M/S.PAYTRONIC NETWORK PRIVATE LIMITED, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7(1), MUMBAI

ITA 1417/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9917 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN K SINGH
• Keywords: Principle of natural justice; Bonafide belief; Difference of opinion; Tax effect; Commercial expediency; Bonafide mistake; TDS
• Section: 271(1)(c); 143(3); 40(a)(ia); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM ITA NO. 1417 & 1418 /MUM/201 8 ( ASSESSMENT YEAR: 2011 - 12 ) M/S PAYTRONIC NETWORK PVT. LTD., 4 TH FLOOR, SADHANA HOUSE, 570, PANDURANG BUDHKAR MARG, WORLI, MUMBAI - 400018. VS. D.C.I.T., CIRCLE - 7(1) AAYAKAR BHAWAN, MUMBAI. PAN/GIR NO. AAECP 2622 A (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI JITENDRA JAIN/MR. MAHESH/ SHRI O. RAJORA (AR S ) REVENUE BY SHRI CHAUDHARY ARUN K. SINGH (DR) DATE OF HEARING 29/08 / 2019 DATE OF PRONOUNCEMENT 18 / 09 /2019 / O R D E R PER: R.C. SHARMA , A .M. THESE APPEAL S BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDER S DATED 29/12/2019 AND 26/12/2019 RESPECTIVELY OF LD. CIT(A) - 13 , MUMBAI FOR THE A.Y. 201 1 - 12 IN THE MATTER OF ORDER PASSED U/S 143(3) AND IN THE MATTER OF PENALTY IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ELECTRONIC DISTRIBUTION OF MOBILE AND DTH RECHARGE AND PROVISION OF TRAVEL BOOKING SERVICES TO VARIOUS RETAIL OUTLETS SPREAD ACROSS INDIA. THE ASSESSEE ITA NO. 1417 & 1418 /MUM / 20 1 8 M/S PAYTRONIC NETWORK PVT. LTD. VS DCIT 2 COMPANY HAS FILED ITS RETURN OF INCOME ON 29.09.2011 DECLARING TOTAL INCOME/LOSS OF ( - )R S. 6,18,02,588 / - . THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY AND ACCORDINGLY, NOTICE U/S.143(2) DATED 03.08.2012 WAS ISSUED AND DULY SERVED ON THE ASSESSEE AS PER PROVISO THERETO. IN RESPONSE TO NOTICE U/S 143(3) ISSUED BY THE LD. ASSESSING OFFICER , THE ASSESSEE FILED REQUIRED DETAILS. THE ASSESSMENT WAS COMPLETED ON 16.12.2013 AT A LOSS OF RS. 6,10,66,903/ - VIDE ORDER DATED 16.12.2013 FRAMED U/S 143(3) OF THE ACT, 1961. FOLLOWING ADDITIONS WERE MADE IN THE ASSESSMENT SO FRAMED: A. RS. 3,14,325/ - ON ACCOUNT OF RECONCILIATION OF TDS AS PER 26AS AND AS PER RETURN. B. RS. 30,711/ - ON ACCOUNT OF LOSS ON SALE OF FIXED ASSETS. C. RS. 32,210/ - ON ACCOUNT OF INTEREST ON TDS. D. RS. 1,86,282/ - ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. E. RS. 61,157/ - ON ACCOUNT OF DISALLOWANCE U/S 36(L)(III) OF THE INCOME TAX ACT, 1961. F. RS. 1,05,000/ - ON ACCOUNT OF CAPITALIZATION OF INTEREST TOWARDS WIP. 3. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. IN R ESPECT OF THE ADDITIONS SO MADE. THE A.O. HAS ALSO INITIATED AND LEVIED PENALTY IN RESPECT OF ADDITION S MENTIONED AT SL. NO.A,E & F. 4. AGAINST THE ABOVE ORDER S OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US WITH RESPECT TO QUANTUM ADDITION AS WELL AS PENALTY. 5. THERE IS A DELAY IN FILING BOTH THE APPEALS. IT WAS ARGUED BY LD. AR THAT THE ASSESSEE HAS INCURRED HUGE LOSS OF RS.6,18,02,588/ - DURING THE YEAR UNDER CONSIDERATION AND THE ADDITIONS/DISALLOWANCE SO MADE ITA NO. 1417 & 1418 /MUM / 20 1 8 M/S PAYTRONIC NETWORK PVT. LTD. VS DCIT 3 AGGREGATING TO RS.7,35,685/ - HAS THE E FFECT OF ONLY REDUCING THE LOSS INCURRED BY THE ASSESSEE AND CONSEQUENTLY HAS NO TAX EFFECT DURING THE YEAR. ACCORDINGLY, THE COST OF LITIGATION FOR ASSESSEE WOULD BE HIGHER THAN THE GAIN FROM THE APPEAL. THUS, ON THE ADVICE OF ITS ACCOUNTANT AND CONSIDERI NG THE HIGHER COST OF LITIGATION THAN THE TAX INVOLVD, THE ASSESSEE ACCEPTED THE ADDITIONS MADE BY THE AO IN THE APPELLATE PROCEEDING BEFORE THE CIT(A). THE ASSESSEE ALSO ACCEPTED THE SMALL PENALTY OF RS. 1,50,323/ - LEVIED BY THE A O UNDER BONAFIDE BELIEF T HAT THE MATTER WILL GET CLOSED. HOWEVER, THE LD.CIT(A) VIDE ORDER DT.26.12.2016 DISMISSED THE QUANTUM APPEAL AND VIDE ORDER DT.29.12.2016 DISMISSED THE PENALTY APPEAL FILED BY THE ASSESSEE. THEREAFTER, THE PRINCIPLE COMMISSIONER OF INCOME TAX - 7, MUMBAI H AD ISSUED A SHOW CAUSE NOTICE DT.01.02.2018 TO THE ASSESSEE REQUIRING HIM TO SHOW CAUSE AS TO WHY PROSECUTION PROCEEDINGS U/S 276C( 1) OF THE ACT SHALL NOT BE LAUNCHED IN RESPECT OF ADDITIONS/DISALLOWANCES MADE BY THE AO IN ASSESSMENT ORDER PASSED U/S 143( 3) OF THE ACT. ON RECEIPT OF IMPUGNED SHOW CAUSE FOR PROSECUTION, THE ASSESSEE CONSULTED A CHARTERED ACCOUNT IN THE MATTER AND THE ASSESSEE WAS ADVISED TO FILE APPEAL BEFORE THE HON'BLE ITAT FOR RELIEF. ACCORDINGLY, THE ASSESSEE FILED THE PRESENT BELATED A PPEALS BEFORE THE HON'BLE TRIBUNAL ON 07.03.2018. THE ASSESSEE RESPECTFULLY SUBMITS THAT DUE TO ALL THE ABOVE UNAVOIDABLE CIRCUMSTANCES THE ASSESSEE WAS PREVENTED FROM FILING THE SAID APPEAL IN TIME. THE ASSESSEE FILED AN AFFIDAVIT ENUMERATING THE REASONS FOR DELAY ALONGWITH WITH A REQUEST FOR CONDONATION. THE ASSESSEE THEREFORE REQUEST YOUR HONOUR TO CONDONE THE DELAY IN FILING THIS APPEAL AND CONSIDER THE PLEA ON MERITS IN THE INTEREST OF NATURAL JUSTICE. 6. WE HAD CAREFULLY GONE THROUGH THE CONDONATION P ETITION AND ITA NO. 1417 & 1418 /MUM / 20 1 8 M/S PAYTRONIC NETWORK PVT. LTD. VS DCIT 4 THE REASONS FOR THE DELAY. WE ARE SATISFIED THAT THERE WAS SUFFICIENT CAUSE FOR DELAY IN FILING THE APPEAL, THEREFORE, IN THE SUBSTANTIAL INTEREST OF JUSTICE, WE CONDONE THE DELAY AND APPEALS ARE BEING HEARD ON MERIT. 7. WITH RESPECT TO ADDITIO N OF RS.3, 14,325/ - ON ACCOUNT OF RECONCILIATION OF TDS AS PER 26AS WE FOUND THAT THE AMOUNT OF RS.3,14,325/ - ACTUALLY REPRESENTS THE TDS ON COMMISSION PAID BY VARIOUS PARTIES TO THE ASSESSEE. THE ASSESSEE HAS DULY BOOKED THE COMMISSION INCOME IN ITS BOO KS OF ACCOUNTS AS WELL AS THE TDS OF RS.6,91,912/ - AS PER CERTIFICATES PROVIDED BY VARIOUS PARTIES. THE ADDITIONAL TDS OF RS.3,14,325/ - DEDUCTED BY VARIOUS PARTIES AND DEPOSITED INTO GOVERNMENT ACCOUNT, WERE NOT BOOKED BY THE ASSESSEE AS INCOME IN ITS BOOK S OF ACCOUNTS, AS THE ASSESSEE WAS NOT AWARE OF THE ABOVE TDS OF RS.3,14,325/ - DEDUCTED BY THE PARTIES AND HAS ALSO NOT RECEIVED THE TDS CERTIFICATE IN RESPECT OF ABOVE TDS. 8. IN THIS REGARD, WE OBSERVE THAT NON ACCOUNTING OF TDS OF RS.3,14,325/ - WAS AN INADVERTENT BONAFIDE MISTAKE DUE TO NON AVAILABILITY OF TDS CERTIFICATE AND PROPER INFORMATION AT THE RELEVANT TIME. THE SAME IS PROVED FROM THE FACT THAT THE ASSESSEE HAS CLAIMED TDS CREDIT OF RS.6,91,912/ - ONLY IN ITS RETURN OF INCOME AND DID NOT CLAIM T HE TDS OF RS.3,14,325/ - DEDUCTED AND PAID TO GOVERNMENT ACCOUNT BY VARIOUS PARTIES. HERE IT IS WORTHWHILE TO NOTE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME DECLARING HUGE LOSS OF RS.6,18,02,588/ - . EVEN IF THE ABOVE AMOUNT OF TDS OF RS.3,14,325/ - WOU LD HAVE BEEN BOOKED BY THE ASSESSEE AS INCOME IN ITS BOOKS OF ACCOUNTS, THE SAME WOULD HAVE REDUCED THE LOSS ONLY TO THE EXTENT OF RS.3,14,325/ - THUS HAVING NO TAX ITA NO. 1417 & 1418 /MUM / 20 1 8 M/S PAYTRONIC NETWORK PVT. LTD. VS DCIT 5 IMPACT ON THE ASSESSEE, WHEREAS ON THE OTHER HAND THE ASSESSEE WOULD HAVE BEEN ELIGIBLE TO C LAIM THE ABOVE AMOUNT OF TDS OF RS,3,14,325/ - AS REFUND FROM THE GOVERNMENT. THUS, BY NO STRETCH OF IMAGINATION IT CAN BE PRESUMED THAT THE ASSESSEE HAS INTENTIONALLY OMITTED/IGNORED TO ACCOUNT THE TDS OF RS.3,14,325/ - IN ITS BOOKS OF ACCOUNTS. BY ACCOUNTI NG THE TDS OF RS.314,325/ - IN ITS BOOKS OF ACCOUNTS, THE ASSESSEE IS ELIGIBLE FOR GETTING THE FULL TDS REFUND OF RS.3,14 ,325/ - . NEVERTHELESS, THE ABOVE AMOUNT OF TDS WAS ALREADY BEEN DEPOSITED INTO GOVERNMENT ACCOUNT AND INADVERTENTLY THE ASSESSEE HAS NOT CLAIMED THE ABOVE TDS OF RS.3,14,325/ - AS REFUND IN ITS RETURN OF INCOME. THUS, INFLICT BY MAKING ASSESSMENT AND ADDING ABOVE AMOUNT TO INCOME AND SIMULTANEOUSLY MAKING ASSESSEE ELIGIBLE FOR REFUND TO THE EXTENT OF RS.3,14,325/ - , THE ASSESSEE'S POSITION HA S BECAME BETTER OFF AND ASSESSEE BECAME ELIGIBLE FOR INCREASED REFUND TO THE EXTENT OF RS.3,14,325/ - . ACCORDINGLY, THERE WAS NO TAX SOUGHT TO BE EVADED BY THE ASSESSEE AND CONSEQUENTLY NO PENALTY CAN BE LEVIED U/S 271(1)(C) OF THE ACT. 9. IN THIS REGARD, RELIANCE IS PLACED UPON THE FOLLOWING DECISIONS WHEREIN THE HON'BLE SUPREME COURT/JURISDICTIONAL HIGH COURTS HAS DELETED THE PENALTY U/S 271(1 )(C) ON ACCOUNT OF INADVERTENT MISTAKES BY THE ASSESSEE IN FILING THEIR RETURNS: A ) PRICE WATERHOUSE COOPERS PVT. L TD VS. CIT [348 ITR 306](SUPREME COURT) B ) CIT VS. SOMANY EVERGREE KNITS LTD [352 ITR 592](BOMBAY) C ) CIT VS. BENNETT COLEMAN & CO. LTD. [87 DTR 368](BOMBAY) 10. IN VIEW OF OUR ABOVE FACTS AND CIRCUMSTANCES AND CONSIDERING JUDICIAL PRONOUNCEMENT RELIED UPON WE ARE OF THE ITA NO. 1417 & 1418 /MUM / 20 1 8 M/S PAYTRONIC NETWORK PVT. LTD. VS DCIT 6 VIEW THAT THE NON ACCOUNTING/BOOKING OF TDS OF RS.3, 14,325/ - AS INCOME IN ASSESSEE'S BOOKS OF ACCOUNTS IS DUE TO INADVERTENT MISTAKE AND NO PENALTY U/S 271(1)(C) IS ATTRACTED IN THE CASE OF THE ASSESSEE. 11. W ITH RESPECT TO DISALLOWANCE OF INT EREST EXPENSE OF RS.67,157/ - U/S 36(1 )(III) OF THE ACT, WE OBSERVE THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOAN OF RS. 13,80,000/ - TO ITS GROUP CONCERN M/S . MYZUS INFOTECH DUE TO COMMERCIAL EXPEDIENCY AND BUSINESS EXIGENCY. THE AO DISALLOWED THE PROPORT IONATE INTEREST EXPENSE OF RS.67, 157/ - U/S 36(1 )(III) OF THE ACT, HOLDING THAT THE INTEREST BEARING FUNDS ARE USED FOR GIVING INTEREST FREE ADVANCE TO GROUP CONCERN. UNDER THE IDENTICAL FACTS THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF S.A. BUILDERS VS. CIT 288 ITR 1 HAS ALLOWED THE INTEREST EXPENSE AS DEDUCTIBLE REVENUE EXPENSE WHEREIN THE INTEREST FREE FUNDS ARE GIVEN BY THE ASSESSEE TO ITS SISTER CONCERN AS A MEASURE OF COMMERCIAL EXPEDIENCY. 12. UNDER THESE FACTS AND CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS ONLY A CASE WHEREIN THE AO DID NOT ACCEPT THE LEGITIMATE CLAIM OF THE ASSESSEE DUE TO DIFFERENCE OF OPINION ON THE SAME SET OF FACTS AND HENCE UND ER THE FACTS AND CIRC UMSTANCE OF THE CASE OF THE ASSE SS EE AT LEAST NO PENALTY CAN BE LEVIED U/S 271(1)(C) OF THE ACT. 13. WITH RESPECT TO DISALLOWANCE OF INTEREST EXPENSE OF RS. 1,05,000/ - BY CAPITALIZING IT TO CAPITAL WORK IN PROGRESS, WE FOUND THAT THE INTEREST EXPENSE WAS INCURRED BY THE ASSESSEE ON LOANS TAKEN FOR ITS WORKING CAPITAL REQUIREMENT. THE AO ALLOCATED THE INTEREST EXPENSE INCURRED ON WORKING CAPITAL REQUIREMENT TO CAPITAL WORK IN ITA NO. 1417 & 1418 /MUM / 20 1 8 M/S PAYTRONIC NETWORK PVT. LTD. VS DCIT 7 PROGRESS ONLY ON THE BASIS OF ASSUMPTION AND SURMISES AND DI SALLOWED INTEREST EXPENSE OF RS.1,05,000/ - U/S 36(1)(III) OF THE ACT. THE ASSESSEE HAS NOT MADE ANY BORROWING FOR SPECIFIC ASSET OR INCURRED ANY INTEREST EXPENSE FOR CAPITAL WORK IN PROGRESS. THUS, THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCU RATE PARTICULARS OF SUCH INTEREST SO AS TO ATTRACT PENALTY U/S.271(1)(C). IN THIS REGARD, WE OBSERVE THAT THE H ON'BLE SUPREME COURT OF INDIA IN ITS DECISION IN THE CASE OF CIT VS. R ELIANCE PETROPRODUCTS PVT. LTD 322 ITR 158 HAS CLEARLY LAID DOWN A PROPOSIT ION OF LAW THAT BY NO STRETCH OF IMAGINATION MAKING AN INCORRECT CLAIM IN LAW, WOULD AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INCORRECT PARTICULARS OF INCOME. THUS, LEVY OF PENALTY WAS NOT JUSTIFIED. 14. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD TH AT IT IS NOT A FIT CASE FOR LEVY OF PENALTY, ACCORDINGLY, AO IS DIRECTED TO DELETE THE PENALTY SO IMPOSED U/S.271(1)(C) OF THE ACT AMOUNTING TO RS.1,50,323/ - . SINCE THERE WAS HUGE LOSSES, THE ADDITIONS / DISALLOWANCES SO MADE BY AO WAS NOT AFFECTING THE TA X LIABILITY OF ASSESSEE, THEREFORE ASSESSEE DID NOT SERIOUSLY PRESSED THE GROUNDS TAKEN IN RESPECT OF QUANTUM ADDITIONS / DISALLOWANCES SO MADE, ACCORDINGLY WE DISMISS THE SAME AS NOT PRESSED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.1417/MUM/2 018 IS DISMISSED WHEREAS APPEAL OF THE ASSESSEE IN ITA NO.1418/MUM/2018 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 / 09 / 2019. SD/ - (PAWAN SINGH) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 18 / 09 /2019 ITA NO. 1417 & 1418 /MUM / 20 1 8 M/S PAYTRONIC NETWORK PVT. LTD. VS DCIT 8 KARUNA, SR. PS. COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//