Nand Batteries Pvt. Ltd, Delhi V. ITO, New Delhi

ITA 1687/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3729 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 15-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R S GUPTA
• Keywords: Business income; Bonafide belief; Bonafide mistake

Judgement Text

ITA NO. 1687/DEL/2010 A.Y. 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1687/DEL/2010 A.Y. : 2006-07 M/S NAND BATTERIES PVT. LTD., VS. INCOME TAX OFF ICER, WARD-13(1), C/O M/S R.S. JHALANI & COMPANY, NEW DELHI CHARTERED ACCOUNTANTS, 16-17, 1 ST FLOOR, SUBZI MARKET, HAUZ KHASI, DELHI 110 006 (PAN : AAACN4051H) [APPELLANT] (RESPONDENT) ASSESSEE BY : SHRI R.S. GUPTA, CA DEPARTMENT BY : SMT. PRATIMA KAUSHIK, SR. DR PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONERS OF INCOME TAX (APPEALS) DATED 16.2.20 10 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE LEVY OF PENALTY U/S 271(1)(C) AMO UNTING TO RS. 1,40,000/-. 3. THE ASSESSEE IN THIS CASE IS A PRIVATE LIMITED C OMPANY ENGAGED IN MANUFACTURING CUM TRADING. DURING THE CURRENT ASSE SSMENT YEAR IT HAD DECLARED A LOSS OF RS. 59,809/-. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS CLAIMED LOSS ON ACCOUNT OF SALE OF CAR TO THE TUNE OF RS. 15,194/- IN THE PROFIT AND LOSS ACCOUNT . HOWEVER THE SAME WAS NOT ITA NO. 1687/DEL/2010 A.Y. 2006-07 2 ADDED BACK IN THE COMPUTATION OF INCOME FILED. WH EN CONFRONTED THE ASSESSEE COULD NOT GIVE ANY REPLY IN THIS REGARD. ACCORD INGLY, ASSESSING OFFICER HAS MADE ADDITION OF RS. 15,194/- ON THIS ACCOUNT. 3.1 ASSESSING OFFICER FURTHER OBSERVED THAT IN THE COMPUTATION OF INCOME ASSESSEE HAS SET OFF BROUGHT FORWARD BUSINESS LOS S AGAINST INCOME FROM HOUSE PROPERTY TO THE TUNE OF RS. 353691/-. HE OBSERVED THAT THE PROVISION OF SECTION 72 OF THE ACT PROHIBITS SET OFF OF BROUGHT FORWARD LOSS AGAINST INCOME UNDER ANY HEAD OTHER THAN BUSINESS INCOME HEAD, SUCH SET OFF IS NOT ALLOWABLE. WHEN ASSESSING OFFICER CONFRONTED THIS ASPECT TO THE AS SESSEE, ASSESSEE COULD NOT GIVE ANY REPLY. HENCE ADDITION ON THIS ACCOUNT WAS ALSO MADE. ON THE ABOVE ADDITIONS PENALTY PROCEEDINGS WERE INITIATED. IN THE PENAL TY PROCEEDINGS ASSESSEE SUBMITTED THAT THE MISTAKES WERE BONAFIDE MISTAKES. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT NO BASIS FOR THE SAID MISTAK E WAS GIVEN. ASSESSING OFFICER CONCLUDED THAT ASSESSEE HAS DELIBERATELY NOT GIVEN EFFECT TO THE EXPLICIT PROVISIONS OF LAW AND IGNORED THE SAME TO ITS ADVANTAGE TO LO WER ITS TAX LIABILITY. HENCE PENALTY OF RS. 1,40,000/- WAS LEVIED UNDER SECTION 271(1)(C). 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INC OME TAX (APPEALS) HELD THAT HE WAS OF THE CONSIDERED OPINION THAT ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME. IN THIS REGARD HE REFERRED TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF C.I.T. VS. ESCORTS FINANCE LTD. 226 CRE 105. ACCORDINGLY, HE CONFIRMED THE LEVY OF PENALTY. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. ITA NO. 1687/DEL/2010 A.Y. 2006-07 3 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IT WAS A BONAFIDE MISTA KE ON THE PART OF THE ASSESSEE AND HENCE THE PENALTY IN THIS CASE IS NOT LEVIABLE. IN THIS REGARD, HE RELIED UPON THE SEVERAL CASE LAWS INCLUDING THE HONBLE APEX C OURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010 AND HONBLE DELHI HIGH COURT DECISION IN THE CASE OF C.I.T. VS. AURIC INVESTMENT AND SECURITIES LTD. 310 ITR 121. 6.1 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. APART FROM THE DECISION IN THE CASE OF ESCORTS FINANCE LTD. RELIED UPON BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), SHE RELIED UPON THE DECISION OF THIS TRIBUNAL IN ITA NO. 106/D EL/2009 DATED 16.4.2010 IN THE CASE OF MICROSOFT CORPORATION INDIA PVT. LTD. VS. D CIT AND IN ANOTHER DECISION OF THE TRIBUNAL IN ITA NO. 12/DEL/2010 DATED 14.5.2010 IN THE CASE OF SURVIDHI FINANCIAL SERVICES LTD. ACIT. LD. DEPARTMENTAL REPRESENTATIVE FURTHER RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT I N THE CASE OF C.I.T. VS. ECS LTD. IN ITA NO. 1003 VIDE ORDER DATED 5.2.2010. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. W E FIND THAT IN THIS CASE THE ASSESSEE HAS DULY DISCLOSED THE LOSS ON SALE OF CAR IN THE PROFIT AND LOSS ACCOUNT. HOWEVER, THERE WAS AN OMISSION TO EXCLUDE THE SAME IN THE COMPUTATION OF INCOME AS SUCH LOSS ON DEPRECIABLE ASSETS ARE NOT ALLOWABLE IN THE INCOME TAX LAW. IN OUR CONSIDERED OPINION HAVING DISCLOSED T HE SAME IN THE PROFIT AND LOSS ACCOUNT ASSESSEE CANNOT BE SAID TO BE GUILTY OF CON CEALMENT OR FURNISHING OF INACCURATE PARTICULARS. IT COULD VERY WELL SAID TO HAVE MISTAKENLY LEFT OUT, THE SAME FROM EXCLUSION IN THE COMPUTATION OF INCOME. AS THERE WAS NO POINT OF NOT ITA NO. 1687/DEL/2010 A.Y. 2006-07 4 EXCLUDING THE SAME IN THE COMPUTATION OF INCOME ONC E IT HAS BEEN DULY AND PROPERLY DISCLOSED IN THE PROFIT AND LOSS ACCOUNT. 7.1 ANOTHER ASPECT OF THE LEVY OF PENALTY IN THIS R EGARD IS THAT THE ADJUSTMENT OF BROUGHT FORWARD LOSS. IN THIS REGARD ASSESSEE H AS ADJUSTED THE LOSS AGAINST CURRENT YEAR INCOME, BUT ASSESSING OFFICER DISALLO WED THE SAME BY HOLDING THE SAME THAT BROUGHT FORWARD LOSS BUSINESS HAS BEEN SE T OFF FROM HOUSE PROPERTY IS NOT PERMISSIBLE. WE FIND THAT BROUGHT FORWARD BUS INESS LOSS WAS BEING SOUGHT TO BE ADJUSTED AGAINST HOUSE PROPERTY WAS CLEARLY DISC LOSED IN THE COMPUTATION OF INCOME AND FROM THERE ONLY ASSESSING OFFICER COULD NOT FIND THE MISTAKE. THIS IN OUR CONSIDERED OPINION IS ALSO A MISTAKE AS DISCLOS URE OF CARRY FORWARD BUSINESS LOSS AND ADJUSTMENT OF THE SAME FROM INCOME FROM HOU SE PROPERTY IS CLEARLY A MISTAKE WHICH IS QUITE APPARENT. HENCE IN OUR CONSIDERED OPINION THE ASSESSEE COULD NOT HELD TO BE GUILTY OF FURNISHING OF INACCU RATE PARTICULARS OR CONCEALMENT. 7.2 THE CASE LAWS RELIED UPON BY THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) IN THE CASE OF C.I.T. VS. ESCORTS FINANC E REFERRED TO ABOVE WAS BASED UPON THE FINDING THAT ASSESSEE CLAIM WAS EX-FACIE B OGUS. HERE WE FIND THAT ASSESSEE HAD COMMITTED A BONAFIDE MISTAKE AND ALL THE RELEVANT PARTICULARS HAVE BEEN PROPERLY DISCLOSED. THE OTHER CASE LAWS RELIED UPON BY THE REVENUE ARE NOT APPLICABLE ON THE FACTS OF THIS CASE. I N THOSE CASES THE CLAIM OF THE ASSESSEE WAS FOUND TO BE EX-FACIE BOGUS. BUT IN THI S CASE WE HAVE GIVEN A FINDING THAT THERE WAS PROPER DISCLOSURE OF ALL THE PARTICU LARS AND IT WAS ONLY MISTAKE ON THE PART OF THE ASSESSEE. 7.3 IN THIS REGARD, THE CASE LAW RELIED UPON BY THE LD. COUNSEL OF THE ASSESSEE FROM THE HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF C.I.T. VS. AURIC ITA NO. 1687/DEL/2010 A.Y. 2006-07 5 INVESTMENT AND SECURITIES LTD. CITED ABOVE IS ALSO RELEVANT. IN THIS CASE IT WAS HELD THAT HELD THAT MERE TREATMENT OF BUSINESS LOSS AS S PECULATIVE LOSS BY ASSESSING OFFICER DID NOT AUTOMATICALLY WARRANT INFERENCE OF CONCEALMENT OF INCOME. IT WAS FURTHER HELD THAT SINCE THERE WAS NOTHING ON RECORD TO SHOW THAT ANY FURNISHING ITS RETURN OF INCOME ASSESSEE HAD EITHER CONCEALED ITS INCOME OR HAS FURNISHED ANY INADEQUATE PARTICULARS OF INCOME. PENALTY IMPOSE D BY THE ASSESSING OFFICER WAS TO BE DELETED. 7.4 IN THIS REGARD WE ALSO PLACE RELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LOR DSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGA TION IS THE RESULT OF A QUASI- CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARI LY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LA W OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDIC IALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENA LTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE P ROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OF FENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 7.5 WE WOULD ALSO LIKE TO REFER TO THE HONBLE AP EX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS ITA NO. 1687/DEL/2010 A.Y. 2006-07 6 CASE VIDE ORDER DATED 17.3.2010 IT HAS BEEN HELD T HAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANI NG OF WORD CONCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUSE WH AT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILI P SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PE NALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTEN TION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CL AIM IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE THE PENAL TY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENTS, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELE TE THE LEVY OF PENALTY OF RS. 1,40,000/-. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/06/2010. SD/- SD/- [A.D. JAIN] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 18/06/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES