The DCIT, Circle-4,, Ahmedabad v. M/s. Metrochem Industries Limited,, Ahmedabad

ITA 787/AHD/2007 | 1999-2000
Pronouncement Date: 09-07-2010 | Result: Dismissed

Appeal Details

RSA Number 78720514 RSA 2007
Assessee PAN AABCM8019K
Bench Ahmedabad
Appeal Number ITA 787/AHD/2007
Duration Of Justice 3 year(s) 4 month(s) 19 day(s)
Appellant The DCIT, Circle-4,, Ahmedabad
Respondent M/s. Metrochem Industries Limited,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 09-07-2010
Date Of Final Hearing 30-06-2010
Next Hearing Date 30-06-2010
Assessment Year 1999-2000
Appeal Filed On 19-02-2007
Judgment Text
ITA.787/AHD/07 A.Y.99-00 1 IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD BEFORE SHRI BHAVNESH SAINI AND SHRI_D.C. AGRAWAL ITA. NO.787/AHD/2007 (ASSESSMENT YEAR 1999 -00) THE DY.COMMISSIONER OF INCOME TAX CIRCLE-4 NAVJIVAN TRUST BLDG. OFF ASHRAM ROAD AHMEDABAD VS METROCHEM INDUSTRIES LTD. 505-506 SURAYA RATH NR. PANCHAWATI ELLISBRIDGE AHMEDABAD-380006. (APPELLANT) (RESPONDENT) PAN: AABCM 8019 K APPELLANT BY : SHRI. SHELLY JINDAL CIT(DR) RESPONDENT BY : SHRI D.P. SONI. ( )/ ORDER PER SHR D.C. AGRAWAL. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF LD. CIT(A) DATED 30-11-2006 WHEREIN THE LD. C.I.T.(A) HAS CANCELLED THE PENALTY. THE GROUND RAISED BY THE REVENUE ARE AS UNDER :- 1. THE LD. C.I.T.(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN CANCELING THE PENALTY OF RS.1 33 16 954/- LEVIED U/ S. 271(1)(C ) OF THE I.T. ACT AFTER HOLDING THAT THE PENALTY U/S. 271(1)(C) IS NOT LEVIABLE IN RESPECT OF THE DISALLOWANCES MADE BY THE A.O. UNDER THE FOLLOW ING HEADS :- 2. THE A.O. HAD PROPOSED ADDITIONS WHICH WERE PARTI ALLY CONFIRMED BY THE LD. C.I.T.(A). THE DETAILS GIVEN BY THE AO ARE AS U NDER :- ITA.787/AHD/07 A.Y.99-00 2 SR. NO. HEADS. ADDITION BY AO CONFIRMED BY CIT(A) 1. DEDUDCTION OF OFFICE BUILDING EXPENSES. 1 47 478 1 47 478 2. EXP.. ON EFFLUENT TREATMENT PLANT. 44.52 108 44 52 108 3. DISALLOWANCE OF LEASE RENT. 9 90 259 9 90 259 4. DEDUCTION U/S. 80IA. 82 95 124 80 15 646 5. DEDUCTION U/S. 80HHC. 3 73 71 516 2 44 43 049 TOTAL. 3 80 48 540 3. THE A.O. ALSO INITIATED THE PENALTY PROCEEDINGS IN RESPECT OF THESE ADDITIONS MADE BY HIM. FINALLY AFTER GIVING OPPORTU NITY TO THE ASSESSEE AND FINDING THAT NO EXPLANATION IS FURNISHED THE A.O. PROPOSED TO LEVY THE PENALTY. HOWEVER HE AGAIN PROVIDED ANOTHER OPPORTUNITY TO T HE ASSESSEE IN RESPONSE TO WHICH A REPLY WAS FURNISHED WHICH WAS CONSIDERED BY HIM. AFTER CONSIDERING THE REPLY A.O. HELD THAT EXPLANATION FURNISHED BY THE A SSESSEE IS NOT SATISFACTORY AND ACCORDINGLY HE LEVIED THE PENALTY OF RS. 1 33 16 95 4/-. 4. THE LD. C.I.T.(A) CANCELLED THE PENALTY IN RESPE CT OF THESE ADDITIONS. IN RESPECT OF PENALTY LEVIED ON DEPRECIATION ON BUILDI NG AMOUNTING TO RS.1 47 478/- THE LD. C.I.T.(A) OBSERVED AS UNDER :- 6.1. I HAVE CONSIDERED THE ABOVE ARGUMENTS. THOUGH DISALLOWANCE HAS BEEN CONFIRMED IT CANNOT BE SAID THAT THERE IS A C ASE OF CONCEALMENT PARTICULARLY WHEN ALL THE PARTICULARS ARE AVAILABLE ON RECORD. THIS ISSUE IS A SUBJECT MATTER OF DISPUTE BETWEEN ASSESSEE AND DEPA RTMENT FOR LAST 2/3 YEARS. THEREFORE I HOLD THAT AO IS NOT JUSTIFIED I N CONSIDERING THE ABOVE DISALLOWANCE OF DEPRECIATION AS CONCEALED INCOME. 5 IN RESPECT OF EXPENDITURE ON EFFLUENT TREATMENT P LANT THE LD. C.I.T (A) CANCELLED THE PENALTY BY HOLDING AS UNDER :- 7.1. I HAVE CONSIDERED THE ABOVE SUBMISSION. IT IS A FACT THAT APPELLANT HAS SUBMITTED A DETAILED NOTE ON THIS ISSUE ALONG W ITH COMPUTATION OF INCOME AT THE TIME OF FILING THE RETURN OF INCOME. IT IS AN UNDISPUTED FACT ITA.787/AHD/07 A.Y.99-00 3 THAT ALL DETAILS RELATED TO THIS ISSUE WHICH IS PEN DING AT VARIOUS STAGES OF LITIGATION FOR THE LAST THREE TO FOUR YEARS ARE IN THE KNOWLEDGE OF THE DEPARTMENT. FURTHER THE ADDITIONS HAVE BEEN DELETED IN EARLIER ASSESSMENT YEAR 1997-98 AND 1998-99 BY CIT(A) IN AP PELLANTS OWN CASE. ON IDENTICAL ISSUE IN ANOTHER CASE REFERRED TO BY T HE LD. A.R. THE HONBLE ITAT HAVE ALLOWED RELIEF TO THE APPELLANT. THUS TH E ISSUE HAS BECOME DEBATABLE ON WHICH TWO OPINIONS ARE POSSIBLE. FURTH ER THE APPELLANT HAS FILED ALL MATERIAL FACTS RELATED TO THIS ISSUE. IN VIEW OF THE ABOVE FACT I HOLD THAT THE APPELLANT HAS NOT FILED INACCURATE PARTICU LARS OF INCOME WHILE CLAIMING DEDUCTION ON ACCOUNT OF EXPENDITURE ON EFF LUENT TREATMENT PLANT. RELIANCE IS PLACED ON THE DECISION OF HONBLE RAJAS THANHIGH COURT IN THE CASE OF CIT VS. HARSHVARDHAN CHEMICALS & MINERALS L TD. 259 ITR-212 (JAIPUR BENCH). ACCORDINGLY I HOLD THAT PENALTY IS NOT LEVIABLEIN RESPECT OF DISALLOWANCE OF EXPENDITURE ON EFFLUENT TREATMENT P LANT FOR RS.44 52 108/ 6. IN RESPECT OF LEASE RENT LD. C.I.T. (A) CANCELLE D THE PENALTY AFTER CONSIDERING THE RIVAL SUBMISSIONS OF THE LD. A.R. A S UNDER :- 8.2. IT WAS SUBMITTED BY THE LD. A. R. THAT THE AB OVE DISALLOWANCE WILL NOT AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME. IT WAS ALSO SUBMITTED THAT IN THE ASSESSMENT ORDER WHILE DISALLOWING THE ABOVE CLAIM THE LD. A.O. HAS NOT RECORDED SATISFACTION IN RESPECT OF AB OVE DISALLOWANCE FOR INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C ). 8.3. I HAVE CONSIDERED THE ABOVE SUBMISSIONS. CONSI DERING THE ABOVE FACTS I HOLD THAT THIS DISALLOWANCE DOES NOT AMOUN T TO CONCEALMENT OF INCOME. THEREFORE PENALTY IS NOT LEVIABLE IN RESPE CT OF DISALLOWANCE OF LEASE RENT OF RS. 9 90 259/-. 7. IN RESPECT OF THE DISALLOWANCE OF CLAIM OF DEDUC TION U/S. 80IA LD. C.I.T.(A) CANCELLED THE PENALTY BY OBSERVING AS UNDER :- 9.4. THE FACTS STATED ABOVE HAVE BEEN FOUND TO BE CORRECT. THE REALLOCATION OF EXPENDITURE HAS BEEN A SUBJECT MATT ER OF DISPUTE. IN A.Y. 1998-99 THE DISALLOWANCE MADE BY THE AO HAS BEEN D ELETED BY THE LD. CIT(A).THOUGH FOR THE CURRENT ASSESSMENT YEAR THE D ISALLOWANCE HAS BEEN CONFIRMED BY TAKING THE FACTS OF THE CASE AND NON APPEARANCE OF THE APPELLANT INTO CONSIDERATION. IT HAS BEEN HELD BY C OURTS THAT DISALLOWANCE OF A CLAIM WILL NOT AUTOMATICALLY LEAD TO CONCEALME NT. IN THE PRESENT CASE NO ADDITIONAL FACT HAS BEEN BROUGHT ON RECORD BY TH E A.O. TO PROVE THAT THE APPELLANT HAS MISREPRESENTED FACTS OR SUPPRESSED SO ME FACTS. IN PENALTY ITA.787/AHD/07 A.Y.99-00 4 ORDER AT PARA-5 THOUGH THE AO HAS OBSERVED THAT THE APPELLANT MADE MISREPRESENTATION OF FACTS WHILE CLAIMING DEDUCTION U/S. 80IA AND 80HHC HE HAS NOT RELIED UPON ANY MATERIAL EVIDENCE IN SUP PORT OF THE ABOVE OBSERVATION. MERELY BECAUSE THE APPELLANTS CLAIM H AS BEEN DISALLOWED THE SAME WILL NOT AMOUNT TO CONCEALMENT. IN THE FOL LOWING CASES IT HAS BEEN HELD THAT DISALLOWANCE OF A CLAIM DOES NOT AMO UNT TO CONCEALMENT WHEN ALL PARTICULARS ARE DISCLOSED BY THE ASSESSEE. (I) 124 ITR 15 (SC) (II) 144 ITR 127 (KAR) (III) 240 ITR 943 (MAD) (IV) 241 ITR 208 (MAD) ON CONSIDERATION OF THE FACTS OF THE CASE RELYING ON THE ABOVE CASES I HOLD THAT AO IS NOT JUSTIFIED IN LEVYING PENALTY ON THE BASIS OF DISALLOWANCE OF EXPENDITURE ON EFFLUENT TREATMENT PLANT. 8. IN RESPECT OF THE DISALLOWANCE OF CLAIM OF DEDUC TION U/S. 80 IA LD. C.I.T.(A) CANCELLED THE PENALTY BY OBSERVING AS UND ER :- 9.7. I AGREE WITH THE ABOVE CONTENTION OF THE APPE LLANT. IN THE FOLLOWING CASES IT HAS BEEN HELD THAT THE DECISION OF HONBLE SUPREME COURT IN THE STERLING FOODS CASE IS NOT APPLICABLE TO CASES OF C LAIM OF DEDUCTION U/S. 80IA. (I) JCIT VS. M/S. SUDITI INDUSTRIES LTD. (ITA NO.34 90/MUM/2000 DT.11.4.05). (II) ACIT VS. MAXCARE LABORATORIES LTD. 92 ITD 11 ( 273 ITR(AT) 1 (CUT) (III) DCIT VS. CHAMAN LAL & SONS (2005) 93 TTJ 132 (ASR) (IV) ITO VS. KIRAN ENTERPRISES 92 TTJ 104 (CHD) 9.8. IN VIEW OF THIS IT IS TO BE SEEN WHETHER DISA LLOWANCE OF THE CLAIM OF DEDUCTION U/S. 90IA CAN AMOUNT TO CONCEALMENT OF IN COME. IT IS NOT THE CASE OF THE AO THAT APPELLANT HAS FURNISHED ANY INA CCURATE PARTICULARS OR SUPPRESSED ANY FACTUAL INFORMATION WHILE CLAIMING T HE DEDUCTION U/S. 80IA. THE ISSUE OF EXCLUSION OF OTHER INCOME FROM THE PRO FIT FOR THE PURPOSE OF DEDUCTION U/S. 80IA IS BASED ON A QUESTION OF LAW A S IT APPARENT FROM ORDERS OF ITATS MENTIONED IN PRECEDING PARAGRAPHS. THEREFORE DISALLOWANCE OF APPELLANTS CLAIM CANNOT BE SAID TO BE A CASE OF CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTI CULARS. IN ANY CASE IN VIEW OF THE ABOVE DECISIONS OF THE HONBLE ITAT TH E ISSUE HAS BECOME DEBATABLE ON WHICH TWO OPINIONS ARE POSSIBLE. RELIA NCE IS PLACED ON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT (JAIPU R BENCH) IN THE CASE OF ITA.787/AHD/07 A.Y.99-00 5 CIT VS. HARSHVARDHAN CHEMICAKLS & MINERAL LTD. 259 ITR-212. IN VIEW OF THE ABOVE FACTS IS HELD THAT THE AO IS NOT JUSTIFIE D IN LEVYING PENALTY ON THE DISALLOWANCE OF DEDUCTION CLAIMED U/S. 80IA. 10. IN RESPECT OF DISALLOWANCE OF DEDUCTION U/S.80 HHC THE LD. C.I.T.(A) CANCELLED THE PENALTY BE OBSERVING AS UNDER :- 10.2. I AGREE WITH THE ABOVE CONTENTION OF THE LD. A.R. AS THERE IS ENHANCEMENT OF INCOME ON ACCOUNT OF REDUCTION OF TH E CLAIM AS ALLOWED BY THE AO THE LD. CIT(A) CAN ONLY INITIATE PENALTY PROCEEDINGS IN RESPECT OF ENHANCED INCOME OR CLAIM DISALLOWED BY HIM. IN T HE APPEAL ORDER THERE IS NO MENTION OF PENALTY PROCEEDINGS INITIATED. THE REFORE THIS CANNOT BE TAKEN AS A CASE OF CONCEALMENT OF INCOME BY THE A.O . I HOLD THAT PENALTY IMPOSED BY THE AO ON ACCOUNT OF THE ABOVE INCOME I. E. DISALLOWANCE OF DEDUCTION U/S. 80 HHC TO THE EXTENT OF RS.2 44 43 0 49/- IS BAD IN LAW AND HENCE DELETED. 10.3. IT HAS ALSO BEEN ARGUED IN COURSE OF HEARING THAT THE RESTRICTION OF DISALLOWANCE U/S. 80HHC BY APPLYING THE PROVISIONS OF SECTION 80-IA(9) HAS BEEN DELETED BY HONBLE ITAT BANGALORE IN THE F OLLOWING CASES :- (I) IRFAN SHERIFF VS. ACIT 7 SOT-57. (II) MITTAL CLOTHING CO. VS. DY. CIT 4 SOT-626. THE ABOVE DECISION OF THE HONBLE ITAT BANGALORE HA D BEEN FOLLOWED BY ITAT AHMEDABAD IN THE CASE OF ATUL INTERMEDIARIES (ITA NO.347/AHD/2005) .IN VIEW OF THIS THE ISSUE HAS BE COME A DEBATABLE ONE ON WHICH TWO OPINIONS ARE POSSIBLE. THE DISALLOWANC E OF CLAIM THEREFORE WILL NOT ATTRACT PENALTY. 10.4. I FIND CONSIDERABLE STRENGTH IN THE ABOVE ARG UMENTS. THE ISSUE HAS BECOME DEBATABLE IN VIEW OF THE ABOVE DECISIONS OF THE I.T.A.T. FURTHER IN RESPECT OF EXCLUSION OF EXCISE DUTY AND SALES TAX FROM TOTAL TURNOVER HONBLE ITAT AHMEDABAD IN THE CASE OF MILTON LAMINATES LTD. VS. ITO ITA NO.3939/AHD/2004 HAVE DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT. 11. IN RESPECT OF THE PENALTY LEVIED FOR EXCLUSION OF INTEREST FOR THE PURPOSE OF DEDUCTION U/S. 80HHC THE LD. CIT(A) CANCELLED THE PENALTY BY OBSERVING AS UNDER :- ITA.787/AHD/07 A.Y.99-00 6 10.5. NEXT IS ISSUE OF EXCLUSION OF INTEREST FOR T HE PURPOSE OF DEDUCTION U/S. 80HHC. ON THIS THERE ARE DIVERGENT OPINIONS O F COURTS. TO SUM UP THE DISALLOWANCE MADE IN RESPECT OF (A) EXCLUSION O F EXCISE DUTY AND SALES TAX (B) EXCLUSION OF INTEREST (C) NON-ADJUSTMENT O F LOSS AGAINST PROFIT AND RESTRICTING THE DISALLOWANCE U/S. 80HHC BY APPLYING PROVISIONS OF SECTION 80IA(9) ARE SUBJECT MATTER OF DISPUTE. THE CONFIRMA TION OF THE ABOVE DISALLOWANCE WILL NOT AMOUNT TO CONCEALMENT. TO ADD TO THAT THE AO HAS ALLOWED DEDUCTION OF RS. 3 73 71 516/- AS AGAINST R S.1 45 90 811/- ALLOWED BY THE CIT (A) BY ISSUING ENHANCEMENT NOTIC E WITHOUT INITIATING PENALTY ON ACCOUNT OF THIS ENHANCEMENT OF INCOME. I HOLD THAT THE AO IS NOT JUSTIFIED IN IMPOSING PENALTY IN RESPECT OF INC OME ADDED BY LD. CIT (A). 12. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW NO INTERFERENCE IS C ALLED FOR IN THE ORDER OF THE LD. C.I.T.(A). IN THE FIRST ISSUE REGARDING DEPRECIAT ION ON BUILDING WE FIND THAT TRIBUNAL IN THEIR ORDER IN ITA NO.1692/AHD/04 PRONO UNCED ON 5-3-2010 HAVE ALLOWED THE CLAIM OF THE ASSESSEE. SINCE THE CLAIM HAS BEEN ALLOWED NO PENALTY WOULD SURVIVE. IN RESPECT OF EXPENDITURE ON EFFLUEN T TREATMENT PLANT THE ISSUE HAS BEEN RESTORED TO THE FILE OF THE A.O. SINCE THE ADD ITION DOES NOT SURVIVE PENALTY ALSO CANNOT SURVIVE. IN RESPECT OF LEASE RENT ADDI TION IS DELETED BY THE TRIBUNAL VIDE PARAGRAPHS 7 AND 8 OF THEIR ORDER. SINCE THE A DDITION IS DELETED PENALTY CANNOT BE LEVIED. IN RESPECT OF THE CLAIM OF DEDU CTION U/S. 80IA THE TRIBUNAL HAS EITHER DELETED VARIOUS ADDITIONS ON WHICH CLAIM OF DEDUCTION U/S. 80IA WAS DISALLOWED OR RESTORED THE MATTER TO THE FILE OF TH E AO. SINCE THE ADDITION DID NOT SURVIVE PENALTY COULD NOT BE LEVIED. IN RESPECT OF THE DEDUCTION U/S. 80HHC WE NOTICE THAT THE TRIBUNAL HAS ALLOWED THE GROUND OF THE ASSESSEE. THEREFORE ONCE THE ADDITION DID NOT SURVIVE PENALTY COULD NOT BE L EVIED. THE ISSUE RELATING TO INTEREST HAS BEEN RESTORED TO THE FILE OF THE A.O. FOR CALCULATING THE DEDUCTION U/S. 80 HHC SINCE THE ADDITION DID NOT SURVIVE PENALTY C OULD NOT BE LEVIED. ITA.787/AHD/07 A.Y.99-00 7 13. AS A RESULT WE DISMISS THE APPEAL FILED BY THE REVENUE. ORDER PRONOUNCED IN OPEN COURT ON 09 / 07 /2010. SD/- SD/- (BHAVNESH SAINI) (D. C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER. AHMEDABAD. DATED: 09 /07 /2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REG ISTRAR ITAT AHMEDABAD.