Deputy Commissioner of Income-tax, V. C.G. Lucy Swithcgear Ltd., Nashik

ITA 881/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2606 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-12-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 01-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: I P NAGO
• Keywords: Question of law
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 881/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2005-06 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, NASHIK ....... / APPELLANT ' / V/S. C.G. LUCY SWITCHGEAR LTD., F-10 & H-21, MIDC, AMBAD, NASHIK 422010 PAN : AAACC9268P / RESPONDENT ASSESSEE BY : SHRI PRADIP KAPASI REVENUE BY : SHRI I.P. NAGO / DATE OF HEARING : 30-12-2015 / DATE OF PRONOUNCEMENT : 29-02-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 19-02 -2014 FOR THE ASSESSMENT YEAR 2005-06 WHEREBY THE COMMISSIONER OF INCOME TAX (APPEALS) HAD DELETED THE PENALTY LEVIED U/S. 271(1)(C) OF THE I NCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2 ITA NO. 881/PN/2014, A.Y. 2005-06 2. THE FACTS OF THE CASE AS EMANATING FROM THE RECORDS A RE: THE ASSESSEE IS A COMPANY, ENGAGED IN THE BUSINESS OF MANUFA CTURING OF SWITCHGEARS AND PARTS AND COMPONENTS USED IN THE SWITC HGEARS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEA R 2005-06 ON 31-10-2005 DECLARING TOTAL INCOME OF ` 6,35,68,480/-. THE ASSESSING OFFICER DURING THE SCRUTINY ASSESSMENT PROCEEDINGS MADE D ISALLOWANCE OF ` 7,30,65,239/- U/S. 40(A)(IA) R.W.S. 194C OF THE ACT. THE ASSES SEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TA X (APPEALS) ASSAILING THE DISALLOWANCE. THE FIRST APPELLATE AUTHORITY VIDE ORDER DATED 18-03-2009 CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER. PENALTY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE FO R FILING INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, THE ASSESSI NG OFFICER LEVIED PENALTY OF ` 68,58,915/- U/S. 271(1)(C) OF THE ACT VIDE ORDER DATED 26-03-2010. AGGRIEVED BY THE PENALTY ORDER THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE PENALTY VIDE IMPUGNED O RDER ON THE GROUND THAT THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS AND THE CLAIM OF THE ASSESSEE FOR DEDUCTION WAS BONAFIDE BASED ON THE PAST ASSESSMENT ORDER ACCEPTING THE CLAIM OF THE ASSESSEE. T HE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERVED THA T THE ASSESSEE HAS CARRIED THE QUANTUM APPEAL BEFORE THE HON' BLE HIGH COURT AND THE SAME HAS BEEN ADMITTED AND IS PENDING FOR FINAL A DJUDICATION. AGAINST THESE FINDINGS OF THE COMMISSIONER OF INCOME TAX (A PPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI PRADIP KAPASI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE ASSESSING OFFICER MADE ADDITION OF MORE THAN ` 7 3 ITA NO. 881/PN/2014, A.Y. 2005-06 CRORES U/S. 40(A)(IA) IN THE INCOME RETURNED BY THE ASSESSE E. IN FIRST APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED TH E ADDITION. IN SECOND APPEAL, THE TRIBUNAL GRANTED PART RELIE F TO THE ASSESSEE. AGAINST THE FINDINGS OF THE TRIBUNAL, THE ASSESSEE FILED AP PEAL BEFORE THE HON'BLE BOMBAY HIGH COURT IN INCOME TAX APP EAL NO. 4257 OF 2010. THE HON'BLE HIGH COURT WAS PLEASED TO ADMIT T HE APPEAL AS IT INVOLVED SUBSTANTIAL QUESTION OF LAW. THE LD. AR SUBMITTED TH AT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NAYAN BUILDERS & DEVELOPERS (P.) LTD. REPORTED AS 368 ITR 722 (BOM) HAS HE LD THAT NO PENALTY IS LEVIABLE WHERE THE ISSUE IS DEBATABLE AND THE HIG H COURT HAS ADMITTED THE APPEAL AS IT INVOLVES SUBSTANTIAL QUESTION OF LAW. 4. ON THE OTHER HAND SHRI I.P. NAGO REPRESENTING THE D EPARTMENT SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN DELETING THE PENALTY ON MERITS. THE TRIBUNAL VIDE ORDER DA TED 23-02- 2010 HAS CONFIRMED THE ADDITION TO THE TUNE OF ` 1.87 CRORES. THE LD. DR PRAYED FOR SETTING ASIDE THE IMPUGNED ORDER AND CONFIR MING THE LEVY OF PENALTY. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE LD. AR HAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE HAS APPROACHED THE HON'BLE HIGH COURT ASSAILING THE ORDER OF TRIBUNAL PARTLY CONFIRMING THE ADDITION U/S. 40(A)(IA). THE HON'BLE HIGH COURT HAS ADMITTED THE APPEAL OF THE ASSESSEE AS IT INVOLVES SUBSTANTIAL QUESTION OF LAW. THE LD. AR HAS PLACED ON RECORD A COPY OF THE ORDER PASSED BY THE HON'BLE HIGH COURT ADMITTING THE APPEAL OF THE ASSESSEE. A PERU SAL OF THE SAME SHOWS THAT THE HON'BLE HIGH COURT HAS ADMITTED THE APP EAL OF ASSESSEE ON THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: 4 ITA NO. 881/PN/2014, A.Y. 2005-06 (I) WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE APPELLANT OUGHT TO HAVE DEDUCTED TAX AT SOURCE UNDER SECTION 194C O F THE ACT WITH RESPECT TO PURCHASES AGGREGATING RS.14,115,859/- MA DE FROM VENDORS TO WHOM IT HAD SUPPLIED TOOLS AND DIES FOR THE PURPOSES OF MANUFACTURE OF THE PRODUCTS PURCHASED ? (II) WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE APPELLANT OUGHT TO HAVE DEDUCTED TAX AT SOURCE FROM THE AMOUNT OF RS.1,12,07,546/- PAID TO THE VENDORS FOR PURCHASE O F GOODS UNDER SECTION 194C OF THE ACT BECAUSE THE APPELLANT HAD S OLD MATERIAL WORTH RS.45,02,746/- WHICH WERE USED BY THE VENDORS WITH OTHER MATERIALS INDEPENDENTLY PURCHASED BY THEM FOR PRODU CING THE GOODS PURCHASED BY THE APPELLANT, PARTICULARLY AS T HE VENDORS PURCHASED THE MATERIAL FROM THE APPELLANT ONLY WHEN THE MATERIALS WERE UNAVAILABLE IN THE OPEN MARKET AND T HE MATERIALS WERE SOLD BY THE APPELLANT WITH THE INTENT TO ENSUR E TIMELY SUPPLY OF FINISHED PRODUCTS ? (III) WHETHER ADDITION OF CLAUSE (IV) (E) TO THE EX PLANATION TO SECTION 194C WAS RETROSPECTIVE IN ITS OPERATION AND IF EVEN SO WHETHER THE SAME WOULD BE ATTRACTED ONLY IN THE EVENT WHERE THE GOODS WERE MANUFACTURED BY VENDORS BY WHOLLY OR SUBSTANTIALLY USING MATERIAL SUPPLIED TO THEM BY THE APPELLANT? (IV) WHETHER THE AMOUNTS PAID BEFORE THE END OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-06, PAID BY TH E APPELLANT TO VENDORS ON WHICH TAX HAD NOT BEEN DEDUCTED UNDER SE CTION 194C COULD BE DISALLOWED UNDER SECTION 409(A) (IA) OF TH E ACT ? 6. THE LD. AR HAS ALSO PLACED RELIANCE ON THE DECISION REND ERED IN THE CASE OF CIT VS. NAYAN BUILDERS & DEVELOPERS (P.) LTD. (SU PRA). IN THE SAID CASE, THE HON'BLE HIGH COURT DELETED THE PENALTY ON THE GROUND THAT THE APPEAL (QUANTUM APPEAL) OF THE ASSESSEE IS ADMIT TED BY THE HON'BLE HIGH COURT ON SUBSTANTIAL QUESTION OF LAW. IT IS A WELL SETTLED LAW THAT NO PENALTY CAN BE LEVIED ON THE ADDITIONS/DISALLOWA NCES, WHERE THE ISSUES ARE DEBATABLE. IF THE APPEAL IS ADMITTED BY THE HON'BLE HIGH COURT, IT CONNOTES THAT ADDITIONS/DISALLOWANCES MADE DURING ASSESSMENT ARE DEBATABLE. 5 ITA NO. 881/PN/2014, A.Y. 2005-06 7. IN VIEW OF THE FACTS OF THE CASE AND THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. NAYAN BUILDE RS & DEVELOPERS (P.) LTD. (SUPRA), WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. ACCORDINGLY, THE IMPUGNED ORDER IS UPHELD AND THE APPEAL OF THE REVENUE IS REJECTED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 29 TH DAY OF FEBRUARY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 29 TH FEBRUARY, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-I, NASHIK 4. ' / THE CIT-I, NASHIK 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE