M/s. Sunrider India Pvt. Ltd., Gurgaon V. ACIT, New Delhi

ITA 284/DEL/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0009 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 22-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 17-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJAN CHOPRA C A RE
• Keywords: Bonafide belief; Set aside
• Section: 271(1)(c); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: DELHI BENCHES: DELHI BENCHES: DELHI BENCHES: G GG G NEW DELHI NEW DELHI NEW DELHI NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER AND AND AND AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO: ITA NO: ITA NO: ITA NO: 284 284 284 284/DEL/201 /DEL/201 /DEL/201 /DEL/2011 11 1 ASSESSMENT YEAR : 200 ASSESSMENT YEAR : 200 ASSESSMENT YEAR : 200 ASSESSMENT YEAR : 2003 33 3- -- -0 00 04 44 4 M/S SUNRIDER INDIA P.LTD. VS. ACIT, CIRCLE 9(1) PLOT 495, UDYOG VIHAR NEW DELHI PHASE III, GURGAON 122 016, HARYANA (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) APPELLANT BY APPELLANT BY APPELLANT BY APPELLANT BY : SH. RANJAN CHOPRA, C.A. RESPONDENT BY RESPONDENT BY RESPONDENT BY RESPONDENT BY : SHRI KISHORE B, D.R. O R D E R O R D E R O R D E R O R D E R PER SHAMIM YAHYA, ACCOUNTAN PER SHAMIM YAHYA, ACCOUNTAN PER SHAMIM YAHYA, ACCOUNTAN PER SHAMIM YAHYA, ACCOUNTANT MEMBER T MEMBER T MEMBER T MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD.CIT(A) DATED 26.2.2009 PERTAINING TO A.Y. 2003-04. 2. THE ISSUE RAISED IS THAT THE LD.CIT(A) HAS ERRED IN C ONFIRMING THE PENALTY U/S 271(1)(C) OF THE ACT OF RS. 8,17,130/-. ITA 284/DELHI/2011 PAGE 2 OF 6 M/S SUNR IDER INDIA PVT. LTD. 3. IN THIS CASE THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF EXPIRED STOCK OF RS. 19,69,252/- WHICH INCLUDED IN THE COST OF GOODS SOLD AS CLAIMED AS PER NOTE BELOW SCHEDULE-8 OF THE BALANCE SHEET. THE ASSESSEES RESPONSE IN THIS REGARD WAS AS UNDER:- THE ASSESSEE HAD INCLUDED RS. 19,69,252/- BEING EXPIRED ST OCKS, AS COST OF GOODS SOLD. THE AMOUNT OF EXPIRED STOCKS INCLUDED IN T HE COST OF GOODS SOLD RELATED TO A PROVISION FOR SLOW MOVING AND OBSOLETE STOCKS OF RS. 22,94,614/- CREATED IN THE A.Y. 2002-03. SIMILARLY, THE ASSESSEE HAD CREATED A PROVISION OF RS. 40, 90,831/- FOR SLOW MOVING AND OBSOLETE STOCKS DURING THE A.Y. 2003-04. THIS AMO UNT OF PROVISION WAS DULY ADDED BACK TO THE INCOME OF THE ASSESSEE WHILE COMPUTING T HE TAXABLE INCOME FOR THE A.Y. 2003-04. PRESUMING THAT A SIMILAR TREATMENT FOR PROVISION FOR S LOW MOVING AND OBSOLETE STOCKS WERE MADE IN THE A.Y. 2002-03, THE ASSESSEE CLAIMED EXPENSES A S AN ALLOWABLE EXPENSE DURING THE A.Y. 2003-04. HOWEVER, DURING THE ASSES SMENT PROCEEDINGS IT WAS NOTICED BY THE ASSESSEE THAT THE AMOUNT OF PROVISION CREATED DURING THE A.Y. 2002-03 WERE CLAIMED AS EXPENSE IN THE SAME YEAR AND THE S AME WAS IMMEDIATELY INFORMED TO THE A.O. THIS WAS AN ERROR COMMITTED BY THE ASSESSEE AND NOT A CON SCIOUS ATTEMPT TO CONCEAL OR FURNISH INACCURATE PARTICULARS. THIS OCC URRED DUE TO OVERSIGHT SINCE THIS ISSUE RELATED TO TWO DIFFERENT A.YS. THE FOLLOWING FACTS CLARIFY THAT THIS WAS AN ERROR DUE TO OVERSIGHT RATHER THAN CONCEALMENT OF PARTICULARS OF INCOME. THE ASSESSEE HAD REVEALED IN ITS BALANCE SHEET THAT COST OF GOODS SOLD INCLUDED EXPIRED STOCK OF RS. 19,69,252/- OUT OF THE LAST YEARS PROVISION OF RS. 22,94,614/- ITA 284/DELHI/2011 PAGE 3 OF 6 M/S SUNR IDER INDIA PVT. LTD. . ONCE THE ASSESSEE CHECKS ITS PREVIOUS YEARS RETURN AND F OUND THAT THE ASSESSEE COMMITTED AN ERROR IT DID NOT CONTEST ON THE ISSUE WITH THE A.O. 3.1 THE ABOVE SUBMISSION OF ASSESSEE WAS NOT ACCEPTED BY T HE A.O. HE HELD THAT ONLY AFTER DETECTION THE ASSESSEE HAS ACCEPTED THE MIS TAKE. FURTHER THE A.O. HAS MADE AN ADDITION OUT OF TRAVELING EXPENSES RELATING TO PERSONS VISITING ASSESSEE COMPANY WHO BELONG TO THE PARENT COMPANY OF THE ASSESSEE IN USA. THESE TRAVELING EXPENSES AMOUNTED TO RS. 1,54,062/- AND RS. 1 ,00,192/-. PENALTY WAS ALSO IMPOSED ON THESE DISALLOWANCES. 4. UPON ASSESSEES APPEAL THE LD.CIT(A) UPHELD THE AOS A CTION. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS IN THE LIGHT OF MA TERIAL PRODUCED BEFORE US AND THE PRECEDENTS RELIED UPON. AS REGARDS THE ISSUE OF EXPIRED STOCK OF RS.19,69,252/-, IN OUR CONSIDERED OPINION THE ASSESSEES SUBMISSION IS QUITE COGENT ENOUGH AND IT CAN BE CONCURRED THAT IT WAS AN I NADVERTENT ERROR ON THE PART OF ASSESSEE. THE ASSESSEE HAD PRESUMED THAT THE PROVISION FO R SLOW MOVING STOCK FOR 2002-03 WOULD HAVE BEEN WRITTEN OFF IN THE COMPUTAT ION OF INCOME CANNOT BE SAID TO BE MALAFIDE, WHEN SIMILAR TREATMENT FOR SUCH STO CK FOR THE CURRENT YEAR HAS BEEN CLEARLY GIVEN IN THE COMPUTATION OF INCOME. ITA 284/DELHI/2011 PAGE 4 OF 6 M/S SUNR IDER INDIA PVT. LTD. 6. AS REGARDS THE DISALLOWANCE OF TRAVELING EXPENSES CONCER NED, IN OUR CONSIDERED OPINION IT IS NOT THE CASE THAT THE EXPENSES WER E BOGUS OR NOT INCURRED. REVENUES CLAIM IS THAT THE EXPENSES RELATED TO EMPLOYEES OF PA RENT COMPANY WHO HAVE VISITED THE ASSESSEE COMPANY. SUCH DISALLOWANCE, IN OUR CONSIDERED OPINION CANNOT BE SAID TO BE CONCEALMENT OF INCOME OR FURNISHI NG OF INACCURATE PARTICULARS OF INCOME. 7. SECTION 271(1)(C) OF THE INCOME TAX ACT POSTULATES TH E LEVY OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT O F INCOME. IN THIS CASE WE FIND THAT AS REGARDS THE MATTER PERTAINING TO OBSOLETE STOCK A SSESSEES CLAIM THAT THERE WAS AN INADVERTENT ERROR IS BONAFIDE. AS REGARDS DISA LLOWANCE OF TRAVELING EXPENSES, IN OUR CONSIDERED OPINION THE SAME ALSO DOES NOT FALL IN THE AMBIT OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 7.1 WE WOULD LIKE TO REFER TO THE HONBLE APEX COURT D ECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3.2010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUSE WHAT WA S OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILIP SHERO FF CASE WHERE IT WAS HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 27 1(1)(C). THE HONBLE ITA 284/DELHI/2011 PAGE 5 OF 6 M/S SUNR IDER INDIA PVT. LTD. APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REV ENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 7.2 WE WOULD ALSO LIKE TO REFER THE DECISION OF THE HONBL E APEX COURT RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIP S IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATI ON IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS O BLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER P ENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERAT ION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIB ED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOS E PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT , OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. ITA 284/DELHI/2011 PAGE 6 OF 6 M/S SUNR IDER INDIA PVT. LTD. 8. IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECED ENTS, WE SET ASIDE THE ORDER OF AUTHORITIES BELOW AND DELETE THE PENALTY. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STAN DS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2011. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - ( (( (A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN ) ) ) ) (SHAMIM YAHYA ) (SHAMIM YAHYA ) (SHAMIM YAHYA ) (SHAMIM YAHYA ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATED: 31 ST MARCH, 2011 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2. RESPONDENT; 3. CIT; 4. CIT(A); 5. DR; 6. GUARD FILE BY ORDER DY. REGISTRAR // C O P Y // *MANGA