Volga Airtechnic Limited, Ahmedabad V. The Income tax Officer, Ward-8(4), Ahmedabad

ITA 1852/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63130 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 24-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Keywords: Depreciation; Reassessment proceedings
• Section: 43B; 143(3)

Judgement Text

ITA NO 1852 /AHD/2012 A.YR.. 2008 -09 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BEN CH, AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM & SHRI ANIL CHATURVEDI A.M.) I.T.A. NO.1852/AHD/2012. (ASSESSMENT Y EAR: 2008-09) VOLGA AIRTECHNICS LTD., PLOT NO.472/478, OPP. M.N.DESAI PETROL PUMP, SARKHEJ-BAVLA HIGHWAY, CHANGODAR. (APPELLANT) VS. INCOME TAX OFFICER, WARD 8(4), 31, AJANTA A WING, ASHRAM ROAD, AHMEDABAD. (RESPONDENT) PAN: AAACV9965A APPELLANT BY : MS. URVASHI SHODHAN RESPONDENT BY : MR.D.K.SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 17-10-2012 DATE OF PRONOUNCEMENT : 23-11-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THE PRESENT APPEAL IS AGAINST THE PENALTY ORDER DA TED 16-3-2011 PASSED U/S. 271(1)(C) FOR ASSESSMENT YEAR 2008-09 W HEREIN A PENALTY OF RS.3,53,794/- HAS BEEN LEVIED BY ASSESSING OFFICER. 2. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF FAN AND BLOWER BLADES, SHEET METAL COMPONENTS AND J OB WORK OF SHEET METAL PARTS AS WELL AS TRADING OF ELECTRICAL APPLIA NCES. ASSESSEE E-FILED ITS RETURN OF INCOME ON 19-9-2008 DECLARING LOSS OF RS. 1,29,742/-.THE ITA NO 1852 /AHD/2012 A.YR.. 2008 -09 2 ASSESSMENT WAS COMPLETED U/S. 143(3) VIDE ORDER DAT ED 18-10-2010 AND THE TOTAL INCOME WAS DETERMINED AT RS.9,97,459/- AF TER MAKING ADDITION U/S. 43B AND 40A(7) BUT BEFORE ADJUSTMENT OF BROUGHT FOR WARD LOSSES. AFTER THE ADJUSTMENT OF BROUGHT FORWARD LOSS TO THE EXTENT OF INCOME, THE TOTAL INCOME WAS DETERMINED AT RS. NIL. IT IS ON THE AFORESAID A DDITIONS, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS FURNISHED INACCU RATE PARTICULARS OF INCOME AND THEREFORE LIABLE TO PENALTY U/S. 271(1) (C). 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. OBSERVED THAT ASSESSEE HAD CLAIMED DEDUCTION OF RS.3,25,566/- IN RESPECT OF BONUS TO EMPLOYEES. HOWEVER, IN THE TAX AUDIT REPORT THE AUD ITOR HAD STATED THAT THE BONUS WAS PAID TO THE EMPLOYEES AFTER THE DUE DATE OF FILING OF RETURN. THE A.O. CONCLUDED THAT SINCE THE BONUS WAS NOT PAID TI LL THE FILING OF RETURN, THE SAME SHOULD BE DISALLOWED U./S. 43B. HE ACCORDINGLY DISALLOWED RS.3,25,566/- U/S. 43B. 4. A.O. ALSO OBSERVED THAT ASSESSEE HAD MADE PROVIS ION FOR PAYMENT OF GRATUITY AMOUNTING TO RS.8,53,748/- AND IN THE TAX AUDIT REPORT THE SAME WAS REPORTED AS NOT ALLOWABLE U/S. 40A(7) AS IT WAS IN THE NATURE OF A PROVISION BUT HOWEVER THE SAME WAS CLAIMED AS EXPEN DITURE. THE A.O. CONCLUDED THAT SINCE THE AMOUNT REPRESENT PROVISION AND NOT ACTUAL PAYMENT, IT IS NOT ALLOWABLE EXPENSES U/S. 40A(7) A ND ACCORDINGLY DISALLOWED IT. 5. IT IS ON THE AFORESAID ADDITION, A.O. INITIATED PENALTY PROCEEDINGS U./S. 271(1)(C). DURING THE COURSE OF PENALTY PROCEEDINGS , THE ASSESSEE SUBMITTED THAT IT IS A SICK COMPANY REGISTERED UNDE R BIFR. THE COMPANY ITA NO 1852 /AHD/2012 A.YR.. 2008 -09 3 WAS PASSING THROUGH SEVERE FINANCIAL CRISIS AND IT HAD SUSPENDED PRODUCTION FROM 28-2-2010. FURTHER IT HAD HUGE CARR IED FORWARD BUSINESS LOSSES AND DEPRECIATION AND EVEN AFTER THE ADJUSTME NT OF BROUGHT FORWARD LOSSES, THERE WAS NO TAXABLE INCOME. THUS THE CLAIM OF DEDUCTION WAS NOT WITH A DELIBERATE INTENTION TO CONCEAL THE INCOME. THE A.O. DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE MORE SO IN VIEW OF THE FACT THAT THE DISALLOWANCES U/S.43B AND 40A(7) WERE SPECIFICALLY IDENTIFIED AND REPORTED IN TAX AUDIT REPORT. THE A.O. THUS RELYING ON THE D ECISION OF APEX COURT IN THE CASE OF DHARMENDRA PROCESSORS & ORS. (306 ITR 2 77) AND THE DECISION OF DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATI ONS PVT. LTD. (2010) 327 ITR 510 HELD THAT THE ASSESSEE HAD CONCEALED IT S INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME AND ACCORDINGLY LE VIED PENALTY OF RS.3,53,794/-. CIT (A) CONFIRMED THE PENALTY VIDE O RDER DATED 6-7-2012 BY HOLDING AS UNDER: 2.3. I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER AND THE SUBMISSION MADE BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS. THE PENALTY HAS BEEN IMPOSED AS THE AD DITION OF RS.3,25,566/- U/S. 43B AND RS.8,53,748/- U/S. 40A ( 7) OF THE ACT WAS MADE BY THE A.O. IT IS NOTED FROM THE REPLY OF THE APPELLANT AND THE PENALTY ORDER THAT THE DISALLOWANCES WERE MADE AFTE R THE DETAILS OF THE DISALLOWANCES WERE IDENTIFIED FROM THE TAX AUDI T REPORT IN FORM NO.3CD. IT WAS, HOWEVER, NOTED BY THE A.O. THAT THE APPELLANT DID NOT DISALLOW THESE AMOUNTS WHILE COMPUTING ITS TAXABLE INCOME BUT ALSO EXCLUDED THE DETAIL OF THESE DISALLOWANCES IN PART A -01 (OTHER INFORMATION). IN THE E-RETURN OF INCOME FILED FOR T HE YEAR UNDER CONSIDERATION. THE APPELLANT HAS SUBMITTED THAT IT WAS A SICK COMP ANY AND WAS REGISTERED WITH BIFR SINCE 1998. THE APPELLANT HAD PROVIDED FOR BONUS AND GRATUITY BUT SAME WAS NOT PAID TILL THE D UE DATE OF FILING OF RETURN OF INCOME. THE TAX AUDIT REPORT CLEARLY MENT IONED ABOUT THIS ITA NO 1852 /AHD/2012 A.YR.. 2008 -09 4 FACT, BUT NO DISALLOWANCE WAS MADE IN THE RETURN OF INCOME. THE ADDITION THAT HAS BEEN MADE IS BASED ON THE TAX AUD IT REPORT. IT HAS FURTHER BEEN SUBMITTED THAT IT WAS A MERE CLAIM WHI CH HAS BEEN DISALLOWED AND THERE WAS NO CONCEALMENT OR THAT MAT TER FURNISHING OF INACCURATE PARTICULARS IN THE RETURN OF INCOME. I AM NOT INCLINED TO ACCEPT THE SUBMISSION MADE BY THE APPELLANT. IT IS CLEARLY EVIDENT FROM THE PENALTY O RDER THAT THE APPELLANT WHILE FILING THE E-RETURN OF INCOME DID NOT DISALLO W THE BONUS LIABILITY AND UNPAID GRATUITY. THE APPELLANT ALSO DID NOT FUR NISH THESE DETAILS IN PART A-01 OF THE E-RETURN WHICH SHOW THAT IT WAS A DELIBERATE ATTEMPT FOR CONCEALING THE INCOME OR AVOIDING THE INCIDENCE OF TAX. IN THESE CIRCUMSTANCES, THE CASE OF THE APPELLANT CLEARLY FA LLS UNDER EXPLANATION 1(B) TO SECTION 271 WHICH PROVIDES THA T IF THE PERSON FAILS TO PROVE THAT THE EXPLANATION OFFERED BY HIM WAS BO NAFIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. IT IS A KNOWN FA CT THAT THE AUDIT REPORT IN FORM NO.3CD IS NOT UPLOADED IN THE E-RETU RN FULLY. ONLY THE CERTAIN PORTIONS AND IMPORTANT INFORMATION OF THE A UDIT REPORT IS UPLOADED IN THE E-RETURN. THE APPELLANT DID NOT UPL OAD THE INFORMATION RELATED TO UNPAID BONUS LIABILITY AND GRATUITY WHIC H WAS TO BE PROVIDED IN PART A -01 OF THE E-RETURN. THEREFORE, IT DID NO T DISCLOSE THE MATERIAL FACTS RELATED TO COMPUTATION OF INCOME ON HIS OWN I N THE RETURN OF INCOME. IT WAS ONLY DURING THE SCRUTINY ASSESSMENT, THE A.O. OBTAINED THE COMPLETE AUDIT REPORT IN FORM NO.3CD A ND NOTED THAT THE AMOUNTS WERE UNPAID AND ACCORDINGLY THE DISALLOWANC E WAS MADE. THE MISTAKE THEREFORE, WAS, NOT BONAFIDE. THE RELIA NCE PLACED BY THE APPELLANT ON THE JUDGMENT OF RELIANCE PETRO PRODUCT S PVT. LTD. [322 ITR 158] (SC) IS ALSO NOT JUSTIFIED AS THE FACTS SH OW THAT THE APPELLANT DID NOT FURNISH THE COMPLETE INFORMATION IN THE RET URN OF INCOME. IT IS NOT A CASE WHERE A CLAIM HAS BEEN MADE AND THE SAME HAS BEEN DISALLOWED. THE APPELLANT DID NOT DISCLOSE THE DETA ILS IN THE RETURN OF INCOME BUT SUBSEQUENTLY IT WAS FOUND OUT BY THE A.O . FROM THE AUDIT REPORT. SIMILARLY, THE RELIANCE PLACED BY THE APPEL LANT ON THE JUDGMENT OF HONBLE ITAT AHMEDABAD IN THE CASE OF GUJARAT ST ATE CO- OPERATIVE HOUSING FINANCE CORPORATION LTD., [134 TT J (AHD) (UO)7] IS ALSO NOT JUSTIFIED AS IN THAT CASE THE DETAILS WERE FILED BY THE ASSESSEE IN THE RETURN OF INCOME WHICH IS NOT THE CASE AT PR ESENT. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE CONSIDERED OPINION TH AT THE A.O. WAS JUSTIFIED IN IMPOSING THE PENALTY U/S. 271(1)(C ) O F THE ACT AND THE ITA NO 1852 /AHD/2012 A.YR.. 2008 -09 5 APPELLANT HAS CONCEALED THE PARTICULARS OF ITS INCO ME. THE PENALTY IMPOSED BY THE A.O. IS ACCORDINGLY UPHELD. 6. AGGRIEVED BY THE ORDER OF CIT (A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, THE LD. A.R. SUBMITTED THAT THE ASSES SEE IS A SICK INDUSTRIAL COMPANY REGISTERED UNDER THE BIFR AND HA S HUGE CARRY FORWARD LOSSES. IT HAD STOPPED PRODUCTION AT ITS UNIT FROM 28-2-2010. IN THE YEAR UNDER APPEAL, THE INCOME DETERMINED AFTER MAKING TH E ADDITIONS AND AFTER ADJUSTMENT OF BROUGHT FORWARD LOSSES WAS NIL AND NO TAX WAS PAYABLE BY THE ASSESSEE. THE LD. A.R. FURTHER SUBMITTED THAT T HERE WAS NO CONCEALMENT OF FACTS AS THE AMOUNT OF BONUS PAYABLE AS ON THE LAST DAY OF THE FINANCIAL YEAR AND THE PROVISION FOR GRATUITY W AS DISCLOSED IN THE TAX AUDIT REPORT AND BASED ON WHICH THE A.O. HAD MADE T HE DISALLOWANCE. THE NON FURNISHING OF DETAILS IN PART A-01 OF THE E-RET URN WAS A CLERICAL ERROR AND THEREFORE CANNOT BE CONSIDERED TO BE WITH A MALAFID E INTENTION. IT WAS FURTHER SUBMITTED THAT THE DISALLOWANCE MADE IN THE CURRENT YEAR WILL BE ALLOWED IN THE SUBSEQUENT YEAR AS PER THE PROVISION S OF SEC. 43B AND THEREFORE THERE WAS NO EVASION OF TAX. THE LD. A.R. ALSO RELIED ON THE DECISIONS OF APEX COURT IN THE CASE OF PRICE WATERH OUSE COOPERS PVT. LTD. (CIVIL APPEAL NO.6924 OF 2012) AND THE DECISION DAT ED 19 TH JULY, 2012 OF DELHI HIGH COURT IN THE CASE OF CIT VS. SOCIETEX (I TA NO.1190/2011). 8. THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORD ERS OF A.O. AND CIT (A). ITA NO 1852 /AHD/2012 A.YR.. 2008 -09 6 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A SICK INDUSTRIAL COMPANY REGISTERED UNDER BIFR, HAS CARR IED FORWARD LOSSES AND THE TAXABLE PROFITS DETERMINED AFTER MAKING THE ADD ITIONS AND BROUGHT FORWARD LOSSES IS NIL. THE ASSESSEE IS NOT LIABLE T O PAY ANY TAX ON THE INCOME DETERMINED BY THE A.O. THE DISALLOWANCE HAS BEEN MADE ON ACCOUNT OF 43B AND 40A (7).THE ASSESSEE WILL BE ENT ITLED TO THE BENEFIT OF THE SAME IN SUBSEQUENT YEARS U/S. 43B WHEN THE PAYM ENT HAS BEEN MADE. ASSESSEE HAS DISCLOSED THE AFORESAID DISALLOWANCES IN THE TAX AUDIT REPORT FILED IN FORM 3CD U/S.44AB OF THE ACT AND THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED IN ACCURATE PARTICULARS. THE A.O. AFTER CONSIDERING THE TAX AUDIT REPORT MAD E ADDITIONS TO THE INCOME. THE SUBMISSION OF THE ASSESSEE THAT THE NO N DISCLOSURE OF THE DISALLOWANCE IN PART A 01 (OTHER INFORMATION) IN TH E E-RETURN FILED WAS A CLERICAL ERROR AND NOT WITH THE INTENTION TO HIDE M ATERIAL FACTS COULD NOT BE CONTROVERTED BY THE REVENUE BY BRINGING ANY CONTRAR Y MATERIAL ON RECORD. 10. IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LT D. VS. CIT (SUPRA), THE ISSUE WAS THAT THOUGH THE PROVISION TOWARDS PAY MENT OF GRATUITY WAS NOT ALLOWABLE, THE ASSESSEE CLAIMED A DEDUCTION IN THE RETURN OF INCOME AND WAS ALSO ALLOWED IN ASSESSMENT FRAMED U/S. 143( 3). LATER ON IN THE REASSESSMENT PROCEEDINGS, THE AFORESAID PROVISION W AS DISALLOWED AND ADDED TO THE INCOME. ON THIS ADDITION THE A.O. LEVI ED PENALTY. IN THOSE CIRCUMSTANCES THE HONBLE APEX COURT HELD THAT THE ASSESSEE HAD COMMITTED AN INADVERTENT AND BONAFIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH I NACCURATE PARTICULARS AND THEREFORE UPHELD THE ORDER OF HONBLE CALCUTTA HIGH COURT WHEREIN THE ITA NO 1852 /AHD/2012 A.YR.. 2008 -09 7 PENALTY WAS DELETED. THE HONBLE APEX COURT HAD FUR THER HELD THAT THROUGH A BONAFIDE AND INADVERTENT ERROR, THE ASSESSEE WHIL E SUBMITTING ITS RETURN, FAILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOT AL INCOME. THIS CAN ONLY BE DESCRIBED AS A HUMAN ERROR WHICH ONE IS PRONE TO MA KE. ABSENCE OF DUE CARE DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF E ITHER FURNISHING OF INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. 11. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTA NCES IN THE PRESENT CASE AND SEEN IN THE LIGHT OF THE DECISION OF THE A PEX COURT IN THE CASE OF PRICE WATERHOUSE COOPERS (SUPRA) SINCE ALL THE NECE SSARY FACTS WITH RESPECT TO THE CLAIM OF DISALLOWANCE AND DEDUCTIONS WERE FURNISHED IN THE TAX AUDIT REPORT THE FACT THAT THE DISALLOWANCE HAS BEEN MADE OF EXPENDITURE REPORTED IN TAX REPORT DOES NOT CALL FO R LEVY OF PENALTY UNDER SEC. 271(1)(C). WE THUS CANCEL THE PENALTY LEVIED BY THE A.O. THEREFORE, THIS GROUND OF ASSESSEE IS ALLOWED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN OPEN COURT ON 23 -11 - 2012. SD/- SD/- ( D. K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)- 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD. ITA NO 1852 /AHD/2012 A.YR.. 2008 -09 8 1.DATE OF DICTATION 21 - 11 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 21 /11 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..