Broach Textile Mills Ltd., Bharuch V. The Dy.CIT., Bharuch Circle, Bharuch

ITA 152/AHD/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0106 (ITAT-SURAT)
• Duration Of Justice: 5 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-07-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Wrong claim; TDS
• Section: 271(1)(c); 40(a)(ia); 195

Judgement Text

BROACH TEXTILE MILLS LTD. V. DCIT- BHARUCH /I.T.A. NO.152/AHD/2014/A.Y.02-03 PAGE 1 OF 5 , , IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.152/AHD/2014: / ASSESSMENT YEAR: 2002-03 M S BROACH TEXTILE MILLS LTD. , 16 ANKUR TOWER B/H CENTRAL BANK , M G ROAD BHARUCH PAN: AAACB 6244 J V. DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - BHARUCH APPELLANT / RESPONDENT ASSESSEE BY SHRI RAJESH C SHAH, CA REVENUE BY SHRI PRASOON KABRA, SR. D.R. DATE OF HEARING 1 5 .05.2019 DATE OF PRONOUNCEMENT 15 .05.2019 /ORDER PER O. P. MEENA, AM 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, BARODA (IN SHORT THE CIT (A)) DATED 25.10.2013 PERTAINING TO ASSESSMENT YEAR 2002-03. 2. GROUND NO. 1 AND 2 RELATES TO CONFIRMING PENALTY OF RS. 3,64,530 LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 3. SUCCINCT FACTS ARE THAT THE ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) ON 31.10.2002 BY MAKING AN ADDITION OF RS. 10,21, 088 ON ACCOUNT OF DISALLOWANCE MADE UNDER SECTION 40(A)(IA) AS THE ASSESSEE HAS FAILED TO DEDUCT TDS ON THE INTEREST PAYMENT MADE OUTSIDE INDIA. THIS ADDITION WAS ALSO CONFIRMED BY CIT (A). THE AO HAS ALSO INITIATED PENALTY PROCEEDINGS AGAINST THE SAID DISALLOWANCE UNDER SECTION 271(1)(C). IN RESPONSE TO SHOW-CAUSE NOTICE, THE ASSESSEE HAS EXPLAINED THAT SUCH DISALLOWANCE OF BROACH TEXTILE MILLS LTD. V. DCIT- BHARUCH /I.T.A. NO.152/AHD/2014/A.Y.02-03 PAGE 2 OF 5 NON DEDUCTION OF TDS UNDER SECTION 195 WAS CONFIRMED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF VIJAY SHIP BREAKING [2003] 261 ITR 113 (GUJARAT). HOWEVER, BEFORE THAT THE ASSESSEE HAS HAD FILED RETURN OF INCOME AND THE DECISION OF TRIBUNAL IN THE SAID CASE WAS IN FAVOUR OF THE ASSESSEE. THEREFORE, THE ISSUE WAS DEBATABLE ONE; HENCE, NO PENALTY COULD BE LEVIED. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS CLAIMED WRONG EXPENSE IN PROFIT & LOSS ACCOUNT AS NO TDS WAS MADE ON THIS PAYMENT. THEREFORE, THE ASSESSEE IS LIABLE TO PENALTY. ACCORDINGLY, THE AO IMPOSED PENALTY OF RS. 3,64,530 UNDER SECTION 271(1)(C) OF THE ACT. 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). HOWEVER, CIT (A) HAS ALSO CONFIRMED THE PENALTY AS THE ASSESSEE HAS MADE WRONG CLAIM OF INTEREST PAID OUT SIDE INDIA WITHOUT DEDUCTING TDS THEREON 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AT THE TIME FILING OF RETURN OF INCOME, THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF VIJAY SHIP BREAKING CORPORATION WAS IN FAVOUR OF THE ASSESSEE. THE DECISION OF HONBLE GUJARAT HIGH COURT IN SAID CASE WAS NOT AVAILABLE AT THAT TIME. THEREFORE, THE ISSUE WAS DEBATABLE. FURTHER THE ASSESSEE HAS MADE A CLAIM WHICH IS SHOWN IN THE RETURN OF INCOME, HENCE, WRONG CLAIM MADE IN THE RETURN OF INCOME DOES NOT AMOUNT FURNISHING OF INACCURATE PARTICULARS OF INCOME AS HELD IN THE CASE OF CIT V RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC); [2010] 189 TAXMAN 322(SC), FILTEX TECHNOLOGIES PVT. LTD. 380 ITR 222 (KAR) . NO PENALTY LEVIABLE ON DEBATABLE ISSUE AS HELD IN THE CASE OF CIT V. TEK RAM HUF 300 ITR 354. 6. AU CONTRAIRE , THE LD. SR. D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. BROACH TEXTILE MILLS LTD. V. DCIT- BHARUCH /I.T.A. NO.152/AHD/2014/A.Y.02-03 PAGE 3 OF 5 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. A PERUSAL OF THE ASSESSMENT ORDER AND PENALTY ORDER REVEALS THAT THE AO HAS MADE DISALLOWANCE OF INTEREST EXPENDITURE PAID OUT SIDE INDIA ON THE GROUND THAT THE ASSESSEE HAS FAILED TO DEDUCT TDS THEREON. THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS MADE ADDITION ON THE BASIS OF FACTS AS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WE FIND THAT THE ASSESSEE HAS FURNISHED ALL RELEVANT FACTS; THEREFORE, THE PENALTY CANNOT BE LEVIED MERELY BECAUSE THAT IT WAS NOT ACCEPTABLE TO THE AO. IT WAS CLAIMED THAT AT THE TIME OF FILING OF RETURN OF INCOME, THE TRIBUNAL DECISION OF AHMEDABAD BENCH ON THE ISSUE WAS IN THE FAVOUR OF THE ASSESSEE AND THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS AS PER PROVISIONS OF 195 OF THE ACT. HOWEVER, THE SAID DECISION WAS REVERSED BY THE HON`BLE HIGH COURT LATER ON. THEREFORE, THE ISSUE WAS OF DEBATABLE IN NATURE. THUS, WE OBSERVE THAT WHERE THE EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS NOT LEVIABLE. IT IS TRITE LAW THAT PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCEEDINGS FROM ASSESSMENT PROCEEDINGS. THE FINDING RECORDED IN THE ASSESSMENT ORDER IS NOT CONCLUSIVE FOR DECIDING THE IMPOSITION OF PENALTY. IT ONLY HAS A PERSUASIVE VALUE. ANY FINDING RECORDED IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PENALTY HAS TO BE IMPOSED AUTOMATICALLY. EXPLANATION 1 TO SECTION 271 (L) (C) PROVIDES THAT THE PENALTY WOULD BE DEEMED TO ATTRACT WHERE IN RESPECT OF A FACT MATERIAL TO THE COMPUTATION OF INCOME EITHER NO EXPLANATION IS OFFERED, OR EXPLANATION OFFERED IS FOUND TO BE FALSE. IN THIS CASE, THE ASSESSEE HAS NOT DISALLOWED THE INTEREST PAYMENT MADE WITHOUT DEDUCTING TDS UNDER THE BONA FIDE BELIEF THAT IT WAS NOT REQUIRED TO DEDUCT TDS. THE ASSESSEE HAS OFFERED THAT EXPLANATION, BUT THE AO FAILED TO CONSIDER THE SAME. BROACH TEXTILE MILLS LTD. V. DCIT- BHARUCH /I.T.A. NO.152/AHD/2014/A.Y.02-03 PAGE 4 OF 5 IT IS SEEN THAT THIS AMOUNT HAS BEEN REFLECTED IN PROFIT & LOSS ACCOUNT AND COMPUTATION OF TOTAL INCOME AND RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE HAD OFFERED EXPLANATION AND THE SAID EXPLANATION OFFERED WAS NOT FOUND TO BE FALSE AND ACCORDINGLY ITS CASE IS NOT COVERED BY CLAUSE (A) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. CLAUSE (B) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT PROVIDES THAT WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATION AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS LEVIABLE. AS THE CLAIM OF INTEREST EXPENDITURE WAS GENUINE, WHICH WAS CLAIMED UNDER MISTAKEN IMPRESSION DOES NOT AMOUNT TO CONCEALMENT OF INCOME AND THUS, THERE WAS NO CONCEALMENT OF INCOME. THIS BEING THE FACTUAL POSITION, THEREFORE PENALTY UNDER SECTION 271(1) (C) IS NOT LEVIABLE. JUST BECAUSE APPELLANTS EXPLANATION WAS NOT FOUND ACCEPTABLE BY THE AO, IT DOES NOT FOLLOW THAT THAT THE APPELLANT WAS UN 8. ABLE TO SUBSTANTIATE HIS EXPLANATION BY PROVIDING VARIOUS EVIDENCES AND JUDICIAL OPINIONS. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE PENALTY IS NOT SUSTAINABLE IN LAW IN THE LIGHT OF RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN CASE OF CIT V RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC); [2010] 189 TAXMAN 322(SC) WHEREIN IT WAS HELD THAT MERELY BECAUSE THE ASSESSEE HAS CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE BY THE REVENUE, PENALTY UNDER SECTION 271(1) (C) OF THE ACT CANNOT BE ATTRACTED. THE HON'BLE SUPREME COURT ALSO OBSERVED THAT MERE DISALLOWANCE OF CLAIM MADE BY THE ASSESSEE, CANNOT AMOUNT FURNISHING OF INACCURATE PARTICULARS OF INCOME UNLESS, THE INFORMATION AS GIVEN IN RETURN OF INCOME WAS FOUND TO BE INCORRECT OR INACCURATE. THE OTHER VARIOUS DECISION OF TRIBUNALS AS WELL AS HIGH COURTS AS RELIED BY THE ASSESSEE ARE ALSO SUPPORTS ITS CASE. BROACH TEXTILE MILLS LTD. V. DCIT- BHARUCH /I.T.A. NO.152/AHD/2014/A.Y.02-03 PAGE 5 OF 5 FURTHER, AS THE ISSUE IS DEBATABLE HENCE, NO PENALTY IS LEVIABLE UNDER SECTION 271(1)(C) OF THE ACT IN VIEW OF DECISION IN THE CASE OF TEK RAM HUF OF HON`BLE SUPREME COURT (SUPRA) IN THE LIGHT OF ABOVE DISCUSSION, THE PENALTY LEVIED AT RS.3,64,530/- IS DELETED. THEREFORE, GROUND NO. 1 AND 2 OF APPEAL IS THEREFORE, ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. 10. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.05.2019 SD/- SD/- (BHAVNESH SAINI) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT: DATED: 15 TH MAY, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT