Bloom Decor Ltd., Ahmedabad V. The Income tax Officer,Ward-1(2), Ahmedabad

ITA 1730/AHD/2009

• Counselvise Citation: 173020514 RSA 2009
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-03-2012
• Assessment Year: 1996-1997
• Appeal Filed On: 26-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Wrong claim
• Section: 27

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI D K TYAGI JUDICIAL MEMBER AND SHRI T R MEENA ACCOUNTANT MEMBER ITA NO.1730/AHD/2009 (ASSESSMENT YEAR:-1996-97) BLOOM DCOR LIMITED, 2/F, SUMEL, S.G. HIGHWAY THALTEJ, AHMEDABAD V/S THE INCOME-TAX OFFICER, WARD-1(2), AHMEDABAD PAN: AAACB 6221 B [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI NITIN MEHTA, AR REVENUE BY:- SHRI SAMIR TEKRIWAL, SR. DR DATE OF HEARING:- 06-03-2012 DATE OF PRONOUNCEMENT:- 30-03-2012 O R D E R PER D K TYAGI (JM) :- THIS APPEAL HAS BEEN FILED BY AN ASSESSEE AGAINST AN ORDER DATED 06-01-2009 PASSED B Y THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-VI, AH MEDABAD [HEREINAFTER REFERRED TO AS THE LEARNED CIT(A)] F OR ASSESSMENT YEAR (AY) 1996-97. 2 THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL ARE AS UNDER:- 1. THAT ON FACTS AND IN LAW THE LD. CIT(A) HAS ERR ED IN CONFIRMING THE PENALTY U/S 271(1)(C) OF IT ACT, RS.12,66,501/- AS THE APPELLANT HAS NEITHER CONCEALED ANY INCOME NOR FURN ISHED ANY INACCURATE PARTICULARS OF INCOME. 2 2. WITHOUT PREJUDICE TO ABOVE, AS THE DISALLOWANCES IN THE ORDER OF ASSESSMENT HAS RESULTED INTO THE REDUCTION IN LOSS AGAINST THE DECLARED LOSS IN THE RETURN OF INCOME THE PENALTY L EVIED IS BAD IN LAW AND ON FACTS. 3. WITHOUT PREJUDICE TO THE ABOVE, ANY OTHER AND FU RTHER GROUNDS THAT MAY BE RAISED DURING THE COURSE OF ARGUMENT OR HEARING. 3 AT THE OUTSET, THE LEARNED COUNSEL OF THE ASSESSE E DID NOT PRESS GROUND NO.2. HENCE, THE SAME IS DISMISSED, AS NOT PRESSED. GROUND NO.3 IS GENERAL IN NATURE AND DOES NOT REQUI RE ANY ADJUDICATION. 4 THE ONLY GROUND REMAINS TO BE CONSIDERED IS REGAR DING CONFIRMATION OF PENALTY LEVIED BY THE AO. THE FACTS IN BRIEF AS NOTED BY THE AO IN THE PENALTY ORDER ARE THAT IN AY 1995-96, THE ASSESSEE HAD CLAIMED MODVAT CREDIT FOR RS.27,40,535 /- IN RESPECT OF PURCHASE OF RAW MATERIALS. THE PROFITS WERE ACCO RDINGLY INFLATED. DURING THE YEAR UNDER APPEAL, THE ASSESSE E COMPANY OPTED FOR BASIC EXEMPTION SCHEME OF EXCISE DEPARTME NT AND WAS NOT ELIGIBLE FOR MODVAT CREDIT. KEEPING IN VIEW THE SAME, THE ASSESSEE COMPANY, THEREFORE, REVERED THE ENTRY AND CLAIMED THE DEDUCTION IN THE YEAR UNDER CONSIDERATION I.E. AY 1 996-97. THE AO NOTED IN THE ASSESSMENT ORDER THAT THE BOOKS OF ACCOUNT FOR AY 1995-96 WERE AUDITED MUCH AFTER CLOSING OF FY 94 -95 AND THE ASSESSEE COMPANY WAS REQUIRED TO OPT FOR THE SCHEME RELATING TO EXCISE PAYMENT AND CLAIM OF MODVAT ENTRY IN APRIL, 1995 ITSELF. ON THE OTHER HAND, THE AUDIT FOR AY 1995-96 WAS DON E MUCH LATER AND THERE WAS NO REFERENCE TO SUCH REVERSAL OF ENTR IES AND THE CIRCUMSTANCES AS TO WHY THIS WAS REQUIRED. ON THIS ACCOUNT, IT 3 WAS HELD BY THE AO THAT THE CLAIM WAS NOT ADMISSIBL E SINCE THE SAME DID NOT RELATE TO AY 1996-97. BEFORE THE LEAR NED CIT(A), THE ASSESSEES COUNSEL DID NOT GIVE ANY EXPLANATION EXCEPT FOR THE REASON THAT NO DECISION HAD BEEN TAKEN REGARDING TH E SCHEME BEING OPTED BY THE COMPANY FOR THE PURPOSES OF EXCI SE DUTY PAYMENTS. THE LEARNED CIT(A) DID NOT FIND MERIT IN THE SAID EXPLANATION AND HELD THAT SINCE THE ASSESSEE COMPAN Y WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THIS LIABILITY IF AT ALL RELATES TO AY 1995-96, CAN NOT BE ENTERTAINED I N AY 1996-97. ADDITION MADE ON THIS ACCOUNT WAS CONFIRMED BY THE CIT(A). THE TRIBUNAL ALSO CONFIRMED THE ADDITION AS THE ASSESSE E DID NOT PRESS THAT GROUND. ON THE BASIS OF THESE FACTS, THE PENAL TY PROCEEDINGS WERE INITIATED BY ISSUING NOTICE. THE AO NOTED THAT IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE COMPANY HAD NOT FU RNISHED ANY REPLY. THE AO, THEREFORE, OBSERVED THAT IT IS PRES UMED THAT THE ASSESSEE HAS NOTHING TO SAY AGAINST IMPOSITION OF P ENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS O F INCOME AND CONCEALED INCOME TO THE EXTENT OF RS.27,53,262/- AN D THE TAX SOUGHT TO BE EVADED ON THE SAME AMOUNTS TO RS.12,66 ,501/-. THE AO HELD THAT - IN VIEW OF THE FACTS OF THE CASE, I AM SATISFIED THAT THE CASE IS FIT FOR LEVY OF PENALTY U/S 271(1)(C) OF RS.12,66,501/- @ 1 00%, THE MINIMUM PENALTY LEVIABLE AS AGAINST PENALTY OF RS.37,99,503 /- @ 300% OF THE TAX SOUGHT TO BE EVADED ON ACCOUNT OF CONCEALMENT O F INCOME. I, THEREFORE, LEVY A PENALTY OF RS.12,66,501/- @ 100% U/S 271(1)(C) OF THE ACT. 5 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FI LED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LE ARNED CIT(A) 4 HAS CONFIRMED THE LEVY OF PENALTY IMPOSED BY THE AO U/S 271(1)(C) OF THE ACT AFTER TAKING INTO CONSIDERATIO N THE SUBMISSIONS OF THE ASSESSEE, BY OBSERVING AS UNDER: - , IT IS A FACT THAT THE APPELLANT HAS CLAIMED MO DVAT IN A.Y. 95- 96, THEREBY, INFLATED PROFITS OF A.Y. 1995-96 AND W HILE REVERSING THIS ENTRY THE PROFITS OF A.Y. 1996-97 HAVE BEEN SUPPRES SED. INSTEAD OF FIRST CARRYING FORWARD MODVAT CLAIM OF A.Y. 1995-96 IN A.Y. 96-97 AND THEN REVERSING IT, THE APPELLANT SHOULD HAVE RE VERSED THIS ENTRY IN A.Y. 95-96 ITSELF, BECAUSE AS PER EXCISE PROCEDURE ON FIRST DAY OF NEXT F.Y THE ASSESSEE HAS TO DECLARE AS TO WHICH SCHEME FOR EXCISE PAYMENT, IT IS OPTING FOR. IN CASE IT IS GOING FOR BASIC EXEMPTION THEN IT CAN NOT CARRY FORWARD THE MODVAT CLAIM, THEREBY, IT HAS BEEN WELL WITHIN THE KNOWLEDGE OF THE APPELLANT THAT IT IS WR ONGLY CARRYING FORWARD THIS ENTRY. OTHERWISE ALSO IT IS VERY ESSEN TIAL TO MENTION THAT IN FINALIZATION OF BALANCE SHEET AS WELL AS IN THE AUDIT, INCIDENTS TAKE PLACE BEFORE THE FINALIZATION OF BALANCE SHEET WHIC H HAVE A BEARING ON THE PROFIT OF ACCOUNTING PERIOD, WHICH MUST BE SPEC IFICALLY MENTIONED AS PER STANDARD PROCEDURE BUT IT IS A FACT THAT THE SAME HAS NOT BEEN DONE IN THE BALANCE SHEET OF THE APPELLANT FOR A.Y. 95-96 AS WELL AS A.Y. 96-97. THIS VERY FACT CLEARLY CAST DOUBTS OVER INTENTIONS OF THE APPELLANT. IN THE GIVEN FACTS AND CIRCUMSTANCES, TH E APPELLANT CANNOT BE ALLOWED DEDUCTION OF REVERSAL ENTRY IN RESPECT O F MODVAT CLAIM OF EARLIER YEAR IN PREVIOUS YEAR, THEREBY, REDUCING TH E PROFIT OF THIS YEAR. CONSEQUENTLY, SUCH CLAIM MUST HAVE BEEN MADE AND AL LOWED ONLY IN JA.Y. 95-96. WITH THE RESULT, THE APPELLANT'S CLAIM OF MODVAT REVERSAL (ENTRY (I.E. RS.27,40,535/-) HAS TO BE DISALLOWED. IN THE GIVEN FACTS AND I CIRCUMSTANCES, IT IS A FACT THAT THE APPELLANT HA S CLEARLY CONCEALED/FURNISHED INACCURATE PARTICULARS OF INCOM E ON THIS ACCOUNT. 6 AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE LEARNED COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND RELIED UPON THE FOLLOWING DECISIONS:- (I) CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) 5 (II) CIT VS. MANILAL TARACHAND (2002) 254 ITR 630 (GUJ) (III) CIT VS. BTX CHEMICAL P. LTD. (2007) 288 ITR 1 96 (GUJ) (IV) CIT VS. MAZDA LTD. (UNREPORTED) IN TAX APPEAL NO.70 OF 2011, DATED 18 TH OCTOBER, 2011 7 THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AO AND THE LEARNED CIT(A). 8 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS. WE FIND THAT DURING AY 1995-96 MODVAT CREDIT OF RS.27, 40,535/- WAS RECEIVABLE TO THE ASSESSEE AND THE SAME WAS CREDITE D TO RAW MATERIAL PURCHASE ACCOUNT. HOWEVER, DURING THE YEAR UNDER APPEAL, THE ASSESSEE-COMPANY OPTED FOR BASIC EXEMPT ION SCHEME OF EXCISE DEPARTMENT AND REVERSED THIS ENTRY AND CL AIMED DEDUCTION FOR THE SAME. THE AO WAS OF THE VIEW THAT THIS CLAIM WAS NOT ADMISSIBLE FOR THE AY 1996-97 AND THEREFORE THE ADDITION OF RS.27,40,535/- WAS MADE AND PENALTY OF RS.12,66, 501/- WAS IMPOSED FOR CONCEALMENT OF INCOME. THE ASSESSEES C ASE IS THAT THE ASSESSEES CLAIM WAS AS PER THE SCHEME OF THE E XCISE ACT AND ALL THE PARTICULARS ABOUT THE CLAIM WERE FURNISHED AND NOTHING WAS CONCEALED FROM THE REVENUE AUTHORITIES. SIMPLY BECAUSE ACCORDING TO THE REVENUE, THE CLAIM WAS NOT ADMISSI BLE FOR AY 1996-97 AS IS CLEAR FROM THE OBSERVATION OF THE LEA RNED CIT(A) IN HIS ORDER THAT AS THE ASSESSEE-COMPANY WAS FOLLOWIN G MERCANTILE SYSTEM OF ACCOUNTING, THIS LIABILITY BEING RELATED TO AY 1995-96, CANNOT BE ENTERTAINED IN AY 1996-97, WILL NOT ATTRA CT THE PENALTY PROVISIONS. 6 9 WE FIND FORCE IN THIS SUBMISSION OF THE ASSESSEE AS THERE IS NO DISPUTE ABOUT THE FACT THAT THE AMOUNT OF RS.27, 40,535/- IS AN ALLOWABLE DEDUCTION. THE DISPUTE IS ONLY ABOUT THE YEAR IN WHICH THIS IS TO BE ALLOWED. ACCORDING TO THE ASSESSEE, I T IS ALLOWABLE IN THE YEAR UNDER APPEAL WHILE ACCORDING TO THE REVENU E, THE DEDUCTION IS ALLOWABLE IN THE AY 1995-96. ON THESE FACTS PENALTY FOR CONCEALMENT OR FOR FURNISHING OF INACCURATE PAR TICULARS OF INCOME CANNOT BE LEVIED. IT IS WELL SETTLED LAW THA T ASSESSMENT AND PENALTY PROCEEDINGS BEING SEPARATE, THE ADDITIO N FOR WRONG CLAIM DOES NOT AUTOMATICALLY ATTRACT PENALTY U/S 27 1(1)(C) OF THE ACT. THIS VIEW OF OURS GETS SUPPORT FROM THE DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC), WHEREIN T HEIR LORDSHIPS HELD AS UNDER:- ' A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, T HERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' U SED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MA DE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCO RRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING IN ACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT C LAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS, (EMPHASIS ADDED) THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETUR N FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE T HE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PA RTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATT RACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE , NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. 7 WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS O R FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( L)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNO T AMOUNT TO FURNISHING INACCURATE PARTICULARS. ' FROM THE ABOVE IT IS EVIDENT THAT THEIR LORDSHIPS H AVE CLEARLY LAID DOWN THAT MERELY AN INCORRECT CLAIM IT WOULD N OT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS SO AS TO MA KE THE ASSESSEE LIABLE FOR PENALTY UNDER SECTION 271(1)(C). IN THE INSTANT CASE, ASSESSEES CLAIM WAS NOT FOUND TO BE INCORRECT BUT THE CONTROVERSY WAS ONLY ABOUT THE YEAR IN WHICH CLAIM WAS TO BE ALLOWED. IN VIEW OF THE ABOVE NO PENALTY WAS LEVIAB LE U/S 271(1)(C) OF THE ACT. THEREFORE, WE HEREBY DELETE T HE PENALTY LEVIED BY AO AND SUSTAINED BY THE LEARNED CIT(A). 9 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 30-03-2012 SD/- SD/- (T R MEENA) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 30-03-2012 COPY OF THE ORDER FORWARDED TO: 1. BLOOM DCOR LIMITED, 2/F, SUMEL, S.G. HIGHWAY TH ALTEJ, AHMEDABAD 8 2. THE INCOME-TAX OFFICER, WARD-1(2), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VI, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-B, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD