ACIT 25(1), MUMBAI v. BIOVET INDUSTRIES, MUMBAI

ITA 5291/MUM/2010 | 2004-2005
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 529119914 RSA 2010
Assessee PAN AADFB3600L
Bench Mumbai
Appeal Number ITA 5291/MUM/2010
Duration Of Justice 1 year(s) 1 month(s) 1 day(s)
Appellant ACIT 25(1), MUMBAI
Respondent BIOVET INDUSTRIES, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 29-07-2011
Assessment Year 2004-2005
Appeal Filed On 28-06-2010
Judgment Text
IN THE INCOME APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S. SYAL A.M. AND SHRI V. DURGA RAO J.M. ITA NO. 5291/MUM/2010 ASSESSMENT YEAR: 2004-05 ASSTT. COMMISSIONER OF INCOME-TAX APPELLANT 25(10 C-11 PRATYAKSHA KAR BHAVAN R.NO.202 BANDRA KURLA COMPLEX BANDRA (E) MUMBAI 400 051. VS. BIOVET INDUSTRIES RESPONDENT SHOP NO. 9 B WING DEVKI NAGAR EKSAR ROAD BORIVALI (W) MUMBAI 400 103. (PAN AADFB 3600 L) ITA NO. 2953/MUM/2009 ASSESSMENT YEAR: 2003-04 BIOVET INDUSTRIES RESPONDENT SHOP NO. 9 B WING DEVKI NAGAR EKSAR ROAD BORIVALI (W) MUMBAI 400 103. (PAN AADFB 3600 L) VS. ASSTT. COMMISSIONER OF INCOME-TAX APPELLANT 25(10 C-11 PRATYAKSHA KAR BHAVAN R.NO.202 BANDRA KURLA COMPLEX BANDRA (E) MUMBAI 400 051. REVENUE BY : MR. P.C. MAURYA RESPONDENT BY : MR. S.N. DIVATIA ORDER PER V. DURGA RAO J.M.: BOTH THESE APPEALS PERTAIN TO ONE ASSESSEE. THE IT A NO. 5291/M/10 FILED BY THE REVENUE AND ITA NO. 2953/M/0 9 FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2003-04 AND 2004- 05 RESPECTIVELY. ITA NOS. 5291/M/2010 & 2953/M/09 M/S BIO VET INDUSTRIES 2 ITA NO. 5291/M/10 2. THIS IS APPEAL IS DIRECTED AGAINST THE ORDER OF CIT(A)-35 MUMBAI PASSED ON 08/04/2010 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD.CIT(A) ERRED IN DELETING THE PENALTY U/S 271 (1)(C) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DELIBERATEL Y APPORTIONED THE EXPENSES BETWEEN UNIT I &II SO AS TO CLAIM EXCE SS DEDUCTION U/S 80-IB. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE PENALTY US/ 271(1)(C) WITHOUT APPRECIATING THE FACT THAT PENALTY U/S 271(1)(C) LEVIED ON THE A SSESSEE UNDER SIMILAR CIRCUMSTANCES IN THE PRECEDING YEAR I.E. 20 03-04 WAS CONFIRMED BY THE LD. CIT(A). 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RES TORED. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED RETURN OF INCOME ON 01/11/2004 DECLARING TOTAL INCO ME OF RS. 16 33 832/-AFTER CLAIMING DEDUCTION OF RS. 91 55 15 6/- U/S 80IB OF THE ACT WHICH WAS PROCESSED U/S 143(3) OF THE ACT ON 29/12/06 DETERMINING TOTAL INCOME AT RS. 80 02 705/-. WHILE COMPLETING THE ASSESSMENT DEDUCTION U/S 80IB ON UNIT II @ 100% WAS DISALLOWED CONSIDERING THE UNIT II AS AN EXTENSION OF EXISTING UNIT (I.E. UNIT I) AND ACCORDINGLY DEDUCTION U/S 80IB @25% WAS ALLOWED ON BOTH THE UNITS. ON APPEAL THE CIT(A) DIRECTED THE AO TO ALL OW 100% DEDUCTION U/S 80IB ON THE PROFIT OF UNIT II & 25% ON UNIT-I. HE FURTHER DIRECTED TO APPORTION MANUFACTURING EXPENSES TO BOTH UNITS O N THE BASIS OF GOODS MANUFACTURED AND ALSO APPORTION THE ADMINISTR ATIVE SELLING AND FINANCIAL EXPENSES ON THE BASIS OF TURNOVER OF EACH UNIT. AFTER GIVING THE EFFECT TO THE ORDER OF CIT(A) THE AO WO RKED OUT THE NET PROFIT AT RS. 78 56 010/-. 4. THEREAFTER THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS O F INCOME AND ISSUED A SHOW CAUSE NOTICE TO THIS EFFECT. IN REPLY THE A SSESEE FILED WRITTEN ITA NOS. 5291/M/2010 & 2953/M/09 M/S BIO VET INDUSTRIES 3 SUBMISSION ON 30/03/2009. THE AO REPRODUCED THE REL EVANT PORTION OF THE SUBMISSIONS IN HIS ORDER AT PAGES 2 & 3 OF H IS ORDER. IN THE WRITTEN SUBMISSION THE ASSESSEE INTER-ALIA STATED THAT ALL THE FACTS AND MATERIAL FOR THE COMPUTATION OF THE BIFURCATION OF SAID EXPENSES WHICH IS UNDER DISPUTE WERE ON RECORD OF THE DEPART MENT. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE FIRM HAS CONCEALED OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE COMPUTATION O F THE DEDUCTION IS ALSO SUPPORTED BY THE AUDIT CERTIFICATE AS REQUIRED U/S 80IB OF THE ACT. THE SUBMISSIONS OF THE ASSESSEE WERE NOT CONS IDERED BY THE AO AND LEVIED PENALTY OF RS. 25 00 000/- ON THE GROUND THAT IT IS WELL ESTABLISHED THAT THE ASSESSEE HAS CONCEALED THE PAR TICULARS OF HIS INCOME TO THE EXTENT OF RS. 62 22 178/- LEADING TO FURNISHING OF INACCURATE PARTICULARS OF HIS INCOME AND THEREFORE PENALTY U/S 271(1)(C) IS LEVIABLE ON THE ASSESSEE. AGGRIEVED T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT T HE TRIBUNAL HAD DECIDED THE APPEAL FILED BY THE ASSESSEE AND THE DE PARTMENT BY ORDER DATED 25/02/10. HE FURTHER SUBMITTED THAT THE TRIBU NAL UPHELD THE CLAIM OF THE ASSESSEE THAT UNIT-II IS A SEPARATE IN DUSTRIAL UNDERTAKING AND THE SAME IS ENTITLED TO 100% DEDUCTION U/S 80IB . IT WAS SUBMITTED THAT REGARDING ALLOCATION OF EXPENSES THA T THE TRIBUNAL HELD THAT THE ADMINISTRATIVE EXPENSES AND SELLING EXPENS ES ARE TO BE APPORTIONED ON THE BASIS OF TURNOVER WHEREAS THE FI NANCIAL EXPENSES ARE TO BE APPORTIONED ON THE BASIS OF VALUE OF GOOD S MANUFACTURED IN BOTH THE UNITS. HE SUBMITTED THAT THE ONLY ISSUE CO NFIRMED BY THE ITAT ON WHICH THE AO HAS IMPOSED PENALTY IS ALLOCAT ION OF EXPENSES IN RESPECT OF ADMINISTRATIVE EXPENSES AND SELLING EXPE NSES. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE CI T(A) CANCELLED THE PENALTY OBSERVING AS UNDER:- 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESE NTATIVES AND THE STAND TAKEN BY THE AO. WHEN THE IMPUGNED OR DER WAS PASSED THE APPEAL FILED BEFORE THE HONBLE TRIBUNA L HAS DECIDED THE APPEAL FILED BY THE APPELLANT AND THE DEPARTMEN T. AFTER CONSIDERING THE ORDER OF THE HONBLE TRIBUNAL IT I S SEEN THAT THE ITA NOS. 5291/M/2010 & 2953/M/09 M/S BIO VET INDUSTRIES 4 VARIATION WITH REFERENCE TO THE ADMITTED INCOME IS ONLY IN RESPECT OF BIFURCATION OF EXPENSES BETWEEN THE TWO UNITS IN RESPECT OF ADMINISTRATIVE EXPENSES AND SELLING EXPENSES AND AS SESSMENT OF INTEREST INCOME UNDER THE HEAD OTHER SOURCES. REGAR DING BIFURCATION OF EXPENSES IT IS SEEN THAT THE SAME W AS CLAIMED ON THE BASIS OF CERTIFICATE ISSUED BY CA IN THE FORM N O. 10CCB. THE AO DID NOT DISPUTE THE FACT THAT THE CLAIM WAS MADE IN ACCORDANCE WITH THE CERTIFICATE ISSUED BY CO. AS CO NTENDED BY THE REPRESENTATIVE THERE WAS HONEST AND BONAFIDE D IFFERENCE OF OPINION REGARDING THE APPORTIONMENT OF EXPENSES WHI CH CANNOT BE SAID TO BE CONCEALMENT OF INCOME. IN AN CASE THE A PPELLANT HAD BONAFIDE BELIEF THAT IT WAS ENTITLED TO DEDUCTION U /S 80IB AS QUANTIFIED BY THE CA AND ACCORDINGLY THE DEDUCTION WAS CLAIMED IN THE RETURN FILED. I ACCEPT THE PLEA OF THE REPRE SENTATIVE THAT WHEN THE CLAIM IS MADE BASED ON THE CERTIFICATE ISS UED BY THE CA. NO CONCEALMENT PENALTY COULD BE LEVIED BECAUSE THE APPELLANT HAD BONAFIDE BELIEF THAT THE CERTIFICATE ISSUED BY THE CA WAS CORRECT. EVEN IF EXPLANATION I IS INVOKED T HERE IS ONLY A REBUTTABLE PRESUMPTION OF CONCEALMENT IN LAW AND TH E SAME CAN BE SAID TO BE REBUTTED BY THE ASSESSEE WHEN THE CLA IM IS BASED ON THE CERTIFICATE ISSUED BY A QUALIFIED CA AND THI S WOULD CONSTITUTE BONAFIDE BELIEF AND REASONABLE CAUSE FOR NOT IMPOSING PENALTY. AS CONTENDED BY THE REPRESENTATIVE HONBL E SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCT S LTD. (322 ITR 156) HAS RECENTLY HELD THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW WOULD NOT AMOUNT TO FURNISHING I NACCURATE PARTICULARS. AS CONTENDED BY THE REPRESENTATIVE TH E HONBLE CHANDIGARH BENCH TRIBUNAL IN THE CASE OF ACIT VS. A RISUDANA SPINNING MILLS LTD. (19 DTR 1 HELD AS UNDER:- NOW THE QUESTION IS AS TO WHETHER THE DENIAL OF T HE CLAIM MADE IN THE RETURN OF INCOME CAN LEAD TO AN AUTOMAT IC IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF TH E ACT IT IS SUFFICIENT TO SAY THAT THE ASSESSMENT PROCEEDINGS A ND THE SUBSEQUENT PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS. THE FINDINGS AND CONCLUSIONS DRAWN BY THE AUTHORITIES IN THE ASSESSMENT PROCEEDINGS ARE RELEV ANT BUT CANNOT BE CONSTRUED AS CONCLUSIVE SO AS TO FASTEN T HE ASSESSEE WITH THE CHARGE OF CONCEALMENT OF INCOME A ND FURNISHING OF INACCURATE PARTICULARS THEREOF. A SIM ILAR SITUATION WAS BEFORE THE HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF DEEP TOOLS (P) LTD. (SUPRA). I N THE SAID CASE TOO THE ASSESSEE HAD STAKED CLAIM FOR DEDUCTI ON U/S 80HHC OF THE ACT WHICH WAS DECLINED. THE AO LEVIED PENALTY U/S 271(1)(C) OF THE ACT. THE STAND OF THE ASSESSEE WAS THAT THE CLAIM WAS MISTAKEN BUT WAS BASED ON TH E BONAFIDE CONSIDERATIONS. THE HONBLE HIGH COURT OBS ERVED THAT THE CLAIM THOUGH UNTENABLE WAS BASED ON THE RE PORT OF A CA IN TERMS OF SECTION 80 HHC AND THE SAID FACT L ED TO THE CONCLUSION THAT IT WAS A BONAIFDE MISTAKE. IN O UR VIEW THE SAID PARITY OF REASONING IS APPLICABLE IN THE P RESENT ITA NOS. 5291/M/2010 & 2953/M/09 M/S BIO VET INDUSTRIES 5 CASE TOO. IN THE CASE OF T.ASHOK PAI VS. CIT[2007] 210 CTR(SC) 259; [2007] 292 ITR 11(SC) HONBLE SUPREME COURT ALSO OBSERVED THAT THE PENALTY U/S 271(1)(C) WAS NOT EXIGIBLE WHERE THE CLAIM OF THE ASSESSEE WAS BASED ON THE REPORT OF AN EXPERT. IN THE PRESEN CASE TOO AS OBSE RVED EARLIER THE ACCOUNTS OF THE ASSESSEE ARE DULY AUDI TED. THE RETURN OF INCOME AS ACCOMPANIED BY THE AUDIT REPORT REQUIRED UNDER SECTION 80IA AND THERE IS NOTHING TO SUGGEST RATHER THERE IS NO CHANGE AGAINST THE ASSE SSEE THAT THE REPORT OF THE AUDITOR WAS COLLUSIVE. FROM THE ABOVE IT IS CLEAR THAT WHEN THE CLAIM OF THE ASSESSEE IS BASED ON THE OPINION OF THE TECHNICAL EXPERT INCLUD ING REPORT OF CA IN FORM NO. 10CCB NO CONCEALMENT PENALTY COULD BE IMPOSED. I THEREFORE HELD THAT THERE IS NO GROUND FOR LEVY ING PENALTY REGARDING APPORTIONMENT OF EXPENSES RELATING TO UNI T-I & UNIT-II. REGARDING INTEREST INCOME IT IS TRUE THAT THE APPE LLANT DID NOT PRESS THE GROUND BEFORE THE HONBLE TRIBUNAL BUT TH E NECESSARY AND RELEVANT FACTS WERE SUBMITTED BEFORE THE AO AND THE APPELLANT WAS UNDER THE BONAFIDE BELIEF THAT THE IN TEREST IS ASSESSABLE UNDER THE HEAD BUSINESS BECAUSE THE INTE REST PAID WAS MORE THAN THE INTEREST RECEIVED. IF THE NET INT EREST IS COMPUTED IT RESULTS ONLY IN PAYMENT OF INTEREST AN D THE INCOME IS RECEIPT MINUS PAYMENT AND NOT RECEIPT ALONE. THUS THERE IS NO CASE FOR LEVY OF CONCEALMENT PENALTY EVEN IN RESPEC T OF INTEREST INCOME EVEN THOUGH THE APPELLANT DID NOT PRESS THIS GROUND BEFORE THE HONBLE TRIBUNAL. IN VIEW OF THE ABOVE I HOLD THAT THERE IS NO JUSTIFICATION FOR LEVY OF CONCEALMENT P ENALTY AND THE SAME IS CANCELLED. 6. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. BEFORE US THE LEARNED DR SUBMITTED THAT THE ASS ESSEE ATTEMPTED TO CLAIM HIGHER DEDUCTION BY NOT APPORTIO NING THE EXPENSES ON THE BASIS OF TURNOVER WHICH AMOUNTED TO CONCEAL MENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE CONTENDED THAT THE CIT(A) WRONGLY DELETED THE PENALTY WITHOUT APPR ECIATING THE FACT THAT THE ASSESSEE DELIBERATELY APPORTIONED THE EXPE NSES BETWEEN UNIT I AND UNIT II SO AS TO CLAIM EXCESS DEDUCTION U/S 8 0IB. HE FURTHER CONTENDED THAT THE CIT(A) WITHOUT APPRECIATING THE FACT PENALTY U/S 271(1)(C) LEVIED ON THE ASSESSEE UNDER SIMILAR CIRC UMSTANCES IN THE PRECEDING YEAR I.E. AY 2003-04 WAS CONFIRMED BY THE CIT(A). HE ITA NOS. 5291/M/2010 & 2953/M/09 M/S BIO VET INDUSTRIES 6 THEREFORE PLEADED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED. 8. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE A SSESSEE HAS STRONGLY RELIED UPON THE ORDER OF CIT(A). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUSE D THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. IT IS OBSERVED THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80IB OF RS. 91 55 157/- IN RESPECT OF UNIT I & UNIT II AS PER CERTIFICATE ISSU ED BY THE AUDITOR. WHILE COMPUTING THE AFORESAID DEDUCTION THE BIFURC ATION OF EXPENSES SUCH AS ADMINISTRATIVE SELLING AND DISTRIBUTION WE RE MADE AS PER THE DETAILS GIVEN IN THE AUDIT CERTIFICATE. THE AO AFT ER EXAMINING THE CLAIM OF THE ASSESSEE HELD THAT UNIT-II WAS NOT A SEPARATE AND INDEPENDENT INDUSTRIAL UNDERTAKING SO THAT DEDUCTIO N @100% WAS NOT ADMISSIBLE AND HENCE HE ALLOWED DEDUCTION @25% IN RESPECT OF UNIT- I. THE AO ALSO MODIFIED THE BIFURCATION OF EXPENSES AS A RESULT NO DEDUCTION WAS ALLOWABLE IN RESPECT OF UNIT-II. ON A PPEAL THE CIT(A) HELD THAT THE ASSESSEE WAS ENTITLED TO 100% DEDUCTI ON IN RESPECT OF UNIT-II BECAUSE THE ASSESSEE EMPLOYED 10 PERSONS P RODUCE ARTICLES OBTAIN SEPARATE LICENCE ADDITIONAL LAND FOR SETTIN G UP OF NEW UNIT INSTALLED SEPARATE POWER METERS AND NEW MACHINERY E TC. FOLLOWING THE ORDER PASSED BY THE CIT(A) IN AY 2003-04. IN THE ME ANWHILE THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESEE FURNISHED INACCURATE PARTICULARS O F INCOME. AFTER REJECTING THE SUBMISSIONS MADE BY THE ASSESSEE IN T HE PENALTY PROCEEDINGS THE AO LEVIED PENALTY OF RS. 25 00 000 /-. THE CIT(A) CANCELLED THE PENALTY. WHILE CANCELING PENALTY THE CIT(A) HELD THAT A S CONTENDED BY THE REPRESENTATIVE THERE WAS HONEST A ND BONAFIDE DIFFERENCE OF OPINION REGARDING THE APPORTIONMENT O F EXPENSES WHICH CANNOT BE SAID TO BE CONCEALMENT OF INCOME. IN AN C ASE THE APPELLANT HAD BONAFIDE BELIEF THAT IT WAS ENTITLED TO DEDUCTI ON U/S 80IB AS QUANTIFIED BY THE CA AND ACCORDINGLY THE DEDUCTION WAS CLAIMED IN THE ITA NOS. 5291/M/2010 & 2953/M/09 M/S BIO VET INDUSTRIES 7 RETURN FILED. I ACCEPT THE PLEA OF THE REPRESENTATI VE THAT WHEN THE CLAIM IS MADE BASED ON THE CERTIFICATE ISSUED BY THE CA. NO CONCEALMENT PENALTY COULD BE LEVIED BECAUSE THE APPELLANT HAD B ONAFIDE BELIEF THAT THE CERTIFICATE ISSUED BY THE CA WAS CORRECT. EVEN IF EXPLANATION I IS INVOKED THERE IS ONLY A REBUTTABLE PRESUMPTION OF CONCEALMENT IN LAW AND THE SAME CAN BE SAID TO BE REBUTTED BY THE ASSE SSEE WHEN THE CLAIM IS BASED ON THE CERTIFICATE ISSUED BY A QUALI FIED CA AND THIS WOULD CONSTITUTE BONAFIDE BELIEF AND REASONABLE CAU SE FOR NOT IMPOSING PENALTY HE FURTHER HELD THAT IT IS CLEAR THAT WHEN THE CLAIM OF THE ASSESSEE IS BASED ON THE OPINION OF THE TECHNICAL E XPERT INCLUDING REPORT OF CA IN FORM NO. 10CCB NO CONCEALMENT PENA LTY COULD BE IMPOSED THEREFORE I HOLD THAT THERE IS NO GROUND FOR LEVYING PENALTY REGARDING APPORTIONMENT OF EXPENSES RELATING TO UNI T I & UNIT II. WE FIND THAT THE TRIBUNAL IN THE QUANTUM APPEAL UPHELD THE CLAIM OF THE ASSESSEE THAT UNIT II IS A SEPARATE INDUSTRIAL UNDE RTAKING AND THE SAME IS ENTITLED TO 100% DEDUCTION U/S 80IB. IN VIE W OF THE ABOVE DISCUSSION WE FIND NO INFIRMITY IN THE ORDER OF CI T(A) IN CANCELING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT THEREFORE THE ORDER OF CIT(A) IS HEREBY UPHELD AND THE APPEAL OF THE REVENUE IS DISM ISSED. 10. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. ITA NO. 2953/M/2009 11. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A)-XXV MUMBAI PASSED ON 30/03/2009. 12. THE GROUND RAISED BY THE ASSESSEE IS AGAINST TH E ACTION OF THE CIT(A) IN CONFIRMING THE PENALTY OF RS. 17 23 908/- IMPOSED BY THE AO U/S 271(1)(C) OF THE ACT. 13. IN THIS CASE RETURN WAS FILED ON 13/11/03 DECLA RING TOTAL INCOME AT RS. 12 06 000/- AFTER CLAIMING DEDUCTION OF RS. 1 72 70 010/- U/S 80IB OF THE ACT. WHILE COMPLETING THE ASSESSMENT U /S 143(3) ITA NOS. 5291/M/2010 & 2953/M/09 M/S BIO VET INDUSTRIES 8 DEDUCTION CLAIMED U/S 80IB WAS DISALLOWED WHICH WAS CLAIMED ON UNIT I @ 100% BY THE ASSESSEE CONSIDERING THE SECO ND UNIT AS AN EXTENSION OF EXISTING UNIT (I.E. UNIT I) AND ACCORD INGLY DEDUCTION U/S 80IB@ 25% BEING 7 TH YEAR OF MANUFACTURING ACTIVITIES WAS ALLOWED AND TOTAL INCOME WAS DETERMINED AT RS. 1 40 42 230/-. O N APPEAL THE CIT(A) DIRECTED THE AO TO ALLOW 100% DEDUCTION U/S 80IB ON THE PROFIT OF UNIT II AND ALSO DIRECTED TO REDUCE THE PROFIT O F II BY TRANSFERRING THE EXPENSES FROM UNIT II TO UNIT I WHICH ARE GENU INELY CLAIMED IN UNIT I BUT ACTUALLY RELATED TO UNIT II. ACCORDINGLY THE AO PASSED ORDER U/S 250 GIVING EFFECT TO THE ORDER OF CIT(A) WORKIN G OUT THE TOTAL INCOME AT RS. 52 83 383/-. SUBSEQUENTLY ORDER U/S 154 WAS PASSED ON 28/03/08 DETERMINING TOTAL INCOME AT RS. 61 61 4 53/-. THEREAFTER THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD CONCEALED ITS PROFIT A ND FURNISHED INACCURATE PARTICULARS OF ITS INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED ON 03/03/08 THE ASSESSEE FILED WRITT EN SUBMISSION ON 17/03/2008 WHICH WAS EXTRACTED BY THE AO IN THE PE NALTY ORDER AT PAGES 2 3 & 4. THE WRITTEN SUBMISSIONS WERE NOT F OUND FAVOUR WITH THE AO THEREFORE HE LEVIED A PENALTY OF RS. 17 23 908/- U/S 271(1)(C) OF THE ACT. AGGRIEVED THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE THE CIT(A). 14. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT IT IS NOT TRUE THAT THE ASSESSEE HAD DELIBERATELY AND CONSCIOUSLY MADE BIFURCATION OF EXPENSES AND CLAIMED THE EXPENSES IN UNIT I WHICH R ELATED TO UNIT II AS CLAIMED BY THE AO. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CONFIRMED THE PENALTY LEVIED BY THE AO OBSERVING THAT THE ASSESSEE HAS NOT APPORTIONED EXPENSES TO THE PR OFIT OF UNIT II IN PROPORTION TO THE GOODS MANUFACTURED OR GOODS SOLD. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 15. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE QUANTUM APPEAL THE ITAT VIDE ITA NOS. 5928/ MUM/06 ORDER ITA NOS. 5291/M/2010 & 2953/M/09 M/S BIO VET INDUSTRIES 9 DATED 25 TH FEBRUARY 2010 ALLOWED THE APPEAL OF THE ASSESSEE. THEREFORE WHEN THE ADDITION ITSELF IS NOT IN EXIST ENCE PENALTY LEVIED ON SUCH NON-EXISTENT ADDITION DOES NOT HAVE LEGS TO STAND. 16. ON THE OTHER HAND THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AU THORITIES BELOW. THE FINDINGS OF THE ITAT IN THE QUANTUM APPEAL ARE REPRODUCED BELOW:- 10. COMING TO THE BIFURCATION OF EXPENSES WE FIND THAT DISPUTE IS ONLY QUA ADMINISTRATIVE EXPENSES SELLING EXPENSES AND FINANCIAL EXPENSES. THE ASSESSEE HAS NO OBJECTION O N THE MANUFACTURING EXPENSES BEING APPORTIONED ON THE BAS IS OF GOODS MANUFACTURED. THE LEARNED CIT(A) DIRECTED TO APPORT ION THESE THREE TYPES OF EXPENSES ON THE BASIS OF TURNOVER OF BOTH THE UNITS. IN OUR CONSIDERED OPINION THE SELLING EXPENSES HAV E DIRECT RELATION WITH THE TURNOVER. WE THEREFORE HOLD THA T THE APPORTIONMENT OF SELLING EXPENSES ON THE BASIS OF T HE AMOUNT OF TURNOVER IN BOTH THE UNITS IS APPROPRIATE. THE FINA NCIAL EXPENSES REPRESENT THE COST OF MONEY BORROWED FOR USE IN BUS INESS. RAW MATERIAL FOR A PRODUCT IN UNIT-I MAY COST RS. 100 W HILE IN THE OTHER UNIT MAY COST RS. 1000. BIFURCATION OF THE EX PENSES ON THE BASIS OF QUANTITY PRODUCED WOULD OBVIOUSLY LEAD TO ABSURD SITUATION BECAUSE THE NUMBER OF UNITS MANUFACTURED WITH DIFFERENT VALUES CANNOT BE THE BASIS OF APPORTIONIN G THE EXPENSES. IN OUR CONSIDERED OPINION THE APPORTIONMENT OF FIN ANCIAL EXPENSES NEEDS TO BE DONE ON THE BASIS OF VALUE OF GOODS MANUFACTURED IN BOTH THE UNITS. COMING TO THE LAST ITEM BEING ADMINISTRATIVE EXPENSES WHICH INCLUDED RENT TRAVEL ING AND TELEPHONE EXPENSES ETC. IN OUR CONSIDERED OPINION A GAIN THE CONTENTION OF THE LD AR IS NOT ACCEPTABLE FOR APPOR TIONING SUCH EXPENSES ON THE BASIS OF NUMBER OF UNITS MANUFACTUR ED. THERE IS NO CONNECTION OF SUCH EXPENSES WITH THE QUANTITY OF GOODS MANUFACTURED. IN OUR VIEW SUCH EXPENSES NEED TO BE APPORTIONED ON THE BASIS OF VALUE OF TURNOVER IN BOTH THE UNITS . WE ORDER ACCORDINGLY. 