INCOME TAX OFFICER 9(1)-2, MUMBAI v. M/S. CALCHEM INDUSTRIES PVT. LTD., MUMBAI

ITA 3512/MUM/2007 | 2001-2002
Pronouncement Date: 31-05-2010 | Result: Allowed

Appeal Details

RSA Number 351219914 RSA 2007
Bench Mumbai
Appeal Number ITA 3512/MUM/2007
Duration Of Justice 3 year(s) 23 day(s)
Appellant INCOME TAX OFFICER 9(1)-2, MUMBAI
Respondent M/S. CALCHEM INDUSTRIES PVT. LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-05-2010
Date Of Final Hearing 30-03-2010
Next Hearing Date 30-03-2010
Assessment Year 2001-2002
Appeal Filed On 07-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI D.MANMOHAN VICE PRESIDENT & SHRI R.K.PANDA AM I.T.A. NO. 3512/MUM/2007 (ASSESSMENT YEAR 2001-02) I.T.O-9(1)-2 ROOM NO. 226 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020 VS. M/S. CALCHEM INDUSTRIES PVT. LTD. CHANDBAI PALACE BAZAR ROAD BANDRA (W) MUMBAI-400 050 PAN:AAACC2402R APPELLANT RESPONDENT APPELLANT BY : SHRI S.M. KESH KAMAT RESPONDENT BY : SHRI M.M. PORWAL ORDER DATE OF HEARING: 30.03.2010 DATE OF ORDER: 31.05.2010 PER R.K.PANDA AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 7.2.2007 OF THE CIT(A)-IX MUMBAI DATED RELAT ING TO ASSESSMENT YEAR 2001-02. 2. THE REVENUE IN THE ONLY EFFECTIVE GROUND OF APPEAL HAS CHALLENGED THE ORDER OF THE CIT(A) IN DELETING THE PENALTY OF RS.10 64 600 LEVIED BY THE ASSESSING OFFICER U/S. 2 71(1)(C) OF THE ACT. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSMEN T IN THE INSTANT CASE WAS COMPLETED U/S. 43(3) OF THE ACT ON A TOTAL INCOME OF RS.23 46 670 AS AGAINST THE RETURNED INCOME OF RS.5 20 403. THE ASSESSING OFFICER IN THE SAID ASSESSMENT HAS APPORT IONED CERTAIN EXPENDITURE RELATING TO MUMBAI OFFICE AND FACTORY A T POANTA BETWEEN THE ROHA UNIT IN MAHARASHTRA AND POANTA UNI T IN HIMACHAL PRADESH IN THE RATIO OF THEIR SALES. FURTHER DISALL OWANCE WAS ALSO ITA NO. 3512/MUM/2007 M/S. CALCHEM INDUSTRIES PVT. LTD. ============================ 2 MADE ON ACCOUNT OF EXPENSES OF RS.1 10 396 CLAIMED U/S. 35D OF THE ACT. IN APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND PARTLY ALLOWED THE CLAIM OF THE ASSESSE E U/S. 80IB OF THE ACT AND UPHELD THE DISALLOWANCE MADE U/S. 35D OF TH E ACT. 4. THE ASSESSING OFFICER THEREAFTER INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. IT WAS SUBM ITTED BEFORE THE ASSESSING OFFICER THAT WHILE COMPLETING THE ASSESSM ENT THE ASSESSING OFFICER HAS APPORTIONED CERTAIN EXPENDITU RE RELATING TO MUMBAI OFFICE AND FACTORY AT POANTA ON THE ASSUMPTI ON THAT SOME OF THE EXPENSES RELATED TO POANTA UNIT MIGHT HAVE BEEN DEBITED TO THE PROFIT AND LOSS A/C. OF MUMBAI OFFICE. HOWEVER TH ERE IS NOTHING ON RECORD TO PROVE THAT SUCH ASSUMPTION IS CORRECT. I T WAS SUBMITTED THAT THE COMPANY HAS NOT CONCEALED ANY INCOME NOR F ILED ANY INACCURATE PARTICULARS. THE ASSUMPTION OF THE ASSE SSING OFFICER THAT BY NOT DEBITING THE EXPENDITURE TO THE UNIT WHICH I S ENTITLED TO 100% DEDUCTION U/S. 80IB THE ASSESSEE HAS MINIMISE D ITS PROFIT OF THE INELIGIBLE UNIT IS INCORRECT. IT WAS ALSO SUBM ITTED THAT BENEFICIAL SECTION SHOULD BE INTERPRETED LIBERALLY. HOWEVER THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE VARIOUS EXPLANAT IONS GIVEN BY THE ASSESSEE AND OBSERVED THAT THE ASSESSEE HAS FURNISH ED INACCURATE PARTICULARS OF INCOME OF RS.25 81 386 BY CLAIMING T HE EXCESSIVE EXPENSES AND ALSO FURNISHED INACCURATE PARTICULARS OF INCOME OF RS.1 10 396 BY CLAIMING EXPENSES WHICH ARE CAPITAL IN NATURE. HE ACCORDINGLY LEVIED PENALTY OF RS.10 64 600 U/S. 271 (1)(C) OF THE ACT BEING 100% OF TAX SOUGHT TO BE EVADED. 5. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT THE P ENALTY ORDER IS BEYOND THE STATUTORY TIME PRESCRIBED IN TH E STATUTE AND IS TIME BARRED. ON MERIT IT WAS SUBMITTED THAT IN TH E QUANTUM PROCEEDINGS THE CIT(A) PARTLY ALLOWED THE CLAIM OF DEDUCTION U/S. 80IB AND CONFIRMED THE DISALLOWANCE U/S. 35D OF THE ACT. IT WAS SUBMITTED THAT MERELY BECAUSE THE REVENUE DID NOT A GREE WITH THE EXPLANATION/VIEW OF THE ASSESSEE IT WOULD NOT BE PR OPER TO HOLD THAT ITA NO. 3512/MUM/2007 M/S. CALCHEM INDUSTRIES PVT. LTD. ============================ 3 THE ASSESSEE HAD CONCEALED THE PARTICULARS OF ITS I NCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT WAS SUBMITTED THAT AN EXPLANATION WAS OFFERED BEFORE THE ASSESSING OFFICE R TO THE EFFECT THAT THE ACCOUNTANT OF THE ASSESSEE COMPANY BASED ON THE CONSISTENT PRACTICE FOR THE LAST SEVERAL YEARS DEB ITED THE ENTIRE HEAD OFFICE EXPENSES TO THE ROHA UNIT IN MAHARASHTRA WIT HOUT UNDERSTANDING ITS SIGNIFICANCE THAT THE SAME SHOULD HAVE BEEN APPORTIONED. IT WAS FURTHER SUBMITTED THAT NOTHING HAS BEEN CONCEALED FROM THE DEPARTMENT. 6. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE TH E CIT(A) CANCELLED THE PENALTY LEVIED BY THE ASSESSIN G OFFICER. WHILE DOING SO HE OBSERVED THAT THE APPORTIONMENT OF EXPE NSES BETWEEN THE ROHA UNIT AND POANTA UNIT WERE MADE AS PER THE SALES OF THE UNIT ON ESTIMATE BASIS. ACCORDING TO THE ASSESSING OFFI CER SINCE ALL THE BUSINESS ACTIVITIES OF THE UNIT ARE CONTROLLED FROM THE CORPORATE OFFICE EXPENSES PERTAINING TO CORPORATE OFFICE CAN NOT BE ALLOWED TO BE DEBITED IN ROHA UNIT WHICH CLAIMS DEDUCTION U/S. 80IB @ 30%. HE FURTHER OBSERVED THAT IT IS NOT A CASE WHERE THE ASSESSEE HAS CONCEALED ANY INCOME OR FURNISHED ANY INACCURATE PA RTICULARS OF INCOME SINCE THE ASSESSEE HAS BEEN CONSISTENTLY DEB ITING THE EXPENSES TO PROFIT AND LOSS A/C. OF THE CORPORATE O FFICE FOR THE LAST SO MANY YEARS. IT IS ONLY DURING THIS YEAR THAT TH E ASSESSING OFFICER APPORTIONED THE EXPENSES ON ESTIMATE BASIS ON THE B ASIS OF TURNOVER. SINCE THE APPORTIONMENT OF EXPENSES HAS BEEN MADE B Y THE ASSESSING OFFICER ON THE BASIS OF TURNOVER AND ON E STIMATE BASIS THEREFORE IT DOES NOT ATTRACT ANY PENALTY PROCEEDI NGS. SHE ACCORDINGLY DELETED THE PENALTY LEVIED BY THE ASSES SING OFFICER. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENU E IS IN APPEAL BEFORE US. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDER OF THE ASSESSING OFFICER A ND THE CIT(A) AND THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT ITA NO. 3512/MUM/2007 M/S. CALCHEM INDUSTRIES PVT. LTD. ============================ 4 THAT THE HEAD OFFICE EXPENSES WERE DEBITED TO THE R OHA UNIT WHICH CLAIMS 30% DEDUCTION U/S. 80IB AND NO EXPENSES HAVE BEEN ALLOCATED TO THE POANTA UNIT WHICH IS ELIGIBLE FOR 100% DEDUCTION U/S. 80IB. THEREFORE THE ASSESSING OFFICER APPORT IONED THE EXPENSES IN RATIO OF THEIR TURNOVER ON ESTIMATE BAS IS AND ALLOCATED EXPENSES WHICH HAVE BEEN UPHELD BY THE TRIBUNAL. N OW THE QUESTION THAT ARISES IS AS TO WHETHER PENALTY IS SU STAINABLE ON ACCOUNT OF SUCH WRONG ALLOCATION OF EXPENSES BY THE ASSESSEE. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSES SEE THAT SINCE THE ASSESSEE IS FOLLOWING THIS PRACTICE SINCE LAST SO M ANY YEARS WHICH HAS BEEN ACCEPTED BY THE REVENUE ALTHOUGH UNDER SU MMARY ASSESSMENTS AND SINCE THERE IS NOTHING ON RECORD TO SUGGEST THAT AFTER THIS PRACTICE WAS DETECTED BY THE ASSESSING OFFICER FOR THE IMPUGNED ASSESSMENT YEAR NO RE-ASSESSMENT PROCEEDIN GS FOR THE PREVIOUS ASSESSMENT YEARS HAVE BEEN TAKEN THEREFOR E NO PENALTY SHOULD BE LEVIED. HOWEVER WE DO NOT FIND MUCH FOR CE IN THE ABOVE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. THE HEAD OFFICE EXPENSES IN OUR OPINION SHOULD HAVE BEEN APPORTIO NED BETWEEN BOTH THE UNITS AND SHOULD NOT HAVE BEEN ALLOCATED T O THE UNIT CLAIMING LESSER RATE OF EXEMPTION U/S. 80IB OF THE ACT. MERELY BECAUSE A WRONG PRACTICE WAS FOLLOWED BY THE ACCOUN TANT OF THE ASSESSEE FOR SO MANY YEARS WHICH WAS NOT DETECTED B Y THE ASSESSEE OR THE REVENUE IN OUR OPINION WILL NOT ABSOLVE TH E ASSESSEE ESPECIALLY WHEN THE ASSESSEE IS A PRIVATE LIMITED C OMPANY AND ASSISTED BY THE AUDITORS WHO AUDIT THE ACCOUNTS AND ALSO HELPED BY OTHER CONSULTANTS FOR TAXATION MATTERS. AS REGARDS THE OTHER CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IN THE PAST SUCH PRACTICE HAS BEEN ALLOWED WE FIND ALL ASSESSM ENTS WERE UNDER SUMMARY SCHEME AND THERE WAS NO SCRUTINY ASSESSMENT . AS REGARDS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSES SEE THAT SUCH EXPENDITURE HAS BEEN ON ESTIMATED BASIS WE FIND IN ABSENCE OF ANY SPECIFIC DETAILS THE ASSESSING OFFICER HAS NO OTHER ALTERNATIVE BUT TO ALLOCATE THE EXPENSES ON THE BASIS OF RATIO OF TURN OVER OF THE 2 UNITS ITA NO. 3512/MUM/2007 M/S. CALCHEM INDUSTRIES PVT. LTD. ============================ 5 WHICH IN OUR OPINION IS A SCIENTIFIC ONE. AS REG ARDS THE VARIOUS CASE LAWS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSES SEE WE FIND THE FACTS OF THE INSTANT CASE ARE DIFFERENT FROM THOSE CASES AND ARE DISTINGUISHABLE. 8. SINCE THE ASSESSEE CLAIMED THE ENTIRE HEAD OFFICE E XPENSES IN THE PROFIT AND LOSS ACCOUNT OF ROHA UNIT WITHOUT AL LOCATING ANY EXPENDITURE TO THE OTHER UNIT WHICH CLAIMS 100% DED UCTION U/S. 80IB AND THUS MAXIMISED THE PROFIT OF THE ELIGIBLE UNIT AND MINIMISED THE TAX LIABILITY OF THE LESS ELIGIBLE UN IT THEREFORE WE ARE OF THE OPINION THAT THE ASSESSEE HAS FURNISHED IN A CCURATE PARTICULARS OF INCOME SO AS TO ATTRACT THE PROVISIO NS OF SECTION 271(1)(C) OF THE ACT. SIMILAR IS THE CASE FOR WRON G CLAIM OF DEDUCTION U/S 35D. WE THEREFORE SET ASIDE THE ORD ER OF THE CIT(A) AND RESTORE THE ORDER OF THE ASSESSING OFFICER. TH E GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY ALLOWED. 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS A LLOWED. PRONOUNCED ON 31 ST MAY 2010 SD/- (D. MANMOHAN) VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI DATED 31 ST MAY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-IX MUMBAI 4. THE CIT CITY-IX MUMBAI 5. THE DR C BENCH. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO