Ganpatbhai M.Mistry Furnishers Pvt.Ltd., Anand V. The ACIT.,Circle-3, Baroda

ITA 1662/AHD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67951 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 31-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: S N DIVETIA
• Keywords: Bonafide mistake; Revenue expenditure
• Section: 143(3)

Judgement Text

ITA NO 166 2/AHD/2012 . A.Y. 2007- 08 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 1662/AHD/2012 (ASSESSMENT YEAR: 2007-08) GANPATBHAI M. MISTRY FURNISHER PVT. LTD. 204/206, GIDC ESTATE, VASNA, BORSAD (DIST. ANAND) 388540 (APPELLANT) VS. THE A.C.I.T., CIRCLE-3, BARODA (RESPONDENT ) PAN: AABCG1817B APPELLANT BY : SHRI S.N. DIVETIA RESPONDENT BY : SHRI P.L. KUREEL, SR. D.R. ( )/ ORDER DATE OF HEARING : 11-10-2013 DATE OF PRONOUNCEMENT : 22 -11-2013 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS DIRECTED AGAINST THE PENALTY ORDER D ATED 19.05.2010 PASSED UNDER SECTION 271(1)(C) WHEREIN PENALTY OF RS. 2,88 ,450/- WAS LEVIED. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MA NUFACTURING OF WOODEN FURNITURE, TRADING OF FURNITURE, MATTRESSES AND OTHER FURNISHING ITA NO 166 2/AHD/2012 . A.Y. 2007- 08 2 PRODUCTS AND ALSO REPAIRING WORK OF FURNITURE. ASSE SSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 07-08 ON 29.10. 2007 SHOWING TOTAL INCOME OF NIL. THE CASE WAS SELECTED FOR SCRUTINY A ND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORD ER DATED 17.11.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 8,56,930 /- BY MAKING ADDITIONS, NAMELY. (I) DISALLOWANCE OF INCOME TAX U NDER SECTION 40(A)(II) RS. 8,49,830/-. (II) DISALLOWANCE OF FBT UNDER SECT ION 40(A)(IC) RS. 5,000/- AND CLAIM FOR DONATION RS. 2,100/-. ON THE AFORESAID ADDITIONS, A.O. LEVIED PENALTY OF RS. 2,88,450/- UNDER SECTION 271(1)(C) VIDE ORDER DATED 19.05.2010 AS HE WAS OF THE VIEW THAT THE ASS ESSEE HAD FURNISHED DETAILS WHICH ARE INCORRECT AND HAD THE RETURN NOT BEEN SELECTED FOR SCRUTINY PROCEEDINGS, THE ASSESSEE WOULD HAVE EASIL Y EVADED TAXES AND CAUSED LOSS TO REVENUE. THIS ACCORDING TO THE A.O. WAS IN THE NATURE OF WILLFUL NEGLECT AND AMOUNTS TO FURNISHING OF INACCU RATE PARTICULARS ON THE PART OF ASSESSEE. AGGRIEVED BY THE ORDER OF A.O, AS SESSEE CARRIED THE MATTER BEFORE CIT(A), CIT(A) CONFIRMED THE PENALTY LEVIED BY A.O. BY HOLDING AS UNDER:- 4. I HAVE CONSIDERED FACTS OF THE CASE AND APPELLAN T'S SUBMISSIONS. RETURN OF INCOME CLAIMING DEDUCTION OF INCOME TAX OF RS.8,49,830/-, FBT OF RS.5,000/- AND DONATION OF RS.2,100 WAS FILED ON 29.10.2007. THERE IS NO DISPU TE THAT THE CLAIMS IN QUESTION WERE INADMISSIBLE AS PER LAW BUT WERE STILL MADE IN THE RETURN OF INCOME FILED. SCRUTINY PROCEEDINGS COMMENCED ON 29.9.2008, DURING WHICH AS SESSING OFFICER ON VERIFICATION OF PROFIT & LOSS ACCOUNT DETECTED THAT APPELLANT HA D MADE INADMISSIBLE CLAIM IN RESPECT OF INCOME TAX OF RS.8,49,830/- AND FRINGE B ENEFIT TAX OF RS.5,000/-. TILL SUCH DETECTION BY THE ASSESSING OFFICER, APPELLANT ON IT S OWN DID NOT COME FORWARD TO DIVULGE INADMISSIBLE NATURE OF THE CLAIMS MADE. APP ELLANT'S SUBMISSION THAT THE MISTAKE OCCURRED DUE TO INCOME TAX AND FBT BEING GR OUPED UNDER THE HEAD 'FINANCIAL CHARGES' CANNOT BE ACCEPTED TO BE A VALI D EXCUSE FOR MAKING A PATENTLY INADMISSIBLE CLAIM. APPELLANT'S CONTENTION THAT THE MISTAKE WAS ON PART OF C.A. ALONE IS NEITHER BELIEVABLE NOR SUFFICIENT TO EXONERATE THE APPELLANT. WHEN ONLY A MINISCULE PROPORTION OF RETURNS ARE SCRUTINIZED, IT IS THE RE SPONSIBILITY OF TAX PAYER TO ENSURE THAT PATENTLY INADMISSIBLE CLAIMS ARE NOT MAKE IN T HE RETURN OF INCOME FILED. ITA NO 166 2/AHD/2012 . A.Y. 2007- 08 3 EXPLANATION OF THE APPELLANT CANNOT BE CONSIDERED T O BE BONAFIDE. ON SIMILAR FACTS, HON'BLE HIGH COURT OF DELHI IN THE CASE OF ZOOM COM MUNICATIONS LTD. (2010) 327 ITR 510 ON IDENTICAL ISSUE OF CLAIM OF DEDUCTION OF INCOME TAX HELD AS UNDER:- THE ASSESSEE CONCERN IS A COMPANY, WHICH DECLARED A N INCOME OF RS. 1,21,49,861/- AND ACCOUNT OF WHICH ARE MANDATORILY SUBJECTED TO A UDIT. IT IS NOT THE CASE OF THE ASSESSEE THAT IT WAS ADVISED THAT AMOUNT OF INCOME TAX PAID BY IT COULD BE CLAIMED AS A REVENUE EXPENDITURE. IT IS ALSO NOT THE CASE OF T HE ASSESSEE THAT DEDUCTION OF INCOME TAX PAID BY IT WAS A DEBATABLE ISSUE. IN FACT, IN V IEW OF SPECIFIC PROVISIONS CONTAINED IN SECTION 40(A)(II), NO SUCH ADVISE COULD BE GIVEN BY AN AUDITOR OR OTHER TAX EXPERT. .... THE ONLY PLEA TAKEN BY THE ASSESSEE BEFORE THE INCOME TAX AUTHORITIES WAS THAT IT WAS DUE TO OVERSIGHT THAT THE AMOUNT OF INCOME TAX PAID BY THE ASSESSEE AS WELL AS AMOUNT CLAIMED AS DEDUCTION ON ACCOUNT OF CERTAIN E QUIPMENT BEING WRITTEN OFF COULD NOT BE ADDED BACK IN THE COMPUTATION OF INCOME. IT IS TRUE THAT MERE SUBMITTING A CLAIM, WHICH IS INCORRECT IN LAW, DOES NOT AMOUNT T O GIVING INACCURATE PARTICULARS OF INCOME OF THE ASSESSEE BUT IT CANNOT BE DISPUTED TH AT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONAFIDE. IF THE CLAIM BESIDES BEING IN CORRECT IN LAW IS MALA FIDE, EXPLANATION 1 OF SECTION 271(1) WOULD COME INTO PLA Y TO THE DISADVANTAGE TO THE ASSESSEE.... COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PE RCENTAGE OF INCOME TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLA IM, WHICH IS NOT ONLY INCORRECT IN LAW, BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND EXPLA NATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONAFIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY U/S.271(L)(C). IF ONE TAKES THE VIEW THAT A CLAIM, WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSI TION OF PENALTY, EVEN IF HE WAS NOT ACTING BONAFIDE, WHILE MAKING A CLAIM OF THIS NATUR E THAT WOULD GIVE LICENSE TO UNSCRUPULOUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED O N THE BASIS OF SELF ASSESSMENT U/S. 143(1) AND EVEN IF THEIR CASE IS DETECTED FOR SCRUT INY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE WAS PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP FOR SCRUTINY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. IT IS HELD THAT MAKING OF CLAIM OF INCOME TAX AND F BT AMOUNTED TO FURNISHING OF INACCURATE PARTICULARS OF INCOME AND APPELLANT IS L IABLE FOR LEVY OF PENALTY U/S.271(L)(C) IN THIS RESPECT. AS FAR AS CLAIM OF D ONATION OF RS.2,100/- IS CONCERNED, APPELLANT HAS NOT BEEN ABLE TO PRODUCE PROOF IN RES PECT OF SUCH A CLAIM DURING ASSESSMENT PROCEEDINGS, PENALTY PROCEEDINGS OR APPE LLATE PROCEEDINGS. LEVY OF PENALTY U/S.271(L)(C) IS HELD TO BE JUSTIFIED IN RE SPECT OF DISALLOWANCE OF RS.2,100/- AS WELL. TO SUM UP, LEVY OF PENALTY U/S.271(L)(C) OF R S.2,88,450/- IS CONFIRMED. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. ITA NO 166 2/AHD/2012 . A.Y. 2007- 08 4 5. BEFORE US, THE LD. A.R. SUBMITTED THAT ASSESSEE HAD CHARGED TO PROFIT AND LOSS ACCOUNT INCOME TAX PAID TO RS. 8,49,830/- AND FBT OF RS. 5,000/- UNDER THE HEAD OF FINANCIAL CHARGES. HE FURTHER S UBMITTED THAT THE ACCOUNTS OF THE ASSESSEE WERE MAINTAINED ON COMPUTE R AND THE FINAL ACCOUNTS WERE COMPILED BY THE STAFF OF THE AUDITOR FIRM WHO HAD INCLUDED THE SAME AS FINANCIAL EXPENSES AND WHILE PREPARIN G THE RETURN THE SAME THROUGH OVERSIGHT REMAINED TO BE DISALLOWED. HE FUR THER SUBMITTED THAT THE BONAFIDE MISTAKE WAS COMMITTED BY THE STAFF OF CHARTERED ACCOUNTANTS WHO WERE ASSIGNED THE WORK TO PREPARE T HE FINALIZATION OF ACCOUNT AND THE FILING OF RETURN. THE LD. A.R. FURT HER SUBMITTED THAT THE MISTAKE BEING UNINTENTIONAL AND GENUINE MISTAKE BY THE STAFF OF CHARTERED ACCOUNTANT, IT SHOULD NOT BE CONSTRUED TO BE CONCEALMENT AND FILING OF INACCURATE PARTICULARS FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 271(1)(C). THE LD. A.R. FURTHER PLACED RELI ANCE ON THE DECISION OF RELIANCE PETRO PRODUCT (2010) 322 ITR 158 (SC). HE ALSO RELIED ON THE DECISION OF APEX COURT IN THE CASE OF PRICEWATER HO USE COOPERS PVT. LTD. VS. CIT (2012) 348 ITR 306 (SC). AND THE DECISION I N THE CASE OF BTX CHEMICALS PVT. LTD. VS. CIT(A) (2007) 288 ITR 196 ( GUJ.). 6. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. AND CIT(A) AND FURTHER PLACED RELIANCE ON THE DECISION IN THE CASE OF ZOOM COMMUNICATIONS 327 ITR 510 (DEL.). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE AMOUNTS WHICH WER E DISALLOWED NAMELY INCOME TAX, FRINGE BENEFIT TAX AND DONATION WAS DIS CLOSED IN THE PROFIT AND LOSS ACCOUNT AND THE SAME WAS MADE AVAILABLE BE FORE A.O. IT IS ASSESSEES SUBMISSION THAT DUE TO THE INADVERTENT M ISTAKE OF THE AUDIT ITA NO 166 2/AHD/2012 . A.Y. 2007- 08 5 STAFF OF THE C.AS WHO WERE ENTRUSTED WITH THE WORK OF COMPILATION OF ACCOUNTS AND PREPARATION OF RETURN OF INCOME, THE A MOUNT REMAINED TO BE DISALLOWED WHILE COMPUTING THE TOTAL INCOME. ASSES SEE HAS ALSO PLACED ON RECORD THE LETTER OF THE CHARTERED ACCOUNTANT WH EREIN IT HAS BEEN SUBMITTED THAT DISALLOWANCE SKIPPED THEIR ATTENTION DUE TO THE FACT THAT THE EXPENSES WERE GROUPED UNDER FINANCIAL CHARGES. TH E AFORESAID EXPLANATION OF THE ASSESSEE HAS NOT BEEN FOUND TO B E FALSE. 8. THE NECESSARY INGREDIENTS FOR ATTRACTING EXPLN. 1 T O SECTION 271(L)(C) ARE THAT : (I) THE PERSON FAILS TO OFFER THE EXPLANATIO N, OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AO OR THE CIT(A) OR THE CIT TO BE FALSE, OR (III) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLO SED BY HIM. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CATEGOR IES, THEN ACCORDING TO THE DEEMING PROVISION PROVIDED IN EXPLN. 1 TO SECTI ON 271(L)(C) THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL I NCOME SHALL BE CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTIC ULARS HAVE BEEN CONCEALED, FOR THE PURPOSES OF CL. (C) OF S. 271(1) , AND THE PENALTY FOLLOWS. ON THE OTHER HAND, IF THE ASSESSEE IS ABLE TO OFFER AN EXPLANATION, WHICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE, AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AN D THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM, TH EN IN THAT CASE PENALTY SHALL NOT BE IMPOSED. ITA NO 166 2/AHD/2012 . A.Y. 2007- 08 6 9. IN THE PRESENT CASE THE ASSESSEE HAD DISCLOSED THE MATERIAL FACTS BEFORE THE AO. WHEN THE ASSESSEE HAS MADE A PARTICULAR CLAIM IN THE RETURN OF INCOME AND HAS ALSO FURNISHED ALL THE MATERIAL FACT S RELEVANT THERETO, THE DISALLOWANCE OF SUCH CLAIM CANNOT AUTOMATICALLY LEA D TO THE CONCLUSION THAT THERE WAS CONCEALMENT OF PARTICULARS OF HIS IN COME BY THE ASSESSEE OR FURNISHING INACCURATE PARTICULARS THEREOF. WHAT IS TO BE SEEN IS WHETHER THE SAID CLAIM MADE BY THE ASSESSEE WAS BONA FIDE A ND WHETHER ALL THE MATERIAL FACTS RELEVANT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED, THE ASSESSEE CANNOT BE HELD LIABLE FOR CONCEALMENT PENALTY UNDER S. 271(1) (C) OF THE ACT. IN THE PRESENT CASE SINCE ALL THE NECESSARY FACTS WERE FURNISHED. IN THE CASE OF RELIANCE PETR O PRODUCTS (SUPRA) IT HAS BEEN HELD THAT A MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE I N LAW, BY ITSELF, WOULD NOT AMOUNT TO FURNISHING OF I NACCURATE PARTICULARS REGARDING INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN RETURN IS NOT AMOUNTING TO FURNISHING OF INACCURATE PARTICULARS . 10. IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT (2012) 348 ITR 306 (SC) THE HON. APEX COURT NOTED THAT THOUGH A BONAFIDE AND INADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING IT S RETURN HAD FAILED TO ADD THE PROVISIONS FOR GRATUITY TO ITS TOTAL INCOME , THE SAME WAS DESCRIBED AS A HUMAN ERROR WHICH ALL ARE PRONE TO MAKE. IT F URTHER NOTED THAT THE CALIBER AND EXPERTISE OF THE ASSESSEE HAD LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. IT FURTHER HELD THAT ABSENCE OF DUE CARE DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING IN ACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. ITA NO 166 2/AHD/2012 . A.Y. 2007- 08 7 11. CONSIDERING THE TOTALITY OF FACTS AND RELYING ON T HE AFORESAID DECISIONS OF APEX COURT, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, MAKING OF ADDITION WHILE FRAMING ASSESSMENT DOES NOT CALL FOR LEVY OF PENALTY U/S 271(1)(C). WE THUS CANCEL THE PENALTY LEVIED BY THE AO. THEREFORE, THIS GROUND OF ASSESSEE IS ALLOWED. 12. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 22 -11 - 2013. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/A SSTT.REGISTRAR ITAT ,AHMEDABAD