DACSS GRANITES PVT LTD.,BENGALURU V. .INCOME TAX OFFICER, WARD-2(1)(3), BENGALURU

ITA 1876/BANG/2024

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DACSS Granites Pvt. Ltd., a company engaged in the granite business, faced a scrutiny assessment under section 143(3) of the Income Tax Act, 1961 for the assessment year 2017-18. The AO made additions under sections 14A, 36(1)(iii), and 40(a)(ia) totaling Rs.49,28,158. Although the company accepted these additions due to a minimal tax demand, a subsequent penalty notice under section 270A for underreporting of income led to a contested penalty of Rs.7,61,400. The company appealed against this penalty, arguing that the disallowances made were not applicable as they had sufficient reserves and had correctly deducted TDS. The CIT(A) upheld the penalty, leading to the current appeal before the Tribunal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 34119 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 25-09-2024
• Other Referred Cases: Reliance Utilities & Power Ltd. vs. ITO, Pawan Kumar Bhatia vs. ITO, Karim Nagar District Cooperative Society vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRAMANIAN S.
• Assessee Lawyers: BALRAM R. RAO
• Keywords: TDS
• Section: 143(3); 14A; 40(a)(ia)

Judgement Text

"ITA No.1876/Bang/2024 DACSS Granites Pvt. Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “B’’ BENCH: BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER ITA No.1876/Bang/2024 Assessment Year: 2017-18 DACSS Granites Pvt. Ltd. 2439/2, Channamma Kalyana Mantapa Nagashettihalli Bengaluru 560 094 Karnataka PAN NO : AACCD3486G Vs. ITO Ward-2(1)(3) Bengaluru APPELLANT RESPONDENT Appellant by : Sri Balram R. Rao, A.R. Respondent by : Sri Subramanian S., D.R. Date of Hearing : 09.12.2024 Date of Pronouncement : 11.12.2024 O R D E R PER PRAKASH CHAND YADAV, JUDICIAL MEMBER: Present appeal of the assessee is arising from the order of ld. CIT(A) dated 26.8.2024 and relates to assessment year 2017-18 having DIN & Order No.ITBA/NFAC/S/250/2024- 25/1067988663(1). 2. Brief facts of the case are that the assessee is a Private Limited company which is engaged in the business of granites. The scrutiny assessment was concluded under section 143(3) of the Income Tax Act, 1961 (in short “The Act”) wherein additions were made u/s 14A, 36(1)(iii) and 40(a)(ia) of the Act totaling to Rs.49,28,158/-. Since there was negative income returned, there was only a tax demand of Rs.5/- pursuant to the orders passed u/s 143(3) of the Act, the assessee chose not to contest the order under appeal and accepted ITA No.1876/Bang/2024 DACSS Granites Pvt. Ltd., Bangalore Page 2 of 6 the additions made in the quantum assessment. Thereafter, a show cause notice dated 16.12.2019 u/s 270A of the Act was issued to the assessee asking him as to why penalty was not exigible for under reporting. In response the assessee filed its reply objecting to the levy of penalty u/s 270A of the Act. The AO without considering the same levied a penalty of Rs.7,61,400/- towards under reporting of income. 2.1. The relevant observations of the AO are as under: ITA No.1876/Bang/2024 DACSS Granites Pvt. Ltd., Bangalore Page 3 of 6 2.2 Aggrieved with the order of AO, the assessee filed an appeal before the ld. CIT(A) and contested that the penalty levied by the AO is not tenable. The assessee has contended that the assessee is neither guilty of under reporting nor guilty of mis-reporting. However, the ld. CIT(A) could not find any force in the arguments of the assessee and confirmed the levy of penalty. 2.3 Aggrieved with the order of ld. CIT(A), the assessee has come up in appeal before us and has raised following grounds of appeal: ITA No.1876/Bang/2024 DACSS Granites Pvt. Ltd., Bangalore Page 4 of 6 2.4 Ld. Counsel for the assessee contended that the disallowance made by the ld. AO during the assessment proceedings are of two categories. a) Disallowance of Rs.33,92,033/- u/s 36(1)(iii) of the Act and b) Disallowance of Rs.7,50,000/- u/s 40(a)(i) of the Act. 2.5 Ld. Counsel for the assessee contended that the disallowance made by the AO u/s 36(1)(iii) of the Act is not tenable in view of the fact that the assessee was having reserves of Rs.17.89 Crores on the date, when the assessee had advanced the sum to its sister concern for the purpose of business. Ld. Counsel for the assessee relied upon the judgement in the case of Reliance Utilities & Power Ltd. reported in 313 ITR 340 for the proposition that when surplus funds are there with the assessee, then no disallowance can be made on proportionate basis u/s 36(1)(iii) of the Act. So far as the disallowance made by the ld. AO u/s 40(a)(i) of the Act is concerned, ld. Counsel for the assessee contended that the assessee has initially deducted TDS @ 30%. However, realizing the mistake, the assessee had disallowed 70% of the payments made and hence, there is no violation of section 40(a)(i) of the Act. Ld. Counsel for the assessee lastly contended that the figures disclosed by the assessee are accepted by the AO in totality and hence, it is not a case of either mis-reporting or under reporting of the income. ITA No.1876/Bang/2024 DACSS Granites Pvt. Ltd., Bangalore Page 5 of 6 3. Ld. D.R. appearing on behalf of the revenue relied upon the order of authorities below. 4. We have heard the rival submissions and perused the materials available on record. We observe that in this case, it is an admitted position of fact that the assessee was having surplus funds in the shape of reserves to the tune of Rs.17.89 crores as evident from the facts coming out from the orders of authorities below. Further, the assessee has also acted bona-fidely while deducting the TDS @ 30% and upon realizing its mistake, disallowed the 70% of the payments made in accordance with law. These facts are not controverted by the ld. AO and the ld. D.R. It is pertinent to note that the Ld CIT(A) has partly deleted the penalty, levied by the AO with the respect to the issue of 14A disallowances and disallowance made by the AO in terms of the provisions of section 2(24)(X). 5. Further assessee has also sought immunity as per the provisions of section 270AA(2) of the Act. It is an admitted position of facts that the assessee has filed application for getting immunity in Form-68. However, the CIT(A) rejected this argument on the ground that the same was filed belatedly. We observe that there are two decisions of the coordinate Benches of the Tribunal wherein it is held that filing of Form 68 is mere procedural compliance and if the assessee has substantially complied with the payment of taxes then immunity shall be granted to the assessee. A reference can be made to the decision of Pawan Kumar Bhatia Vs ITO – ITA-No- 454/Jodhpur/2023 dated 21.03.2024 and to the decision of Hyderabad Bench in the case of Karim Nagar District Cooperative Society ITA No- 701/Hyd/2024 order dated 20.09.2024. It is not in dispute that the assessee has deposited the due taxes, it also not in dispute that assessee has not filed any appeal against the assessment order. Therefore, filing of form 68 beyond due date is ITA No.1876/Bang/2024 DACSS Granites Pvt. Ltd., Bangalore Page 6 of 6 mere irregularity in our view, as held by coordinate Bench in Pawan Kumar Bhatia case (Supra) and Karim Nagar District Case. Therefore, considering the totality of the facts and circumstances we are of the view that the penalty levied by the AO is not tenable in law. 6. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 11th Dec, 2024 Sd/- (Waseem Ahmed) Accountant Member Sd/- (Prakash Chand Yadav) Judicial Member Bangalore, Dated 11th Dec, 2024. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Bangalore. "