Compact Softech Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-1(3), Now Ward-1(1)(3), Ahmedabad

ITA 3595/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9361 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 22-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Assessee Lawyers: PRAMOD N POPAT
• Keywords: Bonafide belief; Bonafide mistake
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO. 3595/AHD/2015 ASST. YEAR: 2011-12 COMPACT SOFTECH PVT. LTD. 302, 3 RD , EYE ONE, PANCHVATI CROSS ROAD, NAVRANGPURA, AHMEDABAD VS. INCOME TAX OFFICER, WARD 1(1)(3), AHMEDABAD - 380015 APPELLANT RESPONDENT PAN AADCC7889B APPELLANT BY SHRI PRAMOD N. POPAT, A.R. RESPONDENT BY SHRI ALBINUS TIRKEY, SR.DR DATE OF HEARING: 23/02/2016 DATE OF PRONOUNCEMENT: 2 3/02/2016 O R D E R PER GEORGE GEORGE K, JUDICIAL MEMBER. THIS APPEAL AT THE INSTANCE OF ASSESSEE IS DIRECTED AGAINST CIT(A)-1, AHMEDABAD, ORDER DATED 28.09.2015. THE RELEVANT AS SESSMENT YEAR IS 2011- 12. 2. THE SOLITARY ISSUE THAT ARISE FOR MY CONSIDERATI ON IS WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ORDER OF A.O. , IMPOSING PENALTY U/S.271(1)(C) OF THE ACT, AMOUNTING TO RS.7,25,741/ -. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS: ITA NO. 3595/AHD/2015 ASST. YEAR 2011-12 2 ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SO FTWARE DEVELOPMENT AND EXPORT OF THE SAME. THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR WAS FILED ON 10.06.2011, DECLARING TOTAL INCOME AT NIL AND BOOK PROFIT U/S.115JB OF THE ACT AMOUNTING TO RS.75 ,547/-. THE ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED VIDE ORDER DATE D 03.12.2013 FIXING TOTAL INCOME UNDER THE NORMAL PROVISION AMOUNTING TO RS.1 2,56,879/- AND INCOME U/S.115JB OF RS.39,14,459/-. IN THE COURSE OF ASSE SSMENT PROCEEDINGS, IT WAS NOTICED THAT ASSESSEE HAD CLAIMED DEDUCTION U/S.10B OF THE ACT, WHILE COMPUTING THE BOOK PROFIT U/S.115JB OF THE ACT. TH E A.O. SHOW CAUSED THE ASSESSEE AS TO WHY THE BOOK PROFIT SHOULD NOT BE RE COMPUTED AFTER ADDING THE DEDUCTION CLAIMED U/S.10B OF THE ACT. IN REPLY, AS SESSEE STATED THAT IT HAD ERRONEOUSLY EXCLUDED THE DEDUCTION U/S.10B WHILE CO MPUTING BOOK PROFIT. THE ASSESSEE FILED REVISED COMPUTATION OF BOOK PROF IT AND PAID TAXES DUE ON SUCH BOOK PROFIT. 4. THE A.O. INITIATED PENALTY PROCEEDINGS U/S.271(1 )(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME BY ISSU ING NOTICE U/S.274 R.W.S. 271(1)(C) OF THE ACT. IN REPLY TO THE SHOW CAUSE N OTICE FOR PENALTY, THE ASSESSEE SUBMITTED THAT THERE WAS NO CONCEALMENT OF INCOME OR INACCURATE FURNISHING OF RETURN AND RELIED ON THE JUDGMENT OF THE HONBLE APEX COURT IN CASE OF CIT VS. RELIANCE PETRO PRODUCTS P. LTD. [20 10] 322 ITR 158 (SC). HOWEVER, THE OBJECTIONS RAISED BY THE ASSESSEE AGAI NST THE INITIATION OF PENALTY WAS REJECTED AND PENALTY AMOUNTING TO RS.7, 25,734/- WAS IMPOSED U/S.271(1)(C) OF THE ACT. ON FURTHER APPEAL, THE F IRST APPELLATE AUTHORITY CONFIRMED THE IMPOSITION OF PENALTY U/S.271(1)(C) O F THE ACT. ITA NO. 3595/AHD/2015 ASST. YEAR 2011-12 3 5. THE ASSESSEE, BEING AGGRIEVED, HAS FILED THIS AP PEAL BEFORE THE TRIBUNAL. IT WAS SUBMITTED BY THE LEARNED A.R. THA T ASSESSEE HAD MADE A GENUINE AND BONAFIDE MISTAKE IN COMPUTATION OF BOO K PROFIT U/S.115JB OF THE ACT. IT WAS FURTHER SUBMITTED THAT ASSESSEE IT SELF HAD RECOMPUTED THE BOOK PROFITS AND PAID THE DUE TAXES BEFORE THE ASSE SSMENT U/S.143(3) OF THE ACT WAS COMPLETED. THE LEARNED A.R. FURTHER STATED THAT THE CHARTERED ACCOUNTANT CONCERNED HAS FILED AN AFFIDAVIT TO THE EFFECT THAT COMPUTATION OF BOOK PROFIT BY NOT ADDING BACK THE DEDUCTION U/S.10 B OF THE ACT WAS A BONAFIDE MISTAKE. THEREFORE, IT WAS PLEADED THAT P ENALTY U/S.271(1)(C) OF THE ACT MAY BE DELETED. THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORDERS OF INCOME TAX AUTHORITIES. 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD. THE ASSESSEE HAD EXCLUDED THE DEDUCTION U/S.10B OF THE ACT, WHILE ARRIVING AT THE BOOKS PROFIT U/S.115JB OF THE ACT. AS PER A MENDED PROVISIONS OF SECTION 115JB OF THE ACT W.E.F. 01.04.2008, DEDUCTI ON CLAIMED U/S.10B OF THE ACT WAS TO BE ADDED BACK WHILE CALCULATING THE BOOK PROFIT FOR ARRIVING AT THE TAX LIABILITY U/S.115JB OF THE ACT. THE ASSESS EE WAS UNDER BONAFIDE BELIEF AND WAS UNAWARE OF THE AMENDMENT AND HAD NOT ADDED BACK THE DEDUCTION U/S.10B OF THE ACT, WHILE COMPUTING THE B OOK PROFIT U/S.115JB OF THE ACT. HOWEVER, WHEN THE MISTAKE WAS POINTED OUT BY THE A.O., IMMEDIATELY ASSESSEE FILED REVISED WORKING OF BOOK PROFITS U/S.115JB OF THE ACT AND ALSO DEPOSITED TAX PAYABLE THEREON BEFORE T HE COMPLETION OF THE ASSESSMENT U/S.143(3) OF THE ACT. IT WAS ALSO CLAI MED IN THE COURSE OF HEARING OF THIS APPEAL THAT THIS WAS THE FIRST YEAR IN WHICH ASSESSEE HAD FILED RETURN OF INCOME COMPUTING BOOK PROFIT U/S.115JB OF THE ACT. THE ASSESSEE HAS ALSO FILED AN AFFIDAVIT OF THE CHARTERED ACCOUN TANT TO THE EFFECT THAT THE ITA NO. 3595/AHD/2015 ASST. YEAR 2011-12 4 COMPUTATION OF THE BOOK PROFIT U/S.115JB OF THE ACT BY NOT ADDING BACK DEDUCTION U/S.10B OF THE ACT WAS A BONAFIDE MISTAKE COMMITTED BY THE CHARTERED ACCOUNTANT OF THE ASSESSEE COMPANY. 6.1 SECTION 271(1)(C) OF THE ACT LAYS DOWN THAT THE PENALTY CAN BE IMPOSED, IF THE AUTHORITY IS SATISFIED THAT ANY PER SON HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIA NCE PETRO PRODUCTS P. LTD. (SUPRA) HELD THAT THE PLAIN LANGUAGE OF THE PR OVISION SHOWS THAT IN ORDER TO BE COVERED BY THIS PROVISION THERE HAS TO BE CON CEALMENT AND THAT THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS . IT WAS FURTHER HELD BY THE HONBLE APEX COURT THAT BY NO STRETCH OF IMAGIN ATION MAKING AN INCORRECT CLAIM IN LAW, WOULD AMOUNT TO FURNISHING INACCURATE PARTICULARS. THE HONBEL PUNJAB & HARYANA HIGH COURT IN CASE OF CIT VS. STOCK HOME LTD. 369 ITR 251 (P&H) HAS HELD A WRONG COMPUTATION OF BOOK PROFIT U/S.115JB OF THE ACT BY CLAIMING DEDUCTION OF EXEMP T INCOME U/S.10(38) OF THE ACT WOULD NOT TANTAMOUNT TO CONCEALMENT OF INCO ME OR FURNISHING INACCURATE PARTICULARS OF INCOME, WARRANTING IMPOSI TION OF PENALTY. 6.2 IN THE INSTANT CASE, ASSESSEE HAS NOT FURNISHED INACCURATE PARTICULARS OF INCOME, EVEN IN THE ASSESSMENT ORDER, A.O. HAS POIN TED THAT GOING THROUGH THE COMPUTATION OF BOOK PROFIT, BOOK PROFIT IS SHOW N AT NIL AFTER ADJUSTING THE CLAIM OF DEDUCTION U/S.10B OF THE ACT. ASSESSE E HAS CLEARLY SHOWN THE PARTICULARS OF INCOME AND CLAIMS WHICH HAVE MADE IN THE RETURN ONLY TANTAMOUNT TO AN INADMISSIBLE CLAIM AND NOT FURNISH ING OF INACCURATE PARTICULARS OF INCOME. THE BONAFIDE MISTAKE OF THE ASSESSEE WAS CORRECTED BY FILING REVISED COMPUTATION OF INCOME AND TAX HAS BEEN DULY PAID BEFORE ITA NO. 3595/AHD/2015 ASST. YEAR 2011-12 5 THE COMPLETION OF ASSESSMENT. AS MENTIONED EARLIER THAT CHARTERED ACCOUNTANT HAS ALSO FURNISHED AN AFFIDAVIT TO THE E FFECT THAT THE COMPUTATION OF BOOK PROFIT U/S.115JB OF THE ACT BY NOT ADDING BACK THE DEDUCTION U/S.10B OF THE ACT IS ONLY A BONAFIDE MISTAKE. ON PERUSAL OF THE AFFIDAVIT, I HAVE NO REASON TO DISBELIEVE THE SAME FILED BY A CH ARTERED ACCOUNTANT. MOREOVER, THE CBDT CIRCULAR NO. 25/15, DATED 31.12. 2015 HAD ACCEPTED THE HONBLE DELHI HIGH COURT JUDGMENT DATED 26.08.2010 IN ITA NO.1420 OF 2009 IN CASE OF NALWA SONS INVESTMENT LTD., WHEREIN IT WAS HELD THAT WHEN THE TAX PAYABLE ON INCOME COMPUTED UNDER NORMAL PRO VISION IS LESS THAN THE TAX PAYABLE UNDER THE DEEMING PROVISIONS OF SECTION 115JB OF THE ACT, THEN PENALTY U/S.271(1)(C) OF THE ACT COULD NOT BE IMPO SED. 6.3 IN THE LIGHT OF THE AFORESAID REASONING AND THE JUDICIAL PRONOUNCEMENTS CITED (SUPRA), I HOLD THAT PENALTY IMPOSED ON FACTS AND CIRCUMSTANCES OF THIS INSTANT CASE IS NOT WARRANTED AND I DELETE T HE SAME. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD FEBRUARY, 2016 SD/- (GEORGE GEORGE K) JUDICIAL MEMBER DATED : 23/02/2016 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) ITA NO. 3595/AHD/2015 ASST. YEAR 2011-12 6 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD