M/s. Anand Agros Private Limited, Secunderabad V. The ACIT, Cir-1(1)`, Hyderabad

ITA 1213/HYD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1332 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 22-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV BENJWAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1213/HYD/2011 ASSESSMENT YEAR 2003-04 M/S. ANAND AGROS PVT. LTD., SECUNDERABAD PAN: AABCA9916H VS. THE ACIT CIRCLE-1(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI A.V. RAGHURAM RESPONDENT BY: SRI RAJIV BENJWAL DATE OF HEARING: 13.02.2013 DATE OF PRONOUNCEMENT: 22.02.2013 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-II, HYDERABAD DATED 27.4.2011 F OR ASSESSMENT YEAR 2003-04. 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WIT H REGARD TO CONFIRMING LEVY OF PENALTY BY THE CIT(A) AT RS. 1,78,240 U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961 . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE- COMPANY HAD FILED THE RETURN OF INCOME ON 28.11.200 3 DECLARING A LOSS OF RS. 1,25,51,709. IN THIS CASE T HE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 27.2.2006 M AKING THE ADDITIONS ON ACCOUNT OF DISALLOWANCES OF SALES TAX INSPECTION FEES AT RS. 44,376 AND CHARGES ON BREACH OF CONTRACT RS. 73,000 UNDER THE HEAD 'GENERAL EXPENSE S' AS THEY ARE NOT ALLOWABLE. FURTHER, LOSS ON CHITS RS. 3,67,631 IT A NO. 1213/HYD/2012 M/S. ANAND AGROS PVT. LTD. =================== 2 WAS DISALLOWED SINCE THE ASSESSEE HAS NOT OFFERED T O TAX AND INCOME (DIVIDEND) FROM CHIT DURING THE EARLIER YEAR S. 4. DURING THE COURSE OF PENALTY PROCEEDINGS U/S. 271(1)(C), A NOTICE U/S. 274 WAS ISSUED BY THE AO O N 17-08- 2006. IN RESPONSE, THE ASSESSEE FILED REPLY. IN HI S REPLY, THE ASSESSEE STATED THAT THE COMPANY IS NOT RUNNING WEL L AND STOPPED ALL ACTIVITIES OF BUSINESS AND FACTORY HAS BEEN GIVEN ON LEASE BASIS DUE TO BAD FINANCIAL & MARKETING CON DITIONS AND ALL THE ADMINISTRATIVE AND ACCOUNTS STAFF HAS LEFT THE ORGANIZATION. AS REGARDS THE CHIT LOSS, THE ASSESS EE HAS REPLIED THAT THE AMOUNTS PAID TOWARDS CHIT FUNDS WE RE DEBITED AND AMOUNT RECEIVED TOWARDS CHIT BID WAS CREDITED T O P&L A/C AND THE BALANCE OF THE AMOUNT DEBIT OR CREDIT IS SH OWN AS LOSS ON CLOSURE OF CHIT/PROFIT ON CLOSURE OF CHIT. THE A SSESSEE COMPANY MERELY STATED THAT BECAUSE OF LACK OF PROPE R KNOWLEDGE IN THE ACCOUNTS, THE NECESSARY INFORMATIO N CANNOT BE FURNISHED IMMEDIATELY. THE ASSESSEE'S EXPLANATIO N WAS NOT ACCEPTED BY THE AO IN VIEW OF THE FACT THAT LACK OF PROPER KNOWLEDGE IS NOT AN EXCUSE FOR NOT SUBSTANTIATING T HE CLAIM. AS REGARD THE CHIT LOSS, THE ASSESSEE'S EXPLANATION WAS ALSO NOT ACCEPTED BY THE AO AS THE SAME WAS NOT SUBSTANT IATED WITH EVIDENCE. IN VIEW OF THE ABOVE, THE AO HELD TH AT THERE IS NO PROPER EXPLANATION ON THE PART OF THE ASSESSEE A ND THEREFORE IT IS ESTABLISHED THAT THE ASSESSEE COMPA NY HAS FURNISHED INACCURATE PARTICULARS OF INCOME WITH A C LEAR KNOWLEDGE OF THE SAME. THEREFORE, THE PENALTY PROVI SIONS OF THE SECTION 271(1)(C) OF THE ACT ARE ATTRACTED IN T HIS CASE. ACCORDINGLY, THE AO LEVIED MINIMUM PENALTY OF RS. 1 ,78,240 U/S. 271(1)(C) ON THE ASSESSEE COMPANY. IT A NO. 1213/HYD/2012 M/S. ANAND AGROS PVT. LTD. =================== 3 5. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE MERELY STATED THAT THE PAYMENT MADE FOR BREACH OF CONTRACT OF RS. 73,000 AND SALE TAX INSPECTION FEE OF RS. 44,376 HAVE BEEN INCURRED IN THE USUAL COURSE OF BUSINESS AND DUE TO THE FINANCIAL DIFFICULTIES THAT THE COMPANY WAS FACING, THE MANAGEMENT COULD NOT LOOK AFTER THE ACCOUNTING ON REGULAR BASIS. ACCORDING T O THE CIT(A) THE ASSESSEE FAILED TO SUBSTANTIATE THE CLAI M AND TO FURNISH DETAILS OF SALE TAX INSPECTION FEE AND B REACH OF CONTRACT. SIMILARLY, WITH REFERENCE TO CHIT LOSS O F RS. 3,67,631 THE ASSESSEE FAILED TO FURNISH THE DETAILS . ACCORDINGLY, THE CIT(A) CONFIRMED THE PENALTY LEVIE D U/S. 271(1)(C) OF THE ACT AT RS. 1,78,240. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED AR SUBMITTED THAT THE ASSESSEE INCURRED THE EXPENDITURE TOWARDS BREACH OF CONTRACT AT RS. 73,000 AND SALES TAX INSPECTION FEE AT RS. 44,3 76. SIMILARLY THE ASSESSEE INCURRED CHIT LOSS AT RS. 3, 67,631. WHATEVER THE EXPENDITURE INCURRED BY THE ASSESSEE O N THE ABOVE COUNTS WAS INCURRED FOR THE PURPOSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE AND THE DISALLOWANCE WAS NOT LIABLE FOR PENALTY UNDER INCOM E-TAX ACT AND THE DISALLOWANCE WAS ACCEPTED BY THE ASSESS EE DUE TO SMALLNESS OF THE AMOUNT AND THE ASSESSEE HAS NOT PREFERRED ANY APPEAL. ACCORDING TO THE AR FOR LEVYING PENALTY U/S. 271(1)(C) OF THE ACT, THERE SH OULD BE MATERIAL TO SHOW THAT THE ASSESSEE CONCEALED PARTICULARS OR FURNISHED INACCURATE PARTICULARS OF INCOME. HE SUBMITTED THAT THE ASSESSEE IN ALL FAIRNESS FURN ISHED INFORMATION RELATING TO THE ABOVE EXPENDITURE AND T HE SAME WAS FOUND BY THE ASSESSING OFFICER AS NOT IT A NO. 1213/HYD/2012 M/S. ANAND AGROS PVT. LTD. =================== 4 ALLOWABLE AND IT WAS NOT ALLOWED WHILE COMPLETING T HE ASSESSMENT. HE SUBMITTED THAT THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO DIFFERE NT PROCEEDINGS. ONE CANNOT BORROW FINDINGS FROM THE ASSESSMENT ORDER FOR LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. HE SUBMITTED THAT THE ASSESSING OFFICER S HALL INDEPENDENTLY ESTABLISH IN THE PENALTY ORDER THAT T HE ASSESSEE DELIBERATELY FURNISHED INACCURATE PARTICUL ARS OF INCOME OR CONCEALED PARTICULARS OF INCOME. HE RELI ED ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT V . RELIANCE PETRO PRODUCTS PVT. LTD. (322 ITR 158). H E ALSO RELIED ON THE JUDGEMENT OF SUPREME COURT IN THE CAS E OF PRICEWATERHOUSE COOPERS PVT. LTD. V CIT & ANOTHER (2012) 348 ITR 306 (SC). 7. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ASSESSEE MADE AN ATTEMPT TO CLAIM WRONG DEDUCTION AND THE SAME WAS STOPPED BY THE ASSESSING OFFICER WHICH ACT ION DULY ATTRACTS PENALTY U/S. 271(1)(C) OF THE ACT. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, IN THIS CASE THE ASSESSEE CLAIMED DEDUCTION TOWARDS BREACH OF CONTRA CT CHARGES, SALE TAX INSPECTION FEE AND LOSS ON CHIT. THIS CLAIM OF DEDUCTION WAS DISALLOWED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT. THE DR ARGUED THAT THE ASSESSEE WRONGLY CLAIMED THE EXPENDITURE THAT AMOUNTS TO CONCEALMENT OF PARTICUL ARS OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTI CULARS OF INCOME WHICH WILL ATTRACT LEVY OF PENALTY. WE D O NOT AGREE, AS THE ASSESSEE HAD FURNISHED FULL DETAILS O F IT A NO. 1213/HYD/2012 M/S. ANAND AGROS PVT. LTD. =================== 5 EXPENDITURE RELATING TO THE ABOVE EXPENDITURE AND T HE SAME WAS DISALLOWED AS IT IS NOT ALLOWABLE BUSINESS EXPENDITURE. HOWEVER, THE REVENUE AUTHORITIES NOT FOUND THE ACCOUNTS INACCURATE NOR CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE. IT WAS LEFT TO THE AUTHORITIES TO ACCEPT THE CLAIM OF THE ASSESSEE AS IT IS OR REJECT THE SAME IF IT IS NOT ACCEPTABLE TO THE REVE NUE AUTHORITIES. THE REJECTION OF THE CLAIM OF THE ASS ESSEE BY THE REVENUE AUTHORITIES, THAT ITSELF CANNOT BE CONSTRUED AS FURNISHING OF INACCURATE PARTICULARS O F INCOME OR CONCEALMENT OF INCOME. THERE IS ALSO MER IT IN THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE INCURRE D THIS EXPENDITURE IN THE COURSE OF CARRYING ON ITS BUSINE SS. DUE TO THE APPLICATION OF PARTICULAR PROVISIONS OF THE INCOME-TAX ACT THAT EXPENDITURE CANNOT BE ALLOWED A S DEDUCTION WHILE COMPUTING INCOME OF THE ASSESSEE. THAT DISALLOWANCE ITSELF CANNOT BE A REASON FOR LEVYING OF PENALTY. THE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA) HELD AS F OLLOWS: 'A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS . IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE IT A NO. 1213/HYD/2012 M/S. ANAND AGROS PVT. LTD. =================== 6 ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS.' 9. ACCORDINGLY, IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT AND ACCORDINGLY, WE DELETE THE PENALTY. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY, 2013. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 22 ND FEBRUARY, 2013 TPRAO COPY FORWARDED TO: 1. M/S. ANAND AGROS LTD., 12-14, HAPPY TRADE CENTRE, 62, S.D. ROAD, SECUNDERABAD. 2. THE ACIT, CIRCLE-1(1), HYDERABAD. 3. THE CIT(A)-II, HYDERABAD. 4. THE CIT-I, HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD.