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M/s. Balaji Marble Versus ITO 14 (1) (2) , Mumbai

2016 (10) TMI 886 - ITAT MUMBAI

Penalty u/s.271(1)(c)- addition on account of provision for detention charges and demurrage charges - Held that:- The assessee has genuinely disclosed all the facts qua the claim of the expenses which were based on a scientific method and also in respect of goods actually imported from Sri Lanka, and therefore, we do not doubt and dispute the genuineness of the claim made by the assessee. We also find that the provisions were written back when the assessee lost the quantum appeal before CIT(A) a .....

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YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For The Appellant : Shri B.V. Jhaveri, C.A. For The Respondent : Ms. Mahna Sarkar, Sr.D.R. ORDER PER RAJESH KUMAR, A.M: The present appeal has been filed by the assessee against the order of CIT(A)-25, Mumbai for the Assessment Year 2008-09. 2. The only issue raised in various grounds of appeal by the assessee is against the confirmation of penalty of ₹ 5,19,811/- as imposed by the AO u/s.271(1)(c) of the IT Act on account o .....

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murrage and detention charges in the return of income. The Assessing Officer disallowed the said detention and demurrage charges to the extent of ₹ 16,82,238/- being the provision for expenses for demurrage and detention charges which was payable to Jawaharlal Nehru Port Trust (JNPT) and was outstanding at the year end. The Assessing Officer during the course of assessment proceedings required the details from the assessee qua the said claim and after issuing show cause notice added ₹ .....

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of income and also concealed the particulars of income and therefore, was liable for a penalty u/s.271(1)(c) of the Income Tax Act read with Explanation-I and accordingly imposed a penalty of ₹ 5,19,811/- being 100% of the tax sought to be evaded. It is pertinent to mention that CIT(A) upheld the quantum addition made by the Assessing Officer which was not challenged before the Tribunal and thus attained finality. However, the assessee in the subsequent year reversed the said provisions fo .....

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g through the appellate order of my predecessor CIT(A)-25 dated 22.09.2011 [CIT(A)-25/IT-435/14(1)2/10-11] that the appellant had made provision of the impugned amount of ₹ 16,82,238/- on account of demurrage/detention charges, and no credible documentary evidence in the form of communication from Port Trust Authority was furnished, and also no reliable evidence was furnished to establish that there was a crystallized and genuine liability. It was established that the amount computed by th .....

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uch as order of Appeal of Commissioner of Customs (Appeal) dated 18.01.2007, Bombay High Court Order dated 18.04.2007 (Writ Petition No. 1347/07), Order of Dy. Commission of Custom dated 17.09.2007, Letter to Commission of Customs (Imports) for clearing of consignment etc. On going through the same, I concur with the findings of my predecessor CIT(A) in quantum appeal, and note that there is nothing apparent in said correspondence/orders to show that the appellant was liable to pay the expenditu .....

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at the penalty u/s.271(1)(c) is not leviable only in such cases where an assessee makes a claim in the return of income, knowing it to be a bonafide claim; however, the assessee cannot take shelter of such case laws to make non-genuine claims of expenditure solely for the purpose of deflating his taxable profits. In the case of Sanghvi Swiss Refills (P.) Ltd. vs. ACIT [2012] 28 taxmann.com 208 (Bom.) relied upon by the AO, the Hon'ble High Court of Bombay, after considering the decision of H .....

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respect of any ascertained liability, and not for any contingent liability. Even if any provision was made in accounts for any contingent liability, the same should have been added back in computation of income. The appellant has neither disclosed the true facts in return of income, nor added back the amount in its computation of income. Therefore, the appellant has furnished inaccurate particulars of its income liable for penalty u/s 271(1)(c). It is a fact that the unjustifiable claim made by .....

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was supposed to pay even otherwise. On the other hand, in case the return is not selected for scrutiny, he would save the tax which would have otherwise payable by him. In such a situation, it would be unfair to the honest taxpayers who legitimately offer their taxable income in the return of income. In my opinion, the levy of penalty u/s.271(1)(c) in such situations is the only remedy to deter the assessee to make true disclosure of his income in the return, and thereby to keep a check on the l .....

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of the above, I confirm the penalty levied of ₹ 5,19,811/-. Therefore, the grounds of appeal are dismissed. 5. Learned AR vehemently submitted before us that assessee has provided the detention and demurrage charges payable to Jawaharlal Nehru Port Trust in respect of slabs of marble imported by the assessee and accordingly calculated the said charges by applying the rate charged by the said port authority and provided the same in the books of accounts of the assessee pursuant to mercantil .....

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ed the contention of the assessee and confiscated the goods u/s. 111(d) of the Customs Act on the ground that Public Notice No.25(RE-98) dated 1st August, 1998 was not applicable but DGFT notification bearing no. 23/2005 dated 31st August, 2005 read with notification no.26/2005 dated 2nd September, 2005 were applicable. The assessee firm preferred an appeal before Commissioner of Custom (Appeals) who vide order dated 18th January, 2007 set aside the order of confiscation and directed to clear th .....

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rit Petition No.1347 of 2007 to direct the Commissioner of Customs (Import) to clear goods covered by Bill of entry dated 20th July, 2005 which was granted by the High Court vide its order dated 18th April, 2007 but the DCIT instead of releasing the goods, raised the issue of valuation of goods despite the High Court order and enhanced the value of goods by passing order dated 17th September, 2007 raising demand of customs duty of ₹ 2,05,142/-. Again asessee carried the matter to Commissio .....

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pending till date. 5.1 Learned AR in view of the above facts submitted that since the assessee was following mercantile system of accounting and calculated the detention and demurrage charges as per the rate list of port trust authority and rightly provided ₹ 16,82,236/- in its books of account which was disallowed by the Assessing Officer on the ground of being contingent liability and also that the assessee failed to furnish the bill of said amount. Learned CIT(A) also dismissed the app .....

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particulars of claim of expenses for detention and demurrage charges in the return filed before the AO which had a reasoned and scientific basis and therefore the penalty has been wrongly levied u/s.271(1)(c) and also confirmed by the CIT(A) which was against the provision of law. In defence of his argument learned AR relied upon the judgement of Hon ble Apex Court in the case of CIT vs. Reliance Petro Product, 328 ITR 158 (SC) and also relied upon the order of Hon ble Tribunal, Delhi Bench in .....

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terial available on record. We find that the assessee has provided a sum of ₹ 16,82,388/- on the ground of detention and demurrage expenses payable to Jawaharlal Nehru Port Trust in respect of goods which were imported from Sri Lanka and were in the custody of the port as the same was seized by the Deputy Commissioner of Customs vide order dated 22nd November, 2006 and thereafter, a series of litigations followed and reached upto Hon ble High Court and even the Hon ble High Court direction .....

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were provided on reasoned and scientific basis as these charges were payable to Jawarharlal Nehru Port Trust for the goods storage by the said authorities in its godown following seizure of the material by the customs authorities. From the facts discussed above, we are of the opinion that the assessee has genuinely disclosed all the facts qua the claim of the expenses which were based on a scientific method and also in respect of goods actually imported from Sri Lanka, and therefore, we do not .....

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