ACIT, Chandigarh V. M/s Torque Pharmaceuticals (P) Ltd., Chandigarh

ITA 972/CHANDI/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90141 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 04-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Question of law; Non-deduction of tax
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 972/CHD/2013 ASSESSMENT YEAR: 2006-07 THE ACIT, VS M/S TORQUE PHARMACEUTICALS CIRCLE 1(1), (P) LTD., CHANDIGARH. 693, INDL. AREA, PHASE II, CHANDIGARH. PAN: AABCT1244P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH , DR RESPONDENT BY : SHRI PARIKSHIT AGGARWAL DATE OF HEARING : 07.05.2015 DATE OF PRONOUNCEMENT : 19.05.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS) CHANDIGARH DATED 01.07.2013 FOR ASSESS MENT YEAR 2006-07 CHALLENGING THE CANCELLATION OF PENALTY UND ER SECTION 271(1)(C) OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT FOLLOWING A DDITIONS WERE MADE AND SUBSEQUENTLY UPHELD BY HON'BLE ITAT, CHANDIGARH IN THIS CASE : I) ADDITION ON ACCOUNT OF FREIGHT INWARD AND RS. 28,96,304/- OUTWARD U/S 40(A)(IA) II) ADDITION ON ACCOUNT OF FREIGHT OUTWARD ON RS. 63,447/- PAYMENT MADE TO M/S GATI LTD. U/S 40(A)(IA) 2 III) ADDITION ON ACCOUNT OF REPAIR AND MA INTENANCE RS. 1,94,593/- OF CARS U/S 40(A)(IA) IV)ADDITION ON ACCOUNT OF STITCHING OF UNIFORMS ETC RS. 5,82,625/- U/S40(A)(IA) V) ADDITION U/S40A(3) RS. 18,297/- VI) ADDITION ON ACCOUNT OF DISALLOWANCE U /S R S. 28,63,569/- 80IC ON RE-ALLOCATION OF EXPENSES VII) ADDITION ON ACCOUNT OF INTEREST CAPI TALISED RS. 10,355/- (2053 + 8302) (VIII) ADDITION ON ACCOUNT OF INTEREST DEBITED TO RS. 1,42,520/- DERRA BASSI UNIT - TREATED AS RELATING TO BADDI UNIT 3. THE ASSESSING OFFICER HAD INITIATED PENALTY PROCEEDINGS ON ALL THE ABOVE ADDITIONS AT THE TIME OF ASSESSMENT. IN THE PENALTY PROCEEDINGS, THE ASSESSE E HAD FILED A REPLY, BUT THE ASSESSING OFFICER WAS NOT SA TISFIED WITH THE EXPLANATION AND HAS LEVIED MINIMUM LEVIABL E PENALTY U/S 271(L)(C) OF THE ACT AFTER DISCUSSING A LL THE ABOVE ISSUES AND HAS MENTIONED AS UNDER ON THE LAST PAGE OF THE PENALTY ORDER: 'ON ACCOUNT OF ABOVE, I AM SATISFIED THAT THE ASSESSE E HAS FURNISHED INACCURATE PARTICULARS OF INCOME BY CLAIMI NG WRONG DEDUCTION WILLFULLY. ASSESSEE EVEN DID-NOT FILE THE A PPEAL ON THIS ISSUE. ASSESSEE WAS AWARE THAT IT HAD NOT DEDUCT ED TAX AT SOURCE AND THEREFORE THE EXPENSE WAS NOT ADMISSIBL E TO IT AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOM E TAX ACT, 1961. STILL THE ASSESSEE WILLFULLY CLAIMED THE EXPENSE IN I TS PROFIT & LOSS ACCOUNT AND THEREBY FURNISHED INACCURAT E PARTICULARS OF INCOME WHICH IS LIABLE TO PENAL ACTION U /S 271(L)(C) OF THE INCOME TAX ACT THEREFORE PENALTY U/ S 271(1 )(C) IS IMPOSED AS UNDER:- THE QUANTUM OF PENALTY IS AS FOLLOWS :- RETURNED INCOME NIL 3 ADDITION ON WHICH PENALTY U/S 271(1)(C) OF THE R S. 67,99,656/- ACT IS BEING IMPOSED AS DISCUSSED ABOVE TAX SOUGHT TO BE EVADED RS. 22,88,770/- 4. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE LD. CIT(APPEALS) AND IT WAS SUBMITTED THAT THE ASSESSIN G OFFICER HAD DISCUSSED IN THE PENALTY ORDER THAT THE PENALTY IS TO BE LEVIED ONLY IN RESPECT OF THE ADDITION MADE ON THE DISALLOWANCES UNDER SECTION 40(A)(IA), BUT HAS LEVIED PENALTY FOR CONCEALMENT OF THE ENTIRE ADDITION CONFIRMED BY THE TRIBUNAL. THE ASSESSEE RELIED UPON DECISION OF THE HON'BLE SUPREME COURT I N THE CASE OF M/S RELIANCE PETROPRODUCTS PVT. LTD. 332 ITR 15 8, DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASES OF M/S SIDHARATH ENTERPRISES 322 ITR 80 AND M/S HARYANA WAREHOUSING CORPORATION 314 ITR 215. 5. THE LD. CIT(APPEALS) CONSIDERING SUBMISSION OF T HE ASSESSEE, CANCELLED THE PENALTY. HIS FINDINGS IN PARA 5 & 6 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER: 5. I HAVE CONSIDERED THE SUBMISSION OF THE LD. COU NSEL. AS PER THE PROVISIONS OF SECTION 271(L)(C), PENALTY CAN BE LEVIED, IF THE ASSESSEE HAS CONCEALED PARTICULARS OF HIS IN COME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. FOR THE SAKE OF READY REFERENCE, EXPLANATION-1 BELOW SECTION 271(1) IS REPRODUCED BELOW: 'EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FA LSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT S UCH EXPLANATION IS BONAFIDE AND THAT ALL THE FACTS RELA TING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOT AL INCOME HAVE BEEN DISCLOSED BY HIM, 4 THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DE EMED TO REPRESENT THE INCOME IN RESPECT OF WHICH '.PARTICU LARS HAVE BEEN CONCEALED.' 5.1 THUS, WHEN THE ASSESSEE HAS CONCEALED PARTICU LARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS, CON DITIONS LAID DOWN IN EXPLANATION-1 (SUPRA) HAVE TO BE EXAMINED. REGARDING VARIOUS DISALLOWANCES UNDER SECTION 40(A)(IA) MADE IN RESPECT OF FREIGHT INWARD AND FREIGHT OUTWARD, REPA IR AND MAINTENANCE OF CARS AND STITCHING OF UNIFORMS ETC, THE APPELLANT CANNOT BE SAID TO HAVE DELIBERATELY FURNI SHED INACCURATE PARTICULARS OF INCOME. HON'BLE ITAT DELH I IN THE CASE OF AT & T COMMUNICATIONS SERVICES INDIA PVT. L TD. (42 DTR 22) HAS HELD THAT THE DISALLOWANCE MADE BY INVO KING PROVISIONS OF SECTION 40(A)(I) CANNOT BE A GROUND T O LEVY PENALTY U/S 271(L)(C) SINCE IN SUCH SITUATIONS, IT CANNOT BE SAID THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT TO THE DEDUCTION CLAIME D BY THE ASSESSEE. SECTION 40(A)(I) PERTAINS TO PAYMENTS MAD E TO NON-RESIDENTS AND THE CORRESPONDING PROVISION FOR R ESIDENTS IS SECTION 40(A)(IA) AND SO THE RATIO OF THIS DECIS ION IS APPLICABLE IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) ALSO. FURTHER, THE ENTIRE AMOUNT HAS BEEN ADDED U/S 40(A) (IA) FOR NON-DEDUCTION OF TAX AND THE APPELLANT HAS ALREADY BEEN PENALIZED BY ADDING WHOLE OF THE AMOUNT, ON WHICH T AX WAS TO BE DEDUCTED. BY RESPECTFULLY FOLLOWING THE D ECISION OF HON'BLE ITAT DELHI (SUPRA), THE PENALTY, FOR CON CEALMENT LEVIED IN RESPECT OF VARIOUS DISALLOWANCES MADE U/S 40(A)(IA) IS CANCELLED. 5.2 FROM A PERUSAL OF THE LAST PARA OF THE PENALTY ORDER (REPRODUCED IN PARA 3.1 ABOVE), IT IS EVIDENT THAT THE ASSESSING OFFICER INTENDED TO LEVY PENALTY FOR CONC EALMENT ONLY IN RESPECT OF DISALLOWANCE U/S 40(A)(IA), BUT HAS COMPUTED THE PENALTY ON THE ENTIRE ADDITION CONFIRM ED BY HON'BLE ITAT. HENCE, THE PENALTY LEVIED ON ADDITION S OTHER THAN U/S 40(A)(IA) ALSO DESERVES TO BE CANCELLED 5.3 IN VIEW OF THE ABOVE DISCUSSION, THE PENALTY FO R CONCEALMENT LEVIED IN THIS CASE IS CANCELLED. ALL THE GROUNDS TAKEN BY THE APPELLANT ARE ALLOWED. 6. IN THE RESULT, THE APPEAL IS ALLOWED. 6. THE LD. DR RELIED UPON ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT IF THE CASE OF THE ASSESSEE WOULD NO T HAVE BEEN TAKEN UP FOR SCRUTINY, NO ADDITION WOULD HAVE BEEN MADE. THEREFORE, IT IS A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF 5 INACCURATE PARTICULARS OF INCOME AND RELIED UPON DE CISION OF DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION PVT. LTD. 327 ITR 510. 7. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT LD. CIT(APPEALS) CORRECTLY FOLLOWED THE DECISION OF THE DELHI BENCH IN THE CASE OF AT&T COMMUNICATIO NS SERVICES (INDIA) PVT. LTD. (SUPRA) AND ALSO SUBMIT TED THAT ASSESSEE HAS DISCLOSED ALL THE PARTICULARS OF INCOM E BEFORE THE AUTHORITIES BELOW AND DISPUTED THE CLAIM OF THE ASS ESSING OFFICER. HE HAS ALSO FILED ORDER OF THE HON'BLE PU NJAB & HARYANA HIGH COURT IN THE CASE OF THE SAME ASSESSEE FOR ASSESSMENT YEAR UNDER APPEAL TO SHOW THAT THE APPEA L OF THE ASSESSEE HAS BEEN ADMITTED AGAINST QUANTUM ADDITION BY HON'BLE PUNJAB & HARYANA HIGH COURT ON SUBSTANTIAL QUESTIONS OF LAW. HE HAS, THEREFORE, SUBMITTED THAT SINCE AP PEAL OF THE ASSESSEE IS PENDING BEFORE HON'BLE HIGH COURT, THER EFORE, CLAIM OF ASSESSEE IS BONAFIDE AND PENALTY HAS BEEN CORREC TLY CANCELLED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MATERI AL AVAILABLE ON RECORD. THE ISSUE INVOLVED IN THE APP EAL IS REGARDING CANCELLATION OF PENALTY ON ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE UNDER SECTION 40(A)( IA) OF THE ACT. THE ASSESSEE HAS DISCLOSED THE ENTIRE FACTS B EFORE THE AUTHORITIES BELOW WITHOUT CONCEALING ANY INCOME. T HE ASSESSEE MADE A CLAIM OF DEDUCTION IN THE RETURN OF INCOME A ND EXPLAINED THE FACTS BUT THE SAME WERE NOT ACCEPTED BY THE 6 AUTHORITIES BELOW AND ADDITIONS HAVE BEEN CONFIRMED . THEREFORE, IT IS A CASE OF MERE DISALLOWANCE OF EXP ENDITURE WITHOUT BRINGING ANY ADEQUATE MATERIAL AGAINST ASSE SSEE TO PROVE THAT ASSESSEE HAS CONCEALED THE PARTICULARS O F INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. TH E APPEAL OF THE ASSESSEE ON SUBSTANTIAL QUESTION OF LAW WITH RE GARD TO DISALLOWANCE UNDER THE PROVISIONS HAD BEEN ADMITTED BY HON'BLE PUNJAB & HARYANA HIGH COURT. THE HON'BLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS HARYANA WA REHOUSING CORPORATION 314 ITR 215 HELD AS UNDER : HELD, DISMISSING THE APPEAL, THAT THE DEDUCTION CLAIME D BY THE ASSESSEE WAS LEGITIMATE AND BONAFIDE IN TERMS OF THE CO NFLICTING DETERMINATION OF LAW ON THE PROPOSITION IN QUESTION. THE CATEGORICAL FINDING AT THE HANDS OF THE TRIBUNAL IN ITS ORDER W AS THAT THE ASSESSEE HAD DISCLOSED THE ENTIRE FACTS WITHOUT HAV ING CONCEALED ANY INCOME. THERE WAS NO ALLEGATION AGAINST THE ASSESSE E THAT IT HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME. THE DETERMINATION OF THE TRIBUNAL HAD NOT BEEN CONTROVER TED EVEN IN THE GROUNDS RAISED IN THE APPEAL. THE ASSESSEE WAS GUILTY OF NEITHER OF THE TWO CONDITIONS. THEREFORE, IN THE ABS ENCE OF TWO PRE-REQUISITES POSTULATED UNDER SECTION 271(1)(C) IT WA S NOT OPEN TO THE REVENUE TO INFLICT ANY PENALTY ON THE ASSESSEE . 9. THE LD. CIT(APPEALS) CONSIDERING THE MATERIAL ON RE CORD CORRECTLY FOLLOWED THE DECISION OF THE DELHI BENCH IN THE CASE OF AT&T COMMUNICATIONS SERVICES (INDIA) PVT. LTD. (SUP RA) FOR CANCELING THE PENALTY AGAINST THE ASSESSEE. THE AS SESSEE MADE A BONAFIDE CLAIM OF DEDUCTION OF THE EXPENDITURE EV EN THOUGH IT WAS NOT ACCEPTABLE TO THE REVENUE, WOULD NOT LEAD T O INFERENCE THAT ASSESSEE HAS CONCEALED THE PARTICULARS OF INCO ME OR FILED INACCURATE PARTICULARS OF INCOME. NOTHING IS BROUG HT ON RECORD IF CLAIM OF ASSESSEE WAS INCORRECT IN LAW OR WAS MA LAFIDE. 7 THEREFORE, DECISION RELIED UPON BY LD. DR IS NOT AP PLICABLE TO THE FACTS OF THE CASE. 10. CONSIDERING THE ABOVE DISCUSSION, IN THE LIGHT OF T HE FINDINGS OF THE LD. CIT(APPEALS), WE DO NOT FIND AN Y JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS) IN CANCELING THE PENALTY. 11. IN THE RESULT, DEPARTMENTAL APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH MAY,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19 TH MAY,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH