The ACIT,Valsad Circle, Valsad V. Atul bioscience Limited, Valsad

ITA 943/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63085 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 30-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Keywords: Depreciation; Business expenditure; Bonafide belief; Difference of opinion
• Section: 143(3)

Judgement Text

ITA NO 943/ AHD/2010 A.YR.. 2006 -07 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AH MEDABAD (BEFORE SHRI D.K. TYAGI JM & SHRI ANIL CHATURVEDI A .M.) I.T.A. NO.943/ AHD/2010. (ASSESSMENT YEAR: 2006-07) ASSISTANT COMMISSIONER OF INCOME TAX, VALSAD CIRCLE, SURYAPRAKASH CHAMBERS, DHARAMPUR ROAD, VALSAD (APPELLANT) VS. M/S.ATUL BIOSCIENCE LTD., D-1,DOWN COLONY, ATUL, DIST. VALSAD. (RESPONDENT) PAN: AACCA0331P APPELLANT BY : MR. D.K.SINGH, SR. D.R. RESPONDENT BY : MR. PRAKASH D. SHAH ( )/ ORDER DATE OF HEARING : 27-9-2012 DATE OF PRONOUNCEMENT : 27-11-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. PRESENT APPEAL IS AGAINST THE PENALTY ORDER PASSED U/S. 271(1)(C) WHICH WAS PASSED BY THE DEPUTY COMMISSIONER OF INCO ME TAX ON 22-5- 2009 AND DELETED BY THE CIT (A). 2 IN THIS CASE THE ASSESSEE FILED ITS RETURN OF IN COME SHOWING LOSS OF RS.1,68,26,261/- AND ASSESSMENT U/S. 143(3) WAS FIN ALIZED U/S. 143(3) VIDE ITA NO 943/ AHD/2010 A.YR.. 2006 -07 2 ORDER DATED 24-11-2008 AND THE TOTAL INCOME WAS DET ERMINED AT RS.430. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. NO TICED THAT ASSESSEE HAD CLAIMED BUSINESS EXPENDITURE OF RS.1,66,25,691/ - THOUGH THE ASSESSEE DID NOT CARRY OUT ANY MANUFACTURING ACTIVITY AND AL SO NOT CLAIMED DEPRECIATION. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, ITSELF, ASSESSEE WITHDREW THE CLAIM OF AFORESAID EXPENSES. WHILE FINALIZING THE ASSESSMENT A.O. MADE ADDITION ON ACCOUNT OF BUSINES S EXPENDITURE OF RS.1,66,25,691/- AND IN RESPECT OF TAX PAID FOR FBT OF RS.2,01,000/-. FOR THE REASON THAT A.O. WAS OF THE VIEW THAT SINCE THE ASSESSEE DID NOT CARRY OUT PRODUCTION/MANUFACTURING ACTIVITY AND HAD NOT C LAIMED DEPRECIATION IN THE RETURN OF INCOME IT WAS NOT ENTITLED TO ANY BUS INESS EXPENDITURE. IT IS ON THE AFORESAID DISALLOWANCE OF BUSINESS EXPENSES. A.O. LEVIED PENALTY U/S.271(1)(C ) OF THE ACT. 3. AGAINST THE PENALTY LEVIED BY THE A.O. ASSESSEE CARRIED THE MATTER BEFORE CIT (A). CIT (A) VIDE HIS ORDER DATED 24-11 -2009 DELETED THE PENALTY BY HOLDING AS UNDER: 4.3. I HAVE CAREFULLY EXAMINED THE ASSESSMENT ORDER AND PENALTY ORDER PASSED BY THE A.O. AND ALSO THE SUBMISSIONS MADE BY THE APPELLANT. THE A.R. VEHEMENTLY ARGUED INTER-ALIA TH AT TO BUY PEACE, THE APPELLANT DID NOT FILE SECOND APPEAL BEFORE THE ITAT. THE RETURN OF INCOME FOR A.Y. 2006-07 WAS FILED ON 29-12-2006. NO TICE U/S. 143(2) OF THE ACT WAS ISSUED ON 17-10-2007. THE LD. CIT (A ) PASSED ORDER FOR THE A.Y. 2005-06 ON20-11-2008. THE APPELLANT IN REPLY TO THE NOTICE OF A.O. DATED 7-10-2008 WITHDREW THE CLAIM O F EXPENSES VIDE LETTER DATED 18-10-2008 PROBABLY THE APPELLANT FELT THAT THE DECISION OF THE LD. CIT (A) MAY NOT BE IN FAVOUR OF THE ASSESSE E. THE A.O. PASSED ASSESSMENT ORDER ON 24-11-2008. FROM THE SEQ UENCE OF ITA NO 943/ AHD/2010 A.YR.. 2006 -07 3 EVENT IT IS CLEAR THAT THERE IS NO CONTUMACIOUS OR DISHONEST CONDUCT OR ANY ACTION CONSCIOUS DISREGARD OF ITS OBLIGATION. IT IS NECESSARY TO UNDERSTAND THAT SEC.271(1)(C ) I S ATTRACTED WHERE, IN THE COURSE OF ANY PROCEEDING UNDER THE ACT, THE A.O . OR THE FIRST APPELLATE AUTHORITY IS SATISFIED THAT (A) ANY PERSO N HAS CONCEALED THE PARTICULARS OF HIS INCOME OR (B) HAS FURNISHED INAC CURATE PARTICULARS OF SUCH INCOME. THE EXPRESSION HAS CONCEALED AND HA S FURNISHED INACCURATE PARTICULARS HAVE NOT BEEN DEFINED IN TH E ACT. THE FORMER IS DIRECT WHILE THE LATER IS INDIRECT IN ITS EXECUT ION. THE A.O. HAS INVOLVED THAT THE APPELLANT HAS FURNISHED INACCURA TE PARTICULARS OF THE INCOME FOR LEVYING THE PENALTY. THE MOOT QUESTION IN THE INSTANT IS THAT WHETHER THE PARTICULARS GIVEN BY THE APPELLANT IS INACCURATE PARTICULARS. I FIND IT IS NOT. AT THE SAME TIME THE EXPLANATION GIVEN BY THE APPELLANT IS BONAFIED. THE APPELLANT HAD DISPUT ED THE ADDITIONS AND THE PENALTY PROCEEDING WAS HANGING ON THE APPEL LANT AT THE TIME OF FILING THE RETURN OF INCOME. HOWEVER WHEN THE A. O. RAISED THE ISSUE AT THE TIME OF ASSESSMENT PROCEEDING THE APPELLANT SURRENDERED THE EXPENSES CLAIMED IN THE RETURN OF INCOME AND DID NO T PREFER APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. HAD THE APPEL LANT CONTESTED THE ADDITIONS MADE BY THE A.O. THE CASE WOULD HAVE AT D IFFERENT FOOTING SO TO SAY THAT THE APPELLANT COULD NOT HAVE ESCAPED THE PENALTY. BEFORE ME THE APPELLANT HAD SUPPORTED HIS ARGUMENTS WITH LARGE NUMBER OF JUDICIAL PRECIDENCES SOME OF WHICH I FOUN D RELEVANT TO THE PRESENT CASE. FOLLOWING THE DECISION IN DILIP N. SH ROFF VS. JCIT 291 ITR 591 (SC), THE HONBLE RAJASTHAN HIGH COURT IN A .R. ENTERPRISES 300 ITR 96 (RAJ.) HELD THAT MERELY BECAUSE THE AUTH ORITY FOUND THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION, IT COULD NOT BE CONCLUDED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME. THE EXPLANATION GIVEN BY THE APPELLANT IS NOT IMPROBABL E. THE LD. A.R. ALSO CONTENDED THAT THE APPELLANT DID NOT CONTEST T HE ADDITIONS TO BUY PEACE. IN THE CASE OF ADDL. CIT VS. AGRAWAL MISTAN BHANDAR 131 ITR 619 (RAJ.) THE HONBLE HIGH COURT HELD THAT OFFER O F INCOME TO AVOID APPEALS WITHOUT ANY EVIDENCE OF INFORMATION OF CONC EALMENT DOES NOT ATTRACT PENAL PROVISION. AT BEST THIS IS A CASE THE ADMISSION IS FOR INCOME AND NOT FOR PENALTY. SIMILARLY, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. UNION ELECTRONIC CORPORATION 200 CTR (GUJ.) 636, HELD THAT THE ASSESSEE OFFERED DURING THE ASSE SSMENT PROCEEDING BEFORE DETECTION BY THE A.O. DOES NOT AT TRACT PENALTY ITA NO 943/ AHD/2010 A.YR.. 2006 -07 4 PROVISION U/S. 271(1)(C ).FURTHER, IN CIT VS. BACAR DI MARTINI INDIA LTD. 265 ITR 562 (SC), THAT WITHDRAWAL OF CLAIM OF DEDUC TION OF CERTAIN EXPENDITURES BY THE ASSESSEE BY FILING REVISED RETU RN OR DISALLOWANCE OF EXPENDITURE DUE TO DIFFERENCE OF OPINION BETWEEN THE A.O. AND THE ASSESSEE DID NOT AMOUNT TO CONCEALMENT OF INCOME IO R FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE, AND THEREFO RE, PENALTY U/S. 271(1)(C ) WAS NOT LEVIABLE. IN THESE CIRCUMSTANCES , I DIRECT THE A.O. TO DELETE THE PENALTY. THE APPELLANT SUCCEEDS THIS GROUND OF APPEAL. 4 IT IS AGAINST THE AFORESAID ORDER OF CIT (A), THE REVENUE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, AT THE OUTSET, THE LD. A.R. SUBMITTED THAT ON IDENTICAL FACTS FOR A.Y. 2005-06 PENALTY WAS LEVIED BY THE A.O. BUT THE SAME WAS DELETED BY HONBLE ITAT VIDE ITS ORDER DATED 31-5-2010 IN I TA NO.166/AHD/2010 HE PLACED ON RECORD COPY OF THE ORDER. HE THUS SUBM ITTED THAT SINCE THE FACTS OF THE CASE IN THE PRESENT YEAR ARE IDENTICAL TO THAT OF A.Y. 2005-06, FOLLOWING THE ORDER OF EARLIER YEAR, PENALTY LEVIED UNDER THE YEAR MAY ALSO BE DELETED. 6. THE LD. D.R. ON THE OTHER HAD RELIED ON THE ORDE R OF THE A.O. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN A.Y.2005-06, A.O. HAD LEVI ED THE PENALTY AND THE SAME WAS DELETED BY THE HONBLE CO-ORDINATE BENCH B Y HOLDING AS UNDER: 4. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES AT SOME LENGTH, WE ARE OF THE VIEW THAT THE ISSUE OF SET UP BUSINE SS HAPPENED TO BE A CONTENTIOUS ISSUE. EVEN IN THE PRESENT SET OF FAC TS, IT WAS AN ARGUABLE CASE THAT WHETHER THE ASSESSEE HAS COMMENC ED ITS BUSINESS ON ACQUISITION OF THE BUSINESS OF A GOING CONCERN, NAMELY ITA NO 943/ AHD/2010 A.YR.. 2006 -07 5 M/S. AGRI MORE LIMITED. THE APPELLANT HAS CLAIMED T HE EXPENDITURE, SUCH AS PF, WELFARE EXPENSE, ETC. UNDER A BONAFIDE BELIEF THAT BUSINESS HAS NOT ONLY BEEN SET UP BUT COMMENCED ON ACQUISITION OF THE BUSINESS OF THE SAID GOING CONCERN. THERE WAS NO CONTROVERSY ABOUT THE GENUINENESS OF THOSE EXPENSES CLAIMED BY THE ASSESSEE. THIS IS NOT THE CASE OF THE REVENUE THAT THOSE EXPE NSES WERE NOT BONAFIDELY CLAIMED OR THE NATURE OF THOSE EXPENSES WAS DOUBTED. THE DETAILS OF THOSE EXPENSES WERE VERY MUCH IN THE KNO WLEDGE OF THE REVENUE DEPARTMENT BEING PROPERLY DISCLOSED IN THE PROFIT AND LOSS ACCOUNT AND NO PART OF IT COULD BE SAID TO BE DELIB ERATELY CONCEALED BY THE ASSESSEE. RELIANCE HAS ALSO BEEN PLACED ON THE FOLLOWING DECISIONS:- SR. NO. DECISION IN THE CASE OF REPORTED IN 1. CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158(SC) 2. BTX CHEMICAL P. LTD. VS. CIT 288 ITR 196 (GUJ.) 3. HINDUSTAN STEEL LTD. 83 ITR 26 (SC) 4. CIT VS.HARSHVARDHAN CHEMICALS & MINERAL LTD. 259 ITR 212. 4.1. IN ADDITION TO ABOVE CASE LAWS, A DECISION OF ITAT DELHI IN THE CASE OF WHIRPOOL OF INDIA LTD. VS. JCIT REPORTED AS (2008) 114 TTJ (DEL) 211 HAS ALSO BEEN CITED WHEREIN ON IDENTICAL SITUATION, THE HONBLE BENCH HAS DECIDED THAT THERE WAS NO OCCASIO N FOR LEVY OF PENALTY. THE RELEVANT PORTION IS REPRODUCED BELLOW: THE QUESTION AS TO WHEN CAN BE SAID TO HAVE BEEN SET UP IS ESSENTIALLY ONE OF FACT AND WOULD DEPEND ON THE FAC TS OF EACH CASE AND HAVING REGARD TO THE NATURE AND TYPE OF TH E PARTICULAR BUSINESS. THE ASSESSEE HAS, BY PLACING ALL THE FACT S BEFORE THE A.O. TAKEN THE POSITION THAT THE BUSINESS WAS SET U P IN NOV.,1995 WITH WHICH THE A.O. DID NOT AGREE. THAT D OES NOT AMOUNT TO FURNISHING OF ANY INACCURATE PARTICULARS OF INCOME NOR CAN IT BE SAID THAT THE ASSESSEE CONCEALED ITS INCO ME BY CLAIMING EVEN PRE-SET UP EXPENSES AS DEDUCTION. AT BEST, IT CAN ONLY BE A DEBATABLE POINT. WHEN ALL THE FACTS ARE P LACED BY THE ASSESSEE BEFORE THE A.O., WHO HAS