Income Tax Appellate Tribunal - Ahmedabad
The Dy. Commissioner Of Income Tax, ... vs M/S. Dishman Pharmaceuticals & ... on 7 September, 2018
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ, अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
And
SHRI WASEEM AHMED, ACCOUNTANT MEMBER
आयकर अपील सं./ITA.Nos.138 & 189/Ahd/2017
नधा रण वष /Asstt. Year: 2009-2010
Dishman Pharmacecuticals & A.C.I.T,
Chemicals Ltd., Vs Central Circle-2(2),
2nd Floor, Bhadraraj Chambers, Ahmedabad
Navrangpura,
Ahmedabad-380009.
PAN : AAACD4164D
अपीलाथ!/ (Appellant) "#यथ!/ (Respondent)
Assessee by : Shri T.P. Hemani, A.R
Revenue by : Shri S.K. Dev, Sr. D.R
सन
ु वाई क तार ख/ Dateof Hearing : 05/09/2018
घोषणा क तार ख / Date of Pronouncement: 07/09/2018
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
The assessee and revenue are in cross appeals against the order of Ld.CIT(A) dated 29/11/2016, passed for Asstt.Year 2009-10.
2. The common issue involve in both the appeals relates to whether assessee deserves to be visited with penalty u/s.271(1)(c) of the Act, if yes than what should be amount of penalty imposable upon the assessee.
3. With the assistance of Ld.Representative we have gone through the record carefully, it emerges out from the record that assessee has filed its return of income on 29/11/2011, declaring total income of Rs.2,54,05,015/-
ITA Nos.138&189/Ahd/2017 A.Y. 2009-10 2 .Assessment order was passed u/s.143(3) r.w.s 144C on 21/03/2013. The Ld.AO has determined the taxable income of the assessee at Rs.19,67,00,320/- after making following disallowances/additions.
(a) Transfer Pricing Addition Rs. 14,94,92,409/-
(b) Prior Period Income Rs 2,60,695/-
(c) Depreciation on Electrical Installation Rs. 8,502/-
(d) Foreign exchange difference loss Rs. 11,27,589
(e) Disallowance u/s.14A Rs. 1.21.423/-
(f) Disallowance for non deduction of TDS Rs. 44,58,072/-
40(a)
(g) Disallowance u/s.10B Rs. 1,58,26,608/-
4. On appeal, Ld.CIT(A) has partly deleted the disallowances/additions.
Ld.AO in the penalty order took note of the addition which have been deleted by Ld.CIT(A). Such details read as under:
(a) Transfer Pricing Addition (interest on loan) Rs. 34,86,035/-
(b) Prior period Income Rs. 2,60,696/-
(c) Excess claim of depreciation on electrical Rs. 8,502/-
installation
(d) Foreign Exchange difference loss Rs. 11,27,589/-
(e) Disallowance u/s 14A Rs. 1,21,423/-
(f) Non-deduction of TDS u/s.40(a)(ia) Rs. 44,58,072/-
(g) Disallowance u/s.10B Rs. 44,90,967/-
ITA Nos.138&189/Ahd/2017
A.Y. 2009-10
3
5. Ld.AO has issued showcause notice u/s.271(1)(c) of the Act r.w.s 274, inviting an explanation of the assessee as to why penalty be not imposed upon it. After hearing, penaltywas imposed of Rs.47,46,721/-. Dissatisfied with the penalty order dated 31/03/2015, assessee carried the matter in appeal before First Appellate Authority. The First appellate Authority deleted the penalty amounting Rs.43,59,454/- on the total addition confirm by Ld.CIT(A) in quantum appeal of Rs.1,28,25,695/- He confirm the penalty on an addition of Rs.11,27,589/-
6. The assessee in its appeal is impugning the penalty confirmed by the Ld..CIT(A). On the other hand Revenue is impugning the penalty deleted by the Ld.CIT(A).
7. During the course of hearing ld.Counsel for the assessee carved out the details of different additions on which penalty has been deleted by the Ld.CIT(A). Such additions read as under:
Addition on which penalty is levied Amount of addition TP addition Rs.34,86,035/-
Prior period income Rs.2,60,696/-
Depreciation on electric installation Rs.8,502/-
Disallowance u/s.14A Rs.1,21,423/-
Disallowance u/s.40(a)(i) Rs.44,58,072/-
Disallowance u/s.10B Rs.44,90,967
8. As far as appeal of the assessee is concern,he contended that an additions on account of Foreign exchange fluctuation loss claimed by the assessee was made by the AO. The issue with regard to this addition has been ITA Nos.138&189/Ahd/2017 A.Y. 2009-10 4 set aside by the Tribunal. The copy of the Tribunal's order placed on record.
Thus, no penalty is imposable upon the assessee on this issue.
9. On the other hand Ld.DR relied upon the order of the AO.
10. We have duly consider the rival contention and gone through the record carefully. Ld.Counsel for the assessee has placed on record chart contending there in, that out of total item considered by the AO for visiting the assessee with penalty, the major additions have been deleted by the ITAT in quantum appeal. He made reference to para no. and page no. of Tribunal's order. The submission in this chart read as under:
"Penalty on "TP addition - Rs.34,86,035 AO made TP adjustment of Rs.34,86,035/- in respect of "interest on loan to AE's and the same came to be confirmed by CIT(A) as well' In the quantum appeal bearing ITA 2958 & 3087/Ahd/2013. Hon'ble the ITAT has deleted such TP adjustment - para 10-12 @ 12 pgs.23-25 of order (Annexure ''A''). Hence, penalty deserves to be deleted.
Penalty on ''Prior period income - Rs.2,60,696/-'' Assessee earned ''Prior period income'' (PPI) of Rs.1,30,352/- and incurred '' prior period expenses'' (PPE) of Rs.13,36,441/-. After setting off PPE against PPI, assessee debited net sum of Rs.12,06,089/- as expenses in P& L. However, sum of Rs.12,06,097/- was added back by the assessee while filing the return of income.
AO did not agree with the above treatment since he was of the view that entire PPE ought to have been disallowed. Hence, he made addition of Rs.1,30,344/- (i.e 13,36,441 - Rs.12.06,097/-). AO made total addition of Rs.1,30,352/- being PPI. Accordingly, AO made total addition of Rs.2,60,696/- (i.e Rs.1,30,344 + Rs.1,30,352/).
In quantum appeal,Hon'ble ITAT held that PPI is to be set-off against PPE and only ''net differential sum'' is to be brought to tax. Accordingly, Net Prior period expenses have been allowed as deduction (para 22-25 @ 25, pgs. 28-30 of the order). Hence penalty deserves to be deleted.
ITA Nos.138&189/Ahd/2017 A.Y. 2009-10 5 Penalty on ''Depreciation on Electric Installation -Rs.8,502/-'' Assessee claimed depreciation @ 15% of ''Electric installation''. However, AO applied depreciation rate @ 10% and made addition of Rs.8,502/- in respect of the differential amount.
Before Hon'ble the ITAT, the said ground was not pressed on account of smallness of amount (Para 38,pgs.32-33 of the order).
Details of depreciation appeared in the Tax Audit Report and the said fact is not in dispute (pg.4 of Asst. order) The only dispute was w.r.t ''rate'' of depreciation. As per assessee, it was 15% and as per AO, it was 10%. Merely because addition has been made in respect of the differential depreciation, no penalty can be levied.
There is neither any concealment of income nor any inaccurate particulars of income have been furnished. Hence, penalty cannot be levied. Reliance is placed on ''Reliance Petroproducts Pvt. Ltd.'' 322 ITR 158(SC).
Penalty on ''Disallowance u/s.14A -Rs.1,21,423/-'' AO made disallowance of Rs.1,21,423/- u/s.14A and the same came to be confirmed by CIT(A) & ITAT (Para 43-47 @ 47, pgs 37-39 of the order) Impugned addition has been made merely on the basis of invoking deeming fiction u/s. 14A of the Act. All the necessary facts have already been disclosed by the assessee. There is neither any concealment of income not any inaccurate particulars of income have been furnished. Merely because an addition has been made, penalty cannot be levied. Reliance is placed on ''Reliance Petroproducts Pvt. Ltd.'' 322 ITR 158 (SC). Under such circumstances penalty deserve to be deleted.
Penalty on ''Disallowance u/s.40(a)(i) - Rs.44,58,072/-
Hon'ble the ITAT has deleted such disallowance of Rs.44,58,072/- amade u/s.40(a)(i) of the Act (para 48-53 @ 52-53, pgs 39-41 of the order). Hence, penalty on the same deserves to be deleted.
Penalty on ''Disallowance u/s.10B - Rs.44,90,967/-'' Hon'ble the ITAT has deleted such disallowance made u/s. 10B of the Act (Para 61-63 @ 63 pgs.47-53 of the order). Hence penalty on the same deserves to be deleted.
11. With regard to assessee appeal, such submission read as under:
AO levied penalty on addition of Rs.11,u/s.271(1)(c) of the Act,589/- w.r.t. disallowance on account of ''foreign exchange fluctuation loss'' of ITA Nos.138&189/Ahd/2017 A.Y. 2009-10 6 Rs.11,u/s.271(1)(c) of the Act,589/- and the same came to be confirmed by CIT(A) as well.
In the quantum proceedings, Hon'ble the ITAT has set-aside the issue to the file of AO for adjudication afresh (para 39-42 @ 42, pgs. 33-37 of the order). Copy of the quantum order is annexed and marked as Annexure ''A'' to Department's appeal bearing ITA 138/Ahd/2017.
Hence, penalty deserves to be deleted."
12. Sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. It contemplates that the assessee would be directed to pay a sum in addition to taxes, if any, payable by him, which shall not be less than, but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of on income and furnishing of inaccurate particulars of income. In other words, the quantification of the penalty is dependant upon the additions made to the income of the assessee.
13. On perusal of the details placed before us as well as order of the ITAT in the quantum proceedings would indicate that addition for TP adjustment, disallowance u/s.40(a)(i) &disallowance u/s.10B of the Act stands deleted. These are the major additions for visiting the assessee with penalty. Therefore with regard to these items there is no basis on which it could be alleged that assessee has evaded taxes.
14. As far as the issue regarding depreciation on electric installation is concerned an addition of Rs.8,502/- was made on account of difference in rate of depreciation. Thus, in our mind this doesn't call for visiting the assessee with penalty. The assessee has disclosed basic facts fully and truly.It is a difference of opinion between AO and assessee about the admissibility depreciation at particular rate.
ITA Nos.138&189/Ahd/2017 A.Y. 2009-10 7
15. As far as prior period income is concern the Ld.AO took the prior period income without giving set off prior period expenditure. The ITAT in the quantum proceedings held that prior period income is to be set off against prior period expenditure. We have dealt with number of A.Ys and found that in certain A.Y the net balance was positive income whereas in other assessment year it was negative. Thus, on this issue it could be concluded that assessee has not concealed the particulars of income. It doesn't call for visiting the assessee with penalty.
16. Similarly, as far as disallowance u/s. 14A is concern, during the quantum proceedings we have examined this issue and observe that assessee was having sufficient interest free fund for taking care of interest expenditure relatable to earning of tax free income on the estimate basis. Adhoc disallowance was confirmed in A.Y 2007-2008 and on same analogy adhoc additions stand confirmed for A.Y 2009-2010.
17. We find that assessee has disclosed complete fact about the tax free income and how funds have been used. The Ld.CIT(A) has appreciated this aspect and thereafter deleted the penalty. Thus, we find that major additions which goad the AO to visit with penalty stands deleted in the quantum proceedings. The amount which have been added to income of the assessee on three issues were basically adhoc disallowances. The Ld.CIT(A) has appreciated this aspect and thereafter deleted penalty. We do not see any reason to interfere in the order of Ld.CIT(A) as far as Revenue's appeal is concern.
ITA Nos.138&189/Ahd/2017 A.Y. 2009-10 8
18. As far as assessee's appeal is concern, we have already set aside the issue to the file of Ld.AO for re-adjudication in the quantum proceedings. Thus, as observed earlier there is no basis to visit the assessee with the penalty on this issue because the AO has yet to examine whether any disallowances/additions on account of Foreign exchange fluctuation loss claim is to be made in computation of total income of the assessee.After adjudicating this issue in quantum proceedings, it will be in the discretion of Ld.AOto initiate or not to initiate penalty on this issue. At this stage, there is no addition on whose basis it could be alleged that assessee has evaded tax. Therefore, we allow the appeal of assessee.
19. In the result, appeal of Revenue is dismiss and appeal of assessee is allowed.
Order pronounced in the Open Court on 7thSeptember, 2018.
-Sd- -Sd- (WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER(True Copy) JUDICIAL MEMBER Ahmedabad; Dated 07/09/2018 Manish
आदे श क& " त(ल)प अ*े)षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आयु!त(अपील) / The CIT(A)
5. $वभागीय 'त'न ध, आयकर अपील य अ धकरण / DR, ITAT,
6. गाड* फाईल / Guard file.
ु ार/BY ORDER, आदे शानस उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad