The Dy. Commissioner of Income Tax, Vadodara V. Vadodara Enviro Channel Ltd., Vadodara

ITA 2030/AHD/2017

AI Insights

The case involves the Deputy Commissioner of Income Tax (DCIT), Circle-1(1)(2), Baroda as the appellant and Vadodara Enviro Channel Ltd. as the respondent. The dispute centered on the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961, following an addition/disallowance of Rs.1,03,59,359 to the assessee's income, which included Rs.82,87,487 on account of members' capital contribution for the Assessment Year 2011-12. The CIT(A) had deleted the penalty, which the Revenue appealed against. The Tribunal's decision was influenced by previous rulings on similar issues, where it was established that only 1/5th of such capital contributions could be taxed in the year of receipt, with the remaining spread over subsequent years.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124730 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-06-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 07-09-2017
• Other Referred Cases: ACIT vs. M/s. Effluent Channel Project Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 271(1)(c); 143(3); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ I. T.A. No. 203 0/Ahd /2017 ( नधा रण वष / A ss es sment Year : 2011-12) T h e D C I T C ir cl e - 1 ( 1 ) ( 2 ) , B a r od a बनाम/ Vs . M/ s. V a do d a ra E n v i ro C h a n ne l Lt d. 3 0 4/1 , 31 7 & 31 8 , Po s t – D h a n o ra , D i st : B a r oda 3 9 13 46 थायी लेखा सं./जीआइआर सं./P A N / G I R N o . : A A A C E 8 4 8 6 B (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri Atul Pandey, Sr. DR यथ क ओर से/Respondent by : Shri M. J. Shah & Shri Jimi Patel & Shri Rushin Patel, A.Rs. स ु नवाई क तार ख / D a t e o f H e a r i ng 21/06/2023 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 05/07/2023 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the Revenue is directed against the order dated 16.06.2017 passed by the Ld. Commissioner of Income Tax (Appeals)-1, Vadodara deleting the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) on addition/disallowance of Rs.1,03,59,359/- to the extent of Rs.82,87,487/- on account of members’ capital contribution for Assessment Year 2011-12. ITA No. 2030/Ahd/2017 (DCIT vs.Vadodara Enviro Channel Ltd. ) A.Y.– 2011-12 - 2 – 2. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. 3. The brief facts leading to the case is this that the assessee filed its return of income for the year under consideration on 23.09.2011 declaring total loss of Rs.48,17,297/-, which was finalized under Section 143(3) of the Act on 12.12.2014 determining total income at Rs.2,63,69,155/- upon making addition of Rs.3,11,86,450/- on account of capital contribution received from members for life time membership to avail of effluent disposal facility offered by the assessee company treating the same as revenue receipt and penalty proceeding under Section 271(1)(c) of the Act has been initiated. The said proceeding was culminated into imposing of penalty of Rs.1,03,59,360/- for furnishing inaccurate particulars of income and thereby concealing the income of the assessee only to evade the tax. The same was deleted by the Ld. CIT(A). Hence, the instant appeal before us. 4. In fact, similar addition was made for A.Ys. 2001-02 to 2007-08 as the assessee had shown the initial subscription from members received during a particular financial year as revenue receipt and the same was being offered on deferred basis in the year of receipt and in four subsequent years. Such addition on entire receipt was treated as income of the assessee for the year of receipt itself was deleted by the Co-ordinate Bench upholding the assessee’s treatment of offering to tax 1/5 th of such amount in 5 years. As from 2008-09, the assessee stopped offering such amount to taxation and started treating them as capital receipt and added the entire amount of receipt by the Ld.AO. In assessee’s own case for A.Y. 2008-09, the CIT(A) in Appeal No. CAB/1/107/2013-14 by and under order dated 19.08.2014 discussed the entire issue in detail and opined that the levy of penalty on addition of 1/5 th of initial subscription amount received during the relevant previous year was correct as the assessee was bound to show ITA No. 2030/Ahd/2017 (DCIT vs.Vadodara Enviro Channel Ltd. ) A.Y.– 2011-12 - 3 – such income in its return of income. The Ld. CIT(A) further held that levy of penalty on account of addition of balance 4/5 th of the initial subscription amount was not correct as whether this amount could have been added in the year of receipt itself was a debatable issue. The Co-ordinate Bench was pleased to hold that such amount is to be spread over in equal amounts in the year of receipt and succeeding four years. Ultimately, penalty of 1/5 th of the entire receipt of Rs.3,11,86,450/- i.e. Rs.62,37,290/- has been found to be correct and accordingly upheld the Ld. CIT(A)’s order. We have further considered the judgment relied upon by the Ld. CIT(A) on the identical issue passed by the Co-ordinate Bench in ITA Nos. 2997/Ahd/2014 & 2532/Ahd/2016 in ACIT vs. M/s. Effluent Channel Project Ltd., wherein the deletion of addition made by the Ld. CIT(A) of 4/5 th of the receipt of capital contribution and confirmation of penalty of 1/5 th of such capital contribution has been found to be correct and upheld. Thus, we do not find any reason to interfere with the order passed by the Ld. CIT(A). Respectfully relying upon the order passed by the Co-ordinate Bench, the same is found to be without any ambiguity and, thus, upheld. The appeal filed by the Revenue is found to be devoid of any merit and, thus, dismissed. 5. In the result, Revenue’s appeal is dismissed. This Order pronounced on 05/07/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 05/07/2023 True Copy S. K. SINHA आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं%धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A)- ITA No. 2030/Ahd/2017 (DCIT vs.Vadodara Enviro Channel Ltd. ) A.Y.– 2011-12 - 4 – 5. *वभागीय -त-न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड3 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad