M/s. Rajesh Malleables Ltd., Ahmedabad V. ITO, Ward-3(1)(3), Ahmedabad

ITA 347/AHD/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9617 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 04-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Wrong claim; Bad and doubtful debts; Revised return
• Section: 271(1)(c); 143(3); 274

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ C’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 347/AHD/2019 िनधाᭅरण वषᭅ/Asstt. Year: 2012-13 M/s. Rajesh Malleables Ltd., C/o. Anuj Mehta, Nandanvan Opp. Shapath IV, Nr.Karnavati Club, S.G. Highway, Ahmedabad. PAN: AABCRO270K Vs. Income-Tax Officer, Ward-3(1)(3), Ahmedabad. (Applicant) (Respondent) Assessee by : Shri Anil Kshatriya, Advocate Revenue by : Shri Alpesh Parmar, Sr.D.R सुनवाई कᳱ तारीख/Date of Hearing : 23/12/2021 घोषणा कᳱ तारीख /Date of Pronouncement: 28/01/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: This appeal is filed by an assessee and is arising out of the order of the Commissioner of Income tax, Appeals-9, Ahmedabad, [ here-in after “the Ld. CIT(A)] passed on 17-01-2019 in appeal No. CIT(A)-9/11118/ITO Wd-3(1)(3)/16- 17 where in the levy of penalty of Rs. 28,41,863/- levied by the assessing officer confirmed by “the Ld. CIT(A)” for Assessment Year 2012-13. ITA no.347/AHD/2019 A.Y. 2012-13 2 2. The assessee is in appeal before us where in the assessee has taken following grounds: 1) The impugned order passed by the Ld.CIT(A) is bad in law, illegal and arbitrary, the same deserves to be quashed. 2) In law and on facts as well as in the circumstances of the assessee's case, the Ld.CIT(A) erred in rejecting ground No. 1 of the appeal that "in view of the explicit provision of section 292B of the Act, this ground no. I & 2 of the appeal are rejected after considering the various judicial pronouncements relied upon by the appellant during the course of appellate proceedings which are not found to be squarely applicable to the facts Of the appellant's case", by wrongly stating that the show cause notice dated 27/02/2017 (wrongly mentioned as 22/02/2017) did not mention anything about the first notice (i.e. notice dated 03/03/2015) which all suggested that company has concealed the particulars of income rather than furnishing of inaccurate particulars of such income and the said finding is not emerging either from notice dated 03/03/2015 or 27/02/2017, the decision based on such erroneous consideration is perverse. Further the Ld.CIT (A) has erred in invoking & applying the provisions of section 292B of the Act, non application of mind by lower authorities which is not a curable mistake within the meaning of section 292B of the Act. 3) In law and on facts as well as in the circumstances of the assessee's case, the Ld.CIT (A) has further erred in deriving support from Sec.292B of the Act in rejecting ground no. I & 2 of the appeal that too without dealing with the two relied judgments of the jurisdictional high court. 4) On the facts and circumstances of the case as well as in law, the Ld CIT(A) has grossly erred in sustaining the penalty order passed by the A. O. levying penalty of Rs. 28,41,863/- u/s. 271(1)(c) of the Act when he ought to have deleted the same. 3. All the grounds are in relation to the levy of penalty u/s. 271(1)(c) of the Act for an amount of Rs. 28,41,863/- ordered to be levied by the assessing officer and confirmed by the “ Ld. CIT(A)”. 4. The appellant is a domestic public limited company incorporated on 03.09.1981 and is engaged in the business of manufacturing of GI Pipe fittings and assessed to tax bearing PAN:AABCR0270K, since decades. However, the company having suffered heavy loss, it got itself registered as Sick Industrial Company with BIFR with effect from 02.02.2011. ITA no.347/AHD/2019 A.Y. 2012-13 3 5. For the A. Y. 2012-13, the appellant furnished its e-return of income on 28.09.2012, declaring therein loss of Rs. 10,73,25,012/- only. The AO made an assessment u/s 143(3) of the Act assessing loss at Rs. 2,56,09,614/- while making the assessment, the A. O. had made additions/disallowance on account of excess of bad debts for Rs. 7,25,19,032/- and Rs. 91,96,966/- on account of excess provision for bad debts. “The Ld. CIT(A)” has given the relief to the extent of Rs. 7,25,19,032/- and sustained the addition of Rs. 91,96,966/- in quantum appeal filed by the assessee. 6. This penalty amount is levied only on addition to the extent of Rs. 91,96,966/- sustained in appellate order. Therefore, it is important to extract the nature of addition/disallowance from the original assessment. The discussion made is extracted here in below in respect of the addition on which the questioned penalty was levied: “4. During the course of assessment proceedings, it was gathered that the assessee had made provision of bad and doubtful debts of Rs.2,59,83,195/- on 31.3.2006 which was brought forward till 01.04.2011. On verification of the final account, it is gathered that the provision for bad and doubtful debt carried forwarded to 01.04.2012 is trade receivable of Rs. 82,16,506 and deposit of Rs. 5,000/-, totalling to Rs. 82,21,506/-. Further the amount of Rs. 90,54,581/- is settled during the year under consideration. Thus, the excess provision of Rs.87,72,108/- [ 2,59,83,195 –(82,21,506+90,54,581) ] is to be offered to tax. The assessee had not offered. The discrepancy was brought to the knowledge of the assessee. The assessee vide letter dated 18/2/ 15 had submitted its revised calculation in which the amount of Rs. 91,96,966 is added to the income of the assessee as excess provision of bad debt is written back. Penalty proceedings u/s.271(1)(c) of the I.T.Act are initiated for furnishing inaccurate particulars of income.” 7. Consequent to the decision of the quantum appeal decided by “the Ld. CIT(A) the assessing officer proceeded to levy the penalty as initiated in the assessment order in respect the addition of Rs. 91,96,966/- as confirmed by the CIT(A) in his appellate order. 8. In the order of penalty passed on 15-03-2017, the assessing officer has considered the arguments of the assessee which was on technical ground as well as on merits. All the submission of the assessee are incorporated in the penalty ITA no.347/AHD/2019 A.Y. 2012-13 4 order. The assessee mainly argued before the assessing officer that the notice is invalid and is not having the ground on which the penalty is proposed. The second ground of argument that it is mere disallowance of claim to some extent on account of error in computation and therefore, the penalty is not required to be levied. The assessing officer has incorporated the submission of the assessee, he has also given his own finding. The final conclusion of the penalty order is recorded is at para 6 & 7 of the order which is reproduced as under; “6. In view of the decisions discussed above, it is clearly emerges that in case any where any particular filed in the return of income by the assessee is found be inaccurate, erroneous or false and which has an impact on total income returned by the assessee, it would attract liability for penalty u/s. 271(1)(c) for furnishing inaccurate particulars of income. Moreover, after the decision of Hon’ble Supreme Court in the case of Dharmendra Textiles Proceessors(discussed above), penalty u/s. 271(1)(c) is a `civil liability’ and `mean era’ need not be proved for the levy of penalty. Mere, establishing of inaccuracy in particulars of income would be adequate for attracting the `civil liability’ of penalty u/s. 271(1)(c) of the I. T. Act. 7. Considering all these facts as brought out and more particularly, the fact that the assessee deliberately furnished inaccurate particulars in respect of provision for bad debts which was found to be wrong and discussed at length in the assessment order, I am fully satisfied that the assessee has conceled the particulars of income as well as furnished inaccurate particulars of income during the whole assessment proceding and as such I proceed further to levy minimum penalty of Rs. 28,41,863/- u/s. 271(1)(c) of the act as worked out in the below table;” Thus, the penalty is worked out at Rs. 28,41,863/- being 100 % on tax sought to be evaded on a sustained addition of Rs. 91,96,966/- on account of error in computation of the claim of provision of bad and doubtful debts. 9. In an appeal filed by the assessee against the penalty order before “the Ld CIT(A)”, the technical ground as well as ground on merits were raised. In the technical ground, the assessee stated that since there is no specific charge while issuing notice under section 274 of the Act dated 03.03.2015 and thus, the levy of penalty is not correct. The assessee has also contended before “the Ld. CIT(A) that the addition in question is mere addition on account of error in computation of provision of bad debts to the extent of Rs. 91,96,966/-. Thus, there is not concealment of income or providing of any inaccurate particulars of income. ITA no.347/AHD/2019 A.Y. 2012-13 5 10. While disposing the penalty appeal of the assessee “the Ld. CIT(A) has given a detailed finding on the technical grounds raised by the assessee and the same is reproduced here in below as point (a) and observation on arguments on merits in (b) for the sake of brevity of the facts of the case. (a) Finding of the Ld. CIT(A) “from para 3.2 page 12” last line on page 12 for technical ground “ ..........Thus, the A. O. did not erred in concluding the penalty proceeding by deriving specific satisfaction over the appellant’s failure to furnish inaccurate particulars besides attempting to conceal the particulars of income. Thus, in view of these explicit provision of section 292BB of the Act, this ground no 1 & 2 of the appeal are rejected after considering various judicial pronouncements relied upon by the appellant during the course of appellate proceedings which are not found to be squarely applicable to the facts of the appellant’s case.” (b) Finding of the Ld. CIT(A) “from para 4.6 on page 31” levy of penalty on merits “4.6 I have perused these judicial pronouncements and found that there is some force in the contentions so raised. However, in the case of the appellant, it has already been clearly noticed that the appellant did not come forward voluntarily for offering the income on account of excess provision written off but it was first detected by the Assessing Officer as mentioned in the reproduced paragraph of the assessment order and during the course of assessment proceedings only, the appellant filed the revised statement of total income. From the date of filing of the return of income for A. Y.2012-13 i.e. 28.09.2012, the appellant must have filed the returns of income for the subsequent assessment years i.e. 2013-14 and 2014- 15 d also must have got the books of accounts audited but did not come forward to offer the excess provision voluntarily. Therefore, it is highly improbable that the appellant was not aware of this excess provision which was required to be offered in A.Y .2012-13 and was required to file the revised return of income for A. Y. 2012-13, if it had in fact examined this issue on the basis of the records of the appellant itself. However, the appellant did not reconcile this discrepancy and it was attempted to be reconciled only when the A.O. issued the notice u/s.142(1) of the Act asking various details which made the appellant to collect and compile the details and on such compilation, the appellant gathered that such mistake has been crept in and then came forward to offer the income. Thus, this is a clear-cut case of furnishing inaccurate particulars knowingly and with an intention to seek the tax to be avoided as defined in section 271(1)(c) of the Act. The Assessing Officer has rightly held that the case of the appellant was for concealing the particulars as well as furnishing inaccurate particulars of income and levied the penalty of Rs.28,41 ,863/- which is the minimum penalty imposed @ 100% of the tax sought to be evaded after considering the facts of the case and granting due immunity by way of not imposing the penalty of more than 100% and upto maximum 300% of the tax sought to be evaded. Therefore, the ground no. 3 of the appeal is dismissed and the penalty order passed u/s.271(1)(c) of the Act dated 15.03.2017 is confirmed and thereby the penalty of Rs.28,41 ,863/- is confirmed. 10.1 Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. ITA no.347/AHD/2019 A.Y. 2012-13 6 11. The AR of the of the assessee argued that there is no jurisdiction and as well as clear finding of the assessing officer to impose penalty u/s 271(1)(c) of the Act. He stated before us that the penalty notice issued u/s. 274 r.w.s. 271(1)(c) of the Act dated 03.03.2015, a copy of which has been placed on page 37 of paper book no. Part-I filed by the assessee, there is non-application of mind while issue of notice and it is in standard format and the irrelevant portion of notice has not been struck off. 12. The AR of the assessee in his paper book extracted the relevant portion from the, assessment order, original notice dated 03.03.2015 and finding of the assessing officer while levying the penalty. He has thus, stated that at the time of initiating penalty proceeding, there was no clear finding by the A.O. whether the assessee is guilty of concealing the income and/or furnishing inaccurate particulars of income. The AR of the assessee further contended that the AO has issued notice without recording his proper finding in the notice dated 03.03.2015 and thus, the requirement for imposing penalty order u/s 271(1)(c) of the Act has not been complied with i.e. two condition are required to be satisfied i.e. either (i) the appellant has concealed the particulars of income or (ii) the appellant has furnished inaccurate particulars of such income. The A.O. has failed give clear finding while initiating / levying penalty u/s. 271(1)(c) of the Act. The AR of the assessee stated that thus, there is, infirmity/irregularity in initiating penalty proceeding, which renders the proceeding ab-initio void and he has relied upon various judicial decisions. 13. The AR of the assessee also argued before us that even on merits the AO in para No. 4 of quantum order noted that the assessee vide its letter dated 18.02.2015 has submitted its revised statement of total income, in which, the above amount of Rs. 91,96,966/- is added to the income of the assessee. He further submitted that it is mere mistake in deriving the claim which was detected by the assessee during ITA no.347/AHD/2019 A.Y. 2012-13 7 the course of assessment proceeding. The assessee submitted a revised computation of income, whereby the error was rectified and the assessee surrendered the amount for the purpose of computation of income suo-motto. He further argued before us that in the quantum appeal, the ld. CIT(A) in para 5.2 of the appellate order, has clearly stated that the appellant realized the mistake and filed revised statement of income. The CIT(A) has given this finding after considering finding of the A.O. The said finding of facts has not been challenged by the department further and has attained finality. Therefore, the A.O. is not permitted to take a contrary stand to justify the levy of penalty order. The AR of the assessee also relied upon the decision of Hon’ble Supreme Court of India in the case of CIT V/s Reliance Petroproducts Limited 332 ITR 168 (SC) where in it is held that merely because the appellant had made claim which was not accepted or was not acceptable fully would not attract penalty u/s. 271(1)(c) of the Act. 14. On the other side the learned DR pointed out that the intention of the assessing officer to levy penalty was already communicated through the discussion in the assessment order where in the penalty has been initiated for furnishing inaccurate particulars of income. The DR has also relied upon the discussion made by the assessing officer on the decision cited in the penalty order as well as also on the decision cited by the CIT(A). He has also relied upon the finding of the CIT(A) on the alleged defect in issue of notice pointed out by the AR of the assessee. 15. Thus the learned DR submitted that the assessing officer pointed out his intention to levy penalty has already been communicated in the assessment order para 4. Therefore, non-striking off the irrelevant portion in the notice u/s. 274 r.w.s. 271(1)(c) of the Act dated 03.03.2015 does not create any ambiguity as the assessee was well aware that the proceedings have been initiated for furnishing inaccurate particulars of income. It was also contended that section 292 BB of the Act saves the error if any in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act and, therefore, the plea of the assessee is not justified and thus he has stated that ITA no.347/AHD/2019 A.Y. 2012-13 8 mentioning of an incorrect charge in the notice of penalty would not render the penalty proceedings void-ab-initio. 16. In reply, the learned representative for the assessee pointed out that non- striking off of irrelevant portion of the standard form of notice u/s 274 r.w.s. 271(1)(c) of the Act is a legal infirmity, which is fatal to the imposition of penalty because in the absence of specifying the ground on which penalty is initiated, there is a violation of principles of natural justice. In this context, the learned representative has specifically pointed out the judgments of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory & Ors., 359 ITR 565 (Karn.) and M/s. SSA’s Emerald Meadows (supra) wherein even the SLP filed before the Hon'ble Supreme Court has also been dismissed. 17. We have considered the rival contentions, and facts along with the judicial decision placed on record. It is not disputed that the assessee is eligible for the claim of the expenses but it was disallowed to the extent of Rs. 91,96,966/- out of the total claim of the assessee. We have also considered that the Ld. CIT(A) has observed that the assessee realized the mistake and filed revised statement of income at para 5.2 in quantum appeal. Therefore, the claim made by the assessee was not wrongfully but was on account of bona fide error to the extent for which the amount is added in the total income. This error in making the claim of expenses cannot be equated with the furnishing of inaccurate particular of income. Considering, the above finding and observations made by the lower authorities and following the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products Ltd. Reported in 322 ITR 158 we hold that there cannot be a penalty where there was bond fide error in the claim. The relevant finding in the judgment of Hon’ble Supreme Court (supra) reads as under: A glance of provision of section 271(1)(c ) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The instant case was not the case of concealment of the income. That was not the case of the revenue either. It was an admitted position in the instant case that no information given in the return was found ITA no.347/AHD/2019 A.Y. 2012-13 9 to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The revenue argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income. Such cannot be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. [Para 7] Therefore, it must be shown that the conditions under section 271(1)(c ) exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed, because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. [Para 8] The word 'particulars' must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In the instant case, there was no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. [Para 9] The revenue contended that since the assessee had claimed excessive deductions knowing that they were incorrect, it amounted to concealment of income. It was argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. Such contention could not be accepted as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that, by itself, would not attract the penalty under section 271(1)(c). If the contention of the revenue was accepted, then in case of every return where the claim made was not accepted by the Assessing Officer for any reason, the assessee would invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature. [Para 10] 17.1 In view of the above, we hold that there was wrong claim in the return of income filed by the assessee which cannot partake the characteristics of furnishing in-accurate particular of income. Therefore, we delete the levy of penalty considering it as bona fide error. Hence, the ground of appeal of the assessee is allowed. ITA no.347/AHD/2019 A.Y. 2012-13 10 17.2 In the result the levy of the penalty for an amount of Rs. 28,41,863/- is deleted and appeal of the assessee is allowed. 19. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Court on 28/01/2022 at Ahmedabad. Sd/- Sd/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 28/01/2022 Manish