The ACIT, Circle-4, Surat V. Summet Industries Ltd., Surat

ITA 2327/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0673 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 17-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 23-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2327/AHD/2013 (ASSESSMENT YEAR: 2010-11) A.C.I.T., CIRCLE-4, SURAT V/S SUMEET INDUSTRIES LTD., 504, 5 TH FLOOR, TRIVIDH CHAMBERS, RING ROAD, OPP. FIRE BRIGADE, SURAT (APPELLANT) (RESPONDENT) PAN: AAPPT0319Q APPELLANT BY : SHRI R.K. GUPTA, SR. D.R. RESPONDENT BY : MS. URVASHI SHODHAN, A.R. ( )/ ORDER DATE OF HEARING : 17 -08-201 6 DATE OF PRONOUNCEMENT : 18 -08-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF LD. CIT(A)-II, SURAT DATED 04.07.2013 PERTAINING TO A.Y . 2010-11. ITA NO. 2327 /AHD/2013 . A.Y. 2010-2 011 2 2. THE SOLE GRIEVANCE OF THE REVENUE RELATES TO THE DE LETION OF THE PENALTY OF RS. 10,21,212/- LEVIED BY THE A.O. U/S. 271(1)(C ) OF THE ACT. 3. RIVAL SUBMISSIONS HAVE BEEN HEARD AT LENGTH. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE CAREFULLY PERUSED THE ORDERS O F THE AUTHORITIES BELOW. WE FIND THAT DURING THE COURSE OF THE ASSESS MENT PROCEEDINGS, THE A.O. FOUND THAT THE ASSESSEE HAS SHOWN LOSS ON INVESTMENT ON SALE OF SUBSIDIARY COMPANY OF RS. 33,27,545/- UNDER THE HEAD OTHER INCOME. WHEN THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS, THE ASSESSEE STATED THAT THE LOSS IS DUE TO THE SALE OF INVESTMENT IN THE SUBSIDIARY COMPANY AND INADVERTENTLY IT HAS BEEN SH OWN AS SHORT TERM CAPITAL LOSS AND CHARGED TO PROFIT AND LOSS ACCOUNT THOUGH IN FACT IT IS A LONG TERM CAPITAL LOSS. THE SAID LOSS OF RS. 33,2 7,545/- WAS DISALLOWED BY THE A.O. THE ASSESSEE DID NOT PREFER ANY APPEAL BECAUSE IT ACCEPTED ITS BONA FIDE MISTAKE. 4. THE A.O. INITIATED PENAL PROCEEDINGS ON IMPUGNED DI SALLOWANCE OF THE LOSS OF RS. 33.28 LACS. DURING THE COURSE OF THE PE NAL PROCEEDINGS, THE ASSESSEE ONCE AGAIN STATED THAT IT HAS INVESTED IN THE SHARES OF M/S. SOMANI INDUSTRIES (NEPAL) PVT. LTD. AND DURING THE YEAR UNDER CONSIDERATION, IT WITHDREW THE WHOLE OF ITS INVESTM ENT IN THE SAID COMPANY. STRONG RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S (P.) LTD. 322 ITR 158. 5. THE EXPLANATION OF THE ASSESSEE DID NOT FIND ANY FA VOUR WITH THE A.O. WHO LEVIED A PENALTY OF RS. 10,21,212/-. ITA NO. 2327 /AHD/2013 . A.Y. 2010-2 011 3 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED WHAT HAS BEEN STATED BEFORE THE ASSESSING AUTHORITY. AFT ER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) WAS CONVI NCED THAT THE MISTAKE WAS INADVERTENT AND THE ASSESSEE CANNOT BE SAID TO HAVE CONCEALED THE INCOME OR HAVE FILED INACCURATE PARTI CULARS OF THE INCOME. THE PENALTY SO LEVIED WAS DELETED. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE WAS HAVING INVESTMENT IN ITS SUBS IDIARY COMPANY M/S. SOMANI INDUSTRIES (NEPAL) PVT. LTD. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE HAD INCURRED LOSS ON WITHDRAWAL O F ITS INVESTMENT FROM THE SAID COMPANY. SUCH LOSS WAS INADVERTENTLY CHARGED TO THE PROFIT AND LOSS ACCOUNT, ALTHOUGH THE ASSESSEE HAD MADE A FULL DISCLOSURE OF MATERIAL FACTS IN ITS AUDITED ANNUAL ACCOUNTS VIDE NOTES ON ACCOUNT IN SCHEDULE 22 AT ITEM NO. 1(E) AND THE SAME READS AS UNDER:- THE COMPANY HAS MADE AN INVESTMENT OF RS. ONE CRO RE IN WHOLLY SUBSIDIARY COMPANY NAMED M/S. SOMANI INDUSTRIES (NEPAL) PVT. L TD. AT PRESENT, THE COMPANY HAS STOPPED ALL OF ITS BUSINESS ACTIVITIES IN NEPAL DUE TO POLITICAL UNREST. DURING THE YEAR UNDER REVIEW, THE COMPANY HAS SETTLED ITS INVESTMENT AGAINST UNSECURED LOAN FROM THE SUBSIDIARY AND THE BALANCE AMOUNT I.E . LOSS OF RS. 33.28 LACS IS TRANSFERRED TO PROFIT AND LOSS A/C. 7. A PERUSAL OF THE ABOVE CLEARLY SHOWS THAT THE ASSES SEE HAD MADE FULL DISCLOSURE OF THE MATERIAL FACTS BUT INADVERTENTLY CHARGED THE LOSS TO ITS PROFIT AND LOSS ACCOUNT. THE MISTAKE WAS BONA F IDE WITHOUT ANY INTENTION TO EVADE TAX. THE HONBLE SUPREME COURT I N THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. IN CIVIL APPEAL NO. 69 24 OF 2012 HAS HELD THAT :- ITA NO. 2327 /AHD/2013 . A.Y. 2010-2 011 4 NOTWITHSTANDING THE FACT THAT THE ASSESSEE IS UNDO UBTEDLY A REPUTED FIRM AND HAS GREAT EXPERTISE AVAILABLE WITH IT, IT IS POSSIBLE T HAT EVEN THE ASSESSEE COULD MAKE A 'SILLY' MISTAKE. THE FACT THAT THE TAX AUDIT REPORT WAS FILED ALONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOWABLE U/S 40A(7) INDICATES THAT THE ASSESSEE MADE A COMPUTATI ON ERROR IN ITS RETURN OF INCOME.................... THE CONTENTS OF TH E TAX AUDIT 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. ALL THAT HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONA FIDE AND INADVERTENT ERROR F AILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESC RIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBER AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING 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 IN ACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. CONSEQUENTLY, GIVEN THE PECULIA R FACTS OF THIS CASE, THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIFIED. 8. THE HONBLE AANDHRA PRADESH HIGH COURT IN THE CASE OF SANIA MIRZA IN TAX APPEAL NO. 526 OF 2011 DATED 09.02.2012, ON IDE NTICAL SET OF FACTS HAS HELD AS UNDER:- THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE ACT ED IN A MANNER SUCH AS TO LEAD TO THE CONCLUSION THAT SHE HAD CONCEALED THE PARTIC ULARS OF HER INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME. AS THE AMOUNT OF RS. 30,63,310/- WAS SHOWN BY HER IN THE RETURN, IT CANNOT BE SAID THAT THERE WAS ANY CONCEALMENT. AS THE AMOUNT WAS CORRECTLY MENTIONED, THERE IS ALSO N OTHING INACCURATE IN THE PARTICULARS FURNISHED BY HER. THE ONLY ERROR THAT S EEMS TO HAVE BEEN COMMITTED WAS THAT IT WAS NOT SHOWN AS A CAPITAL (SIC) RECEIP T. BUT AS SOON AS THIS WAS POINTED OUT, THE ERROR WAS ACCEPTED AND THE AMOUNT WAS SURRENDERED TO TAX. THIS IS NOT A FIT CASE FOR IMPOSITION OF PENALTY. ITA NO. 2327 /AHD/2013 . A.Y. 2010-2 011 5 9. CONSIDERING THE FACTS IN TOTALITY, IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT (SUPRA) AND THE HONBLE A ANDHRA PRADESH HIGH COURT (SUPRA), WE DECLINE TO INTERFERE WITH TH E FINDINGS OF THE LD. CIT(A). 10. APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 18 - 08- 201 6. SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD