M/s. MODERN TERRY TOWELS LTD., MUMBAI v. DCIT CIR. 6(3), MUMBAI

ITA 6506/MUM/2005 | 1997-1998
Pronouncement Date: 25-01-2010 | Result: Allowed

Appeal Details

RSA Number 650619914 RSA 2005
Assessee PAN AAACM0825F
Bench Mumbai
Appeal Number ITA 6506/MUM/2005
Duration Of Justice 4 year(s) 2 month(s) 17 day(s)
Appellant M/s. MODERN TERRY TOWELS LTD., MUMBAI
Respondent DCIT CIR. 6(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 25-01-2010
Date Of Final Hearing 25-01-2010
Next Hearing Date 25-01-2010
Assessment Year 1997-1998
Appeal Filed On 07-11-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI BEFORE SHRI D. K. AGARWAL JM & SHRI R.K. PANDA AM I.T.A. NO. 6506/MUM/2005 (ASSESSMENT YEAR 1997-98) M/S. MODERN TERRY TOWELS LTD. 68/69 GODAVARI POACHKHANWALA ROAD WORLI MUMBAI-400 030 PAN: AAACM0825F VS. DY. CIT CIRCLE 6(3) 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 021 APPELLANT RESPONDENT APPELLANT BY: MR. PIYUSH CHATURVEDI RESPONDENT BY: MR. SUSHIL KUMAR O R D E R DATE OF HEARING: 25.01.2010 DATE OF ORDER: 25.01.2010 PER R.K. PANDA AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 12 TH AUGUST 2005 OF THE CIT(A)-XVI MUMBAI RELATING TO ASSESSMENT YEAR 1997-98. 2. THE ASSESSEE IN THE IMPUGNED APPEAL HAS CHALLENGED THE ORDER OF THE CIT(A) IN SUSTAINING THE PENALTY LEVIE D U/S. 271(1)(C) OF THE INCOME-TAX ACT 1961 (THE ACT) AMOUNTING TO RS. 26 75 033 ON THE FOLLOWING ADDITIONS: (A) GUESTHOUSE EXPENSES - RS. 2 10 009 (B) MAKING UP CHARGES - RS.49 17 790 3. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING TO T HE ORDER OF THE TRIBUNAL VIDE I.T.A. NO.6919/MUM/03 ORDER DATED 21 ST JULY 2008 FOR THE A.Y. 1997-98 REFERRED TO PARA 10 OF TH E ORDER ON PAGE 5 AND SUBMITTED THAT THE ADDITION OF RS.19 17 790 HAS BEEN DELETED BY THE TRIBUNAL. THEREFORE THE PENALTY ON ACCOUNT OF ADDITION OF RS.49 17 790 DOES NOT SURVIVE. I.T.A. NO. 6506/MUM/2005 M/S. MODERN TERRY TOWELS LTD. ===================== 2 4. AS REGARDS THE GUESTHOUSE EXPENSES THE LEARNED COU NSEL FOR THE ASSESSEE REFERRED TO THE DETAILS OF GUESTHOUSE EXPENDITURE OF RS.5 56 358 WHICH IS ENCLOSED TO THE AUDIT REPORT A S ANNEXURE VIII. REFERRING TO THE NOTE APPENDED TO THE SAID ANNEXURE HE SUBMITTED THAT OUT OF TOTAL EXPENDITURE OF RS.5 56 358 AN AMO UNT OF RS.2 10 009 RELATES TO TELEPHONE AND ELECTRICITY. REFERRING TO THE COMPUTATION STATEMENT HE SUBMITTED THAT ALTHOUGH A N AMOUNT OF RS.1 74 602 HAS BEEN ADDED TO THE TOTAL INCOME OF T HE ASSESSEE BEING AMOUNT DISALLOWED ON ACCOUNT OF GUESTHOUSE EXPENSES U/S. 37(4) OF THE ACT THE ASSESSEE COMPANY ON BONAFIDE BELIEF DI D NOT ADD THE AMOUNT OF RS.2 10 009 TREATING THE SAME AS REVENUE EXPENDITURE. HE SUBMITTED THAT ALL DETAILS WERE FILED IN THE RET URN OF INCOME AND THERE WAS FULL DISCLOSURE ON THE PART OF THE ASSESS EE. AGAIN REFERRING TO THE COMPUTATION STATEMENT HE SUBMITTED THAT THE ASSESSEE COMPANY WAS DECLARING NET LOSS OF RS.8 33 32 830 AN D IT WOULD NOT HAVE GAINED ANYTHING BY NOT DISALLOWING THE ABOVE E XPENDITURE. REFERRING TO A NUMBER OF DECISIONS HE SUBMITTED THA T WHEN FULL PARTICULARS ARE FURNISHED AND THE ASSESSEE ACTED UN DER A BONAFIDE BELIEF PENALTY U/S. 271(1)(C) OF THE ACT IS NOT LE VIABLE. HE ALSO RELIED ON THE DECISIONS REPORTED IN 295 ITR 208 AND 301 IT R 13. REFERRING TO THE ORDER OF THE CIT(A) HE SUBMITTED THAT THE C IT(A) DID NOT CONSIDER THE ISSUE ON MERIT WHILE DECIDING THE PENA LTY APPEAL AND HE UPHELD THE PENALTY LEVIED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ADDITION HAS BEEN SUSTAINED. HE ACCORDING LY SUBMITTED THAT THE PENALTY LEVIED ON THE GUESTHOUSE EXPENSES OF RS .2 10 009 SHOULD ALSO BE DELETED. 5. THE LEARNED DR ON THE OTHER HAND FAIRLY CONCEDED THAT IN VIEW OF THE DECISION OF THE TRIBUNAL DELETING THE M AKING UP CHARGES IN THE QUANTUM APPEAL NO PENALTY U/S. 271(1)(C) IS LEVIABLE ON THIS AMOUNT. HOWEVER SINCE GUESTHOUSE EXPENSES AMOUNTI NG TO RS.2 10 009 HAS BEEN SUSTAINED BY THE TRIBUNAL THE REFORE PENALTY I.T.A. NO. 6506/MUM/2005 M/S. MODERN TERRY TOWELS LTD. ===================== 3 SHOULD BE LEVIED ON THIS AMOUNT SINCE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE CIT(A) UPHELD THE ORDE R OF THE ASSESSING OFFICER LEVYING PENALTY U/S. 271(1)(C) ON ACCOUNT O F THE FOLLOWING ADDITIONS: (A) GUESTHOUSE EXPENSES - RS. 2 10 009 (C) MAKING UP CHARGES - RS.49 17 790 7. FROM THE ORDER OF THE TRIBUNAL FOR THE IMPUGNED ASS ESSMENT YEAR WE FIND THE TRIBUNAL HAS ALREADY DELETED THE MAKING UP CHARGES OF RS.49 17 790. THEREFORE PENALTY U/S. 2 71(1)(C) OF THE ACT IS NOT LEVIABLE ON THIS AMOUNT WHICH HAS ALREAD Y BEEN DELETED. AS REGARDS LEVY OF PENALTY ON ACCOUNT OF ADDITION O F GUESTHOUSE EXPENSES OF RS.2 10 009 WE FIND THE ASSESSEE IN AN NEXURE VIII TO THE AUDIT REPORT HAS GIVEN THE DETAILS OF SUCH GUESTHOU SE EXPENSES AND ALSO GIVEN A NOTE WHICH READS AS UNDER: ASSESSEE CONTENDS THAT GUEST HOUSES WERE USED BY T HE STAFF VISITING PLAN/HEAD OFFICE AND THEREFORE WHIL E MAKING OUT THE DISALLOWANCE EXPENSES LIKE RENT REP AIR TELEPHONE ELECTRICITY DEPRECIATION ETC. WHICH A RE SPECIFICALLY OTHERWISE ALLOWABLE UNDER VARIOUS SPEC IFIC SECTIONS SHOULD NOT BE CONSIDERED IN VIEW OF THE DECISION IN CASE OF CHASE BRIGHT STEEL LTD. (177 IT R 114) AND CENTURY SPINNING & WEAVING MILLS LTD. (189 ITR 660). 8. WE FURTHER FIND FROM THE COMPUTATION STATEMENT THAT THE ASSESSEE ITSELF HAS DISALLOWED AN AMOUNT OF RS.1 74 602 U/S. 37(4) OF THE ACT. WE ALSO FIND MERIT IN THE SUBMISSION OF T HE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ISSUE RELATING TO GUESTHO USE EXPENSES WAS A HIGHLY DEBATABLE ISSUE AND WHILE FILING THE RETURN OF INCOME THE I.T.A. NO. 6506/MUM/2005 M/S. MODERN TERRY TOWELS LTD. ===================== 4 ASSESSEE UNDER BONAFIDE BELIEF HAD CLAIMED THIS EXP ENDITURE ON ACCOUNT OF TELEPHONE AND ELECTRICITY PERTAINING TO THE GUESTHOUSE AMOUNTING TO RS.2 10 009. IT HAS BEEN HELD BY VARI OUS JUDICIAL DECISIONS THAT PENALTY CANNOT BE LEVIED ON ACCOUNT OF ADDITIONS WHICH ARE DEBATABLE IN NATURE. SINCE THE ASSESSEE IN ITS RETURN OF INCOME HAS DISCLOSED ALL THE PARTICULARS AND CLAIME D THE EXPENDITURE OF RS.2 10 009 ON ACCOUNT OF ELECTRICITY AND TELEPH ONE EXPENSES PERTAINING TO THE GUESTHOUSE ON THE BASIS OF JUDICI AL DECISIONS PREVAILING AT THAT TIME AND HAS ALSO GIVEN A NOTE I N THE AUDIT REPORT GIVING SUCH DETAILS THEREFORE IN OUR OPINION THE ASSESSEE HAS NEITHER CONCEALED ITS PARTICULARS OF INCOME NOR HAS FURNISHED INACCURATE PARTICULARS. WE THEREFORE ARE OF THE OPINION THAT THE ASSESSEE SHOULD NOT BE VISITED WITH THE PENALTY PRO VISIONS U/S. 271(1)(C) OF THE ACT. ACCORDINGLY WE SET ASIDE TH E ORDER OF THE CIT(A) AND THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT IS CANCELLED. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 25 TH JANUARY 2010 SD/- (D.K. AGARWAL) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI DATED 25 TH JANUARY 2010 COPY TO: (1) THE APPELLANT (2) THE RESPONDENT (3) THE CIT(A)-XXI MUMBAI (4) THE CIT MC-6 MUMBAI (5) THE DR G BENCH ITAT MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO