The DCIT, Circle-4, Ahmedabad V. Ideal Sheet Metal Stamping and Pressing Pvt. Ltd., Ahmedabad

ITA 1602/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6483 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-04-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 20-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJA RAM SHAH
• Assessee Lawyers: APARNA PARELAKAR
• Keywords: Wrong claim; Capital Gains
• Section: 148; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.1602/AHD/2007 A. Y.: 2001-02 THE D. C. I. T., CIRCLE-3, NAVJIVAN TRUST BUILDING, OFF ASHRAM ROAD, AHMEDABAD VS IDEAL SHEET METAL STAMPINGS & PRESSINGS PVT.LTD., KALIDAS MILL COMPOUND, GOMTIPUR, AHMEDABAD PA NO. AAACI 3670D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAJA RAM SHAH, DR RESPONDENT BY MS. APARNA PARELAKAR AND SANJAY R SHAH, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VIII, AHMEDABAD DAT ED 23-01-2007 FOR ASSESSMENT YEAR 2001-02 ON THE FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) ERRED IN LAW AND ON THE FACT S OF THE CASE IN CANCELING THE PENALTY OF RS.5,13,688/- LEVI ED U/S. 271 (1) (C ) OF THE I. T. ACT, 1961 IGNORING T HE FACT THAT THE ASSESSEE AND CONCEALED THE PARTICULARS OF ITS INCOME I.E. RECEIPT OF INTEREST ON BADLA FINANCE OF RS.12,96,835/- AS IT HAD FAILED TO OFFER THE SAID A MOUNT TO TAX IN ITS ORIGINAL RETURN OF INCOME AND THE SAM E HAS BEEN OFFERED TO TAX ONLY IN RESPONSE TO NOTICE U/S. 148 AND ONLY AFTER DETECTION OF THE SAME BY THE DEPT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. ITA NO.1602/AHD/2007 IDEAL SHEET METAL STAMPINGS & PRESSINGS PVT. LTD. 2 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL ON RECORD. 3. THE FACTS OF THE CASE ARE THAT THE AO INITIATED RE-ASSESSMENT PROCEEDINGS AND IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE IT ACT, THE ASSESSEE OFFERED AN AMOUNT OF RS.12,96, 835/- BEING UNEXPLAINED INCOME FROM BADLA FINANCE WHICH WAS OMI TTED TO BE SHOWN IN THE ORIGINAL RETURN. THE AO FOUND THAT INCOME OF FERED BY THE ASSESSEE WAS SUBSEQUENT TO DETECTION BY THE DEPARTMENT AND A CCORDINGLY THE PENALTY PROCEEDINGS WERE INITIATED. AFTER CONSIDERI NG THE ASSESSEES EXPLANATION THE AO HELD THAT THE ASSESSEE CONCEALED THE RECEIPTS OF INTEREST ON BADLA FINANCE BY WAY OF RE-GROUPING IN THE DIFFERENT HEADS AND CAMOUFLAGED THE SAME. THE DISCLOSURE IN THE RET URN FILED IN RESPONSE TO NOTICE U/S 148 OF THE IT ACT WAS ONLY AFTER DETE CTION OF THE SAME BY THE DEPARTMENT AND ACCORDINGLY MINIMUM PENALTY WAS IMPO SED U/S 271 (1) ( C ) OF THE IT ACT. THE PENALTY ORDER WAS CHALLENG ED BEFORE THE LEARNED CIT(A) AND IT WAS ARGUED THAT IT IS A CASE OF OMISS ION BY INADVERTENCE BY GROUPING THE INCOME FROM BADLA FINANCE ALONG WITH S HORT TERM CAPITAL LOSS ON SHARE TRANSACTION WHICH RESULTED IN CARRYIN G FORWARD LESSER LOSS UNDER THE HEAD CAPITAL GAINS AND IN ANY CASE THERE WAS NO CONSCIOUS INTENTION ON THE PART OF THE ASSESSEE TO SUPPRESS T HE RECEIPT. THE SAID RECEIPT WAS PART OF THE PROFIT & LOSS ACCOUNT THOUG H WAS ADJUSTED AGAINST OTHER LOSSES. THE ASSESSEE RELIED UPON THE DECISION S IN THE CASES OF CIT VS INDIA SEA FOOD 218 ITR 629 (KER) AND NATIONAL TE XTILE VS CIT 249 ITR 125 (GUJ) IN SUPPORT OF THE ARGUMENT THAT THE OMISS ION TO OFFER THE INTEREST INCOME SEPARATELY WAS NOT A RESULT OF ANY GROSS AND WILLFUL NEGLECT. THE LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE OF BONA FIDE MISTAKE AND CANCELED THE PENALTY. HIS FIN DINGS IN PARA 3 ARE REPRODUCED AS UNDER: ITA NO.1602/AHD/2007 IDEAL SHEET METAL STAMPINGS & PRESSINGS PVT. LTD. 3 3. I HAVE PERUSED THE PENALTY ORDER AND ALSO CONSI DERED THE ARGUMENTS OF THE APPELLANT CAREFULLY. IT IS FAI RLY ADMITTED THAT IN THE RETURN OF INCOME ORIGINALLY FILED THE I NCOME FROM BADLA FINANCE WAS NOT SHOWN SEPARATELY AND IN THE R ETURN IN RESPONSE TO NOTICE U/S. 148, SHORT TERM GAIN ON BAD LA FINANCE AT RS.12,96,835/- WAS ADDED TO THE GROSS TOTAL INCO ME WITH A FOOT NOTE THAT REASONS RECORDED FOR REOPENING THE A SSESSMENT WERE NOT INTIMATED. AS A RESULT OF THE DISCLOSURE O F THE SAID INCOME WITH COMPLETE PARTICULARS IN THE RETURN U/S. 148, IT WAS CONTENDED THAT THERE WAS NO TAX SOUGHT TO BE EV ADED AND HENCE THE PENALTY WAS NOT EXIGIBLE IN THIS CASE. TH E MISTAKE IN THE ORIGINAL RETURN WAS EXPLAINED DUE TO THE REASON THAT PROFIT ON BADLA FINANCE WAS ADJUSTED AGAINST SHORT TERM CA PITAL LOSS BY OVER SIGHT AND IN THE SECOND RETURN, PROFIT WAS SHOWN SEPARATELY WITH ELIGIBLE CAPITAL LOSS ON SALE OF SH ARES GOING UP FROM RS.7,43 LACS TO RS.20.40 LACS. IN SHORT, THE C LAIM OF THE APPELLANT IS THAT THE MISTAKE WAS BY SHEER INADVERT ENCE AND NOT BY ANY GROSS OR WILLFUL NEGLECT. IT IS NOT A CA SE WHERE ENTIRE INCOME WAS TALLY SHIELDED FROM THE EYE OF TH E DEPARTMENT. IT IS ONLY A MISTAKE IN NOT COMPUTING H EADWISE INCOME/LOSS BY PROPER GROUPING. THE SUBSEQUENT OFFE R OF INCOME ALSO RESULTS IN CARRYING FORWARD OF HIGHER L OSS UNDER THE HEAD SHORT TERM CAPITAL LOSS TO THE SAME EXTE NT. THUS, IT IS TO BE HELD AS A CASE OF OMISSION BY INADVERTE NCE AND NOT BY ANY GROSS OR WILLFUL NEGLECT OR CONSCIOUS DESIGN TO SUPPRESS THE TAXABLE INCOME. THE FACT THAT THE APPELLANTS D ISCLOSURE OF THE SAID INCOME SEPARATELY IN THE RETURN U/S. 148 B Y INCREASING THE TAXABLE INCOME ALSO SHOULD BE GIVEN DUE CONSIDERATION AND IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OBTAINING IN THIS CASE, I WOULD CONSI DER THAT NECESSARY INGREDIENTS FOR LEVY OF CONCEALMENT PENAL TY ARE LACKING IN THIS CASE AND ACCORDINGLY THE PENALTY LE VIED AT RS.5,13,688/- IS CANCELLED. 4. LEARNED DR RELIED ON THE ORDER OF THE AO AND REF ERRED TO THE ASSESSMENT ORDER IN PARA 8 AND RELIED UPON THE FIND INGS OF THE AO IN THE ASSESSMENT ORDER IN WHICH THE AO RECORDED THAT THE PROFIT OF BADLA FINANCE IS IN THE NATURE OF INTEREST INCOME ONLY AN D AS SUCH THE ASSESSEE COMPANY OUGHT TO HAVE OFFERED SUCH INTEREST INCOME SEPARATELY IN THE PROFIT & LOSS ACCOUNT AND OFFERED FOR TAX. SET OFF OF SUCH INCOME AGAINST CAPITAL LOSS IS NOT PERMITTED. THE LEARNED DR SUBMI TTED THAT SINCE THE INTEREST INCOME ON BADLA FINANCE WAS DETECTED BY TH E AO PRIOR TO ISSUE OF ITA NO.1602/AHD/2007 IDEAL SHEET METAL STAMPINGS & PRESSINGS PVT. LTD. 4 NOTICE U/S 148 OF THE IT ACT, THEREFORE, IT IS NOT A CASE OF INADVERTENCE MISTAKE. HE HAS SUBMITTED THAT THE ASSESSEE INTENTI ONALLY DID NOT OFFER PROPER INCOME FOR TAXATION AND THAT IT IS A CASE OF COMPANY WHOSE ACCOUNTS ARE MAINTAINED BY THE PROFESSIONALS. THERE FORE, PENALTY SHOULD NOT HAVE BEEN CANCELLED BY THE LEARNED CIT(A). 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND REFERRED TO PB-40 WHICH IS PROFIT & LOSS ACCOUNT IN WHICH LOSS ON SAL E OF SHARES IS DISCLOSED IN A SUM OF RS.7,43,797/-. PB -17 IS THE STATEMENT OF INCOME IN WHICH ALSO SHORT TERM CAPITAL LOSS IS SHOWN IN A SUM OF R S.7,43,797/- AND DETAILS ARE GIVEN IN THE ANNEXURE ATTACHED TO THE C OMPUTATION OF INCOME (PB -20). THE LEARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED TO PB-49 WHICH IS THE NOTICE ISSUED BY THE AO DATED 28-05-20 03 PRIOR TO ISSUE OF NOTICE U/S 148 OF THE IT ACT IN WHICH EXPLANATION O F THE ASSESSEE ON THIS ISSUE WAS CALLED FOR AND EVEN IN THE NOTICE THE AO DID NOT REALIZED THE ABOVE MISTAKE ON ACCOUNT OF DIFFERENT TREATMENT GIV EN BY THE ASSESSEE IN THE COMPUTATION OF INCOME. THE LEARNED COUNSEL FOR THE ASSESSEE ACCORDINGLY SUBMITTED THAT IT IS A CASE OF BONA FID E MISTAKE COMMITTED BY THE AUDITORS; OTHERWISE ALL PARTICULARS WERE DISCLO SED IN THE ORIGINAL RETURN OF INCOME, PROFIT & LOSS AND THE COMPUTATION OF INCOME. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSE E WITHOUT GETTING THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT MA DE SURRENDER OF ADDITIONAL INCOME OF RS.12,96,835/- ON ACCOUNT OF P ROFIT ON BADLA FINANCE AS SHORT TERM CAPITAL GAIN AND AS SUCH IT I S NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON TH E RECENT DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS REL IANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC). ITA NO.1602/AHD/2007 IDEAL SHEET METAL STAMPINGS & PRESSINGS PVT. LTD. 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS FILED COPY OF THE PROFIT & LOSS ACCOUNT IN THE PAPER BOOK IN WHICH LOSS OF SHARE IN A SUM OF RS.7,43,797/- HAS BEEN SHOWN AND SUCH FACT HAS ALSO BEEN DISCLOSED IN THE COMPUTATION OF INCOME AND THE ANNEXURE. THE DET AILS OF SHORT TERM CAPITAL GAINS ARE ALSO SHOWN. THE AO HAS ALSO ISSUE D NOTICE TO THE ASSESSEE AT THE ASSESSMENT STAGE DATED 28-05-2003 ( PB-49) SEEKING EXPLANATION OF THE ASSESSEE ON ACCOUNT OF CAPITAL L OSS ARRIVED AT AFTER GIVING SET OFF OF VARIOUS OTHER RECEIPTS WHICH OUGH T TO HAVE BEEN SHOWN AS INCOME BY THE ASSESSEE. THE AO EVEN IN THIS LETT ER DID NOT REALIZE THE MISTAKE THAT THE ASSESSEE HAS NOT OFFERED PROFIT ON BADLA FINANCE AS SHORT TERM CAPITAL GAINS. THE AO HAS ALSO NOT REALIZED TH E MISTAKE THAT THE INCOME ON BADLA FINANCE SHOULD BE SHOWN SEPARATELY AND SHOULD NOT BE SET OFF AGAINST CAPITAL LOSS. THE AO DESPITE AVAILA BILITY OF THE FACTS ON RECORD COMPUTED THE INCOME OF THE ASSESSEE U/S 143( 3) OF THE IT ACT. IT WAS ONLY THEREAFTER THE AO NOTED THAT THE ASSESSEE SHOULD HAVE OFFERED THE PROFIT ON BADLA FINANCE SEPARATELY IN THE PROFI T & LOSS ACCOUNT BECAUSE SET OFF AGAINST CAPITAL LOSS IS NOT PERMITT ED. THE ASSESSEE IMMEDIATELY ON RECEIPT OF NOTICE U/S 148 OF THE IT ACT DISALLOWED THE CLAIM ON ACCOUNT OF SHORT TERM CAPITAL GAINS ON BAD LA FINANCE IN A SUM OF RS.12,96,835/- WITHOUT EVEN RECEIPT OF THE REASONS FOR RE-OPENING OF THE ASSESSMENT. THE ABOVE FACTS WOULD SHOW THAT THE ASS ESSEE DISCLOSED ALL THE PRIMARY FACTS IN THE RETURN OF INCOME FILED ORI GINALLY AS WELL AS DISCLOSED THE SHORT TERM CAPITAL LOSS IN THE COMPUT ATION OF INCOME AND THE ANNEXURE. THE DISPUTE IS WITH REGARD TO THE TRE ATMENT GIVEN TO THE PROFIT ON BADLA FINANCE AND OTHER SHORT TERM CAPITA L LOSS. THE AO HAS SPECIFICALLY MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE SHOULD HAVE OFFERED SUCH INTEREST INCOME SEPARATELY IN THE PROFIT & LOSS ACCOUNT AND SHOULD NOT HAVE SET OFF SUCH INCOME AGAINST CAP ITAL LOSS. IT IS, THEREFORE, A CASE OF GIVING PARTICULAR TREATMENT TO THE INCOME DECLARED ON ACCOUNT OF SHORT TERM CAPITAL GAINS. ACCORDING TO T HE EXPLANATION OF THE ITA NO.1602/AHD/2007 IDEAL SHEET METAL STAMPINGS & PRESSINGS PVT. LTD. 6 ASSESSEE SUCH PROPER TREATMENT WAS NOT GIVEN BECAUS E OF INADVERTENCE MISTAKE OF THE AUDITOR. THE EXPLANATION OF THE IS T HUS ACCEPTABLE THAT IT WAS A BONA FIDE MISTAKE BY THE AUDITOR IN NOT SHOWI NG PARTICULAR INCOME IN THE PROFIT & LOSS ACCOUNT, OTHERWISE ALL FACTS W ERE DISCLOSED IN THE RETURN OF INCOME AS WELL AS PROFIT & LOSS ACCOUNT A ND THE ANNEXURE. WE, THEREFORE, ACCEPT THE EXPLANATION OF THE ASSESSEE T HAT IT WAS A CASE OF OMISSION BY INADVERTENCE BY GROUPING INCOME FROM BA DLA FINANCE ALONG WITH SHORT TERM CAPITAL LOSS OF SHARE TRANSACTIONS WHICH RESULTED IN CARRY FORWARD LESSER LOSS UNDER THE HEAD CAPITAL GAINS. I T IS, THEREFORE, NOT BELIEVABLE THAT THE ASSESSEE WILLFULLY AND INTENTIO NALLY WITHHELD THE INFORMATION FROM THE REVENUE DEPARTMENT. 7. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) HELD THAT A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C ) OF THE INCOME-TAX ACT, 1961, SUGGEST THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY , THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS I NCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 2 71(1) ( C ) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INF ORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURAT E, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORREC T CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. TH ERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETUR N FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE T HE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUC H PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARI SE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NO T BE ACCURATE, ITA NO.1602/AHD/2007 IDEAL SHEET METAL STAMPINGS & PRESSINGS PVT. LTD. 7 NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY TH E ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FA LSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1) ( C ). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RE TURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. DECISI ON OF THE GUJARAT HIGH COURT AFFIRMED. 8. THE HONBLE SUPREME COURT IN THE CASE OF M/S. RA JASTHAN SPINNING & WEAVING MILLS 2009 PIOL 63 SC HELD THAT ON EVERY DEMAND PENALTY IS NOT AUTOMATIC. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SAHABAD CO-OP. SUGAR MI LLS LTD. 322 ITR 73 (P&H) HELD THAT MAKING OF WRONG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING OF INACCURATE INFORMATION, WHICH MAY CALL FO R LEVY OF PENALTY U/S 271 (1) ( C ) OF THE ACT. THE HONBLE PUNJAB & HARY ANA HIGH COURT AGAIN IN THE CASE OF CIT VS SIDHARTHA ENTERPRISES 322 ITR 80 (P & H) HELD THAT LOSS SUFFERED ON SALE OF MACHINERY WRONGLY TAKEN AG AINST PROFIT OF BUSINESS. ASSESSEE ON REALIZATION MISTAKE COMMITTED BY THE COUNSEL ACCEPTED THE DECISION OF THE AO. NO DELIBERATE DEFA ULT. APPELLATE AUTHORITIES JUSTIFIED IN DELETING THE PENALTY U/S 2 71 (1) ( C ) OF THE IT ACT. 9. CONSIDERING THE FACTS OF THE CASE AS NOTED ABOVE , IN THE LIGHT OF THE ABOVE DECISIONS AND IN THE LIGHT OF THE FINDINGS OF THE LEARNED CIT(A), WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE FOR IMPOS ITION OF PENALTY. THE LEARNED CIT(A) HAS ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY CANCELLED THE PENALTY U/S 271 (1) ( C ) OF THE IT ACT. WE ACCORDINGLY CONFIRM HIS FINDINGS AND DISMISS THE AP PEAL OF THE REVENUE. ITA NO.1602/AHD/2007 IDEAL SHEET METAL STAMPINGS & PRESSINGS PVT. LTD. 8 10. AS A RESULT, THE DEPARTMENTAL APPEAL IS DISMISS ED. ORDER PRONOUNCED ON 23-04-2010 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 23-04-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD