Asst. CIT, Circle-1, Aurangabad v. M/s. Lombardini India Pvt. Ltd.,, Aurangabad

ITA 750/PUN/2013 | 2007-2008
Pronouncement Date: 17-10-2016 | Result: Dismissed

Appeal Details

RSA Number 75024514 RSA 2013
Assessee PAN AAACL6740M
Bench Pune
Appeal Number ITA 750/PUN/2013
Duration Of Justice 3 year(s) 6 month(s) 15 day(s)
Appellant Asst. CIT, Circle-1, Aurangabad
Respondent M/s. Lombardini India Pvt. Ltd.,, Aurangabad
Appeal Type Income Tax Appeal
Pronouncement Date 17-10-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 17-10-2016
Date Of Final Hearing 17-08-2016
Next Hearing Date 17-08-2016
Assessment Year 2007-2008
Appeal Filed On 01-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH PUN E !'#'' $ % & BEFORE SHRI R.K. PANDA AM AND SHRI VIKAS AWASTHY JM / ITA NO. 750/PN/2013 %' ( ')( / ASSESSMENT YEAR : 2007-08 THE ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 1 AURANGABAD ....... / APPELLANT ' / V/S. M/S. LOMBARDINI INDIA PVT. LTD. J-2/1 MIDC CHIKALTHANA AURANGABAD PAN : AAACL6740M / RESPONDENT ASSESSEE BY : SHRI NISHANT THAKKAR REVENUE BY : SHRI P.L. KUREEL / DATE OF HEARING : 17-08-2016 / DATE OF PRONOUNCEMENT : 17-10-2016 * / ORDER PER VIKAS AWASTHY JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AURANGABAD DATED 23 -01-2013 FOR THE ASSESSMENT YEAR 2007-08 DELETING PENALTY LEVIED U /S. 271(1)(C) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2 ITA NO. 750/PN/2013 A.Y. 2007-08 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DESIGN MANUFACTURIN G AND SELLING OF PORTABLE DIESEL AND GASOLINE COMBUSTION ENGINES AND THEIR SPARE PARTS. IN SCRUTINY ASSESSMENT THE ASSESSING OFFIC ER VIDE ORDER DATED 17-02-2011 PASSED U/S. 143(3) R.W.S. 144C OF THE AC T INTER ALIA DISALLOWED ` 2.40 CRORES CLAIMED BY THE ASSESSEE AS PROVISIONS FOR RETROFITMENT EXPENSES U/S. 37(1) OF THE ACT. IN RESPECT O F ENTIRE ADDITIONS MADE THE ASSESSING OFFICER LEVIED PENALTY OF ` 1 28 65 457/- U/S. 271(1)(C) OF THE ACT VIDE ORDER DATED 30-06-2011. AGGRIEVED BY THE PENALTY ORDER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMIS SIONER OF INCOME TAX (APPEALS) DELETED THE LEVY OF PENALTY IN TOTO. NOW THE REVENUE IS IN APPEAL AGAINST THE DELETING OF PENALTY ON ACC OUNT OF ADDITION MADE BY ASSESSING OFFICER WITH RESPECT TO PROVISION S FOR RETROFIT EXPENSES ` 2.40 CRORES ALONE. 3. SHRI P.L. KUREEL REPRESENTING THE DEPARTMENT SUBMITTED THAT THE ASSESSEE HAD CLAIMED PROVISIONS FOR RETROFITMENT EXPENSES ` 2.40 CRORES THE SAID CLAIM OF THE ASSESSEE IS NOT LEGALLY SUSTAINABLE. THE ASSESSEE HAD NOT FILED ANY APPEAL AGAINST THE ADDITIONS MADE BY ASS ESSING OFFICER. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE PENALTY WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAD ACCEPTED THE ADDITIONS AND THE CLAIM OF PROVISIONS FOR RET ROFIT EXPENSES WAS WRONGLY CLAIMED BY THE ASSESSEE. THE LD. DR PRAYE D FOR REVERSING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) WITH REGA RD TO DELETING PENALTY ON RETROFIT EXPENSES AND FURTHER PRAYED FOR UPHOLDING 3 ITA NO. 750/PN/2013 A.Y. 2007-08 THE FINDINGS OF ASSESSING OFFICER IN LEVY OF PENALTY ON DISALLOWAN CES MADE U/S. 37(1) OF THE ACT. 4. AU CONTRAIRE SHRI NISHANT THAKKAR APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONE R OF INCOME TAX (APPEALS) IN DELETING THE ENTIRE PENALTY INCLUDING THE PEN ALTY LEVIED ON PROVISIONS FOR RETROFIT EXPENSES. THE LD. AR SUBMITTED T HAT THE ASSESSEE HAS MADE PROVISIONS FOR RETROFITMENT EXPENSES D URING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08. HOWEVER THE PROVISION WAS REVERSED IN THE SUCCEEDING FINANCIAL YEAR. D URING THE FINANCIAL YEAR 2006-07 THE FINISHED PRODUCTS SUPPLIED BY THE ASSESSEE TO M/S. ATUL AUTO LTD. WERE REJECTED ON THE GROUND THA T THE PRODUCTS SUPPLIED WERE NOT IN ACCORDANCE WITH THE REQUIREMENTS OF THE CUSTOMER AND WERE DEFECTIVE. THE ENTIRE PAYMENT FOR THE PRODUCTS SUPPLIED BY THE ASSESSEE WAS WITHHELD BY M/S. ATUL AUTO LTD. IN THE BACKDROP OF THE ABOVE FACTS THE ENTIRE INVOICED AMOUNT OF ` 2.40 CRORES WAS PROVIDED FOR BY THE ASSESSEE TOWARDS THE FREE OF COST REPLACEMEN T OF THE DEFECTIVE FINISHED PRODUCTS. THE ASSESSEE IS CONSISTENTLY FOLLOWING ME RCANTILE SYSTEM OF ACCOUNTING. THE PROVISION WAS CREATED FOR KNOW N LIABILITY BY WAY OF ABUNDANT CAUTION TO MITIGATE THE EVENTUALITY OF BEA RING THE EXPENSES AND TO REPLACE THE FINISHED PRODUCTS FREE OF COS T SO AS TO MAINTAIN SMOOTH RELATIONSHIP WITH THE CUSTOMER. THE PROVIS ION WAS CREATED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE ALONE. 4.1 THE LD. AR OF THE ASSESSEE CONTENDED THAT THE ASSE SSING OFFICER HAS ERRED IN INITIATING PENALTY PROCEEDINGS FOR CONCEALMENT OF PARTICULARS OF INCOME. THE ASSESSEE HAD FULLY DISCLOSED THE PROVISION CREATED. THE LD. AR REFERRED TO SCHEDULE 12 TO PROFIT AND LOSS ACCOUNT 4 ITA NO. 750/PN/2013 A.Y. 2007-08 FOR YEAR ENDED 31-03-2007 AT PAGE 33 OF THE PAPER BOO K. THE LD. AR POINTED THAT UNDER THE HEAD MANUFACTURING ADMINISTRATIVE AND OTHER EXPENSES THE ASSESSEE HAS CLAIMED RETROFIT EXPENSES AMO UNTING TO ` 2.40 CRORES. THE LD. AR FURTHER REFERRED TO PAGE 31 OF T HE PAPER BOOK TO SHOW THAT IN SCHEDULE 9 TO THE BALANCE SHEET AS ON 31-03-2007 THE AMOUNT ` 2.40 CRORES HAS BEEN SHOW AS PROVISION FOR RETROFIT EXPEN SES UNDER THE HEAD CURRENT LIABILITIES AND PROVISION. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAD FURNISHED EXPLANATION FOR CREATING THE PROVISION. HOWEVER THE ASSESSING OFFICER REJECTED THE EX PLANATION FURNISHED BY THE ASSESSEE IN SUMMARY MANNER. THE ASSES SING OFFICER HAS NOT DISPROVED THE EXPLANATION FURNISHED BY THE ASSES SEE. THE ASSESSING OFFICER WHILE DISALLOWING THE AMOUNT HAS NOT GIVEN A NY REASON IN THE ASSESSMENT ORDER. THE LD. AR CONTENDED THAT PROVISION MADE FOR ANY ASCERTAINED EXPENDITURE ARISING ON ACCOUNT OF DEFECTIVE GOODS IS ALLOWABLE. IN SUPPORT OF HIS CONTENTIONS THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS : I. BHARAT EARTH MOVERS VS. COMMISSIONER OF INCOME TAX 245 ITR 428 (SC); II. ROTORK CONTROLS INDIA (P) LTD. VS. COMMISSIONER OF INCOME TA X 314 ITR 62 (SC); III. COMMISSIONER OF INCOME TAX VS. DURR INDIA PRIVATE LIMITED 9 7 DTR 160 (MAD); TO STRENGTHEN HIS SUBMISSIONS THAT NO PENALTY CAN BE LEV IED WHEN ALL NECESSARY FACTS ARE DISCLOSED IN THE BOOKS AND FURTHER WHERE THE EXPLANATION FURNISHED BY THE ASSESSEE HAS BEEN SUMM ARILY REJECTED BY THE ASSESSING OFFICER WITHOUT DISPROVING THE SAME NO PENALTY CA N BE LEVIED THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS : 5 ITA NO. 750/PN/2013 A.Y. 2007-08 I. COMMISSIONER OF INCOME TAX VS. ADITYA BIRLA NOVA LIMITED 82 CCH 206 (BOM); II. COMMISSIONER OF INCOME TAX VS. NALIN P. SHAH (HUF) 85 CCH 132 (BOM); III. THE COMMISSIONER OF INCOME TAX VS. UPENDRA V. MITHANI IN INCOME TAX APPEAL (L) NO. 1860 OF 2009 DECIDED ON 05-08-2009. 4.2 THE LD. AR FURTHER SUBMITTED THAT EVEN IF ` 2.40 CRORES WAS WRONGLY CLAIMED BY THE ASSESSEE THE SAME WAS REVERSED IN THE RETURN OF INCOME IN IMMEDIATELY SUCCEEDING ASSESSMENT YEAR. THE RE TURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 WAS FILED ON 30-0 9-2008 WHEREAS THE ASSESSMENT ORDER FOR THE IMPUGNED ASSESS MENT YEAR WAS PASSED ON 17-02-2011 I.E. ALMOST AFTER 2 YEARS AFTER TH E DATE OF FILING OF THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-0 9. THE LD. AR REFERRED TO PAGE 20 OF THE PAPER BOOK TO SHOW THAT TH E AMOUNT ` 2.40 CRORES WAS OFFERED TO TAX IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09. THE LD. AR SUBMITTED THAT THE AMOUNT WA S OFFERED TO TAX IN THE SUCCEEDING ASSESSMENT YEAR THEREFORE NO PENALTY IS LEVIABLE. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF JAYANT VEGOILS & CHEMICALS (P) LTD. VS. COMMISSIONER OF INCOME TAX REPORTED AS 323 ITR 641. 4.3 THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAS C ONSISTENTLY SUFFERED LOSSES. THERE CAN BE NO INTENTION ON BEHALF OF THE ASSESSEE TO MAKE A FALSE CLAIM. THE LD. AR POINTED THAT THE ASSESSEE IN CURRED LOSS OF NEARLY ` 20 CROERS IN THE PERIOD RELEVANT TO THE ASSESSMENT YEA R 2007-08 EVEN IF THE ADDITION OF ` 2.40 CRORES IS MADE THE ASSESSEE 6 ITA NO. 750/PN/2013 A.Y. 2007-08 WOULD STILL BE UNDER LOSS. IN SUCH CIRCUMSTANCES NO PENA LTY SHOULD HAVE BEEN LEVIED. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR DRAWS SUPPORT FROM THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF AMRUTA ORGANICS PVT. LTD. VS. DCIT IN ITA NO. 1121/PN/20 11 FOR ASSESSMENT YEAR 2007-08 DECIDED ON 22-03-2013. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS FROM WHICH THE LD. AR OF THE ASSESSEE HAS DRAWN SUPPORT TO BUTTRESS HIS CONTENTION S. IN ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS MADE AD DITIONS ON SEVERAL COUNTS. PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE AC T WERE INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME IN RESPECT OF ALL THE ADDITIONS MADE DURING THE COURSE OF ASSESSMENT. THE AS SESSING OFFICER LEVIED PENALTY OF ` 1 28 65 457/- QUA THE ADDITIONS MADE. IN FIRST APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED TH E ENTIRE PENALTY AFTER CONSIDERING THE EXPLANATION FURNISHED BY THE ASSESSEE . 6. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST D ELETING OF PENALTY ON ADDITIONS OF ` 2.40 CRORES I.E. THE AMOUNT CLAIMED BY THE ASSESSEE AS PROVISIONS FOR RETROFIT EXPENSES. THE COMMISS IONER OF INCOME TAX (APPEALS) DELETED THE PENALTY BY OBSERVING AS UNDER : THE APPELLANT'S CONTENTION THAT THE SAID PROVISION OF RS.2 40 00 000/- HAS BEEN REVERSED IN A.Y. 2008-09 IS ALSO SUPPORTED BY THE ASSESSMENT ORDER FOR A.Y. 2008-09. THE FACT OF REVE RSAL OF THE PROVISION IS NOTED IN PARA-7 OF THE ASSESSMENT ORDER AND NECE SSARY RELIEF HAS BEEN ALLOWED BY THE A.O. IN A.Y. 2008-09. IT IS SETTLED LAW THAT IN THE CASE WHERE DISPUTE OF ALLOWABILITY OF EXPENDITURE IS ABO UT THE YEAR OF ALLOWABILITY PENALTY U/S. 271(1)(C) IS NOT LEVIABL E. THIS PROPOSITION OF LAW IS SUPPORTED BY THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF 7 ITA NO. 750/PN/2013 A.Y. 2007-08 ]AYANT VEGOILS & CHEMICALS (P) LTD. (2010) 323 ITR 641. FURTHER IN VIEW OF THE ABOVE FACTS THE APPELLANT HAS NOT CONCEALED ANY PARTICULARS OF INCOME PARTICULARLY IN VIEW OF THE RATIO LAID DOWN IN THE CASE OF CIT VS. INDIAN METAL & FERRO ALLOYS LTD. (1994) 117 CTR 378 (ORISSA). 7. A PERUSAL OF THE PENALTY ORDER SHOWS THAT PENALTY HA S BEEN LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME. A PERUSAL OF THE A UDITED BALANCE SHEET AS ON 31-03-2007 AND PROFIT AND LOSS ACCO UNTS FOR THE YEAR ENDED 31-03-2007 PLACED ON RECORD AT PAGES 25 T O 40 OF THE PAPER BOOK SHOWS THAT THE ASSESSEE HAD CLEARLY MENTIONED AB OUT RETROFITMENT EXPENSES IN PROFIT AND LOSS ACCOUNTS AND PROVISIONS FOR R ETROFIT EXPENSES UNDER THE HEAD CURRENT LIABILITIES IN THE BALAN CE SHEET. THUS THE OBSERVATION MADE BY ASSESSING OFFICER THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME DOES NOT HOLD THE GROUND. 8. A PERUSAL OF THE ORDER LEVYING PENALTY SHOWS THAT THE ASSESSEE HAD OFFERED EXPLANATION FOR CLAIMING PROVISIONS FOR RETROFITMENT EXPENSES. HOWEVER THE ASSESSING OFFICER REJECTED THE S AME SUMMARILY IN A MECHANICAL MANNER WITHOUT VERIFYING THE EXPLANATION F URNISHED BY THE ASSESSEE. THE ASSESSEE HAS PLACED ON RECORD A CO PY OF CIVIL SUIT FILED BY M/S. ATUL AUTO LTD. AGAINST THE ASSESSEE AND OTHE RS IN THE COURT OF CIVIL JUDGE GONDAL DISTT.-RAJKOT CLAIMING REPLACEMEN T / RETROFITMENT AND FIXATION OF ADDITIONAL CHARGES OF ENGINES/VE HICLES. THIS CLEARLY SHOWS THAT EXPLANATION FURNISHED BY THE ASSE SSEE WAS BONAFIDE AND GENUINE. 9. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF THE COM MISSIONER OF INCOME TAX VS. UPENDRA V. MITHANI (SUPRA) HAS UPHELD THE VIEW 8 ITA NO. 750/PN/2013 A.Y. 2007-08 TAKEN BY THE TRIBUNAL IN DELETING THE PENALTY WHERE THE E XPLANATION FURNISHED BY THE ASSESSEE IS UNPROVED BUT NOT DISPROVED I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONA BLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE. WE FIND THAT IN THE PRESENT CASE THE ASSESSEES CASE IS RATHER ON A BETTER FOOTING . THE ASSESSEE HAS BEEN ABLE TO SHOW THAT THERE WAS DISPUTE BETWEEN THE ASSESSEE AND M/S. ATUL AUTO LTD. ONE OF THE CUSTOMERS OF THE ASSESSE E. THE ASSESSEE HAD CREATED PROVISIONS FOR RETROFITMENT CHARGES IN ANTICIPATION OF THE EXPENDITURE. IT IS AN UNDISPUTED FACT THAT THE AS SESSEE HAS OFFERED THE AMOUNT IN THE IMMEDIATELY SUCCEEDING ASSESSME NT YEAR I.E. ASSESSMENT YEAR 2008-09. ONCE THE AMOUNT HAS BEEN O FFERED TO TAX THERE CANNOT BE LEVY OF PENALTY MERELY BECAUSE OF DISPUT E IN THE YEAR OF ASSESSMENT. 10. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF JAYANT VEGOILS & CHEMICALS (P) LTD. VS. COMMISSIONER OF INCOME TAX (SUPRA) DELET ED THE PENALTY WHERE THE AMOUNT IN QUESTION WAS OFFERED FOR TAXA TION IN THE NEXT YEAR. THERE WAS NO DELIBERATE LAPSE ON THE PART O F ASSESSEE IN CLAIMING DEDUCTION IN THE YEAR UNDER CONSIDERATION. 11. WE FURTHER FIND FORCE IN THE CONTENTION OF THE ASSESSE E IS THAT SINCE THE ASSESSEE HAD CONSISTENTLY RETURNED LOSS FOR T HE ASSESSMENT YEARS 2006-07 2007-08 AND 2008-09 AND IN THE ASSESSM ENT YEAR UNDER CONSIDERATION THE ASSESSEE HAD SUFFERED LOSSES OF ` 18.37 CRORES EVEN IF THE AMOUNT OF ` 2.40 CRORES IS ADDED STILL THE ASSESSEE WOULD HAVE RETURNED LOSS. THEREFORE WE DO NOT FIND ANY DELIBERA TE ACT ON THE PART OF THE ASSESSEE TO MAKE FALSE/INACCURATE CLAIM BY CR EATING 9 ITA NO. 750/PN/2013 A.Y. 2007-08 PROVISIONS FOR RETROFITMENT EXPENSES IN THE ASSESSMENT YE AR UNDER APPEAL. 12. WE FIND NO ERROR IN THE ORDER OF COMMISSIONER OF INCO ME TAX (APPEALS) IN DELETING THE PENALTY ON THE ADDITIONS MADE BY THE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS. ACCORDINGLY T HE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF ANY MERITS. 13. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON MONDAY THE 17 TH DAY OF OCTOBER 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 17 TH OCTOBER 2016 RK *+ %-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A) AURANGABAD 4. ' / THE CIT AURANGABAD 5. !*+ %% - - . ./0 / DR ITAT B BENCH PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER %5 0 / PRIVATE SECRETARY - / ITAT PUNE