M/s. T.C.N.S. Ltd., New Delhi V. ACIT, New Delhi

ITA 3069/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81704 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 03-09-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 16-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAHNI
• Keywords: Bonafide mistake
• Section: 143(3); 115JB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, AM AND SHRI GEORGE GEORGE K, JM ITA NO: 3069 /DEL/2013 AY : 200 3 - 04 T.C.N.S. LTD. VS. ACIT, CIRCLE 16(1) 3, COMMUNITY CENTRE NEW DELHI SAKET NEW DELHI 110 017 PAN: AAACT 5915 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.S.SAHNI, ADV. DEPARTMENT BY : SH. RAKESH KUMAR, SR. D.R. O R D E R PER GEORGE GEORGE K, JUDICIAL MEMBER THIS IS AN APPEAL AT THE INSTANCE OF THE ASSESSEE AND IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(APPEALS) DT. 28.2.2013. THE ORDER OF THE LD.CIT(APPEALS) ARISE S OUT OF THE ORDER OF THE AICT PASSED U/S 271(1)(C ) OF THE A CT IMPOSING A PENALTY OF RS.2,48, 600/ - . THE RELEVANT ASSESSMENT YEAR IS 2004 - 05. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS MEMORANDUM OF APPEAL. HOWEVER THE CRUX OF THE ISSUE RELATE TO WHETHER THE CIT( APPEALS ) IS JUSTIFIED IN CONFIRMING THE IMPOSI TION OF PENALTY U/S 271(1)(C ) OF THE ACT. 3. THE FACTS OF THE CASE ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY. FOR THE RELEVANT ASSESSMENT YEAR RETURN OF INCOME WAS FILED DECLARING NIL IN COME AS PER THE NORMAL COMPUTATION OF INCOME. HOWEVER UNDER THE PROVISIONS OF S.115 JB OF THE ACT , T HE ASSESSEE DISCLOSED BOOK PROFIT OF RS.1,40,83,499/ - . WHILE CALCULATING THE BOOK PROFITS OF THE ASSESSEE IT HAD CLAIMED DEDUCTION OF ITA NO. 3069/DEL/2013 ASSESSMENT YEAR 2003 - 04 T.C.N.S. LTD., NEW DELHI PAGE 2 OF 5 RS.31,56,838/ - U/S 8 0 HHE OF THE ACT. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 20.3.2006 ASSESSING THE BOOK PROFITS AT RS.1,40,83,499/ - . THEREAFTER A NOTICE U/S 148 OF THE ACT WAS ISSUED SINCE THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80HHE OF THE ACT , WHILE COMPUT ING BOOK PROFITS U/S 115 J B OF THE ACT. IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT , THE ASSESSEE FILED INCOME TAX RETURN , WHEREIN , HE HAD DECLARED AN INCOME OF RS.1,72,40,338/ - AND DEDUCTION U/S 80 HHE WAS NOT CLAIMED WHILE WORKING OUT THE BOOK PR OFITS U/S 115 J B OF THE ACT. ASSESSMENT WAS COMPLETED U/S 1 43(3) R.W.S. 148 OF THE ACT ACCEPTING THE RETURN FILED . 4. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE ACT AND IMPOSED A PENALTY OF RS.2,48,600/ - FOR MAKING A CLAI M OF DEDUCTION U/S 80 HHE OF THE ACT WHILE COMPUTING BOOK PROFITS U/S 115 J B OF THE ACT. 5. AS AGAINST THE IMPOSITION OF PENALTY , THE ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LD.CIT(APPEALS) CONFIRMED THE PENALTY IMPOSED U/S 271(1)(C ) OF THE ACT. THE RELEVANT FINDING OF THE CIT(APPEALS) READ AS FOLLOWS. 8. THE APPELLANT HAS FAILED TO PROVE THAT THE EXPLANATION GIVEN WAS BONAFIDE AND THERE WAS FULL DISCLOSURE OF FACTS. THE PROVISIONS OF EXPLANATION 1(B) TO SECTION 271(1)( C ) ARE APPLICABLE BECAUSE THE ASSESSEE HAS OFFERED AN EXPLANATION BEFORE THE ASSESSING OFFICER WHICH HE IS NOT ABLE TO SUBSTANTIATE AND HAS ALSO FAILED TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THE ADDITIONS MADE HAVE BEEN ACCEPTED BY THE APPELLANT. UNDER THE PRESENT SYSTEM, ONLY A VERY SMALL PERCENTAGE OF RETURNS IS PICKED UP FOR SCRUTINY. HAD THIS CASE NOT BEEN REOPENED U/S 147 , THE NECESSARY ADDITIONS WOULD NOT HAVE BEEN MADE AND THE APPELLANT S SUPPRESSED INCOME WOULD NOT HAVE COME TO LIGHT. THE PENALTY U/S 271(1)(C ) IMPOSED IS THE MINIMUM IMPOSABLE IN THIS CASE. CONSIDERING THE FACTS, THE PENALTY U/S 271(1)(C ) IS JUSTIFIE D AND IS UPHELD. THE GROUNDS ARE DISMISSED. ITA NO. 3069/DEL/2013 ASSESSMENT YEAR 2003 - 04 T.C.N.S. LTD., NEW DELHI PAGE 3 OF 5 6. THE ASSESSEE COMPANY BEING AGGRIEVED IS IN APPEAL BEFORE US. THE LD.A.R. FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES. THE LD.D.R. PRESENT WAS DULY HEARD ON THE MATT ER. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FURNISHED TO THE ASSESSING OFFICER THE COMPLETE CALCULATION OF DEDUCTION CLAIMED U/S 80HHE OF THE ACT WHILE WORKING OUT THE BOOK PROFITS U/S 115 JB OF THE ACT. THE C ONTENTION OF THE ASSESSEE AGAINST THE IMPOSITION OF PENALTY U/S 271(1)(C ) OF THE ACT WAS THAT DEDUCTION U/S 80 HHE WAS CLAIMED DUE TO MISCONCEPTION AND INADVERTENCE AN D THERE WAS NO WILLFUL INTENT TO CONCEAL ANY INCOME OR FURNISHING ANY INACCURATE PARTICULARS OF SUCH INCOME. IT WAS THE SUBMISSION OF THE ASSESSEE THAT IT WAS A BONAFIDE MISTAKE ON THE PART OF THE CHARTERED ACCOUNTANT AND THE SAME IS EVIDENT FROM THE AUDIT REPORT AND FORM NO.10 CCAF ACCOMPANIE D WITH THE AUDIT REPORT. 7.1. IN THE INSTANT CASE , THE CIT( APPEALS ) IN THE IMPUGNED ORDER HAS HELD THAT PROVISIONS OF EXPLANATION 1B TO S.271(1)(C ) OF THE ACT ARE APPLICABLE BECAUSE THE ASSESSEE HAS OFFERED AN EXPLANATION BEFORE THE ASSESSING OFFICER WH ICH HE IS NOT ABLE TO SUBSTANTIATE. IN THIS BACKGROUND WE HAVE TO EXAMINE WHETHER THE CLAIM MADE BY THE ASSESSEE OF DEDUCTION U/S 80 HHE OF THE ACT WHILE CALCULATING BOOK PROFITS IS A BONAFIDE CLAIM OR NOT. THE ASSESSEE WHILE FILING THE INCOME TAX RETUR N IN THE ORIGINAL ASSESSMENT PROCEEDINGS HAD LOST SI GHT OF PROVISIONS OF S EC.80A(2) OF THE ACT ACCORDING TO WHICH NO DEDUCTION U/S 80HHE OF THE ACT WAS ALLOWABLE IF IT EXCEEDS THE G ROSS TOTAL INCOME OF THE ASSESSEE. ON FACTS ON RECORD AND ON PERUSAL OF THE AUDIT REPORT, THE CHARTERED ACCOUNTANT CONCERNED HAS ALSO MADE A MISTAKE IN MAKING A CLAIM OF DEDUCTION U/S 80 HHE OF THE ACT. IN THE ORIGINAL ASSESSMENT PROCEEDINGS BOOK PROFIT WAS CALCULATED AT RS.1,40,83,499/ - AND TAX HAS BEEN PAID FOR RS.11,09,576/ - . IN THE RETURN PURSUANT TO S.148 NOTICE THE TOTAL INCOME DECLARED U/S 115JB WAS RS.1,72,40,338/ - AND TAX PAYABLE WAS ITA NO. 3069/DEL/2013 ASSESSMENT YEAR 2003 - 04 T.C.N.S. LTD., NEW DELHI PAGE 4 OF 5 RS.13,57,677/ - . ON MAKING TH E CLAIM OF DEDUCTION U/S 80HHE OF THE ACT THERE IS A SHORT DEDUCTION OF TAX AMOUNTING TO RS.2,78,432/ - WHI CH INCLUDES ALSO THE INTEREST. THE CALCULATION OF DEDUCTION U/S 80HHE WHILE COMPUTING THE BOOK PROFIT U/S 115JB WAS ALSO FILED IN THE COMPUTATION STATEMENT. AS MENTIONED EARLIER, ASSESSEE HAS DECLARED SUBSTANTIAL INCOME AND TAX SOUGHT TO BE EVADED IS ONLY RS.2,78,432/ - (WHICH ALSO INCLUDES INTEREST). THEREFORE THE CONTENTION OF ASSESSEE THAT 80 HHE DEDUCTION WAS MADE BY INADVERTENCE IS ONLY REASONABLE AND THE SAME CA NNOT BE BRUSHED ASIDE AS NOT BONAFIDE. THIS IS ALSO EVIDENT FROM THE F ACT THAT THE CHARTERED ACCOUNTANT OF THE ASSESSEE HAS ALSO COMMITTED AN ERROR IN CLAIMING DEDUCTION U/S 80HHE OF THE ACT IN THE AUDIT REPORT ACCOMPANYING THE RETURN OF INCOME. THEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT THERE IS NO WILLFUL DEFAULT ON THE PART OF THE ASSESSE IN FURNISHING INACCURATE PARTICULARS OF INCOME WARRANTING IMPOSITION OF PENALTY U/S 271(1)(C ) OF THE ACT. THEREFORE THE ORDER OF CIT(APPEALS) CONFIRMING THE IMPOSITION OF PENALTY IS SET ASIDE . 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 T H SEPTEMBER, 2014. S D / - S D / - (J. SUDHAKAR REDDY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 2 4 T H SEPTEMBER, 2014 *MANGA ITA NO. 3069/DEL/2013 ASSESSMENT YEAR 2003 - 04 T.C.N.S. LTD., NEW DELHI PAGE 5 OF 5 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR