ACIT, CHENNAI V. Tarapore & Co., CHENNAI

ITA 912/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7977 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 15-09-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 08-04-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER ./ I T.A. NO. 912 /MDS/201 6 / ASSESSMENT YEAR :20 0 1 - 0 2 THE ASSISTANT COMMISSIONER OF INCOME TAX, NON - C ORPORATE CIRCLE 9 , CHENNAI . VS. M/S. TARAPORE & CO., 827, DHUN BUILDING, ANNASALAI, MOUNT ROAD, CH ENNAI 2 . [PAN:AA AF T 3579P ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI A.V. SREEKANTH , JCIT / RESPONDENT BY : SHRI V.S. JAYAKUMAR , C.A. / DATE OF HEARING : 1 5 . 0 9 .201 6 / DATE OF P RONOUNCEMENT : 25 . 1 1 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS ) 1 0 , CHENNAI , D ATED 25 . 0 1 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 0 1 - 0 2 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY OF .75,00,000/ - LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 [ AC T IN SHORT]. I.T.A. NO . 912 /M/ 16 2 2. BRIE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL ENGINEERING CONTRACTS AND HOTELIERS. THE ASSESSM ENT UNDER SECTION 143(3) R .W.S. 254 OF THE ACT WAS COMPLETED ON 0 3 . 12 . 2008 BY THE ASSESSI NG OFFICER CONSEQUENT TO THE DIRECTION BY THE ITAT VIDE ITS OR DER IN I.T.A. NOS. 2021/MDS/04 AND 1908 & 1264/MDS/04 DT. 31/8/2007. THE ASSESSING OFFICER HAS ALSO INITIATED PENALTY PROCEEDINGS U NDER SECTION 271(1) (C ) OF THE ACT BASED ON THE DIRECTION S O F TH E ITAT VIDE ITS ORDER D T. 0 7 .0 7 .2 009 WHICH HAD SET ASIDE THE ORDER OF THE LD. CIT(A) (WHO HAD DELETED THE PENALTY LEVIED EARLIER), AND REMITTED BACK THE MATTER TO THE FILE OF THE A SSESSING O FFICER TO RECONSIDER THE ISSUE OF LEVY OF PENAL TY AFRESH AFTER DEC IDING THE ISSUE ON MERITS. SUBSEQUENTLY, THE AO HAS PASSED OR DER U NDER SECTION 271(1)(C) OF THE ACT AFTER HEARI N G THE ASSESSEE'S OBJECTIONS AND IMPOSED A MINIMUM PENALTY OF . 75 LAKHS ON THE GROUND THAT THE A SSESSEE HAD CONCEALED/FURNISHED INACCURATE PARTICULARS WITH REGARD TO THE CLA IM REGARDING THE EXPENDITURE INCURRED ON CONSTRUCTION OF HOTEL AA DITHY A A N D ALSO REGARDING THE CLAIM OF THE REGULARIZATION FEES PAID TO C M DA AS REVENUE EXPENDI TURE. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND FILED A DETAILED WRITTEN SUBMISSIONS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS MATERIALS AVAILABLE ON RECORD, I.T.A. NO . 912 /M/ 16 3 THE LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 4. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. BY RELYING ON THE DECISION IN THE CASE OF MAK DATA P. LTD. V. CIT 358 ITR 593 (SC), THE LD. DR HAS C ONTENDED THAT THE ASSESSEE HAS MADE EXCESS CLAIM OF DEDUCTION BY WRONG CLASSIFICATION OF THE EXPENSES, THEREBY FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS SUBMITTED ALL THE PARTICULARS AND MORE SPECIFICALLY A NOTE APPENDED TO THE STATEMENT OF TOTAL INCOME WHICH WAS ENCLOSED WITH THE RETURN OF INCOME. THEREFORE, THERE WAS NO QUESTION OF EITHER FURNI SHING OF INACCURATE PARTICULARS OR CONCEALING INCOME OF THE ASSESSEE AND STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE H AS CLAIMED THE COST OF CONSTRUCTION AND REGULAR FEE PAID TO CMDA AS REVENUE EXPENDITURE. THE ASSESSING OFFICER DISALLOWED THE SAME AS TREATING THE EXPENDITURE AS CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION. THE LD. CIT(A) UPHELD THE ADDITION MADE BY THE A SSESSING OFFICER IN THE SCRUTINY ASSESSMENT. HOWEVER, AGAINST I.T.A. NO . 912 /M/ 16 4 THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER, THE LD. CIT(A) VIDE HIS ORDER DATED 23.11.2006 DELETED THE PENALTY. ON FURTHER APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL SET ASIDE A PORTION OF ASSESSMENT ORDER FOR RECONSIDERATION AND CONSEQUENTLY SET ASIDE THE PENALTY ORDER. THE ASSESSING OFFICER COMPLETED THE SET ASIDE ASSESSMENT WITHOUT GIVING RELIEF AND LEVIED PENALTY OF .75.00 LAKHS UNDER SECTION 271(1)(C) OF THE ACT. THOUGH THE ASSESSEE HAS NOT PREFERRED ANY FURTHER APPEAL AGAINST THE SET ASIDE ASSESSMENT BUT AGAINST THE PENALTY ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). DURING THE COURSE OF APPELLAT E PROCEEDINGS, THE LD. CIT(A) HAS OBSERVED THAT WHILE PASSING THE ORDER AGAINST PENALTY BY THE LD. CIT(A) VIDE HIS ORDER DATED 23.11.2006, THE THEN LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING THAT NEITHER THE ASSESSEE CONCEALED ANY PARTI CULARS OF INCOME MATERIAL TO THE COMPUTATION OF TOTAL INCOME NOR DID THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND, IN FACT, ALL THE INFORMATION BASED ON WHICH PENALTY HAS BEEN LEVIED BY THE ASSESSING OFFICER WAS MADE AVAILABLE BY THE ASS ESSEE IN ITS RETURN OF INCOME ACCOMPANIED BY THE BALANCE SHEET, PROFIT AND LOSS ACCOUNT AND AUDIT REPORT AND ON THE BASIS OF SUCH FACTUAL FINDINGS, THE LD. CIT(A) WAS NOT PERSUADED BY THE REASONING OF THE ASSESSING OFFICER THAT THE PROVISIONS UNDER SECTION 271(1)(C) OF THE ACT WERE ATTRACTED IN THIS CASE AND ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO DELETE THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT PROCEEDED AGAINST THE ASSESSEE. THE ASSESSING I.T.A. NO . 912 /M/ 16 5 OFFICER HAS NOT UNEARTHED NEW EVIDENCES IN THE ASSES SMENT ORDER PASSED SUBSEQUENT TO THE ITAT S DIRECTION. THE ASSESSEE HAS FURNISHED A NOTE APPENDED TO THE STATEMENT OF TOTAL INCOME ENCLOSED WITH THE RETURN OF INCOME, BY WHICH THE ASSESSEE HAS FURNISHED COMPLETE PARTICULARS OF INCOME AND MOREOVER, IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF MADRAS AUTO SERVICE V. CIT 233 ITR 470, WHICH SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE, BY CONCURRING WITH THE FINDINGS OF EARLIER ORDER, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DE LETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 7. MOREOVER, IN THE GROUNDS OF APPEAL, THE DEPARTMENT HAS RELIED ON THE CASE LAW IN THE CASE OF MAK DATA PVT. LTD. V. CIT 358 ITR 593 (SC). IN THAT CASE, T HE HON'BLE SUPREME COURT HAS OBSERVED THAT THE EXPLANATION 1 TO SECTION 271(1) (C) OF THE ACT RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NOTICED BY THE ASSESSING OFFICER BETWEEN THE REPORTED AND ASSESSED INCOME. THE BURDEN IS THEN ON THE ASSESSEE TO SHOW OTHERWISE, BY COGENT AND RELIABLE EVIDENCE . W HEN THE INITIAL ONUS PLACED BY THE EXPLANATION, HAS BEEN DISCHARGED BY HIM , THE ONUS SHIFTS T O THE DEPARTMENT TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED INCOME AND NOT OTHERWISE. VOLUNTARY DISCLOSURE DOES NOT RELEASE THE ASSESSEE F ROM THE MISCHIEF OF PENAL PROCEEDINGS. THE LAW DOES NOT PROVIDE THAT WHEN AN ASSESSEE MAKES A VOLUNTARY DISCLOSURE OF HIS CONCEALED INCOME, HE HAS TO BE ABSOLVED FROM I.T.A. NO . 912 /M/ 16 6 PENALTY. THE ASSESSING OFFICER SHOULD NOT BE CARRIED AWAY BY THE PLEA OF THE ASSESSEE SUC H AS VOLUNTARY DISCLOSURE , BUY PEACE , AVOID LITIGATION , AMICABLE SETTLEMENT , TO EXPLAIN AWAY ITS CONDUCT. THE QUESTION IS WHETHER THE ASSESSEE HAS OFFERED ANY EXPLANATION FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. 8. FURTHER, I N THAT CASE, THE ASSESSEE HAS FILED AN APPLICATION BEFORE THE ADDL.CIT UNDER SECTION 144A SOLICITING DIRECTIONS FOR EXPEDITING THE ASSESSMENT PROCEEDINGS AND THEREIN IT INDICATED ITS WILLINGNESS TO BE ASSESSED ON AN AMOUNT OF . 56.49 LA KH S AS ITS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES , SINCE THE ASSESSEE COULD NOT ABLE TO EXPLAIN ITS INCOME . THEREFORE, THE HON BLE SUPREME COURT HAS HELD THAT THE FIRST PART OF A OF EXPLANATION 1 TO SECTION 271(1) (C) OF THE ACT IS ATTR ACTED AND ALSO OBSERVED THAT THE REVENUE IS ENTITLED TO KNOW THE NATURE AND SOURCE OF AMOUNT SURRENDERED BY THE ASSESSEE AND IF THE NATURE AND SOURCE OF AMOUNT IS NOT EXPLAINED, THEN THE DEPARTMENT IS ENTITLED TO DRAW AN INFERENCE THAT THE AMOUNT REPRESENT S ASSESSEE S TAXABLE INCOME. 9. IN THE INSTANT CASE, BY FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF MADRAS AUTO SERVICES V. CIT 233 ITR 470, WHEREIN, IT WAS CONSIDERED THE EXPENDITURE INCURRED TOWARDS CONSTRUCTION OF NEW BUILDIN G IN PLACE OF OLD IN LEASE HOLD PREMISES AND THE RENT WAS ALSO LOWER, THE EXPENDITURE INCURRED BY THE ASSESSEE WAS HELD AS REVENUE EXPENDITURE, I.T.A. NO . 912 /M/ 16 7 THE ASSESSEE HAS CLAIMED THE EXPENDITURE INCLUDING THE PAYMENT REGULARIZATION FEE TO CMDA AS REVENUE BY PLACING ALL THE PARTICULARS BEFORE THE ASSESSING OFFICER INCLUDING A NOTE APPENDED TO THE STATEMENT OF TOTAL INCOME. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, THE CASE LAW RELIED ON BY THE DEPARTMENT IN THE CASE OF MAK DATA P. LTD. V. CIT (SUPRA) HAS NO APPLICATIO N TO THE FACTS OF THE PRESENT CASE. THUS, WE FIND THAT THE LD. CIT(A) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT AND ACCORDINGLY, THE GROUND RAISED BY REVENUE IS DISMISSED. 10 . IN THE RESULT , THE APPEAL OF REVENUE IS DISMISSED . ORDER PRONOUNCED ON THE 25 TH NOVEMBER , 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 25 . 1 1 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.