Recorders and Medicare Systems (P) Ltd., Chandigarh V. ACIT, Chandigarh

ITA 243/CHANDI/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9966 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.242/CHD/2014 (ASSESSMENT YEAR : 2007-08) AND ITA NO.243/CHD/2014 (ASSESSMENT YEAR : 2009-10) RECORDERS AND MEDICARE VS. THE A.C.I.T., SYSTEMS (P) LTD., CIRCE 2(1), 181/5, IND. AREA, PHASE I, CHANDIGARH CHANDIGARH. PAN: AACCR6241B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 03.05.2016 DATE OF PRONOUNCEMENT : 09.05.2016 O R D E R PER RANO JAIN, A.M . : THESE TWO APPEALS FILED BY THE SAME ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGARH, BOTH DATED 20.1.2014 FOR ASSESSMENT YEARS 2007-08 AND 20 09- 10, CHALLENGING THE PENALTY LEVIED UNDER SECTION 27 1(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 2. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN BOTH THE APPEALS, THE SAME WERE HEARD TOGETHER A ND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. 3. WE WILL FIRST TAKE UP THE APPEAL OF THE ASSESSE E IN ITA NO.242/CHD/2014 ITA NO.242/CHD/2014 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271( 1)(C) OF THE ACT ON THE THREE ADDITIONS MADE BY THE ASSESSIN G OFFICER, WHICH WAS SUSTAINED BY THE LEARNED CIT (AP PEALS), AGAINST WHICH THE ASSESSEE HAS COME IN APPEAL BEFOR E US. 5. FIRSTLY, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IC OF THE ACT ON THE INCOME FROM AMC CHAR GES, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER AND O N WHICH PENALTY UNDER SECTION 271(1)(C) OF THE ACT WA S LEVIED. THE STAND OF THE ASSESSING OFFICER FOR DISALLOWANCE WAS THAT THE DEDUCTION UNDER SECTION 8 0IC IS AVAILABLE ONLY ON INCOMES WHICH ARE DERIVED FROM MANUFACTURING ACTIVITIES OF THE INDUSTRIAL UNDERTAK ING. 6. BEFORE THE LEARNED CIT (APPEALS), THE ACTION OF THE ASSESSING OFFICER IN LEVYING PENALTY ON SUCH DISALLOWANCE WAS CHALLENGED, WHICH WAS REJECTED BY HIM 3 RELYING ON THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT ZOOM COMMUNICATION (P) LTD., 327 ITR 5 10 (DEL). 7. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ALLOWANCE OF DEDUCTION UNDER SEC TION 80IC OF THE ACT HAS ALWAYS BEEN A DEBATABLE AND HIG HLY CONTROVERSIAL ISSUE, THEREFORE, NO PENALTY SHOULD B E LEVIED ON DISALLOWANCE OF IT. 8. THE LEARNED D.R. RELIED ON THE ORDER OF THE LOW ER AUTHORITIES. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. W E OBSERVE THAT THE ASSESSEE CLAIMED DEDUCTION UNDER S ECTION 80IC OF THE ACT ON THE INCOME FROM AMC CHARGES RECE IVED BY IT, WHICH WAS DISALLOWED BY THE ASSESSEE. WE ARE I N AGREEMENT WITH THE SUBMISSIONS OF THE LEARNED COUNS EL FOR THE ASSESSEE THAT THE ISSUE OF DEDUCTION UNDER SECT ION 80IC OF THE ACT ALL ALONG HAS BEEN A DEBATABLE AND HIGHL Y CONTROVERSIAL ISSUE,THEREFORE, THE PENALTY UNDER SE CTION 271(1)(C) OF THE ACT IS NOT LEVIABLE ON THE SAME. FURTHER, IT HAS BY NOW, BECOME A TRITE LAW THAT ONLY A CLAIM MA DE BY THE ASSESSEE WHICH IS NOT ALLOWED TO HIM, DOES NOT LEAD TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE VIEW IS SUPPORTED BY THE JUDGMENT OF THE HON'BLE SUPREM E COURT 4 IN THE CASE OF HON'BLE SUPREME COURT IN THE CASE O F CIT VS . RELIANCE PETRO PRODUCTS PVT. LTD (2010) (322 ITR 15 8) (SC). 10. THE SECOND ISSUE ON WHICH PENALTY IS LEVIED IS THE SHORT DEPOSIT OF PF AND ESI AMOUNTING TO RS.40, 081/-. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT (APPE ALS) THAT IT WAS JUST A TECHNICAL ERROR, HOWEVER, HE CON FIRMED THE PENALTY. EVEN BEFORE US, THE SAME PLEA WAS TAK EN BY THE LEARNED COUNSEL FOR THE ASSESSEE. THE LEARNED D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 11. THIRD ADDITION WAS INVOKING THE PROVISIONS OF SECTION 40(A)(IC). DURING THE YEAR, THE ASSESSEE P AID FRINGE BENEFIT TAX AMOUNTING TO RS.8,14,034/-, WHIC H IT DID NOT ADD BACK IN HIS RETURN OF INCOME. 12. BEFORE THE LEARNED CIT (APPEALS) AS WELL AS BEFORE US THE ARGUMENT OF THE LEARNED COUNSEL FOR T HE ASSESSEE WAS THAT IT WAS ONLY ON ACCOUNT OF AN INAD VERTENT MISTAKE COMMITTED ON PART OF THE ASSESSEE, FOR WHIC H ADDITION IS THOUGH SUSTAINABLE, PENALTY CANNOT BE L EVIED. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE SUPR EME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT (2012) 348 ITR 306. 13. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AU THORITIES 5 BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE STAND OF THE ASSESSEE IS THAT THESE ADDITIONS R ESULTED BECAUSE OF AN INADVERTENT ERROR ON ITS PART. WE OB SERVE THAT THIS IS NOT A CASE WHETHER THE ASSESSEE HAD CO NCEALED ANY INCOME. IN FACT, ALL FACTS AND FIGURES HAVE BE EN TAKEN BY THE ASSESSING OFFICER FROM THE RECORDS PROVIDED BY THE ASSESSEE. IT IS A CASE FIT FOR MAKING ADDITION WHI CH THE ASSESSING OFFICER HAS DONE, BUT NO PENALTY FOR CONCEALMENT CAN BE LEVIED ON THE SAME, AS THE ASSES SEE SHOULD BE GIVEN A BENEFIT OF INADVERTENT ERROR MADE BY HIM, BECAUSE TO ERR IS HUMAN. 14. THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.243/CHD/2014 : 15. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSE SSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IC OF THE ACT ON THE INTEREST INCOME DERIVED FROM FDRS PLACED WITH BANK AS MARGIN MONEY FOR OPENING LETTER OF CREDIT. THE ASSESSING OFFICER DISALLOWED THE SAID DEDUCTION AND LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE S AME. 16. BEFORE THE LEARNED CIT (APPEALS), IT WAS SUBMITTED THAT THE INTEREST INCOME WAS DERIVE D FROM INDUSTRIAL UNDERTAKING, SINCE THE SAME WAS OUT OF BUSINESS SURPLUS PARKED ASIDE FOR OBTAINING LETTER OF CREDIT AND BANK GUARANTEE. THE LEARNED CIT ( APPEALS) 6 REJECTING THE CONTENTION OF THE ASSESSEE, RELYING O N THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS. ZOOM COMMUNICATION (P) LTD., 327 ITR 510 (D EL), DISMISSED THE APPEAL OF THE ASSESSEE. 17. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES, WHILE THE LEARNED D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 18. AFTER HEARING BOTH THE PARTIES, WE OBSERVE THA T THE STANCE OF THE ASSESSEE HAS BEEN THAT THE INTERE ST ON FDRS WAS RECEIVED ON THOSE DEPOSITS WHICH THE ASSES SEE WAS FORCED TO MAKE IN ORDER TO OPEN LETTER OF CREDI T. IN THIS VIEW, THE INTEREST WAS TREATED AS INCOME FROM INDUSTRIAL UNDERTAKING AND DEDUCTION UNDER SECTION 80IC OF THE ACT WAS CLAIMED ON THE SAME. WE ALSO OBSERV E THAT THIS IS A VERY PLAUSIBLE EXPLANATION GIVEN BY THE A SSESSEE, THE SAME MAY NOT BE TENABLE IN THE EYE OF LAW ON TH E BASIS OF CERTAIN JUDICIAL PRONOUNCEMENTS. THEREFORE, IT MAY BE A CASE OF DISALLOWANCE, BUT PENALTY UNDER SECTION 2 71(1)(C) CANNOT BE LEVIED ON THE SAME. THE VIEW IS ALSO END ORSED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS . RELIANCE PETRO PRODUCTS PVT. LTD (2010) (322 ITR 15 8) (SC). 7 19. THE APPEAL OF THE ASSESSEE IS ALLOWED. 20. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF MAY, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 9 TH MAY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH