Dy.CIT, Cir.8, Akurdi, Pune, V. Automotive Stamping and Assemblies Ltd., Pune

ITA 261/PUN/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62737 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 14-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MISHRA
• Assessee Lawyers: ANUJ DESHMUKH
• Keywords: Depreciation; Bonafide belief; Deemed to accrue or arise in india; Retrospective amendment; Bad and doubtful debts
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 261/PN/11 (ASSTT. YEAR: 2004-05) DY.CIT,CIR.8, AKURDI, PUNE .. APPELLANT VS. AUTOMOTIVE STAMPING AND ASSEMBLIES LTD .. RESPONDENT G-71/2, MIDC, BHOSARI-411 507 PAN AAACJ2116M APPELLANT BY : SHRI ALOK MISHRA, CIT RESPONDENT BY : SHR I ANUJ DESHMUKH DATE OF HEARING : 09.05.2 012 DATE OF PRONOUNCEMENT : 25.0 5.2012 ORDER PER G.S. PANNU, A.M : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, PUNE DATED 21.12.2010 WHICH INTURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSES SING OFFICER DATED 30/03/2010 IMPOSING PENALTY OF RS.1,47,90,000/- UND ER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), FOR T HE ASSESSMENT YEAR 2004-05. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN T HIS APPEAL READ AS FOLLOWS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY OF RS.1,47,90 ,000/- U/S. 271(1)(C) OF THE 2 I.T.ACT 1961 BY IGNORING THE FACT THAT BOTH THE A.O . AND CIT(A) HAD ARRIVED AT A CONCURRENT FINDING THAT THE ASSESSEE HAD FURNISHE D INACCURATE PARTICULARS. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY OF RS.1,47,90 ,000/- U/S. 271(1)(C) OF THE I.T.ACT 1961 BY IGNORING THE FACT THE QUANTUM ADDIT ION ON ACCOUNT OF SURPLUS AMOUNT OF RS.3,50,44,825/- ON PREPAYMENT OF SALES T AX DEFERRAL LOAN, SOFTWARE EXPENSES OF RS.13,51,839/-, REPAIRS TO PLA NT AND MACHINERY OF RS.16,39,509/- AND PROVISION FOR DOUBTFUL DEBTS OF RS.31,70,092/- WHILE COMPUTING THE TOTAL INCOME AS PER PROVISIONS OF SEC .115JB HAVE BEEN CONFIRMED BY LD.CIT(A). 2. IN THIS APPEAL WE ARE CONCERNED WITH PENALTY OF RS.1,47,90,000 IMPOSED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE ACT. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEES INCOME AS PER THE NORMAL PROVISIONS OF THE ACT WAS NIL WHEREAS PER SE CTION U/S.115JB OF THE ACT BOOK PROFIT WAS DETERMINED AT RS.13,17,08,443/- , THEREFORE THE INCOME COMPUTED UNDER THE PROVISIONS OF SECTION 115JB OF T HE ACT BEING HIGHER, THE RETURN WAS ACCORDINGLY FILED AND TAXES PAID AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE RETURN OF INCOME WAS TAKEN UP FOR ASSESSMENT WHICH WAS COMPLETED U/S.143(3)(II) OF THE ACT ON 29.12.2006 DETERMINING NIL INCOME AS PER THE NORMAL PROVISIONS OF THE ACT AND THE BOO K PROFIT U/S.115JB OF THE ACT AT RS.13,48,78,535. AS A RESULT THE FINAL ASS ESSED INCOME WAS IN TERMS OF THE PROVISIONS OF SECTION 115JB OF THE ACT. 3. WHILE FINALISING THE INCOME AS PER THE NORMAL PR OVISIONS OF THE ACT, THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS:- SR.NO. PARTICULARS AMOUNT (INR) 1 GAIN ON PREPAYMENT OF SALES TAX DEFERRAL LOAN TREATED AS REVENUERECEIPT CHARGEABLE TO TAX 35,044,825 2 ADDITION ON ACCOUNT OF SOFTWARE EXPENSES (GROSS AMOUNT RS.1,351,839 LESS DEPRECIATION ALLOWED RS.405,552) 946,287 3 ADDITION ON ACCOUNT OF EXPENSES ON REPAIRS AND MAINTENANCE TO PLANT AND MACHINERY (GROSS AMOUNT RS.1,639,509 LESS DEPRECIATION ALLOWED 1,387,371 3 RS.252,138) ADDITIONS TO TAXABLE INCOME 37,378,483 FURTHER, WHILE ASSESSING THE BOOK PROFIT AS PER 1 15JB OF THE ACT, THE ASSESSING OFFICER MADE AN ADDITION OF RS.31,70,092 ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS CONTENDING THAT SUCH PRO VISION WAS CONTINGENT IN NATURE. 4. SUBSEQUENTLY, THE ASSESSING OFFICER HELD THE ASS ESSEE GUILTY OF FURNISHING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT QUA THE AFORESAID ADDITIONS A MOUNTING TO RS.4,12,06,265/-. THUS, IN TERMS OF AN ORDER PASS ED U/S.271(1)(C) OF THE ACT DATED 30/03/2010, PENALTY EQUAL TO 100% OF THE TAX SOUGHT TO EVADED ON THE AFORESAID INCOME WAS LEVIED, WHICH AMOUNTED TO RS.1 ,47,90,000/-. THE ASSESSEE PREFERRED AN APPEAL AGAINST THE AFORESAID ORDER OF THE ASSESSING OFFICER WHICH HAS SINCE BEEN SET ASIDE BY THE CIT(A ), AND THE PENALTY HAS BEEN DELETED, AGAINST WHICH THE REVENUE IS IN APPE AL BEFORE US. BEFORE US THE LD. DR APPEARING FOR THE REVENUE HAS CONTENDED THAT THE ASSESSEE HAD INDEED FURNISHED INACCURATE PARTICULARS QUA THE AFO RESAID FOUR ITEMS OF INCOME AND THEREFORE, THE PENALTY WAS JUSTIFIABLY IMPOSED BY THE ASSESSING OFFICER. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE RESPO NDENT ASSESSEE HAS VEHEMENTLY POINTED OUT THAT THE PENALTY ON ALL THE FOUR ITEMS OF INCOME IS NOT EX IGIBLE AS THERE WAS NO CONCEALMENT OR FURNISHING O F INACCURATE PARTICULARS OF THE INCOME WITHIN THE MEANING OF SECTION 271(1)( C) OF THE ACT. 6. IN SO FAR AS THE ADDITIONS OF RS.3,73,78,483/- R EGARDING PREPAYMENT OF SALES TAX DEFERRAL LOANS, SOFTWARE EXPENSES AND EXPENSES ON REPAIRS AND 4 MAINTENANCE TO PLANT AND MACHINERY RESPECTIVELY ARE CONCERNED, IT IS SEEN THAT THE SAME WERE MADE WHILE DETERMINING THE TOTAL INCOME AS PER NORMAL PROVISIONS OF THE ACT. IN THIS CONNECTION, IT HAS BEEN CONTENDED BY THE LD. COUNSEL FOR THE RESPONDENT ASSESSEE THAT FINAL INCO ME OF THE ASSESSEE COMPANY HAS BEEN ASSESSED AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE PENALTY U/S.271(1)(C) OF THE ACT CANNOT B E LEVIED ON ADDITIONS MADE AS PER NORMAL PROVISIONS OF THE ACT WHERE THE FINAL TAXABLE INCOME WAS ASSESSED UNDER THE PROVISIONS OF SECTION 115JB OF T HE ACT. IN THIS REGARD, RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS . 1) CIT VS. NALWA SONS INVESTMENTS LTD., (2010) 327 ITR 543 (DELHI) 2) CIT VS. CENTRAL WAREHOUSING CORPORATION, ITA NO . 999, 1091/DEL/2011 3) RUCHI STRIPS & ALLOYS LTD. VS. DCIT, VIDE ITA NO .6940/MUM/2008 AND ITA NO.6941/MUM/2008 4) M/S. CHERYL LABORATORIES P.LTD. VS. ITO , VIDE ITA NO.2086/MUM/2009 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS PUT FORTH BY THE RESPONDENT ASSESSEE IN THIS REGARD. THE CLAIM OF THE REVENUE IS THAT EVEN IN A SITUATION WHERE THE INCOME HAS BEEN ASSESSED U/S. 115JB OF THE ACT PENALTY SHOULD BE LEVIED BECAUSE AS PER THE PROVISIONS OF S ECTION 115JB (5) SAVE AS OTHERWISE PROVIDED IN THIS SECTION, ALL OTHER PROV ISIONS OF THE ACT SHALL APPLY TO THE ASSESSEE AND THEREFORE THE PENALTY IS LEVIABLE WITH RESPECT TO SUCH ADDITIONS. TO RECAPTULATE, THE CASE SET UP BY T HE ASSESSEE IS THAT EVEN IF THERE WAS A DEFAULT WITHIN THE MEANING OF SECTION 271(1) (C) OF THE ACT WITH RESPECT TO INCOME DETERMINED AS PER NORMAL PROVISIO NS OF THE ACT THE SAME WAS NOT RELEVANT BECAUSE THE AS S ESSEES INCOME WAS FINALLY ASSESSED AS PER SECTION 115JB OF THE ACT AND THEREFORE THE PENALTY U/S.271(1)(C) OF THE ACT IS NOT LEVIABLE WITH REGARD TO THE AFORESAID THREE ADD ITIONS TOTALING TO 5 RS.3,73,78,483/-. WE FIND THAT THE HONBLE DELHI H IGH COURT IN THE CASE OF NALWA SONS INVESTMENTS LTD., (SUPRA) ACCEPTED SUCH A PROPOSITION AND THE FOLLOWING DISCUSSION IS RELEVANT :- 24. THE INCOME OF THE ASSESSEE WAS THUS ASSESSED UNDER S.115JB AND NOT UNDER THE NORMAL PROVISIONS. IT IS IN THI S CONTEXT THAT WE HAVE TO SEE AND EXAMINE THE APPLICATION OF EXPLN.4. 25. JUDGMENT IN THE CASE OF GOLD COIN(SUPRA), OBVIO USLY, DOES NOT DEAL WITH SUCH A SITUATION. WHAT IS HELD BY THE S UPREME COURT IN THAT CASE IS THAT EVEN IF IN THE IT RETURN FILED BY THE ASSESSEE LOSSES ARE SHOWN, PENALTY CAN STILL BE IMPOSED IN A CASE WHERE ON SETTING OFF THE CONCEALED INCOME AGAINST ANY LOSS INCURRED BY THE A SSESSEE UNDER OTHER HEAD OF INCOME OR BROUGHT FORWARD FROM EARLIE R YEARS, THE TOTAL INCOME IS REDUCED TO A FIGURE LOWER THAN THE CONCEA LED INCOME OR EVEN A MINUS FIGURE. THE COURT WAS OF THE OPINION THAT THE TAX SOUGHT TO BE EVADED WILL MEAN THE TAX CHARGEABLE NOT AS IF IT W ERE THE TOTAL INCOME. ONCE WE APPLY THIS RATIONALE TO EXPLN.4 GIVEN BY TH E SUPREME COURT, IN THE PRESENT CASE, IT WILL BE DIFFICULT TO SUSTAIN T HE PENALTY PROCEEDINGS. REASON IS SIMPLE. NO DOUBT, THERE WAS CONCEALMENT BUT THAT HAD ITS REPERCUSSIONS ONLY WHEN THE ASSESSMENT WAS DONE UND ER THE NORMAL PROCEDURE. THE ASSESSMENT AS PER THE NORMAL PROCED URE WAS, HOWEVER, NOT ACTED UPON. ON THE CONTRARY, IT IS THE DEEMED INCOME ASSESSED UNDER S.115JB OF THE ACT WHICH HAS BECOME THE BASIS OF ASSESSMENT AS IT WAS HIGHER OF THE TWO. TAX IS THU S PAID ON THE INCOME ASSESSED UNDER S.115JB OF THE ACT. HENCE, WHEN TH E COMPUTATION WAS MADE UNDER S.115JB OF THE ACT, THE AFORESAID CO NCEALMENT HAD NO ROLE TO PLAY AND WAS TOTALLY IRRELEVANT. THEREFOR E, THE CONCEALMENT DID NOT LEAD TO TAX EVASION AT ALL. FOLLOWING THE AFORESAID PARITY OF REASONING NO PENA LTY CAN BE IMPOSED U/S.271(1)(C) OF THE ACT QUA THE THREE ADDITIONS TO TALING TO RS.3,73,78,483/- MADE UNDER THE NORMAL PROVISIONS OF THE ACT SINCE T HE BASIS OF THE FINAL ASSESSMENT IN THIS CASE IS THE INCOME ASSESSED U/S. 115JB OF THE ACT AND TAXES HAVE BEEN PAID ON THE COMPUTATION AS MADE U/ S.115JB OF THE ACT. THEREFORE, THE ASSESSING OFFICER ERRED IN LEVYING PENALTY ON THIS ASPECT. 6 ACCORDINGLY, ON THIS ASPECT WE UPHOLD THE ULTIMATE CONCLUSION OF THE CIT(A) IN DELETING THE PENALTY, ALBEIT ON A DIFFERENT GROUND. 8. ANOTHER ELEMENT OF INCOME ON WHICH PENALTY HAS BEEN LEVIED IS WITH REGARD TO A ADDITION OF RS.31,70,092/- MADE TO BO OK PROFITS UNDER SECTION 115JB OF THE ACT. THE SAID ADDITION IS ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS WHICH HAS BEEN DISALLOWED BY THE ASS ESSING OFFICER ON THE GROUND THAT THE SAME WAS CONTINGENT IN NATURE. ON THIS ASPECT THE ASSESSEE HAS POINTED OUT THAT IT WAS UNDER BONAFIDE BELIEF T HAT THE PROVISION FOR BAD AND DOUBTFUL DEBTS DEBITED IN THE PROFIT AND LOSS ACCOU NT IS NOT A PROVISION FOR LIABILITY BUT A DIMINUTION IN THE VALUE OF ASSETS A ND THEREFORE IT WAS ALLOWABLE WHILE COMPUTING BOOK PROFITS AS PER SECTION 115JB OF THE ACT. BEFORE US, IT HAS BEEN EXPLAINED THAT AT THE TIME OF FILING OF TH E RETURN, ASSESSEES STAND WAS SUPPORTED BY VARIOUS TRIBUNAL DECISIONS INCLUDI NG THE DECISION OF THE PUNE BENCH IN THE CASE OF ACIT VS. JG VACCUM FLASKS PVT. LTD.(2002) 83 ITD 242 (PUNE). IT IS SUBMITTED THAT SUBSEQUENTLY THE PRINCIPLE WA S ALSO CONFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF M/S. HCL COMNET SYSTEMS & SERVICE LTD. (2008) 305 ITR 409. IT WAS EXPLAINED THAT THEREFORE NO ADJUSTMENT WAS REQUIRED TO BE MADE TO THE BOOK PROFITS AS PER THE SECTION 115JB ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS. IT HAS BEEN EXPLAINED THAT ONLY AFTER AN AMENDMENT TO SECTION 115JB INTRODUCED BY FINANCE ACT, 2009 RETROSPECTIVELY FROM 01/04/2001, ADJUSTMENT IS ALSO REQUIRED TO BE MADE FOR THE PROVISION FOR DIMINUTIO N IN VALUE OF ASSETS WHILE COMPUTING BOOK PROFITS AS PER SECTION 115JB OF TH E ACT. IT WAS THEREFORE SUBMITTED THAT IN THIS BACKGROUND THE RETURN OF INC OME FILED BY THE ASSESSEE DETERMINING BOOK PROFITS AS PER SECTION 115JB WIT HOUT MAKING ADJUSTMENT FOR THE PROVISION FOR DOUBTFUL DEBTS DEBITED IN PROFIT AND LOSS A/C CANNOT BE 7 CONSIDERED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE I.T. ACT. 9. ON THE OTHER HAND, THE LD.DR APPEARING FOR THE R EVENUE HAS DEFENDED THE IMPOSITION OF PENALTY BY POINTING OUT THAT THE IMPUGNED ADDITI ON HAS BEEN ACCEPTED BY THE ASSESSEE AND ALSO NOT CHALLENGED IN APPEAL BEFORE THE TRIBUNAL. 10. WE HAVE CONSIDERED THE RIVAL STANDS ON THE AFO RESAID ASPECT AND FIND THAT NO DEFAULT WITHIN THE MEANING OF 271(1)(C) OF THE ACT CAN BE ATTRIBUTED TO THE ASSESSEE. THOUGH THE ADJUSTMENT TO THE BOOK PROFITS MADE BY THE ASSESSING OFFICER WHILE DETERMINING INCOME U/S.115J B HAS BECOME FINAL AS STATED BY THE COUNSEL FOR THE RESPONDENT ASSESSEE I N THE COURSE OF HEARING, HOWEVER, IT HAS BEEN EXPLAINED THAT THE SAME WAS D UE TO RETROSPECTIVE AMENDMENT INTRODUCED BY THE FINANCE ACT, 2009 WHERE IN ADJUSTMENT IS REQUIRED TO BE MADE FOR PROVISION FOR DIMINUTION IN VALUE OF ASSETS WHILE COMPUTING BOOK PROFITS U/S.115JB OF THE ACT. IT IS ALSO TO BE NOTICED THAT THE RETURN OF INCOME FILED BY THE ASSESSEE COMPUTING BO OK PROFITS U/S.115JB WITHOUT MAKING ADJUSTMENTS WITH RESPECT TO PROVISIO N FOR DOUBTFUL DEBTS WAS SUPPORTED BY THE THEN PREVAILING DECISION OF THE PUNE BENCH OF THE TRIBUN AL IN THE CASE OF JG VACCUM FLASKS PVT. LTD (SUPRA). IN THE BACKGROUND OF SUCH FACTS AND CIRCUMSTANCES IT CAN BE SAID THAT AT THE TIME OF FILING OF RETURN THE ISSUE IN QUESTION WAS DEBATABLE WHERE TWO VIEW WERE POSSIBLE AND THEREFORE SUCH A CLAIM MADE IN RETURN OF INCOME, THOUGH FOUND UNTENABLE BY THE ASSESSING OFFICER, CANNOT BE CONSTRUED AS FURNISHIN G OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) O F THE ACT. THEREFORE, ON THIS COUNT ALSO WE FIND NO JUSTIFICATION FOR THE PE NALTY IMPOSED BY THE ASSESSING OFFICER. 8 11. IN THE RESULT WE HEREBY UPHOLD THE ULTIMATE CO NCLUSION OF CIT(A), ALBEIT ON DIFFERENT GROUNDS AS DISCUSSED ABOVE. 12. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMI SSED. DECISION PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF MAY, 2012. SD/- SD/- (I.C.SUDHIR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTAN T MEMBER PUNE, DATED 25 TH MAY, 2012 ASHWINI COPY TO:- 1) ASSESSEE, 2) DCIT CEN. CIR.8, AKURDI, 3) THE CIT(A)-V, PUNE 4) CIT-V PUNE 5) DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE TRUE COPY BY ORDER SR. PS, ITAT PUNE