Unidyes Chemical Supplier, New Delhi V. ITO, New Delhi

ITA 1287/DEL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7037 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 05-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR CHOPRA
• Keywords: Business income; Reassessment proceedings
• Section: 143(3); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH B NEW DELHI BEFORE : S MT. DIVA SINGH , JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 1287/DEL./2016 ASSTT. YEAR : 2007 - 08 UNIDYES CHEMICAL SUPPLIER, VS. INCOME - TAX OFFICER, 2/12, ANSARI ROAD, DARYAGANJ, WARD 30(2), NEW DELHI. NEW DELHI. [PAN: AABFU 4048 H] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ROHIT GARG, C.A. RESPONDENT BY : SH. MANOJ KUMAR CHOPRA, SR. DR DATE O F HEARING : 06.05.2016 DATE OF PRONOUNCEMENT : 29 .06.2016 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)XVI, NEW DELHI DATED 07.12.2015 FOR THE ASSESSMENT YEAR 2007 - 08 ON THE FOLLOWING GROUNDS : 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN LEVYING PENALTY OF RS.2,64,810 UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ( THE ACT ) IN RESPECT OF ADDITION OF RS.7,86,721 MADE UNDER SECTION 68 IN THE REASSESSMENT ORDER DATED 07.02.2014 PASSED UNDER SECTION 147 OF THE ACT. 1.1 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS NOT LEVIABLE QU A THE IMPUGNED ADDITION MADE IN THE REASSESSMENT ORDER INASMUCH AS (I) THE ITA NO. 1287/DEL./2016 2 REASSESSMENT ORDER WAS ILLEGAL AND BEYOND JURISDICTION; (II) ADDITION MADE IN THE QU ANTUM PROCEEDINGS WAS ON ACCOUNT OF INADVERTENT ERROR IN THE RETURN OF INCOME; (III) ALL THE FACT S MATERIAL TO THE AFORESAID CLAIM WERE DULY DISCLOSED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT AS WELL AS REASSESSMENT PROCEEDINGS. 1.2 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE PENALTY PROCEEDINGS ARE INDEPENDENT OF Q UANTUM PROCEEDINGS AND MERE NON - FILING OF APPEAL AGAINST THE ADDITION MADE IN QUANTUM PROCEEDINGS CANNOT BE THE BASIS FOR LEVY OF PENALTY UNDER SECTION 271(1)( C ) OF THE ACT . 2. THE ABOVE GROUNDS OF APPEAL ARE RELATED TO PENALTY OF RS.2,64,810/ - CONFIRMED BY LD. CIT(A) U/S. 271(1)(C) IN RESPECT OF ADDITION OF RS.7,86,721/ - MADE U/S. 68 OF THE ACT IN RE - ASSESSMENT ORDER OF THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY ON 26.10.2007 DECLARING AN INCOME OF RS.3,87,506/ - . THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S. 143(3) AT AN INCOME OF RS.4,96,250/ - . SUBSEQUENTLY, AFTER RECORDING REASONS ON 06.06.2012, NOTICE U/S. 148 OF THE ACT WAS ISSUED TO THE ASSESSEE, IN RESPONSE TO WHICH THE ASSESSEE STATED THAT THE RETURN FILED U/S. 139(1) MAY BE TREATED AS RETURN FILED IN COMPLIANCE TO THE NOTICE U/S. 148 OF THE ACT. THE OBJECTIONS RAISED BY ASSESSEE ON VALIDITY OF RE - ASSESSMENT PROCEEDINGS WERE DISPOSED OF BY THE A .O . DURING THE RE - ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT AT SL. NO. 43 , PAGE NO. 8 OF ITR - V - PROFIT BEFORE TAX (40 - 41 - 42) HAS BEEN SHOWN AT ITA NO. 1287/DEL./2016 3 RS.3,87,506/ - AND AT SL. NO. 47, PROFIT AFTER TAX (43 - 44 - 45 - 46) HAS BEEN SHOWN AT RS.3,87,506/ - , WHICH IS TALLIED WITH THE GR OSS TOTAL INCOME SHOWN IN ACKNOWLEDGEMENT OF IT RETURN GENERATED THROUGH COMPUTER SYSTEM. SIMILARLY, AT PAGE NO. 13 OF THE IT RETURN, PART - B - TI - COMPUTATION OF TOTAL INCOME - SL. NO. 13, THE AGGREGATE INCOME (11 + 12) IS SHOWN AT RS.3,87,506/ - AS INCOME FROM PR OFIT AND GAINS FROM BUSINESS OR PROFESSION. SAME AMOUNT HAS BEEN SHOWN AT PAGE NO. 16 SCHEDULE BP - COMPUTATION OF INCOME FROM BUSINESS OR PROFESSION. AT PAGE NO. 21, SCHEDULE CYLA - DETAILS OF INCOME AFTER SET OFF OF CURRENT YEARS LOSSES - AT SL. NO. II - BU SINESS (INCLUDING SPECULATION PROFIT), RS.11,74,227/ - IS SHOWN IN COLUMN NO. (1) AS INCOME OF CURRENT YEAR. SIMILARLY, AT PAGE 22, SCHEDULE BFLA DETAILS OF INCOME AFTER SET OFF OF BROUGHT FORWARD LOSSES OF EARLIER YEARS, IN SL. NO. II - BUSINESS (INCLUDI NG SPECULATION PROFIT), RS.11,74,227/ - IS SHOWN IN COLUMN NO. (1), WHEREAS THE ACKNOWLEDGEMENT HAS BEEN GENERATED WITH GROSS TOTAL INCOME OF RS.3,87,506/ - . THE ASSESSING OFFICER FOUND THE DIFFERENCE OF RS.7,86,721/ - BETWEEN THE ABOVE SCHEDULE BFLA AND THE BUSINESS INCOME SHOWN IN THE RETURN OF INCOME. HE, THEREFORE, ADDED THE SAME BACK TO THE TOTAL INCOME OF THE ASSESSEE U/S. 68 OF THE ACT. THE ASSESSEE INSTEAD OF CARRYING THE MATTER IN APPEAL BEFORE THE LD. CIT(A), SURRENDERED THE AMOUNT TO BUY PEACE OF MI ND. THE AO THEREAFTER INITIATED PENALTY PROCEEDINGS AND IMPOSED PENALTY U/S. ITA NO. 1287/DEL./2016 4 271(1)(C) OF THE IT ACT FOR FILING INACCURATE PARTICULARS OF INCOME. AGGRIEVED BY PENALTY ORDER, THE APPEL LANT PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ORDER O F THE ASSESSING OFFICER OBSERVING AS UNDER : 4. FINDINGS: - I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER AS WELL AS THE ORDER IMPOSING PENALTY U/S 271(1)(C). THE LD AR VERY VEHEMENTLY ARGUED THAT NO SATISFACTION HAS BEEN RECORDE D BY THE ASSESSING OFFICER WHILE INITIATING THE PENALTY PROCEEDINGS AND THEN HE WENT TO COURT IN VARIOUS JUDGMENTS ON THE ISSUE. HOWEVER, ON PERUSAL OF THE ORDER U/S 147/143(3) FOR ASSESSMENT YEAR 2007 - 08 DATED 28/08/2014, IT IT IS SEEN ON THE LAST PAGE TH E ASSESSING OFFICER HAS GIVEN A CATEGORICAL FINDING AS UNDER: - 'HENCE I AM MAKING ADDITION OF RS. 7,86,721/ - ON AGREED BASIS AS UNDISCLOSED INCOME U/S 1961 IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. AS ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME . I AM I NITIATING PENALTY PROCEEDINGS U/S 271( 1 )(C) OF THE ACT 1961 SEPARATELY' . FROM THE OBSERVATION ABOVE IT CAN BE GATHERED THAT THE ASSESSING OFFICER WAS VERY CLEAR IN HIS MIND WHILE INITIATING THE PENALTY PROCEEDINGS. HE HAS GI VEN A CATEGORICALLY FINDING THAT HE WAS I NITIATING PENALTY PROCEEDING AS THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. THE MAIN THRUST OF ARGUMENT OF THE ASSESSEE BEFORE ASSESSING OFFICER WAS THAT DUE TO SOME INADVERTENT SOFTWARE ERROR A N INCOME OF RS.7,86,721/ - HAD REMAINED UNTAXED. NOW THE TASK OF THE ASSESSEE WAS TO ESTABLISH THAT IT WAS IN AN INADVERTENT ERROR AND NOT INTENTIONAL EFFORT TO REDUCE ITS TAX LIABILITY. THE ASSESSEE HAS FAILED TO ESTABLISH THAT BEFORE ME DURING APPELLATE P ROCEEDING ALSO , THE LD AR HAS FILED A PLETHORA OF CITATIONS WHICH ARE NOT, TO MY MIND , RELEVANT CONSIDERING FACTS OF THIS CASE. THE LD AR HAS RAISED HYPOTHETICAL ISSUES IN HIS SUBMISSION AND THEN WENT ON TO ANSWER THEM THAT THE PENALTY AND ASSESSMENT PROC EEDINGS ARE SEPARATE, THAT IT WAS AN - INADVERTENT ERROR WHICH HAD CREPT IN THE SOFTWARE THAT THE ADDITIONS MADE IN THE RE - ASSESSMENT ORDER WERE NOT WARRANTED (I.E. IN SPITE OF THE FACT THAT ASSESSEE ADMITTED THAT AN ERROR OCCURRED ON HIS PART WHILE FILING T HE INCOME TAX RETURN, I HAVE CAREFULLY CONSIDERED OF THESE ISSUES. THEY MAKE FOR A GOOD PRESENTATION, HOWEVER ARE NOT RELEVANT IN THE PRESENT CASE. SINCE THE LD AR HAS FAILED TO FURNISH THE SATISFACTORY EXPLANATION FOR FURNISHING INACCURATE PARTICULARS OF HIS INCOME BEFORE ASSESSING OFFICER AS WELL AS BEFORE ME, THE PENALTY IMPOSED BY THE AO U/S 271(1 )(C) IS CONFIRMED. 4. AGAINST THE ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. ITA NO. 1287/DEL./2016 5 5. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS CORRECTLY CALCULATED ITS INCOME AND FILED THE RETURN OF INCOME. IT WAS SUBMITTED THAT DUE TO INTRODUCTION OF NEW METHOD OF FILING THE RETURN, I.E., ELECTRONICALLY, THE MISTAKE AS POINTED OUT BY THE AUTHORITIES BEL OW CREPT DUE TO SOFTWARE ERROR. HOWEVER, THE ASSESSEE HAS SHOWN CORRECT INCOME IN THE RETURN OF INCOME. THE RETURN HAS BEEN FILED AFTER GETTING THE ACCOUNT BOOKS AUDITED BY THE CHARTERED ACCOUNTANT AND CORRECT PROFIT HAS BEEN SHOWN IN THE PRESCRIBED COLUMN S OF THE RETURN. THE COMPUTATION PART OF THE RETURN IS SHOWING CORRECT INCOME AS SHOWN BY THE ASSESSEE. SCHEDULE CYLA AND BFLA ARE REGARDING SET OFF OF LOSSES. IT IS NOT THE INCOME PART. THE ASSESSEE HAD NO INTENTION TO FILE INACCURATE PARTICULARS OF INCOM E, BUT DUE TO SOFTWARE ERROR, A SUM OF RS.11,74,227/ - WAS WRONGLY TAKEN IN THE ABOVE SCHEDULES BY THE SOFTWARE. THE BUSINESS OF THE ASSESSEE WAS CLOSED AND THEREFORE, IN ORDER TO PURCHASE PEACE OF MIND, THE AMOUNT WAS SURRENDERED BY THE ASSESSEE. SUCH AN ADMISSION SHOULD NOT BE USED FOR IMPOSITION OF PENALTY. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. ITA NO. 1287/DEL./2016 6 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR SUBMITTED COPY OF ITR - V, WH ICH IS A PRESCRIBED RETURN FORM FOR THE PARTNERSHIP FIRM. AFTER CAREFUL EXAMINATION OF THE RETURN FORM, WE FIND THAT THE ASSESSEE HAS SHOWN CORRECT INCOME IN THE OPERATIVE PART OF THE RETURN OF INCOME. AT PAGE 7 OF THE RETURN - PART A - P&L: PROFIT AND LOSS AC COUNT FOR THE PREVIOUS YEAR 2006 - 07, AT SL. NO. 43, PROFIT BEFORE TAX (40 - 41 - 42), AND ALSO AT SL. NO. 47 - PROFIT AFTER TAX (43 - 44 - 45 - 46), AMOUNT OF RS.3,87,506/ - HAS BEEN SHOWN WHICH TALLIES WITH THE INCOME DECLARED BY THE ASSESSEE. PAGE NO. 13 OF THE RETU RN OF INCOME PART - B - TI COMPUTATION OF TOTAL INCOME SL. NO. 2(I) PROFIT & GAINS FROM BUSINESS OTHER THAN SPECULATIVE BUSINESS, IS ALSO SHOWING THE AMOUNT OF RS.3,87,506 AND SL. NO. 11 - TOTAL INCOME (9 - 10) IS ALSO SHOWING RS.3,87,506/ - . SCHEDULE BP: COM PUTATION OF INCOME FROM BUSINESS OR PROFESSION AT THE END OF PAGE NO. 17 OF RETURN OF INCOME, INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS (A37+B41) IS ALSO SHOWING RS.3,87,506/ - . 8. THE APPELLANT HAS SHOWN CORRECT BUSINESS INCOME IN THEIR RETURN OF INCOME. HE HAS NOT FILED ANY INACCURATE PARTICULARS OF INCOME BECAUSE IN THE COMPUTATION PART, THE INCOME HAS BEEN SHOWN CORRECTLY AND NO SUCH AMBIGUITY IS POINTED OUT THEREIN. SCHEDULE CYLA AND BFLA IS WITH RESPECT TO THE ADJUSTMENT OF INCOME AS PER PROVI SIONS OF THE IT ACT. THE ASSESSEE HAS ALSO ITA NO. 1287/DEL./2016 7 FILED RETURN FOR THE ASSESSMENT YEAR 2008 - 09 IN WHICH ALSO, THE ASSESSEE HAS NOT TAKEN ANY BENEFIT OF THE ABOVE AMOUNT OF DIFFERENCE OF RS.7,86,721/ - . IN PRESENCE OF THESE FACTS, IN OUR CONSIDERED OPINION, THE CON TENTION OF THE ASSESSEE CANNOT BE STRAIGHTWAY REJECTED THAT SUCH ERROR MAY OCCUR DUE TO SOFTWARE PROBLEM. WE, THEREFORE, FIND THAT THE ASSESSEE IS NOT LIABLE FOR PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN THE PECULIAR FACTS AND CIRCUMSTANCE S OF THE PRESENT CASE. AS A RESULT, THE APPEAL OF THE ASSESSEE IS FOUND TO HAVE MERIT AND IS TO BE ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.06.2016 . SD/ - SD/ - ( DIVA SINGH ) (L.P. SA HU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29.06.2016 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI