S.KUMARS ONLINE LTD, MUMBAI v. ACIT 7(2), MUMBAI

ITA 5306/MUM/2010 | 2002-2003
Pronouncement Date: 23-07-2013 | Result: Allowed

Appeal Details

RSA Number 530619914 RSA 2010
Bench Mumbai
Appeal Number ITA 5306/MUM/2010
Duration Of Justice 3 year(s) 25 day(s)
Appellant S.KUMARS ONLINE LTD, MUMBAI
Respondent ACIT 7(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-07-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 23-07-2013
Date Of Final Hearing 30-07-2013
Next Hearing Date 30-07-2013
Assessment Year 2002-2003
Appeal Filed On 28-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL H B ENCH MUMBAI . . !'#$ % &' BEFORE SHRI H.L. KARWA PRESIDENT AND SHRI N.K. BILLAIYA AM ./ I.T.A. NO. 5306/MUM/2010 ( ( ( ( ( / ASSESSMENT YEAR : 2002-03 M/S. S. KUMARS ONLINE LTD. AVADH BLDG. 2 ND FLOOR SHREE RAM MILLS PREMISES MUMBAI-400 018 THE ACIT CIRCLE-7(2) AAYAKAR BHAVAN MUMBAI-400 020 ') % ./ *+ ./PAN/GIR NO. : ( ) /APPELLANT ) .. ( -.) / RESPONDENT ) ) / / APPELLANT BY : ` DR. K. SHIVRAM MS. NEELAM JADHAV -.) 0 / /RESPONDENT BY : SHRI K.C.P. PATNAIK 0 12% / DATE OF HEARING :23.07.2013 34( 0 12% / DATE OF PRONOUNCEMENT :23.7.2013 &5 / O R D E R PER N.K. BILLAIYA AM: THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LD. C IT(A)-13 MUMBAI DT.17.2.2010 PERTAINING TO A.Y. 2002-03. 2. THE GRIEVANCE OF THE ASSESSEE RELATES TO LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT AT RS. 5 40 04 092/-. THE FIR ST GRIEVANCE OF THE ASSESSEE IS THAT THE PENALTY SO LEVIED BY THE AO IS BARRED BY LIMITATION. THE SECOND GRIEVANCE RELATES TO THE LEVY OF PENALTY AT RS. 5 40 04 092/- U/S. 271(1)(C) OF THE ACT. ITA NO.5306/M/2010 2 3. AT THE VERY OUTSET THE LD. COUNSEL FOR THE ASSE SSEE FAIRLY CONCEDED THAT THERE IS NO SUBSTANCE IN THE GRIEVANCE RAISED VIDE GROUND NO. 1 AS PER THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS MOHAIR INVESTMENT AND TRADING CO. PVT. LTD. 345 ITR 51. ON THIS SUBMISSION OF THE LD. COUNSEL GROUND NO. 1 IS DISM ISSED. 4. COMING TO THE LEVY OF PENALTY WE FIND THAT THE ROOTS FOR SUCH LEVY LIE IN THE ASSESSMENT ORDER PASSED U/S. 143(3) OF T HE ACT DT. 22.2.2005 WHEREIN WHILE SCRUTINIZING THE INCOME OF RETURN DU RING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER NOTICED THAT THE ASSESSEE HAS CLAIMED PRE-OPERATIVE EXPENSES AT RS. 19 78 17 189/- THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS AND SUBSTA NTIATE ITS CLAIM. THE ASSESSEE EXPLAINED THAT ADVERTISEMENT EXPENSES OF R S. 19 78 17 189/- ARE CLAIMED AS PER NOTE GIVEN IN COMPUTATION OF INCOME FOR CLAIMING THE SAME AS REVENUE EXPENSES. THE EXPLANATION OF THE A SSESSEE WAS OUT- RIGHTLY REJECTED BY THE AO WHO WAS OF THE FIRM BELI EF THAT THE EXPENSES SO CLAIMED ARE OF CAPITAL IN NATURE AND NOT ALLOWABLE AND ACCORDINGLY TREATED THE EXPENSES OF RS. 19 78 17 189/- AS CAPITAL EXPEN DITURE FROM WHICH THE AO ALLOWED DEPRECIATION AT THE RATE OF 25%. THE PE NALTY IS LEVIED ON THIS DISALLOWANCE OF ADVERTISEMENT EXPENDITURE BEING TRE ATED AS CAPITAL EXPENDITURE. IN QUANTUM PROCEEDINGS THE ASSESSEE SUCCEEDED BEFORE THE LD. CIT(A) BUT FAILED BEFORE THE TRIBUNAL. 5. PENALTY PROCEEDINGS WERE INITIATED AND NOTICES WERE SERVED UPON THE ASSESSEE. THE ASSESSEE WAS ASKED TO EXPLAIN WH Y PENALTY SHOULD NOT BE IMPOSED ON THE DISALLOWANCE MADE BY THE AO IN TH E ASSESSMENT PROCEEDINGS. IT WAS EXPLAINED THAT THE DISALLOWANC ES MADE BY THE AO IN THE ASSESSMENT PROCEEDINGS WERE DELETED BY THE LD. CIT(A) BUT REVERSED ITA NO.5306/M/2010 3 BY THE ITAT. THIS ITSELF SHOW THAT THE ISSUE IS DE BATABLE AND ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS OR CONCEAL ED ANY PARTICULARS RELATED TO THE ISSUES. THE SUBMISSIONS OF THE ASSE SSEE WERE NOT ACCEPTED BY THE AO. THE AO OBSERVED THAT THE EXPENSES INCUR RED BY THE ASSESSEE COMPANY IN A.Y. 2000-01 AND 2001-02 AS ADVERTISEMEN T WERE BEFORE THE COMMENCEMENT OF THE BUSINESS AND THEREFORE THEY WER E PRE- COMMENCEMENT EXPENSES AND THE ASSESSEE HAD NOT CLAI MED IT AS REVENUE EXPENSES IN THE CORRESPONDING ASSESSMENT YEAR. THE ASSESSEE WAS CARRYING THE SAME UNDER THE HEAD PRE-OPERATIVE EXP ENSES PENDING CAPITALIZATION/AMORTIZATION. ACCORDING TO THE AO THE ASSESSEE ITSELF WAS OF THE VIEW THAT THESE EXPENSES ARE NOT OF REVE NUE IN NATURE EVEN THEN THE ASSESSEE CLAIMED THE CUMULATIVE EXPENSES ON ADV ERTISEMENT IN THE YEAR UNDER CONSIDERATION AS REVENUE EXPENSES. THIS AMOUNTS TO FURNISHING INACCURATE PARTICULARS OF INCOME AS PER THE EXPLANATION 1 TO SECTION 271(1) OF THE ACT. AFTER CONSIDERING FEW J UDICIAL DECISIONS THE AO WENT ON TO LEVY PENALTY AT RS. 5 40 04 092/-. 6. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A). THE LD. CIT(A) WAS CONVINCED THAT IT WAS A DELIBERATE ATTEMPT ON THE PART OF THE ASSESSEE TO FURNISH INACCURATE P ARTICULARS AND THEREBY REDUCE THE TAXABLE INCOME FOLLOWED BY TAX LIABILITY AND CONFIRMED THE PENALTY SO LEVIED BY THE AO. 7. THE ASSESSEE IS BEFORE US AGAINST THIS FINDINGS OF THE LD. CIT(A). 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS NOT THE CASE OF FURNISHING OF INACCURATE PARTICULARS IN AS MUCH AS THE ASSESSEE IN ITS COMPUTATION OF INCOME FOR THE YEAR UNDER CONSIDERAT ION WHICH WAS FILED ITA NO.5306/M/2010 4 ALONGWITH THE RETURN OF INCOME HAS IN THE NOTES TO THE COMPUTATION OF INCOME HAS CLEARLY MENTIONED THAT: CLAUSE 4 IN VIEW OF THE COMMENCEMENT OF THE PROJ ECT THE ADVERTISEMENT EXPENDITURE INCURRED FOR THE PROJECT IS CLAIMED AS REVENUE EXPENDITURE. 9. IT IS THE SAY OF THE LD. COUNSEL THAT BY SPECIFI CALLY MENTIONING IN THE COMPUTATION OF INCOME BY WAY OF NOTE THE ASSES SEE HAS CLEARLY MENTIONED THAT IT IS CLAIMING THE ADVERTISEMENT EXP ENSES AS REVENUE EXPENDITURE BECAUSE THE BUSINESS OF THE ASSESSEE HA S COMMENCED DURING THE YEAR UNDER CONSIDERATION. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OR HA S CONCEALED ANY PARTICULARS OF INCOME. THE LD. COUNSEL FOR THE ASS ESSEE RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT I N THE CASE OF SHERVANI HOSPITALITIES LTD. VS CIT 89 DTR 169 AND ALSO ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS NALIN P. SHAH (HUF) IN ITA NOS. 49 50 & 51 OF 2013. 10. PER CONTRA THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES AND RELIED UPON T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ZOOM COMMUNICATION (P) LTD. 327 ITR 510. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE JUDICIAL DECISIONS RELIED UPON BY THE RESPECTIVE PARTIES. IT IS AN UNDISPUTED FACT THAT WHILE COMPUTING THE INCOME FOR THE YEAR UNDER CONSIDERATION THE ASSESS EE HAS CLAIMED THE ITA NO.5306/M/2010 5 ADVERTISEMENT EXPENSES AS REVENUE EXPENDITURE TO TH E TUNE OF RS. 19 78 17 189/-. THE CLAIM OF SUCH EXPENDITURE AS R EVENUE EXPENDITURE COULD BE CONSIDERED AS A POSSIBLE VIEW BECAUSE SU BSEQUENTLY THE HONBLE DELHI HIGH COURT HAS ALLOWED SIMILAR EXPEND ITURE IN THE CASE OF JCIT VS MODI OLIVETTI LTD. IN APPEAL NOS. 2143 & 22 45 (DELHI) OF 1999. THE LD. CIT(A) HAS DELETED THE ENTIRE ADDITION MADE BY THE AO ALTHOUGH THE ORDER OF THE LD. CIT(A) WAS REVERSED BY THE TRI BUNAL. THIS ITSELF SHOW THAT TWO VIEWS ARE POSSIBLE BECAUSE TWO APPELL ATE AUTHORITIES HAVE TAKEN TWO DIFFERENT VIEWS. 12. IN THE CASE OF CIT VS NALIN P. SHAH (SUPRA) WE FIND THAT ON SIMILAR FACTS THE TRIBUNAL HAS HELD THAT THE RESPONDENT AS SESSEE IN ITS RETURN OF INCOME FILED A NOTE WITH ITS COMPUTATION OF INCOME DISCLOSING ALL DETAILS ABOUT THE SALE OF US 64 UNITS THE LOSS AND RESULT ANT CARRY FORWARD. FURTHER ALL DETAILS WERE DISCLOSED IN ITS RETURN O F INCOME AS IS EVIDENT FROM THE FACT THAT THE AO GATHERED INFORMATION ABOU T THE CARRY FORWARD LOSS AND SALE OF UNITS FROM RETURN FILED BY THE RE SPONDENT-ASSESSEE. THE TRIBUNAL HELD THAT FROM THE AFORESAID FACTS AT THE HIGHEST IT CAN BE SAID THAT THE CLAIM OF THE ASSESSEE WAS NOT SUSTAINABLE IN LAW BUT THERE WAS NO FURNISHING OF INACCURATE PARTICULAR OR CONCEALMENT OF INCOME ON THE PART OF THE RESPONDENT-ASSESSEE. THIS FINDING OF THE TR IBUNAL WAS CONFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT WHICH IN T URN RELIED UPON THE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS ( SUPRA). 13. IN THE CASE BEFORE US WE FIND A SIMILAR NOTE W AS FILED WITH THE COMPUTATION OF INCOME BY THE ASSESSEE. THE ENTIRE DETAIL RELATING TO THE ADVERTISEMENT EXPENSES WERE PROVIDED IN THE BALANCE SHEET AND AUDITORS NOTE TO THE ACCOUNTS. JUST BECAUSE THE CLAIM OF THE ASSESSEE WAS NOT FOUND SUSTAINABLE BY THE TRIBUNAL IN THE QUANTUM PROCEEDI NGS IT CANNOT BE SAID ITA NO.5306/M/2010 6 THAT THE ASSESSEE HAS MADE FALSE CLAIM AT THE MOST IT CAN BE A CASE OF WRONG CLAIM. THE RELIANCE IN THE CASE OF ZOOM COMM UNICATION (P) LTD BY THE LD. DR IS MISPLACED INASMUCH AS IN SUBSEQUEN T DECISION THE HONBLE DELHI HIGH COURT IN THE CASE OF SHERVANI HO SPITALITIES LTD (SUPRA) HAS CONSIDERED ITS EARLIER DECISION IN THE CASE OF ZOOM COMMUNICATION (P) LTD AND HELD THAT MERELY MAKING A CLAIM WHICH IS HELD AS NOT SUSTAINABLE UNDER LAW SHOULD NOT LEAD T O PENALIZATION WHEN THE ASSESSEE HAD FURNISHED FULL DETAILS IN THE RETU RN ITSELF AND THE CLAIM IS A DEBATABLE REASONABLY PLAUSIBLE OR MAY WELL HAVE BE EN ACCEPTED. 14. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE JUDICIAL DECISIONS DISCUSSED HEREINABOVE WE FIND THAT THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NALIN P SH AH (SUPRA) DELHI HIGH COURT IN THE CASE OF SHERVANI HOSPITALITIES LTD (SU PRA) AND THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S (SUPRA) SQUARELY APPLLY ON THE FACTS OF THE CASE. THEREFORE WE HAV E NO HESITATION IN REVERSING THE FINDINGS OF THE LD. CIT(A) AND DIRECT ING THE AO TO CANCEL THE PENALTY SO LEVIED. 15. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.7.2013 . &5 0 4( % 6 7&8 23.7.2013 4 0 9 (H.L. KARWA ) (N.K . BILLAIYA ) /PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; 7& DATED 23/07/2013 . . ./ RJ SR. PS ITA NO.5306/M/2010 7 &5 &5 &5 &5 0 00 0 -1! -1! -1! -1! :!(1 :!(1 :!(1 :!(1 / COPY OF THE ORDER FORWARDED TO : 1. ) / THE APPELLANT 2. -.) / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. !<9 -1 / DR ITAT MUMBAI 6. 9= > / GUARD FILE. &5 &5 &5 &5 / BY ORDER .!1 -1 //TRUE COPY// ? ?? ? / @ @ @ @ * * * * (DY./ASSTT. REGISTRAR) / ITAT MUMBAI