Vinay Autoparts Private Limited, CHENNAI V. ITO Company Ward 3(1), CHENNAI

ITA 2384/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9883 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 20-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S PARTHASARATHY
• Keywords: Bonafide belief
• Section: 271(1)(c); 143(3); 115JB; 10B; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , ! ' , # '$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2384/CHNY/2018 % &% /ASSESSMENT YEAR: 2009-10 M/S. VINAY AUTOPARTS PVT. LTD., NO.2 F, NORTH PHASE, SIDCO, INDUSTRIAL ESTATE, AMBATTUR, CHENNAI 600 098. VS. INCOME TAX OFFICER, COMPANY WARD-3(1), CHENNAI. [PAN: AABCV 9229N ] ( '( /APPELLANT) ( )*'( /RESPONDENT) '( + , / APPELLANT BY : SHRI S. PARTHASARATHY, CA )*'( + , /RESPONDENT BY : SHRI SRIDHAR DORA, JCIT - + .# /DATE OF HEARING : 23.04.2019 /0& + .# / DATE OF PRONOUNCEMENT : 10.05.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -11, CHENNAI (HEREINAFTER CALLED AS CIT(A)) DATED 20.06.2018 F OR THE ASSESSMENT YEAR 2009-10. ITA NO.2384/CHNY/2018 (AY: 2009-10) :- 2 -: 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THE INCOME WAS ASSESSED UNDER SECTION 11 5JB AN D NOT UNDER NORMAL PROVISION. IT IS NOT DENIED THAT THERE IS CO NCEALMENT OF INCOME BUT THAT HAD ITS REPERCUSSIONS ONLY WHEN THE ASSESS MENT WAS DONE UNDER THE NORMAL PROCEDURE. 2. THE ASSESSMENT AS PER THE NORMAL PROCEDURE WAS, HOWEVER, NOT ACTED UPON. ON THE CONTRARY, IT IS THE DEEMED INCOM E ASSESSED U/S 1I5JB. HENCE, WHEN THE COMPUTATION WAS MADE U/S 115 JB, THE CONCEALMENT HAD NO ROLE TO PLAY AND WAS TOTALLY IRR ELEVANT THEREFORE, THE CONCEALMENT DID NOT LEAD TO TAX EVASION AT ALL AND HENCE THE PENALTY SHOULD NOT BE IMPOSED U/S 271(L) (C). 3. RELEVANT JUDGEMENTS - DELHI HIGH COURT IN CIT V. NALWA SONS INVESTMENT LTD., [2010 (8) TMI 40 DELHI HIGH COURT] , WHICH HAS ALSO BEEN AFFIRMED BY THE HONBLE SUPREME COURT OF INDIA. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1951. THE RETURN OF INCOME FOR THE A Y 2009-10 WAS FILED ON 28.09.2009 DISCLOSING TOTAL INCOME NIL. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ITO, CO MPANY WARD- III(1), CHENNAI (HEREINAFTER CALLED AO) VIDE ORDE R DATED 01.12.2011 PASSES U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT A LOSS OF RS. 9,18,109/- AND BOOK PROFITS UNDER THE P ROVISION OF ACT 115-JB OF THE ACT AT RS. 28,69,799/-. IT IS AN ADMITTED F ACT THAT THE ASSESSEE- COMPANY HAD FAILED TO DISCLOSE THE BOOK PROFITS U/S . 115-JB OF THE ACT AND THEREFORE, THE AO ISSUED A SHOW CAUSE NOTICE U/ S. 274 R/W. S. 271(1)(C) OF THE ACT ON 01.12.2011. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS SUBMITTED THAT THE FAILURE OF THE AS SESSEE TO DISCLOSE THE BOOK PROFIT U/S. 115-JB OF THE ACT IS ONLY ON ACCOU NT OF ADVERTENT ITA NO.2384/CHNY/2018 (AY: 2009-10) :- 3 -: OMISSION AND THERE WAS NO INTENTION TO CONCEAL OR F URNISH INACCURATE PARTICULARS OF INCOME AND THERE IS NO WILLFUL DEFAU LT, IT IS MERELY A TECHNICAL BREACH OF LAW WHICH DOES NOT ATTRACT LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT PLACING RELIANCE ON THE DECISI ON OF HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. V. STATE OF ORISSA [1972] 83 I TR 26 (SC) . HOWEVER, THE AO PLACING RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS 306 ITR 277 (SC) HELD THAT THE WILLFUL CONCEALMENT IS NOT AN ESSENT IAL INGREDIENT FOR LEVY OF PENALTY SINCE IT IS ONLY A C IVIL LIABILITY AND PROCEEDED TO LEVY OF PENALTY OF RS. 2,95,589/- VIDE ORDER DAT ED 26.06.2012 PASSED U/S. 271(1)(C) OF THE ACT. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER CONFIRMED THE LEVY OF PENALTY. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APP EAL. 5. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL RELATES TO THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT WITH REFERENCE TO THE INCOME A SSESSED U/S. 115-JB OF THE ACT. ADMITTEDLY, THE APPELLANT HAD NOT DISCLOSE D THE BOOK PROFITS LIABLE TO TAX UNDER THE PROVISIONS OF S. 115-JB OF THE ACT . HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON BEING SHOW CAU SED BY THE AO, THE APPELLANT HAD AGREED TO OFFER THE BOOK PROFITS TO TAX UNDER THE ITA NO.2384/CHNY/2018 (AY: 2009-10) :- 4 -: PROVISIONS OF S. 115-JB OF THE ACT AND THE AO HAD A SSESSED THE BOOK PROFIT TO TAX UNDER THE PROVISIONS OF S. 115-JB OF THE ACT. HOWEVER, THE AO INITIATED PENALTY PROCEEDINGS U/S. 274 R/W. S. 2 71(1)(C) OF THE ACT FOR NOT DISCLOSING THE BOOK PROFITS. IN RESPONSE TO TH E SHOW CAUSE NOTICE, THE APPELLANT TENDERED AN EXPLANATION STATING THAT THE BOOK PROFITS WERE NOT OFFERED TO TAX AS IT ENTERTAINED BELIEF THAT TH E PROFITS WHICH ARE EXEMPT FROM TAX U/S. 10B OF THE ACT ARE NOT LIABLE TO BE T AXED AS A BOOK PROFIT EVEN U/S. 115JB OF THE ACT. HOWEVER, THE AO PROCEE DED WITH LEVY OF PENALTY. ON APPEAL BEFORE LD. CIT(A), THE SAME CAM E TO BE CONFIRMED. THEREFORE, THE QUESTION THAT ARISES IS WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE U /S. 271(1)(C) OF THE ACT IS A PLAUSIBLE EXPLANATION OR NOT. THE QUESTIO N OF BONAFIDE BELIEF IS A MATTER OF FACT WHICH REQUIRES TO BE PROVED IN THE P RESENT CASE, THERE IS NO MATERIAL ON RECORD ESTABLISHING AS TO HOW THE APPEL LANT HAD ENTERTAINED BELIEF THAT THE PROFITS EXEMPT FROM TAX UNDER THE P ROVISIONS OF S. 10B OF THE ACT ARE NOT LIABLE TO TAX U/S. 115-JB OF THE AC T. THUS, IT IS MERELY BALD EXPLANATION, THEREFORE, IT CANNOT HELD TO BE A PLAU SIBLE EXPLANATION AND THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT IS JU STIFIED HAVING REGARD TO THE RATIO OF THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF MAD DATA PVT. LTD. V. CIT 358 ITR 539 (SC). THE RELIAN CE PLACED BY THE LD. COUNSEL FOR THE ASSESSEE ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. NALWA SONGS INVESTMENTS LTD. 327 ITR 543 (DE L.) IS ITA NO.2384/CHNY/2018 (AY: 2009-10) :- 5 -: MIS-PLACED AS THE RATIO OF THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE SAID DECISION, THE HON BLE HIGH COURT OF DELHI HELD THAT WHEN THE INCOME ASSESSED UNDER NORMAL PRO VISIONS OF THE ACT IS LESS THAN THE INCOME DETERMINED UNDER THE PROVIS IONS OF S.115-JB OF THE ACT, THE PENALTY U/S. 271(1)(C) OF THE ACT CANN OT BE LEVIED WITH REFERENCE TO THE ADDITIONS MADE UNDER NORMAL PROVIS IONS. THEREFORE, THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF NALWA SONGS INVESTMENTS LTD. (SUPRA) IS NOT APPLICABLE IN THE PRESENT CASE, AS THE PENALTY IS LEVIED WITH REFERENCE TO THE INCOME ASSESSED U/S. 115-JB OF THE ACT, WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 10 TH DAY OF MAY, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' ) (INTURI RAMA RAO) # /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 10 TH MAY, 2019. EDN, SR. P.S + ).23 43&. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 5. ( )/CIT(A) 4. - 5. /CIT 5. 36 ). /DR 6. 7% 8 /GF