Cotton Blossom (India) P Ltd., CHENNAI V. ACIT, Tiruppur

ITA 381/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4594 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 19-02-2016
• Court: TRIBUNAL
• Department Lawyers: SURPIYO PAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Section: 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ ITA NO.: 381/MDS/2016 / ASSESSMENT YEARS: 2011-12 M/S. COTTON BLOSSOM (INDIA) P LTD., NO.189, TEKIC TEA NAGAR, MUDALIPALAYAM, TIRUPUR - 641606 PAN: AACCC5046R V. THE ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE, TIRUPUR 641 602. ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE /RESPONDENT BY : SHRI SURPIYO PAL, CIT / DATE OF HEARING : 06.04.2017 / DATE OF PRONOUNCEMENT : 05.05.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-3, COIMBATORE DATED 24.11.2015 PERTAINING TO ASSESSMENT YEAR 2011-12. 2 I.T.A. NO.381/MDS/2016 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AT ` 36,76,440/-. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE FIL ED ITS RETURN OF INCOME ON 29.09.2011 DECLARING TOTAL INCOME OF ` 34,84,680/- AFTER CLAIMING DEDUCTION OF ` 57,01,338/- U/S.80-IA OF THE ACT. IN THIS CASE, TH ERE WAS A SURVEY U/S.133A OF THE ACT ON 11.01.2011 DURING THE COURSE OF WHICH AN AMOUNT OF ` 1,10,67,779/- WAS OFFERED AS ADDITIONAL INCOME. SUB SEQUENTLY, THE ASSESSMENT WAS COMPLETED BY ACCEPTING THE ABOVE AMO UNT OF ` 1,10,67,779/- AS ADDITIONAL INCOME AND ALSO DISALLOWANCE OF DEDUC TION AT ` 57,01,338/- U/S.80-IA OF THE ACT. LATER, THE AO INVOKED THE PR OVISIONS OF SEC.271(1)(C) OF THE ACT FOR LEVY OF PENALTY IN RESPECT OF ` 1,10,67,779/- WAS OFFERED AS ADDITIONAL INCOME. IT IS ALSO PERTINENT TO MENTION HEREIN THAT THE ASSESSEE CARRIED THE APPEAL TO THE LD.CIT(A) WITH REGARD TO CLAIM OF DEDUCTION U/S.80- IA OF THE ACT WHICH WAS ALLOWED BY TRIBUNAL BY PLAC ING RELIANCE ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT REPORTED IN 231 CTR (MAD.) 3 68 AND ORDER WAS CONFIRMED BY THE TRIBUNAL IN ITA NO.1972/MDS./15 IN ASSESSEE'S OWN CASE VIDE ORDER DATED 08.12.2015. 3 I.T.A. NO.381/MDS/2016 3.1 COMING TO THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). LD.CIT(A) OBSERVED THAT THERE WAS A CONCEALMENT OF INCOME BY THE ASSESSEE WHICH IS ON A CCOUNT OF NON-DISCLOSURE OF THE WASTE SALES IN THE RETURN OF INCOME AND THE DISCLOSURE IN THE STATEMENT RECORDED IN THE SURVEY BASED ON IMPOUNDED MATERIAL. ACCORDING TO HIM, THERE IS A CONCEALMENT OF INCOME AND LEVY OF PENALTY UNDE R SEC.271(1)(C) OF THE ACT IS VALID. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD.A.R SUBMITTED THAT FINALLY TH E INCOME WAS COMPUTED U/S.115JB OF THE ACT, WHICH IS AT ` 3,08,45,298/- AND THE INCOME UNDER NORMAL COMPUTATION IS ONLY ` 1,45,52,459/- AFTER GIVING EFFECT TO THE ORDER OF T RIBUNAL CITED SUPRA IN ASSESSEE'S OWN CASE FOR ASSESSMENT Y EAR 2011-12. ACCORDING TO HIM, IN VIEW OF CIRCULAR OF CBDT NO.25/15 DATED 31.12.2015, WHEN THE INCOME OF ASSESSEE WAS COMPUTED U/S.115JB OF THE AC T, NO PENALTY CAN BE LEVIED UNDER SEC.271(1)(C) OF THE ACT. WITHOUT PRE JUDICE TO THE ABOVE, HE SUBMITTED THAT ADDITION IS ONLY BASED ON THE SURVEY REPORT AND AS SUCH IN VIEW OF THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN T HE CASE OF CIT VS. S.KHADER KHAN SON IN (2008) 300 ITR 0157, PENALTY CANNOT BE LEVIED. 5. ON THE OTHER HAND, LD.D.R SUPPORTED THE ORDER O F LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, IN THIS CASE, ON ACCOUNT OF SURVEY, THE ASSESSEE OFFERED ADDITIONAL 4 I.T.A. NO.381/MDS/2016 INCOME AT ` 1,10,67,779/-. THE AO IN HIS PENALTY ORDER HAD NOT POINTED OUT ON WHAT BASIS THERE IS CONCEALMENT OF INCOME AT ` 1,10,67,779/- AND HE HAD NOT BROUGHT ON RECORD ANY IMPOUNDED MATERIAL IN SUPPORT OF THE DISCLOSURE MADE BY THE ASSESSEE. IN OTHER WORDS, IN OUR OPINION TH E ADDITION IS ONLY BASED ON DISCLOSURE MADE BY THE ASSESSEE DURING THE COURSE O F SURVEY. EVEN IN THE ASSESSMENT ORDER, THE AO HAS MENTIONED THAT THE AS SESSEE HAS OFFERED ADDITIONAL UNDISCLOSED INCOME GENERATED FROM THE SA LE OF WASTE GARMENTS, WHICH RELATES TO THE GARMENT UNIT OF THE COMPANY AT MUDALIPALAYAM, TIRUPUR AND NOT MENTIONED THE DETAILS OF MATERIALS GATHERED BY THE SURVEY PARTY. IN THE ABSENCE OF DETAILS BASED ON COMPUTATION FOR UND ISCLOSED INCOME, IT IS NOT POSSIBLE TO CONFIRM THE FINDINGS OF THE LOWER AUTHO RITIES. MORE SO, AS SEEN FROM THE RECORDS, THE INCOME OF ASSESSEE WAS COMPUT ED U/S.115JB OF THE ACT. AS RIGHTLY POINTED OUT BY THE LD.A.R, AS PER CBDT C IRCULAR NO.25/15/ F.NO.279/140/2015/ITJ DATED 31.12.2015 STATES AS FOLLOWS:- SECTION 115JB OF THE ACT IS A SPECIAL PROVISION FO R LEVY OF MINIMUM ALTERNATE TAX ON COMPANIES, INSERTED BY FINANCE ACT 2000 WITH EFFECT FROM 1-4-2001. 2. UNDER CLAUSE (III) OF SUB-SECTION (1) OF SECTION 271 OF THE ACT, PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME IS DETERMINED BASED ON THE 'AMOUNT OF TAX SOUGHT TO BE EVADED' WHICH HAS BEEN DEFINED INTER-ALIA, AS THE DIFFERENCE BETWEEN THE TAX DUE ON THE INCOME ASSESSED AND THE TAX WHICH WOULD HAVE BEEN CHARGEAB LE HAD SUCH TOTAL 5 I.T.A. NO.381/MDS/2016 INCOME BEEN REDUCED BY THE AMOUNT OF CONCEALED INCO ME OR INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAD BEEN FI LED. 3. IN THIS CONTEXT, HON'BLE DELHI HIGH COURT IN ITS JUDGMENT DATED 26.8.2010 IN ITA NO. 1420 OF 2009 IN THE CASE OF NALWA SONS I NVESTMENT LTD. = 2010- TIOL-890-HC-DEL-IT HELD THAT WHEN THE TAX PAYABLE ON INCOME COMPUTED UNDER NORMAL PROCEDURE IS LESS THAN THE TA X PAYABLE' UNDER THE DEEMING PROVISIONS OF SECTION 115JB OF THE ACT, THE N PENALTY UNDER SECTION 271(1)(C) OF THE ACT COULD NOT BE IMPOSED WITH REFE RENCE TO ADDITIONS /DISALLOWANCES MADE UNDER NORMAL PROVISIONS. THE JU DGMENT HAS ATTAINED FINALITY. 4. SUBSEQUENTLY, THE PROVISIONS OF EXPLANATION 4 TO SUB-SECTION (1) OF SECTION 271 OF THE ACT HAVE BEEN SUBSTITUTED BY FINANCE ACT , 2015, WHICH PROVIDE FOR THE METHOD OF CALCULATING THE AMOUNT OF TAX SOU GHT TO BE EVADED FOR SITUATIONS EVEN WHERE THE INCOME DETERMINED UNDER T HE GENERAL PROVISIONS IS LESS THAN THE INCOME DECLARED FOR THE PURPOSE OF MA T U/S 115JB OF THE ACT. THE SUBSTITUTED EXPLANATION 4 IS APPLICABLE PROSPEC TIVELY W.E.F. 01.04.2016. 5. ACCORDINGLY, IN VIEW OF THE DELHI HIGH COURT JUD GMENT AND SUBSTITUTION OF EXPLANATION 4 OF SECTION 271 OF THE ACT WITH PROSPE CTIVE EFFECT, IT IS NOW A SETTLED POSITION THAT PRIOR TO 1/4/2016, WHERE THE INCOME TAX PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THE NORMAL PROVISION S OF THE ACT IS LESS THAN THE TAX PAYABLE ON THE BOOK PROFITS U/S 115JB OF TH E ACT, THEN PENALTY UNDER 271(1)(C) OF THE ACT, IS NOT ATTRACTED WITH REFEREN CE TO ADDITIONS /DISALLOWANCES MADE UNDER NORMAL PROVISIONS. IT IS FURTHER CLARIFIED THAT IN CASES PRIOR TO 1.4.2016, IF ANY ADJUSTMENT IS MADE IN THE INCOME COMPUTED FOR THE PURPOSE OF MAT, THEN THE LEVY OF PENALTY U/ S 271(1)(C) OF THE ACT, WILL DEPEND ON THE NATURE OF ADJUSTMENT. 6 I.T.A. NO.381/MDS/2016 6. THE ABOVE SETTLED POSITION IS TO BE FOLLOWED IN RESPECT OF SECTION 115JC OF THE ACT ALSO. FURTHER, THE DELHI HIGH COURT IN THE CASE OF CIT VS . CENTER WAREHOUSING CORPORATION IN 81 CCH 55 (DEL.) WHEREIN HELD THAT W HEN THE COMPUTATION OF INCOME WAS MADE U/S.115JB OF THE ACT, THE CONCEALME NT HAD NO ROLE TO PLAY. THEREFORE, THE CONCEALMENT IN NORMAL COMPUTATION OF INCOME ONLY WILL LEAD TO TAX EVASION. BEING SO, WE ARE INCLINED TO DELETE T HE LEVY OF PENALTY UNDER SEC.271(1)(C) OF THE ACT. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON 05 TH MAY, 2017 AT CHENNAI. SD/- SD/- ( . ) ( ) (G. PAVAN KUMAR) (CHANDRA POOJARI) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 05 TH MAY, 2017. K S SUNDARAM. /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF.