ITO 1(2)(2), MUMBAI V. KESAR PETROPRODUCTS LTD, RATNAGIRI

ITA 872/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8523 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 07-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: K P KAPADIA
• Keywords: Business income; Depreciation; Difference of opinion
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI AMIT SHUKLA , JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO. 872 /MUM / 201 5 ( / ASSESSMENT YEAR : 200 7 - 08 ) INCOME TAX OFFICER 1(2)(2), ROOM NO.527, 5 TH FLOOR, AYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. M/S KESAR PETROPRODUCTS LTD, D - 7/1, MIDC INDUSTRIAL AREA , LOTE PA RSHURAM, TAL KHED, DIST RATNAGIR I , MAHBARASHRA. - 415722 ./ PAN : AAACK2056M ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI M C OMI NINGSHEN / RESPONDENT BY : SHRI K P KAPADIA / DATE OF HEARING : 14.12.2016 / DATE OF PRONOUNCEMENT : 31. 1.2 01 7 / O R D E R PER RAJESH KUMAR , AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A) - 2 , MUMBAI DATED 19.11.2014 FOR ASSESSMENT YEAR 200 7 - 08 . 2. THE COMMON ISSUE RAISED IN ALL THE GROUNDS OF APPEAL BY THE REVENUE IS AGAINST THE DELETION OF THE PENALTY OF RS. 1,92,07,921/ - BY THE LD.CIT(A) AS LEVIED BY THE AO UNDER S ECTION 271(1)(C) OF THE ACT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 25.10.2007 DECLARING NIL INCOME. THE ASSESSEE WAS DECLARED AS SICK INDUSTRIAL UNDERTAKING ON 23.09.2005 AND A SCHEME OF REHABILITATION WAS ITA NO. 872 / MUM/20 1 5 2 APPROVE D ON 17.8.2007 BY BIFR. P URSUANT TO THE SAID SCHEME THE OLD DIRECTORS RESIGNED AND NEW WERE INDUCTED ON THE BOARD OF THE ASSESSEE. THE RECORDS OF THE ASSESSEE WERE WITH THE OLD MANAGEMENT WHO WAS NOT COOPERATING WITH THE NEW MANAGEMENT OF THE ASSESSEE AND AS A RESULT THE BOOKS OF ACCOUNTS AND RECORDS COULD NOT BE PRODUCED BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS .THE AO D URING THE ASSESSMENT PROCEEDINGS ON THE BASIS OF INFORMATION AVAILABLE IN THE ANNUAL AUDITED ACCOUNTS OF THE ASSESSEE C AME TO THE CONC LUSION THAT THE ASSESSEE DISCONTINUED ITS MANUFACTURING AND PRODUCTION SINCE NOVEMBER 2004 AND DECLARED NIL RECEIPTS/SALES IN THE PROFIT AND LOSS ACCOUNT . THE AO FINALLY FRAMED THE ASSESSMENT U/S 143(3) OF THE ACT O N 24.12.2009 ASSESSING THE TOTAL INCOM E AT RS.23, 99,342/ - BY DISALLOWING ALL THE EXPENSES AND MAKING ADDITIONS ON ACCOUNT O F HOUSE PROPERTY OF RS.6,68,000 / - , DEPRECIATION OF RS.2,67,93,247/ - , MANUFACTURING EXPENSES OF RS.46,31,654/- , INTEREST & FINANCIAL CHARGES OF RS.2,27,20,949/ - AND WRITTE N OFF DEFERRED REVENUE EXPENSES OF RS.3,18,938/ - AND ALSO TREATING THE INTEREST ON I.T.REFUND OF RS.14,38,549/ - AND THE BANK INTEREST RS.13,753/ - AS INCOME FROM OTHER SOURCES AS AGAINST THE BUSINESS SHOWN BY THE ASSESSEE WHEN THE ASSESSEE FAILED TO PRODU CE THE BOOKS OF ACCOUNT AND SUPPORTING RECORDS BEFORE THE AO BY CITING ITS INABILITY AS THE RECORDS WERE IN THE POSSESSION OF OLD MANAGEMENT WHICH NOT COOPERATIVE IN THE MATTER O F HANDING THE RECORDS TO THE NEW MANAG E MENT . THE AO ALSO INITIATED PENALTY PR OCEEDINGS ITA NO. 872 / MUM/20 1 5 3 U /S.271(1)(C) OF THE ACT,1961 FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. THE FAA DISMISSED THE Q UANTUM APPEAL OF THE ASSESSEE AND NO FURTHER APPEAL WAS FILED BEFORE THE TRIBUNAL. THEREAFTER, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE PENALTY SHOULD NOT BE IMPOSED FOR THE VARIOUS ADDITIONS AS MADE IN THE ASSESSMENT ORDER STATING THE REASONS THAT THE ASSESSMENT ORDER WAS ALSO CONFIRMED AND AFFIRMED BY THE LD.CIT(A). T HE ASSESSEE AGAIN FAILED TO RESPOND TO THE SAID SHOW CAUSE NOTICE AND FINALLY THE AO PROCEEDED TO IMPOSE PENALTY ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AFTER GIVING DETAILED OBSERVATIONS ON PAGE 2 AND 3 OF THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT OF RS.1 ,92,07,921/ - BEING 100% OF THE TAX SOUGHT TO BE EVADED BY ASSUMING THAT THE ASSESSEE HAS NOTHING TO SAY OR SUBMIT IN THE MATTER . 4. THE AGGRIEVED ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) WHO DELETED THE PENALTY AFTER TAKING INTO ACCOUNT THE CON TENTIONS OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER : 3.2. THE FACTS OF THE CASE, THE STAND TAKEN BY THE A.O. IN THE ASSESSMENT ORDER AND THE CONTENTIONS RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE OF THE APPELLANT COMPANY DURING THE APPELLATE PROCEEDINGS AS WELL AS THE WRITTEN SUBMISSIONS MADE ARE CONSIDERED. ON A PERUSAL OF THE PENALTY ORDER, IT IS SEEN THAT THE AO HAS ME RELY RELIED UPON THE ORDER OF THE CIT(A), ALTHOUGH THE APPEAL WAS DISMISSED ON TECH NICAL GROUNDS. PENALTY PROCEEDINGS ARE SE PARATE PROCEEDINGS, WHICH PROVIDE THE REQU ISITE OPPORTUNITY AND AUTHORITY FOR THE AO TO INVESTIGATE INTO THE ISSUES ON W HICH ADDITIONS WERE MADE. DURING THE PENALTY PROCEEDINGS, THE AO IS EMPOWERED TO B RING ON RECORD ANY MATERIALS WHICH SUPPORT THE VIEW TH AT THE ITA NO. 872 / MUM/20 1 5 4 APPELLANT HAD CONCEALE D THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS SEEN FROM THE PE NALTY ORDER THAT THE AO HAS NOT BROUGHT ON RECORD ANY SUCH MATERIALS WHICH INDICATE THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS OF I NCOME. 3.3. ON THE OTHER HAND, DURING THE APPEAL HEARING PROCEEDINGS, THE LD. AR OF TH E APPELLANT HAS CONTENDED THAT THE EXPENSES AND DEDUCTIONS CLAIMED ARE BASED ON TH E AUDITED ACCOUNTS OF THE APPELLANT COMPANY. THE AO HAS REJECTED THE CLAIMS ON ACCOUNT OF A DIFFERENCE OF OPINION BUT NOT ESTABLISHED THAT THE APPELLANT HA S FURNISHED INACCURATE PARTICULARS OF INCOME. I FIND THAT THERE IS A MERIT IN TH E CONTENTIONS OF THE APPELLANT. ALL THE DISALLOWANCES AND ADJUSTMENTS TO THE RET URNED INCOME HAVE BEEN MADE ON ACCOUNT OF THE FACT THAT THE AO HAS HELD A VIEW, WHICH I S DIFFERENT FROM THAT OF THE APPELLANT. ALTHOUGH THE DISALLOWANCES HAVE BEE N CONFIRMED IN THE QUANTUM APPELLATE ORDER OF EVEN DATE, THE SAME IS NOT AN ADEQUAT E JUSTIFICATION FOR IMPOSING OR CONFIR MING THE CONCEALMENT PENALTY. CLEAR LY DISALLOWANCES MADE ARE OF DEBATABLE NATURE AND THEREFORE THE SAID DISALLOWANCES D O NOT JUSTIFY THE LEVY OF CONCEALMENT PENALTY. AS OBSERVED MERELY ON ACCOUNT OF MAKING A DEBATABLE CLAIM DOES NOT AUTOMATICALLY RESULT IN LEVY OF CONCEALME NT PENALTY. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANC E PETROPRODUCTS PVT. LTD. VS CIT (322 ITR 158) IS APPLICABLE TO THE FACTS OF TH E CASE OF THE APPELLANT. THE GIST OF THE DECISION IS AS UNDER: 'A GLANCE AT THE PROVISIONS OF SECTION 271 (L)(C) OF THE INCOME - TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS'' USED IN SECTION 271( 1 )(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCUR ATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTI CULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE C AN FURNISH THE P ARTICUL ARS OF HIS INCOME WHEN SUCH PARTICULARS ARE FOUND T O BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE ITA NO. 872 / MUM/20 1 5 5 RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH O R ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271 ( 1 )(C). A MERE MA KING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. ' 3.4. RESPECTFULLY FOLLOWING THE DECISION OF THE APEX COURT (SUPRA), THE PENALTY LEVIED U /S . 271 (1)( C) OF THE ACT IS HEREBY DELETED. 4. IN THE RESULT, THE APPEAL IS ALLOWED. 5 . THE LD. DR WHILE RELY ING HEAVILY ON THE ORDER OF AO SUBMITTED THAT THE AO HAS RIGHTLY IMPOSED PENALTY FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME AS THE ASSESSMENT ORDER AS FRAMED U/S 143(3) OF THE A CT STANDS CONFIRMED BY FAA. THE LD DR SUBMITTED THAT THE LD.CIT (A) HAS DELETED THE PENALTY I M POSED WITHOUT TAKING INTO CONSIDERATION THE FACTS OF THE CASE BY SIMPLY FOLLOWING THE DECISION OF THE HONBLE APEX COURT RENDERED IN THE CASE OF RELIANCE PETRO P RODUCTS PVT. LTD. (SUPRA) . THE LD DR ALSO ARGUED THAT THE FILING INACCURATE PARTICULARS WAS PROVED BEYOND DOUBT WHEN THE FAA SUSTAINED THE ORDER OF ASSESSMENT PASSED BY THE AO. THE LD. DR FINALLY PRAYED TH A T THE ORDER OF THE LD.CIT(A) BE SET ASIDE AND T HAT OF AO BE CONFIRMED. 6 . ON THE OTHER HAND, THE LD.AR SUBMITTED BEFORE US THAT THE ALL THE ITEMS OF EXPENSES AND INCOME AS WERE DISALLOWED IN THE ASSESSMENT ORDER ITA NO. 872 / MUM/20 1 5 6 WERE FULLY DISCLOSED BY THE ASSESSEE IN ITS ANNUAL ACCOUNTS FILED ALONG WITH THE RETURN O F INCOME FILED BY THE ASSESSEE AND THUS ALL THE DETAILS R EGARDING ADDITIONS WERE AVAILABLE BEFORE THE AO . SIMPLY BECAUSE THE ASSESSEE DID NOT CHALLENGE THE APPELLATE ORDER OF FAA CONFIRMING THE VARIOUS ADDITIONS IN ASSESSMENT ORDER SHOULD NOT BE TAKEN TO MEAN THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF INCOME. THE LD. CIT(A) AFTER CONSIDERING AND EXAMINING EVERY ASPECT OF THE MATTER AND BY FOLLOWING THE DECISION RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) DELETED THE PENALTY LEVIED BY THE AO. THE LD.AR THEREFORE , PRAYED THAT THE ORDER OF THE LD.CIT(A) SHOULD BE UPHELD. 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE REL E V ANT MATERIAL PLACED BEFORE US . T H E ASSESSEE WAS A SICK COMPANY AND UNDER A SCHEME OF REVIVAL THE BY THE BIFR , THE MANAGEMENT AND SHAREHOLDING PATTERN CHANGED HANDS FOLLOWING WHICH OLD DIRECTORS RESIGNED AND NEW DIRECTORS WERE INDUCTED ON THE BOARD OF DIRECTORS OF THE ASSESSEE . THE DETA ILS , INFORM ATION AND BOOKS OF ACCOUNTS REQUIRED BY THE AO IN THE ASSESSMENT PROCEEDINGS COULD NOT BE PRODUCED AS THE SAME WERE STATED TO BE IN THE POSSESSION AND CONTROL OF OLD MANAGEMENT WHO WAS NOT COOPERATING IN HANDING OVER THE RECORDS OF THE COMPANY TO THE NEW MANAGEMENT . ULTIMAT E LY THE AO HAS TO COMPLETE THE ASSESSMENT ON THE BASIS ITA NO. 872 / MUM/20 1 5 7 INFORMATION AVAI L AB L E ON THE RECORDS . THE AO NOTED THAT THAT THE ASSESSEE DISCONTINUED ITS BUSINESS IN 2004 WHEREAS THE ASSESSEE HAS CLAIMED BEFORE THE AO THAT THE BUSINE SS WAS SUSPENDED AND NOT DISCONTINUED. IN CONSEQUENCE, I N THE ASSESSMENT SO FRAMED ALL THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE WERE DISALLOWED AND THE INTEREST INCOME WAS TREATED AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. THE Q UANTUM APPEAL BY THE ASSESSEE BEFORE THE FAA WAS DISMISSED AND THEREAFTER NO FURTHER APPEAL WAS FILED BEFORE THE TRIBUNAL AND THE THUS ASSESSMENT SO FRAMED ATTAINED FINALITY. WE ALSO NOTE THAT ALL THE ADDITIONS WERE MADE BY THE AO ON THE BASI S OF AUDITED ANNUAL ACCOUNTS FILED BY THE ASSESSEE WITH THE RETURN OF INCOME BY DISALLOWING ALL THE EXPENSES CHARGED TO THE PROFIT AND LOSS ACCOUNT. AFTER DISMISSAL OF QUANTUM APPEAL BY THE FAA, THE AO MECHANICALLY LEVIED PENALTY WITHOUT RECORDING ANY FIND INGS THAT AS TO HOW THE ASSESSEE HAS CONCEALED THE INCOME OR FILED IN ACCURATE PARTICULARS OF INCOME . M ERE MAKING A CLAIM OF EXPENSES IN THE PROFIT AND LOSS ACCOUNT IN A CASE WHERE THE ACCOUNTS OF THE ASSESSEE WERE AUDITED AND ALSO ACCOUNTS WERE PREPARED UNDER PROFESS IONAL GUIDANCE AND ADVICE WOULD NOT AUTOMATICALLY LEAD TO INFERENCE THAT ASSESSEE IS LIABLE TO THE PENAL ACTION U.S 271(1) OF THE ACT. A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCUR ATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. THEREFORE, IN OUR OPINION THE LD.CIT(A) HAS RIGHTLY DELETED THE ITA NO. 872 / MUM/20 1 5 8 PENALTY IMPOSED BY THE AO AFTER TAKING INTO ACCOUNT THE CONTENTION S PUT FORTH BY THE ASSESSEE VIS - A - VIS T HE PROVISIONS OF THE ACT BY R ELYING ON THE RATIO IN THE DECISION OF THE RELIANCE PETROPRODUCTS PVT LTD(SUP R A) . IN VIEW OF THE FACTS AS DISCUSSED HEREINABOVE AND RATIO LAID DOWN IN THE DECISION OF APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT LTD WE ARE INCLI N ED TO UPHOLD THE O RDER OF FAA BY DISMISSING THE APPEAL OF THE REVENUE . 8 . IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST JAN, 2017. JAN,2017 S D SD ( AMIT SHUKLA ) ( RAJESH KUMAR ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 31/ 01/2017 . . ./ SRL , SR. PS / 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, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI