S.K. WHEELS P. LTD, NAVI MUMBAI V. ASST CIT 10(3), MUMBAI

ITA 8744/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6684 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NIRJA PRADHAN
• Keywords: Revenue expenditure
• Section: 143(3); 27

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 8744/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR-2008-09 M/S. S.K. WHEELS PVT. LTD. PLOT NO. D-267, TTC INDUSTRIAL AREA, MIDC, TURBHE, NAVI MUMBAI-400705 VS ASST. CIT 10(3), 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 PAN: AAICS1240F ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : NONE + * / REVENUE BY : SHRI NIRJA PRADHAN ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 19-06-2014 -.# + ), / DATE OF PRONOUNCEMENT : 19-06-2014 ' ' ' ' , 1961 + ++ + 254 )1( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DATED.17.10.2011 OF THE CIT(A )-22,MUMBAI, ASSESSEE HAS RAISED FOLLOWING GROUNDS APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. HON. CIT(A) IS NOT JUSTIFIED IN NOT GIVING PROPER AND SUFFICIENT OPPORTUNITY FOR HEARIN G AND CONFIRMING THE ORDER OF THE ASSESSING OFFICER EX-PARTE. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. HON. CIT(A) HAS NOT JUSTIFIED IN CONFIRMING THE PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, WITHOUT LOOKING INTO THE MERITS AND FACTS OF THE ADDITIONS/ DISALLOWANCES MADE BY THE A SSESSING OFFICER. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. HON. CIT(A) HAS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT AHS CONCEALED THE INCOME AND FUR NISHED INACCURATE PARTICULARS OF INCOME AND THEREBY CONFIRMING THE PENALTY U/S. 271(1)(C) O F THE INCOME TAX ACT, TO THE EXTENT OF RS. 12,23,414/-. 4. THE APPELLANT CRAVES LEAVE FOR ANY ADDITION, DELETI ON OR AMENDMENTS IN THE GROUNDS OF APPEAL, TILL THE DISPOSAL OF APPEAL. 2. THE EFFECTIVE GROUND OF APPEAL FILED BY THE ASSESSE E DEALS WITH CONFIRMATION OF PENALTY ORDER PASSED BY THE ASSESSING OFFICER (AO) U/S. 271(1)(C) OF THE ACT.ASSESSEE-COMPANY,DEALING IN AUTOMOBILES,FILED ITS RETURN OF INCOME ON 29.09.200 8 DECLARING LOSS OF RS. 1.21 CRORES. AO DETERM -INED THE INCOME OF THE ASSESSEE AT RS.(-) 81.76 LA KHS,WHILE PASSING ORDER U/S. 143(3) OF THE ACT ON 28.12.2010.DURING THE COURSE OF ASSESSMENT PROCEEDI NGS,AO MADE FOLLOWING ADDITIONS: (I) LOSS ON SALE OF VEHICLES AND LOSS BY THEFT RS . 22.64 LAKHS. (II) DISALLOWANCE OF COMMISSION PAID RS. 7.60 LAKH S. (III) DISALLOWANCE OF INTEREST RS. 9.35 LAKHS HE ALSO INITIATED PENALTY U/S. 271(1)(C) OF THE ACT AS HE WAS OF THE OPINION THAT THE ASSESSEE- CONPANY HAD CONCEALED PARTICULARS OF ITS INCOME BY FURNISHING INACCURATE PARTICULARS.IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE AO, ASSESSEE CONTENDED THAT SUM OF RS. 22.64 LAKHS INADVE -RTENTLY REMAINED TO BE ADDED TO THE TOTAL INCOME,T HAT INTEREST EXPENSES WERE INCURRED FOR BUSINESS PURPOSES,THAT DISALLOWANCE OF COMMISSION EXPENDITUR E WOULD NOT INVITE PENALTY PROVISIONS. 2 ITA NO. 8744/MUM/2011 M/S. S.K. WHEELS PVT. LTD. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,AO HELD THAT ASSESSEE HAD OFFERED SUM OF RS. 22.64 LAKHS FOR TAXATION ONLY AFTER A NOTICE WAS IS SUED TO IT,THAT IT HAD FILED ITS RETURN OF INCOME WITHOUT INCLUDING THE SAID AMOUNT IN ITS STATEMENT OF INCOME,THAT IT WAS WELL AWARE THAT COMMISSION WAS PAID FOR ACQUISITION OF CAPITAL ASSE T AND HENCE WAS TO BE CAPITALISED,THAT THE CLAIM OF DEDUCTION UNDER THE HEAD REVENUE EXPENDITURE WAS FALSE AND INCORRECT,THAT IT HAD DIVERTED THE BORROWED CAPITALS FOR NON-BUSINESS PURPOSES/GIVING INTEREST FREE ADVANCES, THAT CLAIM OF DEDUCTION IN RESPECT OF INTEREST EXPENDITURE WAS INCORRECT AN D WRONGFUL ,THAT IT HAD FAILED TO COMPLY WITH THE PROVISIONS OF ACT,THAT IT HAS SUPPRESSED ITS INCOME TO THE EXTENT OF RS. 39.59 LAKHS,THAT THE RETURN WAS FILED BY THE ASSESSEE AFTER DUE APPLICATION OF MIND, THAT COMPETENT PERSON HAD VERIFIED THE DECLARATION ABOUT CORRECTNESS AND TRUTHFULNESS OF T HE RETURN,THAT HAD THE CASE NOT BEEN SELECTED FOR SCRUTINY THE WRONGFUL CLAIMS WOULD HAVE GONE UN-DED UCTED.HE REFERRED TO EXPLANATION 1 TO SECTION 271(1)(C) AND RELIED UPON THE CASES OF K.P.MADHUSUD AN(251 ITR 99 AND RAGHUVIR SONI (258 ITR 239).FINALLY, HE HELD THAT ASSESSEE-COMPANY HAD CON CEALED ITS INCOME TO THE EXTENT OF RS. 39.59 LAKHS BY CLAIMING WRONGFUL DEDUCTION AND LEVIED A P ENALTY OF RS.12.23 LAKHS. 3 .AGGRIEVED BY THE ORDER OF THE AO,ASSESSEE-COMPANY FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).HE FIXED THE HEARING ON 04.08.2011, 12.08.2011,05.09.2011,27.09.2011 AND 14. 10.2011.NOBODY APPEARED BEFORE HIM ON 12.08.2011, 0 5.09.2011 AND 14.10.2011 AND OTHER TWO OCCASIONS,LETTERS WERE FILED FOR ADJOURNING THE CAS E.AS NONE APPEARED BEFORE THE FAA ON 14. 10. 2011,SO,HE DECIDED THE CASE ON THE BASIS OF FACT AN D MATERIAL AVAILABLE ON RECORD.IN HIS ORDER,FAA HELD THAT PROVISIONS OF EXPLANATION 1 TO SECTION 27 1(1)(C) WERE APPLICABLE TO THE APPELLANTS CASE, THAT ASSESSEE HAD NOT OFFERED ANY EXPLANATION,THAT AO WAS JUSTIFIED IN LEVYING PENALTY AMOUNTING TO RS. 12.23 LAKHS. NOBODY APPEARED BEFORE US,NOR ANY APPLICATION FOR A DJOURNING THE MATTER HAS BEEN FILED BY THE ASSESSEE.DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO AND THE FAA.SHE FURTHER ARGUED THAT ASSESSEE HAD NOT FILED ANY EXPL ANATION BEFORE BOTH THE AUTHORITIES ABOUT THE CONCEALED INCOME, THAT ITS SURRENDER RS. 22.64 LAKH S ONLY AFTER A NOTICE WAS ISSUED BY THE AO, THAT IT HAD CLAIMED PATENTLY WRONG DEDUCTION IN THE RETU RN OF INCOME. IN THIS CASE, ASSESSEE WAS INFORMED BY REGISTERED L ETTER (AD) THAT MATTER WOULD BE HEARD ON 19.06.2014.WE FIND THAT ACKNOWLEDGMENT,DULY SERVED ON THE ASSESSEE,IS PLACED ON RECORD. THUS, IT IS CLEAR THAT ASSESSEE WAS AWARE OF THE HEARING OF THE MATTER.IN ABSENCE OF THE ASSESSEE OR HIS REPRESENTATIVE,WE ARE DECIDING THE MATTER ON THE BA SIS OF AVAILABLE MATERIAL. WE FIND THAT AN ADDITION OF RS. 22.64 LAKHS WAS MAD E BY THE AO UNDER THE HEAD LOSS ON SALE OF VEHICLES AND LOSS BY THEFT ,THAT THE AO HAD ISSUED A NOTICE TO THE ASSESSEE IN THIS REGARD AND HAD ASKED IT TO EXPLAIN THE REASONS FOR NOT ADDING THE ABOVE ITEM TO THE COMPUTATION OF TOTAL INCOME.IT WAS ONLY AFTER LETTER ISSUED BY THE AO,THAT ASSESSE E-COMPANY OFFERED THE SAID AMOUNT FOR TAXATION. SIMILARLY,CLAIM OF COMMISSION PAYMENT (RS. 7.60 LAK HS) AND INTEREST (RS. 9.35 LAKHS),MADE BY THE ASSESSEE,WERE FOUND TO BE AGAINST THE CLEAR MANDATE OF THE PROVISIONS OF THE ACT BY THE AO. DURING THE PENALTY PROCEEDINGS,ASSESSEE DID NOT FIL E ANY SATISFACTORY EXPLANATION BEFORE HIM. CONSIDERING THESE FACTS,WE ARE OF THE OPINION THAT THE APPEAL BEFORE US IS COVERED BY THE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. THE SAID EXPLANATION READS AS UNDER : EXPLANATION 1.--WHERE IN RESPECT OF ANY FACTS MATE RIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,-- (A)SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFF ERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS)OR T HE COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACT S RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, 3 ITA NO. 8744/MUM/2011 M/S. S.K. WHEELS PVT. LTD. THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF TH IS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED . IN THE CASE UNDER CONSIDERATION THE EXPLANATION FIL ED BY THE ASSESSEE HAS BEEN FOUND NOT TO BE A BONAFIDE EXPLANATION.THEREFORE,IN OUR OPINION,FAA W AS JUSTIFIED IN CONFIRMING THE PENALTY LEVIED BY THE AO U/S. 271(1)(C) OF THE ACT.UPHOLDING HIS O RDER,WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE. AS A RESULT,APPEA L FILED BY THE ASSESSEE STANDS DISMISSED. 1)2 '() + UK UKUK UK 3 + ) 45. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH ,JUNE,2014 . 0 + -.# 6 7' 19 TWU , 201 4 . + / 8 SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 7' /DATE:19.06 . 2014. SK 0 0 0 0 + ++ + &)9 &)9 &)9 &)9 : 9#) : 9#) : 9#) : 9#) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ ; < , 4. THE CONCERNED CIT / ; < 5. DR E BENCH, ITAT, MUMBAI / 9=/ &)' , . . . 6. GUARD FILE/ / 1 '9) '9) '9) '9) &) &)&) &) //TRUE COPY// 0' / BY ORDER, > / 4 DY./ASST. REGISTRAR , /ITAT, MUMBAI