 | Section 32 applied only on capital expenditure not on revenue for any reason |
| Posted on 12 November 2012 by Apurba Ghosh | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CourtINCOME TAX APPELLATE TRIBUNAL BriefThat the Ld. Commissioner of Income Tax (A) erred on facts and in law in confirming the disallowance of ` 30,07,454/- made by the Assessing Officer in respect of expenditure on repairs and maintenance of building incurred by the appellant, holding the same to be capital expenditure. CitationUnited Hotels Limited,The Ambassador Hotel, Sujan Singh Park, Cornwallis Road,New Delhi – 110 003 (Appellant) (PAN: AAACU0031C) Vs. Addl. Commissioner of Income Tax,Range-18, New Delhi (Respondent) Judgement IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH "H", NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER I.T.A. No. 3225/Del/2012 A.Y. : 2009-10 United Hotels Limited, The Ambassador Hotel, Sujan Singh Park, Cornwallis Road, New Delhi – 110 003 (Appellant) (PAN: AAACU0031C) Vs. Addl. Commissioner of Income Tax, Range-18, New Delhi (Respondent) Assessee by: Sh. Rupesh Jain, Sh. Upvam Gupta, CA Department by: S mt. Shumana Sen, Sr. D.R. ORDER PER SHAMIM YAHYA: AM This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XXI, New Delhi dated 19.4.2012 pertaining to assessment year 2009-10. 2. The grounds raised read as under:- i) That the Ld. Commissioner of Income Tax (A) erred on facts and in law in confirming the disallowance of ` 30,07,454/- made by the Assessing Officer in respect of expenditure on repairs and maintenance of building incurred by the appellant, holding the same to be capital expenditure. ii) That the Ld. Commissioner of Income Tax (A) erred on facts and in law in not appreciating that Explanation 1 to section 32(1) of the Act was not applicable on the facts of the case, in view of there being no creation of additional space or building capacity by the appellant by virtue of incurring of the aforesaid expenditure. The appellant craves leave to add to, amend or vary the above grounds of appeal on or before the date of hearing. 3. In this case Assessing Officer noted that during the current assessment year assessee has incurred of ` 58,42,496/- on account of repair and maintenance of building. Further it was noticed that assessee has claimed in the head 'Office General' (Renovation) amounting to ` 30,07,465/-. Assessee was asked to submit the details in this regard. Assessee has submitted as under:- "Office General (Renovation) in the amount of ` 30,07,454/-, we would inform that similar kind of renovation is a continuing process in a hotel industry. The has to be done for various reasons. The main being more foot falls and usage as compared to fabrics, upholstery, curtains etc. used in a domestic house. The other main reason being that the public areas have to be redecorated every so often to maintain the charm and to ensure that customers keep coming and to do not get bored with the same scenario. It is exactly for this reason that a mockup room was prepared based on which other rooms in the hotel would be renovated. This expenditure amounted to ` 13,49,485/-, similarly, a Bar by the name of Insomnia was renovated on which expenditure of ` 16,57,969/- was incurred thus aking a total of ` 30,07,454/-." 3.1 Assessing Officer did not accept this contention. He referred to the several case laws. He held that it was found that the expenses which are providing enduring benefits and enhancing efficiency and effectiveness of hotel have been charged off to profit and loss account. Assessing Officer opined that this should have been capitalized to fixed assets. Hence, treating expenditure involved as capital expenditure, Assessing Officer disallowed the expenditure. 4. Before the Ld. Commissioner of Income Tax (A) assessee submitted as under:- "The assessee United Hotels Ltd. is engaged in the business of operating Hotel for last more than 50 years under the name and style of 'Ambassador Hotel' from their rented premises at Sujan Singh Parkj, New Delhi. The Hotel premises have been taken on rent from Sir Sobha Singh and Co. Pvt. Ltd. and the building in which the Hotel is located is absolute antique being more than 60 years old. Something or the other in the building like electrical wiring, switches, plumbing, bath room fittings ceiling paints, polishes require maintenance, repair, renewal as an on-going process. Secondly, being a Hotel, the assessee has to keep on making changes to its rooms restaurants, lobbies in their decor as well as in the edibles on offer (i.e. the menu) to keep attracting the customers. The restaurant, bars, public places especially therefore have to be redesigned, refurbished more so often. The assessee company did exactly this kind of thing during the year under assessment by incurring expenditure of Rs. 58, 42,496/- on repair and maintenance of building. The assessee was asked to provide part details of account Head (Office General) (Renovation) amounting to Rs.30,07,454/-. The details of this account head vide page no. 444 together with explanatory letter dated 16th December, 2011 were duly filed. The same are attached herewith. The assessing officer while disallowing the expenditure of RS.30,07,454/- has quoted case law of Ballimal Nawal Kishore vs. ClT 224 ITR 414(SC) and case law of ACIT vs. E.I., Dupont India Ltd., ITAT, Del) 107 ITD 63. The above two case laws are absolutely not applicable to the facts and circumstances of the assessee and the case. In the case of Ballimal Nawal Kishore, the repairs and renewal were done on self owned premises and not on leased premises. On the other hand the assessee company has infact followed the principle enunciated in the second case law i.e. all capital expenditure incurred in lease hold premises which can be removed when leaving the premises has been capitalized. The expenditure charged to revenue account as shown in page no. 444 consists of upholstery, fabric, cutlery, rubber mats, napkins, civil work, shower mirror, room chair cloth etc. No additional asset was created, it is only the existing assets which were renewed. As mentioned in the note filed with the assessing officer part of the expenditure was on mockup room based on which the other rooms in the Hotel were to be refurbished. The other part of the expenditure was on redoing the bar in the Hotel called Insomnia Bar." 4.1 Furthermore, the case law relied by the Assessing Officer was distinguished and several other case in support of the case of the assessee were submitted. Assessee further submitted that ITAT decided the similar issue in assessee's own case for assessment year 1998-99 in favour of the assessee. Considering the above submissions, Ld. Commissioner of Income Tax (A) held as under:- "I have perused the written submission and copy of the order passed by CIT (A) for assessment year 1998- 99 and Hon'ble ITAT in the assessee's own for assessment year 1998K99. Vide order dated 28.11.2008, in para 20 of the order, Hon'ble ITAT has held as under:- "In this year, the CIT (Appeals) has taken a contrary view than what he has taken in the earlier year. From the reasons given aforesaid in the earlier year's appeal, we hold that expenditure which are of revenue in nature are not covered in the Explanation 1 to section 32(1) of the Act and it is only the expenditure which are of capital expenditure would be governed by this. We accordingly set aside the order of the CIT (Appeals) as well as the assessing officer and remit the matter back to the file of the assessing officer to restrict the allowance on account of capital expenditure vis-a-vis the Explanation 1 to section 32(1) only with regard to those items which are of capital nature by itself and not only the ground that they were expenditure on renovation of the building. It should be in the light of our decision in earlier year as discussed above. If the capacity of the assessee has increased or the mere construction is made by the assessee on the building making more space available to it only then that expenditure would be of capital and hit by the Explanation 1 to section 32(1) of the Act. Accordingly, the first ground taken by both the revenue and assessee in assessment year 1999-2000 is allowed for statistical purposes." In the light of the observation of the Hon'ble ITAT as discussed above, it is found that appellant's plea that Hon'ble ITAT has decided the issue in favour of the appellant is not so and Hon'ble lTAT has remitted back the issue to the file of AO to decide the issue in the light of Explanation 1 to Sec.32 of the ITAT Act, by making observation that issue should be decided to restrict the allowance on account of capital expenditure vis-a-vis the Explanation 1 to Sec. 32 only. The assessment year involved was 1998-99. In the assessment year 2009-10 AO has given specific opportunity and after getting reply of the assessee vide letter dated 16.12.2011 and relying on the ratio of the judgment of Hon'ble Supreme Court in the case of BaIlimal Naval Kishore vs. CIT 224 ITR (SC) and also putting reliance on various other judgments, AO has held that expenses are providing enduring benefit and thus enhancing efficiency and effectiveness of the Hotel. So, finding of the Assessing Officer is based on facts that expenses should have been capitalized to fixed assets in the books of accounts of the assessee. By doing so Assessing Officer has worked out disallowance of ` 30,07,454/-. The Ld. Ld. Authorised Representative's reliance on this vaorus case laws has been considered and found to be not attracted on the facts of the case. In view of the above discussion ground no. 2 of the appellant deserves to be dismissed. 5. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that in this case the assessee has a hotel premises on lease. Assessee had to incur various expenditure as on-going operations. Assessee's submission is that assessee has a hotel and it has to keep on making changes to its rooms restaurants, lobbies in their decor as well as in the edibles on offer (i.e. the menu) in attracting the customers. The restaurant, bars, public places especially therefore have to be redesigned, refurbished more so often. The expenditure is charged to revenue account. The renovation expenditure involved expenditure on items like upholstery, fabric, cutlery, rubber mats, napkins, civil work, shower mirror, room chair cloth etc. Thus, we find that no additional asset was created, it was only the existing assets which were renewed. Assessee has explained the expenditure was on mockup room based on which the other rooms in the Hotel were to be refurbished. The other part of the expenditure was on redoing the bar in the Hotel called Insomnia Bar. The detail of expenditure in this regard have been furnished as follows:- Bar (Repairs to others)
Mockup Room No. 107 (Repairs to others)
6. On examination of the aforesaid items, it is discernible that the expenditure was of revenue in nature and cannot be said to be capital in nature. The Assessing Officer has himself admitted in the assessment order that expenditure incurred were for enhancing the efficiency of the hotel. In our considered opinion, such expenses cannot be said to be adding to the space of hotel or adding to the capacity to the hotel. In this regard, we find that assessee has relied upon the following cases laws:- - 293 ITR 432 C.I.T. vs. Lean Logistics Ltd. - 169 Taxman 41 – Roger Enterprise (P) Ltd. vs. C.I.T. - 322 ITR 590 C.I.T. vs. Delhi Press Samachar P Ltd. - 302 ITR 26 C.I.T. vs. Dr. A.M. Singhvi - 237 ITR 902 C.I.T. vs. Ooty Dasaparkash. The above case laws are germane and support the case of the assessee. In 293 ITR 432 CI.T. vs. TVS Lean Logistics Ltd. In this case it was held that where the assessee did not acquire the capital asset, but had put up construction of building only for the business purpose, the entire construction cost admissible as revenue expenditure. In Roger Enterprise (P) Ltd. vs. C.I.T.- 169 Taxmman 41, it was held that expenditure for renovation of leased premises can be revenue expenditure. In the case of 322 ITR 590 C.I.T. vs. Delhi Press Samachar P Ltd. the Hon'ble Jurisdictional High Court was considering the case where the assessee had a press building, assessee has incurred expenditure on repairs / replacement/ replacing of dilapidated beams, pillars, walls etc. of existing press building, the Hon'ble court upheld the order of the tribunal which adjudicated that assessee has incurred expenditure only to preserve and maintain the existing assets and expenditure was not of a nature which brought into being a new assets, or created for a new addition of enduring nature. Consequently, the deletion of disallowance was upheld. In 302 ITR 26 C.I.T. vs. Dr. A.M. Singhvi. In this case Hon'ble Rajasthan High Court was considering the case where the assessee was an advocate and kept a rental premises for office use during the relevant assessment year. He carried out certain repairs and renovation of office premises in order to see that the said premises was kept in a proper condition and professional activity were carried out effectively and smoothly. In these circumstances, it was held that the assessee has incurred expenditure in connection with smooth working of the profession and leaving the fixed assets untouched. The expenditure in question was revenue and hence, allowable un/s. 37(1) of the Act. In 237 ITR 902, C.I.T. vs. Ooty Dasaprakash. In this case it was held that the expenditure incurred for repairs, modernizing hotel and replacing existing component of the portion of the building for furniture and fitting with a view to create the consultative and beautiful atmosphere for the purpose of running the hotel business should not be said to be of enduring nature and hence, the same was not capital expenditure. 7. We find that this tribunal in assessee's own case in I.T.A. No. 3464/Del/2005 & ors. Vide order dated 28.11.2008 has concluded as under:- "In this year, the CIT (Appeals) has taken a contrary view than what he has taken in the year. From the reasons given aforesaid in the earlier year's appeal, we hold that expenditure which are of revenue in nature are not covered in the Explanation 1 to section 32(1) of the Act and it is only the expenditure which are of capital expenditure would be governed by this. We accordingly set aside the order of the CIT (Appeals) as well as the Assessing Officer and remit the matter back to the file of the Assessing Officer to restrict the allowance on account of capital expenditure vis-Ã -vis the Explanation 1 to section 32(1) only with regard to those items which are of capital nature by itself and not on the ground that they were expenditure on renovation of the building. It should be in the light of our decision in earlier year as discussed above. If the capacity of the assessee has increased or the mere construction is made by the assessee on the building making more space available to it only then that expenditure would be of capital and hit by the Explanation 1 to section 32(1) of the Act. Accordingly, the first ground taken by both the revenue and assessee in assessment year 1999-2000 is allowed for statistical purposes." 8. We further find that ITAT, Delhi in the case of G4S Security Services India (P) Ltd. vs. DCIT in I.T.A. No. 4315/Del/2005 vide order dated 31.3.2008 has inter-alia held as under:- "10. Before parting we may also discuss the arguments advanced from the side of the Revenue. The first argument taken up by the Assessing Officer is based upon the provisions of Explanation 1 to Section 32(1) of the Act. It is urged by the Revenue that the assessee was only entitled to depreciation on the capital expenditure incurred in terms of Explanation 1 to Section 32(1) and not for the deduction of the whole of the amount as a revenue expenditure. In this regard, a perusal of the said Explanation, which has been reproduced by us elsewhere in the order, reveals that it seeks to facilitate the allowance of depreciation in case any capital expenditure is incurred by an assessee in the premises which are otherwise not owned by it and is held merely as a lessee. Ostensibly, the said Explanation does not seek to determine the nature of the expenditure. It only provides that in case a capital expenditure is incurred by an assessee in the premises which are not, owned by the said assessee, still the assessee shall be eligible to claim the depreciation allowance. The Hon'ble Karnataka High Court in the case of Rex Talkies (supra) while considering a similar situation in terms of the erstwhile Section 32(1A) observed that such a provision was enacted for the benefit of a lessee to claim allowance of depreciation on construction of work put up on leased premises which in the normal course such an assessee would not have been entitled to, since such an assessee was not the owner. So however, it is clarified that it is not the same thing to state that whatever is spent by a lessee or a tenant, on the leased premises should always be recorded as a capital expenditure. In our view, the said judicial pronouncement rendered by the Hon'ble Karnataka High Court makes the case of the Revenue weak in so far as the reliance on Explanation 1 to Section 32(1) is concerned. From the aforesaid proposition laid down by the Hon'ble High Court, an inference that can be drawn is that the nature of expenditure in question has to be examined in the light of the normal principles of law, as has been done by us in the earlier paragraphs. We may also add here that the rationale laid down by the Hon'ble Karnataka High Court is in consonance with the objects for which the Explanation 1 to Section 32(1) or the erstwhile Section 32(1 A) was put on the Statute. For the above reasons, we therefore, are of the view that Explanation 1 to Section 32(1) does not come in the way of allowing the present assessee's claim for deduction of the impugned expenditure as a revenue expenditure." 9. In the background of the aforesaid discussion, we hold that in this case assessee has not incurred capital expenditure. The expenditure incurred cannot be said to be adding to the space or the capacity of hotel. The expenditure was only to preserve and maintain existing assets. The Assessing Officer has himself found that the expenditure was for enhancing the efficiency and effectiveness of the hotel. Such expenditure in our considered opinion cannot be said to be capital in nature. Hence, we set aside the orders of authorities below and decide the issue in favour of the assessee. 10. In the result, the appeal filed by the Assessee stands allowed. Order pronounced in the open court on 19/9/2012. Sd/- Sd/- [C.M. GARG] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Date 19/9/2012 "SRBHATNAGAR" Copy forwarded to: - 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Benches | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | Penalty cannot be imposed under section 271 on debatable issue |
| Posted on 12 November 2012 by Apurba Ghosh | |||||||||||||||||||||
CourtINCOME TAX APPELLATE TRIBUNAL BriefThe relevant facts of the case giving rise to these appeals are as follows. The assessee is a private limited company which filed its return of income for A.Y. 1981-82, 82-83 and 83-84 on 30.6.1981, 30.6.1982 and 10.8.1983 respectively. On the basis of the said returns, assessments were originally completed by the Assessing Officer u/s. 143(3). The assessments so completed, however, were subsequently reopened for all these three years on the basis of information received by him that the commission claimed to have been paid by the assessee company to three companies, viz., M/s Excavators India Pvt. Ltd., M/s Triveni International Products Pvt. Ltd. and M/s Bahari & Company Pvt. Ltd. in the said years was bogus an the amounts paid to the said companies by cheques towards commission had been actually received back by the assessee company in cash. CitationITA Nos. 567, 568 & 569/Del/2006 A.Y.rs. 1981-82, 1982-83 & 1983-84 Dy. Commissioner of Income Tax, Cir. 15(1), Room No. 412, CR Building, I.P. Estate, New Delhi (Appellants) Vs. M/s Roger Enterprises (P) Ltd.,Flat No. L, 1st floor, C-3, Kailash Colony, New Delhi (PAN: AAA CR 0234J) (Respondents) Judgement IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH " H" New Delhi BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA Nos. 567, 568 & 569/Del/2006 A.Y.rs. 1981-82, 1982-83 & 1983-84 Dy. Commissioner of Income Tax, Cir. 15(1), Room No. 412, CR Building, I.P. Estate, New Delhi (Appellants) Vs. M/s Roger Enterprises (P) Ltd., Flat No. L, 1st floor, C-3, Kailash Colony, New Delhi (PAN: AAA CR 0234J) (Respondents) Assessee by: Sh. Ajay Vohra, Rohit Jain, Advocates and Ashwani Seta, CA, Deepashree Rao, CAs Department by: D r. B.R.R. Kumar, Sr. D.R. ORDER PER SHAMIM YAHYA: AM These three appeals are preferred by the Revenue against a common order of Ld. Commissioner of Income Tax (A)-XVIII, New Delhi dated 22.11.2005 whereby he cancelled the penalties of ` 18,32,996/-,` 35,00,189/- and ` 9,16,213/- imposed by the Assessing Officer u/s. 271(1)(C) for A.Y.rs. 1981-82, 1982-83 & 1983-84 respectively. 2. The relevant facts of the case giving rise to these appeals are as follows. The assessee is a private limited company which filed its return of income for A.Y. 1981-82, 82-83 and 83-84 on 30.6.1981, 30.6.1982 and 10.8.1983 respectively. On the basis of the said returns, assessments were originally completed by the Assessing Officer u/s. 143(3). The assessments so completed, however, were subsequently reopened for all these three years on the basis of information received by him that the commission claimed to have been paid by the assessee company to three companies, viz., M/s Excavators India Pvt. Ltd., M/s Triveni International Products Pvt. Ltd. and M/s Bahari & Company Pvt. Ltd. in the said years was bogus an the amounts paid to the said companies by cheques towards commission had been actually received back by the assessee company in cash. 3. The statement of Mr. M.K. Meattle, Managing Director of the above three companies was recorded u/s. 131 on 8.3.1990 and in his statement Mr. M.K. Meattle informed the Assessing Officer that commission paid to M/s Roger Enterprises Pvt. Ltd. by the three companies were havala entries. Mr. M.K. Meattle informed that the modus operandi was that Mr. Jhunjhunwala used to fill up the paying slip for depositing the cheques issued by M/s Roger Enterprises Pvt. Ltd. in the name of these three companies and M/s Roger Enterprise had accounts in the same branch of the bank. 3.1 Mr. Jhunjhunwala used to take blank cheques signed by Sh. M.K. Meattle fill up the amounts in his own handwriting and withdraw the cash as the cheques were bearer cheques and the cash withdrawn was returned to M/s Roger Enterprises Pvt. Ltd and Shri Meattle never got 1% commission promised to him. Sh. M.K. Meattle also stated that Shri A.K. Jhunjhunwala used to take his signatures on some papers which were in the nature of correspondence made in the name of three companies. The Assessing Officer further observed that Sh. M.K. Meattle was asked to appear again on 13.3.1990 at 10 AM for cross examination and a copy of statement of Sh. Meattle was forwarded to the company and to appear on 13.3.90 for cross examining. However, the assessee company filed letter requesting for six weeks time for cross examining Shri Meattle. Hence, the assessee company did not avail the opportunity to cross examine him which established contentions of Sh. Meattle as given in his statement on oath. Assessing Officer further observed that copies of correspondence purported to have been made with these three companies regarding payment of commission to these companies were filed but there was no reasonable basis for payment of these commissions. 3.2 The additions made towards payment of commission to above three companies was confirmed by Ld. Commissioner of Income Tax (A). Assessee filed an appeal before the ITAT on the issue of disallowance of payment of commission to above three parties and the ITAT vide order dated 24.12.93 the assessment were set aside with the directions to afford reasonable opportunity to the assessee to cross examine the persons on whose statements the additions were made. In the set aside proceedings the additions were again confirmed by the Assessing Officer. The additions of this commission was confirmed by the Ld. Commissioner of Income Tax (A). The ITAT vide common order for assessment years 1981-82, 82-83 & 83-84 dismissed the appeal of the assessee, after elaborately discussing the sequence of the events and facts in the body of the order. Subsequent to the above ITAT order penalty proceedings were initiated. The AO. observed that the issue of cross examining the two witnesses of the case and that no opportunity was provided for cross examining has been rejected by ITAT and the assessee had also categorically refused to cross examine Shri AK. Jhunjhunwala on 27.02.1996 stating that he was stranger to the transaction. The Hon'ble ITAT discussed the entire contents of the statement of Mr. M.K. Meatlle and Shri AK. Jhunjhunwala and held that both the witnesses were witnesses of transaction and were witnesses of fact and rejected the plea of the assessee that Shri Jhunjhunwala was stranger to the transaction. The Hon'ble ITAT held that in the light of provisions of section 33 of the Evidence Act, statement of Shri M.K.Meatlle recorded earlier in the course of assessment proceedings stands as the assessee did not cross examine him despite been provided an opportunity to do so and hence the evidence of Mr. M.K.Meatlle was complete and can be read in and thus the problem lied at the hands of the assessee who had not availed of the opportunity given to it and having not availed of this opportunity was unnecessarily trying to blame the revenue and that the onus of the proof that commission paid was genuine was on the assessee. Merely because payment was made by cheque may persuade the authorities to hold the payment be genuine but in this case the situation is totally reverse as parties to whom the payment made by cheque alleged to have been made has his own story to tell. The evidences placed by the assessee did not demonstrate the nature of services rendered by the three companies and accordingly the assessee has failed to demonstrate the services rendered and thus failed to discharge the onus and accordingly the ITAT dismissed the appeal of the assessee. The A.O. further in the penalty proceedings concluded that there is no doubt that the assessee company deliberately not cross examined the witness despite been provided opportunity to do so on one pretext or the other and the Hon'ble ITAT conclusively held that by no stretch of imagination can it be said that the authorities below have not given proper opportunity to the assessee to prove his case and therefore the Assessing Officer after examine all the facts and records took a similar view and do not agree with the assessee that it was not provided an opportunity to cross examine the witnesses. The Assessing Officer further observed that the assessee had filed Paper Books containing papers claimed to be the correspondence with three companies as evidence of services rendered by these companies and genuineness of the payments. However the role of the three companies in the work does not get substantiated and in the correspondence with the principals of the clients there is no mention about any role of the three companies who have claimed as sub agent for liaison work and the correspondence has been put in between the clients/principals for justifying the role of payment of 75-80% of the commission received by it. The companies have highly qualified and experienced personnel but the correspondence do not show any evidence and the assessee company ever tried to find out about the genuineness of the claim which proves that the correspondence between M/s. Roger Enterprises Pvt. Ltd. and all the three companies were not genuine. Thus the Assessing Officer concluded that this corroborates the claim of Shri Meattle that he had signed the papers purportedly claimed as correspondence without actually undertaking any work for the assessee and therefore papers filed by the assessee cannot be relied upon. The AO has stated that the assessee company has given parawise reply claiming the commission was genuine not withstanding the statement given by Shri Meattle and Shri Jhunjhunwala which did not substantiate the same and has not agreed with the contentions of the assessee. The Assessing Officer confirmed that the assessee vide his letter dated 29.12.2003 has asked for allowing opportunity to cross examine both Shri Meattle and Shri Jhunjhunwala and the same request was reiterated vide letter dt. 21.01.2004 but such plea at this stage of proceedings appear to be deliberate attempts of the assessee to delay the proceedings. Thus the AO finally concluded that he is of considered view that the assessee has deliberately made a wrong claim of expenditure by way of bogus commission with an intention of concealing the actual income and levied penalty @120% of the tax sought to be d and levied the penalties as under:-
4. Before the Ld. Commissioner of Income Tax (A) assessee made elaborate submissions. Considering the above Ld. Commissioner of Income Tax (A) observed that nowhere in the assessment order the Assessing Officer has recorded his satisfaction for initiation of penalty proceedings u/s. 271(1)(c). Ld. Commissioner of Income Tax (A) further observed that Assessing Officer has primarily and substantially relied upon the finding of the ITAT and no new facts have been placed on record justifying that the assessee company has concealed the income or furnished inaccurate particulars of income. Ld. Commissioner of Income Tax (A) further observed that on going through the penalty order and replies furnished by the company, it is found that explanation offered by the company was not found to be malafide or false, but the same could not be substantiated on account of lack of opportunity to cross examine the persons whose ex-party statements have been used for making the disallowance. Ld. Commissioner of Income Tax (A) further observed that in the set aside proceedings Mr. Meattle could not be produced for cross examination and the Assessing Officer himself in the order has admitted that the issue of cross examination of Mr. Meattle has come to dead end. Ld. Commissioner of Income Tax (A) further observed that the addition has been made on the exparte statement of Mr. Meattle and Mr. A.K. Jhunjhunwala recorded by the Assessing Officer in the course of assessment proceedings and / or other proceedings. Ld. Commissioner of Income Tax (A) further observed that as the explanations furnished by the assessee are bonafide and therefore merely because disallowance has been made and confirmed by ITAT no penalty is leviable. Ld. Commissioner of Income Tax (A) further noted that during the course of penalty proceedings assessee company requested the Assessing Officer to cross examine Sh. Meattle and Mr. Jhunjhunwala whose statement was relied upon by the Assessing Officer in disallowing the commission paid by the company. Ld. Commissioner of Income Tax (A) noted that penalty proceedings are separate proceedings and Assessing Officer should have allowed cross examination of both the persons which have been denied due to time baring matter when the set aside order was passed on 25.3.1996. Ld. Commissioner of Income Tax (A) opined that in the interest of justice such opportunity should have been allowed. The whole assessment / reassessment is based upon the statement of two persons mentioned above and no opportunity was allowed in the penalty proceedings to cross examine them. It was further observed that the statement of Mr. Meattle and Mr. A.K. Jhunjhunwala are altogether contradictory and the answers to the questions put in separately have been answered in a casual way without confirming the entire facts and therefore such statement without cross examination has no meaning in the eyes of law. Ld. Commissioner of Income Tax (A) further observed that in the set aside proceedings, the Assessing Officer could not produce Mr. Meattle for cross examination by the assessee. The notice sent to Mr. Meattle and Mr. A.K. Jhunjhunwala to appear for cross examination has returned unserved. Please check the full judgment in the attachment........ JUDGMENT IN DETAIL IS ATTACHED AS DOCUMENT FILE........ | |||||||||||||||||||||
__._,_.___
No comments:
Post a Comment