11. THE OTHER OBJECTION OF THE ASSESSEE IS AGAINST NOT GIVING ANY FINDING ON THE AVAILABILITY OF DEDUCTION IN RES PECT OF PROFITS OF UNIT-I AT THE RATE OF 25%. THE AO HAS RECORDED IN T HE ASSESSMENT ORDER THAT IT IS 7 TH YEAR OF THE EXISTING UNIT. GOING BY THAT STANDARD THE ASSESSEE IS STILL ENTITLED TO DEDUCTIO N U/S 80IB FOR ITA NOS. 5291/M/2010 & 2953/M/09 M/S BIO VET INDUSTRIES 10 THE REMAINING PERIOD. WE FIND THAT IN FACT THE LE ARNED CIT(A) INADVERTENTLY OMITTED TO GIVE FINDING ABOUT ALLOWAB ILITY OF DEDUCTION U/S 80IB IN RESPECT OF PROFITS OF UNIT-I WHEN HE CATEGORICALLY HELD THAT UNIT II WAS A NEW UNIT INDE PENDENT OF UNIT-I. WE THEREFORE DIRECT THE AO TO GRANT DEDUC TION AT THE ELIGIBLE RATE ON THE PROFIT OF UNIT-I COMPUTED ON T HE BASIS OF BIFURCATION OF THE EXPENSES IN THE AFORESAID MANNER . 18. WE FIND THAT THE TRIBUNAL IN THE QUANTUM APPEAL UPHELD THE CLAIM OF THE ASSESSEE THAT UNIT II IS A SEPARATE IN DUSTRIAL UNDERTAKING AND THE SAME IS ENTITLED TO 100% DEDUCTION U/S 80IB . PENALTY WAS IMPOSED BY THE AO ON THE GROUND THAT THE ASSESSEE R EDUCED PROFIT OF UNIT-II BY TRANSFERRING EXPENSES FROM UNITE-II TO U NIT-I AND CONCEALED ITS PROFITS AND FILED INACCURATE PARTICULARS OF INC OME. WE FIND THAT PENALTY LEVIED ONLY ON THE APPORTIONMENT OF EXPENSE S IN OUR CONSIDERED VIEW IT IS NEITHER AMOUNTING TO FURNISH ING INACCURATE PARTICULARS OF INCOME NOR CONCEALMENT OF INCOME. TH E ASSESSEE HAS DISCLOSED ALL THE PARTICULARS OF EXPENDITURE IN RES PECT OF UNIT-II AS WELL AS UNIT-I BEFORE THE AO AND THE AO WAS NOT APP RECIATED THE SAME AND WAS NOT JUSTIFIED IN INVOKING SECTION 271(1)(C) WHICH WAS CONFIRMED BY THE CIT(A). THEREFORE THE PENALTY LE VIED BY THE AO ON THE DISALLOWANCE MADE U/S 80IB ON THE GROUND THAT T HE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME IS NOT PROPER. WE A RE OF THE VIEW THAT THE CASE OF THE ASSESSEE IS NOT A FIT CASE LEVY PEN ALTY U/S 271(1)(C) OF THE ACT THEREFORE WE SET ASIDE THE ORDER OF THE C IT(A) AND HEREBY CANCEL THE PENALTY OF RS. 17 23 908/- IMPOSED BY TH E AO U/S 271(1)(C) OF THE ACT. 19. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 29 TH JULY 2011. SD/- SD/- (R.S. SYAL) (V. DU RGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 29 TH JULY 2011 KV ITA NOS. 5291/M/2010 & 2953/M/09 M/S BIO VET INDUSTRIES 11 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE H BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. KV