The Co. Operative Textiles Mills Ltd., Meerut V. ACIT, Bulandshahr

ITA 1590/DEL/2010

• Counselvise Citation: 159020114 RSA 2010
• Duration Of Justice: 4 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-02-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Search and seizure; Opportunity of being heard; Bonafide belief; Wrong claim
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B , NEW DELHI) BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.1590 /DEL/2010 ASSESSMENT YEAR : 1997-98 THE COOPERATIVE TEXTILES MILLS LTD., VS. ADDL. CIT , SEHKARI NAGAR, RANGE, BULANDSHAHR BULANDSHAHR GIR / PAN: (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SMT. PARWINDER KAUR, SR. DR DATE OF HEARING : 19.02.2015 DATE OF PRONOUNCEMENT : 25.02.2015 ORDER PER T.S. KAPOOR, AM: THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER OF LD. CIT(A) DATED 01.02.2010. THE ASSESSEE HAS RAISED SEVEN GR OUNDS OF APPEAL WHEREIN, THE ASSESSEE HAS CHALLENGED THE ASSESSMENT ON LEGAL ISSUE FOR NON SERVICE OF NOTICE U/S 143(2) AND HAS ALSO TAKEN THE GROUNDS ON MERIT AGAINST THE ACTION OF LD. CIT(A) BY WHICH HE HAD CONFIRMED THE IMPOSIT ION OF PENALTY AMOUNTING TO RS.8.50 LACS. NONE WAS PRESENT ON BEH ALF OF THE ASSESSEE. HOWEVER, WITH THE HELP OF LD. D.R. AND THE MATERIAL PLACED ON FILE, WE ARRIVED AT A CONCLUSION THAT THE MATTER CAN BE DISP OSED OFF WITHOUT PRESENCE OF LD. A.R. THEREFORE, ADJOURNMENT APPLICATION FI LED BY ASSESSEE/ LD. A.R. WAS REJECTED AND LD. D.R. WAS HEARD ON MERITS. ITA NO.1590/DEL/2010 2 2. LD. D.R. SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE CASE LAW OF CIT VS ZOOM COMMUNICATIONS 370 ITR 512 AND, THEREFORE THE PENALTY NEEDS TO BE UPHELD. 3. WE HAVE HEARD LD. D.R. AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN MANUFACTURE OF COTTON YARN. THE A.O. DURING ASSE SSMENT PROCEEDINGS OBSERVED THAT THE AMOUNTS WERE DEDUCTED FROM SALARY AND WAGES OF EMPLOYEES FOR DEPOSIT IN EPF ACCOUNT BUT WHICH WERE NOT PAID BY IT TO GOVERNMENT ACCOUNT AND, THEREFORE THE AMOUNTS WERE DISALLOWED AND ADDITION WAS MADE. LD. CIT(A) HAD ALSO DISMISSED T HE APPEAL OF ASSESSEE. ON RECEIPT OF APPELLATE ORDER, THE ASSESSEE WAS PRO VIDED AN OPPORTUNITY OF BEING HEARD BEFORE IMPOSITION OF PENALTY U/S 271(1) (C). ON BEHALF OF ASSESSEE NOBODY ATTENDED THEREFORE, A.O. AFTER RELY ING UPON THE PROVISIONS OF SECTION 271(1)(C) IMPOSED PENALTY OF RS.8.50 LAC S. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A). HOWEVER, LD. CIT(A) UPHELD THE PENALTY BY HOLDING AS UNDER: I HAVE CAREFULLY CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE AR AS ALSO THE CONTENTS OF THE CASE-LAWS REFERR ED TO BY THE AO AND THE AR. THE AR'S REFERENCE TO THE ADDITIONS MADE ON ACCOUNT OF YIELD OF YARN AND EXPENSES IS NOT RELEVANT AT ALL AS THE AO HAS NOT IMPOSED THE PENALTY IN RESPECT OF THESE TWO ADDITIONS. THE ONLY ADDITION THAT IS RELEVANT IS RELATING TO THE E.P.F. ACCOUNT. THE AR' S CONTENTION IS THAT THE DISALLOWANCE OF RS.21,54,370/- DID NOT ARISE BE CAUSE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. IT HAS BEEN STATED BY HIM THAT THE ACCOUNT STATEMENT FILED IN COURSE OF ASSESSMENT PROCEEDINGS CONTAINED FULL PAR TICULARS REGARDING E.P.F. DEDUCTION AND PAYMENT THEREOF. IT HAS ALSO B EEN ARGUED THAT THE DISALLOWANCE UNDER SECTION 43B WAS BASED ON THE FACTS AND FIGURES AS DISCLOSED AND FURNISHED BY THE ASSESSEE IN COURSE OF THE ITA NO.1590/DEL/2010 3 ASSESSMENT PROCEEDINGS AND IT WAS NOT A RESULT OF A NY DETECTION OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. IT WAS ALSO STATED THAT THE ASSESSEE HELD A BONAFIDE BELIEF BASED ON THE ADVICE OF THE COUNSEL THAT THE DEDUCTI ON OF SALARY AND WAGES OF VARIOUS EMPLOYEES DID NOT CONSTITUTE INCOM E BUT WAS A LIABILITY DISCHARGEABLE BY THE ASSESSEE. TO EXPLAIN THE MEANING OF WORD 'CONCEALMENT', THE A R HAS REFERRED TO THE DISCUSSION MADE IN THE JUDGMENT OF THE APEX COU RT IN THE CASE OF DILIP N. SHROFF VS. JCIT, 291 ITR 519 (SC). IT HAS BEEN ARGUED THAT THE WORD 'CONCEAL' HAS BEEN DISCUSSED BY THE APEX C OURT AS UNDER:- '53. THE EXPRESSION 'CONCEAL' IS OF GREAT IMPORTANC E. ACCORDING TO LAW LEXICON, THE WORD 'CONCEAL' MEANS: 'TO HIDE OR KEEP SECRET. THE WORD 'CONCEAL' IS CON + CELARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION; TO C OVER OR KEEP FROM SIGHT ; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KN OWLEDGE OF. THE OFFENCE OF CONCEALMENT IS, THUS, A DIRECT ATTEMPT T O 'HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES. SIMILARLY, THE WORD 'INACCURATE' HAS BEEN INTERPRET ED AS UNDER: 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE -STATEMENT, COPY OR TRANSCRIPT.' 55. IT SIGNIFIES A DELIBERATE ACT OR OMISSION ON TH E PART OF THE ASSESSEE. SUCH DELIBERATE ACT MUST BE EITHER FOR THE PURPOSE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS.' I AM AFRAID THE AR'S ARGUMENTS DO NOT CUT MUCH ICE AGAINST THE ORDER OF PENALTY MADE BY THE AO. I FIND THAT EVEN BY THE DEFINITION OF 'INACCURATE' AS CITED ABOVE, THE ASSESSEE'S CASE FA LLS WITHIN THE PURVIEW OF HAVING FURNISHED INACCURATE PARTICULARS. THE RECOVERIES MADE FROM THE SALARY AND WAGES AND HAVING HOT PAID IT OR HAVING PAID IT LATE OUGHT TO HAVE BEEN SHOWN BY THE ASSESSEE IN THE RETURNS OF INCOME SUO MOTO. THESE AMOUNTS SHOULD HAVE BEEN ADD ED TO THE INCOME BY THE ASSESSEE ITSELF AS DISALLOWANCES, WHI CH WAS NOT DONE THIS, IN MY VIEW, CLEARLY ESTABLISHES FURNISHING OF INACCURATE PARTICULARS. I WOULD ALSO LIKE TO REFER TO THE FACT HERE THAT AN Y RELIANCE ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F DILIP N. SHROFF VS. JCIT, 291 ITR 519 DOES NOT HELP AT ALL BECAUSE THE SAME HAS BEEN ITA NO.1590/DEL/2010 4 DISAPPROVED BY THE HON'BLE SUPREME COURT IN THE CAS E OF UNION OF INDIA AND OTHERS VS. DHARMENDRA TEXTILES PROCESSORS & OTHERS (2008), 306 ITR 277. THE AR'S RELIANCE ON THE PLETHORA OF CASE LAWS WHIC H HAVE BEEN CITED IN HIS WRITTEN SUBMISSION ALSO ARE OF NO HELP AND W ORTHY OF DISCUSSION IN VIEW OF THE FACT THAT THE HON'BLE SUPREME COURT IN THE CASE CIT VS. GOLD COIN HEALTH FOOD P. LTD., (2008) 304 ITR 308 ( SC) HAVE OVERRULED THE JUDGMENT IN THE CASE OF VIRTUAL SOFT SYSTEMS LIMITED VS. CIT, (2007) 289 ITR 83 (SC). THE POSITION OF LAW NO W IS CLEAR BEYOND ANY DOUBT THAT PENALTY IS LEVIABLE NOT ONLY IN A CA SE WHERE AFTER ADDITION OF CONCEALED INCOME, A LOSS RETURN AFTER A SSESSMENT BECOMES POSITIVE INCOME, BUT ALSO IN A CASE WHERE ADDITION OF CONCEALED INCOME REDUCES THE RETURNED LOSS AND FINALLY THE AS SESSED INCOME IS ALSO A LOSS OR A MINUS FIGURE. IN VIEW OF THE FACTS OF THE CASE AS- DISCUSSED ABOVE AND THE POSITION OF LAW, THE PENALT Y ORDER IS CONFIRMED. 4. WE FIND THAT PENALTY WAS IMPOSED UPON ASSESSEE O N ACCOUNT OF DISALLOWANCE OF RS.21,51,370/-, WHICH THE ASSESSEE HAD NOT DEPOSITED IN EPF ACCOUNT AFTER DEDUCTING THE SAME FROM THE EMPLOYEES . WE FIND THAT THOUGH THE DISALLOWANCE IN THIS CASE WAS WARRANTED AS THE PROVISIONS OF SECTION 43B WERE HIT. HOWEVER THE FACT REMAINS THAT NECESSARY PARTICULARS REGARDING THESE DEDUCTIONS FROM SALARIES WERE FILED ALONG WIT H RETURN OF INCOME AND THERE WAS NO CONCEALMENT OF PARTICULARS OF INCOME. THE PENALTY IMPOSED WAS NOT THE RESULT OF ANY DETECTION OR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE FURTHER FI ND THAT THE A.O. IN ASSESSMENT ORDER DATED 28.01.2000 VIDE PARA 2 HAS O BSERVED AS UNDER: IT IS OBSERVED THAT IN EPF ACCOUNT A SUM OF RS.3,4 2,463.45 AND RS.15,03,851/- HAS BEEN DEDUCTED FROM SALARY AND WA GES OF THE EMPLOYEES WHICH HAVE NOT BEEN PAID BY THE ASSESSEE IN GOVT. ACCOUNT. APART FROM THIS, THE PAYMENT OF RS.3,18,056/- HAS B EEN PAID LATE BY 15 DAYS. THEREFORE, THE ENTIRE AMOUNT OFRS.21,64,370/ - IS DISALLOWABLE U/S 43B AND THE SAME IS DISALLOWED AND ADDED TO THE TOTAL INCOME. ITA NO.1590/DEL/2010 5 5. FROM THE ABOVE FINDINGS OF A.O., WE FIND THAT TH E FACT REGARDING NONPAYMENT OF SUCH DUES TO THE GOVERNMENT ACCOUNT W ERE OBTAINED BY A.O. FROM THE DOCUMENTS ACCOMPANYING INCOME TAX RETURN O NLY AND A.O. HAD NOT DETECTED ANY CONCEALED INCOME OF THE ASSESSEE. FUL L PARTICULARS REGARDING STATUTORY PAYMENT TO BE MADE WERE DISCLOSED IN THE RETURN OF INCOME THEREFORE, WE HOLD THAT ASSESSEE HAD NOT CONCEALED PARTICULARS OF INCOME AND HAD NOT FURNISHED INACCURATE PARTICULARS OF INCOME. MERE WRONG CLAIM MADE BY ASSESSEE CANNOT AMOUNT TO CONCEALMENT OF INCOME. HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS HELD A S UNDER: THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. RE LIANCE PETRO PRODUCTS PVT. LTD. [(2010) 322 ITR 158 (SC)} HAS HE LD THAT SIMPLY FOR THE REASON THAT THE ASSESSING OFFICER DID NOT FIND THE CLAIM OF THE ASSESSEE TO BE SUSTAINABLE IN LAW UP TO A CERTAIN E XTENT, IT CANNOT BE A CASE FOR PENALTY U/S.271(L)(C) MORE SO WHEN THE PAR TICULARS FURNISHED BY THE ASSESSEE WERE NOT INACCURATE. SIMILARLY, THE HON'BLE SUPREME COURT IN PRICE WATER HOUSE COOPERS PVT. LTD. VS. CIT (2012) 348 ITR 306 (SC) HAS HELD THAT NO PENALTY U/S 271(L)(C) CAN BE IMPOSED FOR A BONA FIDE MISTAKE OR A NORMAL HUMAN ERROR. 6. IN THE CASE LAW OF PRICE WATERHOUSE COOPERS, THE ASSESSEE HAD NOT ADDED BACK TO ITS COMPUTATION OF INCOME THE QUANTIT Y AS PER THE PROVISIONS OF SECTION 40A(7) OF THE ACT. HOWEVER, HON'BLE SUPREME COURT DELETED THE PENALTY HOLDING THAT MISTAKE WAS DUE TO HUMAN ERROR . IN THE PRESENT CASE, WE OBSERVE THAT NOT ADDING BACK TO THE INCOME OF UN ALLOWABLE EXPENSES, WAS DUE TO A BONA FIDE MISTAKE WHICH IS STRENGTHENED FR OM THE FACT THAT ASSESSEE HAD DECLARED A LOSS OF RS.153.35 LACS AND EVEN IF T HE AMOUNT OF RS.21.54 LACS WAS SUO MOTO ADDED BACK BY ASSESSEE, STILL THE INCOME FIGURE WOULD ITA NO.1590/DEL/2010 6 HAVE REMAINED IN NEGATIVE. THEREFORE, IT CANNOT BE SAID THAT INTENTION OF ASSESSEE WAS TO EVADE TAXES BY CLAIMING WRONG DEDUC TIONS. 6. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, WE HOL D THAT PENALTY WAS NOT IMPOSABLE AND THEREFORE WE DELETE IT. SINCE WE HAVE GIVEN RELIEF TO THE ASSESSEE ON MERITS, LEGAL GROUNDS RAISED BY ASSESSE E HAS NOT BEEN ADJUDICATED. 7. IN VIEW OF ABOVE, APPEAL FILED BY ASSESSEE IS AL LOWED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 25.02.2015 . SD./- SD./- (G. C. GUPTA ) (T.S. KAPOOR) VICE PRESIDENT ACCOUNTANT MEMBER DATE: 25 TH FEB., 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 19/2 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 24/2 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 25/2 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 25/2 SR. PS/PS 7 FILE SENT TO BENCH CLERK 25/2 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER