Income Tax Appellate Tribunal - Pune
Pradeep Rajkumar Agrawal, Jalgaon vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "A" , Pune
Before Shri I.C. Sudhir Judicial Member
and Shri G.S. Pannu Accountant Member
ITA No.711/PN/2010
(Asstt. Year : 2006-07 )
Income Tax Officer, Ward 1 (3) ... Appellant
B.J. Market,
Jalgaon (MS)
v.
Shri Pradeep Rajkumar Agrawal ... Respondent
Prop. Metrans Transpowers,
K-37, MIDC Area, Jalgaon
PAN : AFHPA8632C
C.O. No.53/PN/2011
(Arising out of ITA No.711/PN/2010)
(Asstt. Year : 2006-07
Shri Pradeep Rajkumar Agrawal ... Cross Objector
Prop. Metrans Transpowers,
K-37, MIDC Area, Jalgaon
PAN : AFHPA8632C
v.
Income Tax Officer, Ward 1 (3) ... Respondent
B.J. Market,
Jalgaon (MS)
Assessee by : Shri. Sunil Ganoo
Department by : Ms. Ann Kapthuama
Date of Hearing :01/3/12
Date of Pronouncement : -3-12
ORDER
Per I.C. Sudhir, JM
ITA No.711/PN/2011
The Revenue has questioned first appellate order basically on the ground that the Ld CIT(A) has erred in deleting addition of Rs. 9,60,000/- made by the A.O on account of payment of penalty by the 2 ITA . No.771/PN/2010 & C.O. 53/PN/2011 Shri Pradeep Rajkumar Agrwal,, A.Y. 2006-07 Page of 5 assessee to Maharashtra State Electricity Board (MSEB) for the offence committed by him.
2. The relevant facts are that burning of Electric Meter installed in the factory premises of the assessee on 25th December 2005 was reported by the assessee to the Executive Engineer, MSEB, MIDC Unit, Jalgaon. On the basis of said report, the meter was removed and necessary enquiries were conducted. The MSEB authorities collected an amount of Rs.11,75,399/- treating the assessee committed offences u/s. 135 and 138 of the Electricity Act, 2003. The said amount included Rs.9,60,000/- as compounding fees. The A.O was of the view that as per narration of the said amount indicates an offence conducted by the assessee to slow down the meter by tampering it. Accordingly, he invoked the provision of Explanation to section 37 of the Act and disallowed an amount of Rs.9,60,000/- . After considering the submissions of the assessee, the Ld CIT(A) has deleted the disallowance with this observation that the compounding of the said offence amounts to acquittal and cannot be treated that assessee has committed an offence.
3. In support of the ground, the Ld. D.R. submitted that the Ld CIT(A) has failed to appreciate that as per Explanation to Sec. 37(1), any expenditure incurred by an assessee for the purpose which is offence and which is prohibited by law will not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance will be made in respect of such expenditure. Admittedly, the assessee has not incurred the said expenses of Rs. 9,60,000/- for carrying out his business and such expenses are not allowable deduction under the Income Tax Act.
3 ITA . No.771/PN/2010 & C.O. 53/PN/2011
Shri Pradeep Rajkumar Agrwal,, A.Y. 2006-07 Page of 5
4. The ld. D.R. on the other hand tried to justify the first appellate order with this submission that the compounding fee charged by MSEB cannot be treated as penalty or fine for invoking the Explanation to Sec. 37(1) of the Act. He has also filed the true extracts of the provisions of Sec. 135, 138 and 152 of the Electricity Act, 2003.
5. Having gone through the provisions laid down u/s. 152 of the Electricity Act 2003, we find that this Section is under the heading "Compounding of offences". Sub-section (3) to Sec. 152 of the Electricity Act reads as under :
"(3) The acceptance of the sum of money for compounding an offence in accordance with sub-section (1) by the Appropriate Government or an officer empowered in this behalf shall be deemed to amount to acquittal within the meaning of section 300 of the Code of Criminal Procedure, 1973 (2 of 1974)."
The very reading of the above sub-section makes it clear that the acceptance of the sum of money for compounding an offence by the appropriate or an officer empowered in this behalf shall be deemed to amount to acquittal within the meaning of Sec. 300 of the Code of Criminal Procedure, 1973. There is no reason to doubt the finding of the Ld CIT(A) in this regard that the compounding of the said offence amounts to acquittal and can not be treated that the assessee had committed an offence. Certain material fact in the present case are also to be noted that the burning of meter was voluntarily reported by the assessee to the Electricity Authority and the observations of the Junior Engineer in his report were based on mechanical finding and other presumptions. Under these circumstances, we do not find infirmity in the first appellate order whereby the Ld CIT(A) deleted the disallowance. With this finding that the amount paid is of compensatory in nature and 4 ITA . No.771/PN/2010 & C.O. 53/PN/2011 Shri Pradeep Rajkumar Agrwal,, A.Y. 2006-07 Page of 5 invocation of Explanation to Sec. 37(1) of the Act for disallowing the amount of Rs.9,60,000/- was not warranted. We thus uphold the first appellate order on the issue. The ground is accordingly rejected.
6. In result, appeal is dismissed.
C.O. No. 53/PN/2011
7. The sole objection raised by the assessee against the first appellate order regarding non-adjudication of Ground No. 2 raised against charging of interest u/s. 234B at Rs. 32,705/- by the Ld. CIT(A).
8. Having gone through the first appellate order especially the Memo of Appeal containing the grounds, we find that ground No. 2 on the issue was raised before the ld CIT(A), but adjudication thereof has not been done. We thus in the interest of justice set aside the matter to the file of the Ld CIT(A) to adjudicate the same after affording opportunity of being heard to the parties. The Cross Objection is thus allowed for statistical purposes.
9. In result, appeal preferred by the revenue is dismissed and C.O. filed by the assessee is allowed for statistical purposes.
The order is pronounced in the open Court on 28th March 2012.
Sd/- Sd/-
(G.S. PANNU) (I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 28th March, 2012
5 ITA . No.771/PN/2010 & C.O. 53/PN/2011
Shri Pradeep Rajkumar Agrwal,,
A.Y. 2006-07
Page of 5
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT - Central, Pune
4. The CIT(A)-IV, Pune
4. The D.R. "A" Bench, Pune
5. Guard File
By order
Senior Private Secretary
Income Tax Appellate Tribunal
Pune