Income Tax Appellate Tribunal - Mumbai
Chemicals & Ferro Alloys P. Ltd, Mumbai vs Assessee on 11 December, 2012
आयकर अपीलीय अिधकरण,
अिधकरण मुंबई Ûयायपीठ 'सी ' मुंबई ।
IN THE INCOME TAX APPELLATE TRIBUNAL " C " BENCH, MUMBAI
सव[ौी बी.आर.िमƣल, Ûया.स.एवं नरे Ûि कुमार ǒबãलैáया, लेखा सदःय के सम¢
BEFORE SHRI B.R. MITTAL, JM AND SHRI N.K. BILLAIYA, AM
आयकर अपील सं./I.T.A. No. 8600/Mum/2010
( िनधा[रण वष[ / Assessment Year :2003-04
M/s. Chemicals & Ferro बनाम/
बनाम The ACIT 1(1),
Alloys Pvt. Ltd., Vs. Aayakar Bhavan,
Liberty Building, Mumbai-400 020
Sir Vithaldas Thackersey
Marg,
New Marine Lines,
Mumbai-400 020
ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACC 4508N
(अपीलाथȸ /Appellant) .. (ू×यथȸ / Respondent)
अपीलाथȸ ओर से/ Appellant by: Shri Mahesh C. Mathur
ू×यथȸ कȧ ओर से/Respondent by : Shri V. Krishnamoorthy
सुनवाई कȧ तारȣख / Date of Hearing : 11.12.2012
घोषणा कȧ तारȣख /Date of Pronouncement : 14.12.2010
आदे श / O R D E R
PER N.K. BILLAIYA, AM:
With this appeal the assessee has challenged the correctness of the order of the Ld. CIT(A)-1, Mumbai dt.6.7.2010 pertaining to A.Y. 2003-
04.
2. The sole grievance of the assessee is that the Ld. CIT(A) erred in upholding the levy of penalty u/s. 271(1)(c) of the Act at Rs. 1,21,375/-.
2 ITA No. 8600/M/20103. The roots for the levy of penalty lie in the assessment order dt. 28.10.2005 passed u/s. 143(3) of the Act. During the course of the assessment proceedings, the Assessing Officer noted that the assessee has debited an expense of Rs. 3,30,000/- on account of payment made to Mr. M. Jethwani for looking after the company's interest in the Universal Ferro & Allied Chemicals Ltd. The assessee was asked to justify the claim of this expense. The AO was not convinced with the reply of the assessee on the ground that any expense incurred for the maintenance or guarding the investment is not the business expenditure and accordingly added back a sum of Rs. 3,30,000/- to the returned income and completed the assessment.
4. The assessee carried the matter before the Ld. CIT(A) but without any success. The matter went up to the Tribunal. The Tribunal in ITA No. 5168/Mum/2006 while confirming the order of the Ld. CIT(A) held as under:
"We have heard both the sides, perused the records and the materials available on record. The issue involved in this appeal is whether the expenditure incurred for the purpose of the business of the subsidiary company or for the purpose of the business of the assessee company. It is clear from the order of the AC as well as the CIT(A) that the assessee company is a holding company of Universal Ferro and Allied Chemicals Ltd. and the sum of Rs.3,30,000/- was paid to Mr.Jethwani for looking after the company's interest in Universal Ferro and Allied Chemicals Ltd. The Ld AC) has held that expenses incurred was largely in the nature of guarding the investment the same being not the business of the assessee. Therefore, the expenditure incurred is not allowable as business expenditure and the sum of Rs.3,30,000/- added back to the income of the assessee. On appeal by the assessee, the Ld CIT(A) confirmed the order of the AC by holding that the expenditure incurred by the assessee is not for its business purpose. Only for the business of subsidiary company. From the above facts, we find that the assessee company is a holding 3 ITA No. 8600/M/2010 company of M/s.Universal Ferro & Allied Chemicals Ltd. The payment of Rs.3,30,000/- paid to Mr.Jethwani for looking after the interest of the subsidiary company, the Ld CIT(A) rightly held that the payment of Rs.3,30,000/- paid to Mr.Jethwani not for the purpose of the business of the assessee. Therefore, after careful consideration of facts and circumstances of the case and the above finding, we uphold the order of the CIT(A)."
5. With this factual background, the AO proposed to levy penalty u/s. 271(1)(c) of the Act on the disallowance of expenditure of Rs. 3,30,000/- being professional fees paid to Mr. M. Jethwani. Statutory notices were issued and served upon the assessee by which the assessee was asked why penalty should not be levied on the addition of Rs. 3,30,000/-. In response to which, the assessee filed a detailed reply dt. 17.3.2008 and explained that neither there is any concealment of particulars of income nor there is furnishing inaccurate particulars of income. The assessee also submitted that there was no mens rea in claiming said expenditure and prayed that no penalty should be levied.
6. The AO rejected the submissions made by the assessee. The AO was of the opinion that any expense incurred for the maintenance or guarding the investment is not a business expenditure and even knowing this, yet the assessee claimed the sum of Rs. 3,30,000/- as its business expenditure which amounted to claiming a false expense resulting into filing of inaccurate particulars. After discussing various judicial decisions , the AO went on to levy penalty u/s. 271(1)(c) of the Act at Rs. 1,21,275/- being 100% of tax sought to be evaded.
7. The assessee agitated this matter before the Ld. CIT(A) but without any success. The Ld. CIT(A) relied upon the findings of his predecessor 4 ITA No. 8600/M/2010 in quantum appeal. The Ld. CIT(A) also relied upon the decision of the Tribunal in quantum appeal. After considering the facts and the submission and the decisions in the quantum appeal, the Ld. CIT(A) came to the conclusion that the services of Mr. M. Jethwani to whom professional fees of Rs. 3,30,000/- has been paid was nowhere for the purpose of business of the appellant company, hence the expenditure debited on account of professional fees against the income of the appellant company was wrongly claimed by the appellant company. Thereafter, the Ld. CIT(A) agreed with the findings of the AO that the expenditure claimed amounts to filing of an inaccurate particulars of its income and confirmed the penalty so levied at Rs. 1,21,275/-.
8 Aggrieved with this findings of the Ld. CIT(A), the assessee is before us. The Ld. Counsel for the assessee reiterated the facts as they were at the time of assessment proceedings and submitted that this is a case of disallowance of expenditure which in the opinion of the assessee was an allowable expenditure being incurred for the purpose of business which opinion has not been accepted by the Revenue authorities in quantum proceedings. Merely on the basis of the addition, it cannot be said that the assessee has filed inaccurate particulars of its income liable for penalty u/s. 271(1)(c) of the Act.
9. Per contra, the Ld. Departmental Representative relied upon the findings of the lower authorities.
10. We have carefully considered the rival submissions and perused the orders of the lower authorities. We have also the benefit of the 5 ITA No. 8600/M/2010 decision of the Tribunal in ITA No. 5168/M/06 in quantum proceedings. The undisputed fact is that the genuineness of the payment has not been questioned by the Revenue authorities. It has been accepted in the quantum proceedings that the payment was actually made to Mr. M. Jethwani , only because the said expenditure was not allowed as business expenditure by the Revenue authorities would not amount to filing of inaccurate particulars of income. The Hon'ble Supreme Court in the case of CIT Vs Reliance Petro Products 322 ITR 158 has laid down the ratio that "by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars". The Hon'ble Jurisdictional High Court of Bombay in ITA No. 3899 of 2010 in the case of CIT Vs Aditya Birla Nova Ltd has held as under:
We do not agree, as the assessee had shed all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1) c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the assessing officer for any reason. the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the legislature".
11. Considering the facts of the present case, in the light of the above judicial pronouncement of the Hon'ble Superior Courts , we find that the ratio laid down by the Hon'ble Superior Courts squarely apply on the facts of the present case. Therefore, we do not find any merit in the order of the Ld. CIT(A). The finding of the CIT(A) are reversed. The AO is 6 ITA No. 8600/M/2010 directed to delete the penalty levied u/s. 271(1)(c) of the Act at Rs. 1,21,375/-.
12. In the result, the appeal filed by the assessee is allowed.
पǐरणामतः िनधा[ǐरती कȧ अपीलɅ ःवीकृ त कȧ जाती है Order pronounced in the open court on 14th December, 2012 .
आदे श कȧ धोषणा खुले Ûयायालय मɅ Ǒदनांकः 14.12.2012 को कȧ गई ।
Sd/- Sd/-
(B.R.MITTAL) (N.K. BILLAIYA)
Ûयाियक सदःय /JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER मुंबई Mumbai; Ǒदनांक Dated 14.12.2012 व.िन.स./ RJ , Sr. PS आदे श कȧ ूितिलǒप अमेǒषत/Copy षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. आयकर आयुƠ(अपील) / The CIT(A)-
4. आयकर आयुƠ / CIT
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड[ फाईल / Guard file.
आदे शानुसार/ ार BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai