DCIT, New Delhi V. M/s Maharishi Ayurveda Products Pvt. Ltd., New Delhi

ITA 946/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4240 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 18-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI RAMACHANDRAN
• Assessee Lawyers: MANOJ ARORA
• Keywords: Difference of opinion; Revenue expenditure
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO.946/DEL/2011 ASSESSMENT YEAR : 2004-05 DCIT, CIRCLE 6 (1), ROOM NO.413, CR BUILDING, NEW DELHI. VS. MAHARISHI AYURVEDA PRODUCTS PVT. LTD., A-14, MOHAN CO-OP. INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI. PAN : AACCM5403A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MANOJ ARORA, ADVOCATE REVENUE BY : SHRI K. RAVI RAMACHANDRAN, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS CONTEST ING THE DELETION OF PENALTY MADE BY LEARNED CIT (A) VIDE OR DER DATED 27 TH OCTOBER, 2010 IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEA R 2004- 05. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THE ORDER OF LEARNED CIT (APPEALS) IS ERRONEOUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE PENALTY OF RS.28,85,956/- LEVIED BY THE ASSESSING OFFICER U/S 2 71(1)(C) OF THE IT ACT. 2.1 THE LD. CIT (A) IGNORED THE FACT THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF ITS INCOME BY CLAI MING NON ALLOWABLE EXPENSES ON ACCOUNT OF DEFERRED REVENU E EXPENSES. ITA NO.946/DEL/2011 2 EXPENSES. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AME ND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD FIL ED A RETURN DECLARING NET LOSS OF ` 2,04,26,750/- ON 31 ST OCTOBER, 2004. AN ASSESSMENT ORDER U/S 143 (3) CAME TO BE PASSED ON 26 TH DECEMBER, 2006 IN WHICH THE DISALLOWANCE ON ACCOUNT OF DEFERRE D REVENUE EXPENDITURE AMOUNTING TO ` 82,45,588/- WAS MADE. TH OSE EXPENDITURES WERE INCURRED BY THE ASSESSEE ON ESTABLISHMEN T, RECRUITMENT AND TRAINING, AND ADVERTISEMENT AND SALES PROMOTION, ETC., AND WERE INCURRED IN EARLIER YEARS. ACCORDING TO TH E ASSESSEE, ALL THESE EXPENDITURES WERE OF REVENUE NATURE. THE ENTIRE AMO UNT WAS NOT CLAIMED IN EARLIER YEARS, SINCE THE ASSESSEE WAS OF THE VI EW THAT THE BENEFIT OF THESE EXPENDITURES WILL ACCRUE TO THE ASSESSEE OVER A PERIOD OF TIME. HOWEVER, SUCH CLAIM OF THE ASSESSEE WAS NOT ACC EPTED IN THE YEAR UNDER CONSIDERATION AS WELL AS IN THE EARLIER YEA RS. IT IS ON THAT AMOUNT, THE PENALTY OF ` 28,85,956/- WAS LEVIED BEIN G 100% OF THE TAX SOUGHT TO BE EVADED. IT MAY BE MENTIONED HERE THAT THE ADDITION IN QUANTUM PROCEEDINGS HAS BECOME FINAL AT THE LEVEL OF ITAT AND THE LEARNED ASSESSING OFFICER HAS IMPOSED PENALTY ON THE GROU ND THAT THE ADDITION ITSELF HAS BEEN UPHELD BY THE ITAT AND THE A SSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOME AND IT IS IN T HESE CIRCUMSTANCES THE IMPUGNED PENALTY HAS BEEN LEVIED. 3. THE LEARNED CIT (A) AFTER GOING THROUGH THE ORDE R OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 HAS DELETED THE PENALTY WHEREIN ON IDENTICAL FACTS SIMILAR PENALTY WA S DELETED. A REFERENCE IN THIS REGARD CAN BE MADE TO THE ORDER OF THE TRIBUNAL DATED 13 TH AUGUST, 2010 IN ITA NO.1369/DEL/2010 WHEREIN THE PE NALTY WAS DELETED VIDE PARA 9 AS PER THE FOLLOWING OBSERVATIONS: - ITA NO.946/DEL/2011 3 9. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. THE CASE OF THE ASSESSEE IS THAT IT IS FOLLOWING A PARTICULARS ACCOUNTING POLICY WHERE 50 % OF THE REVENUE EXPENSES INCURRED ON FOUR ACTIVITIES, NAMELY, ESTABLISHMENT, RECRUITMENT & TRAINING AND ADVERTISING AND SALES PROMOTION WHICH COPPED IN A COMMON ACCOUNT NAMED AS 'DEFERRED REVENUE ACCOUNT'. THE TOTAL EXPENSES WERE NO T CLAIMED IN THE YEAR OF INCURRENCE BUT ONLY 10% WAS CL AIMED EVERY YEAR. IN THIS YEAR, THE TOTAL EXPENSES INCURRED B Y THE ASSESSEE UNDER THESE HEADS WERE RS.3,10,57,134. 50% OUT OF THIS APPEARS TO HAVE BEEN CLAIMED. THE 50% WAS TAKEN TO THE DEFERRED REVENUE ACCOUNT. IN OUR OPINION, THE ASSESSE E HAS DISCLOSED ALL NECESSARY DETAILS. IT IS THE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AS WELL AS THE ASSESSING OFFICER. THIS 50% OF THE TOTAL EXPENSES WHICH WAS TAKEN TO THE DEFERRED REV ENUE ACCOUNT CAN EASILY TAKE CARE OF THE TOTAL EXPENSES I.E. RS.40,74,650 CLAIMED BY THE ASSESSEE OUT OF THE ALLEGE D DEFERRED ACCOUNT. ASSESSING OFFICER DID NOT BOTHER TO E XAMINE THE CONTROVERSY WITH THIS ANGLE. THE ASSESSEE HAS DISCL OSED ALL THE DETAILS IN RESPECT OF EXPENSES. THOSE HAVE NOT BEEN DOUBTED. THE EXPLANATION OFFERED BY THE ASSESSEE FOR E XPLAINING ITS POSITION IN THE PENALTY PROCEEDINGS IS A PLAUSIBLE ONE AND THERE IS NO LACK OF BONA FIDE. AS FAR AS THE OTHER TWO AMOUNTS ARE CONCERNED, AFTER THE DECISION OF HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF PM ELECTRONICS (SUPRA), THE ADDITIONS IN RESPECT OF THE DISALLOWANCE OF PF AND ESI CONTRIBUTIONS COULD HAV E NOT BEEN SUSTAINABLE. THEREFORE, PENALTY AT LEAST CANNOT BE IMPOSED ON THESE AMOUNTS. AS FAR AS THE LOSS CLAIMED BY THE ASS ESSEE ON SALE OF ASSETS IS CONCERNED, THE ASSESSEE HAS DISCLOS ED ALL THE NECESSARY FACTS WHICH WERE NOT FOUND TO BE FALSE BY THE ASSESSING OFFICER. IN THE CASE OF RELIANCE PETRO PROD UCTS (SUPRA), HON'BLE SUPREME COURT HAS OBSERVED THAT A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IN THAT CASE, THE DETAILS SUBMITTED BY THE ASSES SEE WERE NOT FOUND TO BE ERRONEOUS, INCORRECT OR FALSE. SI MILARLY, IN THE PRESENT CASE, THE DETAILS SUBMITTED BY THE ASSESSEE WE RE NOT FOUND TO BE INCORRECT OR FALSE. IN THE OPINION OF TH E ASSESSING OFFICER, THE ALLEGED DEFERRED REVENUE EXPENSES WERE NOT ALLOWABLE TO THE ASSESSEE IN THE MANNER ASSESSEE HAS C LAIMED. TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCE S, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY. 4. THE COPY OF THE AFOREMENTIONED ORDER WAS PLACED O N OUR RECORD AND A COPY WAS ALSO GIVEN TO LEARNED DR. ITA NO.946/DEL/2011 4 5. AFTER NARRATING THE FATS, LEARNED DR, RELYING UPO N THE PENALTY ORDER AND ASSESSMENT ORDER, PLEADED THAT THE PENALTY HA S RIGHTLY BEEN IMPOSED AND THE ORDER OF LEARNED CIT (A) SHOULD BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 6. ON THE OTHER HAND, RELYING UPON THE AFOREMENTION ED ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02, IT WAS PLEADED BY LEARNED AR THAT THE FACTS AND CIRCUMSTANCE S BEING SAME, LEARNED CIT (A) HAS RIGHTLY DELETED THE PENALTY FOLL OWING THE AFOREMENTIONED ORDER OF THE TRIBUNAL AND HIS ORDER SH OULD BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. NO DIFFERENCE IN FAC TS AND CIRCUMSTANCES OF THE CASE HAS BEEN POINTED OUT. FOR ASSE SSMENT YEAR 2001-02 THE TRIBUNAL HAS DELETED THE SIMILAR PENALTY. WE HAVE NO REASON TO DIFFER WITH THE EARLIER ORDER OF THE TRIBU NAL IN WHICH IT WAS HELD THAT THE ASSESSEE IS NOT LIABLE FOR PENALTY ON THE DISALLOWANCES MADE ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE. R ESPECTFULLY FOLLOWING THE SAID ORDER, WE FIND NO INFIRMITY IN TH E ORDER OF THE CIT (A) VIDE WHICH THE IMPUGNED PENALTY HAS BEEN DELETED. W E DECLINE TO INTERFERE AND THE DEPARTMENTAL APPEAL IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.04.20 11. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 21.04.2011. DK ITA NO.946/DEL/2011 5 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES