Devarsons Industries Pvt.Ltd., Ahmedabad V. The ACIT.,(OSD),Range-1, Ahmedabad

ITA 1463/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7734 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2000-2001
• Appeal Filed On: 08-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA
• Assessee Lawyers: B J THAKKAR
• Keywords: Set aside
• Section: 271(1)(c); 143(3); 205; 80IA

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, B - BENCH,AHMEDABAD . BEFORE : SHRI T.K.SHARMA, JUDICIAL MEMBER , AND SHRI N.S.SAINI, ACCOU NTANT MEMBER. ITA NO. 1463/AHD/2009 (ASSESSMENT YEAR 2000 - 01) DEVARSONS INDUSTRIES PRIVAE LIMITED, 441, GIDC, NR. WATER TAK , ODHAV , AHMEDABAD 382 415 PAN AAACO 9671 M VERSUS ASST. COMMISSIONER OF INCOME TAX (OSD), RANGE 1, AHMEDABAD. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI B.J.THAKKAR, AR FOR THE RESPONDENT SHRI P.M.SHUKLA, DR ORDER SHRI T.K.SHARMA, JUDIC IAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DT.26.2.2009 CONFIRMING THE PENALTY OF RS.7,25,383 LEVIED U/S.271(1)(C) OF THE INCOME - TAX ACT,1961 FOR THE ASSESSMENT YEAR 2000 - 01. 2. WHILE FILING THE APPEAL BEFORE THE TRIBUNAL, THE ASSESSEE HAS PAID APPEAL FEES OF RS.500. THE REGISTRY ISSUED A NOTICE FOR DEFECT IN RESPECT OF SHORT PAYMENT OF THE FILING FEES. THE ASSESSEE VIDE LETTER DT.9.7.2009 STATED THAT IT HAS PAID APPEAL FEES OF RS. 500 BY RELYING ON THE DECISION OF HONBLE PATNA HIGH COURT IN THE CASE OF DR. AJITKUMAR PANDEY (310 ITR 195). IN THE SAID CASE THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL AGAINST LEVY OF PENALTY UNDER SECTION 271 OF THE INCOME - TAX ACT, 1961, AND PAID RS. 500 TOWARDS COURT FEES. THE A PPEAL WAS DECIDED EX PARTE AND THE ASSESSEE APPROACHED THE TRIBUNAL FOR RECALLING OF THE EX PARTE ORDER. THE TRIBUNAL AGREED TO RECALL THE EXPARTE ORDER AND TO DECIDE THE APPEAL ON MERITS PROVIDED THE ASSESSEE FURNISHED THE DEFICIT COURT FEE OF RS.8,330. O N A WRIT PETITION, HONBLE HIGH COURT HAS HELD - THAT IN THE CASE OF AN APPEAL FILED ON OR AFTER OCTOBER 1, 1998, THE APPEAL MUST BE ACCOMPANIED BY A FEE AS PROVIDED IN CLAUSES (A) TO (D) OF SUB - SECTION (6) OF SECTION 253 OF THE ACT. IN THE CASE OF AN AP PEAL WHERE THE TOTAL INCOME OF THE ASSESSEE WAS ASCERTAINABLE FROM THE APPEAL ITSELF, I. E. WHEN THE APPELLANT WAS SEEKING TO CHALLENGE THE ASSESSMENT OF HIS TOTAL INCOME, FEES AS MENTIONED IN CLAUSES (A), (B) AND (C) WOULD BE ITA NO. 1463/AHD/2009 2 REQUIRED TO BE PAID. CLAUSE ( D) DEALS WITH OTHER APPEALS. IMPOSITION OF PENALTY UNDER SECTION 272 OF THE ACT HAD NO CONNECTION OR BEARING WITH THE TOTAL INCOME OF THE ASSESSEE. IF A PERSON AGGRIEVED BY AN ORDER IMPOSING PENALTY APPROACHES THE TRIBUNAL BY PREFERRING AN APPEAL, IMPOSITI ON OF PENALTY HAVING NO NEXUS WITH THE TOTAL INCOME OF THE ASSESSEE, IT WOULD BE NOT BE DISCERNIBLE WHAT IS THE TOTAL INCOME OF THE APPELLANT AND ACCORDINGLY SUCH AN APPEAL WOULD BE COVERED BY CLAUSE (D) . THE IMPORTANT WORDS USED IN CLAUSES (A), (B) AND (C ) OF SUB - SECTION (6) OF SECTION 253 ARE TOTAL INCOME OF THE ASSESSEE. THEREFORE, THE APPELLANT MUST BE AN ASSESSEE AND THE APPEAL MUST DEMONSTRATE WHAT IS HIS TOTAL INCOME. IN THE CASE OF IMPOSITION OF PENALTY THAT MAY NOT BE DISCERNIBLE. THE ORDER OF TH E TRIBUNAL WAS LIABLE TO BE SET ASIDE AND THE APPEAL WAS REMITTED FOR DECISION ON THE MERITS. IN VIEW OF SUCH JUDICIAL PRONOUNCEMENT, SINCE THE ASSESSEE HAS PAID RS.500 TOWARDS APPEAL FEES WHILE FILING THE APPEAL BEFORE THE TRIBUNAL, WE ADMIT THE APPEAL. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 01. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS ERRED IN LAW AND ON FACTS IN ARRIVING AT A CONCLUSION AND CONFIRMING ACTION OF LEARNED ASSESSING OFFICER THAT ON THE FACTS AND IN CIRCUMSTANC ES OF THE CASE PENALTY OF RS.725383/ - U/S 271 (1)(C) OF THE ACT CAN BE IMPOSED. 02. WHETHER THE LEARNED CIT(A) IS RIGHT IN LAW AND ON FACTS IN CONFIRMING ACTION OF ASSESSING OFFICER IN IMPOSING THE PENALTY U/S 271 (1)(C) OF THE ACT WHERE THE APPELLANT COM PANY SAYS AND SUBMIT THAT THE ASSESSEE COMPANY HAS CORRECTLY FILED PARTICULARS REGARDING DEDUCTION UNDER SECTION 8OHHC(4) OF THE ACT, ADDITION ON ACCOUNT OF RECALCULATION OF CLAIM BY THE AO COULD NOT BE TREATED AS CONCEALMENT OF INCOME BY THE ASSESSEE. REL IANCE IS PLACED ON DECISION OF HONBLE ITAT IN THE CASE OF KASINKA TRADING V/S CCT (1999) 63TTJ 348 (ASR). 03. WHETHER THE LEARNED CIT(A) IS RIGHT IN LAW AND ON THE FACTS IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN IMPOSING THE PENALTY U/S 271 (1)(C) OF THE ACT WITHOUT ANY SATISFACTION NOTE IN THE ASSESSMENT ORDER HOW THE ASSESSEE COMPANY HAS CONCEALED PARTICULARS OF ITS INCOME IN RESPECT OF THE CLAIM OF DEDUCTION U/S 80 HHC WHICH IS BASED ON CERTIFICATE ISSUED BY A CHARTERED ACCOUNTANT. 04. THE DEPA RTMENT HAS FILED REFERENCE TO GUJARAT HIGH COURT AGAINST ORDER OF HONBLE ITATS ORDER IN THE CASE OF THE APPELLANT COMPANY FOR THE AX. 2000 - 2001 FOR THE SAME ISSUE. THEREFORE THE MATTER IS SUBJUDICED AND THE AO HAS NO POWER TO PASS THE ORDER. 05. THE PE NALTY IMPOSED U/S 271(1)(C) OF THE ACT AMOUNTING TO RS.725383/ - IS TOO HIGH AND EXORBITANT AND NOT WARRANTED TO THE FACTS OF THE CASE. ITA NO. 1463/AHD/2009 3 06. THE APPELLANT RESERVE RIGHT TO ADD, ALTER OR MODIFY ALL OR ANY OF THE GROUND SET OUT HERE IN ABOVE. 4. THE FACTS L EADING TO LEVY OF THE IMPUGNED PENALTY, AS CULLED OUT FROM RECORD, ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME28.11.2000 DECLARING TOTAL INCOME OF RS.29068683 . THE ORDER U/S. 143(3) OF THE ACT WAS FRAMED ON 27 . 02 . 2003 AND INCOME WAS ASSESSED AT RS.344 16950. THE EFFECT TO THE CIT(A)S ORDER WAS GIVEN ON 31 - 5 - 2004 AND INCOME ARR IVED AT RS.31624816. THE I TAT RESTORED BACK SOME OF THE ISSUES TO THE FILE OF THE A SSESSING OFFICER WITH A DIRECTION TO DECIDE AFRESH AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE. THE EFFECT OF THE ORDER WAS GIVEN ON 19 .11.2 007 AND INCOME WAS DETERMINED AT RS.31938574. THE THEN ASSESSING OFFICER LEVIED A PENALTY OF RS.1074972 U/S. 271(1) (C) OF THE I ,T. ACT VIDE ORDER DATED 23 .3.2006 . ON APPEAL, T HE CIT(A) DELETED THE PENALTY . THE M ATTER WENT UPTO THE ITAT AND THE ITAT IN ITA NO. 2595/AHD/2006 DATED 23/2/2007 RESTORED THE ISSUE RELATING TO LEVY OF PENALTY U/S.271(1)(C) WITH THE DIRECTIONS TO DECIDE THE SAME AFRESH AFTER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL ON MERITS AND IF FIN DS THAT THE ADDITIONS WHICH COULD BE SUBJECT MATTER OF LEVY OF PENALTY HAVE BEEN DELETED, THEN TO DROP THE PENALTY PROCEEDINGS, OTHERWISE PASS A FRESH ORDER ON THE BASIS OF ADDITION, IF ANY, HAVING REMAINED SUSTAINED. THEREFORE, NOTICE U/S. 271(1)(C) WAS I SSUED TO THE ASSESSEE ON 19 .11.2007. THE ASSESSEE VIDE LETTER DATED 7.4.2008 SUBMITTED ITS EXPLANATION. CONSIDERING THE REPLY AND ALSO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER HELD THAT THE ASSESSEE CLAIMED DEDUCTION U/S.80HHC WHICH IS NOT CORRECT AND BONAFIDE. THEREFORE, HE CONCLUDED THAT FOR CLAIMING INCORRECT CLAIM OF DEDUCTION , THE INCOM E TO THAT EXTENT OF RS.18,84,112 WAS SUPPRESSED AND THEREFORE THE CONTENTION OF THE ASSESSEE THAT THERE WAS NO CONCEALMENT/FURNISHING OF INACCURATE PARTICULARS OF INCOME IS NOT CORRECT. ACCORDINGLY, HE LEVIED PENALTY OF RS.7,25,383 U/S.271(1)(C) OF THE ACT BEING 100% OF TAX SOUGHT TO BE EVADED. IN APPEAL, THE LEARNED CIT(A) CONFIRMED THE SAME. 5. ON APPEAL, IN THE IMPUGNED ORDER, THE LEARNED CIT(A) CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER N THE GROUND THAT WHILE COMPUTING THE DEDUCTION U/S.80HHC, 90% OF GROSS INTEREST RECEIPT OF RS.34,85,322, FINANCIAL ITA NO. 1463/AHD/2009 4 CHARGES OF RS.26,861 AND SALES TAX REFUND OF RS.29,503 WERE REQUIRED TO BE DEDUCTED FR OM THE PROFIT OF THE BUSINESS. THESE ITEMS ARE NOT AT ALL THE PROFIT DERIVED FROM EXPORT ACTIVITIES CARRIED OUT BY THE ASSESSEE. IN VIEW OF THIS, THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME IN CLAIMING EXCESS DEDUCTION U/S.80HHC OF THE ACT. IN THE IMPUGNED ORDER, THE LEARNED CIT(A) ALSO MENTIONED THAT BEFORE THE ASSESSING OFFICER ASSESSEE HAS FILED A DETAIL SUBMISSION ONLY REGARDING SECTION 80IA AND HAS FAILED TO GIVE SUBMISSION REGARDING THE FACT WHY PENALTY SHOULD NOT BE LEVIED AGAINST THE INCO RRECT CLAIM OF DEDUCTION U/S.80HHC. THE LEARNED CIT(A) ACCORDINGLY CONCLUDED THAT FROM THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, IT IS CRYSTAL CLEAR THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80HHC WHICH IS NOT AT ALL CORRECT AND BONAFIDE, THEREBY, I T HAS BEEN AVAILING FACILITIES OF THE SKILLED PROFESSIONALS; CLEARLY CONCEALED/FURNISHED INACCURATE PARTICULARS OF ITS INCOME. ACCORDINGLY, THE LEARNED CIT(A) CONFIRMED THE LEVY OF PENALTY . 6. AT THE TIME OF HEARING, SHRI B.T.THAKKAR, LEARNED AR OF THE AS SESSEE APPEARED AND CONTENDED THAT IN THE ASSESSMENT ORDER PASSED U/S.143(3) DT.23.3.2003, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS ON ACCOUNT OF REWORKING OF DEDUCTION U/S.80IA. IN THIS ASSESSMENT ORDER THE ASSESSING OFFICER REWORKED THE DEDUCT ION U/S.80HHC BUT NO PENALTY PROCEEDING HAVE BEEN INITIATED. THIS IS EVIDENT FROM THE ASSESSMENT ORDER PLACED ON RECORD. THE LEARNED COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE CORRECTLY FILED THE PARTICULARS REGARDING CLAIM OF DEDUCTION U/ S.80HHC AND ALSO CERTIFICATE OF CA AS REQUIRED U/S.80HHC (4) OF THE ACT. ADDITION ON ACCOUNT OF RECALCULATION OF CLAIM BY THE ASSESSING OFFICER COULD NOT BE TREATED AS CONCEALMENT OF INCOME BY THE ASSESSEE. IN SUPPORT OF THIS, HE PLACED RELIANCE ON THE DE CISION IN THE CASE OF KUSINKA TRADING V. CIT (63 TTJ 348 (ASR) AND B.T.X.CHEMICALSL (P) LTLD., V. CIT 155 TAXMANN 644 AND 205 CTR 252 (GUJ). WITHOUT PREJUDICE TO TH ABOVE, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT EXPLANATION HAS BEEN FURNISHED BEFORE THE ASSESSING OFFICER IN RESPECT OF THE CLAIM OF DEDUCTION U/S.80HHC OF THE ACT. HOWEVER, TH ASSESSING OFFICER EXCLUDED 90% OF RECEIPTS FROM PROFIT OF BUSINESS WHILE COMPLUTING THE DEDUCTION U/S.80HHC ON THE FOLLOWING FOUR ITEMS. ITA NO. 1463/AHD/2009 5 I. COMMISSON AND DI SCOUNT EARNED .. RS. 434119 II. SALES TAX REFUND .. RS. 29503 III. FINANCIAL CHARGES .. RS. 26861 IV. INTEREST .. RS. 3485322 THE ASSESSEE COMPANY EXPLAINED BEFORE THE ASSESSING OFFICER THAT I. COMMISSION AND DISCOUNT IS ALLOWED BY SUPPLIERS OF RAW MATERIALS WHICH ARE USED FOR MANUFACTURING EXPORT GOODS. IT HAS DIRECT NEXUS WITH BUSINESS OF THE APPELLANT COMPANY. II. SALES TAX PAID IS DEBITED TO P & L ACCOUNT. SIMILARLY SALES TAX REFUND IS CREDITED TO OTHER INCOME, WHICH HAS DIRE CT NEXUS WITH BUSINESS OF THE APPELLANT COMPANY. III. FINANCIAL CHARGES ARE RECEIVED FROM DEBTORS ON LATE PAYMENTS OF THEIR OUTSTANDING. IV. THE APPELLANT COMPANY HAS NETTED OUT INTEREST. NET INTEREST AMOUNT IS DEBIT THEREFORE INTEREST IS CHARGED NET TO P & L ACCOUNT. THE LEARNED ASSESSING OFFICER HAS EXCLUDED INTEREST AMOUNT RECEIPT. FOR THIS THE APPELLANT PLACED RELIANCE ON DECISION OF HONBLE ITAT AHMEDABAD BENCH N THE CASE OF ITAT MUMBAI BENCH A IN THE CASE OF INK STAR V. DCIT 72 ITD 137. THE LEARNED CIT(A) IN EARLIER ORDER DT.20.9.2006 AGAIN ST THE PENALTY LEVIED U/S.271(1) (C) OF TH E ACT FOR THE ASSESSMENT YEAR 2000 - 01 (THE VERY SAME ASSESSMENT ORDER UNDER APPEAL) HAS OBSERVED THAT IT IS SEEN THAT SO FAR AS THE ADDITION REGARDING CLAIM OF DEDUCTION U/ S.80HHC OF THE ACT ARE CONCERNED, MOST OF THEM ARE COVERED BY DECISION OF ITAT IN ASSESSEES OWN CASE N EARLIER YEARS. THE LEARNED COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT IN THE IMPUGNED PENALTY ORDER THE ASSESSING OFFICER HAS NOT LEVIED PENALTY IN RESPECT OF ADDITION MADE ON ACCOUNT OF REWORKING OF THE DEDUCTION U/S.80IA WHICH WAS THE BASIS OF INITIATING THE PENALTY U/S.271(1)(C) OF THE ACT, THEREFORE, ON THIS GROUND ALONE THE PENALTY DESERVES TO BE CANCELED. 