. 852/MUM/2017 2 I) DISALLOWANCE OF LEGAL EXPENSES OF RS.36,91,125 / - RELATING TO GILLETTE, USA AND II) DISALLOWANCE OF EXPENDITURE FOR INCREASE IN ITS AUTHORIZED SHARE CAP ITAL INCLUDED IN DEDUCTION U/S 35 D AMOUNTING TO RS.4,50,000/ - . 2) THAT THE ORDER PASSED BY T HE CI T(A) CONFIRMING THE PENALTY U/S 271(1 )(C) IS BAD IN LAW. 3) THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW IN CONCLUDING THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS IN RESPECT OF ADDITION OF RS.36,91,125/ - BEING DISALLOWANCE ON ACCOUNT OF LEGAL EXPENSES, BY THE ASSESSING OFFICER, WHICH HAS BEEN UPHELD BY THE HON'BLE ITAT. 4) THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW IN CONCLUDING THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS IN RESPECT OF ADDITION OF FLS.4,5 0,000 / - BEING DISALLOWANCE ON ACCOUNT OF EXPENDITURE FOR INCREASE IN ITS AUT HORIZED SHARE CAPITAL, BY THE ASSESSING OFFICER, WHICH HAS NOT BEEN PRESSED BEFORE HON'BLE ITAT. 5) THAT THE CIT(A) FAILED TO APPRECIATE THAT PENALTY PROCEEDINGS AND QUANTUM PROCEEDINGS ARE INDEPENDENT AND PENALTY CANNOT BE LEVIED MERELY ON MAKING THE ADDITIO NS. 6) THAT THE CIT(A) HAS GROSSLY ERRED IN LAW IN HOLDING THAT PENALTY IS LEVIABLE ON DISALLOWANCE OF LEGAL EXPENSES OF RS.36,91,125/ - BECAUSE THIS IS NOT THE CASE OF QUANTUM OF EXPENDITURE BUT THIS IS THE CASE OF CLAIM OF EXPENSES NOT RELATABLE TO THE PURPO SE OF BUSINESS. 7) THAT THE CIT(A) HAS GROSSLY ERRED IN LAW IN HOLDING THAT PENALTY IS LEVIABLE ON DISALLOWANCE OF EXPENDITURE FOR INCREASE IN ITS AUTHORIZED SHARE CAPITAL INCLUDED IN DEDUCTION U/S 35D AMOUNTING TO RS.4,50,000/ - BECAUSE THE SAID EXPENDITURE I S LIABLE TO BE DISALLOWED AS PER THE TWO JUDGMENTS IN THE CASE OF BROOKE BOND (I) LTD. 225 ITR 798 (SUPREME COURT) AND PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD 225 ITR 792 (SUPREME COURT) AND ALSO ON ACCOUNT OF THE FACT THAT THE SAID ISSUE WAS N OT RAISED BEFORE HON'BLE ITAT, M/S WELLA INDIA HAIRCOSMETICS ITA NO. 852/MUM/2017 3 8) THAT THE CIT( A) OUGHT TO HAVE APPRECIATED THAT UNLESS THE CLAIMS MADE ARE FOUND TO BE MALAFIDE, NO PENALTY IS LEVIABLE U/S 271(1)(C). 2.1 FURTHER, THE ASSESSEE HAS FILED AN ADDITIONAL GROUND WHICH IS AS UNDER: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE PENALTY LEVIED BY THE AO U/S. 271(1)(C) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE PENALTY WAS LEVIED WITHOUT PROPER APPLICATION OF MIND BY THE AO. 2. THE LEAR NED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT A. MERE MENTION OF ' PENALTY PROCEEDINGS U/S 271(1)(C) HAVE BEEN INITIATED SEPARATELY' IN ASSESSMENT ORDER, DOES NOT AMOUNT TO A DIRECTION UNDER SECTION 271(1)(C ) FOR LEVY OF PENALTY. B. THE NOTICE ISSUED U/S. 274 R.W.S. 271 WAS ISSUED ALLEGING SEVERAL DEFAULTS AND THAT IT WAS NOT DISCERNIBLE FROM THE NOTICE THAT THE PENALTY WAS INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. C. THE PENALTY LEVIED IN THE ORDER PASSED U/S 271(1)(C ) WAS WITHOUT ANY CL EAR CHARGE AS TO THE LIMB UNDER WHICH PENALTY IS LEVIED. 2.2 AS THE ADDITIONAL GROUND OF APPEAL FILED BY THE ASSESSEE IS CONCERNED WITH JURISDICTIONAL ISSUES AND THE FACTS ARE ALREADY AVAILABLE ON RECORD, WE ADMIT IT FOR ADJUDICATION. 3. BEFORE US, THE LD. COUNSEL SUBMITS THAT NO PENALTY IS LEVIABLE IN CASE WHERE INAPPROPRIATE PORTION OF THE NOTICE ARE NOT STRUCK OFF. IN THIS REGARD RELIANCE IS PLACED BY HIM ON THE DECISION IN CIT V. SS AS EMERALD MEADOWS (2017) 242 TAXMAN 180 (SC), CIT V. SAMSON PERINCHERY (ITA NO. 953 OF 2014) OF BOMBAY HIGH COURT AND RELATED ORDERS OF THE TRIBUNAL. M/S WELLA INDIA HAIRCOSMETICS ITA NO. 852/MUM/2017 4 THE LD. COUNSEL ALSO SUBMITS THAT NO PENALTY IS LEVIABLE IN A CASE WHERE PENALTY IS NOT INITIATED ON SPECIFIC LIMB OF SECTION 271(1)(C) AND INAPPROPRIATE PORTION OF THE NOTICE ARE NOT STRUCK OFF. HE RELIES ON THE DECISION IN CIT V. MANJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KARN), CIT V. MWP LTD . ( 2014) 41 TAXMANN.COM 496 (KARN) AND RELATED ORDERS OF THE TRIBUNAL. ALSO THE LD. COUNSEL SUBMITS THAT PENALTY CANNOT BE LEVIED ON BOTH THE LIMBS OF SECTION 271(1)(C). IN THIS REGARD HE RELIES ON THE DECISION IN DILIP N. SHROFF V. JCIT (2007) 291 ITR 519 (SC). 4. ON THE OTHER HAND, THE LD. DR RELIES ON THE DECISION IN M/S MAHARAJ GARAGE & CO. V. CIT (INCOME TAX REFERENCE NO. 21 OF 2008) OF BOMBAY HIGH COURT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE CASE OF M/S MAHARAJ GARAGE & CO. (SUPRA), RELIED ON BY THE LD. DR , THE BASIC QUESTION URGED BEFORE THE COURT WAS WHETHER WHILE GRANTING PREVIOUS APPROVAL BY THE INSPECTING ASSISTANT COMMISSIONER, AS REQUIRED UNDER THE PROVISO BELOW SECTION 271(1)(C)(III) OF THE ACT, THE ASSESSEE WAS REQUIRED TO BE GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD? THIS IS NOT SO IN THE PRESENT CASE. THEREFORE, THE RATIO LAID DOWN THEREIN IS NOT APPLICABLE IN THE INSTANT CASE. W E FIND THAT IN THE PRESENT CASE, IN THE ORIGINAL ASSESSMENT MADE U/S 143(3) DATED 29.03.2004, THE AO HAS MENTIONED THAT THE PENALTY PROCEEDINGS U/S 271(1)(C) HAVE BEEN INITIATED SEPARATELY. SUBSEQUENTLY, M/S WELLA INDIA HAIRCOSMETICS ITA NO. 852/MUM/2017 5 THE AO HAS FRAMED THE ASSESSMENT U/S 143(3) R.W.S. 2 54 DATED 12.03.2015 WITHOUT MENTIONING THE INITIATION OF PENALTY PROCEEDINGS. IN THE PENALTY ORDER DATED 30.04.2014 THE AO HAS HELD IT AS A FIT CASE FOR IMPOSITION OF PENALTY STATING THAT THE ASSESSEE HAS CONCEALED ITS INCOME AS WELL AS FURNISHED INACCURAT E PARTICULARS OF ITS INCOME. IN CIT VS. SAMSON PERINCHERRY (ITA NO. 953, 1097, 1154 & 1226 OF 2014), THE HONBLE BOMBAY HIGH COURT HELD: THEREFORE, THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SE CTION 271(1)(C) OF THE ACT, FOR INITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT/PERMIT PENALTY BEING IMPOSED FOR THE ORDER BREACH. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPOND TO THE GROUND ON WHICH THE PENALTY HAS BEEN INITIATED/NOTICE ISSUED. IT MUST , THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND OF WHICH THE PENALTY PROCEEDINGS HAS BEEN INITIATED, AND IT CANNOT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAS NO NOTICE. WE FIND THAT IN VIEW OF THE FACTUAL SCENARI O DELINEATED ABOVE, THE RATIO LAID DOWN IN THE ABOVE DECISION SQUARELY APPLIES TO THE PRESENT CASE. THUS, WE DELETE THE PENALTY OF RS. 16,38,000/ - LEVIED BY THE AO. 6. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/12/2018 . SD/ - SD/ - ( PAWAN SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 27/12/2018 RAHUL SHARMA, SR. P.S. M/S WELLA INDIA HAIRCOSMETICS ITA NO. 852/MUM/2017 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI