RAMA GARG,SEHORE vs. DCIT-3(1), BHOPAL, BHOPAL
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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
Per Vijay Pal Rao, JM :
This appeal by the assessee is directed against order dated
10.01.2024 of Commissioner of Income Tax (Appeal), National
Faceless Appeal Centre, Delhi arising from penalty order passed
u/s 271(1)(c) of the Act for the Assessment Year 2012-13.
ITA No.90/Ind/2024 Smt. Rama Garg 2. The assessee has raised following grounds of appeal:
That the learned CIT(A), NFAC erred in not holding that the penalty order was bad in law. It was perverse; (2) it was based on irrelevant material; (3) it was un- reasonable; (4) there was mis-application of the provisions of law; (5) the authority misdirected. 2. That the learned CIT(A) NFAC erred in not holding that the penalty order passed by the A.O. was without following rule of natural justice and fair play and was therefore a nullity and the same may be declared null and void. 3. That the learned CIT(A) NFAC erred in confirming the penalty levied on power expenses of Rs.7,99,254/- on the basis of the disallowance of expenses confirmed by the Hon. ITAT, Indore bench is bad in law and needs to be deleted. 3. The assessee is a trader and engaged in sale and purchase of
food grains and pulses. In the scrutiny assessment completed u/s
143(3) on 17.03.2015 the Assessing Officer made various additions
including on account of disallowance of electricity expenses which
is relevant for the appeal before us.
The Assessing Officer vide order dated 22.03.2018 passed u/s
2711)(c) levied penalty against two additions i.e. 25% of
disallowance of total purchase and electricity and power expenses.
The matter in the quantum appeal was carried to this Tribunal and
vide order dated 05.12.2019 this Tribunal deleted the addition
made on account of adhoc disallowance by purchases however, the
addition made by the Assessing Officer on account of electricity
ITA No.90/Ind/2024 Smt. Rama Garg charges has been confirmed by this Tribunal and consequently the
CIT(A) has restricted the penalty to the extent of disallowance of
electricity expenses.
Before the Tribunal Ld. AR of the assessee has submitted that
the electricity expenses claimed by the assessee are in respect of
godown of husband of the assessee which is used for the business
purpose of the assessee. Ld. AR has submitted that the assessee
has used the said godown for sorting/processing of grains as the
sorting machine is installed at said place and therefore, the
electricity was consumed by the assessee for the purpose of
business of the assessee. He has referred to the balance sheet and
submitted that the sorting machine is part of plant and machinery
on which the Assessing Officer has allowed the depreciation.
Therefore, the Ld. AR has submitted that the claim of the assessee
is a bona fide claim though the same was disallowed for want of
supporting evidences. He has relied upon the decision of Hon’ble
Supreme Court in the case of CIT Vs Reliance Petroproducts (P)
Ltd 322 ITR 158 and submitted that the disallowance of expenses
cannot be mean that the assessee have furnished inaccurate
ITA No.90/Ind/2024 Smt. Rama Garg particulars of income. He has further contended that sorting and
packaging is an essential part of the business of the assessee. The
assessee has not claimed any other electricity expenses except the
electricity expenses which are incurred exclusively for the business
of the assessee and the assessee has duly recorded the details of
the expenses and the consumption of the electricity in the books of
accounts which is a bona fide claim of the assessee. He has also
relied upon the judgment of Hon’ble Supreme Court in case of
CIT Vs. State Bridge Corporation Limited 258 Taxman 63 and
submitted that merely because the claim of expenditure was not
accepted or not acceptable to the revenue, that by itself would not
attract penalty u/s 271(1)(c) of the Act. He has also relied upon the
following decisions:
(i) Balaji Vegetable Products (P) Ltd Vs. CIT (Karnataka High Court) (ii) PCIT Vs M/s Rana Sugar Ltd (Punjab & Haryana High Court)
Thus the Ld. AR has submitted that the penalty levied by the
Assessing Officer u/s 271(1)(c) against the disallowance of
electricity expenses is not justified and the same may be deleted.
ITA No.90/Ind/2024 Smt. Rama Garg 6. On the other hand Ld. DR has submitted that the assessee
has not produced any evidence in the shape of electricity bill, proof
of payment and consumption of electricity for the business purpose
of the assessee. The Assessing Officer has recorded this fact that
the assessee has claimed electricity expenses of Rs.7,99,254/-
however, during the assessment proceedings the assessee failed to
produce any bill of electricity despite various opportunities provided
by the Assessing Officer to substantiate of her claim of electricity
expenses. Therefore, the claim of the assessee was absolutely not
tenable. In support of his contention he has relied upon the
judgment of Hon’ble Bombay High Court in case of Clariant
Chemicals (India) Ltd vs. ACIT 229 Taxman 267 and submitted
that after considering the decision of Hon’ble Supreme Court in
case of CIT Vs. Reliance Petroproducts (P) Ltd as well as other
decision of Hon’ble Bombay High Court (supra) has upheld the
penalty levied u/s 271(1)(c) of the Act in respect of disallowance of
claim u/s 35 in respect of 6 items out of total 9 items claimed by
the assessee. Ld. DR relied on the orders of authorities below.
ITA No.90/Ind/2024 Smt. Rama Garg 7. We have considered the rival submissions as well as relevant
material on record. There is no dispute that the Assessing Officer
has disallowed the claim of electricity expenses for want of
supporting evidences and the same was confirmed by CIT(A) as well
as by this Tribunal vide order dated 05.02.2019 in para 47 and 48
as under:
“47. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The Id. CIT(A) sustained these additions by observing as under: "8.3 In the remănd report submitted by the A0, it was stated that no electricity bills in the name of Rama Garg produced by the assessee. The assessee produced only one bill that too in the name of M/s. Garg warehousing. In the rejoinder it has been stated by the assessor That M/s. Garg Warehousing is owned by Mr. Vinod Agarwal, Husband of the warehousing License has been surrendered and the said premises were used by the appellant for her business activities during the year without paying any consideration. Hence the electricity expenses have been debited to the books of the appellant. 8.4 I have considered the facts of the case and the submissions of the appellant. It is an admitted fact that the electricity connection bills are in the name of Garg Warehousing. Apart from making this contention, the appellant has brought no material/evidence on record to show that the said premises were indeed used for the business of the appellant. In the absence of any evidence, the contention of the appellant remains unsubstantiated. Addition on identical issue has also been made u/s 143/3) in the succeeding assessment. In view of above, the addition made by the A0 is uphold. The ground of dismissed. 48. Before this Tribunal, the assessee has met brought any material suggesting that there was any understanding with the proprietor of M/s. Garg Warehousing in respect of electricity bill to be paid by the assessee. In the absence of such material, we do not see any infirmity into the order of the authorities below and the same is hereby dismissed.” 8. Thus the claim of electricity expenses was disallowed because
the assessee failed to produce the supporting evidences. It is a 6
ITA No.90/Ind/2024 Smt. Rama Garg matter of record that the process of sorting grains is an essential
part of business activity of the assessee and the assessee has
installed the sorting machine which cannot run without electricity.
Sorting machine is a part of Plant & Machinery shown in the
balance sheet of the assessee and Assessing Officer has allowed the
depreciation on the said machine. Therefore, the existence and use
of sorting machine for the business purpose has not been disputed
by the Assessing Officer. Hence, in the facts and circumstances of
the case where the consumption of electricity in the process of
sorting the food grains and pulses is an inevitable part of business
activity of the assessee then the claim of electricity expenses is not
an absolutely bogus claim but the same was disallowed for want of
supporting evidence. The assessee has explained the claim of
electricity as the machine is used in the godown owned by the
husband of the assessee and therefore, the electricity connection
was also in the name of husband of the assessee. The Assessing
Officer has not disputed this fact to the extent of the godown owned
by the husband of the assessee however, since the assessee could
not furnish the supporting evidence of electricity bill in her name
the claim of the assessee was disallowed. Therefore, even the 7
ITA No.90/Ind/2024 Smt. Rama Garg assessee failed to substantiate the claim, the explanation of the
assessee for such failure and the claim of the assessee is not mala
fide but the same falls in the ambit of bona fide claim and
explanation. The explanation-1 to Section 271(1)(c) of the Act read
as under:
Explanation 1:Where in respect of any facts material to the computation of the total income of any person under this Act- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) [or the [Principal Commissioner] or Commissioner] or to be false, or (B)such person offers an explanation which he is not able to substantiate [and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him]. Then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.
Clause(B) of Explanation 1 contemplates the situation where
the explanation offered by the assessee is neither substantiated nor
found to be bona fide then the amount added or disallowed in
computing the total income of such person as a result thereof shall,
for the purposes of clause (c) of this Section 271(1), be deemed to
represent the income in respect of which particulars have been
ITA No.90/Ind/2024 Smt. Rama Garg concealed. In the case in hand though the assessee was not able to
substantiate the explanation but the explanation of the assessee is
a bona fide one and consequently the disallowance made by the
Assessing Officer for want of supporting evidence would not ipso
facto lead to the conclusion that the assessee has furnished
inaccurate particulars of income or concealed particulars of income.
The decision of Hon’ble Bombay High Court in the case of
Clariant Chemicals (India) Ltd Vs. ACIT is specifically on the
facts when the weighted deduction u/s 35 of the Act was claimed
by the assessee in respect of non existing items of capital
expenditure. Accordingly, in the facts and circumstances of the
case the penalty levied u/s 271(1)(c) of the Act is deleted.
In the result appeal of the assessee is allowed.
Order pronounced in the open court on 26.06.2024.
Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore,_26.06.2024 Dev/Sr. PS
ITA No.90/Ind/2024 Smt. Rama Garg
Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
