PYARELAL TEXTILES LTD, MUMBAI V. ACIT CIR 5(2), MUMBAI

ITA 1026/MUM/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2642 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 13-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA
• Keywords: Business income; Retrospective amendment; TDS
• Section: 271(1)(c); 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI P M JAGTAP, ACCOUNTANT MEMBER AND SHRI R S PADVEKAR, JUDICIAL MEMBER ITA NO 1026/MUM/2009 (ASSESSMENT YEAR: 2005-06) PYARELAL TEXTILES LTD, C/O SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BLDG, 265, PRINCESS STREET, MUMBAI -400 02 PAN: AADCP 1502 E VS INCOME TAX OFFICER, WARD 7(3)(4), MUMBAI APPELLANT RESPONDENT APPELLANT BY: SHRI S L JAIN RESPONDENT BY: SHRI VIRENDRA OJHA ORDER PER P M JAGTAP, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LEARNED CIT (A) V MUMBAI DATED 15.1.2009 WHEREBY HE SUSTAINED THE PEN ALTY OF RS 16,73,516/- IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) TO T HE EXTENT OF RS 13,65,145/-. 2. THE ASSESSEE IN THE PRESENT CASE, IS A COMPANY W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF FABRIC. T HE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31.10.2005 D ECLARING A LOSS OF RS 78,13,057/-. VIDE AN ORDER DATED 24.12.2007 PASSED U/S 143(3), T HE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE ASSESSING OFFICER AT A LOSS O F RS 23,54,227/- AFTER MAKING ADDITION INTER-ALIA ON ACCOUNT OF DISALLOWANCE OF EXPENSES AMOUNTING T O RS 37,30,670/- U/S 40(A)(IA) FOR DELAYED PAYMENT OF TD S. HE ALSO MADE AN ADDITION OF RS 8,42,716/- TO THE TOTAL INCOME OF THE ASSESSEE O N ACCOUNT OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF & ESIC. HE ALSO INITI ATED PENALTY PROCEEDINGS U/S 271(1)(C) AND HAVING NOT SATISFIED WITH THE EXPLANA TION OFFERED BY THE ASSESSEE IN RESPONSE TO THE SHOW-CAUSE NOTICES ISSUED DURING TH E COURSE OF THE SAID PROCEEDINGS, THE ASSESSING OFFICER IMPOSED A PENALTY OF RS 16,73 ,516/- U/S 271(1)(C) BEING 100% ITA 1026/M/2009 PYARELAL TEXTILES LTD 2 OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE IN R ESPECT OF THE TWO ADDITIONS MADE TO ITS TOTAL INCOME AGGREGATING TO RS 45,73,386/- T REATING THE SAME AS ITS CONCEALED INCOME. 3. THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT (A) WHO HELD THAT THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF AND ESIC WAS RELATED TO A DEBATA BLE ISSUE IN RESPECT OF WHICH NO PENALTY U/S 271(1)(C) WAS LEVIABLE. HE, HOWEVER, H ELD THAT NO SATISFACTORY EXPLANATION COULD BE OFFERED BY THE ASSESSEE AS TO WHY THE DISALLOWANCE U/S 40(A)(IA) WAS NOT MADE BY IT IN THE COMPUTATION OF TOTAL INCOME ITSELF ON ACCOUNT OF DELAYED PAYMENT OF TDS. HE HELD THAT THE ASSESSEE, THUS, HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME IN RESPECT OF THE AMOUNT OF RS 37,30,670/- AND THE PENALTY IMPOSED BY THE ASSESSING OFFICER IN RESPECT OF THE SAID ADDITION AMOUNTING TO RS 13,65,145/- WAS SUSTAINED BY THE LEARNED CIT (A). AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE HAS PREFERRED THIS AP PEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS REITERATED THE FOLLOWING SUBMISSIONS M ADE ON BEHALF OF THE ASSESSEE- COMPANY BEFORE THE ASSESSING OFFICER DURING THE COU RSE OF PENALTY PROCEEDINGS : AS FAR AS DISALLOWANCE U/S 40(A)(IA) ON ACCOUNT OF DELAYED TDS PAYMENTS IS CONCERNED, IT IS HEREBY SUBMITTED THAT THERE WAS NO INACCURATE PARTICULARS FURNISHED BY THE ASSESSEE COMPANY. THE DETAILS THE REOF HAVE BEEN PROVIDED IN THE TAX AUDIT REPORT ACCOMPANYING THE RETURN OF INC OME SUBMITTED BY THE ASSESSEE COMPANY. BESIDES THIS, THE FINANCE ACT, 2 008 (RECENTLY ENACTED) HAVE MODIFIED THE PROVISIONS OF SECTION 40(A)(IA) W ITH RETROSPECTIVE EFFECT FROM AY 2005-06. THE SAID AMENDED SECTION NOW PROVIDES THAT NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE INCOME-TAX ACT SHALL BE MADE IN THE CASE OF A DEDUCTOR, IN RESPECT OF THE EXPENDITURE INCURRED IN THE MONTH OF MARCH, IF THE TAX DEDUCTED AT SOURCE ON SUCH EXPENDITURE HAD BEEN PAID BEFORE THE DUE DATE OF FILING OF THE RETURN. IN VIEW OF THIS AMENDMENT , THE ADDITION MADE DOES NOT HOLD GOOD AND THE SAME NEEDS TO BE DELETED BY RECTI FYING THE ORDER AND THEREFORE, NO PENALTY IS LEVIABLE. ITA 1026/M/2009 PYARELAL TEXTILES LTD 3 5. AS IS CLEARLY EVIDENT FROM THE AFORESAID SUBMISS IONS MADE ON BEHALF OF THE ASSESSEE DURING THE COURSE OF PENALTY PROCEEDINGS, THE CORRECTNESS OF THE ADDITION MADE U/S 40(A)(IA) ITSELF WAS CHALLENGED BY THE ASS ESSEE RELYING ON THE AMENDMENT MADE IN THE RELEVANT PROVISIONS BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 1.4.2005 AND THIS CLAIM MADE BY THE ASSESSEE W AS NOT OUTRIGHTLY REJECTED EVEN BY THE ASSESSING OFFICER. ON THE OTHER HAND, HE HE LD THAT THIS CLAIM OF THE ASSESSEE COULD NOT BE CONSIDERED FOR WANT OF RELEVANT DETAIL S. THUS, THE STAND OF THE ASSESSEE BY IMPLICATION WAS ACCEPTED BY THE ASSESSING OFFICE R IN PRINCIPLE. IN ANY CASE, ALL THE DETAILS RELEVANT TO THIS ISSUE WERE PROVIDED BY THE ASSESSEE IN THE TAX AUDIT REPORT FILED ALONG WITH ITS RETURN OF INCOME AND THE DISAL LOWANCE U/S 40(A)(IA) WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE SAID DETA ILS. AS SUBMITTED ON BEHALF OF THE ASSESSEE COMPANY BEFORE THE AUTHORITIES BELOW AS WE LL AS BEFORE US, THE PROVISIONS OF SECTION 40(A)(IA) WERE MADE APPLICABLE FOR THE FIRS T TIME FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2005-06 AND WHEN THE APPLICABILITY THEREOF WAS POINTED OUT BY THE ASSESSING OFFICER TO THE AMOUNTS IN QUESTION DURING THE COURSE OF HEARING HELD ON 22.8.2007, THE ASSESSEE-COMPANY IMM EDIATELY OFFERED THE SAID AMOUNT FOR DISALLOWANCE U/S 40(A)(IA) VIDE ITS LETT ER DATED 31.8.2007, WHICH CLEARLY SHOWS ITS BONA FIDE . MOREOVER, THE TDS HAVING BEEN PAID BY THE ASSESS EE IN THE IMMEDIATELY SUCCEEDING YEAR, IT WAS ENTITLED TO CLA IM DEDUCTION FOR THE AMOUNT IN QUESTION IN THAT YEAR AND NOT IN THE YEAR UNDER CON SIDERATION AS PER THE PROVISIONS OF SECTION 40(A)(IA) WHICH WERE MADE APPLICABLE TO THE YEAR UNDER CONSIDERATION I.E. AY 2005-06 FOR THE FIRST TIME. THE ISSUE, THEREFORE, WAS RELATING TO THE EXACT YEAR IN WHICH THE DEDUCTION FOR THE AMOUNT IN QUESTION WAS ALLOWABLE TO THE ASSESSEE AND IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE SAID AMOUNT INCURRED BY THE ASSESSEE-COMPANY FOR LEGITIMATE AND GENUINE BUSINES S EXPENSES WAS NOT ALLOWABLE AS A DEDUCTION WHILE COMPUTING ITS BUSINESS INCOME. HAVING REGARD TO ALL THESE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THIS IS NOT A CASE WHERE IT CAN BE SAID THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF ITS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME SO AS TO ATTRACT PENALTY U/S 271(1)(C). IN OUR OPINION, IT IS THUS NOT A FIT CASE TO IMPOSE THE PENALTY U/S 271(1 )(C) AND THIS BEING SO, WE CANCEL THE SAID PENALTY IMPOSED BY THE ASSESSING OFFICER A ND SUSTAINED BY THE CIT (A). ITA 1026/M/2009 PYARELAL TEXTILES LTD 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 22ND DAY OF DECEMBER 2009. SD/- (R S PADVEKAR) JUDICIAL MEMBER SD/- (P M JAGTAP) ACCOUNTANT MEMBER MUMBAI, DATE: 22ND DECEMBER 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) -XXX, MUMBAI. 4) THE CIT-7, MUMBAI. 5) THE D.R. C BENCH, ITAT, MUMBAI BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 1026/M/2009 PYARELAL TEXTILES LTD 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 15.12.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 16.12.09 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER