SADHANA NITRO CHEM LTD., MUMBAI V. ITO 7 (2) (2), MUMBAI

ITA 2192/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0716 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 05-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Assessee Lawyers: V MOHAN
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH G, MU MBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2192//MUM/2016 (ASSESSMENT YEAR-2007-08) M/S SADHANA NITRO CHEM LTD. HIRA BAUG, 1 ST FLOOR, KASTURBA CHOWK, (C.P. TANK), MUMBAI-400004. PAN: AABCS1231R VS. ITO 7(2)(2), 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.MOHAN (AR REVENUE BY : SHRI V.VIDHYADHAR (DR) DATE OF HEARING : 27.12.2017 DATE OF PRONOUNCEMENT : 12.01.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF THE IN COME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER LD. CIT(A)-14, MUMBAI DATED 28.01.2016 FOR ASSESSMENT YEAR (AY) 2007-08, WHICH IN TURN ARI SES FROM THE ORDER OF PENALTY LEVIED UNDER SECTION 271(1)(C) BY THE ASSES SING OFFICER DATED 26.03.2014. THE ASSESSEE HAS RAISED THE FOLLOWING G ROUNDS OF APPEAL: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(APPEALS) ERRED IN CONFIRMING THE LEVY OF PENALTY ON THE REDUCTION IN THE CLAIM OF DEDUCTION UNDER SECTION 10B OF THE ACT OF RS. 33,54,723/-. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(APPEALS) ERRED IN CONFIRMING THE LEVY OF PENALTY ON THE ADDITION MADE UNDER SECTION 145A OF THE ACT OF RS. 165.27 LAKHS. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(APPEALS) ERRED IN CONFIRMING THE PENALTY ORDER OF THE ASSESSING OFFIC ER. ITA NO. 2192/M/ 2016- M/S SADHANA NITRO CHEM LTD. 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TREADING, FILED ITS R ETURN OF INCOME FOR RELEVANT AY ON 27.10.2007 DECLARING NIL INCOME. THE ASSESSMENT WAS COMPLETED ON 31.12.2009 UNDER SECTION 143(3) OF THE ACT. IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTIO N 10B OF RS. 1,30,10,206/-. THE ASSESSING OFFICER (AO) WHILE FRA MING THE ASSESSMENT ORDER RESTRICTED THE DISALLOWANCE UNDER SECTION 10B TO RS. 1,11,01,062/-, THEREBY DISALLOWED THE DEDUCTION UNDER SECTION 10B TO RS. 33,54,723/-. THE AO ALSO MADE THE ADDITION OF RS. 165.27 LAKHS ON AC COUNT OF NON-PAYMENT OF EXCISE DUTY IN TIME AND DISALLOWED THE SAME AS P ER SECTION 43B(A). ON APPEAL BOTH THE ADDITION WERE CONFIRMED. THEREAFTER , THE AO ISSUED NOTICE UNDER SECTION 271(1)(C) READ WITH EXPLANATION-1 DATED 30.12.2009 FOR INITIATING PENALTY FOR FURNISHING INACCURATE PARTIC ULARS OF INCOME. THE ASSESSEE FILED HIS EXPLANATION. THE EXPLANATION OF ASSESSEE WAS NOT ACCEPTED BY AO. THE AO LEVIED THE PENALTY @ 100% OF THE TAX SOUGHT TO BE EVADED. THE AO WORKED OUT THE PENALTY OF RS. 66,92,188/- IN ITS ORDER DATED 26.03.2014. ON APPEAL BEFORE THE LD. CIT(A), THE PE NALTY ORDER WAS SUSTAINED. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT WAS ARGUED BY LD. AR OF THE ASSESSEE THAT THE ITA NO. 2192/M/ 2016- M/S SADHANA NITRO CHEM LTD. 3 AO WHILE PASSING THE ASSESSMENT ORDER HAS NOT INITI ATED THE PENALTY PROCEEDING. THERE WAS NO SATISFACTION RECORDED BY A O WHILE PASSING THE ASSESSMENT ORDER ABOUT THE CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS THEREOF. THUS, THE ORDER OF AO IN LEVYING THE PENALTY IS BAD-IN-LAW. THE AO ISSUED NOTICE UNDER SECTION 2 74 R.W.S. 271 DATED 31.12.2009. THE AO HAS NOT SPECIFIED OR STRIKE OUT THE INAPPROPRIATE PORTION OF NOTICE, SPECIFYING, IF THE PENALTY IS INITIATED FOR CONCEALMENT OF PARTICULAR OR FURNISHING INACCURATE PARTICULAR OF INCOME. THE COPY OF NOTICE DATED 31.12.2009 IS PLACED ON RECORD. THE LD. AR OF THE A SSESSEE RELIED UPON THE DECISION OF MUMBAI TRIBUNAL IN UTTAM VALUE STEELS L IMITED VS. ACIT IN ITA NO. 3622 TO 3625/MUM/16 DATED 22.05.2017, M/S O RBIT ENTERPRISES VS. ITO IN ITA NOS. 1596 & 1597/MUM/14 DATED 01.09.2017 , MEHERJEE CASSINATH HOLDINGS PVT. LTD. VS. ACIT IN ITA NO. 25 55/MUM/12 DATED 28.04.2017, CIT VS. MANJUNATHA COTTON & GINNING FAC TORY (359 ITR 565 (HC, KARNATAKA) AND SESA RESOURCES LTD. VS. ACIT IN TAX APPEAL NO.42 OF 2012 (HC, BOMBAY). ON THE OTHER HAND, THE LD. DR F OR THE REVENUE HEAVILY RELIED ON THE DECISION OF LD. CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE ORDERS OF AUTHORITIES BELOW. IN THE RETURN OF INCOM E, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 10B AT RS. 1,30,10,206/-. T HE ASSESSING OFFICER (AO) WHILE FRAMING THE ASSESSMENT ORDER RESTRICTED THE DISALLOWANCE UNDER SECTION 10B TO RS. 1,11,01,062/-, THEREBY DISALLOWE D THE DEDUCTION UNDER ITA NO. 2192/M/ 2016- M/S SADHANA NITRO CHEM LTD. 4 SECTION 10B TO RS. 33,54,723/-. THE AO ALSO MADE TH E ADDITION OF RS. 165.27 LAKHS ON ACCOUNT OF NON-PAYMENT OF EXCISE DU TY IN TIME AND DISALLOWED THE SAME AS PER SECTION 43B(A). WE HAVE NOTED THAT NO PENALTY UNDER SECTION 271(1)(C) WAS INITIATED BY AO WHILE P ASSING THE ASSESSMENT ORDER. THE AO ISSUED NOTICE UNDER SECTION 271(1)(C) DATED 30.12.2009. THE ASSESSEE FILED ITS REPLY DATED 18.02.2014 AND CONTE NDED THAT THE ASSESSEE WAS GIVEN PARTIAL RELIEF BY THE LD. CIT(A). WE HAVE NOTED THAT NO SUCH ORDER FOR GIVING PARTIAL RELIEF TO THE ASSESSEE IS PLACED ON RECORD. WE HAVE SEEN THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DET AILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEO US OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVIT ING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN OUR VIEW MER E MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. IN OUR VIEW THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF INCOM E IN ITS RETURN, WHICH DETAILS, FOR WHICH THERE IS NO FINDING THAT THE DET AILS WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT O F INCOME ON ITS PART. THE HONBLE SUPREME COURT IN DILIP N. SHORFF VS CIT (291 ITR 519 SC) HELD THAT WHEN THE ASSESSEE HAS FURNISHED ALL THE P ARTICULARS OF INCOME THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. FURTHER, HO NBLE APEX COURT IN RELIANCE PETROPRODUCTS LTD VS CIT (322 ITR 158 SC ) HELD THAT MERE ITA NO. 2192/M/ 2016- M/S SADHANA NITRO CHEM LTD. 5 MAKING A CLAIM WHICH IS NOT SUSTAINABLE IN LAW DOES NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C). HONBLE ANDHRA PRADESH HIG H COURT IN CIT VS. LOTUS CONSTRUCTION REPORTED VIDE [2015] 370 ITR 475 (A P), V.V. PROJECTS AND INVESTMENT PRIVATE LIMITED VS DCIT [2008] 300 I TR 40(AP), CHENNAKESHWAR PHARMACAUTICAL VS CIT [2012] 349 ITR 196 (A P), HONBLE DELHI HIGH COURT IN CIT VS RAM COMMERCIAL ENTERPRIS ES LTD. [2000] 246 ITR 568(DELHI), HELD THAT RECORDING OF THE SATISFAC TION IN THE ASSESSMENT ORDER ABOUT THE INITIATION OF PENALTY IS MUST. IN A BSENCE OF PROPER SATISFACTION ABOUT THE INITIATION OF PENALTY ORDER THE PENALTY IS LIABLE TO BE DELETED. THUS, THE SUBMISSIONS OF THE LD. AR FOR TH E ASSESSEE ARE CONVINCIBLE THAT THE PENALTY WAS LEVIED BY ASSESSING OFFICER WI THOUT PROPER SATISFACTION. IN OUR VIEW THE RATIO OF DECISION IN RELIANCE PETRO PRODUCTS LTD (SUPRA) IS ALSO APPLICABLE ON THE FACTS OF THE PRESENT CASE. T HUS, THE LD AR OF ASSESSEE IS SUCCEEDED IN CONVINCING THAT NEITHER THE AO RECO RDED HIS SATISFACTION ABOUT INITIATING AND IN IMPOSING THE PENALTY NOR ON PARTICULAR LIMB IN NOTICE UNDER SECTION 271(1)(C). HENCE, THE GROUNDS OF APPE AL RAISED BY THE ASSESSEE ARE ALLOWED. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF JANUARY, 2018. SD/- SD/- /- (R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 12/01/2018 S.K.PS ITA NO. 2192/M/ 2016- M/S SADHANA NITRO CHEM LTD. 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/