The ACIT, Circle-2, Surat V. M/s. Shree Shantinath Silk Indus., Surat

ITA 207/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1867 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 25-01-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: S N DIVETIA
• Keywords: Bonafide belief; Tax effect
• Section: 271(1)(c); 43B; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING: 9.12.2009 DRAFTED ON:9.12.200 9 ITA NO.207/AHD/2006 ASSESSMENT YEAR : 1986-1987 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2, SURAT. VS. M/S. SHREE SHANTINATH SILK INDUSTRIES, UDHNA MAGDALLA ROAD, SURAT. PAN/GIR NO. : AAJFS 6041C (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI M.C.PANDIT SR. D.R. RESPONDENT BY: SHRI S.N.DIVETIA O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD.CIT(APPEALS)-II, SURAT, DATED 24.10.2005 IN APPE AL NO.CAS/II/87/05-06. 2. THE SOLE GROUND OF APPEAL TAKEN BY REVENUE IS T HAT THE CIT(A)-II, SURAT HAS ERRED IN CANCELLING THE PENALTY LEVIED UN DER SECTION 271(1)(C) OF THE ACT OF RS. 38,62,422/-. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DECIDED THE ISSUE AS FOLLOWS:- 2. THE ONLY GROUND OF APPEAL IS AGAINST THE LEVY O F PENALTY OF RS.38,62,422 U/S. 271(1)(C) OF THE ACT. THE A.O. HA S STATED IN THE ASSESSMENT ORDER THAT DURING THE YEAR A SUM OF RS.7 7,24,844/- WAS COLLECTED BY THE ASSESSEE TOWARDS EXCISE DUTY WHICH NOT PAID TO THE GOVERNMENT AND AS PER THE SETTLED POSITION, THE SAM E IS PART AND PARCEL OF TRADING RECEIPTS I.E. THE JOB CHARGES IN THE CASE OF THE ASSESSEE. HOWEVER, THE SAME HAS NOT BEEN DONE SO BY THE APPELLANT ITA NO .207/AHD/2006 M/S.SHREE SHANTINATH SILK INDUSTRIES ASST.YEAR -1986-87 - 2 - AND THE SAME WAS DIRECTLY TAKEN TO THE CREDIT OF CE NTRAL EXCISE ACCOUNT SHOWN IN THE BALANCE SHEET AND THIS AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(L)(C) OF THE I.T. ACT AND THE PENALTY OF RS.38, 62.422 WAS LEVIED ACCORDINGLY. 2.1 AS AGAINST THE ABOVE, THE LD. COUNSEL OF THE A PPELLANT HAS ARGUED THAT NO SPECIFIC FINDING HAS BEEN RECORDED IN THE A SSESSMENT ORDER EITHER REGARDING CONCEALMENT OF INCOME OR FURNISHIN G OF INACCURATE PARTICULARS OF INCOME AND IN THE ABSENCE OF ANY SUC H SATISFACTION, NO PENALTY U/S. 271(L)(C) CAN BE IMPOSED BY THE A.O. I T HAS FURTHER BEEN ARGUED THAT THE PAYMENT OF EXCISE DUTY WAS DISPUTED AND A WRIT PETITION WAS FILED BEFORE THE HON'BLE SUPREME COURT OF INDIA AND THE RESPONDENTS WERE RESTRAINED FROM LEVYING AND RECOVE RING THE DISPUTED PORTION OF THE EXCISE DUTY SUBJECT TO THE CONDITION THAT THE PETITIONER SHALL FURNISH BANK GUARANTEE TO THE FULL EXTENT IN REGARD TO THE DISPUTED PORTION OF THE EXCISE DUTY TO THE SATI SFACTION OF THE RESPONDENTS. IT HAS THERE, BEEN CONTENDED THAT THE DIFFERENCE IN EXCISE DUTY AMOUNTING TO RS.77,24,844 COLLECTED BUT NOT PAID, WAS DEPOSITED AS FDR WITH THE BANK IN DUE COMPLIANCE WI TH THE APEX COURT'S DECISION AND SUBSEQUENTLY THE APEX COURT RE NDERING ADVERSE DECISION ON THE ISSUE, THE PAYMENT WAS EFFECTED TO THE EXTENT OF RS.98,25,198 ON 29/6/1988. THE ID. COUNSEL OF THE A PPELLANT HAS ARGUED THAT THE DEDUCTION IN RESPECT OF EXCISE DUTY IS ALLOWABLE IN THE YEAR IN WHICH THE AMOUNT WAS ACTUALLY PAID BY THE A PPELLANT AND AS THE PAYMENT OF EXCISE DUTY WAS NOT MADE IN COMPLIAN CE TO DECISION OF THE APEX COURT, THERE WAS NO ANIMUS I.E. CONSCIO US CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PARTICULARS ON T HE PART OF THE ASSESSEE AND THE PENALTY IS ALSO NOT LEVIABLE WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OR THE ACT OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFEND ER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. IT IS STRONGLY URGED THAT THE 'CONCEALMENT INHERENTLY CARRIES WITH IT THE EL EMENT OF MENS-REA AND IN THE FACTS OF THE PRESENT CASE, THE ELEMENT O F MENS-REA IS MISSING AND THE A.O. WAS NOT JUSTIFIED IN LEVYING T HE PENALTY U/S. 271(L)(C) OF THE I. T. ACT. THE RELIANCE IS PLACED ON THE FOLLOWING CASES: A) NATIONAL TEXTILES V/S. CIT (GUJ) (2001) 249 ITR 125 B) HINDUSTAN STEEL LTD. V/S. STATE OF ORISSA 83 ITR 26 (SC) C) K. C. BUILDERS V/S. ACIT 265 ITR 562 (SC) 2.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A PPELLANT'S REPRESENTATIVE. THE FACTS ARE NOT DISPUTED THAT THE APPELLANT HAD COLLECTED EXCISE DUTY AMOUNTING TO RS.77,24,844 FRO M THE CUSTOMERS, WHICH WAS NOT CREDITED TO THE TURNOVER I.E. JOB CHA RGES OF THE APPELLANT BUT THE SAME WAS TAKEN TO CENTRAL EXCISE ACCOUNT AND SHOWN IN THE BALANCE SHEET DIRECTLY. THE A.O. HOWEV ER, CAME TO THE ITA NO .207/AHD/2006 M/S.SHREE SHANTINATH SILK INDUSTRIES ASST.YEAR -1986-87 - 3 - CONCLUSION THAT THE AMOUNT OF EXCISE DUTY IS A PART OF THE TURNOVER IN THE LIGHT OF HON'BLE SUPREME COURT DECISION IN THE CASE OF CHOWRIGHEE SALES BUREAU PVT. LTD. 87 ITR - 542 (S.C .) AND SINCLAIRE MURRAY 97 UK 615 (S.C.) AND AS THE AMOUNT OF EXCISE DUTY WAS ACTUALLY NOT PAID DURING THE YEAR, THE SAME WAS DIS ALLOWED U/S.43B OF THE I.T. ACT AND THE SHOW CAUSE NOTICE U/S. 271(L)( C) OF THE I. T. ACT WAS ISSUED ACCORDINGLY. HOWEVER, ON PERUSAL OF TH E RECORDS, IT IS OBSERVED THAT THE PAYMENT OF EXCISE DUTY WAS IN DIS PUTE AND A WRIT PETITION WAS FILED BY THE APPELLANT BEFORE THE HON. SUPREME COURT, WHERE IT WAS HELD THAT THE EXCISE DUTY WAS NOT REQU IRED TO BE LEVIED OR RECOVERED FROM THE APPELLANT SUBJECT TO FURNISHI NG OF BANK GUARANTEE AND ACCORDINGLY, THE WHOLE AMOUNT WAS DEP OSITED IN THE F.D. A/C. WITH THE BANK AND SUBSEQUENTLY ON THE REV ERSAL OF THE DECISION BY THE HON'BLE, SUPREME COURT THE SAME WAS PAID TO THE GOVERNMENT AND THE SAME WAS ALLOWABLE AS DEDUCTION IN THE YEAR OF PAYMENT U/S. 43B OF THE I.T.ACT. IT MAY BE APPRECIA TED THAT THE DEDUCTION IN RESPECT OF EXCISE DUTY IS COVERED WITH IN THE PURVIEW OF SECTION 43B OF THE I.T.ACT. HOWEVER, IN THE PRESENT CASE THE PAYMENT WAS NOT MADE BY THE APPELLANT IN COMPLIANCE TO THE DIRECTIONS OF THE HON'BLE SUPREME COURT. IN VIEW OF THESE CIRCUMSTAN CES, THERE IS A FORCE IN THE ARGUMENTS ADVANCED THE BY THE LD. COUN SEL OF THE APPELLANT THAT ALL THE PARTICULARS OF INCOME NECESS ARY FOR THE COMPUTATION OF APPELLANTS INCOME WERE FURNISHED BEF ORE THE A.O. AND HENCE THE SAME IS NOT COVERED FOR LEVYING OF TH E PENALTY U/S. 271(1) (C) OF THE I. T. ACT. THIS ALSO FINDS SUPPOR T FROM THE DECISION OF HON. ITAT AHMEDABAD BENCH ' A' IN THE CASE APPELLAN T & ITS SISTER CONCERNS IN APPEAL NOS. 3128 TO 3131/AHD./04 FOR TH E ASSESSMENT YEARS 1987-88, 1989-90 & 1985-86 RESPECTIVELY. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: 'IN ALL THESE, THE PENALTIES HAVE BEEN LEVIED FINDI NG THE DIFFERENCE IN THE ASSESSED INCOME AND RETURNED INCO ME ON THE ONE HAND AND THE ASSESSED INCOME AND THE INCOME ESTIMATED BY THE ASSESSEE U/S. 212 OF THE ACT ON TH E OTHER. THE DIFFERENCE IN THE ASSESSED INCOME AND RETURNED INCOME ESTIMATED INCOME HAS ARISEN ON ACCOUNT OF GP ADDITI ONS UNDER SECTION. 43B OF THE ACT AND DISALLOWANCES OF UNPAID CENTRAL INCISE DUTY. THESE ADDITIONS HAVE BEEN DISP UTED BY THE ASSESSEE AND IT SEEMS THAT WITH NO FATE. BE THA T AS IT MAY, THE ASSESSEE'S CONTENTION IS THAT THE ADDITION S AND DISALLOWANCES HAVE BEEN MADE MERELY ON THE BASIS OF CERTAIN ABSENCE OF GATE PASS, REGISTERS, STOCK REGI STERS OF COLOUR AND CHEMICALS, REQUISITION SLIPS FOR CONSUMP TION OF RAW MATERIAL AND RECORD OF PRODUCTION AT VARIOUS ST AGES AND BY REJECTING THE BOOKS OF ACCOUNTS HE APPLIED CERTA IN RATIOS TO WORK OUT THE PROPOSED ADDITIONS IN THE TRADING R ESULTS. THE OTHER ADDITIONS ARE OF THE NATURE OF DISALLOWANCES BECAUSE OF NON PAYMENT OF CERTAIN EXPENDITURE WITHIN THE .STIP ULATED ITA NO .207/AHD/2006 M/S.SHREE SHANTINATH SILK INDUSTRIES ASST.YEAR -1986-87 - 4 - TIME PROVIDED U/S. 43B OF THE ACT. THERE IS NO SPEC IFIC FINDING ABOUT THE CONCEALMENT OF INCOME. IN ALL THESE CASES THE ADDITIONS WITH RESPECT OF WHICH PENALTIES HAVE BEEN LEVIED, IN OUR OPINION, CANNOT BE EQUATED WITH CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS WHICH WERE KNO WN TO BE UNTRUE BY THE ASSESSEE. IN THESE CIRCUMSTANCES, IN OUR OPINION, THE DECISIONS IN THE CASE OF PATEL ENGINEE RING CO. V/S. ITO 39 TAXMAN 236, PARAMOUNT RADIO SERVICES VS . ITO 50 TAXMAN 343, JUMABHAI PREMCHAND HUF VS. CIT 243 T R 812 (GUJ), SUPPORT THE CASE OF THE ASSESSEE STATING THAT THE ESTIMATE OF INCOME DID NOT MEAN THAT THERE WAS A CONCEALMENT OF INCOME. THE OTHER DISALLOWANCES ARE JUST MADE ON THE BASIS OF THE RETURNS OF THE ASSESSEES W HICH ALSO CANNOT BE EQUATED WITH THE CONCEALMENT NOR FUR NISHING OF INACCURATE PARTICULARS, LIE ACCORDINGLY VACATE T HE ORDERS OF THE CIT(A). IN VIEW OF THE ABOVE I AM OF THE CONSIDERED OPINION THAT THERE WAS NO CONSCIOUS CONCEALMENT OF INCOME AND THE ELEMENT OF MENS-REA WAS MISSING. THE RATIO OF DECISIONS OF HON. SUPREME COURTS. GUJA RAT HIGH COURT AND ITAT RELIED BY THE APPELLANT CITED SUPRA ARE APPLICABLE ON THE FACTS OF THE CASE. THE A.O. WAS THEREFORE, NOT JUSTIFIED IN LEVYING TH E PENALTY U/S, 271(L)(C) OF THE I. T. ACT. THE LEVY OF PENALTY OF AMOUNTING TO RS.3 8,62,422 IS, THEREFORE, CANCELLED. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENT LY ARGUED AND SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICE R. 5. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE ON THE OTHER HAND SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND RELIED ON HIS SUBMISSIONS MADE BEFORE THE LEARNED C OMMISSIONER OF INCOME TAX(APPEALS) WHICH IS QUOTED ABOVE. HE FURTHER REL IED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. DAL MIA AGENCIES (P) LTD. (2009) 29 DTR (DEL) WHEREIN IT WAS HELD THAT TWO VI EWS BEING POSSIBLE ON ALLOWABILITY OF COMPENSATION TO WORKS, WHETHER ALLO WABLE UNDER SECTION 37(1) OR SECTION 35DDA, THERE WAS NO CONCEALMENT OF FURNISHI NG OF INACCURATE PARTICULARS ATTRACTING PENALTY UNDER SECTION 271(1) (C). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE LEARNED ITA NO .207/AHD/2006 M/S.SHREE SHANTINATH SILK INDUSTRIES ASST.YEAR -1986-87 - 5 - ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271( 1)(C) OF RS.77,24,844/- UNDER SECTION 43B OF THE ACT ON ACCOUNT OF NON PAYMENT OF EXCISE DUTY WITHIN THE STIPULATED TIME. ACCORDING TO THE LEARNED ASSESSING OFFICER THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME TO THE E XTENT OF RS.77,24,844/-. ON APPEAL LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ABOVE LEVY OF PENALTY UNDER SECTION 271(1)(C) ON THE GROUND THAT THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS AND THE ASSESSMENT WAS M ADE ONLY ON THE BASIS OF THE PARTICULARS FURNISHED BY THE ASSESSEE. WE FIND THAT IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT THE ADDITION OF RS.77,24,844/- MADE IN THE YEAR BY INVOKING PROVISIONS OF SECTION 43B IS ALLOWABLE AS DEDUCTION TO THE ASSESSEE IN THE SUBSEQUENT YEAR IN WHICH THE ASSESSEE HAD MADE THE PAYMENT OF THE SAME TO THE GOVERNMENT. THUS, THE ADDITION MADE IN THE YEAR UND ER APPEAL HAS RESULTED IN ALLOWANCE OF DEDUCTION IN THE SUBSEQUENT YEAR IN TH E HANDS OF THE ASSESSEE WHICH IMPLIES THAT THE TAX EFFECT OF BOTH THE YEARS TAKEN TOGETHER IS NIL. FURTHER, THE ASSESSEE BONAFIDELY BELIEVED THAT AS PER ITS SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY IT, IT HAD NOT CLAIMED DEDUCTION OF EXC ISE DUTY, BEING DIRECTLY CREDITED TO BALANCE SHEET, PROVISIONS OF SECTION 43 B DOES NOT COME INTO OPERATION. SECTION 43B COMES INTO OPERATION ONLY WH EN DEDUCTION IN RESPECT OF ANY TAX DUTY ETC. WAS CLAIMED BY THE ASSESSEE. THUS , NON ADDITION OF THE UNPAID EXCISE DUTY BY THE ASSESSEE IN ITS RETURN OF INCOME WAS BECAUSE OF THE ABOVE BONAFIDE BELIEF. FURTHER, IT IS OBSERVED THAT LEARN ED DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY MATERIAL BEFORE US TO CONTROVER T THE FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THAT THE ASSESS MENT OF RS.77,24,844/- WAS MADE ONLY ON THE BASIS OF THE PARTICULARS FURNI SHED BY THE ASSESSEE IN ITS RETURN OF INCOME AND NO PARTICULARS OF MATERIAL FAC TS WHICH WERE REQUIRED FOR COMPUTING THE INCOME OF THE ASSESSEE FURNISHED BY T HE ASSESSEE WAS FOUND TO BE INACCURATE. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS). WE THEREFORE, CONFIRM THE ORDER OF THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS) AND DISMISS THE APPEAL OF THE REVENUE. ITA NO .207/AHD/2006 M/S.SHREE SHANTINATH SILK INDUSTRIES ASST.YEAR -1986-87 - 6 - 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE H EARING IN THE PRESENCE OF THE PARTIES ON 09/12/2009. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 09/12/2009 PREPARED AND COMPARED BY : PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, SURAT. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD