Addl. CIT, Noida v. M/s. Spice System Ltd., Noida

ITA 1164/DEL/2011 | 2002-2003
Pronouncement Date: 18-11-2011 | Result: Dismissed

Appeal Details

RSA Number 116420114 RSA 2011
Bench Delhi
Appeal Number ITA 1164/DEL/2011
Duration Of Justice 8 month(s) 15 day(s)
Appellant Addl. CIT, Noida
Respondent M/s. Spice System Ltd., Noida
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 18-11-2011
Date Of Final Hearing 25-08-2011
Next Hearing Date 25-08-2011
Assessment Year 2002-2003
Appeal Filed On 04-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NO. 1164/DEL/2011 ASSTT. YR: 2002-03 ACIT CIRCLE NOIDA. VS. M/S SPICE SYSTEM LTD. NOW KNOWN AS IO SYSTEM LTD. D-1 SECTOR-3 NOIDA. (APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI ROHIT GARG RESPONDENT BY : SHRI S.K. AGGARWAL ADV. O R D E R PER R.P. TOLANI J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DATED 8-12-2010 RELATING TO A.Y. 2002-03 CHALLENGING THE DELETION OF PENALTY U/S 271(1)(C) OF THE I.T. ACT LEVIED IN RESPECT OF DISALLOWANCE OF COMMISSION AND DEPRECIATION. 2. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT F OLLOWING HIS ORDER FOR A.Y. 2001-02 THE AO DISALLOWED CERTAIN AMOUNTS IN RESPECT OF DEPRECIATION AND COMMISSION IN A.Y. 2002-03 ALSO WHICH WERE CHAL LENGED IN APPEALS. QUANTUM ADDITIONS IN RESPECT OF A.Y. 2001-02 AND 20 02-03 HAVE BEEN CONFIRMED BY THE ITAT. IN A.Y. 2001-02 ALSO AO IMP OSED PENALTY U/S 271(1)(C); IN FIRST APPEAL CIT(A) CONFIRMED THE PEN ALTY LEVIED BY AO; IN SECOND APPEAL BY THE ASSESSEE THE ITAT VIDE ITS ORDER DATED 17-9-2010 IN ITA NO. 1936/DEL/10 HELD THAT PENALTY U/S 271(1)(C) WAS NOT LEVIABLE QUA THE ISSUES OF DEPRECIATION AND COMMISSION BY FOLLOWING OBSERVATIONS: WE HAVE HERD THE RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE MATERIAL AVAILABLE ON RECORD. FIRST WE DEAL WITH TH E PENALTY IMPOSED BY THE ASSESSING OFFICER WITH REGARD TO DIS ALLOWANCE 2 OF COMMISSION PAID BY THE ASSESSEE. THE DISALLOWANC E WAS MADE BY THE ASSESSING OFFICER ON THE BASIS THAT COM MISSION PAYMENT IS HIGHER IN THE PRESENT YEAR AS COMPARED T O THE PRECEDING YEAR DURING WHICH THE COMMISSION PAYMENT WAS ONLY TO THE EXTENT OF RS. 12.60 LAKHS AS AGAINST RS. 55. 84 LAKHS IN THE PRESENT YEAR. THIS DISALLOWANCE WAS CONFIRMED BY TH E LD. CIT(A) ON THIS BASIS THAT GENUINENESS OF THE SERVIC E RENDERED BY THE COMMISSION AGENT COULD NOT BE PROVIDED BY TH E ASSESSEE. IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE LD. CI T(A) IN THE COURSE OF QUANTUM APPEAL THAT SOME OF THE CONFIRMAT IONS WERE OBTAINED AND MADE AVAILABLE AND THE REMAINING CONFI RMATIONS COULD NOT BE OBTAINED FOR THE REASON THAT THE BUSIN ESS OF THE ASSESSEE IS LYING CLOSED FOR LAST ABOUT 2 YEARS AND ALL THE SALES EXECUTIVES WHO WERE INVOLVED IN EXECUTING ORDERS AN D IN TOUCH WITH THE CONCERNED PARTIES HAVE LEFT THE ASSESSEE C OMPANY. SOME OF THE CONFIRMATIONS PROCURED BY THE ASSESSEE COMPANY ARE AVAILABLE ALONG WITH COMMISSION DETAILS ON PAGE S 9-27 OF THE PAPER BOOK. THE REASON FOR THE INABILITY OF THE ASSESSEE TO FURNISH REMAINING CONFIRMATIONS HAVE BEEN EXPLAINED BY THE ASSESSEE AND NO DEFECT IS POINTED OUT BY THE AUTHOR ITIES BELOW WITH REGARD TO THIS SUBMISSION THAT THE BUSINESS OF THE ASSESSEE WAS CLOSED SINCE LAST TWO YEARS AND THE EMPLOYEES H AVE LEFT AND THEREFORE THE ASSESSEE COULD NOT PROCURE THE REMAI NING CONFIRMATIONS. THE ASSESSING OFFICER HAS COMMENTED ABOUT THE COMPARATIVE AMOUNT PAID IN THE PRECEDING YEAR I.E. ASSESSMENT YEAR 2000-01 BUT IN ASSESSMENT YEAR 1999-00 THE COM MISSION PAYMENT IS OF RS. 70.35 LAKHS ON SALES OF RS. 1232. 