7. SHRI P.M.SHUKLA, LEARNED DR, ON THE O THER HAND, SUPPORTED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. HE POINTED OUT THAT PENALTY PROCEEDING WAS INITIATED IN THE ASSESSMENT ORDER BECAUSE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN CLAIMING THE DEDUCTION U/S.80HHC, THEREFO RE, PENALTY HAS RIGHTLY BEEN LEVIED AND CONFIRMED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER. ITA NO. 1463/AHD/2009 6 8. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE ASSESSMENT ORDER FR AMED U/S.143(3) DT.23.3.2003 THE ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) ONLY IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF REWORKING OF DEDUCTION U/S.80IA OF THE ACT. NO PENALTY PROCEEDING WAS INITIATED IN RESPECT OF REWORKING OF DEDUCTION U/S.80HHC OF THE ACT. THIS FACT COULD NOT BE CONTROVERTED BY THE LEARNED DR. THEREFORE, THE PENALTY LEVIED IN RESPECT OF REWORKING OF DEDUCTION U/S.80HHC CANNOT BE SUSTAINED BECAUSE THERE WAS NO INITIATION OF PENALTY IN THE ASSESSMENT ORDER IN R ESPECT OF THE DEDUCTION U/S.80HHC. BE THAT IT MAY, THE DEDUCTION CLAIMED BY THE ASSESSEE U/S.80HHC IS ON THE BASIS OF CERTIFICATE OF AUDITOR. THE ESSENTIAL PRE - REQUISITES OF SECTON 271(1)(C) OF THE ACT BEFORE A PENALTY CAN BE IMPOSED ARE : THE ASSESSEE S HOULD HAVE EITHER CONCEALED THE PARTICULARS OF HIS INCOME OR ALTERNATIVELY THE ASSESSEE SHOULD HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THEREFORE, BEFORE DETERMINING THE LIABILITY OF THE ASSESSEE IT WOULD FIRST HAVE TO BE ASCERTAINED, WHETH ER OR NOT, THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF HIS INCOME. FURTHR, U NDER SECTION 271(1)( C ) OF THE ACT THE AUTHORITY IS GIVEN THE DISCRETION TO LEVY A PENALTY IF THERE IS CONCEALMENT OF PART ICULARS OF INCOME AND EVEN AS REGARDS THE QUANTUM OF THE PENALTY THERE IS A DISCRE TION. OF GREATER IMPORTANCE IS THE NECESSITY FOR A DEFINITE FINDING THAT THERE IS CONCEALMENT, AS WITHOUT SUCH A FINDING OF CONCEALMENT, THERE CAN BE NO QUESTION OF IMPOSING ANY PENALTY. THE MERE REVISION OF THE INCOME TO A HIGHER FIGURE BY THE ASSESS - ING AUTHORITY DOES NOT AUTOMATICALLY WARRANT AN INFERENCE OF CONCEALMENT OF THE EXPENDITURE ON THE CONSTRUCTION. IN THE PRESENT CASE AT HAND, THE ASSESSEE HAS FURNISHED ALL THE PARTICULARS BUT THE ASSESSING OFFICER HAS REWORKED THE DEDUCTION U/S.80HHC. THEREFORE, ADDITION ON ACCOUNT OF RECALCULATION OF CLAIM BY THE ASSESSING OFFICER , IN OUR CONSIDERED VIEW, COULD NOT BE TREATED AS CONCEALMENT OF INCOME OR SUBMISSION OF INCORRECT PARTICULARS OF INCOME BY THE ASSESSEE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE LEVY OF PENALTY U/S.271(1)(C) IN THE INSTANT CASE IS NOT ITA NO. 1463/AHD/2009 7 PROPER. WE, THEREFORE, CANCEL THE PENALTY LEVIED U/S.271(1)(C) AND ALLOW THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 24.07.2009 SD/ - SD/ - ( N.S.SAINI) ACCOUNTANT MEMBER. (T.K.SHARMA) JUDICIA L MEMBER DATE: 24.07.2009 (H.K.PADHEE) SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. THE DR, AHMEDABAD 6. GUARD FILE (IN DUPL ICATE) TRUE COPY, BY ORDER, DEPUTY.REGISTRAR.