The DCIT, Central Circle-2(1), Ahmedabad V. M/s. Intra Ocular Care Pvt.Ltd., Mumbai

ITSSA 273/AHD/2010

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9213 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 31-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Assessee Lawyers: SANJAY MAJMUDAR
• Keywords: Depreciation; Source of fund; Bonafide mistake
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : A HMEDABAD (BEFORE HON'BLE SHRI G.D. AGRAWAL, V.P. (AZ) & HON BLE SHRI T.K. SHARMA, J.M.) I.T(SS)A. NOS. 272 & 273/AHD./2010 ASSESSMENT YEARS : 2005-2006 & 2006-2007 DEPUTY COMMISSIONER OF INCOME TAX, -VS.- INTR A OCULAR CARE PVT. LTD., MUMBAI CENTRAL CIRCLE-2(1), AHMEDABAD (PAN : AAACI 4883 L) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. KHANDELWAL, D.R. RESPONDENT BY : SHRI SANJAY MAJMUDAR O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THESE TWO APPEALS FILED BY THE REVENUE ARE AGAINST TWO SEPARATE ORDERS BOTH DATED 08.01.2010 OF LEARNED COMMISSIONER OF INCOME TAX(AP PEALS)-III, AHMEDABAD RESTRICTING THE PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT TO RS.1,86,290/- AS AGAINST PENALTY OF RS.4,59,265/- LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) FOR THE ASSESSMENT YEARS 2005-06 & 2006-07. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE C OMPANY, MANUFACTURER AND TRADER OF INTRA OCULAR LENSES, OPHTHALMIC DEVICES, ETC. WAS SUBJECT ED TO SEARCH UNDER SECTION 132 OF THE ACT ON 06.12.2006. SUBSEQUENTLY FOR THE ASSESSMENT YEAR 20 05-06, RETURN WAS FILED DECLARING INCOME OF RS.3,92,67,000/-, WHICH WAS ASSESSED ON 30.06.2009 AT THE INCOME OF RS.4,05,22,080/-. THE ASSESSING OFFICER NOTED DURING THE SEARCH, A DISCLO SURE OF RS.11.50 LAKHS HAD BEEN MADE, BUT THE STATEMENT OF TOTAL INCOME FILED WITH THE RETURN, TH E DISCLOSURE WAS REDUCED DUE TO CLAIM OF EXPENSES OF RS.7,07,000/-, FOR COMMISSION PAID TO O NE M/S. SPECTRA VISION. THE ASSESSING OFFICER POINTED OUT THAT THIS EXPENDITURE OF RS.7.0 7 LAKHS HAD NOT BEEN CLAIMED IN THE RETURN FILED ORIGINALLY AND SOUGHT EXPLANATION WHICH WAS FURNISH ED ON 29.12.08. IN ITS EXPLANATION, THE ASSESSEE SUBMITTED THAT THE EXPENSE OF RS.7.07 LAKH S WAS ON COMMISSION PAID TO M/S. SPECTRA VISION, WHICH WAS NOT REFLECTED IN THE ORIGINAL RET URN. HOWEVER, THIS WAS A GENUINE EXPENSE AND ITS RECEIPT HAS ALSO BEEN DISCLOSED BY M/S. SPECTRA VISION, THE RECIPIENT, IN HIS RETURN OF INCOME 2 ITA NO. 272-273/AHD/2010 FILED ON 31.3.2008. THE ASSESSING OFFICER, HOWEVER, FELT THAT THE CLAIM OF EXPENSES OF RS.7.07 LAKHS WAS FRIVOLOUS AND THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER ALSO NOTED THAT DEPREC IATION HAD BEEN CLAIMED AT RS.1,50,51,803/- WHICH ON VERIFICATION CAME TO RS.1,45,03,728/-. THE ASSESSEE IN REPLY DATED 29.12.2008 TO SHOW CAUSE NOTICE, ADMITTED TO THIS MISTAKE. IN THE PENA LTY PROCEEDINGS, VIDE REPLY DATED 29.6.09 IT WAS CLAIMED TO BE A BONAFIDE MISTAKE FOR WHICH PENALTY WAS NOT TO BE IMPOSE AS PER THE DECISION IN THE CASE OF ASHOK PAI 210 CTR 259 (SC). THE ASSESSI NG OFFICER, HOWEVER, POINTED OUT THAT EXCESS CLAIM OF DEPRECIATION WAS DELIBERATELY MADE AND WAS ONLY FOUND OUT DUE TO VERIFICATION. THUS THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS IN RESPECT OF THE CLAIM OF DEPRECIATION AND THE SALE PROMOTION EXPENSES OF RS.7.07 LAKHS. THE A SSESSING OFFICER, THEREFORE, IMPOSED PENALTY AT THE MINIMUM, I.E. RS.4,59,265/-. 3. ON APPEAL, BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), IT WAS CONTENDED THAT THE CLAIM OF DEPRECIATION WHICH WAS FOUND TO B E IN EXCESS WAS ONLY BECAUSE OF A MISTAKE. THE NATURE OF MISTAKE HAS HOWEVER NOT BEEN SPECIFIE D. APPARENTLY THE STATED MISTAKE HAS NOTHING TO DO WITH EITHER THE CLAIM OF INCORRECT OR / HIGHE R RATE AND/OR ARITHMETICAL MISTAKE. IN THE EVENT, THIS EXCESS CLAIM OF DEPRECIATION, DETECTED ONLY DU RING THE SCRUTINY, DID ATTRACT THE PROVISIONS OF SECTION 271(1)(C). THE LD. COUNSEL CONTENDED THAT T HIS EXCESS CLAIM OF DEPRECIATION HAD ALSO NOT BEEN OFFERED IN THE DISCLOSURE MADE/ SUBSEQUENT ACT ION UNDER SECTION 132(4) OF THE ACT. FOR THE EXPENDITURE OF RS.7.07 LAKHS, IT WAS SUBMITTED BY T HE LD. COUNSEL OF THE ASSESSEE THAT A DISCLOSURE OF RS.13 CRORES HAD BEEN MADE BY THE INTRA OPHTHALM IC GROUP WHICH INCLUDED THE DISCLOSURE OF RS.11.50 LAKHS FOR ASSESSMENT YEAR 2005-06. AT THE SAME TIME, THE GENUINE EXPENDITURE INCURRED, BUT NOT CLAIMED EARLIER, OF RS.7.07 LAKHS WAS ALSO CLAIMED IN THE RETURN FILED. THE LD. COUNSEL ALSO CONTENDED THAT THERE WAS NO CONCEALMENT OR NON-DISC LOSURE OR FURNISHING OF INACCURATE PARTICULARS. THE RECIPIENT I.E. M/S. SPECTRA VISION HAD ALSO ACCOUNTED FOR THE RECEIPT OF RS.7.07 LAKHS IN HIS RETURN FILED ON 31.3.2008. THE ASSESSI NG OFFICER HAD DISALLOWED THIS EXPENDITURE IN THE ASSESSMENT PROCEEDINGS BUT IT HAS NOT BEEN ESTA BLISHED TO BE FALSE. THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT ALL THE FACTS HAD BEEN FILE D IN THE RELEVANT RETURN OF INCOME AND THERE WAS NO QUESTION OF NON-DISCLOSURE OR FURNISHING OF INAC CURATE PARTICULARS. THE PENALTY WAS, THEREFORE, NOT ATTRACTED. 3 ITA NO. 272-273/AHD/2010 4. FOR THE ASSESSMENT YEAR 2005-06, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE VARIOUS S UBMISSIONS RESTRICTED THE ADDITION TO RS.1,86,290/- FOR THE DETAILED REASONS GIVEN IN PAR AS 6 & 7, WHICH READS AS UNDER :- 6. THE CONTENTIONS WERE CAREFULLY CONSIDERED. IT I S SEEN THAT THE A.O. HAS ACCEPTED THE DISCLOSURE MADE FOR THE YEAR 2002-03 B UT HAS DISPUTED THE QUANTUM OF DISCLOSURE SHOWN IN THE RETURN. A STATEMENT OF S HRI JAGRAT N. DAVE, WAS RECORDED U/S. 132(4) IN WHICH HE ADMITTED TO THE UN DISCLOSED INCOME OF RS.13 CRORES AND SUBMITTED THAT THE DETAILED BREAK UP OF THE SOURCES OF INCOME AND ITS APPLICATION WOULD BE PROVIDED AND THE TAX THEREON P AID. THE APPELLANT HAS FILED A COPY OF THE LETTER DATED 7.12.2006, REPORTEDLY FURN ISHED BEFORE THE ADDL. DIT(INV.), UNIT-I, AHMEDABAD WHEREIN THIS DISCLOSUR E WAS CONFIRMED. A STATEMENT OF THE BREAK UP OF THIS DISCLOSURE, YEAR-WISE/ CONC ERN-WISE WAS ALSO FURNISHED BEFORE ME. AS PER THIS BREAK UP, THE GROUP CONCERNS , NAMELY M/S. INTRA OCULAR CARE PVT. LTD., M/S. CONTACARE OPHTHALMIC PVT. LTD. , POLYMER TECHNOLOGIES, M/S. SPECTRA VISION, SHRI A. VENKATRANGAN AND SHRI JAGRA T DAVE HAD MADE YEAR-WISE DISCLOSURE OF UNACCOUNTED SALES, OVERSTATED EXPENSE S AND CASH CREDITS/ UNACCOUNTED SALARY. IT IS POINTED OUT THAT THE RETU RNS WERE FILED ACCORDINGLY AND TAX WAS ALSO PAID. THUS APART FROM THE FACT THAT NO CONCEALMENT/ FURNISHING OF INACCURATE PARTICULARS HAD BEEN PROVED BY THE A.O., THE APPELLANT WAS ALSO ENTITLED TO BE BENEFIT OF IMMUNITY UNDER EXPLANATIO N 5 TO SECTION 271(1)(C) OF THE ACT. THE A.O. HAS NOT ESTABLISHED THAT THE CLAIM OF EXPENSES WAS CONTRIVED. THE RECIPIENTS HAS ALSO ACKNOWLEDGED AND DISCLOSED THE RECEIPT ACCORDINGLY IN THE RETURNS. THUS THERE IS BEING NO FURNISHING OF INACC URATE PARTICULARS, AS HELD BY THE A.O. THE PENALTY IMPOSED IS THEREFORE NOT SUSTAINAB LE AND IS DELETED. 7. IN RESPECT OF THE AMOUNT OF RS.5,48,075/- THERE HAS BEEN INACCURATE FURNISHING OF PARTICULARS. THIS DEPRECIATION HAS AL SO NOT BEEN PART OF THE DISCLOSURE U/S. 132(4), AS SUCH, THE PENALTY TO BE IMPOSED U/S. 271(1)(C), IS MODIFIED AND IS RESTRICTED TO 100% OF THE TAX SOUGH T TO BE EVADED ON THE AMOUNT OF RS.5,48,075/- I.E. RS.1,86,290/-. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. FOR THE ASSESSMENT YEAR 2006-07, THE FACTS ARE I DENTICAL WITH THE FACTS OF THE ASSESSMENT YEAR 2005-06. THE REASONING GIVEN BY THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) IN ASSESSMENT YEAR 2006-07 FOR CANCELLING THE PENALTY IS CONTAINED IN PARA 5, WHICH READS AS UNDER :- 5. THE CONTENTIONS WERE CAREFULLY CONSIDERED. IT I S SEEN THAT THE A.O. HAS ACCEPTED THE DISCLOSURE MADE FOR THE YEAR 2006-07 B UT HAS DISPUTED THE QUANTUM OF DISCLOSURE SHOWN IN THE RETURN. A STATEMENT OF S HRI JAGRAT N. DAVE, WAS 4 ITA NO. 272-273/AHD/2010 RECORDED U/S. 132(4), IN WHICH HE ADMITTED TO THE U NDISCLOSED INCOME OF RS.13 CRORES AND SUBMITTED THAT THE DETAILED BREAK UP OF THE SOURCES OF INCOME AND ITS APPLICATION WOULD BE PROVIDED AND THE TAX THEREON P AID. THE APPELLANT HAS FILED A COPY OF THE LETTER DATED 7.12.06 REPORTEDLY FURNISH ED BEFORE THE ADDL.DIT(INV.), UNIT-I, AHMEDABAD, WHEREIN THIS DISCLOSURE WAS CONF IRMED. A STATEMENT OF THE BREAK UP OF THIS DISCLOSURE, YEAR-WISE/ CONCERN-WIS E WAS ALSO FURNISHED BEFORE ME. AS PER THIS BREAK UP, THE GROUP CONCERNS, NAMEL Y M/S. INTRA OCULAR CARE PVT. LTD., M/S. CONTACARE OPHTHALMIC PVT. LTD., POLYMER TECHNOLOGIES, M/S. SPECTRA VISION, SHRI A. VENKATRANGAN AND SHRI JAGRAT DAVE H AD MADE YEAR-WISE DISCLOSURE OF UNACCOUNTED SALES, OVERSTATED EXPENSE S AND CASH CREDITS/ UNACCOUNTED SALARY. IT IS POINTED OUT THAT THE RETU RNS WERE FILED ACCORDINGLY AND TAX WAS ALSO PAID. THUS APART FROM THE FACT THAT NO CONCEALMENT/ FURNISHING OF INACCURATE PARTICULARS HAD BEEN PROVED BY THE A.O., THE APPELLANT WAS ALSO ENTITLED TO BE BENEFIT OF IMMUNITY UNDER EXPLANATIO N 5 TO SECTION 271(1)(C) OF THE ACT. THE A.O. HAS NOT ESTABLISHED THAT THE CLAIM OF EXPENSES WAS CONTRIVED. THE RECIPIENTS HAS ALSO ACKNOWLEDGED AND DISCLOSED THE RECEIPT ACCORDINGLY IN THE RETURNS. THUS THERE IS BEING NO FURNISHING OF INACC URATE PARTICULARS, AS HELD BY THE A.O. THE PENALTY IMPOSED IS THEREFORE NOT SUSTAINAB LE AND IS DELETED. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING BEFORE US, SHRI A.K. KHAN DELWAL, D.R. APPEARED ON BEHALF OF REVENUE AND RELYING ON THE REASONING GIVEN BY THE A SSESSING OFFICER CONTENDED THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT JUSTIFIE D IN RESTRICTING THE PENALTY FOR THE ASSESSMENT YEAR 2005-06 TO RS.1,86,290/- AND CANCEL LING THE PENALTY FOR THE ASSESSMENT YEAR 2006-07 TO RS.4,44,985/-. THE LD. D.R. POINTED OUT THAT IN BOTH THE ASSESSMENT YEARS, THE ASSESSEE HAS CLAIMED FALSE SALES PROMOTION EXPENSES TO THE EXTENT OF RS.7.07 LAKHS IN ASSESSMENT YEAR 2005-06 AND RS.13.22 LAKHS IN ASSESSMENT YEAR 2006-07. THESE WERE SHOWN AS PAID/ PAYABLE TO SPECTRA VISION, ONE OF THE GROUP UNIT WH O HAS SHOWN THIS RS.13.22 LAKHS AS ADDITIONAL INCOME FOR THE SAID FINANCIAL YEAR IN THEIR RETURN OF INCOME FILED BY THEM AFTER THE SEARCH PROCEEDINGS CARRIED OUT BY THE DEPARTMENT. THE LD. D.R. POINTED OUT THAT IN THIS MANNER THE ASSESSEE GROUP HAS NOT SHOWN THE CORRECT AMOUNT OF INCOME DISCLOSED AT THE TIME OF SEARCH. IN QUANTUM APPEAL, THE DISALLOWANCE MADE BY THE ASSESS ING OFFICER, IN BOTH THE ASSESSMENT YEARS UNDER APPEAL HAS BEEN ACCEPTED, THEREFORE, THE PENA LTY IS RIGHTLY LEVIED BY THE ASSESSING OFFICER AND LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT JUSTIFIED IN DELETING THE SAME. 7. ON THE OTHER HAND, SHRI SANJAY MAJMUDAR, LD. COU NSEL APPEARING ON BEHALF OF THE ASSESSEE CONTENDED THAT WHATEVER IS DISCLOSED AT THE TIME OF SEARCH IS CORRECT REFLECTED IN THE RETURN OF 5 ITA NO. 272-273/AHD/2010 INCOME. SALES PROMOTION EXPENSES CLAIMED ARE BONAFI DE BECAUSE WHATEVER EXPENDITURE CLAIMED BY THE ASSESSEE-COMPANY FOR BOTH THE ASSESSMENT YEA RS HAS BEEN SHOWN AS INCOME BY M/S. SPECTRA VISION. THE LD. COUNSEL OF THE ASSESSEE POI NTED OUT THAT THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.- RELIANCE PET RO PRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC) IS SQUARELY COVERED WITH THE FACTS OF THE PRES ENT CASE. 8. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT DURING THE COUR SE OF SEARCH, A STATEMENT OF SHRI JAGRAT N. DAVE, WAS RECORDED U/S. 132(4) IN WHICH HE ADMITTED TO TH E UNDISCLOSED INCOME OF RS.13 CRORES AND SUBMITTED THAT THE DETAILED BREAK UP OF THE SOURCES OF INCOME AND ITS APPLICATION WOULD BE PROVIDED AND THE TAX THEREON PAID. A STATEMENT OF T HE BREAK UP OF THIS DISCLOSURE, YEAR-WISE/ CONCERN-WISE WAS ALSO FURNISHED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). AS PER THIS BREAK UP, THE GROUP CONCERNS, NAMELY M/S. INTRA OCULAR CARE PVT. LTD., M/S. CONTACARE OPHTHALMIC PVT. LTD., POLYMER TECHNOLOGIES, M/S. SP ECTRA VISION, SHRI A. VENKATRANGAN AND SHRI JAGRAT DAVE HAD MADE YEAR-WISE DISCLOSURE OF U NACCOUNTED SALES, OVERSTATED EXPENSES AND CASH CREDITS/ UNACCOUNTED SALARY. AFTER CONSIDERING THE YEAR-WISE/ CONCERN-WISE DISCLOSURE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TOOK TH E VIEW THAT THE ASSESSEE-COMPANY IS ENTITLED TO THE BENEFIT OF IMMUNITY UNDER EXPLANATI ON 5 TO SECTION 271(1)(C) OF THE ACT. IN RESPECT OF DISALLOWANCE OF SALES PROMOTION EXPENSES, IT IS PERTINENT TO NOTE THAT WHATEVER EXPENSES CLAIMED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEA RS HAS BEEN SHOWN AS INCOME BY M/S. SPECTRA VISION, GROUP CONCERN OF THE ASSESSEE. THEREFORE, I T IS NOT A CASE OF THE REVENUE THAT THE CLAIM IS NOT BONA FIDE. THEREFORE, ON THIS DISALLOWANCE OF C LAIM, PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE AS PER THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA). 8.1. WE ARE OF THE OPINION, KEEPING IN VIEW THE JUD GMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. REPORTED IN [2010] 322 ITR 158 (SC), THAT PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE. ON PERUSAL OF REASONING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND LEARNED COMMISSIONER OF IN COME TAX(APPEALS) IN QUANTUM APPEAL, WE ARE CONVINCED THAT BOTH THE ADDITIONS WERE MADE BY ASSESSING OFFICER AND CONFIRMED BY LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON ACCOUNT OF D IFFERENCE OF OPINION BETWEEN THE ASSESSEE AND ASSESSING OFFICER. ALL THE MATERIAL FACTS WERE DISCLOSED IN THE RETURN AND, THEREFORE, IT CANNOT 6 ITA NO. 272-273/AHD/2010 BE SAID THAT ASSESSEE HAD FURNISHED INACCURATE PART ICULARS OR CONCEALED INCOME. IN SUPPORT OF THIS, RELIANCE CAN BE PLACED ON THE JUDGMENT OF THE HON'B LE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA). WE ARE, THEREFORE , OF THE VIEW THAT LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS LEGALLY AND FACTUALLY CORREC T IN CANCELLING THE PENALTY ON BOTH THE DISALLOWANCES. WE, THEREFORE, INCLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 25.06.201 0 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 25/ 06 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.