Punjab Steel Rolling Mills(Baroda) Pvt. Ltd, Baroda V. The ACIT.,Circle-4, Baroda

ITA 2368/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94665 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-10-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 16-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Difference of opinion
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA NO: 2368/AHD/2011 (ASSESSMENT YEAR: 2002-03) M/S. PUNJAB STEEL ROLLING MILLS (BARODA) PRIVATE LIMITED OPPOSITE OLD STATION BARODA-390002, GUJARAT V/S THE A.C.I.T., CIRCLE-4, BARODAS (APPELLANT) (RESPONDENT) PAN: AABCP 2459G APPELLANT BY : SHRI SANJAY R. SHAH, AR RESPONDENT BY : SHRI DINESH SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 19-10-2015 DATE OF PRONOUNCEMENT : 30 -10-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-III, BARODA DATED 20.06.2011 FOR A.Y. 2002-03. ITA NO. 2368 /AHD/2011 . A.Y. 2002-03 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF MANUFACTURING AND SALE OF STEEL BARS. ASSESSEE FILED ITS RETURN O F INCOME FOR A.Y. 2002-03 ON 29.10.2002 DECLARING TOTAL LOSS OF RS. 3,32,64,3 10/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 28.02.2005 AND THE TOTAL LO SS WAS DETERMINED AT RS. 2,63,60,110/- INTERALIA BY MAKING VARIOUS DISALLOWA NCES INCLUDING THE DISALLOWANCE OF INTEREST TO ONGC OF RS. 67,73,007/- . ON THE ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST OF RS. 67,73,00 7/-. A.O WAS OF THE VIEW THAT ASSESSEE HAS CLAIMED AN EXPENDITURE WHICH WAS NOT ALLOWABLE TO IT AND IT AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE THEREFORE CONCLUDED THAT ASSESSEE HAS CONCEALED THE PARTICULA RS OF INCOME AND ALSO FURNISHED INACCURATE PARTICULARS IN RESPECT OF THE INCOME AND EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT WAS APPLICABLE AND THE ASSESSEE WAS LIABLE FOR PENALTY U/S. 271(1)(C) OF THE ACT AND ACCORDING LY LEVIED PENALTY OF RS. 24,17,963/-. AGGRIEVED BY THE PENALTY ORDER OF A.O ., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 20.06 .2011 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1 THE LEARNED C1T(A) HAS ERRED IN CONFIRMING THE PE NALTY OF RS. 24,17,963 LEVIED U/S. 27 (1 )(C) OF THE ACT DESPITE THE FACT THAT (A)PROPER SATISFACTION TO INITIATE PENALTY PROCEEDI NGS WAS NOT ARRIVED AT BY THE LEARNED AO; (B)THE LEARNED AO DID NOT SPECIFY THE CHARGE ON THE APPELLANT AS TO WHETHER IT HAD CONCEALED THE PARTICULARS OF ITS INCOME OR HAD FURN ISHED INACCURATE PARTICULARS OF ITS INCOME WHILE INITIATING THE PENALTY PROCEEDINGS. ITA NO. 2368 /AHD/2011 . A.Y. 2002-03 3 2.THE LEARNED C1T(A) HAS ERRED IN HOLDING THAT THE DENIAL OF DEDUCTION OF EXPENSES CLAIMED ITSELF REFLECTS CONCEALMENT OF INCOME. 3. THE LEARNED C1T(A) HAS ERRED IN SUSTAINING THE ACTION OF THE LEARNED AO OF NOT FOLLOWING THE PROPER PROCEDURE TO COMPLETE THE PENA LTY PROCEEDINGS SINCE NO OPPORTUNITY OF PERSONAL HEARING WAS ACCORDED TO THE APPELLANT B EFORE PASSING OF THE IMPUGNED ORDER LEVYING PENALTY DESPITE A SPECIFIC REQUEST HAVING B EEN MADE IN THIS REGARD. 4.THE LEARNED C1T(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT (A) THE APPELLANT HAD OFFERED BONA FIDE EXPLANATIO N; AND (B) NONE OF THE DETAILS / INFORMATION FURNISHED WER E FOUND TO BE INCORRECT / INACCURATE WITH REGARD TO THE CLAIM OF DEDUCTION OF INTEREST P AYABLE TO M/S. OIL AND NATURAL GAS COMMISSION LIMITED (ONGC) AS PER THE TERMS OF SETTL EMENT WHICH IS THE SUBJECT MATTER OF LEVY OF PENALTY U/S. 271 (1 )(C) OF THE ACT. 5. EVEN ON MERITS, HAVING REGARD TO THE FACTS AND C IRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE ACTION OF THE LE ARNED AO IN LEVYING PENALTY ON THE ADDITION OF RS. 67,73,007/- IN RESPECT OF INTEREST PAYABLE TO ONGC AS PER THE TERMS OF SETTLEMENT. 5.1. THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATI NG THE FACT THAT THERE WAS NO TAX SOUGHT TO BE EVADED AS THE EXPENDITURE WAS DISALLOW ED IN THE YEAR UNDER REFERENCE AND ALLOWED AS A DEDUCTIBLE EXPENDITURE IN THE IMMEDIAT ELY SUCCEEDING ASSESSMENT YEAR 2003-04. 5.2 THE ID. CIT(A) HAS ERRED IN NOT APPRECIATING TH E FACT THAT IN THE ORIGINAL RETURN FILED FOR AY 03-04 THE APPELLANT DISALLOWED THE SAME AND THE CLAIM WAS REVIVED WHEN DISALLOWED IN AY 02-03. 4. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THAT T HOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE SOLITARY ISSUE FOR A DJUDICATION IS WITH RESPECT TO LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. ITA NO. 2368 /AHD/2011 . A.Y. 2002-03 4 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAS CLAIMED DEDUCTION FOR INTEREST OF RS. 67,73,007/- P AID TO ONGC. HE ALSO NOTED THAT THIS PAYMENT WAS MADE WITHOUT MAKING PRO VISION IN THE BOOKS OF ACCOUNTS, A.O WAS OF THE VIEW THAT SINCE ASSESSEE W AS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, EXPENSES INCURRED WITHOUT MAK ING PROVISION IN THE BOOKS OF ACCOUNTS AND THE EXPENSES WHICH HAVE NOT C RYSTALLIZED DURING THE YEAR ARE NOT ALLOWABLE AND ACCORDINGLY THE CLAIM OF INTEREST WAS DISALLOWED BY THE A.O. ON THE AFORESAID DISALLOWANCE, A.O LEVI ED PENALTY U/S. 271(1)(C) OF THE ACT AND THE PENALTY WAS ALSO CONFIRMED BY LD . CIT(A). 6. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE HAS NOT FILED ANY INACCURATE PARTICULARS OF INCOME AND THAT EVEN AFTER THE DISAL LOWANCE MADE BY THE A.O, THERE WAS LOSS TO THE ASSESSEE AND THEREFORE IT CAN NOT BE SAID THAT BY CLAIMING EXPENSES WHICH IS NOT ALLOWABLE WILL RESUL T IN LOWER TAX LIABILITY. HE FURTHER SUBMITTED THAT THIS CLAIM HAS BEEN ALLOW ED IN SUBSEQUENT YEARS I.E. A.Y. 2002-03 AND FOR WHICH HE POINTED OUT TO T HE COPY OF THE ASSESSMENT ORDER PLACED AT PAGE 13 TO 18 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT ASSESSEE HAS MADE FULL DISCLOSURE AND THERE WAS NO MENS REA ON THE PART OF THE ASSESSEE AND ASSESSEE WOULD NOT HAVE GAINED ANY THING BY CLAIMING LOSS IN VIEW OF THE FACT THAT EVEN AFTER THE DISALLOWANC E, THE ASSESSEE HAD LOSSES. HE FURTHER SUBMITTED THAT FULL DISCLOSURE HAS BEEN MADE BY THE ASSESSEE AND IN SUCH A SITUATION IT CANNOT BE SAID THAT ASSESSEE HAD CONCEALED PARTICULARS IN THE RETURN OF INCOME. HE FURTHER PLACED RELIANCE ON THE DECISION OF APEX ITA NO. 2368 /AHD/2011 . A.Y. 2002-03 5 COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. L TD. (2010) 322 ITR 158. HE THEREFORE SUBMITTED THAT THE PENALTY LEVIED BY T HE A.O BE DELETED. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O A ND LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE PENALTY U/S. 271(1)(C) HAS BEEN LE VIED ON THE DISALLOWANCE OF INTEREST PAID TO ONGC. BEFORE US, LD. A.R. HAS S UBMITTED THAT THE EXPLANATION WITH RESPECT TO THE EXPENDITURE WAS FUR NISHED BY WAY OF A NOTE APPENDED BELOW THE COMPUTATION OF INCOME AND ALL TH E MATERIAL DETAILS RELEVANT TO THE CLAIM WERE FURNISHED AND THERE WAS NO MALA FIDE INTENTION BECAUSE THERE WAS HUGE LOSS AND THE DISALLOWANCE WA S ON ACCOUNT OF DIFFERENCE OF OPINION ON THE QUESTION OF YEAR OF AL LOWABILITY OF CLAIM. THESE SUBMISSIONS OF ASSESSEE HAVE NOT BEEN CONTROVERTED BY REVENUE. 9. THE NECESSARY INGREDIENTS FOR ATTRACTING EXPLANATIO N 1 TO SECTION. 271(L)(C) ARE THAT: (I) THE PERSON FAILS TO OFFER THE EXPLANA TION, OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AO OR THE LD. CIT (A) OR THE LD. CIT TO BE FALSE, OR (III) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CATEGORIES, TH EN ACCORDING TO THE DEEMING PROVISION PROVIDED IN EXPLANATION 1 TO SECTION. 271 (L)(C) THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME SHALL B E CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED, FOR THE PURPOSES OF CLAUSE (C) OF SECTION. 271(1), AND THE PENALTY F OLLOWS. ON THE OTHER HAND, IF THE ASSESSEE IS ABLE TO OFFER AN EXPLANATION, WH ICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE, AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH ITA NO. 2368 /AHD/2011 . A.Y. 2002-03 6 EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME HAVE BEEN DISCLOSED BY HIM, THEN IN THAT CASE PENALTY SHALL N OT BE IMPOSED. 10. IN THE PRESENT CASE THE ASSESSEE HAD DISCLOSED THE MATERIAL FACTS BEFORE THE AO. WHEN THE ASSESSEE HAS MADE A PARTICULAR CLAIM I N THE RETURN OF INCOME AND HAS ALSO FURNISHED ALL THE MATERIAL FACTS RELEV ANT THERETO, THE DISALLOWANCE OF SUCH CLAIM CANNOT AUTOMATICALLY LEA D TO THE CONCLUSION THAT THERE WAS CONCEALMENT OF PARTICULARS OF HIS INCOME BY THE ASSESSEE OR FURNISHING INACCURATE PARTICULARS THEREOF. WHAT IS TO BE SEEN IS WHETHER THE SAID CLAIM MADE BY THE ASSESSEE WAS BONA FIDE AND W HETHER ALL THE MATERIAL FACTS RELEVANT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED, THE ASSESSEE CANNOT BE HELD LIABLE FOR CONCEALMENT PENA LTY U/S. 271(1) (C) OF THE ACT. 11. A CASE FOR LEVY OF PENALTY FOR CONCEALMENT OF INCOM E HAS TO BE EVALUATED IN TERMS OF PROVISIONS OF EXPLANATION. 1 TO SECTION. 2 71(1)(C), AS PER WHICH IF IN RELATION TO ANY ADDITION IN THE ASSESSMENT, THE ASSESSEE OFFERS NO EXPLANATION OR OFFERS EXPLANATION WHICH IS FOUND TO BE FALSE OR IS NOT ABLE TO SUBSTITUTE THE EXPLANATION AND IS ALSO NOT ABLE TO PROVE THAT THE EXPLANATION IS BONAFIDE, THE ADDITION MADE WOULD AMOUNT TO CONCEAL MENT OF PARTICULARS OF INCOME. IT IS A SETTLED LEGAL POSITION THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM ASSESSMENT PROCEEDINGS AND THE FINDINGS GIVEN IN THE ASSESSMENT THOUGH IT MAY CONSTITUTE GOOD EVIDENCE BUT SAME IS NOT CONCLUSIVE IN THE PENALTY PROCEEDINGS FURTHER, MERELY BECAUSE ASSESSE E HAS NOT CHALLENGED THE ORDER OF ASSESSMENT LEVYING TAX AND INTEREST AN D HAS PAID TAX AND INTEREST THAT BY ITSELF WILL NOT BE SUFFICIENT FOR THE AUTHO RITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY. IN THE PRESENT CASE, WE ARE OF THE VIEW THAT IN ITA NO. 2368 /AHD/2011 . A.Y. 2002-03 7 THE ABSENCE OF COMPLETE AND CONVINCING CORROBORATIV E EVIDENCE, THE REVENUE MAY JUSTIFY ADDITION, BUT IN THE MATTER OF PENALTY PROCEEDINGS, THE ONUS LIES HEAVILY ON THE REVENUE TO PROVE THAT THE ASSESSEE HAD CONCEALED ITS INCOME OR HAS FILED INACCURATE PARTICULARS OF ITS I NCOME. 12. IN VIEW OF THE AFORESAID FACTS WE ARE OF THE VIEW T HAT IN THE PRESENT CASE NO PENALTY IS LEVIABLE U/S 271(1)(C) AND THEREFORE DIR ECT ITS DELETION. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 13. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 30 - 10 - 2015 . SD/- SD/- (S.S. GODARA) (ANIL CHATURVEDI) 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,AHM EDABAD