57 LAKHS AS COMPARED TO PRESENT YEAR COMMISSION OF RS. 55.84 LA KHS AND SALES OF RS. 1920.88 LAKHS. IN ASSESSMENT YEAR 2004 -05 THE COMMISSION PAYMENT IS OF RS. 8.39 LAKHS ON SALES AM OUNT OF RS. 85.17 LAKHS AND IN THIS YEAR THE TRIBUNAL HAS ALLOWED THE COMMISSION IN FULL AS PER THE TRIBUNAL ORDER AVAILA BLE ON PAGES 81-90 OF THE PAPER BOOK. ALTHOUGH THE ASSESSEE COU LD NOT FURNISH EVIDENCE IN SUPPORT OF ITS CLAIM REGARDING PAYMENT OF COMMISSION IN THE PRESENT YEAR BUT THE ASSESSEE HAS EXPLAINED THE REASONS ABOUT ITS FAILURE I.E. THE BUSINESS OF THE ASSESSEE HAS BEEN CLOSED FROM ASSESSMENT YEAR 2007-08 BECAUSE IN THAT YEAR THE TOTAL SALES IS ONLY RS. 10.46 LAKHS. CONSIDERIN G THE FATS OF THE PRESENT CASE WE ARE OF THE CONSIDERED OPINION THAT IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INAC CURATE 3 PARTICULARS OF INCOME BECAUSE THE ASSESSEE HA EXPLA INED THE REASONS DUE TO WHICH IT COULD NOT FURNISH EVIDENCE WITH REGARD TO COMMISSION PAYMENT. THE DISALLOWANCE WAS MADE ON THIS BASIS THAT COMMISSION PAYMENT IN THE PRESENT YEAR IS EXCESSIVE AS COMPARED TO IMMEDIATELY PRECEDING YEAR BUT IF WE CONSIDER THE COMMISSION PAYMENT AND SALES OF ASSESSMENT YEAR 1999-00 AND 2000-01 TOGETHER WE FIND THAT THE COMBINED COM MISSION PAYMENT TO THESE TWO EARLIER YEARS IS TO THE EXTENT OF AROUND 3% OF ALES BECAUSE TOTAL COMMISSION PAYMENT IN THESE T WO YEARS IS RS. 82.96 LAKHS AND THE TOTAL TURNOVER OF THESE TWO YEARS IS 2738.27 LAKHS WHICH RESULTS INTO A COMMISSION RATE OF AROUND 3% OF THE SALES. IN THE PRESENT YEAR THE COMMISSIO N PAYMENT OF RS. 55.84 LAKHS ON SALES OF RS. 1920.88 LAKHS IS LE SS THAN 3% OF SALES AND HENCE WE FEEL THAT CONSIDERING ALL THE F ACTS OF THE PRESENT CASE IT CANNOT BE ACCEPTED THAT THE ASSESS EE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME AND THEREFORE THE PENALTY IS NOT JUSTIFIED ALTHOUGH THE DISALLOWANCE HAS BEEN CONFIRMED BY THE TRIBUNAL. 2.1. IN THIS YEAR I.E. A.Y. 2002-03 ALSO PENALTY WA S IMPOSED BY AO U/S 271(1)(C). CIT(A) FOLLOWING THE ITAT ORDER FOR A.Y. 2001-02 HELD THAT ASSESSEE DID NOT FILE INACCURATE PARTICULARS OR CON CEALED ANY PARTICULARS OF HIS INCOME DELETED THIS PENALTY U/S 271(1)(C). BESIDES SUBSEQUENTLY IN A.Y. 2004-05 THE ITAT IN ITA NO. 595/DEL/08 ALLOWED THE PAYMENT OF COMMISSION ALSO TO THE ASSESSEE. COPY OF THE ORDER IS PLACED ON PAPER BOOK. CONSEQUENTLY THE ISSUE IN RESPECT OF COMMISSION ON QUANTUM BECOMES CLEARLY DEBATABLE. IN RESPECT OF DEPRECIATION ALL THE RELEVANT PARTICULARS WERE FILED BY THE ASSESSEE IN STATEMENT OF ACCOUNT IN C OMPUTATION OF INCOME. FACTS AND CIRCUMSTANCES BEING SIMILAR TO A.Y. 2001- 02 THE PENALTY SHOULD BE DELETED FOLLOWING THE ITAT ORDER. 3. LEARNED DR ON THE OTHER HAND RELIED ON THE ORD ER OF AO. 4 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FACTS AND CIRCUMSTANCES IN RE SPECT OF COMMISSION AND DEPRECIATION FOR THE ASSESSMENT YEAR IN QUESTION BE ING SAME FOR A.Y. 2001- 02 RESPECTFULLY FOLLOWING THE ITAT IN ASSESSEES O WN CASE ON PENALTY U/S 271(1)(C) FOR A.Y. 2-001-02 QUOTED ABOVE WE HOLD THAT ASSESSEE NEITHER FURNISHED ANY INACCURATE PARTICULARS NOR CONCEALED ANY FACTS IN RESPECT OF ITS INCOME. 4.1. IN THE CASE OF UNION OF INDIA VS. DHARMENDRA T EXTILES PROCESSORS & OTHERS 295 ITR 244 (SC) RELIED UPON BY LEARNED DR THE HONBLE SUPREME COURT HAS HELD THAT LEVY OF PENALTY WILL DEPEND ON FACTS OF EACH AND EVERY CASE. IN THIS CASE THE DISPUTE WAS CONTINUING ONE A ND AS THERE IS ALREADY ITAT ORDER IN ASSESSEES OWN CASE DELETING THE PENA LTY WE RESPECTFULLY FOLLOW THE SAME. IN VIEW THEREOF WE UPHOLD THE ORD ER OF CIT(A) DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE I.T. ACT. 5. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18-11-2011. SD/- SD/- ( K.D. RANJAN ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18-11-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR