The ACIT, Circle-5, RAJKOT-GUJARAT V. Sogo Ceramic Pvt. Ltd., Morbi

ITA 424/RJT/2012

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0151 (ITAT-RAJKOT)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-10-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Assessee Lawyers: DHRUVE A SOLANKI
• Keywords: Revenue expenditure
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . .. . , , , , . .. . . .. . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAV A, AM ITA NO.424/RJT/2012. / ASSESSMENT YEAR 2008-09 ACIT, CIR-5 AAYAKAR BHAVAN 1 ST FLOOR, ROOM NO.114, RACE COURSE, RING ROAD RAJKOT ( * / APPELLANT) VS. SOGO CERAMIC PVT.LTD., OLD GHUNTU ROAD, MORBI PAN:AAHCS4649B +,* / RESPONDENT - / REVENUE BY SHRI. ANKUR GARG /- / ASSESSEE BY SHRI DHRUVE A SOLANKI - /DATE OF HEARING 16.10.2012 - / DATE OF PRONOUNCEMENT 30.10.2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 9.5.2012 OF CIT( A)-IV, RAJKOT CANCELLING THE PENALTY OF RS.35,57,487/- LEVIED BY THE AO U/S 271(1)( C ) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COM PANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF CERAMIC TI LES. FOR THE ASSESSMENT YEAR UNDER APPEAL IT FILED RETURN OF INCOME O N 30.9.2008 DECLARING TOTAL INCOME RS.(-) 8,64,71,332/-. THE AO FRAMED ASSESSMENT AT A TOTAL INCOME OF THE ASSESSEE U/S 143(3) ON 3.12.20 10 AT A LOSS OF ITA NO.424/RJT/2012. 2 RS.7,60,05,056/-. IN THIS ASSESSMENT ORDER THE AO MADE THE FOLLOWING DISALLOWANCES: DEFERRED REVENUE EXPENSES AT RS.99,44,507/- SALES TAX PENALTY RS.5,21,633/- 3. IN RESPECT OF THE AFORESAID ADDITIONS/DISALLOWANCES THE AO IN THE ASSESSMENT ORDER INITIATED PENALTY PROCEEDINGS U/S 271(1) (C) OF THE INCOME TAX ACT, 1961 (THE ACT). 4. SUBSEQUENTLY, VIDE ORDER DATED 28.6.2011, THE AO LEVIED PENALTY OF RS.35,57,487/- BEING 100% OF THE TAX SOUGHT TO BE EVADED IN RESPECT OF THE AFORESAID TWO ADDITIONS. ON APPEAL, BEFORE THE LD.CIT(A) THE ASSESSEE CONTENDED THAT THE ADDITIONS TO THE RETURNED I NCOME REPRESENT INADVERTENT MISTAKE ON THE PART OF THE ITP WHO FILED RETURN OF INCOME ON BEHALF OF THE APPELLANT. IT WAS ALSO SUBMITTED THAT ON IDENTICAL FACTS PENALTY LEVIED ON SAME ISSUE WAS DELETED BY THE LD. C IT(A) IN THE ASSESSMENT YEAR 2007-08 IN ASSESSEES OWN CASE. IT WAS FURTHE R SUBMITTED THAT IN THE YEAR UNDER APPEAL, THE APPELLA NTS CASE WAS UNDER MANDATORY SCRUTINY DUE TO HUGE LOSS AND HEAVY ADDITIO N MADE IN THE EARLIER YEARS BOTH THE ADDITIONS (I.E SALES TAX PENAL TY AND DEFFERRED REVENUE EXPENDITURE) WERE APPARENT IN NATURE AND T HE TAX AUDITOR HAD ALSO DISALLOWED THE SAME IN TAX AUDIT REPORT. THE TA X AUDIT REPORT WAS DULY FILED ALONG WITH AUDITED ACCOUNT AND WERE ON R ECORD RIGHT FROM THE BEGINNING OF THE ASSESSMENT PROCEEDINGS AND ON POINTING OUT THE MISTAKE, THE ASSESSEE ADMITTED THE ADDITIONS. AFTER CONSI DERING THESE SUBMISSIONS, IN THE IMPUGNED ORDER THE LD. CIT(A) CANCEL ING THE PENALTY ITA NO.424/RJT/2012. 3 FOR THE REASONS GIVEN IN PARAGRAPHS 4.1 AND 4.2. OF HI S ORDER WHICH READS AS UNDER : 4.1 I HAVE GONE THROUGH THE PENALTY ORDER, ASSESSMENT ORDER AND SUBMISSIONS OF APPELLANT . I FIND THAT THE ARGUME NT OF APPELLANT THAT PENALTY WAS INITIATED ON THE CHARGES OF CONCEALMEN T OF INCOME, HOWEVER, IN THE PENALTY ORDER, THE PENALTY HAS BEEN LEVIED ON FURNISHING OF INACCURATE PARTICULARS, WOULD NOT GIVEN J URISDICTION TO THE AO TO LEVY PENALTY, MAY NOT APPLY IN VIEW OF R ETROSPECTIVE AMENDMENT VIDE FIANC ACT 2008, WHEN SUBSECTION (1B) WAS INSERTED IN SECTION 271 OF THE IT ACT. THE DECISIONS QUO TED BY THE APPELLANT ARE PRIOR TO THIS AMENDMENT. TE DECISION IN CASE OF CHHZAIL BEHARI (129 TTJ 389) (ITAT-AGRA) WAS IN RESPECT OF DISPOSAL OF MISCELLANEOUS APPLICATION WHERE THE APPLICAT ION OF SECTION 271(1B) IN RESPECT OF CANCELLATION OF PENALTY U/S 271(1)( C) DUE TO INITIATION OF PENALTY FOR FURNISHING INACCURAT E PARTICULARS OF INCOME AND LEVY OF PENALTY FOR CONCEALMENT WAS HELD T O BE DEBATABLE. THEREFORE, IT CANNOT BE CONSIDERED AS FINA L DECISION ON THIS ISSUE. 4.2 ON MERIT, I FIND THAT BOTH THE ADDITIONS (I.E. SALES TAX PENALTY AND DEFERRED REVENUE EXPENDITURE) WERE APPARENT IN NATURE AND THE TAX AUDITOR HAD ALSO DISALLOWED THE SAME IN TAX AUDIT REPORT. APPELLANT HAD SUBMITTED THE COPY OF TAX AUDIT REPORT BEFORE THE AO ALONG WITH AUDITED ACCOUNTS RIGHT FROM THE BEGINNING O F THE ASSESSMENT PROCEEDINGS AND ON POINTING OUT THE MISTAKE, TH E APPELLANT ADMITTED THE ADDITION. THERE WAS NOTHING TO GAIN BY HIDING THESE APPARENT ADDITIONS AS THE BUSINESS OF THE APPELLANT WAS ABOUT TO BE CLOSED DOWN DUE TO HEAVY LOSSES AND THUS, THERE WAS NO FUTURE BENEFIT TO BE DERIVED FROM SUCH LOSSES. T HE FACT BEHIND SUCH OMISSION WAS THAT THE AUDITORS AND RETURN FI LERS (ITP) WERE DIFFERENT AND THE ITP FAILED TO MAKE THESE ADJU STMENTS IN THE RETURN EVEN THOUGH THE SAME WERE APPARENT IN TAX AUD IT REPORT. THE APPELLANT SIGNED THE RETURN IN GOOD FAITH RELYIN G UPON THE SAME. I FIND THAT WHEN FURNISHING OF INACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ATTEMPT TO EVADE TAX, P ENALTY CANNOT BE LEVIED AS HELD IN CASE OF CIT V/S SIDDHARTHA ENTE RPRISES (322 ITR 80(P&H) RELIED ON BY THE APPELLANT. HONBLE SU PREME COURT IN THE CASE OF RELIANCE PETROPRODUCT (P) LTD (322 ITR 158) HELD THAT EACH AND EVERY CASE OF ADDITION/DISALLOWANCE DOES NOT ATT RACT PENALTY ON THE GROUND OF CONCEALMENT OR INACCURATE PA RTICULARS. THE OMISSION OF RECOMMENDATION OF TAX AUDITOR BY THE ITP WHO PREPARED THE RETURN OF APPELLANT APPEAR TO BE A CASE OF BONAFIDE OMISSION BECAUSE APPELLANT COULD NOT HAVE GAINED ANYTH ING ON ACCOUNT OF SUCH OMISSION. IN ASSESSMENT YEAR 2007-08, THER E WERE SIMILAR DISALLOWANCES OF SALES TAX PENALTY AND DIFFERE D REVENUE EXPENSES AND PENALTY WAS LEVIED BY THE AO U/S 271(1)( C ) ON SUCH DISALLOWANCES. I HAD DELETED THE PENALTY IN AY 20 07-08 IN MY DECISION TAKEN FOR AY 2007-08 FOR SIMILAR DISALLOWAN CES OF SALE TAX ITA NO.424/RJT/2012. 4 PENALTY AND DEFERRED REVENUE EXPENDITURE, I DIRECT T HE AO TO DELETE THE PENALTY OF RS.3557487/- LEVIED U/S 271(1)( C) OF IT ACT 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVE NUE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING BEFORE US ON BEHALF OF TH E REVENUE SHRI ANKUR GARG, THE LD. DR APPEARED AND RELIED ON THE R EASONING GIVEN BY THE AO AND CONTENDED THAT IN THE CASE OF LOSS ALSO PENALTY U/S 271(1)( C ) IS LEVIABLE. HE FURTHER SUBMITTED THAT WHILE FILING TH E RETURN OF INCOME, IT WAS THE DUTY OF THE ASSESSEE TO MAKE ADDITIONS/DISALLOWANCES O N BOTH THE POINTS RAISED BY THE TAX AUDITOR IN TAX AUDIT REPOR T PREPARED U/S 44AB OF THE ACT. ADMITTEDLY, THE ASSESSEE HAS NOT DONE SO, TH E AO RIGHTLY LEVIED PENALTY U/S 271(1)(C) OF THE ACT AND THE LD.CIT(A) IS NOT JUSTIFIED IN DELETING THE SAME. AS AGAINST THIS, SHRI DHRUVE A SOLA NKI, THE LD. COUNSEL FOR THE ASSESSEE PRODUCED THE COPY OF THE DECISION OF THE RAJKOT BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ACIT V/S SOGO CERA MIC PVT.LTD. IN ITA NO.193/RJT/2012 (AY 2007-08) DATED 26.7.2012 A ND CONTENDED THAT IN THE IMPUGNED ORDER THE LD. CIT(A) FOLLOWED HIS DECISIO N FOR THE ASSESSMENT YEAR 2007-08, ON FURTHER APPEAL, IN THAT YEA R THE TRIBUNAL UPHELD THE ORDER OF THE LD. CIT(A). THIS YEAR ALSO THE FACTS BEING IDENTICAL, THE ORDER OF THE LD. CIT(A) BE UPHELD. THE LD. COU NSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN RESPECT OF SILLY MISTAKES THE P ENALTY U/S 271(1)(C) IS NOT LEVIABLE. IN SUPPORT OF THIS, HE PLACED RELIA NCE ON THE LATEST DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PRICE WA TERHOUSE COOPERS PVT. LTD. V/S CIT IN CIVIL APPEAL NO. 6924 2012[ARI SING OUT OF S.L.P.(C) NO.10700 OF 2009] DATED 25.9.2012, WHEREI N IN THE HONBLE SUPREME COURT HAS HELD AS UNDER: ITA NO.424/RJT/2012. 5 NOTWITHSTANDING THE FACT THAT THE ASSESSEE IS UNDOUBTEDL Y A REPUTED FIRM AND HAS GREAT EXPERTISE AVAILABLE WITH I T, IT IS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A SILLY MISTAKE. THE FA CT THAT THE TAX AUDIT REPORT WAS FILED ALONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WA S NOT ALLOWABLE U/S 40A(7) INDICATES THAT THE ASSESSEE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. APART FROM THE ASSESSEE, EVEN THE AO WHO FRAMED THE ORIGINAL ASSESSMENT ORDER MA DE A MISTAKE IN OVERLOOKING THE CONTENTS OF THE TAX AUDIT REP ORT. THE CONTENTS OF THE TAX AUDIT REPORT SUGGEST THAT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QUESTI ON OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. ALL TH AT HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONA FI DE AND INADVERTENT ERROR FAILED TO ADD THE PROVISION FOR GR ATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESCRIBED AS A HUMAN ERR OR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBRE AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTEN T ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTE D, BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING INACCURAT E PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. CONSEQUENTLY, GIVEN THE PECULIAR FACTS OF THIS CASE, THE IMPOSITION OF PENALTY O N THE ASSESSEE IS NOT JUSTIFIED. 7. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED TH AT THE AFORESAID JUDGMENT OF THE HONBLE SUPREME COURT IN T HE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. V/S CIT (SUPRA) IS SQUARELY APPLICABLE TO THE ASSESSEES CASE, , THEREFORE, THE ORDER OF THE LD. CIT(A) CANCELLING THE PENALTY U/S 271(1)( C ) BE UPHELD. 8. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NO TE THAT BOTH THE DISALLOWANCE WHICH WERE MADE ARE ALSO POINTED OUT BY TH E TAX AUDITOR IN THE REPORT. THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, CLEARLY INDICATE THAT DUE TO CLERICAL MISTAKE COMMITTED BY THE CONCERNED OFFICIAL WHO FILED THE RETURN THROUGH INADVERTENCE DID NOT D ISALLOW BOTH THE ITA NO.424/RJT/2012. 6 DISALLOWANCES POINTED OUT BY THE AUDITOR. BE THAT IT MAY, PRIMA FACIE IT APPEAR THAT THERE WAS NO INTENTION ON THE PART OF TH E ASSESSEE NOT TO MAKE ROUTINE DISALLOWANCE AS POINTED OUT BY THE TAX AUDITO R. THE JUDGMENT OF THE HONBLER SUPREME COURT HONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. V/S CIT (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. WE, THEREFORE, INCLINE TO UPHOLD THE ORDER OF THE LD. CIT(A) IN CANCELLING THE PENALTY LEVI ED BY THE AO U/S 271(1)( C ). 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED HEREINABOVE. SD SD ( D. K. SRIVASTAVA) (T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER 3/ ORDER DATE 30. 10.2012 /RAJKOT SRL - -- - +7 +7 +7 [phone] / COPY OF ORDER FORWARDED TO:- 1. * / APPELLANT-, 2. +,* / RESPONDENT- 3. ; / CONCERNED CIT. 4. ;- / CIT (A). 5. 7 +, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.