Basanti Nath Dutta, Bhubaneswar V. ITO, Bhubaneswar

ITA 209/CTK/2012

• Counselvise Citation: 20922114 RSA 2012
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 10-07-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 28-03-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: M K KARNA
• Keywords: Depreciation; Cost of acquisition
• Section: 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 209/CTK/2012 / ASSESSMENT YEAR 2005 - 06 SRI BASANTI NATH DUTTA, PLOT NO.LIG - 84, NAYAPALLI BRITE COLONY, BHUBANESWAR - 12 PAN: AAJPD 5741 L - - - VERSUS - INCOME - TAX O FFICER, WARD 2(1), BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI M.K.KARNA, AR / FOR THE RESPONDENT: / SHRI S.C.MOHANTY, DR / DATE OF HEARING: 10.07. 2012 / DATE OF PRONOUNCEMENT: 13.07.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE IS ON THE SOLITARY ISSUE REGARDING LEVY OF PENALTY UNDER THE PROVISIONS OF SECTION U/S. 271(1)(C) P ARTLY REDUCED BY THE LEARNED CIT(A) BUT ON ASSUMPTION OF WRONG FACTS TO 100% OF THE TAX SOUGHT TO BE EVADED WHEN THE VERY DISALLOWANCE OF EXPENDITURE HAS BEEN PARTLY DELETED BY THE LEARNED CIT(A) HIMSELF. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE IS A DEALER OF LIQUOR PURCHASED FROM ORISSA STATE BEVERAGES CORPORATION LTD., (IN SHORT OSBCL ) SUBJECT TO TAX COLLECTION AT SOURCE AT THE RATE PRESCRIBED UNDER THE PROVISIONS OF SECTION 206C(5) INCLUDING SURCHARGE AND CESS. THE ASSESS ING OFFICER ON THE BASIS OF AUDITED P & L ACCOUNT VERIFIED THE PURCHASES ON THE BASIS OF TC S CERTIFICATES ISSUED WHICH DIFFERENCE WAS APPROXIMATELY 1% DUE TO TECHNICAL ACCOUNTING OF THE SAME WAS CONSIDERED EXCESS I.T.A.NO. 209/CTK/2012 2 PURCHASES CLAIMED BY THE ASSESSEE IN THE P & L ACCOUNT FOR TAXATION. A SUM OF 68,508 WAS ADDED TO THE INCOME RETURNED BY THE ASSESSEE FROM ITS PROPRIETARY CONCERN. DISALLOWANCE OF EXPENSES ON THE BUSINESS PROMOTION, MISC. EXPENSES AND DEPRECIATION WERE ALSO ADDED TO THE ASSESSEES INCOME WHICH W ERE APPEALED AGAINST BEFORE THE FIRST APPELLATE AUTHORITY . THE FIRST APPELLATE AUTHORITY ON THE TECHNICAL ERROR COMMITTED BY THE ACCOUNTANT WAS NOT TO BE CONSIDERED IN VIEW OF THE PROVISIONS OF SECTION 145A AS CLAIMED BY THE ASSESSEE DISMISSED THE ASSESSEES CONTENTION PRAYING FOR DELETION OF THE ADDITION. HOWEVER, THE LEARNED CIT(A) GAVE PART RELIEF WHEN THE TOTAL DISALLOWANCE OF OTHER EXPENDITURE AMOUNTING TO 20,205 WAS REDUCED TO 9,000 SUSTAINED. THERE WAS NO SECOND APPEAL BY THE ASSESSEE . 3. THE ASSESSING OFFICER ON THE BASIS OF ORDER PASSED PURSUANT TO THE APPELLATE ORDER PROCEEDED TO LEVY PENALTY U/S. 271(1)(C) WHEN THE TOTAL AMOUNT FOR THE PURPOSE OF QUA NTUM OF TAX SOUGH TO BE EVADED WAS CONSIDERED AT 26,853. THE ASSESSING OFFICER, HOWEVER, LEVIED PENALTY OF 35,000 WHICH WAS APPEALED AGAINST BEFORE THE LEARNED CIT(A) WHO HAS REDUCED THE LEVY OF PENALTY FROM 35,000 TO 26,853 BEING THE 100% OF THE TAX S OUGHT TO BE EVADED AS PENALTY U/S. 271(1)(C). 4. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS, SUBMITTED THAT THE QUANTUM APPEALS ARE SEPARATE T HEN THOSE OF PENALTY PROCEEDINGS INSOFAR AS THE ASSESSING AUTHORITY AND THE APPELLATE AUTHORIT Y HAVE CLARIFIED THAT THE DISALLOWANCE OF EXPENSES CANNOT BE CONSIDERED FOR LEVY OF PENALTY U/S. 271(1)(C). HE POINTED OUT THAT THE ADDITION HAS BEEN MADE ON ACCOUNT OF EXCESS PURCHASE WHICH WAS CONSIDERED BY THE LEARNED CIT(A) AS A TECHNICAL ERROR IN VIEW OF THE FACT THAT THE ACCOUNTANT HAD INCLUDED 1% TCS AS PART OF PURCHASE COST WHEN ACTUALLY THE PURCHASES WERE IN ACCORDANCE WITH THE PURCHASE BILLS RAISED BY OSBCL. THE ASSESSING OFFICER I.T.A.NO. 209/CTK/2012 3 HAD SIMPLY COMPARED THE TCS ON THE TOTAL PURCHASES OF 68,12,763.65 ON WHICH THE TCS WAS 73,319 AGAINST WHICH THE ASSESSING OFFICER HAS GIVEN CREDIT . THEREFORE, IT WAS A TECHNICAL ERROR OF THE ACCOUNTANT OF INCLUDING THE SUM OF 68,508 AS EXCESS PURCHASE WHICH WAS BASICALLY THE AMOUNT OF TCS SOUGHT TO BE RECONCILED AGAIN ST THE PURCHASES WHICH STOOD RECONCILED IN THE ASSESSMENT YEAR 2007 - 08 WHICH COPIES ARE BEING FURNISHED AS PER THE STATEMENT OF TCS, SURCHARGE AND CESS. NO FURTHER AMOUNT OF TCS HAS BEEN GIVEN CREDIT CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE THAT THE AS SESSING OFFICER CONSIDERED THE TCS EQUATED WITH THE PURCHASES WAS AN ERROR ON THE PART OF THE OSBCL WHO HAD NOT DEDUCTED TCS ON THESE PURCHASES WERE HELD AS EXCESS PURCHASE BY THE ASSESSING OFFICER TO BE ADDED IN THE HANDS OF THE ASSESSEE. THE LEARNED CIT( A) CONFIRMED THIS ADDITION ON THE CRITERIA THAT TCS IS NOT AN ALLOWABLE EXPENDITURE RATHER LEANS IN FAVOUR OF THE ASSESSEE TO THE EXTENT THAT THERE WAS NEITHER ANY CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS INSOFAR AS THE ERROR ON THE PART OF THE DEDUCTOR COULD NOT BE HELD AGAINST THE ASSESSEE. FOR THIS PROPOSITION, HE HAS FILED THE BALANCE SHEET FOR THE IMPUGNED ASSESSMENT YEAR ALONG WITH THE DETAILS WHICH CLEARLY INDICATE THAT THERE WAS NO VIOLATION UNDER THE PROVISIONS OF SECTION 145 A. THE AUDITORS HAVE VERIFIED THE CREDITORS THEREFORE WERE SUPPORTED BY HOLDING THE CLOSING STOCK IN THE AUDITED BALANCE SHEET MORE THAT THE SAID PURCHASES, BY NO STRETCH OF IMAGINATION, CAN BE CONSIDERED AS CONCEALMENT OF INCOME. SIMILARLY, THE DISALLOWAN CE OF EXPENSES CLAIMED PARTLY ALLOWED BY THE LEARNED CIT(A) COULD NOT BE CONFIRMED FOR THE PURPOSE OF LEVY OF PENALTY BY THE LEARNED CIT(A) WHO HAS REDUCED THE PENALTY FROM 35,000 TO 26,853 ON THE BASIS OF ORDER U/S.251. IN OTHER WORDS, THE LEARNED CIT(A) HAS HELD THAT THE MAJOR DISALLOWANCE OF EXPENDITURE WAS NEITHER CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS THEREFORE I.T.A.NO. 209/CTK/2012 4 COULD NOT HAVE BEEN A GROUND TO IN ITIATE PENALTY PROCEEDINGS U/S. 271(1)(C). FOR THIS PROPOSITION, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISIONS OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF DR.SYAMAL BARAN MONDAL V. CIT [(2011 244 CTR (CAL) 631] WHO HAVE CATEGORICALLY CONC LUDED THAT TECHNICAL ERRORS COMMITTED BY THE ACCOUNTANTS AND DISALLOWANCE OF EXPENDITURE PARTLY SUSTAINED CANNOT BE A GROUND FOR INVOKING THE PR OVISIONS OF SECTION 271(1)(C) INSOFAR AS CLAIMING OF EXPENDITURE TO BE DISALLOWED BY THE ASSESSING OFFICER IS N EITHER CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. FURTHERMORE THE ADDITION OF 68,508 CONFIRMED BY THE LEARNED CIT(A) WAS ON THE TECHNICAL GROUND THAT THE TCS CANNOT BE CLAIMED AS AN EXPENDITURE CLEARLY INDICATES THAT ON ALL THE DISALLOWANCES THE ASSESSING OFFICER HAD NOT REACHED TO ANY SATISFACTION TO INITIATE PENALTY U/S. 271(1)(C). HE PRAYED THAT THE PENALTY U/S. 271(1)(C) SO CONFIRMED BY THE LEARNED CIT(A) BE DELETED. 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITI ES BELOW. HE SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH AS TO HOW THE AMOUNT OF 68,508 WAS PURCHASES NOTED BY HIM IN THE BOOKS OF ACCOUNT WERE NOT RECORDED SALE BY THE OSBCL. IT IS AN AFTERTHOUGHT FOR HOLDING THE SAME AS TECHNICAL ERROR BEING RECONCILIATION OF THE TCS WHICH HAS BEEN CONCLUDED ACCEPTABLE TO THE OSBCL IN THE ASSESSMENT YEAR 2007 - 08. THE LEARNED CIT(A) THEREFORE RIGHTLY CONSIDERED CONFIRMING THE PENALTY SO LEVIED AT 100% OF THE TAX SOUGHT TO BE EVADED AS AGAINST HIGHER AMOUNT LEVIED BY THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO AGREE WITH THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. THE ASSESSING OFFICER BEGAN HIS RECORDING SATISFACTION FOR I.T.A.NO. 209/CTK/2012 5 HOLDING THE PURCHAS ES CLAIMED AT A HIGHER AMOUNT VIS - - VIS REPORTED LESS OF OSBCL. THE LEARNED CIT(A) CATEGORICALLY HELD THAT THE PURCHASE SHOULD NOT INCLUDE THE AMOUNT OF TCS. THE ACCOUNTING THEREFORE RESULTED IN A TECHNICAL ERROR COMMITTED BY THE ACCOUNTANT WAS TO COVER UP THE ERROR COMMITTED BY THE OSBCL WHO HAD NOT RECONCILED THE TCS AS WITH THE AMOUNT OF TAX CREDIT AVAILED BY THE ASSESSEE. THE ASSESSEE CHO SE TO REPORT THE SAME FOR CARRYING OUT THE RECTIFICATION IN THE ASSESSMENT YEAR 2007 - 08 WHEN THE TOTAL AMOUNT OF TCS STANDS TALLIED WITH THE AMOUNT OF PURCHASES AS RECORDED BY THE OSBCL. IN OTHER WORDS, IT IS A CLEAR CASE OF ERROR COMMITTED BY THE TCS DEDUCTOR AND NOT BECAUSE THE ASSESSEE HAD VIOLATED THE PROVISIONS OF SECTION 145A. REFRAINING OURSELVES FROM COMMENTING O N QUANTUM NOT BEING AGITATED BY THE ASSESSEE BEFORE THE TRIBUNAL, WE ARE OF THE CONSIDERED VIEW THAT THE FACTS CLEARLY INDICATE THAT THERE WAS NO MATERIAL WITH THE ASSESSING OFFICER TO INITIATE PENALTY PROCEEDINGS U/S. 271(1)(C) AFTER HAVING CARRIED OUT AP PEAL EFFECT ON LEARNED CIT(A)S ORDER. THE LEARNED CIT(A) HAD GIVEN RELIEF ON ACCOUNT OF SUBMISSIONS OF THE ASSESSEE APPELLANT BEFORE HIM AND THE EXPENDITURE DISALLOWED HAD BEEN REDUCED SUBSTANTIALLY WHEN THE CLAIM OF EXCESS PURCHASE WAS ALSO CONSIDERED B Y THE LEARNED CIT(A) AS AN ISSUE FOR CLAIMING EXPENDITURE OF INCOME TAX COLLECTED BY THE SELLER OF LIQUOR. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT NEITHER THERE WAS A CASE OF CONCEALMENT OF INCOME INSOFAR AS THE NOMENCLATURE EXCESS PURCHASE HAD BEEN BALANCED BY STOCK HELD BY THE ASSESSEE AGAINST WHICH NO CONTROVERSY HAS BEEN REPORTED EITHER BY THE ASSESSING OFFICER OR THE LEARNED CIT(A). THE PURPORTED INCOME HAD BEEN RENDERED TO TAX BY THE ASSESSEE ITSELF. IN OTHER WORDS, THE CLAIM OF TCS AS HELD BY THE AUTHORITIES BELOW WAS A MERE WITHHOLDING OF TAX IN WHICH THE DEDUCTOR HAD COMMITTED ERROR STOOD RECONCILED BY INDICATING THE PURCHASES WHICH WAS NOT AN EXPENDITURE TO BE I.T.A.NO. 209/CTK/2012 6 DISALLOWED IN VIEW OF THE ASSESSEE HOLDING PHYSICAL STOCK OF THE SAID PUR CHASES. SIMILARLY, PART SUSTENANCE OF EXPENDITURE DISALLOWED UNDER THE VARIOUS HEADS AS MENTIONED ABOVE CANNOT BE A GROUND FOR LEVY OF PENALTY U/S. 271(1)(C). SIMPL Y BECAUSE A PART OF EXPENDITURE IS UNACCEPTABLE FOR DEDUCTION FORMING PART OF WHOLE OF THE E XPE NDITURE OTHERWISE ALLOWABLE CLEARLY INDICATES THAT IT WAS NOT A MATTER OF CONCEALMENT OF INCOME OR FOR THAT MATTER FURNISHING OF INACCURATE PARTICULARS. THEREFORE, ON THIS SCORE, THE PENALTY SO LEVIED U/S. 271(1)(C) DOES NOT HAVE ANY LEGS TO STAND ON. T HE CASE LAWS CITED AT THE BAR AND BEFORE THE LEARNED CIT(A) ARE APPLICABLE TO THE FACTS OF THE ASSESSEES CASE THEREFORE LEAD TO THE FINDING THAT THE ASSESSEE WAS NOT TO BE SUBJECTED TO LEVY OF PENALTY U/S. 271(1)(C). THE SAID PENALTY OF 26,853 SUSTAINED BY THE LEARNED CIT(A) IS CANCELLED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. S D/ - S D/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 13.07.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SRI BASANTI NATH DUTTA, PLOT NO.LIG - 84, NAYAPALLI BRITE COLONY, BHUBANESWAR - 12 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 2(1), BHUBANESWAR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 209/CTK/2012 7 SEAL TO BE AFFIXED ON THE ORDER SH EET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 10.07.2012 .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 11.07.2012 OT HER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COME S BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.07.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE O RDER ................ 9. DATE OF DESPATCH OF THE ORDER ..