ACIT 6(3), MUMBAI v. LONA INDUSTREIS LTD, MUMBAI

ITA 3397/MUM/2010 | 2003-2004
Pronouncement Date: 23-09-2011 | Result: Dismissed

Appeal Details

RSA Number 339719914 RSA 2010
Assessee PAN AAACL1166F
Bench Mumbai
Appeal Number ITA 3397/MUM/2010
Duration Of Justice 1 year(s) 4 month(s) 23 day(s)
Appellant ACIT 6(3), MUMBAI
Respondent LONA INDUSTREIS LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 23-09-2011
Date Of Final Hearing 15-09-2011
Next Hearing Date 15-09-2011
Assessment Year 2003-2004
Appeal Filed On 30-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER. I.T.A. NO. 3397/MUM/2010. ASSESSMENT YEAR : 2003-04. ASSTT. COMMISSIONER OF INCOME TAX LONA INSURANCE LTD. 6(3) MUMBAI. VS. ATLAS BHAVAN 532 SENAPATI BAPAT MARG DADAR (WEST) MUMBAI 400 028. PAN : AAACL 1166F. APPELLANT. RESPONDENT. APPELLANT BY : SHRI A.K. NAYAK. RESPONDENT BY : SHRI SANTOSH PARAB. DATE OF HEARING : 15-09-2011 DATE OF PRONOUNCEMENT : O R D E R. PER P.M. JAGTAP A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT(APPEALS)-12 MUMBAI DATED 12-01-2010 WHEREBY HE CANCELLED THE PENALTY OF RS.8 87 055/- IMPOSED BY THE AO U/S 271(1)(C). 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PIGMENTS COLOURS AND DYES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 27- 11-2003 DECLARING TOTAL LOSS OF RS.1 88 47 150/-. IN THE ASSESSMENT COMPLETED U/S 1 43(3) VIDE AN ORDER DATED 23- 2 ITA NO. 3397/MUM/2010 ASSESSMENT YEAR : 2003-04. 01-2006 THE TOTAL INCOME OF THE ASSESSEE WAS COMPU TED BY THE AO AT A LOSS OF RS.1 58 88 762/- AFTER MAKING INTER ALIA THE FOLLOW ING THREE ADDITIONS : I) ADDITION OF RS.3 93 253 ON ACCOUNT OF FOREIGN TR AVEL EXPENSES TREATING THE SAME AS CAPITAL IN NATURE. II) ADDITION OF RS.10 LAKHS OUT OF TOTAL STAFF WELF ARE EXPENSES OF RS.45 71 446/- CLAIMED BY THE ASSESSEE FOR WANT OF DETAILS AND SUPPORTING EVIDENCE. III) ADDITION OF RS.10 20 500/- OUT OF TOTAL MISCEL LANEOUS EXPENSES OF RS.1 02 50 218/- CLAIMED BY THE ASSESSEE FOR WANT O F DETAILS AND SUPPORTING EVIDENCE. THE ABOVE THREE ADDITIONS MADE BY THE AO TO THE TOT AL INCOME OF THE ASSESSEE WERE CONFIRMED BY THE LEARNED CIT(APPEALS) WHILE DISPOS ING OF THE APPEAL FILED BY THE ASSESSEE IN THE QUANTUM PROCEEDINGS. THEREAFTER A N OTICE WAS ISSUED BY THE AO REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENA LTY U/S 271(1)(C) SHOULD NOT BE IMPOSED IN RESPECT OF THE SAID THREE ADDITIONS MADE TO ITS TOTAL INCOME. IN REPLY IT WAS SUBMITTED BY THE ASSESSEE THAT THE DISALLOWANCE OUT OF FOREIGN TRAVEL EXPENSES WAS MADE BY TREATING THE SAME AS CAPITAL IN NATURE WHICH INVOLVED A HIGHLY DEBATABLE ISSUE. IT WAS SUBMITTED THAT THE OTHER TW O ADDITIONS WERE MADE BY WAY OF ADHOC DISALLOWANCE OUT OF STAFF WELFARE EXPENSES AN D MISCELLANEOUS EXPENSES ON ESTIMATED BASIS WHICH INVOLVED PRESUMPTIONS AND SUR MISES. IT WAS CONTENDED THAT PENALTY U/S 271(1)(C) THEREFORE WAS NOT ATTRACTED IN RESPECT OF THE SAID ADDITIONS KEEPING IN VIEW THE NATURE OF DISALLOWANCE MADE AND THE BASIS THEREOF. THE AO WAS NOT CONVINCED BY THIS EXPLANATION OFFERED BY TH E ASSESSEE AND PROCEEDED TO IMPOSE A PENALTY OF RS.8 87 055/- U/S 271(1)(C) BEI NG 100% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE IN RESPECT OF THE ADDITION O F RS.24 13 753/- HOLDING THAT THE ASSESSEE WAS GUILTY OF FURNISHING INACCURATE PARTIC ULARS OF ITS INCOME TO THAT EXTENT. 3 ITA NO. 3397/MUM/2010 ASSESSMENT YEAR : 2003-04. 3. THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT( APPEALS) AND AFTER CONSIDERING THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE BEFOR E HIM AS WELL AS THE MATERIAL AVAILABLE ON RECORD THE LEARNED CIT(APPEALS) CANCE LLED THE SAID PENALTY HOLDING THAT IT WAS NOT A FIT CASE TO IMPOSE THE SAID PENAL TY. HE HELD THAT ALL THE THREE ADDITIONS WERE MADE TO THE TOTAL INCOME OF THE ASSE SSEE BY WAY OF DISALLOWANCE OF EXPENSES FOR NON FILING OF RELEVANT DETAILS AND DOC UMENTS BY THE ASSESSEE WHICH WOULD NOT AMOUNT TO CONCEALMENT WITHIN THE MEANING OF SECTION 271(1)(C). AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS) THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED DR HAS CONTENDED TH AT IN THE ABSENCE OF RELEVANT DETAILS AND DOCUMENTS FILED BY THE ASSESSEE TO SUPP ORT AND SUBSTANTIATE ITS CLAIM FOR FOREIGN TRAVEL EXPENSES AND STAFF WELFARE EXPENSES AND MISCELLANEOUS EXPENSES EXPLANATION 1 TO SECTION 271(1)(C) WAS CLEARLY AT TRACTED AND THE ASSESSEE WAS LIABLE TO PAY PENALTY UNDER THE SAID PROVISION. HE HAS TAKEN US THROUGH THE ORDERS OF THE AO AND LEARNED CIT(APPEALS) PASSED IN THE Q UANTUM PROCEEDINGS TO SHOW THAT THERE WAS A FAILURE OF THE ASSESSEE TO FURNISH THE RELEVANT DETAILS AS WELL AS DOCUMENTS TO SUPPORT AND SUBSTANTIATE ITS CLAIM FOR THE SAID EXPENSES WHICH RESULTED IN THE RESPECTIVE DISALLOWANCE. HE HAS CON TENDED THAT THE LEARNED CIT(APPEALS) HOWEVER IGNORED THIS VITAL ASPECT AN D CANCELLED THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) WITHOUT GIVING ANY REASON OR JUSTIFICATION IN SUPPORT THEREOF. HOWEVER AS POINTED OUT BY THE LEA RNED COUNSEL FOR THE ASSESSEE FROM THE COPIES OF QUESTIONNAIRE ISSUED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND REPLIES GIVEN BY THE ASSESSEE THERE TO PLACED IN HIS PAPER BOOK THE RELEVANT DETAILS OF TRAVELLING EXPENSES WERE FILED BY THE ASSESSEE SHOWING THAT THE 4 ITA NO. 3397/MUM/2010 ASSESSMENT YEAR : 2003-04. AMOUNT OF RS.3 93 253/- WAS REIMBURSED TO JAPANESE COMPANY ON ACCOUNT OF TRAVEL OF THEIR STAFF TO INDIA FOR PROVIDING TECHNICAL ASS ISTANCE TO THE COMPANY AS PER THE COLLABORATION AGREEMENT. THE DEBIT NOTE ISSUED BY T HE JAPANESE COMPANY WAS ALSO FILED BY THE ASSESSEE. THESE DETAILS AND DOCUMENTS FILED BY THE ASSESSEE IN OUR OPINION WERE SUFFICIENT TO SHOW THE GENUINENESS OF FOREIGN TRAVEL EXPENSES INCURRED BY THE ASSESSEE AND EVEN THE AO OR THE CIT (APPEALS) HAS NOT DISPUTED THIS POSITION. THEY HAVE DISALLOWED THE SAID EXPENS ES TREATING THE SAME AS CAPITAL IN NATURE AND AS RIGHTLY CONTENDED BY THE LEARNED C OUNSEL FOR THE ASSESSEE THIS IS A HIGHLY DEBATABLE ISSUE ON WHICH A POSSIBLE VIEW WAS TAKEN BY THE ASSESSEE WHILE MAKING A CLAIM FOR FOREIGN TRAVEL EXPENSES. IT IS ALSO OBSERVED FROM PAGE NO. 8 AND 9 OF THE ASSESSEES PAPER BOOK THAT THE DETAILS OF STAFF WELFARE EXPENSES AND MISCELLANEOUS EXPENSES WERE FURNISHED BY THE ASSESS EE BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND AN ADHOC DISAL LOWANCE OUT OF THE SAID EXPENSES WAS MADE BY THE AO ON ESTIMATED BASIS FOR WANT OF FURTHER DETAILS AND DOCUMENTARY EVIDENCE. IT IS BY LAW WELL SETTLED THA T WHERE ADDITIONS ARE BASED MERELY ON ESTIMATE WITHOUT ANYTHING POSITIVE TO SUP PORT THE INFERENCE OF CONCEALMENT PENALTY U/S 271(1)(C) CANNOT BE IMPOS ED. IN THE CASE OF CIT VS. RAWEL SINGH & CO. 254 ITR 191 IT WAS HELD BY THE H ONBLE PUNJAB & HARYANA HIGH COURT THAT THE PENALTY U/S 271(1)(C) IS NOT LE VIABLE WHERE THE ADDITION TO ASSESSEES INCOME WAS MADE ON THE BASIS OF ESTIMATE AND NOT ON ANY CONCRETE EVIDENCE OF CONCEALMENT OF ANY TRANSACTION OR FURNI SHING OF ANY INACCURATE PARTICULARS. 5. IT IS ALSO OBSERVED THAT THE ADDITIONS TO THE TO TAL INCOME OF THE ASSESSEE WERE MADE BY THE AO BY DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSESSEE FOR WANT OF RELEVANT DETAILS AND SUPPORTING DOCUMENTS. THERE WA S HOWEVER NO ALLEGATION MADE BY THE AO THAT ANY PARTICULARS FILED BY THE AS SESSEE IN RESPECT OF ITS CLAIM FOR 5 ITA NO. 3397/MUM/2010 ASSESSMENT YEAR : 2003-04. THE SAID EXPENSES WERE INCORRECT OR INACCURATE. IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. 322 ITR 158 THE INFORMATION GIVEN BY THE ASSESSEE IN THE RETURN WHILE MAKING THE CLAIM FOR DEDUCTION WAS NOT FOUND TO BE INCORRECT OR INACCURATE AND IT WAS HELD BY THE HONBLE SUPREME COURT THAT T HE ASSESSEE COULD NOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IT WAS HELD BY THE HONBLE APEX COURT THAT MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAM OUNT TO FURNISHING INACCURATE PARTICULARS AND MERELY BECAUSE THE ASSESSEES CLAIM FOR DEDUCTION WHICH HAD NOT BEEN ACCEPTED BY THE REVENUE PENALTY U/S 271(1)(C ) WAS NOT ATTRACTED. KEEPING IN VIEW THE DECISION OF HONBLE SUPREME COURT IN THE CA SE OF RELIANCE PETRO PRODUCTS P. LTD. (SUPRA) AS WELL AS THE DECISION OF HONBLE PUNJAN & HARYANA HIGH COURT IN THE CASE OF CIT VS. RAWEL SINGH & CO. (SUPRA) AND H AVING REGARD TO THE FACTS OF THE ASSESSEES CASE WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE TO IMPOSE PENALTY U/S 271(1)(C) AND THE LEARNED CIT(APPEALS) IS FULLY JUS TIFIED IN CANCELLING THE SAME. IN THAT VIEW OF THE MATTER WE UPHOLD THE IMPUGNED ORD ER OF THE LEARNED CIT(APPEALS) CANCELLING THE PENALTY IMPOSED BY THE AO U/S 271(1) (C) AND DISMISS THIS APPEAL FILED BY THE REVENUE. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THIS 23RD DAY OF SEPT. 2011. SD/- SD/- (R.S. PADVEKAR) (P.M. J AGTAP) JUDICIAL MEMBER. ACCO UNTANT MEMBER MUMBAI DATED: 23RD SEPT. 2011. 6 ITA NO. 3397/MUM/2010 ASSESSMENT YEAR : 2003-04. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR G-BENCH. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR ITAT MUMBAI BENCHES MUMBAI. REDDY GP / WAKODE .