The Spunpipe & construction Co.(Baroda) Pvt. Ltd, Vadodara V. The DCIT, Circle-2(1)(1), Vadodara

ITA 127/AHD/2023

AI Insights

The case involves The Spunpipe & Construction Co. appealing against a penalty imposed by the Assessing Officer (AO) under Section 271(1)(c) for alleged furnishing of inaccurate particulars of income related to disallowances under Section 14A read with Rule 8D, and Section 36(1)(va) of the Income Tax Act, 1961. The Tribunal examined whether the assessee had indeed furnished inaccurate particulars of income, considering the legal interpretations and the assessee's arguments that the issues were debatable and under a bona fide belief. The Tribunal referenced decisions from the Supreme Court, particularly the case of CIT vs. Reliance Petroproducts (P) Ltd., to support its decision to allow the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129250 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-05-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 05-03-2023
• Other Referred Cases: CIT vs. Reliance Petroproducts (P) Ltd., 322 ITR 158, PCIT vs. Gruh Finance Limited (2018) 259 Taxman 420 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief; Rule 8D
• Section: 271(1)(c); 143(3); 14A; 274

Judgement Text

ITA No.127/Ahd/2023 Assessment Year: 2013-14 Page 1 of 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.127/Ahd/2023 Assessment Year: 2013-14 The Spunpipe & Construction Co. vs. The D.C.I.T., (Baroda) Pvt. Ltd., Circle – 2(1)(1), Baroda. A/505-506, Alkapuri Arcade, 5 th Floor, Opp. Hotel Welcome Group, R.C. Dutt Road, Baroda – 390 007. [PAN – AAACT 6738 R] (Appellant) (Respondent) Assessee by : Shri Dhinal Shah & Shri Bhadresh Gandhakwala, ARs Revenue by : Shri V.K. Mangla, Sr. DR Date of hearing : 08.05.2023 Date of pronouncement : 10.05.2023 O R D E R This appeal is filed by the Assessee against order dated 23.02.2023 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2013-14. 2. The Assessee has raised the following ground of appeal :- “1. The learned CIT(A) has erred in confirming the penalty of Rs.54,678/- under Section 271(1)(c) without appreciating the reply by the assessee by letter dated 16.02.2022 in as much as the assessee has not furnished any inaccurate particulars of income and that the burden that lay on the AO is not discharged to the effect that which particulars furnished by the assessee are inaccurate.” 3. Scrutiny assessment for A.Y. 2013-14 was completed under Section 143(3) of the Income Tax Act, 1961 on 22.03.2016 making disallowance under Section 14A read with Rule 80D, disallowance of interest payment and disallowance under Section 36(1)(va) of the Act. Penalty notice under Section 274 read with Section 271(1)((c) of the Act dated 22.03.2016 was initiated for furnishing inaccurate particulars of income. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) vide order dated 20.07.2017 confirmed the disallowance made under Section 14A read with Rule 8D and disallowance under Section 36(1)(va) of the ITA No.127/Ahd/2023 Assessment Year: 2013-14 Page 2 of 3 Act. Aggrieved by the order of CIT(A), the assessee preferred appeal before the Tribunal and Tribunal vide order dated 09.07.2019 confirmed the addition made under Section 14A and addition made under Section 36(1)(va) of the Act. The assessee filed reply to the show cause notice under Section 271(1)(c) of the Act on 09.02.2022 and submitted that the assessee has not concealed income or furnished inaccurate particulars of income. The Assessing Officer, after considering the reply of the assessee, levied penalty under Section 271(1)(c) of the Act in respect of disallowance under Section 14A and disallowance under Section 36(1)(va) of the Act. 4. Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The Ld. AR submitted that since the assessee considered the disallowance under Section 14A as debatable issue and has not utilised any funds outside the interest-free funds. The assessee was under the bonafide belief that the disallowance under Section 14A read with Rule 8D was not applicable in assessee’s case. The Ld. AR further submitted that in respect of late payment of employees’ contribution to the Provident Fund was also a debatable issue at the particular juncture and some of the Hon’ble Courts were in favour of the assessee and, therefore, the assessee has claimed deduction under Section 36(1)(va) of the Act. Thus, the Ld. AR submitted that the assessee never furnished inaccurate particulars of income and the question of penalty under section 271(1)(c) of the Act is not justified. The Ld. AR relied upon the decision of Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd., 322 ITR 158. 6. The Ld. DR relied upon the Assessment Order and the order of the CIT(A) 7. Heard both the parties and perused all the relevant material available on record. The Assessing Officer while making the penalty has not made out the case of which element of the income was treated as furnishing inaccurate particulars of income. While claiming exempt income, the assessee has not made disallowance under Section 14A under bonafide belief that the investments was done from interest- free fund and, therefore, Rule 8D will not be applicable in the present case. Similar is the case with late payment of employees’ contribution to Provident Fund as some of the High Courts have taken a view that late payment of employees contribution to EPF ITA No.127/Ahd/2023 Assessment Year: 2013-14 Page 3 of 3 is permissible deduction. Both these issues being under bonafide belief that the assessee should not work out accordingly while giving return of income, the decision of Hon’ble Supreme Court in case of Reliance Petroproducts is squarely applicable in assessee’s case as there is no finding by the Revenue Authorities that any details given by the assessee in this return are incorrect or erroneous. The decision of Hon’ble Supreme Court in case of PCIT vs. Gruh Finance Limited (2018) 259 Taxman 420 (SC) was also relied upon by the assessee therein. The Hon’ble Supreme Court has confirmed the view taken by the Hon’ble Gujarat High Court in case of issues pertaining to penalty under Section 271(1)(c) of the Act wherein quantum addition pertaining to disallowance of interest expenditure under Section 14A read with Rule 8D. Thus, the decision of Hon’ble Apex Court in the case of Reliance Petroproducts (supra) is squarely applicable in the present case and the penalty under Section 271(1)(c) of the Act does not sustain. Hence, appeal of the assessee is allowed. 8. In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on this 10 th day of May, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 10 th day of May, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad