M/s Punjab State Warehousing Corporation Ltd., Chandigarh V. ACIT, Chandigarh

ITA 122/CHANDI/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2409 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 29-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Bonafide belief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 122/CHD/2010 ASSESSMENT YEAR: 2004-05 PUNJAB STATE WAREHOUSING CORPORATION LTD., VS THE ACIT, CIRCLE-2(1), CHANDIGARH CHANDIGARH PAN NO. AABCP725J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY JAIN RESPONDENT BY : SHRI J.S. NAGAR DATE OF HEARING : 12.06.2013 DATE OF PRONOUNCEMENT : 21.06.2013 ORDER PER T.R. SOOD, AM THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A), CHANDIGARH DATED 17.11.2009. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING EFFECTIVE GROUND:- THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED THE PENAL TY OF ` 1,25,56,250/- U/S 271(1) (C) OF THE INCOME TAX ACT , 1961. 2 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT ASSESSEE HAS DEBITE D A PROVISION OF ` 3.5 CRORES IN PROFIT & LOSS ACCOUNT AS PROVISION FOR IN TEREST OF PUNJAB GOVERNMENT & CONWARE. ON ENQUIRY, IT WAS EXPLAINED THAT IT WAS A CASE OF CONTRA ENTRIES PASSED FOR MEMORANDUM PURPOSES AS THE AMOUNT WAS SHOWN AS INCOME. THE REPLY WAS NOT ACCEPTED AND A SUM OF ` 3.5 CRORES WAS ADDED TO THE INCOME OF THE ASSESSEE AND PENALTY PROCEEDIN GS U/S 271(1) (C) OF THE ACT WERE INITIATED. IN RESPONSE TO THE SHOW CASE N OTICE AGAINST PENALTY PROCEEDINGS, IT WAS SUBMITTED THAT IT WAS A CASE OF CONTRA ENTRY AND IN ANY CASE DETAILED EXPLANATION WAS FURNISHED BEFORE THE ASSESSING OFFICER AND, THEREFORE, PENALTY WAS NOT LEVIABLE. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CEMENT MAR KETING CO. OF INDIA LTD V ASTT. COMMISSIONER OF SALES TAX & OTHERS 124 ITR 15. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND FORCE IN THESE SUBMI SSIONS AND LEVIED A MINIMUM PENALTY OF ` 1,25,56,250/- . 4. ON APPEAL BEFORE THE CIT(A), IT WAS MAINLY SUBMI TTED THAT ASSESSING OFFICER HAS NOT PROVED ANY CONCEALMENT, THEREFORE, PENALTY WAS NOT LEVIABLE. RELIANCE WAS PLACED ON VARIOUS CASE LAWS. HOWEVER, LD. CIT(A) DID NOT AGREE AND CONFIRMED THE LEVY OF PENALTY. 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT EXPLANATION WAS ALREADY FURNISHED BEFORE THE ASSESSING OFFICER DURI NG ASSESSMENT 3 PROCEEDINGS. IN FACT THE ASSESSEE HAS MADE PROVISI ON FOR INTEREST ON THE ADVANCES GIVEN TO GOVT. OF PUNJAB AND CONWARE. THO SE LOANS WERE NOT RECOVERABLE AND THE ENTRY FOR INTEREST WAS MADE ONL Y FOR THE PURPOSE OF MEMORY BY WAY OF MEMORANDUM ENTRIES. SINCE THE INT EREST WAS NOT RECOVERABLE, A CORRESPONDING ENTRY WAS MADE ON THE DEBIT SIDE OF THE PROFIT & LOSS ACCOUNT BY WAY OF PROVISION OF INTEREST NOT RECOVERABLE. AT BEST, THE ONLY FAULT OF THE ASSESSEE IS THAT IT HAS PASSED A CCOUNTING ENTRIES AGAINST THE INCOME WHICH WAS NOT RECOVERABLE. IN THIS REGARD, HE REFERRED TO PARA 37 OF THE ORDER OF THE TRIBUNAL WHERE IN THE NEXT YEAR, T HE SIMILAR ADDITION ON ACCOUNT OF INTEREST AMOUNTING TO ` 3.5 CRORES WAS DELETED BY OBSERVING THAT PRINCIPLE ITSELF HAS BEEN WRITTEN OFF BY THE ASSESS EE. BY NO STRETCH OF IMAGINATION IT CAN BE CALLED AS CONCEALMENT OF PART ICULARS OF INCOME. THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS AND, THE REFORE, PENALTY IS NOT LEVIABLE. IN THIS REGARD, HE PARTICULARLY RELIED O N THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V RELIANCE PETRO P RODUCTS (P) LTD 322 ITR 158 AND HON'BLE GUJRAT HIGH COURT IN THE CASE OF CI T VS SAMBHAV MEDIA LTD. TAX APPEAL NO. 589 OF 2012. 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT AD DITION HAS ALREADY BEEN CONFIRMED BY THE TRIBUNAL VIDE PARAS 23 TO 25 . THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THEREFOR E, INTEREST WAS RECOVERABLE AND THERE WAS NO JUSTIFICATION FOR MAKI NG A DEBIT ENTRY IN THE PROFIT AND LOSS ACCOUNT FOR THE PROVISION OF INTERE ST. THE ASSESSEE HAS MADE 4 AN EFFORT TO REDUCE ITS INCOME, THEREFORE, IT IS A CLEAR CASE OF CONCEALMENT AND ACCORDINGLY LEVY OF PENALTY IS JUSTIFIED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT ASSESSEE HAS CREDITED A SUM OF ` 3.5 CRORES TOWARDS INTEREST ON ADVANCES GIVEN TO GOVERNMENT OF PUNJAB AND CONWARE. IT SEEM S THAT AMOUNTS WERE NOT RECOVERABLE AND IN FACT THE AMOUNTS HAVE BEEN W RITTEN OFF IN THE NEXT YEAR. AGAINST THE ENTRY OF INTEREST, THE ASSESSEE M ADE A PROVISION OF SUCH INTEREST AND DEBITED THE SAME AMOUNT TO THE PROFIT AND LOSS ACCOUNT. THE ADDITION WAS CONFIRMED BY THE TRIBUNAL BY FOLLOWING THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF SOUTH INDI A SURGICAL CO. LTD 287 ITR 62. HOWEVER, THE UNDISPUTED FACT REMAINS THAT PRINCIPAL AMOUNT DUE FROM PUNJAB GOVERNMENT AS WELL AS FROM CONWARE WAS WRITTEN OFF IN THE NEXT YEAR I.E. ASSESSMENT YEAR 2005-06. THIS FACT HAS BEEN NOTED EVEN BY THE TRIBUNAL IN ASSESSEES OWN CASE VIDE PARA 21 IN IT A NOS. 204, 311 & 292, 459 & 427/CHANDI/2008 RELATING TO ASSESSMENT YEARS 2004-05 & 2005-06 ORDER DATED 23.09.2009 . THIS CLEARLY SHOWS THAT A SSESSEE WAS NOT HOPING TO RECOVER THE INTEREST AND ENTRY OF INTEREST WAS MADE ONLY FOR MEMORANDUM PURPOSES I.E WHY CORRESPONDING DEBIT ENTRY WAS ALSO MADE. IT IS SETTLED LAW THAT PENALTY PROCEEDINGS ARE NOT AUTOMATIC IN THE S ENSE THAT ONCE ADDITION IS MADE, THE SAME WILL NOT BE FOLLOWED BY PENALTY. FU RTHER, THE ASSESSEE HAS FURNISHED THE EXPLANATION WHICH SEEMS TO BE BONAFID E BEFORE THE ASSESSING OFFICER FOR MAKING THIS ENTRY FOR PROVISION TOWARDS INTEREST. THE PENALTY 5 CANNOT BE LEVIED UNLESS AND UNTIL THERE IS CONCEALM ENT OR WHEN THE EXPLANATION WHICH HAS BEEN FILED BEFORE THE ASSESSI NG AUTHORITY AND WHICH IS FOUND NOT BONAFIDE. THE HON'BLE SURPEME COURT IN THE CASE OF CIT V CEMENT MARKETING CO OF INDIA LTD V ACIT 124 ITR 16 HAD OBSERVED AS UNDER:- IF THE VIEW CANVASSED ON BEHALF OF THE REVENUE WER E ACCEPTED, THE RESULT WOULD BE THAT EVEN IF THE ASSESSEE RAISE S A BONA FIDE CONTENTION THAT A PARTICULAR ITEM IS NOT LIABLE TO BE INCLUDED IN THE TAXABLE TURNOVER, HE WOULD HAVE TO SHOW IT AS F ORMING PART OF THE TAXABLE TURNOVER IN HIS RETURN AND PAY TAX U PON IT ON PAIN OF BEING HELD LIABLE FOR PENALTY IN CASE HIS C ONTENTION IS ULTIMATELY FOUND BY THE COURT TO BE NOT ACCEPTABLE. THAT SURELY COULD NEVER HAVE BEEN INTENDED BY THE LEGISLATURE. 8. THE ABOVE CLEARLY SHOWS THAT WHEREVER ASSESSEE M IGHT HAVE MADE A CLAIM ON BONAFIDE BASIS AND THAT CLAIMS IS ULTIMATE LY FOUND TO BE INCORRECT, THE SAME WILL NOT LEAD TO THE PENAL CONSEQUENCE. F URTHER, IN THE CASE OF CIT V RELIANCE PETRO PRODUCTS (P) LTD (SUPRA) IT WAS OB SERVED AS UNDER:- 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 INC OME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHE D INACCURATE PARTICULARS OF HIS INCOME. THE MEANING O F THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIV EN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARS. IN ORDER TO EXPOSE THE ASSESSE TO PENALTY, UNLESS THE CASE IS 6 STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAU SE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH TH E PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS AR E FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRAC T PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE , NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS . 9. IN THE CASE BEFORE US, THERE IS NO FINDING THAT DETAILS PROVIDED BY THE ASSESSEE ARE INCORRECT. AS OBSERVED EARLIER, THE CLAIM OF THE ASSESSEE SEEMS TO BE BONAFIDE BECAUSE PRINCIPAL AMOUNT ITSELF WAS WRITTEN OFF AND THEREFORE, PERHAPS THERE WAS NO CLAIM AGAINST THE INTEREST. T HE ASSESSEE PROVIDED THE INTEREST ON THE ACCRUAL BASIS BUT SIMULTANEOUSLY MA DE A DEBIT ENTRY AGAINST SUCH INTEREST. THIS IS PURELY A BONAFIDE CLAIM BASE D ON BONAFIDE BELIEF. IN OUR OPINION, THE PENAL PROVISION CANNOT BE ATTRACTE D IN SUCH A SITUATION AND ACCORDINGLY WE SET ASIDE THE ORDER OF LD. CIT(A) AN D DELETE THE PENALTY. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. (ORDER PRONOUNCED IN THE OPEN COURT ON 21.06.2013) SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 21 ST JUNE, 2013 RKK 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR