M/s Indu Nissan Oxo Chemicals Inds. Ltd., Vadodara V. The ACIT, Circle-1(2), Baroda

ITA 2150/AHD/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4979 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 21-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: S N DIVETIA
• Keywords: Principle of natural justice; Revised return
• Section: 43B; 143(3); 147

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD , JUDICIAL MEMBER AND SHRI WASEEM AHMED , ACCOUNTANT MEMBER ./ ITA NO. 2150/AHD/2015 / ASSTT. YEAR : 2006 - 2007 M/S.INDU NISSAN OXO CHEMICALS INDS. LTD., BHAJWACHHANI ROAD , B/H. GSFC COMPLEX , BAJWA, DIST. VADODARA - 391310. PAN: AAACI4359M VS . A .C.I.T, 103, 1 ST FLOOR , AYAKAR BHAWAN , RACE COURSE CIRCLE, BARODA - 39007. (APPLICANT) ( RESPON D ENT ) ASSESSEE BY : SHRI S.N. DIVETIA , A .R REVENUE BY : SHRI L.P. JAIN, D .R / DATE OF HEARING : 2 5 / 04 / 201 9 / DATE OF PRONOUNCEMENT: 14 /05 /2 01 9 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX , (APPEALS) - 1, VADODARA [ LD. CIT (A) IN SHORT] , DATED 07 / 05 / 2015 ARISING IN THE MATTER OF ASSESS MENT ORDER PASSED UNDER S . 143(3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DATED 05/12 / 2008 RELEVANT TO A SSESSMENT Y EAR (AY) 2006 - 07 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO.2150/AHD/2015 ASSTT. YEAR 2006 - 07 2 1.1 THE ORDER PASSED U/S.250 ON 07.05.2015 FOR A.Y. 2006 - 07 BY CIT(A) - 1, BARODA UPHOLDING THE PENALTY OF RS.45,71,700/ - LEVIED U/S.271(1)(C) BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY OF RS.45,71,700/ - LEVIED U/S.27 1(1)(C) BY AO . THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY LEVIED U/S.271(1)9C) ON THE GROUND THAT THE APPELLANT HAD NOT COME FORWARD SUO MOTO TO FILE REVISED RETURN. 1.3 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE W AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE PENALTY OF RS.45,71,700/ - LEVIED U/S.271(1)(C) BY AO. THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT THE INTEREST EXPS. OF RS.1,35,82,090/ - WAS DULY DEBITED TO THE P&L ACCOUNT AND IT WAS FOUND TO BE GENUINE AS WELL AS THE TAX AUDITOR HAD ALSO DISCLOSED IN THE TAX AUDIT REPORT. IT IS, THEREFORE, PRAYED THAT THE PENALTY U/S.271(1)(C) AS CONFIRMED BY THE CIT(A) MAY KINDLY BE DELETED. THE ONLY EFFECTIVE ISSUE RAISED BY THE ASSESSEE IS THAT THE LD. CIT - A ER RED IN CONFIRMING THE PENALTY LEVIED BY AO FOR RS. 45,71, 700 / - ON ACCOUNT OF FURNISHING IN ACCURATE PARTICULA RS OF INCOME. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF VARI OUS PRODUCT LIKE OXO ALCOH O LS. T HE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL LOSS OF RS. 3 , 16 , 10 , 430 / - ONLY . S UBSEQUENTLY , THE ASSESSME NT WAS FRAMED U/S 143( 3 ) OF THE ACT V IDE ORDER DATED 5 TH DECEMBER 2008. IN T HE ASSE SSMENT FRAMED U/S 143( 3 ) OF THE ACT THE TOTAL LOSS WAS DETERMINED AT RS. 2,88,55,366/ - ONLY . TH E ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED THE DEDUCTION OF INTEREST EXPENSE S PAYABLE TO BANK OF INDIA AND U NION B ANK OF INDIA AMOUNTING TO RS. 1 ,35, 82 ,00 0 .00 ONLY. HOWEVE R, THE AO WAS OF THE VIEW THAT ITA NO.2150/AHD/2015 ASSTT. YEAR 2006 - 07 3 SUCH AMOUNT CANNOT BE ALLOW ED AS DEDUCTION IN VIEW OF THE P ROVI SION OF SECTION 4 3 B(E) OF THE ACT , I.E. THE INTEREST SHOULD HAVE BEEN PAID ON OR BEFORE THE DUE DATE OF FILING OF INCOME TAX RETURN AS SPECIFIED U/S 139( 1 ) OF THE ACT. THUS THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT ON THE GROUND THAT THE ASSESSEE FAILED TO MAKE THE PAYMENT SUCH INTEREST WITHIN THE SPECIFIED DUE DATE. ACCORDINGLY , THE INTEREST EXPENSES CLAIMED BY THE ASSESSEE WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. SUBSEQUENTLY , THE NOTICE U/S 274 R.W.S 271( 1 )( C) OF THE ACT WAS ISSUED UPON THE ASSESSEE FOR LEVYING THE PENALTY U/S 271( 1 )(C) OF THE ACT ON ACCOUNT OF FURNISHING INACCURATE PARTICULA RS OF INCOME. 2.1 THE ASSESSEE IN RESPONSE TO THE NOTICE ISSUED U/S 274 OF THE ACT MADE R E PLY DATED 14 TH JULY 2014 . T HE DETAILS OF THE REPLY STAND AS UNDER ; A. THE AUDITOR OF THE COMPANY MISSED GIVING THE EFFECT OF THE AMENDMENT BROUGHT IN THE FINANCE ACT 2003 WHEREBY THE PAYM ENT OF INTEREST TO THE BANK WAS SUBJECT TO THE DEDUCTION ON ACTUAL PAYMENT. AS SUCH THE PAYMENT OF THE INTEREST TO THE SCHEDULE D BANK WAS NOT COVERED UNDER SECTION 43B OF THE ACT UNTIL SUCH AMENDMEN T BROUGHT IN THE STATUTE. B. THE ASSESSEE HAS ALREADY MADE DISALLOWANCE OF INTEREST EXPENSES PAYABLE TO FINANCIAL INSTITUTIONS AMOUNTING TO RS. 1 ,93,10, 506 / - ONLY . A S SUCH THERE WAS NO REASON TO MAKE THE DISALLOWANCE OF RS. 1,35,82, 000 / - IN THE COMPUTATION OF INCOME. MOREOVER, THE TOTAL INCOME OF THE ASSESSEE WOULD HAVE BEEN NEGATIVE E VEN AFTER THE DISALLOWANCE OF INTEREST EXPENSES OF RS. 1, 35 ,82.00/ - . ITA NO.2150/AHD/2015 ASSTT. YEAR 2006 - 07 4 2.2 IN VIEW OF THE ABOVE THE ASSESSEE SUBMITTED THAT IT HAS CLAIMED THE DEDUCTION OF THE INTEREST EXPENSES UNDER THE BONAFIDE BELIEVE THAT SAME IS ALL OWABLE AS A DEDUCTION UNDER THE ACT. H OWEVER , THE AO DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT IGNORING OF THE LAW CANNOT BE THE BASIS OF CLAIMING DEDUCTION UNDER THE PROVISIONS OF LAW. THEREFORE THE INTENTION OF THE ASSESSEE WAS MA L A - FI D E AND ACCORDINGLY THE DEDUCTION WAS CLAIMED . SIMILARLY , THE ASSESSEE BY CLAIMING A DEDUCTION OF INTEREST EXPENSES IS ENHANCING THE AMOUNT OF LOSSES WHICH WILL CERTAINLY BE AVAILABLE FOR SET OFF AGAINST THE FUTURE INCOME . FINALLY , THE AO LEVIED THE PENA LTY U/S 271( 1 )(C) OF THE ACT FOR RS. 45 , 71 ,7 00 / - ON ACCOUNT OF FURNISHING INACCURATE PARTICULAR OF INCOME. THE A GGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LD. CIT (A). 2.3 THE ASSESSEE BEFORE THE LD. CIT (A) SUBMITTED THAT THE DISALLOWANCE OF INTEREST EXPENSES ON THE WORKING CAPITAL LOAN W AS BROUGHT UNDER THE STATUTE BY THE FINANCE ACT , 2003 WITH EFFECT FROM 1 - 4 - 2004. BEING THE RECENT AMENDMENT, THE ASSESSEE OMITTED TO MAKE THE DISALLOWANCE OF SUCH INTEREST INADVERTENTLY IN THE STATEMENT OF INCOME. EVEN THE AUDITOR FAILED TO POINT OUT THE DISALLOWANCE U/S 43 B OF THE ACT AS IT WAS THE RECENT AMENDMENT. THE RETURN OF INCOME WAS FILED A T A LOSS AMOUNTING TO RS. 3, 16 , 10 , 630 / - ONLY. AS SUCH THERE WAS NOT ANY TAX LIABILITY ON THE ASSESSEE EVEN A FTER MAKING THE DISALLOWANCE OF THE IMPUGNED INTEREST EXPENSES. ITA NO.2150/AHD/2015 ASSTT. YEAR 2006 - 07 5 2.4 THE ASSESSEE HAS ALREADY MADE THE DISALLOWANCE OF THE INTEREST EXPENSES PAYABLE TO THE FINA NCIAL INSTITUTION AMOUNTING TO RS. 1, 9 3, 10 , 506.00 ONLY. THUS THERE WA S NO REASON FOR THE ASSESS EE NOT TO MAKE THE DISALLOWANCE OF THE INTEREST EXPENSES DESCRIBED ABOVE BUT FAILED DUE TO INADVERTENT MISTAKE. 2.5 THERE WAS COMPLETE DISCLOSURE FOR THE AMOUNT OF THE IMPUGNED INTEREST IN THE FINANCIAL STATEMENT WHICH W AS DULY A UDITED UNDER THE COMPANIE S AND I NCOME - TAX ACT. SIMILARLY , THE EXPLANATION/DETAILS FURNISHED QUA THE IMPUGNED INTEREST EXPENSES DURING THE ASSESSMENT PROCEEDINGS WERE NOT FOUND TO BE FALSE. THEREFORE IT CAN BE CONCLUDED THAT THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULAR OF INCOME. 2.6 EVEN THE AO FAILED TO MAKE THE DISALLOWANCES OF SUCH INTEREST EXPENSES IN THE ASSESSMENT PROCEEDING S FRAMED U/S 143( 3 ) OF THE ACT. 3. HOWEVER, THE LD. CIT (A) WAS NOT CONVINCED WITH THE ARGUMENT OF THE ASSESSEE BY OBSERVING THAT HAD THE CASE OF THE ASSESSEE NOT BEEN SELECTED UNDER SCRUTINY, THE INCOME OF THE ASSESSEE WOULD HAVE GONE TAX FREE. ACCORDINGLY, THE LD. CIT (A) UPHELD THE FINDING OF THE AO. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 73 AND REITERATED THE SUBMISSIONS MADE BEFORE THE AO. ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. ITA NO.2150/AHD/2015 ASSTT. YEAR 2006 - 07 6 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE RELATES TO THE PENALTY UNDER SECTION 271 ( 1 ) OF THE ACT WHICH WAS IMPOSED ON ACCOUNT OF FURNISHING INACCURATE PARTICULAR OF INCOME. THE ASSESSEE HAS CLAIMED THE DEDUCTION FOR THE AMOUNT OF INTEREST EXPENSES PAYABLE ON THE WORKING CAPITAL LOAN TO THE BANK IN ITS PROFIT AND LOSS ACCOUNT. THERE IS NO DISPUTE TO THE FACT THAT SUCH INTEREST IS SUBJECT TO A DEDUCTION ON ACTUAL PAYME NT IN PURSUANCE TO THE PROVISIONS OF SECTION 43B OF THE ACT. THE ASSESSEE IN THE INSTANT CASE HAS NOT MADE THE PAYMENT OF SUCH INTEREST WITHIN THE TIME AS SPECIFIED UNDER SECTION 43 B OF THE ACT AND THEREFORE THE ASSESSEE WAS NO T EN TITLE D TO THE DEDUCTION FROM ITS INCOME FOR SUCH EXPENSE . THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS ADMITTED THE FACT THAT IT NOT ELIGIBLE FOR DEDUCTION ON ACCOUNT OF SUCH INTEREST EXPENSE BY VIRTUE OF THE PROVISION OF SECTION 43B OF THE ACT . ON PERUSAL OF THE FINANCIAL ST ATEMENTS OF THE ASSESSEE, WE NOTE THAT THERE WAS A DISCLOSURE REGARDING THE DEFAULT COMMITTED BY THE ASSESSEE FOR NON - PAYMENT OF INTEREST TO THE BANK. THE RELEVANT DISCLOSURE WAS MADE IN THE FINANCIAL STATEMENTS AS UNDER : (B) IN RESPECT OF TEM LOANS F ROM FINANCIAL INSTITUTION, THE COMPANY HAS DEFAULTED IN REPAYMENT OF THEIR DUES. FOLLOWING TABLE BRINGS OUT THE AMOUNT OF DEFAULT AND THE PERIOD FROM WHICH DEFAULT IS MADE. SR.NO. TERM LOANS FROM FINANICAL INSTITUTUIIONS PRINCIPAL (IN LACS) INTERESET (IN LACS) TOTAL (IN LACS) DEFAULT COMMENCING ON PRINCIPAL INTEREST ITA NO.2150/AHD/2015 ASSTT. YEAR 2006 - 07 7 1. IDBI 261.30 883.04 1144.34 31 - MAR - 98 30 - SEP - 98 2. ICICI 7.01 22.19 29.20 30 - SEP - 98 30 - SEP - 98 3. IFCI 19.43 80.76 100.91 15 - DEC - 97 15 - DEC - 97 4. LIC 7.51 23.97 31.48 15 - DEC - 97 15 - DEC - 97 TOTAL 295.25 1009.96 1305.21 SR.NO. CASH CREDITS FROM BANKS PRINCIPAL (IN LACS) INTERESET (IN LACS) TOTAL (IN LACS) DEFAULT COMMENCING ON PRINCIPAL INTEREST 1. BANK OF INDIA 161.29 523.78 678.72 01 - JUL - 98 01 - JUL - 98 2. UNION VBANK OF INDIA 125.67 280.99 406.56 30 - SEP - 98 30 - SEP - 98 TOTAL 286.96 804.77 1085.38 SIMILARLY, WE ALSO FIND THAT THE CA ALSO FILED A LETTER ISSUED ADMITTING THE MISTAKE COMMITTED BY HIM FOR NOT MAKING THE DISALLOWANCE IN ITS TAX AUDIT REPORT ON ACCOUNT OF NON - PAYMENT OF INTEREST TO THE BANK. THE COPY OF THE CA LETTER IS PLACED ON PAGES 73 TO 74 OF THE PAPER BOOK. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT THE ASS ESSEE HAS MADE SUFFICIENT DISCLOSURES IN THE FINANCIAL STATEMENTS AND FURTHERMORE IT SHOULD NOT BE PENALI Z ED ON ACCOUNT OF THE MISTAKE COMMITTED BY THE CHARTERED ACCOUNTANTS AS DISCUSSED ABOVE. THEREFORE WE ARE RELUCTANT TO CONFIRM THE PENALTY LEVIED BY TH E AUTHORITIES BELOW. ITA NO.2150/AHD/2015 ASSTT. YEAR 2006 - 07 8 IN HOLDING SO , WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. VS CIT REPORTED IN 25 TAXMANN.COM 400 WHEREIN, IT WAS HELD AS UNDER: THE CONTENTS OF THE TAX AU DIT REPORT SUGGEST THAT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QUESTION OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. IT APPEARS THAT ALL THAT HAS HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONA FIDE AND I NADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING ITS RETURN, FAILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESCRIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBER AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NO THING TO DO WITH THE INADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTED, BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEM PTING TO CONCEAL ITS INCOME. GIVEN THE PECULIAR FACTS OF THIS CASE, THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIFIED. THE ASSESSEE HAD COMMITTED AN INADVERTENT AND BONA FIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS A FTER CONSIDERING THE FACTS IN TOTALITY AS DISCUSSED ABOVE, WE FEEL THAT THERE WAS NO DELIBERATE INTENTION / ACT ON THE PART OF THE ASSESSEE TO FURNISH THE INACCURATE PARTICULARS OF INCOME. WE ALSO FIND STRENGTH FROM THE FACT THAT THERE WAS NO IMMEDIATE TAX BENEFIT TO THE ASSESSEE BY NOT DISALLOWING THE INTEREST EXPENSES IN THE GIVEN FACTS AND CIRCUMSTANCES SINCE THERE WAS LOSS IN THE RETURN OF INCOME FILED BY THE ASSESSEE. THUS WE REVERSE THE ORDER OF THE AUTHORITIES BELOW AND DIRECT THE AO TO DELETE THE PENALTY IMPOSED BY HIM UNDER SECTION 271 ( 1 ) OF THE ACT. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.2150/AHD/2015 ASSTT. YEAR 2006 - 07 9 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. O R DER PRONOUNCED IN THE COURT ON 14 /05 / 2019 AT AHMEDABAD. - SD - - SD - ( MAHAVIR PRASAD ) ( WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 14 / 05 /2019 MANISH