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M/s. Indian Aluminium Company Ltd Versus The Asst. Commissioner of Income-tax

2015 (3) TMI 532 - ITAT MUMBAI

Penalty u/s.271(1)(c) - disallowance u/s 80-I for grant of claim on account of reallocation of administrative expense - Held that:- The difference in the claim of deduction u/s 80-IA is mainly on the basis of allocation of administrative expenses, which has been allocated in the ratio of turnover. The assessee’s case had been that it has adopted the basis of allocation based on the precedent of Tribunal order for assessment year 1983-84, which has been accepted by the department in subsequent as .....

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hat the assessee has failed to establish any extra ordinary situation or difficulty of the payee under Rule 6DD. Whereas, the assessee’s case has been that, the payments were made to the Government authorities and advance to the employees, genuineness of which have not been doubted. The disallowances have been made mainly on technical ground. In our opinion, such a disallowance does not warrant levy of penalty, because there is no furnishing of inaccurate particulars or concealment of income, be .....

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expenditure, which were incurred towards car, minibus, electronic typewriter etc., which are capital in nature. If such an expenditure has been claimed in the profit and loss account as revenue expenditure, then definitely it amounts to furnishing of inaccurate particulars of income. Thus, penalty confirmed by the CIT(A) on the expenditure of ₹ 9,23,000 is upheld, because admittedly there are capital expenditure. - Decided against assessee.

Disallowance u/s 43B - Held that:- If .....

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s from the passing of the original assessment order. On the present facts the assessee’s bonafide is liable to be accepted for the reason that the accounting period for the assessment years 1988-89 and 1989-90 had overlapped and assessment year 1989-90 being the transition period (because the accounting period in most of the cases was for more than 12 months), such claim for deduction cannot be adversely viewed, whether it should be treated as allowable in the assessment year 1988-89 or in the A .....

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, penalty u/s 271(1)(c) on such a disallowance is deleted. - Decided in favour of assessee. - ITA No.2081/Mum/2013 - Dated:- 4-3-2015 - Shri N.K.Billaiya And Shri Amit Shukla JJ. For the Appellant : Shri Naresh Jain For the Respondent : Shri Asghar Zain V.P. ORDER Per Amit Shukla (JM) : The aforesaid appeal has been filed by the assessee against order dated 21.12.2012, passed by the Commissioner of Income-tax (Appeals)- 12, Mumbai, in relation to the penalty proceedings u/s. 271(1)(c), for the a .....

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u/s 80-I amounting to ₹ 43,64,230/- for grant of claim on account of reallocation of administrative expense. 3. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (A) has grossly erred in affirming the decision of the AO for imposing penalty u/s 271(1)(c) on disallowance of ₹ 9,23,000/- on account of replacement of plant and machinery being held as capital expenditure. 4. On the facts and circumstances of the case and in law, the learned Com .....

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on following disallowances:- (i) Disallowance of claim of ₹ 43,64,230 u/s 80-I on account of reallocation of administrative expenses; (ii) Disallowance of ₹ 9,23,000 on account of replacement and repairs of plant and machinery being held as capital expenditure. (iii) Disallowance of ₹ 5,24,079 made u/s 40A(3). (iv) Disallowance of ₹ 48,30,254 u/s 43B. 3. DISALLOWANCE MADE U/s 80- I 3.1 In the return of income, the assessee has claimed deduction u/s.80-I of ₹ 3,73,40 .....

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made by the assessee of other expenses like direct cost, interest etc., except for administrative expenses, which was allowed in the ratio of turnover. As an effect of CIT(A) order, the claim u/s 80-IA was restricted to ₹ 3,29,75,770. This order of the CIT(A) has been affirmed by the Tribunal. In the penalty order, the Assessing Officer has levied the penalty on this difference in claim of ₹ 43,64,230 (Rs.3,73,40,000 -3,29,75,770). 3.2 The assessee s explanation in the penalty proce .....

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CIT(A). Hence, it cannot be said that there is any concealment of income or furnishing of inaccurate particulars. Various decisions were also relied upon in support of the contention that, no penalty can be levied on such reduction of claim u/s 80-I. The learned CIT(A) has confirmed the penalty on the ground that the claim made by the assessee was on adhoc method instead of any scientific method, and therefore, the assessee has claimed higher deduction, which amounts to filing of inaccurate par .....

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elied upon the order of the CIT(A). 3.5 We have heard the rival submissions and also perused the relevant material placed on record. The difference in the claim of deduction u/s 80-IA is mainly on the basis of allocation of administrative expenses, which has been allocated in the ratio of turnover. The assessee s case had been that it has adopted the basis of allocation based on the precedent of Tribunal order for assessment year 1983-84, which has been accepted by the department in subsequent a .....

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exceeding ₹ 10,000, along with the nature of payments. The aggregate of such cash payment was at ₹ 5,64,079. It was submitted on behalf of the assessee that the said payments were made to the Government authorities and advances to the employees, the identity of such parties, genuineness of the payment and the purpose of payment, had been verified and reported by the Tax Auditor. However, the Assessing Officer disallowed the entire expenditure u/s 40A(3) without considering the asses .....

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the CIT(A) and in the assessment year 1997-98, the same has been allowed by the ITAT. In this year also, the identity of the parties and the genuineness of the payment, have not been doubted. Therefore, no penalty for furnishing of inaccurate particulars or concealment of income should be levied. However, the Assessing Officer has levied the penalty, which has been confirmed by the CIT(A), in his detailed order, wherein his findings are mostly general in nature and discussion on the proposition .....

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ns and also on the perusal of the impugned orders, we find that the disallowance u/s 40A(3) was made on the ground that the assessee has failed to establish any extra ordinary situation or difficulty of the payee under Rule 6DD. Whereas, the assessee s case has been that, the payments were made to the Government authorities and advance to the employees, genuineness of which have not been doubted. The disallowances have been made mainly on technical ground. In our opinion, such a disallowance doe .....

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₹ 50,93,829 towards replacement of assets, against which, the CIT(A) has partly allowed the claim of the assessee by directing the AO to verify whether each and every items covered in the assets were independent or not, and whether it is a part of any plant or machinery. After giving effect to the CIT(A) s order, the AO has disallowed a specific sum of ₹ 9,23,000, which was towards the car, minibus, electronic typewriter etc. Admittedly, such an expenditure cannot be treated as reven .....

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d upon the decision of the Hon ble Supreme Court in the case of Price Waterhouse Coopers v. CIT [(2012) 348 ITR 306 (SC)]. 5.3 On the other hand, the learned Departmental Representative, strongly relying upon the order of the CIT(A), submitted that, this was a wrong claim made by the assessee, which definitely amounts to furnishing of inaccurate particulars, and therefore, penalty has rightly been confirmed. 5.4 After considering the rival submissions, we find that it is an admitted fact that th .....

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rief facts are that, the Assessing Officer found that an amount of ₹ 48,29,984 cannot be allowed as deduction u/s.43B. In the appellate proceedings, the CIT(A) restricted the disallowance to ₹ 33,69,014 and for the balance amount of ₹ 14,60,970, gave the direction to the AO to allow the claim after due verification of evidence of payment. In the appeal effect proceedings, the assessee filed a letter dated 03.09.2010 stating that the details of ₹ 14,60,970 are no longer av .....

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cted not to serve the copy of the assessment order without the permission of the Court. Later on, vide order dated 26.06.2004, the Hon ble High Court quashed the intimation u/s 143(1), and finally the assessment order dated 30.03.1992 was served to the assessee in March 2004, i.e., after a gap of 12 years. Due to lapse of such a huge time, the assessee could not furnish the details of actual payment. All the particulars of the payment otherwise have been duly shown in the books of account, and t .....

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he course of the assessment proceedings, the AO noted that as per the Audit Report, the claim of expenditure of ₹ 48,29,984 pertained to assessment years 1986-87 to 1988-89. The assessee had claimed that it relates to dues and taxes of the financial year ending on 31.12.1987, i.e., assessment year 1988-89, which was disallowable u/s 43B for the assessment year 1988-89, and therefore, it was claimed as deduction in the assessment year 1989-90. He further took note of the Auditor s remark th .....

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e reported as unpaid in the Audit Report for assessment year 1988-89, was as under:- Sl. No. Particulars Liabilities of AY 88-89 claimed in A.Y. 1989-90 on payment. (Rs.) Unpaid liabilities as shown in audit report of AY 88-89 and claimed on payment before the due date. (Rs.) 1. Contribution to Gratuity Fund 7,23,883 7,23,883 2. Family Pension Funds 28,518 28,518 3. E.S.I. Contribution 11,597 11,597 4. Labour Welfare Fund 7,789 7,789 5. Sales Tax Surcharge 11,70,822 11,70,822 6. Cess 60,844 4,12 .....

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assessment year 1989-90, and therefore, the claim of expenditure has been made twice. Further, the expenditures mentioned in Sr.No.1 to 4 cannot be claimed on the basis of the payment before the due date of filing of return of income, they can only be claimed in assessment year 1988-89. In the first appellate proceedings, the assessee had stated that in the order giving effect to the CIT(A) order, it was clearly mentioned that only sum of ₹ 11,70,822 and ₹ 13,26,405 was allowed for .....

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in assessment year 1989-90 are the following payments:- Sl. No. (as mentioned in table above) Particulars Liabilities of AY 88-89 claimed in 1989-90 on payment. 6 Cess 60,844 7 Royalty 2,21,459 9 Entry Tax 8,37,069 10 Water Cess 15,000 11 Surface rent / dead Rent 3,358 12 Electricity Duty 3,23,240 Total 14,60,970 6.6 He directed the AO to verify the payment of aforesaid liabilities, however, in the appeal giving affect proceedings, the assessee could not furnish the actual evidences of payment .....

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