MELOG SPECIALITY CHEMICALS P. LTD, MUMBAI v. ITO 6(3)(3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI. BEFORE S/SHRI S.V.MEHROTRA AM & N.V.VASUDEVAN JM I.T.A. NO.3866/MUM/2009 ASSESSMENT YEAR: 2005-06 MELOG SPECIALITY CHEMICALS P.LTD. V. THE I.T.O. 6 (3)(3) NO. 5 METHDOOT 2 ND FLOOR 283 FALANK RD. AAYAKAR BHAVAN M.K. ROAD SION (E) MUMBAI. MUMBAI. PA NO.AADCM 3976 F (APPELLANT) (RESPONDENT) ASSESSEE BY: NONE REVENUE BY : SHRI M.B.REDDY O R D E R PER S.V.MEHROTRA AM THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 7.5.2009 OF LD CIT (A)-VI MUMBAI CONFIRMING THE PENALTY OF RS .24 428/- LEVIED BY THE AO U/S.271(1)(C) OF THE I.T.ACT FOR THE ASSESSMENT YEA R 2005-06. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE WHEN TH E MATTER WAS CALLED ON FOR HEARING INSPTIE OF THE NOTICE. THEREFORE WE DECID E THE APPEAL OF THE ASSESSEE EXPARTE AFTER HEARING THE LD D.R. AND ON THE BASIS OF MATER IAL AVAILABLE ON RECORD. 3. AS PER THE PENALTY ORDER THE ASSESSMENT WAS COM PLETED AT A TOTAL INCOME OF RS.66 758/- AS AGAINST THE RETURNED INCOME OF NIL BY DISALLOWING INTEREST INCOME OF RS.66 758/- ON THE GROUND THAT THE SAME WAS REQUIRE D TO BE CONSIDERED AS INCOME FROM OTHER SOURCES. IN THE COURSE OF ASSESSMENT PROCEED INGS IT WAS NOTICED THAT THE ASSESSEE HAD DEDUCTED AN AMOUNT OF RS.1 75 710/- FROM THE TO TAL EXPENDITURE DURING CONSTRUCTION 2 ON THE GROUND THAT SINCE NO PRODUCTION HAD COMMENCE D NO INCOME EARNED OF RS.1 75 710/- FROM DIVIDENDS INTEREST INCOME AND P ROFIT ON THE SALE OF MUTUAL FUND UNITS WAS REQUIRED TO BE OFFERED FOR TAXATION. THE DIVIDE ND INCOME WAS EXEMPT; THEREFORE THE SAME WAS NOT SUBJECTED TO TAX. HOWEVER IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TUTICORON ALKALI CHEMICALS & F ERTILISERS LTD V CIT 227 ITR 172 (SC) BEING INTEREST INCOME WAS CONSIDERED AS INCOME FROM OTHER SOURCES AND PENALTY PROCEEDINGS WERE INITIATED. AFTER CONSIDERING THE VARIOUS CASE LAWS THE AO CONCLUDED THAT THE ASSESSEE MADE A CONSCIOUS ATTEMPT TO CONCE AL ITS INCOME AND LEVIED THE PENALTY OF RS.24 428/-. 4. LD CIT (A) CONFIRMED THE PENALTY. 5. HAVING HEARD LD D.R. WE FIND FROM THE SUBMISSIO NS MADE BEFORE LD CIT (A) THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY WITH JAPA NESE COLLABORATION. ITS SHARES ARE HELD EQUALLY BY JAPANESE PEOPLE AND BY INDIANS. IT IS E NGAGED IN THE MANUFACTURE OF SPECIALTY CHEMICALS WHICH ARE TOTALLY EXPORTED TO JAPAN. FOR THIS PURPOSE DURING THE ACCOUNTING YEARS 31.3.2004 AND 31.3.2005 RELEVANT TO ASSESSMEN T YEARS 2003-04 AND 2004-05 THE ASSESSEE HAD PURCHASED THE LAND AND HAD UNDERTAKEN THE CONSTRUCTION OF THE FACTORY INSTALLATION OF MACHINERY ELECTRIC TRANSFORMER AND OTHER EQUIPMENTS REQUIRED FOR THE INSTALLATION OF THE PIPE LINES AND FOR CONSTRUCTION OF FULL FLEDGED MANUFACTURING FACILITIES. IT HAD CAPITALIZED ALL ITS EXPENDITURE DURING THE Y EAR. SOME SURPLUS FUNDS WERE INTER ALIA INVESTED IN GIVING LOANS ON INTEREST TO OUTSIDERS. THE INCOMES EARNED WERE DEDUCTED FROM THE EXPENDITURE INCURRED DURING THE CONSTRUCTION AN D THE BALANCE EXPENDITURE WAS CAPITALIZED. THUS IT IS EVIDENT THAT THE ASSESSEE HAD DISCLOSED ALL THE INCOMES AND HAD DEDUCTED THE SAME FROM THE PRE-COMMENCEMENT EXPENDI TURE. MERELY BECAUSE THE ACTION OF THE ASSESSEE IN DEDUCTING FROM THE EXPENDITURE D URING THE CONSTRUCTION PERIOD AND CAPITALIZING THE BALANCE WAS NOT ACCEPTED BY THE AS SESSING AUTHORITY DOES NOT IMPLY THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS O F INCOME. THE HONBLE SUPREME COURT IN THE CASE OF CIT V RELIANCE PETROPRODUCTS PVT LT D[2010]322 ITR 158(SC) HELD THAT WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO Q UESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). IN THIS CASE ALL THE DETAILS WERE GIVEN IN THE FINANCIAL STATEMENT AND 3 NOTHING WRONG WAS FOUND BY THE ASSESSING AUTHORITY IN REGARD TO THESE DETAILS. THEREFORE WE DELETE THE PENALTY OF RS.24 428/- LEVIED BY THE AO AND CONFIRMED BY LD CIT (A). 6. IN THE RESULT APPEAL FILED BY THE ASSESSEE STAN DS ALLOWED. PRONOUNCED ON 20 TH APRIL 2010 SD/- (N.V.VASUDEVAN) (JUDICIAL MEMBER) SD/- (S.V. MEHROTRA) (ACCOUNTANTMEMBER) MUMBAI DATED 20 TH APRIL 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- MUMBAI 4. COMMISSIONER OF INCOME TAX CITY- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH F MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI 4 DATE INITIALS 1. DRAFT DICTATED ON 15.4.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 19.4.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER 5