Sh. Vipin Behari Sharma, New Delhi V. ACIT, New Delhi

ITA 3208/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0703 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 19-10-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 29-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Assessee Lawyers: SM MATHUR
• Keywords: Opportunity of being heard; Wrong claim; Revised return; Bonafide mistake; Set aside
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH H DELHI ] BEFORE SHRI A. D. JAIN, JM AND SHRI K. D. RANJAN, AM I. T. A. NO. 3208 (DEL) OF 2010 ASSESSMENT YEAR : 2006-07. SHRI VIPIN BEHARI SHARMA, ASSTT. COMMISSIONER OF I NCOME-TAX, B 14, I N D E R P U R I, VS. C I R C L E : 33 (1), N E W D E L H I. N E W D E L H I. PAN/GIR NO. AAQPS8406C. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI S. M. MATHUR, C. A.; DEPARTMENT BY : SHRI AMRENDRA K UMAR, SR. D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 06-07 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XXVI, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER :- ' 1. THAT THE HONBLE CIT (APPEALS) HAS ERRED IN L AW AS MUCH AS ON THE FACTS OF THE CASE BY CONFIRMING THE UNWARRANTED PENALTY O F RS.1,45,927/- LEVIED BY THE LD. ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE : 33 (1), NEW DELHI, UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961; 2. THAT THE HONBLE CIT (APPEALS) WHILE UP HOLDING THE IMPUGNED PENALTY ORDER, DID NOT APPRECIATE THE REASONS AND CIRCUMSTA NCES FOR SOU-MOTTO FILING 2 I. T. A. NO. 3208 (DEL) OF 2010 THE REVISED COMPUTATION OF INCOME WHICH WERE EXPLAI NED. HE HAS SIMPLY DISBELIEVED THE SUBMISSIONS OF THE APPELLANT AND AR BITRARILY SUSTAINED THE ORDER OF THE LD. AO; 3. THAT THE HONBLE CIT (APPEALS) DID NOT APPRECIATE THAT IT IS A TRITE LAW THAT PENALTY PROCEEDINGS ARE INDEPENDENT TO THE ASS ESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS. THE FINDINGS GIVEN INTO THE A SSESSMENT PROCEEDINGS THROUGH ARE GOOD EVIDENCE BUT THE SAME IS NOT CONCLUSIVE IN THE PENALTY PROCEEDINGS; 4. THAT IT IS A SETTLED LAW THAT IN THE AB SENCE OF ANY FALSITY IN THE DETAILS SUBMITTED BY THE ASSESSEE REGARDING COMPUTATION OF INCOME, PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE IN RESPECT OF THE INADVER TENT WRONG CLAIM MADE BY THE APPELLANT FOR DEDUCTION WHICH IS OTHERWISE AVAILABL E TO THE APPELLANT. 3. THE ONLY ISSUE IN THIS APPEAL RELATES TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS TH E ACT]. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME AT RS.4,63 ,550/- AFTER CLAIMING DEDUCTION UNDER SECTION 80-IB OF RS.45,73,263/-. THE ASSESSEE IN THE RELEV ANT ASSESSMENT YEAR WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING ACTIVITIES. THE MANUFACTURING UNIT WAS ESTABLISHED AT BANSWARA, RAJASTHAN. THE SALES OUTLETS WERE AT DEL HI, MUMBAI AND KOLKATA WHERE THE SALE OF GOODS MANUFACTURED AT BANSWARA AS WELL AS GOODS PUR CHASED FROM THIRD PARTIES WAS AFFECTED. THE ASSESSEE MAINTAINED BOOKS OF ACCOUNTS BRANCH-WI SE. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB AT RS.45,73,263/- BEING HUNDRED PER C ENT OF MANUFACTURING PROFITS OF BANSWARA UNIT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN RESPONSE TO A QUERY ABOUT CLAIM OF DEDUCTION UNDER SECTION 80-IB IT WAS SUBMITTED THAT THE ASSESSEE WHILE COMPUTING DEDUCTION UNDER SECTION 80-IB DID NOT ACCOUNT FOR IN PROPER P ROPORTION THE DIRECT AND INDIRECT EXPENSES INCURRED AT MANUFACTURING UNIT AT BANSWARA AND SALE S UNITS AT DELHI, MUMBAI, KOLKATA WHICH RESULTED IN VARIATION IN DEDUCTION. THE ASSESSEE I N VIEW OF THE ERRORS / MISTAKES DISCOVERED IN TRADING AND MANUFACTURING ACCOUNTS RE-CASTED COMPUT ATION OF DEDUCTION UNDER SECTION 80-IB. IT WAS ALSO EXPLAINED THAT THE CA CALCULATED DEDUCTION ONLY ON NET PROFIT EARNED BY THE ASSESSEE ON ITS BANSWARA UNIT, WITHOUT CARRYING OUT ITS ADJUSTM ENTS IN THE PROFIT WHICH THE ASSESSEE HAD EARNED ON SALES OF THESE ITEMS AT THEIR SALES OUTLE TS AT DELHI, MUMBAI AND KOLKATA. IN THE RE- CASTED PROFIT AND LOSS ACCOUNT THE MANUFACTURING AN D TRADING PROFITS HAVE BEEN RECALCULATED SEPARATELY AS ONLY MANUFACTURING PROFITS WERE ELIGI BLE FOR PROFIT UNDER SECTION 80-IB. AS PER THE 3 I. T. A. NO. 3208 (DEL) OF 2010 REVISED COMPUTATION, DEDUCTION UNDER SECTION 80-IB WAS WORKED OUT AT RS.41,60,115/- AS AGAINST RS.45,73,263/- CLAIMED IN THE RETURN OF INCOME. TH E AO ALLOWED DEDUCTION UNDER SECTION 80-IB AT RS.41,60,115/- AND INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 4. DURING THE COURSE OF PENALTY PROCEEDINGS IT WAS SUBMITTED THAT THE ASSESSEE UNDER BONA FIDE BELIEF HAD CLAIMED DEDUCTION OF RS.45,73,265/- UNDER SECTION 80-IB(V) WHICH WAS COMPUTED BY M/S. ARUN K. AGGARWAL & ASSOCIATES, CHARTERED AC COUNTANTS. THE AMOUNT OF DEDUCTION WAS CALCULATED AND CERTIFIED IN FORM 10-CCB DATED 2/08/ 2006 BY HIM THE COPY OF WHICH WAS SUBMITTED ALONG WITH THE RETURN OF INCOME. THE CHA RTERED ACCOUNTANT HAD CALCULATED DEDUCTION ONLY ON NET PROFIT EARNED FROM ITS BANSWARA UNIT WI THOUT CARRYING OUT ADJUSTMENTS FOR THE PROFITS WHICH THE ASSESSEE HAD EARNED ON SALE OF THESE ITEM S AT THEIR SALE OUTLETS AT DELHI, MUMBAI AND KOLKATA. THE ASSESSEE HAD CLAIMED DEDUCTION ON THE BASIS OF CERTIFICATES ISSUED BY THE CA. WHEN THE MISTAKE WAS NOTICED, THE REVISED STATEMENT OF MANUFACTURING AND TRADING ACCOUNT AND COMPUTATION OF TAXABLE INCOME WAS NECESSITATED OWIN G TO CERTAIN ERRORS / MISTAKES DISCOVERED IN THE CLAIM OF DEDUCTION UNDER SECTION 80-IB, WHICH W AS INADVERTENTLY CALCULATED. THIS EXPLANATION OF THE ASSESSEE WAS REJECTED BY THE AO ON THE GROUND THAT THE ASSESSEE HAD RECASTED THE PROFIT AND LOSS ACCOUNT WHEN DETAILS OF SALES A ND EXPENSES AT BANSWARA UNIT WERE CALLED FOR. HAD THE CASE NOT BEEN TAKEN INTO SCRUTINY, THE ASSE SSEE WOULD HAVE GOT AWAY WITH INFLATED CLAIM OF DEDUCTION U/S. 80-IB. THE AO ALSO NOTED THAT I N AY 2005-06 THE CLAIM OF DEDUCTION WAS REVISED DOWN-WARDS. IF IT WAS A BONAFIDE MISTAKE T HE ASSESSEE SHOULD HAVE REVISED RETURN FOR AY 2006-07 IMMEDIATELY AFTER THE MISTAKE WAS DETECTED IN AY 2005-06. THEREFORE, THE CLAIM OF THE ASSESSEE WAS NOT BONAFIDE. THE AO, THEREFORE, IMPO SED PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF EXCESS CLAIM OF DEDUCTION. 5. ON APPEAL IT WAS PLEADED THAT THE MISTAKE COMMIT TED WAS BONAFIDE AND AS THE ASSESSEE WAS NOT INFORMED ABOUT THE TAX LAWS AND HE WAS TOTA LLY DEPENDENT ON HIS CA. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HI GH COURT IN THE CASE OF CIT VS. DHANBAL 309 ITR 267 (DEL.) WHEREIN IT HAS BEEN HELD THAT WHERE TRIBUNAL HAD COME TO THE CONCLUSION THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS BONAFIDE AN D THAT ALL FACTS WHICH WERE MATERIAL TO THE 4 I. T. A. NO. 3208 (DEL) OF 2010 COMPUTATION OF INCOME HAD BEEN DISCLOSED BY THE ASS ESSEE, THERE WAS NO QUESTION OF IMPOSING THE PENALTY ON THE ASSESSEE. THE ASSESSEE ALSO PLA CED RELIANCE ON THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF SUNIL CHANDRA VOHRA VS. ACIT IN ITA. 4693 (MUM.) OF 2006 DATED 23 RD JUNE, 2009. 6. THE LD. CIT (APPEALS) AFTER CONSIDERING THE FACT S OF THE CASE OBSERVED THAT THE ASSESSEE HAD PLEADED THAT THE MISTAKE WAS COMMITTED DUE TO I GNORANCE OF LAW ON THE PART OF THE ASSESSEE AND THE MISTAKE WAS DONE BY THE CHARTERED ACCOUNTAN T. HE ALSO NOTED THAT SIMILAR MISTAKE WAS COMMITTED IN AY 2005-06. THEREFORE, ONCE THE ASSES SEE WAS AWARE OF THE MISTAKE COMMITTED BY HIM IN AY 2005-06 THERE WAS NO CASE FOR BONAFIDE MI STAKE ON THE PART OF THE ASSESSEE IN AY 2006-07. THUS, THERE WAS POSSIBILITY THAT THE ASSE SSEE WOULD NOT HAVE COME FORWARD WITH THE REVISED COMPUTATION UNLESS THE CASE WAS PICKED UP F OR SCRUTINY AND THE AO HAD NOT ASKED FOR SPECIFIC QUERY IN RESPECT OF BRANCH-WISE PROFIT. T HE LD. CIT (A) ACCORDINGLY UPHELD THE LEVY OF PENALTY, REJECTING THE CONTENTION OF THE ASSESSEE T HAT THE MISTAKE WAS BONAFIDE. 7. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT THE ENTIRE DETAILS WERE AVAILABLE IN THE PROFIT AND LOSS ACCOUNT AND, THEREFORE, THE ASSESSE E DECLARED ALL MATERIAL FACTS NECESSARY FOR COMPUTATION OF DEDUCTION UNDER SECTION 80-IB. IT W AS ALSO SUBMITTED THAT FOR AY 2005-06 ON SIMILAR FACTS THE MATTER HAS BEEN REMANDED BACK TO THE LD. CIT (A) FOR FRESH DECISION ON MERITS. ON THE OTHER HAND, THE LD. SR. DR SUBMITTED THAT TH E ASSESSEE HAD REVISED THE CLAIM FOR LOWER DEDUCTION UNDER SECTION 80-IB WHEN THE MATTER WAS D ETECTED BY THE ASSESSING OFFICER. THEREFORE, PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS IMPO SABLE. 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN AY 2005-06 THE ISSUE RELATING TO LEVY OF PENALTY CAME UP BEFORE THE ITAT, DELHI BENCH H IN ITA. 708 (DEL) OF 2010. ITAT HAS SET ASIDE THE MATTER TO THE FILE OF THE LD. CIT (A) WITH THE DIRECTIONS TO DECIDE THE ISSUE AFRESH ON MERITS AFTER PROVIDING THE ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH THE PARTIES. SI NCE ON IDENTICAL ISSUE THE MATTER HAS BEEN RESTORED TO THE FILE OF THE LD. CIT (A) WE FEEL IT PROPER TO SET ASIDE THE MATTER TO THE FILE OF THE L D. 5 I. T. A. NO. 3208 (DEL) OF 2010 CIT (APPEALS) WITH THE DIRECTIONS TO DECIDE THE ISS UE OF LEVY OF PENALTY UNDER SECTION 271(1)(C) ON THE LINES OF THE APPEAL FOR ASSESSMENT YEAR 2005 -06, WHICH HAS BEEN SET ASIDE TO THE FILE OF THE LD. CIT (A) BY THE TRIBUNAL. THE LD. CIT (A) WILL PASS A FRESH ORDER AFTER AFFORDING THE ASSESSEE AS WELL AS THE AO AN OPPORTUNITY OF BEING HEARD. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 07 TH JANUARY, 2011. SD/- SD/- [ A. D. JAIN ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07 TH JANUARY, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.