ACIT 6(1), MUMBAI V. AKAR TOOLS LTD, MUMBAI

ITA 2711/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70652 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-08-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 07-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R M MADHAVI
• Assessee Lawyers: A K BAGADIA
• Keywords: Wrong claim; Bonafide mistake
• Section: 143(3); 27; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 2711/MUM/2011 (ASSESSMENT YEAR: 2003-04) ACIT, CIRCLE 6(1) M/S. AKAR TOOLS LTD. ROOM NO. 506, FIFTH FLOOR 304, ABHAY STEEL HOUSE AAYAKAR BHAVAN, M.K. ROAD VS. BARODA STREET, CARNAC BUNDER MUMBAI 400020 MUMBAI 400009 PAN - AAACA4261G PAN - AAACA4261G APPELLANT RESPONDENT APPELLANT BY: MS. R.M. MADHAVI RESPONDENT BY: SHRI A.K. BAGADIA DATE OF HEARING: 07.08.2013 DATE OF PRONOUNCEMENT: 07.08.2013 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 03.01.2011 PASSED BY THE CIT(A)-14, MUMBAI AND IT P ERTAINS TO A.Y. 2003- 04. 2. PENALTY LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT WAS CANCELLED BY THE LEARNED CIT(A) ON THE GROUND THAT THERE WAS NO MALAFIDE INTENTION ON THE PART OF THE ASSESSEE TO FURNISH IN ACCURATE PARTICULARS OF INCOME AND THERE WAS NO WILLFUL ACT ON THE PART OF THE ASSESSEE TO EVADE TAX OR HIDE INCOME IN WHICH EVENT PROVISIONS OF SECTION 271(1)(C) OUGHT NOT HAVE BEEN INVOKED BY THE AO. THE REVENUE IS AGGRIEVED BY THE SAID ORDER AND CONTENDED BEFORE US THAT THE LEARNED CIT(A) ERRED I N RELYING UPON THE ORDER OF THE APEX COURT IN THE CASE OF RELIANCE PETROPROD UCTS P. LTD 322 ITR 158 (SC) IGNORING THE FACT THAT THE RATIO AS LAID DOWN BY THE APEX COURT IS NOT FULLY APPLICABLE IN THE INSTANT CASE. 3. WE HAVE HEARD THE LEARNED D.R. AS WELL AS THE LEARN ED COUNSEL FOR THE ASSESSEE IN THIS REGARD AND CAREFULLY PERUSED THE R ECORD. THE FACTS NECESSARY ITA NO. 2711/MUM/2011 M/S. AKAR TOOLS LTD. 2 FOR DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF FORGED HAND T OOLS. FOR THE YEAR UNDER CONSIDERATION IT DECLARED NIL INCOME WHICH WAS PROC ESSED UNDER SECTION 143(1) OF THE ACT. LATER ON THE CASE WAS SELECTED F OR SCRUTINY AND ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF ` 27,59,370/-. THEREAFTER THE REVISIONAL AUTHORITY SET ASIDE THE ORDER OF THE AO, BY INVOKING THE POWERS VESTED IN HIM UNDER SECTION 263 OF THE ACT, BY OBSE RVING THAT THE AO ALLOWED THE LOSS ON SALE OF FIXED ASSETS AMOUNTING TO ` 24,72,133/- WITHOUT MAKING NECESSARY AND ADEQUATE ENQUIRIES. CONSEQUENT THERET O THE AO GAVE AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN HIS CASE AS TO WHY THE DEDUCTION REFERABLE TO LOSS ON SALE OF FIXED ASSES IS NOT ADM ISSIBLE. THE AO NOTICED THAT THERE WAS NO CESSATION OF BLOCK OF ASSETS AND THERE FORE THE ASSESSEE IS NOT ENTITLED TO CLAIM LOSS ON SALE OF FIXED ASSETS. ACC ORDINGLY A SUM OF ` 24,72,133/- WAS ADDED TO THE TAXABLE INCOME AND SIM ULTANEOUSLY PENALTY PROCEEDINGS WERE INITIATED UNDER SECTION 271(1)(C) OF THE ACT. THE CASE OF THE AO WAS THAT THE LOSS WAS CAPITAL IN NATURE AND HENC E NOT ELIGIBLE FOR DEDUCTION WHEREAS THE ASSESSEE WRONGLY DEBITED THE SUM TO THE P & L ACCOUNT. IN RESPONSE THERETO THE ASSESSEE SUBMITTED THAT THE LOSS ON ACCOUNT OF FIXED ASSETS WAS DEBITED TO THE P & L AC COUNT BY MISTAKE AND ON NOTICING THE FACT THE ASSESSEE READILY AND WILLFULL Y ADMITTED THE MISTAKE AND THERE WAS NO MALAFIDE INTENTION IN THAT REGARD EXCE PT THE FACT THAT IT WAS A HUMAN ERROR. THE AO REJECTED THE EXPLANATION. HE OB SERVED THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME WHICH, IN OTHER WORDS, WOULD AMOUNT TO CONCEALMENT OF INCOME TO THE EXTENT OF CLAIM OF EXPENDITURE ON ACCOUNT OF LOSS ON SALE OF ASSETS. T HEREFORE, THE CLAIM THAT THE ASSESSEE ADMITTED THE ERROR ON ITS PART IS NOT ACCEPTABLE. BY APPLYING THE DECISION OF THE APEX COURT IN THE CASE OF DHARMENDR A TEXTILES PROCESSORS 306 ITR 277 THE AO IMPOSED PENALTY UNDER SECTION 27 1(1)(C) OF THE ACT. 4. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THA T IT WAS AN HONEST AND BONAFIDE MISTAKE ON THE PART OF THE ASSESSEE IN DEBITING THE IMPUGNED AMOUNT TO THE P & L ACCOUNT AND THE P & L ACCOUNT H AVING REFLECTED THIS FIGURE, WHICH WAS PART OF THE RECORD OF AO, IT CANN OT BE STATED THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS. IT WAS A LSO CONTENDED THAT ITA NO. 2711/MUM/2011 M/S. AKAR TOOLS LTD. 3 IDENTICAL ISSUE WAS SET ASIDE BY THE FIRST APPELLAT E AUTHORITY IN ASSESSEES OWN CASE FOR A.Y. 2004-05 BY AN ORDER DATED 06.08.2 010 IN APPEAL NO. CIT(A)-14/IT-265/RG.6(1)09-10. COPY OF THE SAME WAS ENCLOSED IN SUPPORT OF ITS CONTENTION THAT THE FACTS BEING IDENTICAL THERE IS NO CASE FOR LEVY OF PENALTY EVEN FOR THE ASSESSMENT YEAR UNDER CONSIDER ATION. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL INFOR MATION AND EXPLANATIONS AND ALL FURTHER DETAILS AS REQUISITIONED BY THE AO DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS AND SOON AFTER THE REVISIONAL AUTHORITY POINTED OUT THE MISTAKE COMMITTED BY THE ASSESSEE I T READILY AGREED TO OFFER THE SAME AS INCOME, WHICH IN ITSELF SHOWS THAT A MI STAKE CROPPED UP IN THE ACCOUNTS BY OVERSIGHT AND EVEN THE AO HAS ALSO COMM ITTED THE SAME MISTAKE BY SCRUTINISING THE RETURN OF INCOME WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. SINCE F ULL PARTICULARS OF ALL ADDITIONS AND DEDUCTIONS IN THE FIXED ASSETS AND DE PRECIATION WORKING WERE FURNISHED BEFORE THE AO, IT CANNOT BE STATED THAT T HERE IS DELIBERATE AND INTENTIONAL ACT ON THE PART OF THE ASSESSEE TO HIDE ANY FACT AND TO SUBMIT ANY INACCURATE PARTICULARS. IN FACT, THE AO WAS HAV ING FULL AND COMPLETE DETAILS OF THE P & L ACCOUNT AT THE TIME OF COMPLET ING THE REGULAR ASSESSMENT. UNDER THE CIRCUMSTANCES IT CAN ONLY BE STATED THAT IT WAS A SHEER ERROR OF OVERSIGHT BOTH ON THE PART OF THE AS SESSEE AND THE AO, WHICH CANNOT BE STATED TO BE A WILLFUL DEFAULT ATTRACTING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. RELIANCE WAS PLACED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS P. LTD 322 ITR 158 (SC) AS WELL AS SEVERAL OTHER DECISIONS IN SUPPORT OF ITS CONTENTION THAT THE AO HAVING LEVIED PENALTY ON THE GROUND THAT THE ASS ESSEE FURNISHED INACCURATE PARTICULARS, ONCE IT IS PROVED THAT THER E WAS NO MALAFIDE OMISSION ON THE PART OF THE ASSESSEE, PENALTY CANNOT BE LEVI ED. 5. THE LEARNED CIT(A) ANALYSED THE FACTS AND CIRCUMSTA NCES OF THE CASE WHILE ARRIVING AT THE CONCLUSION THAT IT WAS NOT A FIT CASE FOR LEVY OF PENALTY. THE OPERATIVE PART OF THE ORDER IS EXTRACTED FOR IM MEDIATE REFERENCE: - 5.1 HOWEVER, APPELLANT ARGUED THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS ASSESSEE HAS AGREED AND ACCE PTED THE DISALLOWANCE DUE TO THE MISTAKE AND EXPLAINED THE S AME WITH ITA NO. 2711/MUM/2011 M/S. AKAR TOOLS LTD. 4 EVIDENCE IN FULL AND CORRECT DETAILS TO THE AO. IT IS FURTHER SUBMITTED BY THE APPELLANT THAT IT HAS SUBMITTED FULL DETAILS WITHOUT HIDING ANY PARTICULARS. THERE IS NO FINDING BY THE AO THAT THE APPELLANT WAS FAILED TO OFFER ANY EXPLANATION OR IT FAILED TO SUB STANTIATE THE EXPLANATION OFFERED BY IT NOR THERE IS ANY FINDING THAT THE EXPLANATIONS SUBMITTED BY THE APPELLANT IS FALSE OR INCORRECT. IN SHORT MAKING A WRONG CLAIM BY MISTAKE OR DUE TO ERROR IN ACCOUNTING ENTRY IS NOT AT PAR WITH CONCEALMENT OF GIVING OF INACCUR ATE INFORMATION WHICH MAY CALL FOR LEVY OF PENALTY U/S. 271(1)(C) O F THE IT ACT. 5.2 APPELLANT FURTHER ARGUED THAT AFTER THE JUDGEME NT IN DHARMENDRA TEXTILES , THE DEPARTMENT TOOK THE VIEW THAT PENALTY U/S. 271(1)(C) IS AUTOMATIC ON AN ADDITION OR DISAL LOWANCE MADE IN THE ASSESSMENT ORDER BUT THE SAID ARGUMENT WAS NEGA TIVED BY THE HON'BLE SC IN THE CASE OF ATUL MOHAN BINDAL 317 ITR 19 (SC) AND APPELLANT HAS ALSO RELIED UPON THE DECISIONS OF THE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 WHICH IS WELL EMPHASISED THAT ACCORDING TO THE COURT, THE WORD INACCURATE SIGNIFIED A DELIBE RATE ACT OR OMISSION ON THE PART OF THE ASSESSEE; AND HENCE WILLFUL CONC EALMENT OR WILLFUL FURNISHING OF INACCURATE PARTICULARS OF INCOME IS E SSENTIAL INGREDIENT FOR ATTRACTING PENALTY. ALL THE RELEVANT FACTS WERE ALREADY AVAILABLE BEFORE THE AO. IT APPEARS, THERE WAS NO MALAFIDE IN TENTION ON THE PART OF THE APPELLANT TO FURNISH INACCURATE PARTICULARS OF INCOME. FURTHER, THERE IS NO WILLFUL ACT ON THE PART OF THE APPELLAN T TO EVADE TAXES BY HIDING ANY INCOME. 5.3 RESPECTFULLY FOLLOWING THE RATIO OF RECENT DEC ISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 , I AM OF THE VIEW THAT THE CIRCUMSTANCES AND THE FACTS OF THE CASE AS DISCUSSED ABOVE, THE PENALTY L EVIED U/S. 271(1)(C) OF THE IT ACT IS NOT SUSTAINABLE. THEREFORE, THE PE NALTY LEVIED BY THE AO IS NOT JUSTIFIED, HENCE, THE SAME IS DELETED. 6. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. AT THE T IME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE ADVERTED OUR ATTEN TION TO THE OPENING SENTENCE OF PARA 5 OF LEARNED CIT(A)S ORDER TO SUB MIT THAT ON IDENTICAL ISSUE THE LEARNED CIT(A) SET ASIDE THE PENALTY LEVIED BY THE AO IN A.Y. 2004-05 AND THE REVENUE DID NOT CHOOSE TO FILE ANY APPEAL. 7. ON THE OTHER HAND, THE LEARNED D.R. RELIED UPON THE ORDER PASSED BY THE AO WHICH IN TURN SHOWS THAT THE PENALTY WAS LEV IED ON THE GROUND THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF IN COME WHICH WOULD AMOUNT TO CONCEALMENT OF INCOME. ITA NO. 2711/MUM/2011 M/S. AKAR TOOLS LTD. 5 8. PER CONTRA THE LEARNED COUNSEL FOR THE ASSESSEE REL IED UPON THE DECISION OF THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA) TO SUBMIT THAT THE EXPRESSION INACCURATE SIGNIFIES A DELIBERATE ACT OR OMISSION ON THE PART OF THE ASSESSEE WHEREAS, IN THE INSTANT CASE, THERE WAS NO MALAFIDE INTENTION ON THE PART OF THE ASSESSEE TO F URNISH INACCURATE PARTICULARS; IN FACT PAGE 7 OF THE PAPER BOOK SHOWS THAT THE ASSESSEE CATEGORICALLY MENTIONED THAT IT IS LOSS ON SALE OF FIXED ASSETS WHICH MISSED THE ATTENTION OF BOTH THE ASSESSEE AS WELL AS THE A O WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. HE, THE REFORE, SUBMITTED THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN OUR CONSIDERED OPINION THE ORDER PASSED BY THE LEARNED CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. IT IS NOT THE C ASE OF THE REVENUE THAT EXPLANATION 1 TO SECTION 271(1)(C) DESERVES TO BE I NVOKED IN THE INSTANT CASE. ON THE OTHER HAND, THE AO MERELY PROCEEDED ON THE F OOTING THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS BY CLAIMI NG ADDITION OF THE EXPENDITURE WHICH IS NOT OTHERWISE ADMISSIBLE UNDER LAW. IT IS NOT IN DISPUTE THAT ON IDENTICAL CIRCUMSTANCES THE APPEAL FILED BY THE ASSESSEE FOR A.Y. 2004-05 WAS DECIDED BY THE LEARNED CIT(A) BY HOLDIN G THAT PENALTY IS NOT LEVIABLE AND THE REVENUE APPEARS TO HAVE NOT PREFER RED ANY APPEAL. BY TAKING THE TOTALITY OF THE FACTS WE ARE OF THE VIEW THAT THERE IS NO MALAFIDE INTENTION ON THE PART OF THE ASSESSEE IN CLAIMING T HE IMPUGNED EXPENDITURE AS REVENUE IN NATURE. WE, THEREFORE, UPHOLD THE ORD ER OF THE LEARNED CIT(A) AND DISMISS THE APPEAL FILED BY THE ASSESSEE. 10. IN THE RESULT, AS PRONOUNCED IN THE OPEN COURT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST, 2013. SD/- SD/- (SANJAY ARORA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 7 TH AUGUST, 2013 ITA NO. 2711/MUM/2011 M/S. AKAR TOOLS LTD. 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 14, MUMBAI 4. THE CIT 6, MUMBAI CITY 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.