ACIT, New Delhi V. M/s Schneidder Electric India (P) Ltd., Gurgaon

ITA 206/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5789 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 15-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHOBHIT NARULA; KAPIL GEOL SHRI ROHIT TIWARI
• Keywords: Business expenditure; Wrong claim; Bonafide mistake; Capital expenditure; Set aside
• Section: 271(1)(c); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI E BEN CH, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER, AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER, ITA NO. 206/DEL/2016 [ASSESSMENT YEAR: 2010-11] ACIT, CIRCLE-22(2), ROOM NO.226, 02 ND FLOOR, C.R. BUILDING, I.P. ESTATE, NEW DELHI M/S SCHNEIDER ELECTRIC INDIA (P.) LTD. 9 TH FLOOR, TOWER C, BUILDING NO.10, DLF CYBER CITY, PHASE-II, GURGAON, HARYANA PAN - AABCS1624G APPELLANT RESPONDENT REVENUE BY MS. RINKU SINGH, ASSESSE E BY SHRI KAPIL GEOL, SHRI ROHIT TIWARI AND SHRI SHOBHIT NARULA DATE OF HEARING 08 /08 /2019 DATE OF PRONOUNCEMENT 09 /08 /2019 ORDER PER T. S. KAPOOR, ACCOUNTANT MEMBER, THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-28, DATED 12/11/2015. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N DELETING THE PENALTY OF RS.33,99,000/- LEVIED U/S 271(1)(C) BY T HE AO ON ACCOUNT OF DISALLOWANCE OF FEES PAID TO REGISTRAR OF COMPAN IES FOR INCREASE IN AUTHORIZED SHARE CAPITAL. WHEN THE COMPANY IS EQ UIPPED WITH BATTERY OF LAWYERS AND CA WHO ALL KNOW ABOUT THE DE CISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF M/S BROOKE BO ND INDIA LTD. VS CIT (WB) ON THE ISSUE, IT CANNOT BE SAID THAT THE E XPENSES WAS BONAFIDELY CLAIMED BY THE ASSESSEE. IT IS A WILFUL ATTEMPT ON THE PART OF THE ASSESSEE TO CLAIM EXP OF RS.1 CRORE UNDER TH IS HEAD ON WHICH PENALTY U/S 271(1)(C) IS DEFINITELY LEVIABLE. 2 ITA NO.206/DEL/2016 2. AT THE OUTSET, THE LD. DR SUBMITTED THAT ASSESSE E HAD CLAIMED FEE PAID TO ROC FOR INCREASE IN SHARE CAPITAL AS BUSINE SS EXPENDITURE AND IT WAS ONLY WHEN THE ASSESSEE WAS CONFRONTED VIDE QUES TIONNAIRE DATED 15/07/2013 AND DATED 26/07/2013, THE ASSESSEE SURR ENDERED THE AMOUNT OUT OF BUSINESS EXPENDITURE AND THE LD. CIT(A) HAS WRONGLY STATED THAT EVEN BEFORE THE QUESTIONING BY THE AO, THE ASSESSEE HAD ITS OWN HAD SURRENDERED THE SAME OUR ATTENTION WAS INVITED TO T HE FINDINGS OF THE LD. CIT(A) WHERE HE HAS MENTIONED THAT THE ASSESSEE ITS ELF OFFERED AMOUNT IN QUESTION TO TAX VIDE ITS LETTER DATED 17/12/2013. I T WAS POINTED OUT THAT SURRENDER WAS MADE BY THE ASSESSEE AFTER THE QUESTI ONNAIRE, THEREFORE, THE FINDINGS OF THE LD. CIT(A) ARE CONTRARY TO THE FACTS. 3. THE LD. DR HEAVILY PLACED HER RELIANCE ON THE OR DER OF THE DELHI HIGH COURT IN THE CASE OF CIT VS ZOOM COMMUNICATION (P.) LTD. [2010] 327 ITR 510(DEL.) AND FURTHER PLACED HER RELIANCE O N THE ORDER OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA P. LT D. VS CIT [38 TAXMANN.COM 448](SC). THE LD. DR IN VIEW OF THIS FA CTS AND CIRCUMSTANCES VEHEMENTLY ARGUED THAT THE LD. CIT(A) HAS WRONGLY ALLOWED RELIEF TO THE ASSESSEE. 4. THE LD. AR ON THE OTHER HAND SUBMITTED THAT THIS WAS AN INADVERTENT MISTAKE BY THE ASSESSEE AS THE AMOUNT WAS ONLY RS.1 CRORE WHEREAS THE ASSESSEE HAD INCURRED A LOSS OF RS.15 CRORES AND FU RTHER THE ASSESSEE AT 3 ITA NO.206/DEL/2016 ITS OWN HAD MADE ADDITIONS IN THE COMPUTATION OF IN COME TO THE EXTENT OF RS.34-35 CRORES. THE LD. AR IN THIS RESPECT INVITED OUR ATTENTION TO PARA 3 ONWARDS OF LD. CIT(A)S ORDER WHERE HE HAS NOTED AL L THESE FACTS. THE LD. AR THEREFORE HEAVILY PLACED HIS RELIANCE ON THE ORD ER OF THE LD. CIT(A). SPECIFIC RELIANCE WAS PLACED ON THE ORDER OF THE H ONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS LTD. VS CIT 348 ITR 306 (SC). OUR ATTENTION WAS FURTHER INVITED TO THE FACT THAT TAX AUDITORS IN THE TAX AUDIT REPORT HAD NOT POINTED OUT THE NATURE OF SUCH EXPENDITURE TO BE CAPITAL EXPENDITURE AND THEREFORE THE MISTAKE COMMI TTED BY THE ASSESSEE WAS AN INADVERTENT MISTAKE AND THEREFORE THE LD. CI T(A) HAS RIGHTLY ALLOWED THE RELIEF TO THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THOUGH T HE CONTENTION OF LD. DR THAT ASSESSEE HAD SURRENDERED THE AMOUNT FOR TAXATI ON AFTER ASSESSING OFFICER ISSUED NOTICES U/S 142(1) ARE CORRECT, BUT THE FACT REMAINS THAT THE AO CAME TO KNOW ABOUT THE CLAIM OF THE ASSESSEE REG ARDING REVENUE ITEM FOR ROC FEE FROM THE AUDITED ACCOUNTS OF THE ASSESS EE COMPANY ONLY AND WHICH PROVES THAT THE ASSESSEE HAD DULY DISCLOSED F ULLY THE PARTICULARS OF INCOME AND THE ASSESSING OFFICER FROM THE INFORMAT ION PROVIDED BY ASSESSEE HAD ONLY OBSERVED THAT IT WAS A WRONGLY CL AIM. THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S PVT. LTD. HAS HELD 4 ITA NO.206/DEL/2016 THAT ANY WRONG CLAIM MADE BY THE ASSESSEE WILL NOT TANTAMOUNT TO CONCEALMENT OF INCOME. MOREOVER WE FIND THAT THE A SSESSEE HAD FILED RETURN DECLARING LOSS OF RS 15 CRORES AND SUO MOTO ADDED BACK TO THE INCOME IN THE COMPUTATION OF INCOME AN AMOUNT O F RS.34-35 CRORES WHICH FACT IS COMING OUT OF ORDER OF THE LD. CIT(A) AND THEREFORE, THE CLAIM OF RS.1CRORE CANNOT BE SAID TO BE A DELIBERATE CLAI M AND IT WAS NECESSARILY AN INADVERTENT MISTAKE. THEREFORE, KEEPING IN VIEW THESE FACTS AND CIRCUMSTANCES, WE HOLD THAT ASSESSEE HAD COMMITTED AN INADVERTENT AND BONAFIDE MISTAKE AND HAD NOT INTENDED OR ATTEMPTED TO CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME. 6. THE HONBLE SUPREME COURT IN THE CASE OF PRICE W ATERHOUSE COOPERS LTD. VS CIT 348 ITR 306 (SC) IN A SIMILAR C ASE HAS DELETED PEANTLY U/S 271(1)(C) OF THE ACT BY HOLDING AS UNDE R:- 13. AGAINST THE ORDER OF THE TRIBUNAL, THE ASSESSE E APPROACHED THE CALCUTTA HIGH COURT WHICH DISMISSED ITS APPEAL FILED UNDER SECTIO N 260 A OF THE ACT BY THE IMPUGNED ORDER. THE ONLY REASON GIVEN BY THE HIGH C OURT FOR DISMISSING THE APPEAL READS AS UNDER: 'AFTER ANALYSING THE FACTS OF THIS CASE, CONSIDERIN G THE SUBMISSIONS MADE BY THE LEARNED ADVOCATES FOR THE PARTIES AND THE MATER IALS PLACED BEFORE US, WE CANNOT BRUSH ASIDE THE FACT THAT THE ASSESSEE COMPA NY IS A WELL KNOWN AND REPUTED CHARTERED ACCOUNTANT FIRM AND A TAX CONSULT ANT. WE ALSO DO NOT FIND ANY SUBSTANCE IN THE SUBMISSIONS MADE BY DR. PAL; O N THE CONTRARY, IN OUR CONSIDERED OPINION, WE FIND THAT SECTION 271(1)(C) OF THE ACT HAS SPECIFICALLY STATED ABOUT THE CONCEALMENT OF THE PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME WHICH HAS TO BE READ 'EITHER' 'OR' AND ON THE GIVEN FACTS OF THIS CASE WOULD AUTOMATICALLY COME WITHIN THE FOUR CORNERS OF SECTION 271(1)(C) OF THE ACT AND WE COME TO THE CONCLUSION THAT THE APPELLANT HAVE FAILED TO DISCHARGE THEIR STRICT LIA BILITY TO FURNISH THEIR TRUE AND CORRECT PARTICULARS OF ACCOUNTS WHILE FILING THE RE TURN. WE ARE ALSO OF THE 5 ITA NO.206/DEL/2016 OPINION THAT THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY AND WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTR ACTING CIVIL LIABILITY AS IN THE MATTER OF PROSECUTION UNDER SECTION 276C, AS HA S BEEN HELD BY THE HON'BLE SUPREME COURT. WE ALSO FIND THAT THE MENS REA IS NO T AN ESSENTIAL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. WE, THEREFORE, ACCEPT THE CONTENTION OF MR. SHOME AND DISMISS THE APPEAL ANSWERING THE QUESTIONS IN THE NEGATIVE.' 14. DURING THE COURSE OF HEARING THIS APPEAL AGAINS T THE JUDGMENT AND ORDER OF THE CALCUTTA HIGH COURT, WE HAD REQUIRED THE ASSESSEE T O EXPLAIN TO US HOW AND WHY THE MISTAKE WAS COMMITTED. 15. THE ASSESSEE HAS FILED AN AFFIDAVIT DATED 14TH SEPTEMBER, 2012 IN WHICH IT IS STATED THAT THE ASSESSEE IS ENGAGED IN MULTIDISCIPL INARY MANAGEMENT CONSULTING SERVICES AND IN THE RELEVANT YEAR IT EMPLOYED AROUN D 1000 EMPLOYEES. IT HAS A SEPARATE ACCOUNTS DEPARTMENT WHICH MAINTAINS DAY TO DAY ACCOUNTS, PAY ROLLS ETC. IT IS STATED IN THE AFFIDAVIT THAT PERHAPS THERE WAS S OME CONFUSION BECAUSE THE PERSON PREPARING THE RETURN WAS UNAWARE OF THE FACT THAT T HE SERVICES OF SOME EMPLOYEES HAD BEEN TAKEN OVER UPON ACQUISITION OF A BUSINESS, BUT THEY WERE NOT MEMBERS OF AN APPROVED GRATUITY FUND UNLIKE OTHER EMPLOYEES OF THE ASSESSEE. UNDER THESE CIRCUMSTANCES, THE TAX RETURN WAS FINALIZED AND FIL LED IN BY A NAMED PERSON WHO WAS NOT A CHARTERED ACCOUNTANT AND WAS A COMMON RES OURCE. 16. IT IS FURTHER STATED IN THE AFFIDAVIT THAT THE RETURN WAS SIGNED BY A DIRECTOR OF THE ASSESSEE WHO PROCEEDED ON THE BASIS THAT THE RETURN WAS CORRECTL Y DRAWN UP AND SO DID NOT NOTICE THE DISCREPANCY BETWEEN THE TAX AUDIT REPORT AND TH E RETURN OF INCOME. 17. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT THE FACTS OF THE CASE ARE RATHER PECULIAR AND SOMEWHAT UNIQUE. T HE ASSESSEE IS UNDOUBTEDLY A REPUTED FIRM AND HAS GREAT EXPERTISE AVAILABLE WITH IT. NOTWITHSTANDING THIS, IT IS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A 'SILLY ' MISTAKE AND INDEED THIS HAS BEEN ACKNOWLEDGED BOTH BY THE TRIBUNAL AS WELL AS B Y THE HIGH COURT. 18. THE FACT THAT THE TAX AUDIT REPORT WAS FILED AL ONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOWABLE UNDER SECTION 40A(7) OF THE ACT INDICATES THAT THE ASSESS EE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. APART FROM THE FACT THAT THE ASSESSEE DID NOT NOTICE THE ERROR, IT WAS NOT EVEN NOTICED EVEN BY THE ASSESSING OFFICER WHO FRAMED THE ASSESSMENT ORDER. IN THAT SENSE, EVEN THE ASSESSING OFFICER SE EMS TO HAVE MADE A MISTAKE IN OVERLOOKING THE CONTENTS OF THE TAX AUDIT REPORT. 19. THE CONTENTS OF THE TAX AUDIT REPORT SUGGEST TH AT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QU ESTION OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. IT APPEARS T O US THAT ALL THAT HAS HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONA FIDE AND IN ADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING ITS RETURN, FAILED TO ADD THE PROV ISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESCRIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBRE AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BE EN CAREFUL CANNOT BE DOUBTED, BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DOES NOT MEAN THAT THE 6 ITA NO.206/DEL/2016 ASSESSEE IS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. 20. WE ARE OF THE OPINION, GIVEN THE PECULIAR FACTS OF THIS CASE, THAT THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIFIED. WE ARE SA TISFIED THAT THE ASSESSEE HAD COMMITTED AN INADVERTENT AND BONA FIDE ERROR AND HA D NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS. 21. UNDER THESE CIRCUMSTANCES, THE APPEAL IS ALLOWE D AND THE ORDER PASSED BY THE CALCUTTA HIGH COURT IS SET ASIDE. NO COSTS. 7. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND JUDICIAL PRECEDENTS, THE APPEAL FILED BY THE REVENUE IS DISM ISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09/08/ 2019. SD/- SD/- [BHAVNESH SAINI] [T.S. KAPOOR] JUDICIAL MEMBER ACCOUNTANT MEMBER DELHI; DATED: 09/08/2019. F{X~{T F{X~{T F{X~{T F{X~{T? ?? ? FA FA FA FA P.S P.SP.S P.S COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI