Rotoflex Industries Ltd., Ahmedabad vs Assessee

आयकर अपील सं./I.T.A. No.2381/Ahd/2011 ( नधा रण वष / Assessment Year : 1995-96) Rotoflex Industries Ltd. बनाम/ The DCIT nd 2 Floor, Asarpota Chambers Vs. Circle-5 CG Road Ahmedabad Ahmedabad थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AACCR 0279R (अपीलाथ# /Appellant) .. ($%यथ# / Respondent)

अपीलाथ# ओर से / Appellant by : Shri Sakar Sharma, AR $%यथ# क' ओर से/Respondent by : Shri Nimesh Yadav, Sr.DR

ु वाई क' तार*ख / सन Date of Hearing 23/03/2015 घोषणा क' तार*ख /Date of Pronounce ment 10/04/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-XI, Ahmedabad ('CIT(A)' in short) dated 10/08/2011 pertaining to Assessment Year (AY) 1995-96. The Assessee has raised solitary ground which reads as under:-

1. Ld. CIT(A) erred on facts and in law in confirming penalty u/s.271(1)(c) of the Act amounting to Rs.2,38,000/-.

ITA No.2381 /Ahd/2011 Rotoflex Industries Ltd. vs. DCIT Asst.Year - 1995-96 -2-

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 30/03/1998, thereby the Assessing Officer (AO in short) made disallowance of Rs.7,38,496/- and Rs.7,21,781/- (Total Rs.14,60,277/-) treating the expenditure as loan related expenses and advertisement/project expenses respectively. While making the addition, the AO also initiated penalty proceedings u/s.271(1)(c) of the Act. In quantum proceedings, matter travelled upto the stage of Tribunal and the Tribunal was pleased to confirm the finding of ld.CIT(A), who had reduced the addition from Rs.14,60,277/- to Rs.7,21,781/-. The ld.CIT(A) also gave benefit of section 35-D of the Act and allowed the deduction to the extent of 10% of the impugned addition and sustained addition of Rs.6,49,603/-. Subsequently, the AO imposed a penalty of Rs.2,98,900/- on the sustained addition of Rs.6,49,603/-. The assessee filed an appeal before the ld.CIT(A), who dismissed the appeal. Now, the assessee is in appeal against the confirmation of penalty.

3. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in confirming the penalty. He submitted that the assessee had disclosed all particulars of income. It is only the issue whether a deduction was allowable in a particular provision or not. Therefore, he submitted that in view of the decision of the Hon'ble Supreme Court rendered in the case of CIT vs. Reliance Petro Products reported at 322 ITA No.2381 /Ahd/2011 Rotoflex Industries Ltd. vs. DCIT Asst.Year - 1995-96 -3-

ITR 158(SC), the issue may be decided in favour of assessee. He further submitted that the ld.CIT(A) was not justified in not following the ratio laid down by the Hon'ble Delhi High Court in the case of CIT vs. Salora International Ltd. reported at 308 ITR 199 (Del.) and by the Hon'ble Jurisdictional High Court in the case of CIT vs. Corehealth Care Ltd. reported at 308 ITR 263(Guj.).

3.1. On the contrary, the ld.Sr.DR supported the order of the authorities below and submitted that there is no illegality in the order of the ld.CIT(A). He submitted that making a wrong claim also tantamount to furnishing of inaccurate particulars of income.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO had made addition of Rs.7,38,496/- and Rs.7,21,781/- on account of loan related expenses and advertisement/project related expenses. In appeal, the ld.CIT(A) reduced the said disallowance to Rs.6,49,603/-. The AO observed that all the expenses were incurred in connection with establishment of a new production unit at Santej, therefore such expenses were required to be capitalized. He also observed that the expenses on advertisement, project consultation fee were required to be amortized u/s.35D of the Act, over a period of ten years. It is settled law that making a wrong claim would no ipso facto make the assessee liable for penalty. In the case in hand, the genuineness of expenditure is not doubted, the AO was of the view that ITA No.2381 /Ahd/2011 Rotoflex Industries Ltd. vs. DCIT Asst.Year - 1995-96 -4-

such expenditure relates to establishment of new production unit at Santej, therefore the same were required to be capitalized. The AO further observed that expenses related to fee for project consultancy and advertisement were required to be amortized for a period of ten years. The assessee has placed reliance on the judgement of Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at (2010) 322 ITR 158 (SC), where the Hon'ble Apex Court has held as under:-

"9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as :

"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript."

We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under s. 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars."

4.1. Therefore, respectfully following the ratio laid down by the Hon'ble Apex Court in the case of CIT vs. Reliance Petroproducts ITA No.2381 /Ahd/2011 Rotoflex Industries Ltd. vs. DCIT Asst.Year - 1995-96 -5-

Pvt.Ltd.(supra), assessee's ground of appeal is hereby allowed. Accordingly, the AO is directed to delete the penalty.

5. In the result, the appeal of the Assessee is allowed.

Order pronounced in the Court on Friday, the 10th day of April, 2015 at Ahmedabad.

Sd/- Sd/- (एन.एस.सैनी) (कुल भारत) लेखा सद य या यक सद य ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated 10/ 04 /2015 ट*.सी.नायर, व. न.स./T.C. NAIR, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ# / The Appellant

2. $%यथ# / The Respondent.

3. संबं4धत आयकर आयु6त / Concerned CIT

4. आयकर आय6 ु त(अपील) / The CIT(A)-XI, Ahmedabad

5. 7वभागीय $ त न4ध, आयकर अपील*य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड; फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स%या7पत $ त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 24.3.15 (dictation-pad 5-pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ..30.3.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......10.4.15

7. Date on which the file goes to the Bench Clerk..................... 10.4.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................