ALLIED INSTRUMENTS P. LTD, MUMBAI v. ITO 9(1)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SMT ASHA VIJAYARAGHA VAN (JM) ITA NO. 985/MUM/2009 (ASSESSMENT YEAR-2001-02) M/S. ALLIED INSTRUMENTS PVT. LTD. 30 CD GOVT. IND. ESTATE KANDIVALI(W) MUMBAI-400 067 PAN-AAACA 1032F VS. THE ITO 9(1)(1) AAYAKAR BHAVAN MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY: MRS. ASHIMA GUPTA O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)- IX MUMBAI DATED 22.12.2008 FOR THE A.Y .2001-02. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE THEREFOR E WE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND DISPOSE OF THE MATT ER EX PARTE ON MERIT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY HAS TWO MANUFACTURING UNITS FOR MANUFACTURING THE SAME PROD UCT. ONE UNIT IS ELIGIBLE FOR DEDUCTION U/S. 80IB AND OTHER UNIT IS NOT ELIGIBLE FOR THE DEDUCTION. DURING THE COURSE OF ASSESSMENT PROCEED INGS THE ASSESSING OFFICER FOUND THAT MOST OF THE EXPENSES HAVE BEEN C LAIMED IN THE UNIT WHICH IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB. THE AO TH EREFORE HAD COME TO THE CONCLUSION THAT THE ASSESSEE COMPANY HAS TRIED TO R EDUCE ITS INCOME OF KANDIVALI UNIT WHICH WAS NOT ELIGIBLE FOR DEDUCTION 80IB AND INCREASE THE PROFIT OF THE DAMAN UNIT WHICH WAS ELIGIBLE FOR DED UCTION U/S. 80IB. THE AO IS OF THE VIEW THAT THE ASSESSEES CLAIM OF DEDUCTI ON U/S. 80HHC AND 80IB WAS NOT CORRECT THUS IT HAS CLAIMED EXCESS DEDUCTIO N U/S. 80HHC AND 80IB ITA NO. 985/M/09 2 BY FURNISHING INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALED ITS INCOME. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A). BEFORE THE LD. CIT(A) THE AR CONTENDED AS FOLLOWS: THE PENALTY PROCEEDINGS HAVE BEEN RESORTED TO IN A VERY MECHANICAL MANNER. IT IS SUBMITTED THAT THE APPELL ANT HAD DISCLOSED ALL MATERIAL FACTS IN CONNECTION WITH THE CLAIM FOR DEDUCTION U/S. 80IB AND IT HAD PRODUCED ALL THE INF ORMATION AND EVIDENCE REQUISITIONED BY THE AO WITH REGARD TO THE DEDUCTION U/S. 80IB. THEREFORE THE APPELLANTS CASE DOES NO T FALL WITHIN THE MISCHIEF OF THE FIRST LIMB OF SEC. 271(1)(C). RELI ANCE IS PLACED ON K.C. BUILDER VS ACIT (265 ITR 562)(SC) DILIP SHROF F VS JCIT (291 ITR 519 (SC) AND ASHOK PAI VS CIT 292 ITR 11 (SC). THE APPELLANT HAD THUS CONTENDED THAT ITS CASE DOES NOT SATISFY THE SECOND LIMB VIZ. FURNISHING OF INACCURATE PARTICULA RS OF INCOME OF SEC. 271(1)(C). THE AO HAS NOT RELIED UPON ANY IND EPENDENT MATERIAL TO HOOK THE CASE OF THE APPELLANT U/S. 271 (1)(C). THUS THE PENALTY ORDER IS FOUNDED ON GUESS WORK SURMISE S AND CONJECTURES. IT IS WELL SETTLED THAT WHERE AN ASSE SSMENT IS FOUNDED ON ESTIMATE COGENT PROOF IS NECESSARY TO P ROVE CONCEALMENT 5. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS OF THE CASE APPELLANTS SUBMISSION AS WELL AS THE AOS CONTENTI ON. IT IS EVIDENT FROM THE ASSESSMENT ORDER AS WELL AS DETAIL S AVAILABLE ON RECORD THAT THE ASSESSEE COMPANY HAS DEBITED UNDER THE HEAD ADMINISTRATIVE CHARGES TOTALING TO RS. 45 34 956/ - TO KANDIVALI UNIT WHICH WAS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB . THE ASSESSEE WAS ASKED TO EXPLAIN BY THE AO AS TO WHY T HE COMMON EXPENSES SHOULD NOT BE ALLOCATED TO DAMAN UNIT WHIC H IS ELIGIBLE FOR DEDUCTION U/S. 80IB SO THAT PROFITS OF THE ELI GIBLE UNIT ARE CORRECTLY ASCERTAINED. SINCE NO SATISFACTORY EXPL ANATION IN SUPPORT OF THE ALLOCATION OF THE EXPENDITURE TO THE KANDIVALI UNIT WAS FILED THEREFORE THE PROFIT OF THE DAMAN UNIT WHICH IS ELIGIBLE FOR DEDUCTION U/S. 80IB WAS RECOMPUTED BY DEBITING THE EXPENDITURE OF RS. 45 34 956/-. SUCH ALLOCATION WA S ALSO CONFIRMED BY THE LD. CIT(A). ACCORDINGLY THE APPE LLANTS CLAIM OF DEDUCTION U/S. 80IB WAS ALSO REDUCED. NO PLAUSIBLE REASON HAS BEEN GIVEN BY THE APPELLANT FOR SUCH ALLOCATION OF EXPENSES WHICH RESULTED INTO EXCESS CLAIM OF DEDUCTION U/S. 80IB. THE TAXABLE INCOME OF THE KANDIVALI UNITS WHICH WAS NOT ELIGIBL E FOR THE DEDUCTION U/S. 80IB HAS BEEN REDUCED BY THE APPELLA NT COMPANY ITA NO. 985/M/09 3 FOR WHICH ALSO NO SATISFACTORY EXPLANATION HAS BEEN FILED. UNDER THE CIRCUMSTANCES AND FACTS OF THE CASE I AM OF TH E VIEW THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF I NCOME BY MAKING ALLOCATION OF EXPENSES BETWEEN THESE TWO UNI TS WHICH RESULTED INTO EXCESS CLAIM OF DEDUCTION U/S. 80IB F OR THE DAMAN UNIT. THE HONBLE ITAT CALCUTTA BENCH IN THE CASE OF ACIT VS MCLEOD RUSSELL INDIA LTD. 101 ITD 39 KOLKATA HAS HE LD THAT EVEN IF THE INCOME IS ULTIMATELY DETERMINED BY APPLYING METHOD OF ESTIMATE PENALTY CAN BE IMPOSED. THE HONBLE MADRA S HIGH COURT IN THE CASE OF CEMENT DISTRIBUTORS PVT. LTD V S CIT 60 ITR 586 HAS HELD THAT RECORDING OF BOGUS TRANSACTION IN ORDER TO DISPLAY INCOME AT A MUCH LOWER FIGURE AMOUNTS TO DE LIBERATE FURNISHING OF INACCURATE PARTICULARS OF INCOME WITH IN THE MEANING OF SEC. 271(1)(C). THE HONBLE MP HIGH COURT IN TH E CASE OF ADDL. CIT VS SMT. CHANDRAKANTA 205 ITR 607 HAS HELD WHERE THE ASSESSMENT IS BASED ON ESTIMATE PENALTY CAN BE IMPO SED U/S. 271(1). SIMILAR VIEW WAS ALSO TAKEN BY THE HONBL E BOMBAY HIGH COURT IN THE CASE OF R.B. SHREE RAM DURGAPRASA D N. FATHECHAND NARINHAS VS CIT 168 ITR 619. THEREFORE ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE I AM OF THE VIEW THAT THE ASSESSING OFFICE WAS JUSTIFIED IN LEVYING THE P ENALTY ON EXCESS CLAIM OF DEDUCTION U/S. 80IB BY THE APPELLANT COMPA NY. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) ASSESSE E IS IN APPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS: 1. UNDER THE FACTS & CIRCUMSTANCES OF YOUR APPELLA NT THE LD. CIT(A) ERRED CONFIRMING PENALTY ORDER IN RESPECT OF ALLEGED EXCESS CLAIM OF DEDUCTION U/S. 80IB OF I.T. ACT 196 1. 1.02 UNDER THE FACTS & CIRCUMSTANCES OF YOUR APPELLANT T HE LD. CIT(A) ERRED IN HOLDING THAT YOUR APPELLANT HAS COM MITTED DEFAULT U/S. 271(1)(C) OF THE I.T. ACT 1961. 1.03 THE LD. CIT(A) ERRED IN APPLYING THE SUPREME C OURT JUDGEMENT IN THE CASE OF UOI VS DHARMENDRA TEXTILES DT. 18.10.2008. 7. WE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAS DISCLOSED ALL MATERIAL FACTS IN CONNECTION WITH THE DEDUCTION U/S . 80IB AND HAS PRODUCED ALL THE INFORMATION AND EVIDENCE REQUISITI ONED BY THE AO WITH REGARD TO THE DEDUCTION U/S. 80IB. ITA NO. 985/M/09 4 8. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD (2010) 322 ITR 158 (SC) HAS HELD THAT THE ASSESSEE FURNISHED ALL THE MATERIALS IN RETURN WHICH WAS NOT FOUND TO BE INCORRECT IT WAS UPTO THE AUTHORITIES TO ACCEPT IT S CLAIM IN THE RETURN OR NOT BUT THE SAME COULD NOT BE CONSIDERED AS CONC EALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN OUR CONSIDERED OPINION THE RATIO DECIDENDI OF THIS JUDGEMENT IS FU LLY APPLICABLE TO THE FACTS OF THE INSTANT CASE. WE THEREFORE OVERTURN THE IMPUGNED ORDER AND DIRECT THE DELETION OF PENALTY. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 9 TH DAY OF FEBRUARY 2011 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI DATED 9 TH FEBRUARY 2011. RJ COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CENTRAL - I CONCERNED 5. THE DR A BENCH TRUE COPY BY ORDER ASST. REGISTRAR I.T.A.T MUMBAI ITA NO. 985/M/09 5 DATE INITIALS 1 DRAFT DICTATED ON: 6.02.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 7.02.2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: ______ 9 DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER: ______