Dutt Products, Ahmedabad V. The Income tax Officer,Ward-12(4), Ahmedabad

ITA 1670/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7747 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-07-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 21-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K
• Assessee Lawyers: KALPESH J SHAH
• Keywords: Bonafide belief; Initiation of penalty proceedings; Non-deduction of tax; TDS; Set aside
• Section: 271(1)(c); 40(a)(ia); 194C; 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: AHMEDABAD BEN CHES C BENCH: AHMEDABAD (BEFORE S/SHRI MAHAVIR SINGH, JM AND A N PAHUJA, AM ) ITA NO. 1670/AHD/2009 A Y: 2005-06 M/S. DUTT PRODUCTS, 26, SURVODAY ESTATE, NEAR TATA IRON GODOWN, NEAR CHAMUNDA BRIDGE ROAD, CHAMANPURA, ASARVA, AHMEDABAD -380016 [PAN: AAAFD 6867G] VS THE INCOME TAX OFFICER, WARD- 12(4), AHMEDABAD APPELLANT RESPONDENT ASSESSEE BY SHRI KALPESH J SHAH, AR REVENUE BY SHRI M. K. PANDIT, DR ORDER A N PAHUJA: THIS IS AN APPEAL BY THE ASSESSEE AGAINST AN ORDE R DATED 22-1-2009 OF THE LEARNED CIT(A)-XX, AHMEDABAD , UPHOLDING THE PENALTY OF RS. 53,545/- LEVIED U/S 271(1) ( C ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS. 33,320/- FILED ON 20-10-2005, AFTER BEING PROC ESSED U/S 143(1) OF THE ACT, WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 19-10- 2006. DURING THE COURSE OF ASSESSMENT PROCEEDINGS,T HE ASSESSING OFFICER[ AO IN SHORT]NOTICED THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE IN RESPECT OF THE FOLLOWING PAYMENTS ON ACCOUNT OF JOB CHARGES: 1. PLASTOTECH POLYMERS RS. 95,210/- 2. ASIAD INDUSTRIES RS. 51,120/- 3. SUPREME PLAST RS. 5,000/- RS.1,51,330/- TO A QUERY BY THE AO, THE ASSESSEE EXPLAINED THAT T HEIR FIRM WAS A SMALL ENTITY AND DID NOT EMPLOY FULL TIME ACCOUNTANT TO WRITE TH E BOOKS OF ACCOUNTS. THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE JOB C HARGES DO NOT ATTRACT TDS ITA NO.1670/AHD/2009 M/S. DUTT PRODUCTS 2 PROVISIONS NOR THE ASSESSEE HAD ANY TDS NUMBER . IT WAS FURTHER SUBMITTED THAT SOME OF THE PARTIES WHO HAD UNDERTAKEN JOB WORK WIT H THE ASSESSEE, WOULD NOT WORK IF TAX WAS DEDUCTED AT SOURCE. THE NON-DEDUCTI ON OF TAX BEING A TECHNICAL BREACH, THE ASSESSEE SHOULD NOT BE COMPELLED FOR PA YMENT OF TAXES, THE ASSESSEE PLEADED. AS REGARDS INITIATION OF PENALTY PROCEEDINGS, THE ASSESSEE EXPLAINED THAT THEY HAD NOT CONCEALED OR FURNISHED INACCURATE PARTICULARS OF INCOME, THE PAYMENT OF JOB CHARGES OF RS.1,51,330/- HAVING BEEN RECORDED IN THE TRADING ACCOUNT WHILE DETAILS LIKE NAME OF THE PART Y, ADDRESS, PAN ETC. ALONG WITH COPIES OF BILLS HAVE ALREADY BEEN SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. THE DEFAULT BEING TECHNICAL IN NATURE AND DUE TO IG NORANCE OF NEWLY INSERTED PROVISIONS, SHOULD NOT ATTRACT PENALTY U/S 271(1)(C ) OF THE ACT. THE ASSESSEE ADDED THAT THERE BEING NO CONCEALMENT OR ACT OF FUR NISHING INACCURATE PARTICULARS OF INCOME, PENALTY PROCEEDINGS SHOULD NOT BE INITIA TED. HOWEVER, THE AO DID NOT ACCEPT THESE SUBMISSIONS OF THE ASSESSEE AND DISALL OWED JOB CHARGES OF RS.1,46,330/-, HAVING RECOURSE TO PROVISIONS OF SEC TION 40(A)(IA) OF THE ACT .INTER ALIA, PENALTY PROCEEDINGS U/S 271 (1)(C) OF THE ACT WERE ALSO INITIATED FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PAR TICULARS OF INCOME. 3. ON APPEAL, THE LEARNED CIT(A) UPHELD THE DISALLO WANCE MADE BY THE AO IN VIEW OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT . AFTER RECEIPT OF ORDER OF THE LEARNED CIT(A), IN RESPONSE TO A SHOW CAUSE NOTICE DATED 14-5-2008 BEFORE LEVY OF PENALTY U/S 271(1)( C) OF THE ACT THE ASSESSEE R EPLIED VIDE LETTER DATED 10-2- 2008 RECEIVED BY THE AO ON 12-6-2008 THAT THE PROVI SIONS OF SECTION 40(A) (IA) OF THE ACT WERE VERY HARSH IN NATURE, THE REAL EXPENDI TURE INCURREDBY THE ASSESSEE HAVING BEEN DISALLOWED. RELYING UPON THE DECISIONS IN THE CASE OF BANARAS TEXTORIUM V. CIT 169ITR (ALL), NATIONAL TEXTILES V . CIT (2001) 249 ITR 125 (GUJ.), SARABHAI CHEMICAL PVT. LTD. V. CIT (2002) 2 57 ITR 355 (GUJ.) AND K. C. BUILDERS AND ANR. VS. ACIT (2004) 265 ITR 562 (SC), THE ASSESSEE CONTENDED THAT PRESENCE OF MEANS REA MUST BE PROVED BEFORE LE VY OF PENALTY AND MERE ADDITION IN THE ASSESSMENT DOES NOT TANTAMOUNT TO LEVY OF PENALTY. HOWEVER, THE AO REJECTED THESE CONTENTIONS OF THE ASSESSEE ON TH E GROUND THAT REPLY OF THE ITA NO.1670/AHD/2009 M/S. DUTT PRODUCTS 3 ASSESSEE IS GENERAL IN NATURE. SINCE THE ASSESSEE V IOLATED THE PROVISIONS OF SECTION 40(A)(IA) BY NOT DEDUCTING TAX AT SOURCE ON THE AMOUNT OF JOB CHARGES, ACCORDINGLY, THE AO LEVIED PENALTY OF RS.53,545/- @ 100% OF THE TAX SOUGHT TO BE EVADED ON THE AFORESAID AMOUNT RS.1,46,330/-. 4. ON APPEAL, THE ASSESSEE REITERATED THEIR CONTENT IONS BEFORE THE AO AND CONTENDED THAT THE EXPENDITURE BEING GENUINE AND HA VING BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, MERE N ON-PAYMENT OF TAX DEDUCTED AT SOURCE DOES NOT LEAD TO CONCEALMENT OR FURNISHIN G OF INACCURATE PARTICULARS OF INCOME. RELYING ON A NUMBER OF DECISIONS MENTIONED IN PARA 2.2 OF THE IMPUGNED ORDER OF THE LEARNED CIT(A), IT WAS FURTHE R CONTENDED THAT ASSESSMENT AND PENALTY PROCEEDINGS ARE DIFFERENT FROM EACH OTH ER AND CONSCIOUS OR DELIBERATE INTENTION OF THE ASSESSEE HAS TO BE LOO KED INTO BEFORE IMPOSING PENALTY. SINCE THE ADDITION WAS MADE FOR MERE TECHN ICAL BREACH OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, PENALTY SHOULD NOT BE LEVIED. HOWEVER, AFTER CONSIDERING THESE SUBMISSIONS OF THE ASSESSEE, THE LEARNED CIT(A) UPHELD THE LEVY OF PENALTY IN FOLLOWING TERMS: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS WITH CASE LAWS FILED BY THE APPELLANT. IN THIS CASE IT I S A FACT THAT THE APPELLANT HAS SHOWN INACCURATE PARTICULARS OF INCOME IN ITS R ETURN OF INCOME IN THE LIGHT OF SPECIFIC PROVISION OF SECTION 40(A)(IA) AS IT DID NOT MAKE DEDUCTION OF TDS U/S. 194C FROM THE JOB WORK CHARGES PAID TO THE VARIOUS PARTIES AND THUS NOT BEING ENTITLED TO DEDUCTION OF RELATED AMOUNT OF JOB WORK CHARGES. FURTHER THE APPELLANT HAS NOT FURNISHED A SATISFACTORY EXPLANATION FOR THE ABOVE MENTIONED DEFAULTS. HE SIMPLY STATED THAT THE ADDITIONS ARE MADE FOR TECHNICAL BREACH OF NON-COMPLIANCE OF PROV ISIONS OF SECTION 40(A) (IA). IN THIS CASE IT WAS THE LIABILITY OF TH E APPELLANT TO DEDUCT TAX ON THE JOB WORK CHARGES PAID TO THE VARIOUS PARTIES. I T IS NOW WELL SETTLED LAW THAT WILFUL CONCEALMENT IS NOT ESSENTIAL FOR ATTRAC TING CIVIL LIABILITY OF PENALTY U/S. 271 (1) ( C ) OF THE I. T. ACT, 1961. THE JUDICIAL PRONOUNCEMENT IN THE CASE OF UNION OF INDIA AND OTHERS VS DHARMENDRA TEXTILES PROCESSORS AND OTHERS (2008) 30 ITR 7 (SC) SUPPORTS THE STAND OF REVENUE IN THIS CASE. ITA NO.1670/AHD/2009 M/S. DUTT PRODUCTS 4 AFTER TAKING INTO ACCOUNT ALL THE RELEVANT FACTS A ND CIRCUMSTANCES AND JUDICIAL PRONOUNCEMENT AS NARRATED ABOVE I AM O F THE VIEW THAT THE FINDINGS OF THE AO IN SO FAR AS ARE RELEVANT FOR TH E PURPOSE OF THE PRESENT REFERENCE OUGHT TO BE UPHELD. THE CASE LAWS RELIED BY THE APPELLANT ARE NOT SQUARELY APPLICABLE TO THE FACTS OF THE CASE. H AVING REGARD TO THE EVIDENCE AND MATERIALS ON RECORD, I AM OF THE OPINI ON THAT THE CONCLUSION REACHED BY THE AO IS JUSTIFIED, LEGAL AND VALID. IN VIEW OF THE ABOVE, THE PENALTY LEVIED BY THE A. O. ON THIS COUNT IS CONFIR MED. 5. THE ASSESSEE IS NOW IN APPEAL AGAINST THE FORESA ID FINDINGS OF THE LEANED CIT(A). THE LEARNED AR ON BEHALF OF THE ASSESSEE RE ITERATED THEIR CONTENTIONS BEFORE THE LEARNED CIT(A) WHILE THE LEARNED DR SUPP ORTED THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE T HROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. UNDISPUTEDL Y, THE ASSESSEE DID NOT DEDUCT AT SOURCE ON PAYMENT OF JOB CHARGES OF RS. 1 ,46,330/- PAID TO THE AFORESAID THREE PARTIES, RESULTING IN DISALLOWANCE OF THE SAID AMOUNT U/S 40A(IA) OF THE ACT. THE TAX HAVING BEEN DEDUCTED SUBSEQUENTLY IN THE PERIOD RELEVANT TO AY 2008-2009, THE ASSESSEE HAS BEEN ALLOWED DEDUCTI ON OF THESE CHARGES. IN THESE CIRCUMSTANCES, THE AO AND THE LD. CIT(A) ARE OF THE VIEW THAT SINCE THE ASSESSEE CLAIMED DEDUCTION OF THE AFORESAID AMOUNT OF JOB CHARGES WITHOUT DEDUCTING TAX AT SOURCE, THIS AMOUNTS TO FURNISHIN G INACCURATE PARTICULARS OF INCOME. WE FIND THAT THE ASSESSEE HAD GIVEN ALL THE PARTICULARS OF INCOM E, INCLUDING DETAILS LIKE NAME OF THE PARTY, ADDRESS, PAN, ETC. ALONG WITH COPIES OF BILLS DURING THE ASSESSMENT PROCEEDINGS AND THUS, H AD DISCLOSED ALL FACTS TO THE AO. IT IS NOT THE CASE OF THE AO OR THE ASSESSEE TH AT IN REPLY TO A QUERY OF THE AO, SOME NEW FACTS WERE DISCOVERED OR THE AO HAD DU G OUT SOME INFORMATION WHICH WAS NOT FURNISHED BY THE ASSESSEE . IN SUCH CIRCUMSTANCES, HONBLE DELHI HIGH COURT HELD IN THE CASE OF COMMISSIONER OF INC OME-TAX.VS BACARDI MARTINI INDIA LIMITED.,288 ITR 585(DEL) THAT NO PENALTY WAS LEVIABLE. IT IS WELL SETTLED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT AND AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF ANANTHRAMAN ITA NO.1670/AHD/2009 M/S. DUTT PRODUCTS 5 VEERASINGHAIAH & CO. VS. CIT - 123 ITR 457; THE FIN DING IN THE ASSESSMENT PROCEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR TH E PURPOSES OF THE PENALTY PROCEEDINGS. IT IS, THEREFORE, NECESSARY TO REAPPRE CIATE AND RECONSIDER THE MATTER SO AS TO FIND OUT AS TO WHETHER THE ADDITION MADE I N THE QUANTUM PROCEEDINGS ACTUALLY REPRESENTS THE CONCEALMENT ON THE PART OF THE ASSESSEE AS ENVISAGED IN SEC. 271(1 )(C) OF THE ACT AND WHETHER IT IS A FIT CASE TO IMPOSE THE PENALTY BY INVOKING THE SAID PROVISIONS. NO DOUBT MENSREA IS N O LONGER NECESSARY AND THE BREACH OF CIVIL OBLIGATION WHICH ATTRACTS A PENALTY UNDER THE PROVISIONS OF THE ACT, WOULD IMMEDIATELY ATTRACT THE LEVY OF PENALTY IRRES PECTIVE OF THE FACT WHETHER THE CONTRAVENTION WAS MADE BY THE DEFAULTER WITH ANY GU ILTY INTENTION OR NOT AS HELD BY THE HONBLE APEX COURT IN THE CASE OF IN THE CAS E OF UNION OF INDIA AND OTHERS VS. DHARMENDRA TEXTILE PROCESSORS AND OTHERS, IN CI VIL APPEAL NOS.10289 -10303 OF 2003, NOW REPORTED IN 306 ITR 227 (SC). THEREFO RE, INDEPENDENT FINDINGS ABOUT CONSCIOUS CONCEALMENT ARE NO LONGER A CONDITI ON PRECEDENT FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) READ WITH EXPLAN ATION 1 THERETO. THUS, THE SAID PLEA ON BEHALF OF THE ASSESSEE IS NO LONGER TENABLE AND RELIANCE ON VARIOUS JUDGMENTS IN THAT CONTEXT IS TOTALLY MISPLACED. 7. WE FIND THAT IN THE YEAR UNDER CONSIDERATION , THE DEDUCTION OF JOB CHARGES OF RS. 1,46,330/- WAS DENIED U/S 40A(IA) OF THE ACT ONLY DUE TO NON-DEDUCTION OF TAX AT SOURCE AND HAS SUBSEQUENTLY BEEN ALLOWED IN THE AY 2008-09. IT IS WELL SETTLED THAT THE CRITERION AND YARDSTICKS FOR THE P URPOSE OF IMPOSING PENALTY U/S 271(L)(C) ARE DIFFERENT THAN THOSE APPLIED FOR MAKI NG OR CONFIRMING THE ADDITIONS. WHEN THE ASSESSEE HAS MADE A PARTICULAR CLAIM IN TH E RETURN OF INCOME AND HAS ALSO FURNISHED ALL THE MATERIAL FACTS RELEVANT THER ETO, THE DISALLOWANCE OF SUCH CLAIM CANNOT AUTOMATICALLY LEAD TO THE CONCLUSION T HAT THERE WAS CONCEALMENT OF PARTICULARS OF HIS INCOME BY THE ASSESSEE OR FURNIS HING OF INACCURATE PARTICULARS THEREOF. WHAT IS TO BE SEEN IS WHETHER THE SAID CLA IM MADE BY THE ASSESSEE WAS BONA-FIDE AND WHETHER ALL THE MATERIAL FACTS RELEVA NT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED, THE ASSESSEE CANNOT BE HELD LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT. MERELY BECAUSE TAXATION PROVISIONS PROVIDE FOR POWE R TO ITA NO.1670/AHD/2009 M/S. DUTT PRODUCTS 6 IMPOSE PENALTY, THAT DOES NOT ENTITLE THE AUTHORITY TO IMPOSE PENALTY FOR EVERY BREACH, HOWSOEVER VENIAL OR TECHNICAL [HINDUSTAN ST EEL LTD. VS. STATE OF ORISSA,83 ITR 26(SC) ]. MOREOVER, HONBLE CALCUTTA HIGH COURT IN THE CASE OF BURMAH-SHELL OIL STORAGE & DISTRIBUTING CO. OF INDI A LTD. V. ITO [1978] 112 ITR 592 HAVE HELD THAT THERE COULD BE NO CONCEALMENT IN A CASE WHERE ON ADMITTED FACTS THE ASSESSEE DISPUTES THE LIABILITY TO TAX ON LEGAL CONTENTIONS. 8. IN VIEW OF THE FOREGOING AND TAKING INTO CONSI DERATION THE TOTALITY OF THE CIRCUMSTANCES AND THE EXPLANATION GIVEN BY THE ASSE SSEE, WE ARE OF THE OPINION THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND QUASH THE ORDER OF THE AO, LEVYING PENALTY U/S 271(1)(C) OF THE ACT. 9. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24-07-2009 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 24-07-2009 COPY OF THE ORDER FORWARDED TO : 1. M/S. DUTT PRODUCTS, 26, SARVODAY ESTATE, NEAR TA TA IRON GODOWN, NEAR CHAMUNDA BRIDGE ROAD, CHAMANPURA, ASARVA,AHMED ABAD 2. THE INCOME TAX OFFICER, WARD- 12(4), AHMEDABAD 3. THE CIT CONCERNED 4. CIT(A)-XX, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY.R/AR, ITAT, AHMEDABAD