ITO, Faridabad V. M/s. Laksons Footwear Pvt. Ltd, Faridabad

ITA 2265/DEL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5889 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 27-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F , NEW DELHI BEFORE SH. AMIT SHUKLA , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO . 2265 /DE L/ 2016 ASSESSMENT YEAR: 2008 - 09 INCOME TAX OFFICER, WARD - I(4), FARIDABAD VS. M/S. LAKSONS FOOTWEAR PVT. LTD., PLOT NO. 131, SECTOR - 24, FARIDABAD PAN : AAACL3114B ( APPELLANT ) (RESPONDENT) ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE R EVENUE HAS BEEN PREFERRED AGAINST ORDER DATED 11/02/2016 PASSED BY THE LD. COMMISSIONER OF INCOME - TAX (APPEALS), FARIDABAD [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2008 - 09 IN RELATION TO PENALTY UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961( IN SHORT THE ACT ). THE GROUNDS RAISED IN THE APPEAL ARE REPRODUCED AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN DE LETING THE PENALTY OF APPELLANT BY SH. ATIQ AHMED, SR.DR RESPONDENT BY NONE DATE OF HEARING 21.05.2018 DATE OF PRONOUNCEMENT 30.05.2018 2 ITA NO. 2265/ DEL /2016 RS.17,98,220/ - LEVIED BY THE A SSESSING OFFICER U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 DISREGARDING THE FACTS THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF RS.52,90,440/ - . 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN DELETING THE PENALTY OF RS.17,98,220/ - LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 EVEN THOUGH THE ADDITIONS MADE BY THE ASSESSING OFFICER ON WHICH PENALTY WAS LEVIED WERE CONFIRMED BY THE APPELLATE AUTHORITY. 3. THE APPELLANT CRAVES FOR THE PERMISSION TO ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 2 . B RIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME - TAX A CT , 1961 (IN SHORT THE ACT ) WAS COMPLETED ON 30/12/2010 AT TOTAL INCOME OF RS.1,12,29,440/ - AS AGAINST RETURNED INCOME OF RS.43,57,010/ - . THE ASSESSING OFFICER MADE ADDITIONS OF RS.49,87,440/ - UNDER SECTION 40(A)(IA) OF THE ACT AN D ADDITION OF RS.18,84,991/ - UNDER SECTION 14 A OF THE A CT AND INITIATED PENALTY FOR FURNISHING OF I NACCURATE PARTICULARS OF INCOME . ON FURTHER APPEAL, THE LD. CIT(A) UPHELD THE ADDITION MADE UNDER SECTION 40 (A)(IA), WHEREAS I N RESPECT OF ADDITION UNDER SECTION 14 A OF THE A CT , HE ALLOWED RELIEF OF RS.15,81, 991 / - TO THE ASSESSEE AND CONF IRM ED THE BALANCE ADDITION OF RS.3,03, 000/ - . IN VIEW OF THE ADDITION SUSTAINED BY THE LD. CIT(A), THE ASSESSING OFFICER AFTER PROVIDING OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE, VIDE ORDER DATED 2 4/03/2014 LEVIED PENALTY OF RS.17,98, 220/ - AT THE RATE OF 100% OF THE TAX SOUGHT TO BE EVADED. AGGRIEVED, THE ASSESSEE FILED 3 ITA NO. 2265/ DEL /2016 APPEAL BEFORE THE LD. CIT(A), WHO DELETED THE PENALTY OBSERVING AS UNDER: 9 . I HAVE GONE THROUGH THE FACTS OF THE CASE AND GONE THROUGH THE SUBMISSIONS OF THE APPELLANT. PERUSAL OF THE PENALTY ORDER SHOWS THAT THE PENALTY HAS BEEN LEVIED ON ACCOUNT OF THE DISALLOWANCES MADE UNDER SECTION 40(A)(IA) AND SECTION 14A. COMING TO THE M ERITS OF THE CASE AS FOR AS THE ISSUE OF PENALTY FOR DISALLOWANCE U/S 40(A)(IA) IS CONCERNED, IT IS A FACT THAT ASSESSEE HAS CLAIMED EXPENSES AGGREGATING TO RS.49,87,440/ - AND SAME WERE DISALLOWED BY THE AO WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143 (3) OF THE ACT ON THE GROUND THAT ASSESSEE FAILED TO DEDUCT TDS. I OBSERVE THAT THE GENUINENESS OF THE CLAIM OF THE ASSESSEE HAS NOT BEEN DISPUTED BY THE AO. THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAS CLAIMED EXPENSES WHICH ARE FALSE OR NOT GENUINE. AS SESSEE HAS FURNISHED ALL THE RELEVANT FACTS CONCERNING THE CLAIM MADE BY IT IN THE RETURN FILED. AO HAS LEVIED PENALTY IN RESPECT OF SAID AMOUNT MERELY BECAUSE SAID CLAIM OF THE ASSESSEE WAS DISALLOWED U/S40(A)(IA) OF THE ACT AS ASSESSEE FAILED TO DEDUCT T DS THEREON. THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS LTD (230 - CTR - 320 (SC)/ 320/322 - ITR - 158 (SC)HAS HELD THAT A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN THE LAW, BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCO ME. IN THE PRESENT CASE, ADMITTEDLY, ASSESSEE MADE A CLAIM BUT THE SAME WAS REJECTED AND DISALLOWED NOT FOR THE REASON THAT THE CLAIM WAS NOT GENUINE OR WAS FABRICATED BUT IN VIEW OF PROVISIONS OF LAW THAT ASSESSEE DID NOT DEDUCT TDS THEREON. I AM OF THE C ONSIDERED THAT VIEW THAT THE RATIO OF JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS LTD (SUPRA) SQUARELY APPLIES TO THE FACTS OF THE CASE BEFORE ME AND, THEREFORE, LEVY OF PENALTY IS NOT JUSTIFIED. I ALSO OBSERVE THAT SIMILAR ISSUE HAS ALSO BEEN CONSIDERED BY HON'BLE ITAT AHMEDABAD [ITAT, AHMEDABAD DEPUTY COMMISSIONER OF INCOME TAX. CIRCLE 1(2). BARODA VERSUS M/S. LIBERTY PHOSPHATE LTD.. AND ITO VS LUCKY STAR INTERNATIONAL ITA NO. 1041/AHD /2010 WHEREIN, LEVY OF PENALTY U/S.271(L)(C) OF THE ACT WAS 4 ITA NO. 2265/ DEL /2016 CANCELLED, AS THE ASSESSEE FAILED TO DEDUCT TDS ON PAYMENTS. SIMILARLY THE HON'BLE ITAT HYDERABAD BENCH AND MUMBAI BENCH IN THE CASE OF ACIT VS M/S SEAWAYS SHIPPING LTD. (HYDERABAD 'A' BENCH,ITA N O. 80/H/2011 AND ITAT 'E' BENCH, MUMBAI IN THE CASE OF TANUSHREE BASE VS. ACIT ITA NO. 292/M/2012 RESPECTIVELY HAVE ALSO HELD THAT PENALTY U/S 271(L)(C) IS NOT LEVIABLE ON DISALLOWANCES MADE BY THE AO U/S 40(A)(IA). THE RATIO OF THESE CASES ALSO APPLIES SQ UARELY TO THE CASE BEFORE ME. HENCE THE PENALTY IS DELETED ON THIS ACCOUNT. 10. COMING TO THE SECOND ISSUE OF LEVY OF PENALTY FOR DISALLOWANCE MADE U/S 14A, THE PENALTY IN THIS CASE HAS BEEN LEVIED ON ACCOUNT OF DISALLOWANCE MADE IN ACCORDANCE WITH RULE 8 D READ WITH SECTION 14A. THERE HAS BEEN NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE IN THIS CASE. THE DISALLOWANCE HAS BEEN MADE BY COMPUTING THE SUMS WHICH WERE DULY DISCLOSED IN THE RETURN AND ACCOUNTS OF THE ASSESSEE. I FIND T HAT SECTION 271(L)(C) POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. HENCE, IN MY CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THIS CASE THE ASSESSEE'S CONDUCT CANNOT BE SAID TO BE CONTUMACIOUS SO AS TO WARRANT LEVY OF PENALTY. HENCE, I HOLD THAT NO PENALTY IS LEVIABLE ON THIS GROUND. 11. WHILE COMING TO THE AFORESAID CONCLUSION, I PLACE RELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIPS IN TH E CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT: 'AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLES S THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY S HOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A 5 ITA NO. 2265/ DEL /2016 MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE.' 12. I FURTHER PLACE RELIANCE UPON THE HON'BLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. (SUPRA). IN THIS CASE VIDE ORDER DATED 17.3.2010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIPSHEROFF CASE 291 I TR 519 (SC) AS TO THE MEANING OF WORD 'CONCEALMENT' AND 'INACCURATE' CONTINUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILIPSHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(L)(C). THE HON'BLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN EVERY RETURN WHERE THE CLAIM IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE THE PENALTY U/S 271(L)(C). THI S IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 13. RELIANCE IS ALSO PLACED ON THE DECISION OF THE FOLLOWING JUDICIAL DECISIONS WHICH DIRECTLY COVER THE ISSUE OF LEVY OF PENALTY U/S 271(L)(C) ON DISALLOWANCES MADE U/S 14A. A) ITAT. DELHI - ASST COMMISSIONER OF INCOME TAX VS. MR. MANISH JAIN PROP. BPB PUBLICATIONS - IT A NO.5999/DEL/2012. B) IT AT. MUMBAI - DEPUTY COMMISSIONER OF INCOME TAX VS. M/S PARLE PET PVT LTD - IT A NO.391/MUM/2010 DTD.20/07/2011. C) 2013 (12) TMI 922 - ITAT. AMRITSAR - DEPUTY COMMISSIONER OF INCOME TAX VS. M/S MAX INDIA LTD. THUS TO SUM UP THE PENALTY LEVIED IS DIRECTED TO BE DELETED AND THE GROUND NOS. 2 AND 3 OF APPEAL OF THE APPELLANT ARE ALLOWED. 6 ITA NO. 2265/ DEL /2016 2.1 BEFORE US, THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE IS LIABLE FOR PENALTY IN VIEW OF INACCURATE PARTICULARS OF THE INCOME FILED IN RESPECT OF THE TWO ADDITIONS SUSTAINED BY THE LD. CIT(A). 3. NONE ATTENDED ON BEHALF OF THE ASSESSEE DESPITE NOTIFYING THE DATE OF HEARING TO THE ASSESSEE. 4. WE HAVE HEARD THE SUBMISSION OF THE LD. DR AND PERUSED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). IN THE GROUNDS OF APPEAL, DELETION OF THE PENALTY HAS BEEN OPPOSED MAINLY O N THE GROUND THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME AND ADDITIONS HAVE BEEN SUSTAINED BY THE FIRST APPELLATE AUTHORITY. IN OUR OPINION , MERELY SUSTAINING OF ADDITION BY THE LD. CIT(A), CANNOT AUTOM ATICALLY RESULT IN LEVY OF PENALTY . W E FIND THAT THOUGH THE CLAIM OF THE ASSESSEE FOR ALLOWING EXPENSES HAS BEEN REJECTED BUT THE SAID CLAIM HAS NOT BEEN FOUND TO BE FALSE OR NOT GENUINE. IN OUR OPINION , IT IS SETT LED LAW THAT MERELY REJECTION OR DISALLOWING CLAIM , CANNOT AUTOMATICALLY LEAD T O LEVY OF PENALTY . THE PENALTY OF THE LEVY UNDER SECTION 217(1)(C) OF THE A CT IN SUCH CIRCUMSTANCES SHOULD BE SEEN IN THE LIGHT OF EXPLANATION - 1 TO THE SECTION 271(1)(C) OF THE ACT. IN THE INSTANT CASE, THE A SSESSEE HAS FURNISHED BONA FIDE EXPLANATION WHIC H HAS NOT BEEN FOUND TO BE FALSE BY THE ASSESSING OFFICER AND THERE IS NO ALLEGATION THAT MATERIAL FACTS HAVE NOT BEEN DISCLOSED BY THE ASSESSEE. IN THE CIRCUMSTANCES, EXPLANATION - 1 TO THE SECTION 271(1)(C) OF THE ACT, CANNOT BE INVOKED IN THE CASE OF THE ASSESSEE. THE LD. CIT(A) HAS EXAMINED BOTH THE ADDITION SUSTAINED IN THE LIGHT OF VARIOUS JUDICIAL PRECEDENTS AND CONCLUDED THAT THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS OF INCOME. IN OUR 7 ITA NO. 2265/ DEL /2016 OPINION, THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE IS WELL REASONED, AND WE DO NOT FIND INFIRMITY IN THE SAME, ACCORDINGLY WE UPHOLD THE SAME. THE GROUNDS OF THE APPEAL ARE ACCORDINGLY DISMISSED. 5. IN THE RESULT, APPEAL OF THE R EVENUE IS DISMISSED. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 3 0 T H MAY , 201 8 . S D / - S D / - ( AMIT SHUKLA ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 T H MAY , 201 8 . RK / - (D.T.D . ) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI