THE ACIT 9(3), MUMBAI v. M/S. VIJAY JYOT SEATS LTD, MUMBAI

ITA 4441/MUM/2007 | 2001-2002
Pronouncement Date: 02-02-2010 | Result: Dismissed

Appeal Details

RSA Number 444119914 RSA 2007
Assessee PAN AAACV1235H
Bench Mumbai
Appeal Number ITA 4441/MUM/2007
Duration Of Justice 2 year(s) 7 month(s) 24 day(s)
Appellant THE ACIT 9(3), MUMBAI
Respondent M/S. VIJAY JYOT SEATS LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 02-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 02-02-2010
Date Of Final Hearing 05-01-2010
Next Hearing Date 05-01-2010
Assessment Year 2001-2002
Appeal Filed On 08-06-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SINGH (AM) ITA NO.4441/MUM/2007 ASSESSMENT YEAR : 2001-02 ASSTT. COMMISSIONER OF INCOME TAX-9(3) 219 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD CHURCHGATE MUMBAI-400 020. ..( APPELLANT ) VS. M/S. VIJAY JYOT SEATS LTD. C/O. NATIONAL LEATHER CLOTH MFG. CO. PLOT-B BEHIND NATIONAL AVENUE AKURLI ROAD KANDIVALI EAST MUMBAI-400 001. ..( RESPONDENT ) P.A. NO. (AAACV 1235 H) APPELLANT BY : MS. S. PAL RESPONDENT BY : DR. DILIP K. SHETH O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DT.29.3.2007 PASSED BY THE LD. CIT(A) FOR THE A SSESSMENT YEAR 2001-02 DELETING THE PENALTY OF RS.567540/- IMPOSED B Y THE AO U/S.271(1)(C) OF THE INCOME TAX ACT 1961(THE ACT). 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTOMOBILE SEATS AND INTERIORS FILED ITS RETURN DECLARING AN INCOME OF RS.5 4 43 390/-. HOWEVER THE ASSESSMENT WAS COMPLETED AT AN INCOME OF ITA NO.4441/M/07 A.Y: 01-02 2 RS.1 02 52 550/- INCLUDING THE DISALLOWANCE OF FOREIGN EDUCATION EXPENSES RS.14 35 000/- VIDE ORDER DT. 26.3.2004 PASSED U/S.143(3) OF THE ACT. ON APPEAL THE LD. CIT(A) WHILE UPHOLDI NG THE DISALLOWANCE MADE BY THE AO DISMISSED THE GROUND RAISED BY THE ASSESSEE . IN THE MEANTIME THE AO ISSUED NOTICE TO THE ASSESSEE TO SHOW CAUSE A S TO WHY PENALTY SHOULD NOT BE IMPOSED. IN RESPONSE IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAS NOT FILED ANY INACCURATE PARTICULARS OF INCOME. ON PERUSAL OF THE ASSESSM ENT ORDER IT IS SEEN THAT IT HAS NOT BEEN POINTED OUT WHICH PARTI CULARS OF INCOME ARE INACCURATE. FURTHER IN SUPPORT OF CLAIM OF EMPLOYE ES EDUCATION EXPENSES THE ASSESSEE HAS FILED NECESSARY DOCUMENTS . THE RE ASON GIVEN IN THE ASSESSMENT ORDER FOR MAKING SUCH DISALLOWANCE IS DEBATABLE IN NATURE AND IT HAS BEEN JUDICIALLY HELD THAT IT IS FOR A BUSINESSMAN TO DECIDE AS TO WHAT EXPENDITURE IS NECESSARY F OR IT AND NOT FOR THE AO TO TELL THE ASSESSEE AS TO HOW IT SHOULD R UN ITS BUSINESS. THE RELIANCE WAS ALSO PLACED ON THE VARIOUS DECISIONS NAME LY HINDUSTAN STEEL LTD.(SC)183 ITR 26 ACC VS. DCIT 40 IT D 70 ; CIT VS. JOGIBHAI MANGALBHAI (BOM.) ITR 404 AND CIT VS. HARSHVA RDAN CHEMICALS AND MINERALS LTD. (RAJ.) 259 ITR 212. IT WAS THEREFORE PRAYED TO DROP THE PENALTY . HOWEVER THE AO DID NOT ACCEPT THE ASSESSEES SUBMISSION . HE OBSERVED THAT THE EXPLANATION OFF ERED BY THE ASSESSEE IS NOT SATISFACTORY AND FROM THE DETAILS AVAILA BLE ON RECORD IT IS CLEAR THAT THE SAID EXPENSES ARE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR CARRYING OUT THE BUSINESS OF THE ASSESSEE. THE REFORE HE WAS OF THE VIEW THAT THE ASSESSEE COMPANY HAS COMMITTED A D EFAULT OF CONCEALMENT OF PARTICULARS OF INCOME LIABLE FOR IMPOSITIO N OF PENALTY U/S.271(1)(C) AND ACCORDINGLY HE IMPOSED PENALTY OF RS. 5 67 540/- VIDE ORDER DT.21.3.2006 PASSED U/S.271(1)(C) OF THE ACT. ON APPEAL THE LD. CIT(A) WHILE RELYING ON THE DECISION IN VIRTU AL SOFT SYSTEM LTD. ITA NO.4441/M/07 A.Y: 01-02 3 CIT (2007)289 ITR 83 (SC) HAS HELD THAT IT NOT DISPU TED BY THE AO THAT THE SAID MS. JANAKI MOTASHA WAS NOT AN EMPLOYEE OF THE APPELLANT COMPANY AND THEREFORE UNDER THE CIRCUMSTANCES IT WOULD B E INAPT TO LEVY THE PENALTY ON SUCH DISALLOWANCE AND HENCE HE DEL ETED THE PENALTY. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUND THE DE LETION OF PENALTY OF RS.5 67 540/- IMPOSED BY THE AO U/S.271(1)(C) OF THE ACT. 4. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE PENALTY ORDER PASSED BY THE AO THE LD. CIT(A) WAS NOT JUSTIFIED IN CANCELLING THE PENALTY IMPOSED BY TH E AO. SHE THEREFORE SUBMITS THAT THE PENALTY IMPOSED BY THE AO BE RESTORED. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SUB MITS THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.14 35 000/- ON HIGHER EDUCATION OF MS. JANAKI MOTASH A AN EMPLOYEE AS DEDUCTION FROM TAXABLE INCOME. FOR TWO YE ARS PRIOR TO HER GOING ABROAD FOR HIGHER EDUCATION SHE WORKED WITH THE COMPANY AND ON HER RETURN AFTER COMPLETION OF STUDIES IN DEC. 2 003 SHE JOINED THE COMPANY PURSUANT TO THE UNDERTAKING AND WORKED W ITH THE COMPANY FOR FIVE YEARS AND IN SUPPORT HE FILED SALARY CE RTIFICATES APPEARING AT PAGE NO.41 TO 44 OF THE ASSESSEES PAPER BO OK. HE FURTHER SUBMITS THAT THE DECISION TO SPONSOR HER EDUCATION WAS TAKEN COLLECTIVELY BY THE BOARD OF DIRECTORS BY PASSING BOARD R ESOLUTION APPROVING THE PROPOSAL TO SEND THE EMPLOYEE ABROAD FO R HIGHER EDUCATION IN INFORMATION TECHNOLOGY. HE FURTHER SUBMIT S THAT THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT PROCEEDING IS FULLY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN SAK AL PAPER PVT. ITA NO.4441/M/07 A.Y: 01-02 4 LTD. VS. CIT (1978) 114 ITR 256 (BOM.) WHEREIN THE HONBLE HIGH COURT HAS MADE SIGNIFICANT OBSERVATIONS ABOUT THE RELATI ONSHIP OF THE EMPLOYEE AS DAUGHTER OF DIRECTOR AT PAGE-260 OF THE R EPORT. HE FURTHER SUBMITS THAT THE AO DISALLOWED THE DEDUCTION O N THE GROUND THAT THE SELECTION OF THE EMPLOYEE FOR HIGHER EDUCATIO N WAS NOT PROPER AND THE HIGHER EDUCATION WAS OF NO ASSISTANCE TO THE ASSESSEE COMPANY. FURTHER SINCE THE EMPLOYEE WAS THE DAUGHTER OF THE DIRECTOR IT WAS THE PERSONAL OBLIGATION OF THE DIRECT OR TO SPEND ON HER HIGHER EDUCATION. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THE SAID OBSERVATIONS OF THE AO ARE NOT FACTS BUT ONLY AOS SU BJECTIVE OPINIONS. HE FURTHER SUBMITS THAT THE LD. CIT(A) CONFI RMED THE DISALLOWANCE ON THE GROUND THAT THE EXPENDITURE WAS NO T CONNECTED WITH THE ASSESSEES BUSINESS AND IT WAS A PERSONAL FAVOUR TO THE DAUGHTER OF THE DIRECTOR. HE FURTHER SUBMITS THAT THE TRIBUNAL HAS CONFIRMED THE DISALLOWANCE ON THE GROUND THAT IT WAS TH E DUTY OF THE PARENTS OF THE EMPLOYEE TO PROVIDE EDUCATION TO HER. THE STUDY COURSE FOR WHICH THE EMPLOYEE WAS SPONSORED WAS NOT SEAT DESIGNING BUT WAS INFORMATION TECHNOLOGY. HER DESIG NATION WAS MARKETING EXECUTIVE AND NOT DESIGNER OF SEATS. THU S THERE IS A COMPLETE MISMATCH BETWEEN THE DEGREE ACQUIRED BY HER AN D THE BUSINESS OF THE COMPANY AND THE JOB ENTRUSTED TO HER AFT ER HER RETURN. THE COMPANYS DECISION TO SPONSOR HER STUDIES WAS GUIDED MOR E BY FAMILY CONSIDERATION THAN BUSINESS CONSIDERATION AND IN SUP PORT THE RELIANCE WAS PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS. HINDUSTAN HOSIERY INDUSTRIES (1994) 209 ITR 383( BOM.). 6. HE FURTHER SUBMITS THAT THE SHOW CAUSE NOTICE AS TO WHY PENALTY MAY NOT BE IMPOSED ISSUED UPON COMPLETION OF ASSESSMENT W AS AMBIGUOUS INASMUCH AS THE NOTICE DID NOT INDICATE WHETHE R THE ITA NO.4441/M/07 A.Y: 01-02 5 PENALTY WAS PROPOSED TO BE LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS. THE ASSESSMENT ORDER HOWEVER SPECIFIED THAT THE PENALTY U/S.271(1)( C) WAS PROPOSED FOR FURNISHING INACCURATE PARTICULARS IN THE REPLY T HE ASSESSEE DENIED HAVING FILED INACCURATE PARTICULARS OF INCOME AND IT WA S POINTED OUT THAT IN THE ASSESSMENT ORDER THE AO HAS NOT SPECIFIED WH ICH PARTICULARS OF INCOME WERE INACCURATE DESPITE THE FACTS THA T NECESSARY DOCUMENTS PERTAINING TO THE EXPENDITURE DISALLOWED WE RE FILED. HOWEVER IN THE ORDER IMPOSING PENALTY U/S.271(1)(C) TH E AO CONCLUDED THAT THE EXPLANATION WAS NOT SATISFACTORY AN D DID NOT HOLD THAT THE EXPLANATION AS FALSE AND IMPOSED IMPUGNED P ENALTY HOLDING THAT THE DEFAULT COMMITTED BY THE ASSESSEE WAS CONCEALMEN T OF PARTICULARS OF INCOME. THE RELIANCE WAS ALSO PLACED ON T HE DECISION OF CIT VS. LAKHDHIR LALJI (1972)85 ITR 77 82 (GUJ.) AN D A.M. SHAH & COMPANY VS. CIT (1999)238 ITR 415 433(GUJ.) FOR THE PROPOSITION THAT THE PENALTY CANNOT BE IMPOSED ON THE GROUND AL TOGETHER DIFFERENT FROM THE GROUND ON WHICH THE SAME WAS INITIA TED. THE RELIANCE WAS ALSO PLACED ON THE DECISION IN THE CASE OF KAN BAY SOFTWARE INDIA (P) LTD. VS. DCIT (2009) 31 SOT 153(P UNE) AT PAGE 201 PARA 60 AND 61 AND AT PAGE 203 PARAS 63 AND 64 TO SHOW THAT IN THE LIGHT OF THE OBSERVATIONS MADE IN THAT CASE THE ASSE SSEES CASE DOES NOT FALL WITHIN THE EXPRESSION CONCEALMENT FURN ISHING INACCURATE PARTICULARS AND WITHIN THE SCOPE OF EXPLANATI ON-1 TO SECTION 271 (1)(C). THE RELIANCE WAS ALSO PLACED IN SH IV LAL TAK VS. CIT 251 ITR 373 379-380(RAJ.) GUJARAT CREDIT CORP N. LTD. VS. ACIT 302 ITR(AT) 250 287(AHD.) AND CIT VS. AIRLINES FINANCI AL SUPPORT SERVICES (I) LTD. (2009) 24 DTR (BOM.) 124 127. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LEARNED CIT(A) IN DELETING THE PENALTY BE UPHELD. ITA NO.4441/M/07 A.Y: 01-02 6 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SET TLED LAW THAT PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILITY AN D THE REVENUE IS NOT REQUIRED TO PROVE WILLFUL CONCEALMENT AS HELD BY T HE HONBLE SUPREME COURT IN CASE THE OF UNION OF INDIA VS. DHARM ENDRA TEXTILES AND PROCESSORS (2008) 306 ITR 277(SC). HOWEVER EACH AND EVERY ADDITION MADE IN THE ASSESSMENT CANNOT AUTOMATICALLY LEAD TO LEVY OF PENALTY FOR CONCEALMENT OF INCOME. A CASE FOR IMPOSITION OF PENALTY HAS TO BE EXAMINED IN TERMS OF THE PROVISIONS OF EXPLAN ATION 1 TO SECTION 271(1)(C). SECONDLY IT IS ALSO A SETTLED LEGAL POSITION THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM ASSESSMENT PROCEEDI NGS. THE FINDING GIVEN IN THE ASSESSMENT THOUGH IS A GOOD EVIDENCE BUT THE SAME IS NOT CONCLUSIVE IN PENALTY PROCEEDINGS AS HELD BY T HE HONBLE SUPREME COURT IN THE CASE OF ANANTHARAM VEERASINGHAIAH & CO. VS. CIT ((1980) 123 ITR 457 (SC). 8. IN THE INSTANT CASE THE PENALTY HAS BEEN IMPOSED O N THE SUSTENANCE OF DISALLOWANCE OF HIGHER EDUCATION EXPENSES AMO UNTING TO RS.14 35 000/- CLAIMED BY THE ASSESSEE ON THE EDUCATION OF MS. JANAKI MOTASHA DAUGHTER OF ONE OF THE DIRECTORS OF THE COMPAN Y. WE FURTHER FIND THAT THERE IS NO DISPUTE THAT IN SUPPORT OF THE CL AIM OF DEDUCTION THE ASSESSEE HAS FILED COPY OF MOU BETWEEN THE ASSESSEE CO. AN D MS. JANAKI MOTASHA LIST OF SHARE HOLDERS RESOLUTION OF BO ARD OF DIRECTORS APPROVING EDUCATION EXPENSES OF MS. JANAKI MOTASHA COPY OF BOARD EXAM CERTIFICATE OF MS. JANAKI MOTASHA SHOWING HER EDUCA TIONAL QUALIFICATION BEFORE SHE WAS SENT ABROAD FOR HIGHER EDU CATION COPY OF DEGREE CONFERRED ON MS. JANAKI MOTASHA BY RENSSELAER POL YTECHNIC INSTITUTE NEW YORK(USA) AND SALARY CERTIFICATE ISSUED T O MS. JANAKI MOTASHA FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 TO SHOW THAT ITA NO.4441/M/07 A.Y: 01-02 7 MS. JANAKI MOTASHA TOOK UP THE EMPLOYMENT WITH THE A SSESSEE IMMEDIATELY AFTER COMPLETING HER HIGHER EDUCATION. WE FURTHER FIND THAT THE DISALLOWANCE WAS SUSTAINED BY THE TRIBUNAL ON THE GROUND THAT IT WAS THE DUTY OF THE PARENTS OF THE EMPLOYEE TO P ROVIDE EDUCATION TO HER THE STUDY COURSE FOR WHICH THE EMPLOYEE WAS SPONSORE D WAS NOT SEAT DESIGNING BUT WAS INFORMATION TECHNOLOGY HER DESIGNATION WAS MARKETING EXECUTIVE AND NOT DESIGNER OF SEATS. THUS THERE IS A COMPLETE MISMATCH BETWEEN THE DEGREE ACQUIRED BY HER AND THE BUSINESS OF THE COMPANY AND THE JOB ENTRUSTED TO HER AFT ER HER RETURN THE EXPENDITURE INCURRED BY THE ASSESSEE HAS NO NEXUS EI THER WITH THE BUSINESS OF THE ASSESSEE OR THE JOB BEING ACTUALLY PERFORM ED BY HER IN THE ASSESSEE COMPANY THE COMPANYS DECISION TO SPONSOR HER STUDIES WAS GUIDED MORE BY FAMILY CONSIDERATIONS THAN BUSINESS CON SIDERATION AND THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISI ON OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS . HINDUSTAN HOSIERY INDUSTRIES (SUPRA). THE TRIBUNAL HAS ALSO DISTINGUI SHED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN SAK AL PAPERS PVT. LTD. (SUPRA) RELIED ON BY THE LEARNED COUNSEL FOR TH E ASSESSEE HOLDING THAT THE FACTS IN THE PRESENT CASE ARE COMPLETELY DIFFERE NT AND THE RATIO LAID DOWN IN THE PRESENT CASE IS NOT APPLICABLE TO THE F ACTS OF THE PRESENT CASE. 9. THERE IS NO DISPUTE THAT THE ASSESSEE HAS MADE THE ABOV E CLAIM ON THE BASIS OF THE DOCUMENTARY EVIDENCE (SUPRA) SUPPOR TED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN SAKAL PA PERS PVT. LTD. (SUPRA). IN CIT VS. AIRLINES FINANCIAL SUPPORT SERVICES ( I) LTD. (2009) 24 DTR (BOM) 124 IT HAS BEEN HELD THAT THE ASSESSEE HAVI NG CLAIMED CERTAIN EXPENDITURE AS REVENUE EXPENDITURE BONAFIDE R ELYING ON A DECISION OF THE JURISDICTIONAL HIGH COURT IT CANNOT BE SA ID THAT THE ITA NO.4441/M/07 A.Y: 01-02 8 PREDICATES OF SECTION 271(1)(C) WERE SATISFIED FOR IMPOSIN G PENALTY MERELY BECAUSE THE AO HELD THAT IT WAS CAPITAL EXPENDI TURE. 10. FURTHER IT HAS BEEN REPEATEDLY HELD BY THE COURT S THAT WHEN THE FACTS ARE CLEARLY DISCLOSED IN THE RETURN OF INCOME PENA LTY CANNOT BE LEVIED. MERELY BECAUSE AN AMOUNT IS NOT ALLOWED OR T AXED TO INCOME IT CANNOT BE SAID THAT THE ASSESSEE HAD FILED INACCURATE PA RTICULARS OR CONCEALED ANY INCOME CHARGEABLE TO TAX. EVEN IF SOME DED UCTION OR BENEFIT IS CLAIMED BY THE ASSESSEE WRONGLY BUT BONAFIDE AND NO MALAFIDE CAN BE ATTRIBUTED THE PENALTY WOULD NOT BE LEVIED. IN THIS VIEW OF THE MATTER AND IN THE ABSENCE OF ANY OTHER CON TRARY MATERIAL PLACED ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWI NG THE RATIO OF THE DECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE HOLD THAT THERE WAS NO DELIBERATE OMISSION ON THE PART OF THE ASSESSEE EITHER FOR THE PURPOSE OF CONCEALMENT OF INCOME OR FURN ISHING OF INACCURATE PARTICULARS AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LEARNED. CIT(A) IN DELETING THE PENA LTY IMPOSED BY THE AO. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. 11. IN THE RESULT REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.02.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED:02.02.2010. JV. ITA NO.4441/M/07 A.Y: 01-02 9 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR F BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. ITA NO.4441/M/07 A.Y: 01-02 10 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 5.1.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 6.1.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 02-02-10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 03-02-10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER