SPM Instruments India Private Limited, Hyderabad v. Dy.CIT., Circle-3(2),, Hyderabad

ITA 1569/HYD/2014 | 1994-1995
Pronouncement Date: 21-10-2016 | Result: Allowed

Appeal Details

RSA Number 156922514 RSA 2014
Assessee PAN AADCS2198D
Bench Hyderabad
Appeal Number ITA 1569/HYD/2014
Duration Of Justice 2 year(s) 8 day(s)
Appellant SPM Instruments India Private Limited, Hyderabad
Respondent Dy.CIT., Circle-3(2),, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 21-10-2016
Date Of Final Hearing 01-09-2016
Next Hearing Date 01-09-2016
Assessment Year 1994-1995
Appeal Filed On 13-10-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B HYDERABAD BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER I.T.A. NO. 1569/HYD/2014 ASSESSMENT YEAR: 1994-95 M/S. SPM INSTRUMENT INDIA PVT. LTD. HYDERABAD [PAN: AADCS2198D] VS THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-3(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD AR FOR REVENUE : SHRI K.J. RAO DR DATE OF HEARING : 01-09-2016 DATE OF PRONOUNCEMENT : 21-10-2016 O R D E R PER B. RAMAKOTAIAH A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE CONFIRMATIO N OF PENALTY OF RS. 4 50 000/- U/S. 271(1)(C) OF THE INC OME TAX ACT [ACT] BY THE COMMISSIONER OF INCOME TAX (APPEALS)-IV HYDE RABAD VIDE ORDER DATED 01-07-2014. 2. BRIEFLY STATED ASSESSEE IS A PRIVATE LIMITED COMPA NY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF CONDITIO N MONITORING EQUIPMENT. IT HAS FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR AT RS. 12 33 192/-. IN THE SCRUTINY PR OCEEDINGS COMPLETED ASSESSING OFFICER (AO) INTER ALIA DISALLOWED THE CLAIM U/S. 80-IA OF RS. 4 04 675/- AND ALSO MADE CERTAIN ADDITIONS I.T.A. NO.1569/HYD/2014 M/S. SPM INSTRUMENT INDIA PVT. LTD. :- 2 -: PERTAINING TO SALE OF PCBS OF RS. 30 569/- AND ALSO C ERTAIN CLOSING STOCK IN FINISHED GOODS RS. 3 10 802/-. EVEN THOUGH ASSESSEE CONTESTED THE SAME IN THE APPEAL HE WITHDREW THE CONTEN TIONS WITH REFERENCE TO ADDITIONS WHEREAS THE LD.CIT(A) ALLO WED THE DEDUCTION U/S. 80-IA. IN THE APPEAL BY REVENUE ITAT VIDE ITS ORDER DT. 30-03-2007 REVERSED THE ORDER OF THE CIT(A) AND AFFIRMED ACTION OF AO IN DISALLOWING THE CLAIM U/S. 80-IA. SI NCE PROCEEDINGS U/S. 271(1)(C) WERE INITIATED ON 13-02-19 97 WHEN ASSESSMENT WAS COMPLETED AO COMPLETED THE PROCEEDING S BY LEVYING PENALTY U/S. 271(1)(C) ON THE ABOVE THREE ITE MS. 3. BEFORE THE LD.CIT(A) ASSESSEE CONTESTED THAT M ERE DISALLOWANCE OF 80-IA DOES NOT ATTRACT PENALTY U/S. 27 1(1)(C) AND FURTHER SUBMITTED THAT BOTH THE ADDITIONS MADE ARE OUT OF ASSESSEES OWN RECORDS AND THEY HAVE ALREADY BEEN AC COUNTED FOR. FURTHER IT WAS ALSO BROUGHT TO THE NOTICE OF THE CIT(A) THAT THE ADDITION MADE BY THE AO TOWARDS SALE OF PCBS FOR A SU M OF RS. 30 569/- WAS RECORDED IN SUCCEEDING YEAR AND AO HIM SELF ALLOWED THE REDUCTION OF THE AMOUNT IN NEXT YEAR AS THE SAME BRO UGHT TO TAX THIS YEAR. WITH REFERENCE TO THREE SHOCK PULSE ANAL YSERS BROUGHT TO TAX AT RS. 3 10 802/- IT WAS SUBMITTED THAT THE VALUE WAS SHOWN IN THE WORK-IN-PROGRESS BUT FOR EXCISE PURP OSES THEY WERE SHOWN IN THE RG1 REGISTER. THEREFORE THERE IS NO ESCAPEMENT OF INCOME. LD.CIT(A) HOWEVER DID NOT AGR EE WITH THESE CONTENTIONS AND CONFIRMED THE PENALTY. ASSESSEE HOWEV ER RAISED AN ISSUE OF LIMITATION IN PASSING THE ORDERS WHICH THE CIT(A) REJECTED AFTER ANALYZING THE PROVISIONS OF SECTION 27 5(1) OF THE ACT. I.T.A. NO.1569/HYD/2014 M/S. SPM INSTRUMENT INDIA PVT. LTD. :- 3 -: 3. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE HONOURABLE COMMISSIONER OF INC OME TAX (APPEALS)-IV DATED 01.07.2014 IS CONTRARY TO LAW A ND TO FACTS; 2. THE HONOURABLE COMMISSIONER OF INCOME TAX (APPEA LS)-IV HAS ERRED IN PASSING AN ORDER U/S. 271(1)(C) WHEREB Y HE HAS UPHELD THE LEVY OF PENALTY LEVIED BY THE DCIT CIRCLE-3(2) DATED 31.12.2007; 3. THE HONOURABLE COMMISSIONER OF INCOME TAX (APPEA LS)-IV ERRED IN PASSING AN ORDER CONFIRMING THE LEVY OF PE NALTY ON THE VALUE OF CLOSING STOCK OF FINISHED GOODS SAID TO BE UNDIS CLOSED WITHOUT CONSIDERING THAT THE VALUE OF WORK IN PROGRESS INCL UDED A VALUE FOR THE SAME; 4. THE HONOURABLE COMMISSIONER OF INCOME TAX (APPEA LS)-IV ERRED IN PASSING AN ORDER CONFIRMING THE LEVY OF PE NALTY U/S. 271(1)(C) ON THE DISALLOWANCE OF DEDUCTION U/S. 80( IA) EVEN THOUGH IT WAS ALLOWED IN APPEAL BY THE CIT(A)-V AND DISREGARD ING THE ASPECT OF DISALLOWANCE BEING MADE ONLY ON THE BASIS OF INT ERPRETATION OF THE FACTS ON RECORD PERTAINING TO NEWLY ESTABLISHED IND USTRIAL UNDERTAKING IN RESPECT OF WHICH SUM CLAIM WAS MADE; GROUND NO. 5 IS GENERAL IN NATURE. 4. LD. COUNSEL SUBMITTED THAT AS FAR AS THE ADDITIONS MAD E BY AO ARE CONCERNED : I. ITEM OF RS. 30 569/- WAS IN FACT ACCOUNTED IN THE NEX T YEAR AND REFERRED TO THE FACTS AS RECORDED BY THE CIT( A) IN THE APPELLATE ORDER; II. WITH REFERENCE TO CLOSING STOCK BROUGHT TO TAX IT WAS SUBMITTED THAT THE SAME VALUE WAS SHOWN IN WORK-IN- PROGRESS BUT AO DISBELIEVED THE EXPLANATION; III. WITH REFERENCE TO CLAIM OF DEDUCTION U/S. 80-IA IT WAS SUBMITTED THAT ASSESSEE HAS ACQUIRED AN UNDERTAKING ON 01-04-1992 AND CLAIMED DEDUCTION U/S. 80-IA. AO DISALLOWED THE CLAIM ON THE GROUND THAT ASSESSEE I.T.A. NO.1569/HYD/2014 M/S. SPM INSTRUMENT INDIA PVT. LTD. :- 4 -: PURCHASED SECOND HAND MACHINERY. IN APPEAL LD.CIT(A) ALLOWED THE CLAIM OF ASSESSEE BUT WAS REVERSED BY THE ITAT. IT WAS A CLAIM OF DEDUCTION AN D ASSESSEE HAS JUSTIFIED THAT CLAIM BUT ON A DIFFERENT INTERPRETATION BY APPELLATE AUTHORITIES THE CLAIM WAS NOT ULTIMATELY ALLOWED. IT WAS SUBMITTED THAT MERE DISALLOWANCE OF A CLAIM DOES NOT ATTRACT PENALTY U/S. 271(1)(C). 5. ASSESSEE HAS RELIED ON THE CO-ORDINATE BENCH DEC ISION IN THE CASE OF G.K. PROPERTIES PVT. LTD. IN ITA NO. 1803/HYD /2013 DT. 16- 09-2014 AND ALSO THE PRINCIPLES LAID DOWN BY THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS [ 322 ITR 158]. 6. LD. DR HOWEVER SUBMITTED THAT ASSESSEE HAS NOT CONT ESTED THE ADDITIONS AND WITHDREW BEFORE THE LD.CIT(A). THER EFORE THERE IS ESCAPEMENT OF INCOME. FURTHER WITH REFERENCE TO 8 0-IA CLAIM THE AR REFERRED TO THE FINDINGS OF THE ITAT THAT ASSESS EE HAS PURCHASED SECOND HAND MACHINERY AND THEREFORE COULD NOT HAVE CLAIMED 80-IA. HE SUPPORTED THE ORDERS OF AO AND CIT (A). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE DOCUMENTS ON RECORD. AS FAR AS TWO ADDITIONS ARE CO NCERNED IT IS THE FACT THAT SALES RECORDED IN THE NEXT YEAR HAVE BEEN B ROUGHT TO TAX DURING THE YEAR BASED ON THE ENTRIES IN THE RG1 REG ISTER. IT IS ALSO FACT THAT AO HAS REDUCED THE SAME VALUE IN AY. 199 5-96. 7.1. WITH REFERENCE TO THREE SHOCK PULSE ANALYSERS THE AO ON VERIFICATION OF RG1 REGISTER NOTICED THAT THEY ARE AVAIL ABLE IN THE CLOSING STOCK WHEREAS ASSESSEE CONTENDS THAT THE STOCK WAS PART I.T.A. NO.1569/HYD/2014 M/S. SPM INSTRUMENT INDIA PVT. LTD. :- 5 -: OF WORK-IN-PROGRESS IN THE BOOKS OF ACCOUNT. IT IS I NTERESTING TO NOTE THAT LD.CIT(A) RECORDED THE FACTS AS UNDER: 3.1. DURING THE ASSESSMENT PROCEEDINGS THE ASSESS ING OFFICER NOTICED ON VERIFICATION OF RG1 REGISTER THAT THE AP PELLANT HAD SOLD 140 PCBS FOR A SUM OF RS. 30 569 VIDE GATE PASS NO. 67 DT. 22.09.1993. THIS TRANSACTION HAD NOT BEEN RECORDED IN THE ACCOUNT BO OKS. THE APPELLANT EXPLAINED THAT THE SALE HAD BEEN RECORDED IN THE SU CCEEDING YEAR ON ACCEPTANCE BY THE CUSTOMER AND ON RECEIPT OF PAYMEN T. THE APPELLANT ALSO SUBMITTED THAT FOR THE AY 1995-96 THE ASSESSING OF FICER ALLOWED THE DEDUCTION FROM THE SALE VALUE THEREOF. 3.2. THE ASSESSING OFFICER HELD THAT SINCE THE GOOD S WERE DISPATCHED TO THE CUSTOMER THROUGH A GATE PASS DURI NG THE CURRENT YEAR THE SALE SHOULD HAVE BEEN ACCOUNTED FOR IN THE AY 1 994-95 ITSELF. 3.3. THE APPELLANT REITERATED ITS SUBMISSIONS DURIN G THE PENALTY PROCEEDINGS. THE ASSESSING OFFICER REJECTED THE AP PELLANTS EXPLANATION AND LEVIED PENALTY ON THIS ISSUE. 4.1. THE EXAMINATION OF RG1 REGISTER ALSO SHOWED TH AT 3 SHOCK PULSE ANALYSERS (ONE MARKED AS A2010 AND TWO MARKED AS T2000) WERE SHOWN AS CLOSING STOCK ON 31.03.1994 WHEREAS IN T HE ANNUAL REPORT AND DETAILS OF STOCK STATEMENT THE CLOSING STOCK WAS S HOWN AS NIL. THE APPELLANT SUBMITTED THAT THESE ITEMS WERE INCLUDED AS PART OF WORK-IN- PROGRESS IN THE BALANCE SHEET. THE ASSESSING OFFIC ER REJECTED THE APPELLANTS EXPLANATION AND ADDED THE SUM OF RS. 3 10 802 BEING THE VALUE OF THESE ITEMS TO THE CLOSING STOCK AND BROU GHT IT TO TAX. 4.2. IN THE COURSE OF THE PENALTY PROCEEDINGS THE APPELLANT SUBMITTED THAT THEY HAD DECLARED STOCK AS PART OF WORK-IN-PROGRESS IN THEIR BOOKS THAT THESE PRODUCTS THOUGH MANUFACTUR ED WERE AWAITING ASSEMBLING AND PACKING BEFORE DISPATCH AND THAT THE DISCLOSURE IN RG1 REGISTER WAS ONLY MADE TO AVOID ADVERSE COMMENTS FR OM EXCISE DEPOT. 4.3. THE ASSESSING OFFICER OBSERVED THAT THE ITEMS UNDER WORK-IN- PROGRESS WERE THOSE ITEMS WHICH HAD NOT BEEN FULLY PROCESSED OR COMPLETED AND THAT ONLY FINISHED GOODS HAD TO BE EN TERED IN RG1 REGISTER AND THE APPELLANT HAD SHOWN THESE ITEMS AS FINISHE D GOODS IN THE RG1 REGISTER. THE ASSESSING OFFICER THEREFORE LEVIED PENALTY ON THE APPELLANT ON THIS ISSUE. 7.2. AS CAN BE SEEN FROM THE ABOVE WE ARE UNABLE TO UNDERSTAND ON WHAT BASIS PENALTY IS LEVIED AS AO INVOKED BOTH CO NCEALMENT OF I.T.A. NO.1569/HYD/2014 M/S. SPM INSTRUMENT INDIA PVT. LTD. :- 6 -: INCOME AS WELL AS FURNISHING INACCURATE PARTICULARS. AS SEEN FROM THE ABOVE FACTS AS RECORDED BY THE CIT(A) AS FAR AS A MOUNT OF RS. 30 569/- IS CONCERNED IT IS THE ACTION OF AO IN BRING ING INTO TAX SALE RECORDED IN NEXT YEAR AS SALE OF THIS YEAR ON THE REASON THAT GOODS WERE SHOWN AS DISCHARGED IN THE RG1 REGISTER. IN FACT THERE IS NO CONCEALMENT AS SUCH. IT IS ONLY THE QUES TION OF YEAR OF TAXABILITY. WITH REFERENCE TO THREE SHOCK PULSE ANALYSE RS VALUED AT RS. 3 10 802/- AGAIN IT IS THE RG1 REGISTER WHICH IS THE BASIS FOR AOS ACTION AND ASSESSEES CONTENTIONS THAT THIS STOCK WA S PART OF WORK-IN-PROGRESS HAS NOT BEEN DISPROVED. IT MAY BE THAT IT DOES NOT HAVE MUCH TAX EFFECT IN ASSESSEES CASE THEREFOR E ASSESSEE HAS NOT PURSUED THE LITIGATION BUT AS THE FACTS INDICATE ASSE SSEES CONTENTIONS THAT THE SAME VALUE WAS SHOWN IN WORK-IN-P ROGRESS AND THE ADDITION IS A DOUBLE ADDITION HAVE NOT BEEN IN VALIDATED. CONSIDERING THESE WE ARE OF THE OPINION THAT THESE T WO AMOUNTS CERTAINLY DOES NOT FALL IN THE CATEGORY OF CONCEALMENT OF INCOME AND THEREFORE PENALTY CANNOT BE LEVIED ON THE ABOVE TWO A MOUNTS. 7.3. THE OTHER ISSUE ON WHICH PENALTY WAS LEVIED IS WITH REFERENCE TO ASSESSEES CLAIM OF DEDUCTION U/S. 80-IA. IN FACT ASSESSEE HAS ACQUIRED THE PROPERTY EARLIER IN 01-04-1992 AND THE EMC ELECTRONIK UNIT WAS SET UP IN AY. 1992-93. IT WAS SUBMITTED THAT IT HAS COMPLIED WITH ALL THE CONDITIONS OF SECTION 80-I A. THIS BEING THE THIRD YEAR OF THE CLAIM AO ANALYSED THAT ASSESSEE P URCHASED SECOND HAND MACHINERY AND DISALLOWED THE CLAIM. IT I S TO BE NOTED THAT CLAIM U/S 80-IA WAS ALLOWED BY THE LD.CIT(A) AFT ER DUE EXAMINATION BY HIM. ON FURTHER APPEAL BY REVENUE I TAT HOWEVER HAS NOT ALLOWED THE CLAIM. THIS SHOWS THAT IT IS MERE RE JECTION OF A CLAIM. MERE DISALLOWANCE OF A CLAIM DOES NOT COME WI THIN THE I.T.A. NO.1569/HYD/2014 M/S. SPM INSTRUMENT INDIA PVT. LTD. :- 7 -: PURVIEW OF CONCEALMENT OF INCOME. IT CAN ALSO DO N OT FORM UNDER THE CATEGORY OF FURNISHING OF INACCURATE PARTICULARS . HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PR ODUCTS [322 ITR 158] HAS HELD AS UNDER: WE HAVE ALREADY SEEN THE MEANING OF THE WORD 'PART ICULARS' IN THE EARLIER PART OF THIS JUDGMENT. READING THE W ORDS IN CONJUNCTION THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN WHICH ARE NOT ACCURATE NOT EXACT OR CORRECT NOT A CCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE I N ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH N OT BEING THE CASE THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER S. 271 (1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM WHICH IS NO T SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MA DE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS'. 7.4. FURTHER HON'BLE PUNJAB & HARYANA IN THE CASE OF SIDHARTHA ENTERPRISES [322 ITR 82] HAS HELD AS UNDER: THE JUDGMENT OF THE SUPREME COURT IN UNION OF IND IA VS. DHARAMENDRA TEXTILE PROCESSORS & DRS. (2008) 219 CT R (SC) 617 : (2008) 306 ITR 277 (SC) CANNOT BE READ AS LAYING DO WN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURA TE PENALTY MUST FOLLOW. WHAT HAS BEEN LAID DOWN IS THAT QUALITATIVE DIFFERENCE BETWEEN CRIMINAL LIABILITY UNDER S. 276C AND PENALT Y UNDER S. 271(1)(C) HAD TO BE KEPT IN MIND AND APPROACH ADOPT ED TO THE TRIAL OF A CRIMINAL CASE NEED NOT BE ADOPTED WHILE CONSIDERI NG THE LEVY OF PENALTY. EVEN SO CONCEPT OF PENALTY HAS NOT UNDERG ONE CHANGE BY VIRTUE OF THE SAID JUDGMENT. PENALTY IS IMPOSED ONL Y WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE M ISTAKE. THIS BEING THE POSITION THE FINDING HAVING BEEN RECORDE D ON FACTS THAT THE FURNISHING OF INACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ATTEMPT TO EVADE TAX THE VIEW TAK EN BY THE TRIBUNAL CANNOT BE HELD TO BE PERVERSE'. 7.5. CONSIDERING THE FACTS OF THE CASE AND LAW ON THE SUBJECT AS DISCUSSED ABOVE WE ARE OF THE OPINION THAT THERE IS NO SCOPE FOR LEVY OF ANY PENALTY U/S. 271(1)(C) BOTH UNDER THE CA TEGORY OF I.T.A. NO.1569/HYD/2014 M/S. SPM INSTRUMENT INDIA PVT. LTD. :- 8 -: CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THEREFORE WE CANCEL THE PENALTY. ASSESSEES GROUND S ARE ALLOWED. 8. IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD DATED 21 ST OCTOBER 2016 TNMM COPY TO : 1. M/S. SPM INSTRUMENT INDIA PVT. LTD. HYDERABAD. C/O. CH. PARTHASARATHY & CO. 1-1-298/2/B/3 1 ST FLOOR SOWBHAGYA AVENUE ST.NO.1 ASHOK NAGAR HYDERABAD. 2. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-3( 2) HYDERABAD. 3. CIT(APPEALS)-IV HYDERABAD. 4. CIT-III HYDERABAD. 5. D.R. ITAT HYDERABAD. 6. GUARD FILE.