MARVEL THERMOSTETS P. LTD, MUMBAI V. ITO WD 9(2)(3), MUMBAI

ITA 1821/MUM/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2725 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-11-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 20-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Assessee Lawyers: S S PHADKAR
• Keywords: Reasonable cause
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SENIOR VICE PRESIDENT I.T.A. NO 1821/MUM/2009 (ASSESSMENT YEAR : 2004-05 ) M/S. MARVEL THERMOSETS P. LTD. SAI PRASAD, GROUND FLOOR, J.P.NAGAR ROAD NO.3, GOREGAON (E), MUMBAI-400 063. PAN:AAACM0688B VS. THE INCOME TAX OFFICER, WARD-9(2)(3), AAYAKAR BHAVAN, M.K.ROAD, MUMABI-400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : MR.S.S.PHADKAR RESPONDENT BY : MR. ANKUR GARG, DR O R D E R THIS APPEAL BY THE ASSESSEE RELATES TO THE ASSESSM ENT YEAR 2004-05 AND THE ONLY ISSUE IS WHETHER THE INCO ME-TAX AUTHORITIES WERE JUSTIFIED IN DISALLOWING THE AMOUN T OF RS.4,01,272/- CHARGED UPON THE ASSESSEE UNDER SECTI ON 36(3) OF THE BOMBAY SALES TAX ACT, 1959. 2. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 14 3(3) OF THE INCOME TAX ACT, THE ASSESSING OFFICER TOOK THE VIEW THAT THE AFORESAID AMOUNT CHARGED ON THE ASSESSEE IN THE SAL ES-TAX ASSESSMENT ORDER REPRESENTED PENALTY AND HENCE NOT ALLOWABLE AS A DEDUCTION. THE DISALLOWANCE HAVING BEEN CONFIR MED BY THE CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE TH E TRIBUNAL. 3. THE AMOUNT REPRESENTS TWO ITEMS (A) RS.2,52,9 56/- LEVIED UNDER SECTION 36(3)(A) OF THE BST ACT AND (B ) RS.1,48,316/- CHARGED UNDER SECTION 36(3)(B) OF THE AFORESAID ACT. I HAVE GONE THROUGH THE PROVISIONS OF THE BST ACT. THE MARGINAL HEADING OF SECTION 36 OF THE SAID ACT READ S IMPOSITION ITA NO.1821/MUM/09 2 OF PENALTY IN CERTAIN CASES AND BAR TO PROSECUTION . SUB SECTION (1) PROVIDES FOR THE PENALTY FOR FAILING TO COMPLY WITH THE CONDITIONS GIVEN IN ANY UNDERTAKING IN ANY DECLARAT ION GIVEN BY THE DEALER UNDER THE VARIOUS PROVISIONS OF THE ACT. THE PENALTY SHALL NOT EXCEED TWICE THE AMOUNT OF THE TAX. SUB-S ECTION (2) PROVIDES FOR IMPOSITION OF A PENALTY ON THE DEALER FOR CARRYING ON BUSINESS WITHOUT BEING REGISTERED AS A DEALER OR FO R FAILURE WITHOUT REASONABLE CAUSE TO COMPLY WITH ANY NOTICES ISSUED BY THE ASSESSING AUTHORITY OR FOR CONCEALMENT OF THE P ARTICULARS OF ANY TRANSACTIONS OR FOR KNOWINGLY FURNISHING INACCU RATE PARTICULARS OF TRANSACTION LIABLE TO TAX. THESE TWO SUB-SECTIONS EXPRESSLY USED THE WORD PENALTY AND SUCH PENALTY IS PAYABLE IN ADDITION TO ANY TAX ASSESSED ON THE DEALER. SUB- SECTIONS (2A) AND (2B) ALSO PROVIDE FOR PENALTY FOR CERTAIN OTHER DEFAULTS AND IN THESE SUB-SECTIONS ALSO THE WORD PENALTY IS US ED. HOWEVER IN SUB-SECTION 3(A) OF THE SECTION, IT IS PROVIDED THAT THE DEALER WHO DOES NOT PAY THE TAX WITHIN THE TIME ALLOWED SHALL BE LIABLE TO PAY BY WAY OF SIMPLE INTEREST, IN ADDITIO N TO THE AMOUNT OF SUCH TAX, A SUM EQUAL TO TWO PERCENT OF THE AMOU NT OF SUCH TAX, FOR EACH MONTH OR FOR PART THEREOF AFTER THE L AST DATE BY WHICH HE SHOULD HAVE PAID SUCH TAX. UNDER SUB-SEC TION 3(B) IF ANY TAX OTHER THAN THE TAX ON WHICH INTEREST IS LEV IABLE UNDER CLAUSE (A) REMAINS UNPAID FOR ONE MONTH AFTER THE E ND OF ANY PERIOD OF ASSESSMENT, THE DEALER IS LIABLE TO PAY BY WAY OF SIMPLE INTEREST, A SUM EQUAL TO 2% OF SUCH TAX FOR EACH MONTH OR PART THEREOF.... THUS, UNDER BOTH CLAUSES OF S UB-SECTION (3) WHAT IS PAYABLE BY THE ASSESSEE IS A COMPENSATION F OR THE DELAY IN PAYMENT OF THE TAXES ASSESSED ON A DEALER. IT IS IRRELEVANT THAT THE MARGINAL HEADING OF SECTION 36 OF THE BST ACT REFERS TO ONLY PENALTY BUT NOT INTEREST, BECAUSE SUB-SECTION (3) CLEARLY PROVIDES FOR PAYMENT OF SIMPLE INTEREST WHICH IS CO MPENSATORY IN NATURE AND NOT FOR PENALTY WHICH IS PENAL IN NAT URE. IT IS ALSO IRRELEVANT THAT IN THE SALES-TAX ASSESSMENT ORDER T HE ASSESSING ITA NO.1821/MUM/09 3 AUTHORITY HAS REFERRED TO THE PAYMENTS AS PENALTIES UNDER CLAUSES (A) & (B) OF SUB-SECTION (3) OF SECTION 36 OF THE BST ACT. THE ERRONEOUS DESCRIPTION MADE BY HIM IS NOT DECISI VE OF THE NATURE AND CHARACTER OF THE PAYMENT WHICH ARE TO BE JUDGED WITH REFERENCE ONLY TO THE STATUTORY PROVISIONS AND THE ACTUAL WORDS USED THEREIN. I AM THEREFORE, OF THE VIEW THA T THE DEPARTMENTAL AUTHORITIES WERE NOT JUSTIFIED IN TREA TING THE PAYMENTS AS PENALTIES UNDER THE BST ACT. THEY ARE P AYMENTS OF INTEREST WHICH IS COMPENSATORY IN NATURE. THEREFORE , THEY ARE ALLOWABLE UNDER SECTION 37(1) OF THE INCOME TAX ACT . I DIRECT THE ASSESSING OFFICER TO ALLOW THE PAYMENT OF RS.4,01,2 72/- AS A DEDUCTION AND ALLOW THE APPEAL WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED ON THIS DAY 10 TH DECEMBER, 2009. SD/- ( R.V.EASWAR ) SENIOR VICE PRESIDENT MUMBAI, DATED 10 TH DECEMBER, 2009. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-IX, MUMBAI. 4. THE CIT(A)-IX, MUMBAI 5. THE DR SMC BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI