PERFECT CIRCLE INDIA LTD, MUMBAI V. ITO 5(2)(4), MUMBAI

ITA 1617/MUM/2012

• Counselvise Citation: 161719914 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C TRIPURA SUNDARI
• Assessee Lawyers: PRASAD BAPAT
• Keywords: Question of law; Revised return; Bonafide mistake
• Section: 143(3); 142(1); 139(5); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH , MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI R AJENDRA SINGH , A M TA NO. 1617 / MUM / 20 1 2 ( ASSESSMENT YEAR : 2007 - 08 ) PERFECT CIRCLE INDIA LIMITED, 10, PRASAD CHAMBERS, OPERA HOUSE, CHARNI ROAD, MUMBAI - 400 004 VS. ITO 5(2)(4) , MUMBAI - 400 020 PAN/GIR NO. : A A AC P 0482 E ( APP ELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI RAJESH ATHAVALE & SHRI PRASAD BAPAT /REVENUE BY : MS . C. TRIPURA SUNDARI DATE OF HEARING : 3 RD S E PTEMBER , 201 3 DATE OF PRONOUNCEMENT : 11 TH SEPTEMBER , 2013 O R D E R P ER SHRI R.K.G UPTA, JM : THE ASSESSEE HAS PREFERRED THIS APPEAL AGAINST THE ORDER OF LEARNED CIT(A) , MUMBAI FOR ASSESSMENT YEAR 2007 - 08 2 . IN GROUND NO.1, THE ASSESSEE IS OBJECTING IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING AN AD - HOC AMOUNT OF RS.12,32,888/ - BEING 15% OF TOTAL MISCELLANEOUS EXPENSES AND THEREAFTER ENHANCING THE DISALLOWANCE OF MISCELL ANEOUS EXPENSES FROM 15% TO 20% AT THE END OF THE LD. CIT(A). 3 . THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PISTON RINGS TO CATER TO ALL SEGMENTS OF THE MARKET I.E. OE, AFTER MARKET AND EXPORTS. IT HAS ITS MANUFACTURING UNIT AT NASHIK. I TA NO. 1617 /1 2 2 DURING THE ASSESSMENT PROCEEDING, THE AO NOTICED THAT VARI OUS EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT ARE NOT FULLY VERIFIABLE, THEREFORE, HE DISALLOWED 15% OUT OF TOTAL MISCELLANEOUS EXPENSES AND SOME OTHER EXPENSES WERE ALSO DISALLOWED BY THE AO. IN RESPECT TO DISALLOWANCE OF EXPENSES, IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE AO HAS NOT CONSIDERED THE CASE OF THE ASSESSEE IN RIGHT PERSPECTIVE. RELIANCE WAS PLACED ON VARIOUS DECISION OF THE TRIBUNAL FOR ASSESSMENT YEAR 2001 - 02 TO 2006 - 07. HOWEVER, LEARNED CIT(A) NOTED THAT THE TRIBUNAL WHILE DECIDI NG THE ISSUE FOR ASSESSMENT YEAR 2001 - 02 HAS CONFIRMED THE DISALLOWANCE AT 20% . THEREFORE, HE ENHANCED THE DISALLOWANCE FROM 15% TO 20%. 4 . DURING THE APPELLATE PROCEEDING, LEARNED COUNSEL OF THE ASSESSEE STATED THAT THOUGH FOR ASSESSMENT YEAR 2001 - 02, T HE TRIBUNAL HAS SU STAINED THE DISALLOWANCE AT 20%, HOWEVER, IN SUBSEQUENT APPELLATE ORDER, THE TRIBUNAL HAS DELETED THE ENTIRE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES. COPIES OF THESE ORDERS WERE ALSO FILED. THEREFORE, IT WAS SUBMITTED THAT A REASONABLE VIEW SHOULD HAVE TO BE ADOPTED BY THE TRIBUNAL. 5 . ON THE OTHER HAND, LEARNED DR PLACED RELIANCE ON THE ORDER OF CIT(A). 6 . AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE TRIBUNAL HAS CONFIRMED THE R ATE OF 20% WHILE I TA NO. 1617 /1 2 3 DECIDING THE APPEAL FOR ASSESSMENT YEAR 2001 - 02 AND THIS ORDER OF THE TRIBUNAL HAS BEEN FOLLOWED BY THE LEARNED CIT(A). HOWEVER, IN SUBSEQUENT YEARS APPEAL, THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE BY HOLDING THE ENTIRE ADDITION MADE AND SUSTAINED ON ACCOUNT OF MISCELLANEOUS EXPENSES IS NOT JUSTIFIED . SINCE TWO ORDERS OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF ARE AVAILABLE, WHEREIN , IN ONE ORDER THE ENTIRE ADDITION HAS BEEN DELETED AND IN ANOTHER ORDER 2 0% ADDITION IS SUSTAINED, THEREFORE, WE ARE OF THE VIEW THAT IF THE AD - HOC DISALLOWANCE MADE BY THE AO @15% ON AMOUNT OF MISCELLANEOUS EXPENSES IS SUSTAINED , THAT WILL MEET THE END OF JUSTICE. ACCORDINGLY, WE SUSTAIN THE AD - HOC DISALLOWANCE IN MISCELLANEOU S EXPENSES AT 15% INSTEAD OF 20% ENHANCED BY THE LEARNED CIT(A). THIS GROUND OF THE ASSESSEE IS ALLOWED IN PART. 7 . THE ASSESSEE IN GROUND NO. 2 HAS RAISED OBJECTION IN REGARD TO NOT ALLOWING TO CARRY FORWARD OF CURRENT YEARS LOSS. 8 . IN THIS CASE THE R ETURN FOR THE YEAR UNDER CONSIDERATION DECLARING NIL INCOME WAS FILED ON 29 - 10 - 2007. THE RETURN WAS PROCEEDED UNDER SECTION 143(1) . THEREAFTER NOTICE UNDER SECTION 143(2 ) AND 142(1) WERE ISSUED. DURING THE ASSESSMENT PROCEEDING, THE ASSESSEE REVISED ITS RE TURN ON 28 - 9 - 2008 I.E. WITHIN ONE YEAR FOR COMPLETION OF THE ASSESSMENT CLAIMING LOSS OF RS. 12,95,21,089/ - . THEREAFTER THE ASSESSMENT PROCEEDING WAS STARTED BY ISSUING A FRESH NOTICE UNDER SECTION 143(2) AND 142(1) . THE AO RECORD ED THE FACT THAT THE ORIGIN AL I TA NO. 1617 /1 2 4 RETURN OF INCOME WAS FILED ON 29 - 10 - 2007 AND THE ASSESSEE HAS DECLAR ED NIL INCOME WITHOUT CLAIMING LOSS, WHICH WAS PROCESSED UNDER SECTION 143(1) . THE AO ALSO OBSERVED THAT THE ASSESSEE HAS CLAIMED LOSS IN THE REVISED RETURN FILED ON 28 - 9 - 2008. THE AO B Y OBSERVING THAT THE ASSESSEES CONTENTION IS NOT ACCEPTABLE AS THE REVISED RETURN WAS FILED AFTER ISSUANCE OF NOTICE UNDER SECTION 143(2)(1). T HOUGH HE ASSESSED LOSS OF RS. 12,22,65,154/ - WHILE COMPLETING ASSESSMENT UNDER SECTION 143(3) , HOWEVER, THE CARRY FORWARD OF THE CURRENT YEARS LOSS WAS NOT ALLOWED FOR THE REASONS RECORDED ABOVE. 9 . LEARNED CIT(A) ALSO CONFIRMED THE ACTION OF THE AO. 10 . LEARNED COUNSEL OF THE ASSESSEE, WHO APPEARED BEFORE THE TRIBUNAL EXPLAINED THAT IN FACT IN COMPUTATION OF INCO ME FILED ORIGINALLY, THERE WAS A LOSS, HOWEVER, WHILE FILING THE RETURN IN COLUMN OF CARRY FORWARD LOSS, THE AMOUNT WAS SHOWN NIL INADVERTENTLY. DURING THE ASSESSMENT PROCEEDING, WHEN THIS FACT WAS NOTED BY THE ASSESSEE, THEN IMMEDIATELY REVISED RETURN WA S FILED ON 28 - 9 - 2008, WHICH IS WITHIN ONE YEAR OF ORIGINAL RETURN FILED. IT WAS EXPLAINED THAT THE RETURN FILED UNDER SECTION 139( 3 ) WILL BE TREATED RETURN FILED UNDER SECTION 139(1) IF THE ORIGINAL RETURN HAS BEEN FILED IN TIME. SINCE THE ORIGINAL RETURN WAS FILED WITHIN THE TIME I..E ON 29 - 10 - 2007 UNDER SECTION 139(1) , THEREFORE, IT WAS A BONAFIDE MISTAKE AND THE REVISED RETURN WAS FILED. THEREFORE, THE DETERMINED LOSS DURING THE YEAR UNDER CONSIDERATION HAS TO BE ALLOWED TO BE CARRIED FORWARD. RELIANCE W AS PLACED ON THE DECISION OF I TA NO. 1617 /1 2 5 H O N BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. PERIYAR DISTRICT CO - OPER ATIVE MILK PRODUCERS UNION LTD., REPORTED IN (2004) 266 ITR 705 (MAD) . IT WAS FURTHER SUBMITTED THAT THE HON BLE SUPREME COURT HAS DISMISSED THE SLP FILED BY THE DEPARTMENT REPORTED IN 270 ITR STATUTE 3 . COPY OF THE ORDER OF THE HON BLE SUPREME COURT HAS ALSO BEEN FILED. 11 . ON THE OTHER HAND, LEARNED DR STRONGLY PLACED ON THE ORDER OF AO & CIT(A) . 12 . WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM C AREFULLY. AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THE ASSESSEE DESERVES TO SUCCEED ON THIS ISSUE. THE UNDISPUTED FACTS ARE THAT THE ORIGINAL RETURN WAS FILED ON 29 - 10 - 2007 UNDER SECTION 139(1) . THEREAFT ER THE ASSESSEE FILED REVISED RETURN ON 28 - 9 - 2008, WHICH IS WITHIN ONE YEAR IN FILING THE ORIGINAL RETURN. THEREFORE, THE SAME HAS TO BE TREATED AS FILED UNDER SECTION 139(!) . IDENTICAL ISSUE WAS INVOLVED BEFORE THE HON BLE MADRAS HIGH COURT . THE FINAL FIN DINGS OF THE HON BLE MADRAS HIGH COURT HAS BEEN RECORDED IN PARAS 2 & 3 , WHICH ARE AS UNDER : - A BARE PERUSAL OF THE AFORESAID TWO PROVISIONS, MORE PARTICULARLY THE PROVISION CONTAINED IN SECTION 139(3), MAKES IT CLEAR THAT A RETURN OF LOSS FILED UNDER S ECTION 139(3) MAY BE FILED WITHIN THE TIME ALLOWED UNDER SECTION 139(1). ONCE SUCH A RETURN IS FILED, ALL THE PROVISIONS OF THE INCOME - TAX ACT SHALL APPLY AS IF SUCH RETURN HAS BEEN FILED UNDER SECTION 139(1). THIS POSITION IS CLEAR FROM THE EXPRESSION.. ALL THE PROVISIONS OF THIS ACT SHALL APPLY AS IF IT WERE A RETURN UNDER SUB - SECTION (!). IN ORDER WORDS, A RETURN FILED UNDER SECTION 139(3) IS DEEMED TO BE A RETURN FILED UNDER SECTION 139(1) . THE PROVISION CONTAINED IN SECTION 139(3) MAKES IT CLEAR THA T ALL THE PROVISIONS OF THIS ACT SHALL APPLY TO SUCH A I TA NO. 1617 /1 2 6 RETURN AS IF IT WERE A RETURN UNDER SECTION 139( 1 ) . IN VIEW OF SUCH A SPECIFIC PROVISION, THERE IS NO REASON TO EXCLUDE THE APPLICABLE OF SECTION 139(5) TO A RETURN FILED UNDER SECTION 139(3) . LEARNE D COUNSEL APPEARING FOR THE APPELLANT HAS FURTHER SUBMITTED THAT SECTION 80 OF THE INCOME - TAX ACT, WHICH CONTAINS THE PROVISION RELATING TO CARRY FORWARD OF LOSS, DOES NOT CONTEMPLATE THAT A REVISED RETURN CAN BE FILED, AND THEREFORE, THE LOSS AS INDICATED IN THE ORIGINAL RETURN ALONE CAN BE TAKEN INTO ACCOUNT. WE DO NOT CONSIDER SUCH A CONTENTION TO BE TENABLE. IN THE FACE OF THE SPECIFI C PROVISION CONTAINED IN SECTION 139(3) LAYING DOWN THAT ALL THE PROVISIONS CONTAINED IN THE ACT SHALL APPLY TO A RETURN UNDER SECTION 139(1) , THERE WAS NO FURTHER NECESSITY IN SECTION 80 TO REFER SO SUCH PROVISIONS . ON THE OTHER HAND, THERE IS NO SPECIFIC PROVISION CONTAINED EITHER IN SECTION 80 OR IN SECTION 139 EXCLUDING THE APPLICABILITY OF SECTION 139(5) TO A RETURN FIL ED UNDER SECTION 139(3) OF THE INCOME TAX ACT. FOR THE AFORESAID REASONS, WE ARE CONVINCED THAT THERE IS NO SUBSTANTIAL QUESTION OF LAW INVOLVED IN THIS APPEAL, WHICH IS ACCORDINGLY DISMISSED AT THE STAGE OF ADMISSION. 13 . AFTER GOING THROUGH THE ABOV E FINDINGS OF THE HON BLE MADRAS HIGH COURT, IT IS AMPLY CLEAR THAT IF THE REVISED RETURN FILED UNDER SECTION 139(3) , WAS WITHIN THE STIPULATED TIME, THEN THE SAME HAS TO BE TREATED AS FILED WITHIN THE TIME ALLOWED UNDER SECTION 139(1) . THE SLP FILED BY THE DEPARTMENT HAS BEEN DISMISSED BY THE HON BLE SUPREME COURT WHICH REPORTED IN 270 ITR STATUTE 3 . IN THE PRESENT CASE, THE REVISED RETURN WAS FILED WITHIN THE STIPULATED TIME AND, THEREFORE, THE SAME HAS TO BE TREATED AS FILED WITHIN THE TIME ALLOWED UNDER SECTION 139(1) . THIS IS NOT A CASE OF THE DEPARTMENT THAT THERE WAS NO LOSS AS THE AO HIMSELF HAS DETERMINED THE LOSS OF RS. 12,22,65,154/ - WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) . THEREFORE, IN OUR CONSIDERED VIEW, THE LOSS ASSESSED DURING THE YEAR UNDER CONSIDERATION IS TO BE ALLOWED TO BE CARRIED FORWARD. ACCORDINGLY, WE DIRECT THE AO TO ALLOW THE CARRIED FORWARD LOSS OF THE YEAR UNDER CONSIDERATION DETERMINED BY I TA NO. 1617 /1 2 7 HIM WHILE PASSING THE ASSESSMENT UNDER SECTION 143(3) . THIS GROUND OF THE ASSESSE E IS ALLOWED. 14 . RESULTANTLY , APPEAL OF THE ASSESSEE IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF SEPT . 201 3 . SD/ - ( ) ( R AJENDRA SINGH ) SD/ - ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 11 / 09 / 2013 /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE C I T(A) , MUMBAI . 4. / C I T 5. / DR, ITAT, MUMBAI . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( /ASSTT. REGISTRAR) / ITAT, MUMBAI