TOPS SECURITY LTD, MUMBAI V. DCIT 8(3), MUMBAI

ITA 4369/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2530 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 21-10-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 20-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SATHYA MOORTHY
• Keywords: Depreciation; Wrong claim; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI RAJENDRA , A M & SHRI C.N.PRASAD , J M INCOME TAX APPEAL NO. 43 69 / MUM/20 1 4 ( ASSESSMENT YEAR : 20 0 6 - 20 07 ) TOPS SECURITY LIMITED, 5, ROYAL PALMS GOLF & COUNTRY CLUB, AAREY MILK COLONY, GOREGAON (E), MUMBAI - 400065 VS. DCIT - 8(3), MUMBAI PAN/GIR NO. : A A A C T 0160 F /ASSESSEE BY : SHRI RUSHABH MEHTA /REVENUE BY : SHRI N.SATHYA MOORTHY D ATE OF HEARING : 21 / 1 0 /2016 DATE OF PRONOUNCEMENT : 21 / 10 / 2016 O R D E R PER C.N.PRASAD ( J .M.) : TH IS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE CIT(A) - 18 , MUMBAI, DATED 22.04.2014 , FOR THE ASSESSMENT YEAR 20 0 6 - 20 07 . 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED TWO GROUNDS, OUT OF WHICH GROUND NO.1 HAS NOT BEEN PRESSED BY THE LD.AR, ACCORDINGLY, WE DISMISS THE GROUND NO.1 AS NOT PRESSED. 3. IN REGARD TO GROUND NO.2, THE ASSESSEE IS AGGR IEVED BY THE LEVY OF PENALTY U/S 271(1)(C ) OF THE ACT ON FRINGE BENEFITS OF RS.8,14,180/ - ARISING OUT OF DEPRECIATION ON MOTOR CAR . 4. FACTS GIVING RISE TO THIS APPEAL ARE THAT THE ASSESSEE IS A LIMITED COMPANY, ENGAGED IN PROVIDING DETECTIVE AND SECURITY SERVICES. THE ASSESSEE FILED ITS RETURN OF INCOME OF FBT FOR THE YEAR UNDER CONSIDERATION AND THE ASSESSMENT WAS COMPLETED AND ORDER WAS PASSED U/S. 1 15WE( 3 ) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER LEVIED PENALTY U/S.271(1)( D ) ON THE 20% OF THE TOTA L VALUE OF FBT. IN APPEAL, THE CIT(A) ITA NO. 43 69 /1 4 2 UPHELD THE ACTION OF THE ASSESSING OFFICER. NOW, THE ASSESSEE IS IN FURTHER APPEAL HERE BEFORE THE TRIBUNAL. 5. LD. AR BEFORE US SUBMITTED THAT D URING THE YEAR UNDER CONSIDERATION THE ASSESSEE DEBITED VEHICLE MAINTENAN CE EXPENSES OF RS. 2,35,59,135 / - , VEHICLE HIRE CHARGES OF RS. 53,28,578 / - , VEHICLE REPAIRS & OTHER CHARGES OF RS. 22,10,155 / - AND DEPRECIATION ON MOTOR VEHICLES OF RS. 40,70,898 / - . HOWEVER, FOR THE PURPOSE OF CALCULATION OF FBT, THE ASSESEE INADVERTENTLY OV ERLOOKED THE AMOUNT OF DEPRECIATION ON MOTOR VHICLES OF RS. 40,70,898 / - . ACCORDINGLY, ADDITION FOR FBT WAS CONFIRMED BY THE CIT(A). FURTHER, IT WAS ALSO ADMITTED BEFORE THE AO THAT IT WAS AN INADVERTENT MISTAKE MADE IN THE RETURN OF FBT AND ALL THE DETAILS REGARDING THE EXPENSES WERE ON RECORD AND THERE WAS NEITHER CONCEALMENT OF PARTICULARS OF THE FRINGE BENEFITS NOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. THE A. O. DISREGARDING ALL THE FACTS AND EXPLANATIONS PLA CED ON RECORD, LEVIED PENALTY U/ S 271 (1)( D ) ON THE PREMISE THAT ACT OF THE ASSESSEE IS NOT BONAFIDE. IT WAS FURTHER SUBMITTED BY THE LD. AR THAT DETAILS WERE FILED WITH THE A O. ALONG WITH THE RECONCILIATION STATEMENT AND THE AMOUNT OF REPAIRS AND MAINTENANCE ACTUALLY REPRESENTS THE DEPRECIAT ION ON MOTOR VEHICLES AMOUNTING TO RS. 40,70,898/ - WHICH WAS INADVERTENTLY MISSED IN COMPUTING THE FRINGE BENEFITS AT THE TIME OF FILING THE RETURN OF INCOME, HENCE, THE SAME WERE ACCEPTED BY THE ASSESSEE . IT WAS ALSO SUBMITTED BY THE LD. THE LD. COUNSEL F OR THE ASSESSEE THAT WHEN THE ASSESSEE HAS ALREADY ACCEPTED THE ADDITION MADE BY THE ASSESSING OFFICER AND UPHELD BY CIT(A) IN ORDER ITA NO. 43 69 /1 4 3 TO AVOID FURTHER LITIGATION , BUT , NO INACCURATE PARTICULARS WERE FILED IN THE RETURN OF INCOME IN ORDER TO ATTRACT PENALTY U/S 271(1)( D ). FOR THIS PURPOSE, LD. AR PLACED RELIANCE ON THE FOLLOWING DECISION : - (A) CLIMATE SYSTEMS INDIA 2007 - TLOL - 134 - ITAT - OEL (LTAT DEL) (B) CIT VS. ESCORTS FINANCE LTD. (2009) 183 TAXMANN 453 (DEL) (C) CIT VS. RELIANCE PETROPRODUCTS PVT. LTD . (2010) 189N TAXMANN 322 (SC) (D) ADIT(INTL.TAXATION) ) VS. PRECISION DRILLING (CYPRUS) LTD. (ITA NO. 1604/AHD/2009) (E) HINDUSTAN COCA - COLA MARKETING COMPANY (P) LTD. VS. DCIT (ITA NO. 3225/DEL/2013 DATED 29.4.2015) 6 . ON THE OTHER HAND, LD.DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE CASE LAW RELIED ON BY THE PARTIES. THE ASSESSEE COMPANY FILED ITS RETURN OF FRINGE BENEFIT TAX ON 28.3.2007 DECLARING FRINGE BEN EFITS AT RS.1,14,37,629/ - . THE ASSESSMENT OF FRINGE BENEFITS WAS COMPLETED ON 29.12.2008 U/S 115WE(3) OF THE I.T.ACT COMPUTING THE TOTAL VALUE OF FRINGE BENEFITS LIABLE FOR FRINGE BENEFITS TAX THE ASSESSING OFFICER HELD THAT THE VEHICLE HIRE CHARGES OF RS. 53,28,578/ - , REPAIRS AND OTHERS OF RS.22,10,151/ - AND DEPRECIATION ON MOTOR VEHICLES OF RS.40,70,898/ - AGGREGATING TO RS.1,16,09,627/ - HAS NOT BEEN INCLUDING FOR FRINGE BENEFIT U/S 115WE(2)(H) OF THE ACT WITHOUT GIVING REASONS AND HE INCLUDED THE SAME IN T HE VALUE OF FRINGE BENEFITS. HOWEVER, THE CIT (APPEALS) HELD THAT SALES PROMOTION INCLUDING PUBLICITY OF RS.5,25,437/ - , CONVEYANCE, TOUR AND TRAVEL OF RS.83,445/ - AND REPAIRS & MAINTENANCE OF MOTOR CAR OF RS.40,07,898/ - ONLY SHOULD BE CONSIDERED WHILE COM PUTING THE FRINGE BENEFITS. ITA NO. 43 69 /1 4 4 8. THE ASSESSING OFFICER LATER LEVIED PENALTY U/S 271(1)(D) OF THE ACT (WRONGLY MENTIONED AS 271(1)(C) IN THE ORDER) ON THE ADDITIONS/ DISALLOWANCES SUSTAINED BY THE CIT(APPEALS). IN PENALTY PROCEEDINGS THE CIT (APPEALS) DELET ED THE PENALTY ON THE DISALLOWANCES IN RESPECT OF SALES PROMOTION, PUBLICITY, CONVEYANCE, TOUR AND TRAVEL HOLDING THAT IT IS ONLY MERE DISALLOWANCE OF CLAIMS OF THE ASSESSEE AND MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS. HOWEVER, IN SO FAR AS THE PENALTY ON THE ADDITION IN RESPECT OF DEPRECIATION ON MOTOR CAR IS CONCERNED THE CIT (APPEALS) HELD THAT THE ASSESSEE ITSELF ADMITTED THAT THIS WAS NOT DECLARED IN THE RETURN OF FBT DUE TO INADVERTENT MISTAKE AND THEREFORE IT IS A CLEAR CASE OF NEGLIGENCE ON THE PART OF THE ASSESSEE WHICH HAS RESULTED INTO CONCEALMENT OF INCOME. THEREFORE IT IS A CASE OF SUBMISSION OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. 9. IN THIS APPEAL THE ASSESSEE IS CHALLENGING THE ORDER OF THE CIT (APPEALS) IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER IN LEVYING PENALTY U/S 271(1)( C ) OF THE ACT ON THE ADDITION OF FRINGE BENEFITS OF RS.8,14,180/ - REPRESENTING DEPRECIATION ON MOTOR CAR. IT IS THE SUBMI SSION OF THE ASSESSEE THAT THIS IS THE VERY FIRST OF YEAR OF FBT PROVISIONS COMING INTO EFFECT .I.E ASSESSMENT YEAR 2006 - 2007. BEING THE FIRST YEAR ASSESSEE MADE CLAIMS ON THE BELIEF THAT ONLY EXPENSES AND PAYMENT RELATED TO EMPLOYEES ARE COVERED BY THE PR OVISIONS OF FBT. BEING FIRST YEAR THE ASSESSEE HAD MADE AN INCORRECT CLAIM BY NOT OFFERING THE FRINGE BENEFIT VALUE ON THE DEPRECIATION ON MOTOR CAR. IT WAS CONTENTED THAT EVEN THE ITA NO. 43 69 /1 4 5 PROVISIONS OF SECTION 115WB(2) READS THAT THE FRINGE BENEFITS SHALL BE DEE MED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES, IF THE EMPLOYER HAS, IN THE COURSE OF HIS BUSINESS OR PROFESSION (INCLUDING ANY ACTIVITY WHETHER OR NOT SUCH ACTIVITY IS CARRIED ON WITH THE OBJECTION OF DERIVING INCOME, PROFITS OR GAINS) INCURRE D ANY EXPENSE ON, OR MADE ANY PAYMENT FOR, ................... HENCE THE ALLOWANCE LIKE DEPRECIATION REMAINED TO BE OFFERED IN THE RETUR N OF FRINGE BENEFITS. IT WAS FURTHER SUBMITTED THAT THE PARTICULARS/DETAILS OR INFORMATION SU BMITTED IN THE RETURN OF I NCOME AND IN THE COURSE OF QUANTUM ASSESSMENT PROCEEDINGS WERE NEITHER CONCEALED/HIDDEN NOR ANY FALSE DETAILS OR INFORMATION WAS GIVEN BY THE ASSESSEE. THEREFORE IT WAS SUBMITTED THAT AND EXPLAINED THA6T THE SAME HAD REMAINED TO BE OFFERED ONLY DUE TO OVER SIGHT AND INADVERTENCE. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS NO INTENTION WHATSOEVER NOT TO OFFER THE FRINGE BENEFITS OF RS.8,05,180/ - ON DEPRECIATION AS IS BORN OUT FROM THE FACT THAT THE TOTAL VALUE OF FRINGE BENEFITS OFFERED BY THE ASSESSEE I N THE RETURN ITSELF IF RS.1,14,37,629/ - . IT WAS ALSO CONTENDED THAT THE TAX AUDITOR HAD MADE A MISTAKE IN COMPUTING THE CORRECT FRINGE BENEFITS BEING FIRST YEAR OF FBT PROVISIONS COMING INTO STATUTE. THE ASSESSEE FURTHER CONTENDED THAT THERE WAS NO DEFAUL T OF ANY ITEM IN COMPUTING FRINGE BENEFITS IN SUBSEQUENT ASSESSMENT YEARS BY THE ASSESSEE. THE ASSESSEE FURTHER CONTENDED THAT THE TAX EFFECT ON THE SAID FRINGE BENEFIT OF DEPRECIATION COMES TO 2.74 LAKHS AND WHEREAS THE ASSESSEE HAS PAID INCOME TAX OF RS. 241.93 LAKHS AND FRINGE BENEFITS TAX OF RS.42.64 LAKHS AND THIS SHOWS THAT THERE CANNOT BE ANY MALAFIDE ITA NO. 43 69 /1 4 6 INTENTION TO SAVE A MEAGER TAX OF RS.2.74 LAKHS. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER AND THE CIT (APPEALS) DID NOT FIND THAT THE DETAILS OR PARTICULARS FURNISHED BY THE ASSESSEE OR THE EXPLANATION OF THE ASSESSEE IS FALSE. THEREFORE IT WAS CONTENDED THAT IT IS ONLY A MERE INADVERTENT MISTAKE AND BY OVERSIGHT NOT REPORTED DEPRECIATION ON MOTOR CAR IN THE FBT RETURN AND LEVYING PENALTY FOR SUCH MISTAKE AND OVERSIGHT IS NOT JUSTIFIED. 10. MORE OR LESS AN IDENTICAL ISSUE HAS COME UP BEFORE THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF HINDUSTAN COCA - COLA MARKETING COMPANY (P) LTD., VS. DCIT (SUPRA) WHERE IN THE ASSESSEE ADMITTED THE MISTAKE I N THE COURSE OF ASSESSMENT PROCEEDINGS IN NOT INCLUDING CONVEYANCE EXPENSES OF RS.11,55,634/ - IN THE VALUE OF FRINGE BENEFITS. THE TRIBUNAL HELD AS UNDER. 16. IN THE CASE IN HAND, THE ASSESSING OFFICER POINTED OUT MISTAKE OF THE ASSESSEE THAT THE VALUE OF THE AMOUNT OF EXPENSES ON ACCOUNT OF CONVEYANCE HAS NOT BEEN CONSIDERED IN THE VALUE OF FBT. AS PER PENALTY ORDER THE ASSESSEE OFFERED THIS AMOUNT SUO MOTO OR VOLUNTARILY AND DID NOT AGITATE THE ISSUE FURTHER IN APPEAL. THE EXPLANATION BEFORE ASSESSING OFFICER DURING PENALTY PROCEEDINGS WAS TWOFOLD, FIRST, THE MISTAKE COMMITTED BY THE ASSESSEE AT THE TIME OF PREPARATION OF RETURN OF IN COME WAS JUST AN ERROR OF OMISSION WHICH WAS IDENTIFIED BY THE ASSESSEE AT THE TIME OF PREPARATION OF DETAILS FOR THE AS SESSMENT AND SECONDLY, IT WAS JUST A CASUAL MISTAKE COMMITTED DUE TO OMISSION AS THE TAX IMPACT OF THE ADDITION ON ACCOUNT OF CONVEYANCE EXPENSES IS ONLY RS.77,800 (INCLUDING INTEREST) WHICH IS QUITE INSIGNIFICANT IN VIEW OF SIZE OF THE ASSESSEE COMPANY AN D THE AMOUNT OF FBT PAID BY THE ASSESSEE. 17. THE ASSESSING OFFICER REJECTED THE ABOVE EXPLANATION AND HELD THAT VOLUNTARY SURRENDER OF INCOME DOES NOT AVOID PENALTY. THE COMMISSIONER OF INCOME TAX(A) HELD THAT THE WRONG CLAIM ITA NO. 43 69 /1 4 7 WOULD NOT HAVE COME TO LIG HT IF THE CASE HAD NOT BEEN TAKEN FOR SCRUTINY BUT AS PER PENALTY ORDER AND DISCUSSIONS MADE HEREINABOVE, WE CLEARLY OBSERVE THAT THE PRESENT CASE IS NOT RELATED TO THE WRONG CLAIM OF THE ASSESSEE. HENCE, THE COMMISSIONER OF INCOME TAX(A) UPHELD THE PENALT Y ON WRONG BASIS AND RELYING ON IRRELEVANT CITATIONS. AS PER FACTUAL MATRIX, THE ASSESSEE DID NOT INCLUDE VALUE OF CONVEYANCE EXPENSES TO THE VALUE OF FBT. OBVIOUSLY THE VOLUNTARY SURRENDER DURING ASSESSMENT PROCEEDINGS DOES NOT CREATE ANY IMMUNITY FROM PE NALTY FOR THE ASSESSEE BUT AS PER EXPLANATION 1 TO SECTION 271(1) OF THE ACT, THE PENALTY CAN ONLY BE IMPOSED WHEN (I) THE ASSESSEE FAILS TO OFFER EXPLANATION OR, (II) THE EXPLANATION OF THE ASSESSEE IS FOUND TO BE FALSE OR (III) THE ASSESSEE OFFERS AN EXP LANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE OR (IV) THE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE C OMPUTATION OF INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. 18. IN THE CASE I N HAND, THE ASSESSEE HAS OFFERED ABOVE EXPLANATION WHICH WAS NOT FOUND TO BE FALSE AND THE AUTHORITIES BELOW HAVE NOT ADJUDICATED THE EXPLANATION IN A PROPER WAY BECAUSE AS PER DECISION OF HONBLE APEX COURT IN THE CASE OF MAC DATA (P) LTD. VS C.I.T., VOLU NTARY SURRENDER IS NOT A COVER TO PROVIDE IMMUNITY FROM PENALTY BUT AT THE SAME TIME, EXPLANATION OF THE ASSESSEE IS TO BE CONSIDERED AND IF THE SAME IS FOUND TO BE CONSIDERABLE AND BONAFIDE, THEN PENALTY WILL NOT BE IMPOSABLE AS PER EXPLANATION 1 TO SECTI ON 271(1) OF THE ACT. 19. IN THE INSTANT CASE, THERE IS NO FINDING FROM THE AUTHORITIES BELOW THAT IT WAS NOT A MISTAKE OF OMISSION AND ON THE OTHER HAND, THE MISTAKE OF OMISSION WAS IDENTIFIED BY THE ASSESSING OFFICER AND THE ASSESSEE ACCEPTED THE SAME WITHOUT ANY DISPUTE. IN THIS SITUATION, WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE COMMISSIONER OF INCOME TAX(A) THAT THE ASSESSEE MADE A WRONG CLAIM WHICH WAS DETECTED AND DISALLOWED BY THE ASSESSING OFFICER. ACCORDINGLY, WE HOLD THAT THE EXPLANATION OFFERED BY THE ASSESSEE DURING PENALTY PROCEEDINGS WAS ACCEPTABLE WHICH WAS WRONGLY REJECTED BY THE AO AND THE COMMISSIONER OF INCOME TAX(A) AND PENALTY WAS NOT IMPOSABLE ON THE ASSESSEE IN THIS REGARD AND WE CANCEL THE PENALTY ORDERS. THUS, GROUND NOS. 1, 2 AND 3 OF THE ASSESSEE ARE ALLOWED. ITA NO. 43 69 /1 4 8 11. IN THE CASE ON HAND ALSO THE ASSESSING OFFICER/CIT(APPEALS) FAILED TO PROVE THAT THE EXPLANATION OF THE ASSESSEE THAT ONLY BY OVERSIGHT AND INADVERT E N T LY THE DEPRECIATION ON MOTOR CAR WAS NOT INCLUDED IN THE VAL UE OF FRINGE BENEFITS. WE SEE NO REASON OTHER THAN AN INADVERT E NT MISTAKE OCCURRED IN NOT INCLUDING THE DEPRECIATION ON MOTOR CAR IN THE VALUE OF FRINGE BENEFITS BECAUSE THE ASSESSEE ITSELF RETURNED THE FRINGE BENEFITS IN RESPECT OF OTHER EXPENSES LIKE REP AIRS, VEHICLE HIRE CHARGES ETC. THE EXPLANATION OF THE ASSESSEE THAT SINCE THIS IS THE FIRST YEAR OF THE PROVISIONS OF FRINGE BENEFITS COMING INTO STATUTE THIS MISTAKE HAD HAPPENED AND THERE IS NO SUCH MISTAKE HAD HAPPENED IN ANY OF THE SUBSEQUENT ASSESSME NT YEARS IS A BONAFIDE EXPLANATION AND THIS IS NOT PROVED TO BE FALSE BY THE REVENUE AUTHORITIES. IN VIEW OF WHAT IS STATED ABOVE WE ARE OF THE OPINION THAT THERE IS NEITHER CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE IN NOT INC LUDING THE DEPRECIATION ON MOTOR CAR IN THE VALUE OF FRINGE BENEFITS WHILE FILING FBT RETURN AND IT HAD HAPPENED ONLY ON AN INADVERTENT MISTAKE BY OVERSIGHT. HENCE NO P E N A LTY IS LEV IABLE U/S 271(1)( C ) OF THE ACT. 12 . IN THE RESULT, APPEAL OF THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST OCT. 201 6 S D/ - SD/ - RAJENDRA C.N.PRASAD / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED 21 / 10 /201 6 /PKM , PS ITA NO. 43 69 /1 4 9 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RES PONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//