SURENDRA C. KALYANPUR, MUMBAI v. DCIT RG 8(3), MUMBAI

ITA 2834/MUM/2009 | 2002-2003
Pronouncement Date: 19-04-2010 | Result: Allowed

Appeal Details

RSA Number 283419914 RSA 2009
Assessee PAN AACPK5424C
Bench Mumbai
Appeal Number ITA 2834/MUM/2009
Duration Of Justice 11 month(s) 15 day(s)
Appellant SURENDRA C. KALYANPUR, MUMBAI
Respondent DCIT RG 8(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 19-04-2010
Date Of Final Hearing 23-03-2010
Next Hearing Date 23-03-2010
Assessment Year 2002-2003
Appeal Filed On 04-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E BEFORE SHRI N.V. VASUDEVAN (JM) & T.R. SOOD (AM) I.T.A.NO. 2834/MUM/2009 (ASSESSMENT YEAR : 2002-0 3) I.T.A.NO. 2835/MUM/2009 (ASSESSMENT YEAR : 2003-0 4) SHRI SURENDRA C. KALYANPUR PROP. M/S. EESHA TOOLS A/61 NANDJYOT INDUSTRIAL ESTATE ANDHERI KURLA ROAD SAKI NAKA MUMBAI-400 072. VS. DCIT RANGE 8(3) MUMBAI. APPELLANT RESPONDENT PAN/GIR NO. : AACPK5424C ASSESSEE BY : SHRI VIJAY MEHTA DEPARTMENT BY : SHRI MAVEEM GUPTA ORDER PER N.V. VASUDEVAN JM :- BOTH THESE APPEALS ARE BY THE ASSESSEE AGAINST THE TWO ORDERS ONE DATED 18.6.2008 AND OTHER DATED 21.4.2008 PASSED BY LEARNED CIT(A)- XXIX MUMBAI RELATING TO A.Y. 2002-03 AND 2003-04 R ESPECTIVELY. 2. IN BOTH THESE APPEALS THE ASSESSEE CHALLENGED T HE ORDER OF LEARNED CIT(A) WHEREBY LEARNED CIT(A) CONFIRMED TH E ORDER OF THE ASSESSING OFFICER IMPOSING PENALTY ON THE ASSESSEE U/S. 271(1)(C) OF THE ACT. 3. FIRST WE SHALL TAKE UP FOR CONSIDERATION A.Y. 2 002-03. THE ASSESSEE IS AN INDIVIDUAL. HE DERIVES INCOME F ROM MANUFACTURE OF PLASTIC INJECTIONS MOULDS. THE ASSES SEE WAS ENTITLED TO CLAIM DEDUCTION U/S. 80HHC OF THE ACT. THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 4 03 811/- U/S. 80HHC OF THE ACT. COMPUTATION OF SHRI SURENDRA C. KALYANPUR 2 DEDUCTION AS CLAIMED BY THE ASSESSEE AND AS DETERMI NED BY THE ASSESSING OFFICER IS AS FOLLOWS :- AS PER RETURN OF INCOME (RS.) AS PER ASSESSMENT ORDER (RS.) PROFIT AS PER PROFIT AND LOSS ACCOUNT ADD : EXPENSES DISALLOWED DEPRECIATION DONATION PROVISION FOR GRATUITY PRIOR PERIOD EXPENSES PENALTY PROF. TAX 3 493 167 1 217 619 3 000 37 750 2 212 4 043 2 500 1 267 124 3 493 167 1 217 619 3 000 37 750 2 212 4 043 2 500 1 267 124 4 760 291 4 760 291 LESS:-EXPENSES ALLOWED/INCOME CONSIDERED SEPARATELY DEPRECIATION ALLOWED VARIATION IN VALUATION OF STOCK U/S. 145 RENT & COMPENSATION CONSIDERED SEPARATE GRATUITY PAID 2 185 630 23 391 36 000 114 590 2 359 611 2 185 630 23 391 36 000 114 590 2 359 611 2 400 680 2 400 680 LESS :90% OF THE OTHER INCOME 1 307 280 1 605 875 PROFIT ELIGIBLE FOR DEDUCTION U/S. 80HHC 1 093 400 794 806 TOTAL TURNOVER LOCAL SALES/SERVICES EXPORT SALE TOTAL TURNOVER 5 003 170 5 587 689 10 590 859 5 003 170 5 587 689 10 590 859 DEDUCTION U/S. 80HHC EXPORT TURNOVER X PROFIT TOTAL TURNOVER 5 587 689 ------------ 1 093 400 10 590 859 5 587 689 ------------ 794 806 10 590 859 DEDUCTION U/S. 80HHC 576 873 419 336 DEDUCTION RESTRICTED TO 70% 403 811 293 535 DIFFERENTIAL DEDUCTION U/S. 80HHC 110 276 AS CAN BE SEEN FROM THE ABOVE THE DISPUTE BETWEEN THE ASSESSEE AND THE REVENUE WAS WITH REGARD TO DEDUCTING 90% OF THE OTH ER INCOME UNDER EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT. ASSE SSEE HAD REDUCED 90% OF OTHER INCOME OF RS. 13 07 280/- WHEREAS THE ASSESSING OFFICER HAS REDUCED 90% OF OTHER INCOME AT RS. 16 05 875/-. REASONS FOR DIFFERENCE IS AS FOLLOWS :- INTEREST INCOME INTEREST ON MARGIN MONEY 305 158 INTEREST ON SHORT TERM DEPOSIT 1 012 171 1 012 171 INTEREST ON DOLLAR DEPOSIT 10 089 10 089 SHRI SURENDRA C. KALYANPUR 3 INTEREST ON UNSECURED LOAN 430 273 430 273 INTEREST ON SALES TAX REFUND - 7 306 OTHER INCOME - 20 208 1 452 533 1 784 305 90% OF THE ABOVE 1 307 280 1 605 875 IT IS ALSO NECESSARY TO MENTION THAT INTEREST INCOM E REFERRED TO ABOVE WAS ORIGINALLY CONSIDERED BY THE ASSESSEE AS BUSINESS I NCOME AND 90% OF THE ABOVE INTEREST INCOME WAS NOT REDUCED WHILE FILING ORIGINAL RETURN OF INCOME. ON SUCH RETURN OF INCOME THE ASSESSING OFF ICER COMPLETED ASSESSMENT U/S. 143(3) OF THE ACT BY ORDER DATED 30 .3.2005 AND ACCEPTED THE CLAIM OF THE ASSESSEE. LATER ON ASSESSMENT WAS REOPENED AND IN THE REASSESSMENT PROCEEDINGS THE ASSESSING OFFICER COM PUTED DEDUCTION U/S. 80HHC REDUCING 90% OF THE INTEREST INCOME FROM THE PROFIT OF THE BUSINESS UNDER EXPLANATION (BAA) TO SECTION 80HHC O F THE ACT. IT IS IN RESPECT OF THE AFORESAID ADJUSTMENTS MADE IN THE DE DUCTION U/S. 80HHC THAT PENALTY WAS IMPOSED ON THE ASSESSEE. 4. IN A.Y. 2003-04 FACTS ARE ALMOST IDENTICAL. AS SESSEES CLAIM FOR DEDUCTION U/S. 80HHC AND THAT DETERMINED BY THE ASS ESSING OFFICER WAS AS FOLLOWS :- AS PER RETURN OF INCOME (RS.) AS PER ASSESSMENT ORDER (RS.) PROFIT AS PER PROFIT AND LOSS ACCOUNT ADD : EXPENSES DISALLOWED DEPRECIATION DONATION PROVISION FOR GRATUITY PRIOR PERIOD EXPENSES 43B LEAVES WAGES 3 220 570 1 267 392 2 700 30 180 34 460 7 738 1 342 470 3 220 570 1 267 392 2 700 30 180 34 460 7 738 1 342 470 4 563 040 4 563 040 LESS:-EXPENSES ALLOWED/INCOME CONSIDERED SEPARATELY DEPRECIATION ALLOWED GRATUITY PAID 1 692 696 47 400 1740 096 1 692 696 47 400 1740 096 2 822 944 2 822 944 LESS :90% OF THE OTHER INCOME - 1574 291 PROFIT ELIGIBLE FOR DEDUCTION U/S. 80HHC 2 822 944 1 248 653 TOTAL TURNOVER LOCAL SALES/SERVICES EXPORT SALE TOTAL TURNOVER 1 1798 385 7 730 142 8 908 527 1 1798 385 7 730 142 8 908 527 DEDUCTION U/S. 80HHC SHRI SURENDRA C. KALYANPUR 4 EXPORT TURNOVER X PROFIT TOTAL TURNOVER 7 730 142 ------------ 2 822 944 8 908 527 7 730 1429 ------------ 1 248 653 8 908 527 DEDUCTION U/S. 80HHC 2 449 536 1 083 486 DEDUCTION RESTRICTED TO 50% 1 224 768 541 743 DIFFERENTIAL DEDUCTION U/S. 80HHC 683 025 INTEREST INCOME WHICH WAS CONSIDERED AS FORMING PA RT OF THE BUSINESS INCOME BY THE ASSESSEE BUT WHICH WAS CONSIDERED BY THE AO AS FALLING WITHIN EXPLN.(BAA) TO SEC.80HHC OF THE ACT IS AS FO LLOWS :- INTEREST INCOME INTEREST ON MARGIN MONEY 132 842 132 842 INTEREST ON SHORT TERM DEPOSIT 1 116 280 1 116 280 INTEREST ON UNSECURED LOAN 396 000 396 000 INTEREST ON SALES TAX REFUND 13 680 13 680 INTEREST ON OTHERS 97 97 1 658 899 1 658 899 SALES TAX SET OFF 44 317 44 317 SALES TAX 45 993 45 993 COLN ADJUSTMENT 3 3 90% OF THE ABOVE 1 749 212 1 749 212 90% OF THE ABOVE 1 574 291 1 574 291 5. WE MAY ALSO ADD THAT IN RESPECT OF SALES TAX SET OFF AND SALE TAX REFUND REFERRED TO ABOVE ADDITION HAS BEEN DELETED IN QUANTUM PROCEEDINGS AND THAT CANNOT BE CONSIDERED FOR THE P URPOSE OF IMPOSING PENALTY U/S. 271(1)(C) OF THE ACT. IN RESPECT OF RE MAINING ADDITION MADE IN COURSE OF ASSESSMENT PROCEEDINGS PENALTY WAS IM POSED BY THE ASSESSING OFFICER AND CONFIRMED BY LEARNED CIT(A) G IVING RISE TO THE PRESENT APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT HAS TO B E MENTIONED AT THE OUTSET IN A.Y. 2002-03 THE ASSESSEE HAD DULY D ISCLOSED ALL DETAILS OF INTEREST INCOME IN ITS BOOKS OF ACCOUNT. IN FACT C LAIM WAS ALLOWED IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IN A.Y. 2003-04 T HE ASSESSEE HAD FILED FORM NO. 10CCAC AND IN THE SPECIFIC NOTE THE ASSES SEE HAS MENTIONED THAT INTEREST INCOME IS BEING CONSIDERED PART OF TH E BUSINESS INCOME IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT I N THE CASE OF CIT VS. SHRI SURENDRA C. KALYANPUR 5 PUNIT COMMERCIAL LTD. 245 ITR 550 (BOM). THE SAID NOTE READS AS FOLLOWS :- SPECIFIC NOTINGS : (1) EXPORT TURNOVER AND TOTAL TURNOVER HAS BEEN TAKEN O N FOB BASIS. (2) AS HELD BY MUMBAI HIGH COURT IN THE CASE OF CIT VS. PUNIT COMMERCIAL LTD. 90% OF INTEREST RECEIVED HAS NOT B EEN CONSIDERED FOR THE PURPOSE OF CALCULATION OF PROFIT AS WELL AS DEDUCTION U/S. 80HHC. 7. WE ARE OF THE VIEW THAT THIS IS NOT FIT CASE FOR IMPOSITION OF PENALTY. ISSUE AS TO WHETHER INTEREST INCOME WILL F ORM PART OF THE BUSINESS INCOME OR OTHER INCOME 90% OF WHICH IS TO BE EXCLUDED UNDER EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT WAS A DEBATABLE ISSUE. AS FAR AS ASSESSEE IS CONCERNED HE HAS DISCLOSED ALL PRIMARY FACTS. IN FACT UNDER IDENTICAL CIRCUMSTANCES DECISION OF DELHI BE NCH OF THE TRIBUNAL HAD TO CONSIDER CASE OF IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE ACT IN THE CASE OF MODEL FOOTWARE (P) LTD. VS. ITO 128 TT J 305(DEL). THE FACTS OF THE CASE WERE THAT DEDUCTION UNDER SECTION 80HHC CLAIMED BY THE ASSESSEE WAS REDUCED BY THE ASSESSING OFFICER FOR T HE REASON THAT 90 PER CENT OF THE INTEREST INCOME AND MISCELLANEOUS INCOM E WAS INCLUDED IN THE BUSINESS PROFIT BY THE ASSESSEE WHILE COMPUTING THE DEDUCTION THOUGH 90 PER CENT THEREOF SHOULD HAVE BEEN REDUCED FROM THE PROFIT AS PER EXPLANATION (BAA) TO SECTION 80HHC. THE TRIBUNA L EXPRESSED THE VIEW THAT ANSWER TO THE QUESTION AS TO WHETHER THE INTER EST AND MISCELLANEOUS INCOME ARE TO BE EXCLUDED FROM THE BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC IS DEPENDEN T ON THE FACT AS TO WHETHER THE INTEREST AND MISCELLANEOUS INCOME AR E DIRECTLY CONNECTED TO THE OPERATIONAL ACTIVITIES OF THE ASSESSEES BUS INESS AND THAT MERELY BECAUSE THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SE CTION 80HHC WITH REFERENCE TO INTEREST AND MISCELLANEOUS INCOME WITH OUT REDUCING 90 PER CENT THEREOF FROM THE NET PROFIT IT CANNOT BE HELD THAT THE ASSESSEE HAS CONCEALED INCOME OR HAS MADE INCORRECT CLAIM WITH A VIEW TO EVADE THE PAYMENT OF TAX. THE BENCH FURTHER HELD THAT DEDUCTI ON HAS BEEN DISALLOWED BY APPLYING THE PROVISIONS OF CLAUSE (BA A) OF EXPLANATION TO SHRI SURENDRA C. KALYANPUR 6 SECTION 80HHC WITHOUT GIVING ANY FINDING THAT THE A SSESSEE HAS FAILED TO DISCLOSE ALL MATERIAL FACTS RELATING TO THE COMPUTA TION OF DEDUCTION U/S. 80HHC OR THAT THE ASSESSEES CLAIM WAS FALSE. THE T RIBUNAL HELD THAT THE ASSESSEES CLAIM WAS BONAFIDE AND IT HAS DISCLOSED ALL THE MATERIAL FACTS RELATING TO THE COMPUTATION OF DEDUCTION. THEREFORE ASSESSEE HAS DISCHARGED THE BURDEN THAT LAY UPON IT UNDER EXPLAN ATION 1 TO SECTION 271(1)(C) OF THE ACT AND NO PENALTY UNDER SECTION 2 71(1)(C) IS LEVIABLE. 8. SIMILAR DECISION WAS RENDERED BY THE MUMBAI BENC H OF THE ITAT IN THE CASE OF SUNIL CHANDRA VOHRA VS. ACIT (2009) 32 SOT 365 (MUM); WHEREIN THE TRIBUNAL OBSERVED AS FOLLOWS :- THE TAX LAWS IN THIS COUNTRY ARE SO COMPLEX AND CO MPLICATED THAT EVEN A PERSON SPECIALIZING IN THIS FIELD INCLUDING TAX ADMINISTRATORS MAY NOT UNDERSTAND THE LAW IN THE C ORRECT PERSPECTIVE OR A PARTICULAR PROVISION MAY GO UNNOTI CED BECAUSE OF THE NUMBER OF AMENDMENTS MADE TO THE TAX ENACTMENTS FROM YEAR TO YEAR. UNDER THESE CIRCUMSTANCES IT WOULD BE A T RAVESTY OF TRUTH AND JUSTICE TO HOLD THAT AN ASSESSEE OUGHT TO HAVE KNOWN THE CORRECT LAW AND COMPLY THEREWITH EVEN THOUGH HE WA S NOT AWARE OF THE PROVISIONS. IN THE CASE OF KAUSHAL DIWAN VS. ITO (1983) 3 ITD 432 (DEL)(TM) THE LEARNED AM OBSERVED ON AN A NALOGOUS SITUATION THAT THE TAX PROVISIONS ARE SO COMPLEX T HAT EVEN HE WAS NOT AWARE OF THE PROVISION IN QUESTION TILL THE MAT TER WAS PLACED BEFORE THE BENCH. SIMILAR VIEW WAS TAKEN IN THE CAS E OF WTO VS. S.P. JAYAKUMAR (1983) 3 ITD 221 (MAD). THE BENCH OB SERVED THAT THE PLEA OF IGNORANCE OF LAW CAN BE TREATED AS A PR OPER EXPLANATION. SUCH EXPLANATION CAN BE SAID TO HAVE B EEN SUBSTANTIATED WHEN IT IS SHOWN THAT : (A) HE WAS AS SISTED BY A PROFESSIONAL CHARTERED ACCOUNTANT WHO HAS NOT BROUG HT TO HIS NOTICE THE APPLICABILITY OF PROVISIONS OF S. 2(22)( E) OF THE ACT AND (B) BY MAKING A STATEMENT THAT THIS IS THE FIRST YEAR I N WHICH THESE PROVISIONS CAME TO BE APPLIED IN ASSESSEE S CASE. IT COULD THUS BE SEEN THAT THE ASSESSEE TENDERED AN EXPLANATION WHIC H WAS SUBSTANTIATED AND THUS THE BURDEN IS CAST UPON THE REVENUE TO PROVE THAT THE EXPLANATION IS FALSE SO AS TO INVOKE EXPLN. 1 TO S. 271(1)(C) OF THE ACT. EXCEPT MERELY STATING THAT TH E ASSESSEE OUGHT TO HAVE FURNISHED THE LOAN PARTICULARS VOLUNTARILY ALONG WITH THE RETURN OF INCOME NO OTHER REASON WAS ASSIGNED BY T HE TAX AUTHORITIES TO DISPUTE THE BONA FIDES OF THE EXPLAN ATION. UNDER THE PECULIAR FACTS AND CIRCUMSTANCES AND IN THE LIGHT O F DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE WE A RE OF THE VIEW THAT THE EXPLANATION OF THE ASSESSEE IS BONA FIDE A ND HENCE THE CASE FALLS OUTSIDE THE AMBIT OF EXPLN. 1 TO S. 271( 1)(C) OF THE ACT. IN SHRI SURENDRA C. KALYANPUR 7 OTHER WORDS NO CASE WAS MADE OUT BY THE TAX AUTHOR ITIES TO LEVY PENALTY UNDER S. 27 1(1)(C) OF THE ACT. WE THEREFO RE SET ASIDE THE ORDERS OF THE TAX AUTHORITIES AND CANCEL THE PENALT Y LEVIED BY THE AO. 14. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS ALLOWED. 9. FOR THE REASONS GIVEN ABOVE WE DIRECT THAT THE PENALTY IMPOSED BE CANCELLED. 10. BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER HAS BEEN PRONOUNCED ON 19 TH DAY OF APRIL 2010. SD/- (T.R. SOOD) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 19 TH APRIL 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT CONCERNED. 5. THE DR CONCERNED MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI PS