M/s Gujrani & Co., Kolkata V. ITO, WD-54(1), KOLKATA, Kolkata

ITA 1163/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1834 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 25-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S M SURANA
• Keywords: Difference of opinion

Judgement Text

1 ITA NO. 1163/KOL/2016 ASSESSMENT YEAR: 2009-2010 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA D BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1163/KOL./2016 ASSESSMENT YEAR: 2009-2010 M/S. GUJRANI & CO.,................................ .........................APPELLANT 42A, C.R. AVENUE, 3 RD FLOOR, KOLKATA-700 012 [PAN: AACFG 6855 D] -VS.- INCOME TAX OFFICER,................................ ..................RESPONDENT WARD-54(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 APPEARANCES BY: SHRI S.M. SURANA, ADVOCATE, FOR THE ASSESSEE SHRI ARINDAM BHATTACHARJEE, ADDL. CIT, D.R., FOR TH E DEPARTMENT DATE OF CONCLUDING THE HEARING : DECEMBER 06, 2017 DATE OF PRONOUNCING THE ORDER : JANUARY 17, 2018 O R D E R PER SHRI P.M. JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-21, KOLKATA DA TED 16.03.2016, WHEREBY HE CONFIRMED THE PENALTY OF RS.35,298/- IMP OSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(D) OF THE IN COME TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM OF PRACTISING CHARTERED ACCOUNTANTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28.09.2009 DECLARI NG TOTAL INCOME OF RS.6,35,470/-. IN THE PROFIT & LOSS ACCOUNT FILED A LONG WITH THE SAID RETURN, A SUM OF RS.5,19,238/- WAS DEBITED BY THE A SSESSEE ON ACCOUNT OF AUDIT EXPENSES. ON VERIFICATION OF THE SAID EXPENSE S, IT WAS FOUND BY THE ASSESSING OFFICER THAT THE SAID EXPENSES WERE INCUR RED BY THE ASSESSEE ON ACCOUNT OF TRAVELLING AND CONVEYANCE OF ITS AUDIT S TAFF AND AUDIT CLERKS. ACCORDING TO THE ASSESSING OFFICER, THE SAID EXPENS ES WERE LIABLE TO BE 2 ITA NO. 1163/KOL/2016 ASSESSMENT YEAR: 2009-2010 TAKEN INTO ACCOUNT WHILE CALCULATING THE VALUE OF F RINGE BENEFIT AND SINCE IT WAS NOT DONE BY THE ASSESSEE, HE REQUIRED THE AS SESSEE TO OFFER ITS EXPLANATION IN THE MATTER. IN REPLY, IT WAS SUBMITT ED BY THE ASSESSEE THAT THE AUDIT EXPENSES WERE INCURRED FOR ARTICLED CLERK S, WHO WERE C.A. STUDENTS RECEIVING TRAINING AND SINCE THERE WAS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE SAID ARTI CLED CLERKS, THE AUDIT EXPENSES DID NOT FALL UNDER THE AMBIT OF FBT. THIS EXPLANATION OFFERED BY THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESS ING OFFICER KEEPING IN VIEW THAT IT WAS SPECIFICALLY SUBMITTED BY THE ASSE SSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE AUDIT EXPENSES W ERE INCURRED BY ITS AUDIT STAFF AND AUDIT CLERKS WHILE CONDUCTING THE A UDIT ASSIGNMENTS AT CLIENTS OFFICE OR WORK PLACE. HE, THEREFORE, INCLU DED THE AUDIT EXPENSES OF RS.5,19,238/- WHILE CALCULATING THE VALUE OF FRINGE BENEFIT AND ALSO INITIATED PENALTY PROCEEDING UNDER SECTION 271(1)(D ). IN REPLY TO THE SHOW-CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER D URING THE COURSE OF PENALTY PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESS EE THAT THERE WAS NO ATTEMPT MADE BY IT TO FURNISH INACCURATE PARTICULAR S OF FRINGE BENEFITS, INASMUCH AS THE EXPENSES INCURRED ON AUDIT WERE PRO PERLY AND CLEARLY SHOWN IN THE PROFIT & LOSS ACCOUNT. THIS EXPLANATIO N OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER AND H E PROCEEDED TO IMPOSE PENALTY OF RS.35,298/- UNDER SECTION 271(1)(D) ON A CCOUNT OF FBT SOUGHT TO BE EVADED BY THE ASSESSEE. 3. THE PENALTY IMPOSED BY THE ASSESSING OFFICER UND ER SECTION 271(1)(D) WAS CHALLENGED BY THE ASSESSEE IN THE APP EAL FILED BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF APPELLATE PR OCEEDINGS BEFORE THE LD. CIT(APPEALS), THE FOLLOWING SUBMISSION WAS FILE D BY THE ASSESSEE IN WRITING IN SUPPORT OF ITS CASE ON THE ISSUE:- FOR THAT THE LD. ITO IGNORED THE FACT THAT CONCER NED AUDIT EXPENSES WHICH WERE FULLY DISCLOSED IN THE PROFIT & LOSS ACCOUNT WITHOUT FURNISHING OF INACCURATE PARTICULARS, IN IM POSING PENALTY U/S.271)1)(D). THUS LEVYING PENALTY U/S. 271(1)(D) ON AUDIT EXPENSES ON THE GROUNDS OF FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF FBT IS AGAINST THE SPIRIT OF LAW & UNJUSTIFIED. 3 ITA NO. 1163/KOL/2016 ASSESSMENT YEAR: 2009-2010 FOR THAT THE MATTER IN THE LD. I.T.O'S ORDER WAS O NE PERTAINING TO POINT OF LAW WHERE THERE IS DIFFERENCE OF OPINION, BUT THE SAME CANNOT BE FIT FOR APPLICATION OF PENALTY. IT MAY BE NOTED THAT PENAL PROVISIONS OF 271(1)(D) IS APPLICABLE WHERE THE ASSESSEE 'HAS CONCEALED THE PARTICULARS O F THE FRINGE BENEFITS OR FURNISHED INACCURATE PARTICULARS OF SUC H FRINGE BENEFITS'. IN THIS CASE, NO SUCH FURNISHING OF INAC CURATE PARTICULARS OR CONCEALMENT OF PARTICULARS OF FRINGE BENEFIT WAS MADE AS THE CONCERNED EXPENSES WERE DEBITED AND PRO PERLY SHOWN IN PROFIT & LOSS ACCOUNT. IN THE INSTANT CASE YOUR GOODSELF WILL APPRECIATE FROM THE PERUSAL OF THE ABOVE FACT THAT THE ASSESSEE DID NOT HAVE AN Y INTENTION TO CONCEAL ANY FACT OR FURNISH ANY INACCURATE PARTICUL AR. IN THIS REGARD RELIANCE MAY BE PLACED ON THE DECISION OF HO N'BLE SUPREME COURT IN THE CASE OF K. C. BUILDERS AND ANR. VS. AC IT (2004) 135 TAXMAN 461, WHEREIN APEX COURT HAS HELD AS UNDER :- 'THE WORD 'CONCEALMENT.' AS USED IN SECTION271(1)( C) INHERENTLY CARRIED WITH THE ELEMENT OF MENS REA, TH EREFORE, THE MERE FACT THAT SOME FIGURE OR SOME PARTICULARS HAVE BEEN DISCLOSED BY ITSELF, EVEN IF TAKES OUT THE CAS E FROM THE PURVIEW OF NON-DISCLOSURE, IT CANNOT BE ITSELF TAKE OUT THE CASE FROM THE PURVIEW OF 'FURNISHING INACCURATE PAR TICULARS, MORE OMISSION FROM THE RETURN OF AN ITEM OF RECEIPT DOES NEITHER AMOUNT TO CONCEALMENT NOR DELIBERATE FURNIS HING OF ACCURATE PARTICULARS OF INCOME UNLESS 'AND UNTIL TH ERE IS SOME EVIDENCE TO SHOW OR SOME CIRCUMSTANCES FOUND F ROM WHICH IT CAN BE GATHERED THAT THE OMISSION WAS ATTR IBUTABLE TO AN INTENTION OR DESIRE ON THE PART OF THE ASSESS EE TO HIDE OR CONCEAL THE INCOME SO AS TO AVOID THE IMPOSITION OF TAX THERE ON, IN ORDER THAT A PENALTY UNDER SECTION 271 (1)(III) MAY BE IMPOSED, IF HAS TO BE PROVED THAT THE ASSESS EE CONSCIOUSLY MADE THE CONCEALMENT OR FURNISHED INACC URATE PARTICULARS OF HIS INCOME. FURTHER THE INCOME TAX APPELLATE TRIBUNAL DELHI BE NCH 'C', NEW DELHI IN THE CASE OF HINDUSTAN COCA-COLA MARKETING COMPANY PRIVATE LTD, VS. DY. COMMISSIONER OF INCOME TAX, CI RCLE-12(1), NEW DELHI HELD THAT, 'IN VIEW OF THE ABOVE FACTS, P ROVISIONS OF LAW AND THE ABOVE DECISION OF APEX COURT, WE RESPECTFUL LY SUBMIT THAT CAPTIONED PROCEEDINGS U1S.271(1)(D) OF THE ACT BE D ROPPED AS THE ADDITION MADE BY LD AO WAS CONSEQUENT TO THE SUO MO TO ACCEPTANCE OF THE ASSESSEE THAT THE ABOVE SAID MIST AKE WAS A CASUAL MISTAKE MADE WHILE CALCULATING/HE VALUE FOR THE PURPOSE OF FBT AND WAS NOT DUE TO THE DETECTION OF ANY CONCEAL MENT OF FACTS OR THE INACCURATE PARTICULARS BY THE LD AO. ' RELIANCE IS ALSO PLACED IN THE JUDGMENT PASSED BY THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'A', NEW DELHI IN TH E CASE OF AHAAR CONSUMER PRODUCTS PVT. LTD. VS. INCOME TAX OFFICER, WARD-L(2), NEW DELHI WHEREIN IT WAS HELD THAT, 'WE HAVE CONSID ERED RIVAL CONTENTIONS AND HAVE GONE THROUGH THE ENTIRE MATERI AL AVAILABLE ON RECORD IN CASE OF CONCEALMENT PENALTY, THOUGH TH E 4 ITA NO. 1163/KOL/2016 ASSESSMENT YEAR: 2009-2010 ESTABLISHMENT OF WILFUL CONCEALMENT IS NOT NECESSAR Y NEVERTHELESS HON'BLE COURTS HAVE HELD THAT THE EXPLANATION FURNI SHED BY THE ASSESSEE IS TO BE JUDGED ON THE TEST OF BONA FIDES AND SUBSTANTIATION. LOOKING FROM THESE PARAMETERS, THE CONDUCT OF THE ASSESSEE DOES NOT DESERVE FOR CONCEALMENT PENALTY I NASMUCH AS ALL THE DETAILS ABOUT EXPENDITURE LIABLE FOR FBT BENEFI T WERE INCORPORATED IN THE RETURN OF THE ASSESSEE ALONG WI TH THE STATEMENT OF ACCOUNTS. IT HAS NOT BEEN DISPUTED THA T THE ASSESSEE PAID ADVANCE FBT TAX AND IT HAS NOT BEEN CLAIMED AS REFUND OF SUCH TAX. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCE S THE DEFAULT BECOMES TECHNICAL IN NATURE AND NOT THE ONE INTENDE D TO DERIVE ANY UNDUE ADVANTAGE. SINCE THE ASSESSEE HAS BEEN AB LE TO SUBSTANTIATE ITS STAND ABOUT BONA FIDE OMISSION, WE SEE NO JUSTIFICATION FOR LEVY OF THE PENALTY WHICH IS DELE TED. IN THE LIGHT OF THE AFORESAID JUDGMENTS THE APPELL ANT BEGS TO STATE THAT THERE IS NO FURNISHING OF INACCURATE PARTICULA RS OR CONCEALING FBT IN QUESTION AND THE APPELLANT HIMSELF HAS ACCEP TED THE LEVY OF FBT ON AUDIT EXPENSES BY THE LD. ITO TO AVOID ANY F URTHER LITIGATION CONSIDERING THE FACT THAT ON THE POINT O F LAW, THERE COULD BE TWO DIFFERENT OPINIONS. THE APPELLANT HAS SHOWN ITS BONA FIDE ON THE COUNT THAT, APPELLANT AID THE TAX LEVIE D AND DID NOT CARRY OUT THE ISSUE IN FURTHER LITIGATION. UNDER FACTS AND CIRCUMSTANCES AS STATED ABOVE, THE PENALTY LEVIED BY THE LD. AO IS UNJUSTIFIED. 4. THE ABOVE SUBMISSION FILED BY THE ASSESSEE WAS N OT FOUND ACCEPTABLE BY THE LD. CIT(APPEALS) AND HE PROCEEDED TO CONFIRM THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECT ION 271(1)(D) FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 5 OF HIS I MPUGNED ORDER:- 5. I HAVE DULY CONSIDERED THE SUBMISSION OF THE A SSESSEE IN THE LIGHT OF THE FACTS OF THE CASE AND THE JUDICIAL PRO NOUNCEMENTS RELIED UPON. THE ASSESSEE HAD DEBITED EXPENSES OFRS .5,19,238/- AS AUDIT EXPENSES IN THE RETURN. HOWEVER, THE AO FOUND THE SAME AS FRINGE BENEFIT TO THE EMPLOYEES AFTER EXAMINATION O F ACCOUNTS AND THE ASSESSEE HAD NOT DISPUTED AO'S DECISION. THE IS SUE IN HANDS IS TO DECIDE WHETHER THE ASSESSEE HAD ANY INTENTION TO CONCEAL THE FACTS OR FURNISH INACCURATE PARTICULARS. THE ASSESS EE INCURRED THE EXPENSES FOR CONVEYANCE, FOOD, REMUNERATION ETC. OF ITS AUDITING ARTICLE CLERKS AND STAFF BUT DEBITED THE SAME AGAIN ST 'AUDIT EXPENSES'. SO THE ASSESSEE HAD INDEED FURNISHED INA CCURATE PARTICULARS OF ACCOUNTS IN ITS RETURN. THE CASE LAW S REFERRED BY THE ASSESSEE DO NOT COME IN HELP OF THE ASSESSEE AS THO SE ARE DISTINGUISHABLE ON FACTS AS MENTIONED BY THE AO IN THE PENALTY ORDER. THIS IS NOT A CASE WHERE THE AO DISALLOWED A PORTION OF THE FRINGE BENEFIT EXPENSES AND INITIATED PENALTY. IN T HIS CASE, ASSESSEE HAD CONCEALED THE FACTS BY CLAIMING FRINGE BENEFIT TO THE EMPLOYEES AS AUDIT EXPENSES. SO THE AO WAS CORRECT IN HIS DECISION 5 ITA NO. 1163/KOL/2016 ASSESSMENT YEAR: 2009-2010 IN IMPOSING PENALTY. IN VIEW OF SUCH, PENALTY LEVIE D BY THE AO IS UPHELD. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE AUDIT EXPENSES OF RS.5,19,238/- WERE CLAIMED TO BE INCURR ED BY THE ASSESSEE- COMPANY TOWARDS TRAVELLING AND CONVEYANCE OF THE AR TICLED CLERKS, WHO WERE C.A. STUDENTS RECEIVING TRAINING FROM THE ASSE SSEE-FIRM. IT WAS CONTENDED BY THE ASSESSEE DURING THE COURSE OF ASSE SSMENT PROCEEDINGS AS WELL AS DURING THE COURSE OF PENALTY PROCEEDINGS THAT THERE BEING NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE -FIRM AND THE ARTICLED CLERKS, THE AUDIT EXPENSES DID NOT FALL UN DER THE AMBIT OF FBT. ALTHOUGH THIS CLAIM OF THE ASSESSEE WAS NOT ACCEPTE D BY THE ASSESSING OFFICER ON THE GROUND THAT IT WAS SPECIFICALLY SUBM ITTED BY THE ASSESSEE EARLIER THAT THE AUDIT EXPENSES WERE INCURRED BY IT S AUDIT STAFF AND AUDIT CLERKS WITHOUT ANY REFERENCE TO THE ARTICLED CLERKS UNDERGOING TRAINING WITH IT, IT IS OBSERVED THAT NOTHING HAS BEEN BROUG HT ON RECORD BY THE ASSESSING OFFICER TO ESTABLISH THAT THE CLAIM OF TH E ASSESSEE WAS WRONG AND THE AUDIT EXPENSES IN QUESTION WERE INCURRED ON THE AUDIT STAFF, WHICH DID NOT INCLUDE ARTICLED CLERKS UNDERGOING TR AINING WITH THE ASSESSEE-FIRM AS PER THE STIPULATION OF THE ICAI. N O DOUBT, THE ASSESSEE- FIRM ALSO FAILED TO BRING ANYTHING ON RECORD TO SUP PORT AND SUBSTANTIATE ITS EXPLANATION BUT SUCH FAILURE, IN OUR OPINION, C AN JUSTIFY THE ADDITION MADE BY THE ASSESSING OFFICER TO THE VALUE OF FRING E BENEFIT BUT NOT THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(D), ESPE CIALLY WHEN THE AUDIT EXPENSES WERE SEPARATELY DEBITED BY THE ASSESSEE-FI RM IN ITS PROFIT & LOSS ACCOUNT AND ALL THE RELEVANT DETAILS OF THE SAME WE RE FULLY AND TRULY FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSE SSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER. KEEPING IN VIEW ALL T HESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT IT IS NOT A CASE WHERE THE ASSESSEE CAN BE SAID TO HAVE FURNISHED INACCURA TE PARTICULARS OF 6 ITA NO. 1163/KOL/2016 ASSESSMENT YEAR: 2009-2010 FRINGE BENEFITS TO JUSTIFY THE IMPOSITION OF PENALT Y UNDER SECTION 271(1)(D). WE, THEREFORE, CANCEL THE SAID PENALTY A ND ALLOW THIS APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DAY OF JANUARY, 2018. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 17 TH DAY OF JANUARY, 2018 COPIES TO : (1) M/S. GUJRANI & CO., 42A, C.R. AVENUE, 3 RD FLOOR, KOLKATA-700 012 2) INCOME TAX OFFICER, WARD-54(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 (3) CIT(APPEALS)-21, KOLKATA, (4) CIT- , KOLKATA, (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO, INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.