NOT UNEARTHED ANY FACT NOT ITA NO 943/ AHD/2010 A.YR.. 2006 -07 6 DISCLOSED BY THE ASSESSEE, BUT HAS MERELY TAKEN A V IEW DIFFERENT FROM THE VIEW EXPRESSED BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE EITHER CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF. THEREFORE, THE CIT (A) HAS RIGHTLY CANCELLED THE PENALTY. EVEN OTHERWISE, THE PENALTY HAS NO LEGS TO STAND IN VIEW OF THE FACT THAT THE BUSINESS WAS SET UP ON 1 ST NOVE.,1995 AS CLAIMED BY THE ASSESSEE AND ALL EXPEN SES INCURRED AFTER THAT DATE ARE ALLOWABLE AS DEDUCTION ADDL. CIT VS. DELHI CLOTH & GENERAL MILLS CO. LTD. (1984) 42 CTR (DEL.) 188 (1986) 157 ITR 822 (DEL) AND CIT VS. BACARDI MA RTINI INDIA LTD. (2006) 206 CTR (DEL) 250 : (2007) 288 ITR 585 (DEL) FOLLOWED. 5. TO ASCERTAIN WHETHER THE ISSUE PERTAINING TO THE SETTING UP OF BUSINESS WAS INDEED A DEBATABLE OR NOT; WE HAVE CO ME ACROSS A DECISION OF RESPECTED THIRD MEMBER PRONOUNCED IN TH E CASE OF STYLER INDIA (P) LTD. REPORTED AS 113 ITD 55 ( TM) (PUNE); WHICH BY ITSELF PROVES THAT THERE WAS A DIFFERENCE OF OPINIO N AMONG THE MEMBERS, THAT IS WHY A THIRD MEMBER WAS APPOINTED U /S.255(4) OF THE I.T. ACT, 1961 TO RESOLVE THE SAME. 6. IN THE LIGHT OF ABOVE DISCUSSION AND THE PRECEDE NTS CITED, IT IS EVIDENT THAT THE DETAILS OF THE CLAIMED EXPENDITURE WAS VERY MUCH AVAILABLE TO THE A.O. WHO HAS NOT QUESTIONED THE GE NUINENESS BUT DISALLOWED THE SAME FOLLOWING ONE VIEW ON THE ISSUE OF SET UP OF BUSINESS, HOWEVER, AS SEEN FROM THE ABOVE REFERENCE S, AN ANOTHER VIEW COULD BE PLAUSIBLE, THEREFORE, ENTIRETY OF THE CIRCUMSTANCES LEADS TO A CONCLUSION THAT IF AT ALL THE SAID CLAIM OF EX PENDITURE WAS MADE UNDER AN ERRONEOUS UNDERSTANDING OF LAW BUT IT COUL D NOT LEAD TO THE CONCLUSION OF CONCEALMENT ON THE PART OF ASSESSEE B EING SIMPLISTICALLY A MATTER OF DEBATE. WE, THEREFORE, HOLD THAT THE IMPUGNED PENALTY WAS NOT LEVIABLE, RESULTANTLY WE H EREBY DIRECT TO DELETE THE PENALTY. 8. IN THE PRESENT CASE CIT (A) WHILE DELETING THE P ENALTY HAS GIVEN A FINDING THAT THE ASSESSEE HAS NOT FILED INACCURATE PARTICULARS OF INCOME AND THE EXPLANATION GIVEN BY THE ASSESSEE WAS FOUND TO BE BONAFIDE. HE HAS ITA NO 943/ AHD/2010 A.YR.. 2006 -07 7 FURTHER HELD THAT WHEN THE ISSUE WAS RAISED BY THE A.O. AT THE TIME OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS SURRENDERED THE EXPENSES CLAIMED IN THE RETURN OF INCOME SUO MOTO AND HAD NO T PREFERRED APPEAL BEFORE THE CIT (A). BEFORE US, NOTHING HAS BEEN BR OUGHT ON RECORD BY THE REVENUE TO CONTROVERT THE FINDINGS GIVEN BY THE CIT (A) OR DISTINGUISH THE FACTS WITH THAT OF EARLIER YEARS IN VIEW OF THESE F ACTS AND RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, WE ARE OF THE VIEW THAT NO PENALTY IS LEVIABLE ON THE FACTS I N THE PRESENT CASE. WE THEREFORE, DELETE THE PENALTY. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 27 11 - 2012. SD/- SD/- ( D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-VALSAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABA D ITA NO 943/ AHD/2010 A.YR.. 2006 -07 8 1.DATE OF DICTATION 22 - 11 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 23,26 /11 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..