ITO, Ward - 7(1), Kolkata, Kolkata V. M/s. Avadh Rubber Ltd., Kolkata

ITA 1712/KOL/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0519 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 15-12-2011
• Court: TRIBUNAL
• Department Lawyers: DILIP KUMAR MITRA
• Assessee Lawyers: N O N E
• Keywords: Bonafide belief; Reassessment proceedings
• Section: 143(3); 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM ] I.T.A NO S . 1712 TO 171 4 /KOL/20 1 1 ASSESSMENT YEAR S : 2004 - 05 TO 2006 - 07 INCOME - TAX OFFICER, WD - 7 ( 1 ), KOLKATA VS. M/S. AVADH RUBBER LTD. (PAN: AA BCA0426C ) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 0 7 .0 5 .2015 DATE OF PRONOUNCEMENT: 15 . 0 5 . 2015 FOR THE APPELLANT: SHRI DILIP KUMAR MITRA, JCIT, SR. DR FOR THE RESPONDENT: N O N E ORDER PER SHRI MAHAVIR SINGH, JM : ALL THESE THREE APPEAL S BY REVENUE ARE ARISING OUT OF SEPARATE ORDER S OF CIT(A) - VII I , KOLKATA IN APPEAL NO S . 24 / CIT(A) - VIII / KOL/10 - 11, 25/CIT(A) - VIII/KOL/09 - 10 AND 52/CIT(A) - VIII/KOL/09 - 10 ALL DATED 06 . 09 .20 11 . ASSESSMENT S W ERE FRAMED BY ITO, WARD - 7 ( 1 ), KOLKATA U/S. 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR S 200 4 - 05 TO 200 6 - 0 7 VIDE HIS SEPARATE ORDER S DATED 30.11.2009 (FOR AY 2004 - 05 AND 2005 - 06) AND 31.12.2008 (FOR AY 2006 - 07). PENALTY WAS IMPOSED BY ITO, WARD - 7(1), KOLKATA U/S. 271(1)(C) OF THE ACT VIDE HIS SEPARATE ORDERS DATED 17.05.2010 (FOR AY 2004 - 05 AND 2005 - 06) AND 24.06.2009 (FOR AY 2006 - 07) . 2. THE ONLY COMMON ISSUE IN TH ESE THREE APPEAL S OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELE TING THE PENALTY LEVIED BY AO U/S. 271(1)(C) OF THE ACT FROM THE CLAIM OF SET OFF OF LOSS RELATING TO MADRAS ELASTOMES LTD. (IN SHORT MEL), A COMPANY UNDER BIFR, WHICH WAS MERGED WITH THE ASSESSEE COMPANY. THE REVENUE HAS RAISED COMMON GROUND FOR ALL THE YEARS EXCEPT VARIANCE IN AMOUNT AND FOR THE SAKE OF BREVITY, WE REPRODUCE THE GROUND OF APPEAL FOR AY 2004 - 05, AND ADJUDICATE THE ISSUE FROM THE FACTS OF THIS YEAR, WHICH IS AS UNDER: 1 . LD. CIT(A) ERRED ON FACTS AND LAW TO DELETE THE PENALTY OF RS.6,42 ,511/ - IMPOSED U/S. 271(1)(C). 2 ITA NO S . 1712 - 1714 /K/201 1 AVADH RUBBER LTD. AY S 2004 - 05 TO 200 6 - 0 7 2. LD. CIT(A) ERRED ON LAW BY ACCEPTING NEW EVIDENCE WHICH WAS NOT FURNISHED EITHER BEFORE AO PASSING THE ORDER OR BEFORE THE AO PASSING PENALTY ORDER. 3 . BRIEFLY STATED FACTS ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE RELEVANT AY 2004 - 05 AND CLAIMED SET OFF OF LOSS OF RS.17,90,980/ - RELATES TO MEL, A COMPANY UNDER BIFR, WHICH WAS MERGED WITH THE ASSESSEE COMPANY. ORIGINAL ASSESSMENT WAS COMPLETED AND THEREAFTER THE AO REOPENE D THE ASSESSMENT BY ISSUING NOTICE U/S. 148 OF THE ACT IN TERM OF SECTION 147 OF THE ACT. THE AO DISALLOWED THE CLAIM OF SET OFF OF LOSS IN THE REASSESSMENT PROCEEDINGS. THE AO IMPOSED PENALTY U/S. 271(1)(C) OF THE ACT FOR THIS DISALLOWANCE BECAUSE THE A SSESSEE HAS NOT CHALLENGED THE QUANTUM ADDITION. ACCORDING TO AO, THE MANAGEMENT OF ASSESSEE COMPANY WAS WELL AWARE ABOUT THE DATE OF MEL AND THE FACT THAT THE LAST DATE OF FY 2003 - 04 AS ON 31.03.2004, THERE WAS NO MERGER. ACCORDING TO AO, THE BIFR ORDER DATED 09.11.2005 GRANTED BENEFIT TO MEL AND NOT TO THE ASSESSEE. IN VIEW OF THESE FACTS, THE AO CONCLUDED THAT DESPITE FULLY AWARE ABOUT THE FACT THAT IT CANNOT CLAIM ADJUSTMENT OF LOSS OF MEL THE ASSESSEE CLAIMED THE SAME KNOWINGLY. ACCORDINGLY, THE AS SESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT AND, THEREFORE, HE LEVIED THE PENALTY. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE PENALTY BY RELYING ON THE DECISION OF RELIA NCE PETRO PRODUCTS LTD. (2010) 322 ITR 158 (SC) BY OBSERVING AS UNDER: AFTER CAREFUL CONSIDERATION OF THE APPELLANT'S SUBMISSION ALONG WITH THE CASE LAWS RELIED UPON, PERUSING THE FACTS OF THE CASE AND ALSO THE ASSESSMENT /ORDER , IMPUGNED PENALTY ORDER AN D O T HER MATERIALS AVAILABLE ON RECORD, I AGREE WITH THE ARGUMENT OF THE A / R OF THE APPELLANT. IN MY OPINION, AS THE APPELLANT DISCLOSED ITS INCOME IN THE RETU R N ON THE BONAFIDE BELIEF BASED ON THE OPINION OF A LE GAL EXPERT AND CLAIMED T HE SET OFF OF LOSS OF THE AMALGAMATED COMPANY AT THE MOST IT CAN BE SAID THAT IT HAS COMMITTED AN E RR OR AND AN ERROR IS NEVER TANTAMOUNT TO PENALTY AND ACCORD IN G LY THE PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 IS MIS CONCEIVED IN VIEW OF THE FACT THAT T HE MISTAKE COMMITTED BASED ON T H E BONAFIDE BELIEF OF AN EXPERT ADVICE CANNOT EXPOSE THE APPELLANT TO A CHARGE OF THE 'FURNISHING OF INACCURATE PARTICULARS OF INCOME.' IT IS OBSERVED THAT THE APPELLANT HAS MENTIONED ABOUT THE FACTS OF MERGER IN THE FORM OF NOTES IN T HE ACCOUNTS TO AUDITED BALANCE SHEET UNDER THE SIGNATURE OF MANAGEMENT. THE RE FORE, IT IS NOTED THAT THE MANAGEMENT DID NOT HIDE ANY FACT WHICH COULD LEAD T O T HE CONCLUSION THAT THERE WAS AN INTENTION TO SUBVERT THE FACT EXISTED . M ERELY IN THE COU RSE OF ASSESSMENT PROCEEDINGS THE APPELLANT AGREED TO THE OPINION OF THE A.O. AND CHOOSE NOT TO DISPUTE THE ORDER AND PAID THE TAX DEMANDED CANNOT BE THE BASIS FOR LEVY OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN VIEW OF THE ABOVE 3 ITA NO S . 1712 - 1714 /K/201 1 AVADH RUBBER LTD. AY S 2004 - 05 TO 200 6 - 0 7 DIS CUSSION, CONSIDERING THE ENTIRE FACTS OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD.(SUPRA) AND THE DECISION OF HON BLE BENCH 'C' OF THE ITAI MUMBAI IN THE CASE OF ITO VS PARIAKH I NVEST MENT DEVELOPMENT PV T . LTD.(SUPRA), IT IS HELD THAT THE PENALTY IS NOT LEVIABLE IN THE CASE OF THE APPELLANT AND PENALTY IMPOSED BY THE AO U/S. 271(1)(C) OF THE I. T. ACT, 1961 AT RS.6,42,511/ - IS HEREBY DELETED. THUS, THIS GROUND OF APP EAL OF THE APPELLANT IS ALLOWED. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAD DISCLOSED TAXABLE INCOME OF R S.17,90,970/ - BASED UPON ITS AUDITED ACCOUNTS FOR THE YEAR ENDED 31.03.2004. HOWEVER, IN THE RETURN OF INCOME THE ASSESSEE HAS CLAIMED THE SET OFF OF THE LOSS OF MEL OF RS.17,90,970/ - AND THERE BY DISCLOSED INCOME OF RS. NIL IN THE RETURN OF INCOME. IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS IN FACT MERGED AND/OR AMALGAMATED WITH MEL AND THE LOSS INCURRED BY THE MEL AT RS. 17.90,970 / - WAS SET OFF WITH T H E PROFIT OF THE ASSESSEE, SO THAT IN THE CO M PUTATION MADE , THE RESULTAN T INCOME WAS NIL. WE FIND THAT AT THAT TIME MERGER PROPOSAL OF THE COMPANY WAS PENDING AT BIFR AS MEL WAS INCURRING HEAVY LOSSES AND 31.03.2004 WAS TAKEN AS CUT - OFF DATE. ALL LOSSES INCURRED TO THIS DATE WERE SUPPOSE D TO SET OFF AGAINST THE INCOME OF ASSESSEE . THE ASSESSEE SOUGHT A LEGAL OPINION FROM AN ADVOCATE AND AS PER HIS OP I NION IT ADJUSTED THE LOSSES UPTO 31.3.2004 FROM THE INCOM E OF ASSESSEE . BEFORE US LD. COUNSEL FOR THE ASSESSEE ARGUED THAT IT IS NOT A CASE OF CONCEALMENT AS THE EXPRESSION 'CONCEALMENT OF INCOME' THAT AN INCOME IS BEING HIDDEN, CAMOUFLAGED OR COVERED UP SO AS IT CANNOT BE SEEN, FOUND OR OBSERVED OR DISCOVERED. IN FACT THE CHA RGE OF 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' IS NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE EXPRESSION 'FURNISHING OF INACCURAT E OF INCOME IMPLIES FURNISHING OF DETAILS OR INFORMATION ABOUT INCOME WHICH ARE NOT IN CONFORMITY WITH THE FACTS OR TRUTH . IN OTHER WORDS, IT MEANS THAT AN Y INACCURACY MADE IN THE BOOKS OF ACCOUNTS UPON WH ICH THE APPELLANT HAS A RRIV ED A T THE RETURNED FIGURE, WHICH RESULTS INTO KEEPING OFF OR HIDING A PORTION OF ITS INCOME. THE PROVISIONS NOT EXTEND TO SUBJECTIVE AREAS SUCH AS THE TAXABILITY OF INCOME, ADMISSIBILITY OF A DEDUCTION AND INTERPRETATION OF LAW. IT IS NOT T HE CASE OF THE 4 ITA NO S . 1712 - 1714 /K/201 1 AVADH RUBBER LTD. AY S 2004 - 05 TO 200 6 - 0 7 R EVENUE THAT THE ACCOUNTS OF THE APPELLANT WERE FAULTY. I N FACT THE ACCOUNTS ARE IMMACULATELY MAINTAINED AS NO INTERFERENCE WAS REQUIRED IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE IS THEREFORE IMMUNE T O THE CHARGE OF 'FURNISHING OF INACCU RATE PAR TICULARS OF INCOME.' I N THE INSTANT CASE THE AUDITED PROFIT & LOSS ACCOUNT, CORRECTLY DISCLOSED THE PROFIT OF THE ASSESSEE WHICH WAS SET OFF AGAINST THE LOSS INCURRED BY THE COMPANY UNDER AMALGAMATION. THEREFORE, THE BASIC ELEMEN T NECESSARY FOR INITIATION OF PR O CEEDING U/SEC 271 (1)(C) OF THE INCOME TAX, 196 1 THAT THE ASSESSEE HAS F U RNISHED INACCURATE PARTICULARS OF INCOME IS CONSPICUOUSLY ABSENT. THE ONLY POINT, IN THE INSTANT CASE AS PER THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE WAS ON WHICH THE IMP UGNED ACTION HAS BEEN CONCEIVED THE AO. STATED THAT INCOME DISCLOSED IN THE RETURN WHICH IS BASED ON AN EXPERT LEGAL OPINION, FROM THE SI MPLE FACT THAT THE ASSESSEE WAS AMALGAMATED WITH MEL , THERE WAS AN ERROR IN THIS R ESPECT COMMITTED BY THE ASSESSEE , IN AID O F THE LEGAL EXPERT, CLAIMING THE SE T OFF OF LOSS OF THE AMALGAMATED COMPANY. HOWEVER, AN ERROR IS NEVER TANTAMOUNT TO PENALTY AND ACCORDINGLY THE PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IS MISCONCEIVED IN VIEW OF THE FACT THAT THE MISTAKE COMM ITTED UNDER AN EXPERT ADVICE CANNOT EXPOSE THE ASSESSEE TO A CHARGE OF T HE ' FURNISHING OF INACCURATE PARTICULARS OF INCOME' . IN S UPPORT OF HIS CONTENTION, THE A/ R ALSO RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE P E T ROPRODUCTS PVT. LTD. 322 TTR 158 (SC) WHICH WAS ALSO CITED BY THE A.O. AND STATED THAT THE A.O. HAS CITED THIS CASE TO EXPLAIN WHAT IS INACCURATE PARTICULARS, BUT HE HAS IGNORED THE RATIO LAID DOWN BY HON'BLE SUPREME COU RT IN THE SAME ORDER THAT A PENAL T Y CANNOT BE LEVIED MERELY BECAUSE THE TAX PAYER AND THE REVENUE HOLD DIVERGENT VIEW ON CALCULATION OF INCOME. THE APEX C OURT HELD T HAT THE REVENUE CANNOT LEVY PENALTY ON A TAXPAYER IF HIS CLAIM FOR DEDUCTION IS NOT ACCEPTABLE. PENALTY IS LEVIABLE ONLY IF T HER E IS ONLY PROVEN CONCEALMENT OF INCOME. IN THIS CASE , HON'BLE SUPREME COURT HAS TAKEN A DIFFERENT OPINION THAN IN THE CASE OF DHARME N DRA TEXTILES. IN VIEW OF THIS JUDGMENT OF THE APEX COURT, THE SETT LED POSITION IS REITERATED BY THE ASSESSEE THAT MERE DISALLOWANCE OF CLAIM FOR EXPENDITURE BY ITSELF WOULD NOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME AND ACCORDINGLY, IN SUCH CASES NO CONCEALMENT PENALTY CAN BE LEVIED ON THAT 5 ITA NO S . 1712 - 1714 /K/201 1 AVADH RUBBER LTD. AY S 2004 - 05 TO 200 6 - 0 7 BASIS . IN VIEW OF THE ABOVE DISCUSSION AND FACTS OF THE CASE, W E ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY DELETED THE PENALTY AND WE CONFIRM THE SAME. 5. THE FACTS AND CIRCUMSTANCES IN OTHER TWO YEARS I.E. AYS 2005 - 06 AND 2006 - 07 ARE EXACTLY IDENTICAL, HENCE TAKING A CONSISTENT VIEW, WE CONFIRM THE ORDERS OF CIT(A). 6 . IN THE RESULT, ALL THE APPEAL S OF REVENUE ARE DISMISSED. 7 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 15.05.2015 . SD/ - SD/ - ( P. K. BANSAL ) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 15TH MAY , 201 5 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT - ITO, WARD - 7(1), KOLKATA. 2 RESPONDENT M/S. AVADH RUBBER LTD., 32. GANESH CHANDRA AVENUE, 2 ND FLOOR, KOLKATA - 13 . 3 . THE CIT (A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .