Shri Piyushkumar Ambalal Shroff,HUF, Ahmedabad V. The Dy.CIT, Bharuah Circle, Bharuch

ITA 1692/AHD/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2134 (ITAT-SURAT)
• Duration Of Justice: 5 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-06-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 02-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R MEENA
• Assessee Lawyers: KETAN H SHAH
• Keywords: Bonafide belief; Difference of opinion; TDS
• Section: 271(1)(c)

Judgement Text

PIYUSH A SHROFF (HUF) V. DCIT- BHARUCH/ I.T.A. NO.1692/AHD/2014/A.Y.03-04 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.1692/AHD/2014 / ASSESSMENT YEAR: 2003-04 SHRI PIYUSHKUMR A. SHROFF (HUF), C/O KETAN H SHAH, ADVOCATE, 93 SAPPHIRE COMPLEX, C G ROAD, NAVRANGPURA, AHMEDABAD 380009 PAN: AACHP 9491 E V . DEPUTY COMMISSIONER OF INCOME-TAX, BHARUCH CIRCLE, BHARUCH APPELLANT /RESPONDENT ASSESSEE BY SHRI KETAN H. SHAH, ADVOCATE REVENUE BY SHRI S.R. MEENA, SR. D.R. DATE OF HEARING 25.07.2019 DATE OF PRONOUNCEMENT 26.07.2019 /ORDER PER O. P. MEENA, AM 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VI; BARODA (IN SHORT THE CIT (A)) DATED 14.03.2014 PERTAINING TO ASSESSMENT YEAR 2003- 04. 2. THE SOLE GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF PENALTY OF RS. 3,04,750 LEVIED UNDER SECTION 271(1)(C) OF THE ACT BY THE LD. CIT (A). 3. SUCCINCT FACTS ARE THAT THE ASSESSMENT WAS FRAMED UNDER SECTION 143 (3) OF THE ACT BY MAKING ADDITION OF RS. 5,03,098 ON ACCOUNT OF UNDISCLOSED INTEREST ON FDRS AND RS. 9,09,882 ON ACCOUNT PIYUSH A SHROFF (HUF) V. DCIT- BHARUCH/ I.T.A. NO.1692/AHD/2014/A.Y.03-04 PAGE 2 OF 6 OF UNDISCLOSED INCOME FROM COMMISSION AND BROKERAGE. THE AO ALSO INITIATED PENALTY UNDER SECTION 271(1) (C) OF THE ACT ON THIS ACCOUNT. THE CIT (A) AS WELL AS ITAT CONFIRMED BOTH THE ADDITION. THEREAFTER, THE AO IMPOSED PENALTY OF RS. 3,04,750. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT (A). HOWEVER, LD. CIT (A) HAS CONFIRMED THE IMPOSITION OF PENALTY ON THE GROUND THAT THE ASSESSEE HAS FIRST ACCOUNTED FOR ADDITIONAL INTEREST OF RS. 5,03,08, BUT LATER ON REVERSED THE ENTRIES ON THE GROUND THAT HE HAS OFFERED SAID INCOME IN EARLIER YEAR ON ACCRUAL BASIS. FURTHER, SOME FDRS ENCASHED PREMATURELY DURING YEAR LEADING LOADING TO ACCOUNTING OF EXCESS INTEREST IN EARLIER YEAR`S. HOWEVER, CIT (A) UPHELD THE PENALTY AS THE ASSESSEE HAS FAILED TO FURNISH EVIDENCES OF REDUCTION OF INTEREST OFFERED EARLIER YEARS AND METHOD OF ACCOUNTING IS NOT CORRECT ON THE PART OF THE ASSESSEE. WITH REGARD TO COMMISSION AND BROKERAGE OF RS. 9,09,882, THE AO NOTICED THAT THE ASSESSEE HAS SHOWN RS. 4,79,904 AS COMMISSION AND BROKERAGE FROM TWO CONCERN, BUT TDS CERTIFICATE SHOWED RS. 9,09,882 HENCE, THE ASSESSEE HAS SUPPRESSED RECEIPTS OF RS. 4,29,978. HENCE, CIT (A) VIEWED THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM IN ACCORDANCE WITH EXPLANATION 1 TO SECTION 271(1)(C). IN VIEW OF THIS MATTER, CIT (A) HAS CONFIRMED THE PENALTY. 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED PAPER BOOK PAGE NO. 42, WHICH IS WORKING OF INTEREST ON FDRS. ACCORDING TO WHICH, THE ASSESSEE HAS OFFERED INTEREST ON FDRS ON ACCRUAL BASIS IN PIYUSH A SHROFF (HUF) V. DCIT- BHARUCH/ I.T.A. NO.1692/AHD/2014/A.Y.03-04 PAGE 3 OF 6 F.Y. 1998-99 TO 2001-02, KEPT WITH OBC BANK DELHI, ANAND AND RAJKOT BRANCHES. HOWEVER, DUE TO PREMATURE ENCASHMENT OF THE FDR DURING CURRENT YEAR, THE ASSESSEE HAS WORKED OUT EXCESS AMOUNT OF INTEREST OF RS. 5,03,108 IN EARLIER YEARS AND MADE REVERSAL OF ENTRIES. THEREFORE, THE DIFFERENCE HAS ARISEN. HOWEVER, THE METHOD OF ACCOUNTING HAS NOT BEEN FOUND ACCEPTABLE BY AO AND CIT (A) AS THIS COULD HAVE DONE BY REVISING RETURN OF INCOME OF RELEVANT YEAR. SIMILARLY, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FURTHER DRAWN OUR ATTENTION TO PAPER BOOK PAGE NO. 45-46, GIVING DETAILS OF COMMISSION AND BROKERAGE INCOME FROM VARIOUS PARTIES AMOUNTING TO RS. 15,58,508. HOWEVER, THE AO HAS CONSIDERED THE FIGURES AS PER TDS CERTIFICATE AS COMMISSION ONLY, WHEREAS TDS CERTIFICATE INCLUDES INTEREST AS WELL AS COMMISSION. THEREFORE, THERE IS NO MISMATCH WITH FIGURES AS PER TDS CERTIFICATES AND AS SHOWN BY THE ASSESSEE. ALL THE TDS CERTIFICATES AS PER PAGE NO. 47 TO 49 OF PAPER BOOK AND LEDGER ACCOUNT OF COMMISSION AND BROKERAGE ARE MAJORLY TALLIED WITH RECEIPTS MENTIONED AT PAGE NO. 45-46 AT PAPER BOOK. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT PENALTY COULD NOT BE LEVIED MERELY BECAUSE THE ADDITION HAS BEEN CONFIRMED BY THE APPELLATE AUTHORITIES. IN SUPPORT OF HIS CONTENTIONS, THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE IN THE CASE OF DURGA KAMAL RICE 265 ITR 25 (GUJARAT), NATIONAL TEXTILES 249 ITR 125 (GUJARAT) AND CIT V RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC); [2010] 189 TAXMAN 322(SC) . PIYUSH A SHROFF (HUF) V. DCIT- BHARUCH/ I.T.A. NO.1692/AHD/2014/A.Y.03-04 PAGE 4 OF 6 6. AU CONTRAIRE , THE LD. SR. D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS MADE ADDITION ON THE BASIS OF FACTS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME AND ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ADDITION IS MADE BY THE AO, AS ACCORDING TO HIM, THE REVERSAL ENTRY OF INTEREST ON FDRS IS NOT FOUND ACCEPTABLE, WHEREAS THE ASSESSEE HAS DULY OFFERED THE SAME ON ACCRUAL BASIS IN EARLIER YEARS. WE FURTHER FIND THAT THE DETAILS OF COMMISSION AND BROKERAGE INCOME REFLECTED AT PAGE NO. 45-45 OF PAPER BOOK IS INCLUSIVE OF COMMISSION AS WELL AS BROKERAGE, WHEREAS THE AO HAS COMPARED THE SAME WITH TDS CERTIFICATE ASSUMING IT AS COMMISSION INCOME ONLY. MAJOR ENTRIES THEREIN ARE TALLIED WITH TDS CERTIFICATES AS PER THE DETAILS FILED BY THE ASSESSEE, WHICH WERE ALSO FILED BEFORE THE AO. THUS, THE ADDITION IS MADE ON DIFFERENCE OF OPINION FROM THE POINT OF VIEW OF THE ASSESSEE AND THE AO. IT IS TRITE LAW THAT PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCEEDINGS FROM ASSESSMENT PROCEEDINGS. THE FINDING RECORDED IN THE ASSESSMENT ORDER IS NOT CONCLUSIVE FOR DECIDING THE IMPOSITION OF PENALTY. IT ONLY HAS A PERSUASIVE VALUE. ANY FINDING RECORDED IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PENALTY HAS TO BE IMPOSED AUTOMATICALLY. EXPLANATION-1 TO SECTION 271 (L) (C) PROVIDES THAT THE PENALTY WOULD BE DEEMED TO ATTRACT WHERE IN RESPECT OF A FACT MATERIAL TO THE PIYUSH A SHROFF (HUF) V. DCIT- BHARUCH/ I.T.A. NO.1692/AHD/2014/A.Y.03-04 PAGE 5 OF 6 COMPUTATION OF INCOME EITHER NO EXPLANATION IS OFFERED, OR EXPLANATION OFFERED IS FOUND TO BE FALSE. IN THIS CASE, THE ASSESSEE HAS OFFERED EXPLANATION, HOWEVER, THE SAME WAS NOT FOUND ACCEPTABLE BY THE AO. THE AMOUNT OF INTEREST ON FDRS ACCOUNTED ON ACCRUAL BASIS. HENCE, THE ASSESSEE MADE ENTRY ON REVERSAL BASIS. THUS, THE EXPLANATION OFFERED WAS NOT FOUND TO BE FALSE AND ACCORDINGLY CLAUSE (A) OF EXPLANATION-1 TO SECTION 271(1)(C) OF THE ACT DOES NOT COVER ITS CASE. CLAUSE (B) OF EXPLANATION 1TO SECTION 271(1)(C) PROVIDES THAT WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATION AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS LEVIABLE. AS THE CLAIM OF INTEREST WAS BASED ON METHOD OF ACCOUNTING, THEREFORE, IT CANNOT BE SAID THAT THERE WAS CONCEALMENT OF INCOME. THIS BEING THE FACTUAL POSITION, THEREFORE PENALTY UNDER SECTION 271(1) (C) IS NOT LEVIABLE. JUST BECAUSE APPELLANTS EXPLANATION WAS NOT FOUND ACCEPTABLE BY THE AO, IT DOES NOT FOLLOW THAT THAT THE APPELLANT WAS UNABLE TO SUBSTANTIATE HIS EXPLANATION BY PROVIDING VARIOUS EVIDENCES AND JUDICIAL OPINIONS. EXPLANATION-1 TO SECTION 271(1) (C) OF THE ACT DOES THEREFORE, NOT COVER THE CASE OF THE APPELLANT. BASED ON THE ABOVE FACTS OF THE CASE, IT CAN BE HELD THAT THE APPELLANT HAD MADE ALL THE NECESSARY DISCLOSURES ON A BONAFIDE BELIEF, WHICH IS NOT AGREEABLE TO THE AO, IT WILL NOT AUTOMATICALLY LEAD TO A CASE FOR PENALTY UNDER SECTION 271(1)(C) OF THE IT ACT, 1961. SIMILARLY, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILE 249 ITR 125 (GUJARAT) HELD THAT ADDITION MADE IS NOT PIYUSH A SHROFF (HUF) V. DCIT- BHARUCH/ I.T.A. NO.1692/AHD/2014/A.Y.03-04 PAGE 6 OF 6 CONCLUSIVE, WHERE THE ASSESSEE HAS FURNISHED EVIDENCE; IT WAS HELD THAT NO PENALTY IS LEVIABLE. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE PENALTY IS NOT SUSTAINABLE IN VIEW OF DECISION OF THE HONBLE SUPREME COURT IN CASE OF CIT V RELIANCE PETROPRODUCTS PVT. LTD. (322 ITR 158) (SC) HELD THAT MERELY BECAUSE THE ASSESSEE HAS CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE BY THE REVENUE, PENALTY U/S. 271(1) (C) OF THE ACT CANNOT BE ATTRACTED. THE HON'BLE SUPREME COURT ALSO OBSERVED THAT MERE DISALLOWANCE OF CLAIM MADE BY THE ASSESSEE, CANNOT AMOUNT FURNISHING OF INACCURATE PARTICULARS OF INCOME UNLESS, THE INFORMATION AS GIVEN IN RETURN OF INCOME WAS FOUND TO BE INCORRECT OR INACCURATE. THE OTHER VARIOUS DECISION OF TRIBUNALS AS WELL AS HIGH COURTS AS RELIED BY THE ASSESSEE. IN THE LIGHT OF ABOVE DISCUSSION, THE PENALTY LEVIED AT RS.3,04,750 IS THEREFORE, DELETED. THIS GROUND OF APPEAL IS THEREFORE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. 9. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT: DATED: JULY 26, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT