MITSUBOSHI BELTING INDIA PRIVATE LIMITED, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX - RANGE 15(2)(2), MUMBAI

ITA 448/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5900 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 22-01-2018
• Court: TRIBUNAL

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 448 /MUM/ 201 8 (ASSESSMENT YEAR 20 13 - 1 4 ) MITSUBOSHI BELTING INDIA P. LTD. R - 672, GROUND & UPPER FLOOR NEXT TO ALPHA LAVAL, PIPELINE R OAD, TTC INDUSTRIAL AREA RABALE MIDC, NAVI MUMBAI. PAN : AAGCM9369K V S . ACIT RANGE 15(2)(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI M.P.LOHIA DEPARTMENT BY SHRI S.K. MITRA DATE OF HEARING 9.5 . 2 01 9 DATE OF PRONOUNCEMENT 9 . 7 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : - THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 30.10.2017 AND PERTAINS TO A.Y. 2013 - 14. 2. GROUNDS OF APPEAL READ AS UNDER : - 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE (EARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER ('AO') IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT AMOUNTING TO RS.54,73,884 ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS OF RS 1,68,68,672. 2 ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED AO AND NOT APPRECIATING THE FACT THAT THE APPELLANT HAD NEITHER CONCEALED PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS THEREOF. 3 ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT QUASHING THE PENALTY AS THE NOTICE UNDER SECTION 274 OF THE ACT DID NOT SPECIFICALLY MENTION, WHETH ER PENALTY IS INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME. MITSUBOSHI BELTING INDIA P. LTD 2 4 ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE LEARNED AO HAS ENQUIRED ABOUT THE DET AILS OF FOREIGN EXCHANGE FLUCTUATION LOSS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 5 ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE DISALLOWED EXPENSE (IE FOREIGN EXCHANGE FLUCTUAT ION LOSS) WAS SUO - MOTO OFFERED FOR TAX BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. BRIEF FACTS OF THE CASE RELATING TO LEVY OF PENALTY ARE AS UNDER : - THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF INDUSTRIAL BEL TS, BUILDING MATERIAL AND HAS STATE OF ART MANUFACTURING FACILITIES ACROSS THE GLOBE. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS HELD AS UNDER : - ON PERUS A L OF THE PROFIT AND LOSS ACCOUNT, IT IS SEEN THAT OUT OF THE TOTAL FOREIGN CURRENCY LOSS OF RS. 1,84,85,987/ - DEBITED, RS. 1,68,68,672/ - PERTAINS TO CAPITAL ASSETS AND SHOULD HAVE BEEN CAPITALIZED. SINCE THE SAME WAS NOT ADDED TO THE TOTAL INCOME, IT NOW DISALLOWED U/S. 37 OF THE I.T. ACT, 1961. (DISALLOWANCE OF RS. 1,68,68,672/ - ). PENALTY PROCE EDINGS U/S. 271(1)(C) OF THE ACT IS INITIATED. 4. IN THE PENALTY ORDER U/S. 271(1)(C) OF THE ACT, THE ASSESSING OFFICER NOTED THAT PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT WAS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME, THEREBY CONCE ALMENT OF INCOME CHARGEABLE TO TAX ON ACCOUNT OF ADDITION U/S. 37 OF THE ACT. ASSESSEE IN RESPONSE SUBMITTED THAT THE ASSESSEES BOOKS OF ACCOUNT WERE AUDITED AS PRESCRIBED U/S. 44AB OF THE ACT AND THE ASSESSEE HAS ALREADY SUBMITTED ALL THE DETAILS. THAT T HE ASSESSEE HAD SUO - MOTTO SUBMITTED DURING THE ASSESSMENT PROCEEDINGS FOREIGN CURRENCY LOSS ON ACCOUNT OF CAPITAL ASSETS OF RS. 1,68,68,672/ - SHALL BE DISALLOWED FOR COMPUTATION OF TAX AS IT DOES NOT PERTAIN TO REVENUE TRANSACTION . FURTHER THE ASSESSEE C L AIMED THAT THE SAME HAPPENED INADVERTENTLY AND THE SAME WAS ALSO NOT REPOR TED BY THE TAX AUDITOR IN FORM 3CD. THAT AT THE TIME OF FILING OF RETURN THE ASSESSEE HAS RELIED ON THE TAX AUDIT REPORT OF THE CHARTERED ACCOUNTANT. THE ASSESSEE ALSO STATED THAT TH E MITSUBOSHI BELTING INDIA P. LTD 3 ASSESSING OFFICER NOWHERE IN THE ASSESSMENT ORDER MENTIONED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF INCOME. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISF IED . HE HELD AS UNDER : - ASSESSEE DURING TH E YEAR HAS CLAIMED FOREIGN EXCHANGE LOSS TO THE TUNE OF RS. 1,84,85,987. ASSESSEE DURING THE COURSE OF ASSESSM E NT PROCEEDINGS WAS ASKED TO GIVE THE DETAILS OF SUCH HUGE FOREIGN EXCHANGE LOSS CLAIMED DURING THE YEAR. ASSESSEE VIDE HIS LETTER DATED 30 TH MARC H, 2016 SUBMITTED THAT THE ENTIRE FOREIGN CURRENCY LOSS ON ACCOUNT OF CAPITAL ASSETS OF RS. 1,68,68,672/ - DEBITED TO THE PROFIT AND LOSS ACCOUNT SHALL BE DISALLOWED FOR THE COMPUTATION OF TAX AS IT DOES NOT PERTAIN TO REVENUE TRANSACTIONS. ASSESSEE IN HIS SUBMISSION TO THE PENALTY NOTI CE CLAIMS THAT ONE OF THE IMPOR T A NT CONDITIONS FOR PENALTY IS THE EXISTENCE OF MENS REA OR DELIBERATE CONCEALMENT OF INCOME. AND THE ASSESSEE HAS NO DELIBERATE INTENTION TO CONCE A L THE PARTICULARS OF INCOME OR EVADE TAX. HOWEV ER THE MERE SUBMISSION OF THE ASSES SEE DURING THE COURSE OF ASSESS M E NT PROCEEDINGS CANNOT BE SAID TO BE THE BASIS OF NOT HAVING DELIBERATE INTENT ION. SUPREME C OURT IN CIT V WOODWARD GOVERNOR INDIA PVT. LTD. HAS CLEARLY HELD THAT THE LOSS ACCOUNT OF FOREIGN EXCHANGE LOSS IN R E SPECT OF REVENUE ACCOUNT CAN ONLY BE ALLOWED UNDER SECTION 37. THE SAME DECISIONS HAS BEEN RELIED IN NUMBER OF DE CISIONS BY THE CIT(A) AND ABOVE . F URTHER IF THE ASSESSEE WAS AWARE OF THE FACT THAT THE SAME WAS NOT ALLOWED REVISED RETURN COULD HAVE BEEN FILLED BY THE ASSESSEE AS THE ACT GIVES ADEQ U A TE TIME FOR THE SAME . 5. THE ASSESSING OFFICER FURTHER REFERRED TO THE DECISION OF HON'BLE APEX COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILES PROCESSORS (166 TAXMANN 65) AND DECI SION IN THE CASE OF K.P. M ADHUSUDANAN VS. CIT (251 ITR 99). THE ASSESSING OFFICER FURTHER DISTINGUISHED THE DECISION RELIED UPON BY THE ASSESSEE AND FINALLY CONCLUDED THAT HE WAS SATISFIED THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOM E AND CONCEALED ITS INCOME IN VARIOUS ISSUES DISCUSSED ABOVE. 6. AGAINST THE ABOVE ORDER, THE ASSESSEE HAS FILED THE APPEAL BEFORE LEARNED CIT(A). HOWEVER LEARNED CIT(A) UPHELD THE DECISION OF THE ASSESSING OFFICER. 7. AGAINST THE ABOVE ORDER THE ASSESS EE IS IN APPEAL BEFORE US. MITSUBOSHI BELTING INDIA P. LTD 4 8. AT THE OUTSET, LEARNED COUNSEL OF THE ASSESSEE CONTENDED THAT NOTICE IN THIS CASE U/S. 271(1)(C) IS INVALID IN AS MUCH AS IN APPROPRIATE PORTION OF THE NOTICE H AS NOT DELETED BY ASSESSING OFFICER . FOR THIS PROPOSITION HE REFE RRED TO SEVERAL CASE LAWS. LEARNED COUNSEL FURTHER REFERRED TO THE FOLLOWING CASE LAWS : SSA'S EMERALD MEADOWS (ITA 380/2015) (KARNATAKA HC) APPROVED BY SC (242 TAXMAN 180) CIT VS SHRI SAMSON PERINCHERY (BOM) (392 ITR 4) APPROVING THE DECISION OF ITAT DATED 11 OCTOBER 2013 (ITA NO. 4630/MURN/2013) HAFEEZ CONTRACTOR (ITA NO. 796 OF 2016) (BOM) DATED 11 DECEMBER 2018 APPROVING THE DECISION OF THE ITAT DATED 2 SEPTEMBER 2015 (ITA NO.6222 & 6223/MUM/2013) CIT VS. MANJUNATHA COTTON & GINNING FACTORY (2 013) (359 ITR 565) (KARNATAKA HC) PR. CIT VS PARINEE DEVELOPERS PVT LTD (BOM HC) (ITA NO. 1344 OF 2016) APPROVING THE DECISION OF THE ITAT DATED 11 SEPTEMBER 2015) (ITA NO.6772/MUM/2013) DY. CIT VS SICOM LTD (ITA NO. 6387/MUM/2014) DATED 6 APRIL 2018 JAY ANT PATEL (ITA NO. 1650/MUM/2017) DATED 26 JULY 2017(MUM) TATA COMMUNICATIONS TRANSFORMATION SERVICES LTD (ITA NO 3108/MUM/2016) DATED 21 FEBRUARY 2018 (MUM) GAGANDEEP SINGH ALAG (ITA NO. 6581/MUM/2016) DATED 30 MAY 2018 SHANGRILA SALES PVT LTD (ITA NO. 75 25/MUM/2016) DATED 7 FEBRUARY 2018 ORBIT ENTERPRISES (ITA NO. 1596 & 1597/MUM/2014) DATED 1 SEPTEMBER 2017 MRS ARCHANA D. TALATI (ITA NO. 2696/MUM/2016) DATED 5 JUNE 201 9. HE FURTHER REFERRED TO THE FOLLOWING PROPOSITION : - PENALTY PROCEEDINGS INVALID I N CASE WHERE PRIMA FACIE SATISFACTION NOT RECORDED BY THE ASSESSING OFFICER AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS : M WP LTD (264 CTR 502) (KAR HC) AMI BUILDERS PVT LTD VS ACIT (46 CCH 334) (MUM ITAT) ABR AUTO PVT LTD VS ACIT (51 CCH 477) (DE LHI ITAT) SUVAPRASANNA BHATACHARYA 175 TTJ 238 (KOL ITAT) SHRI MEGHRAJ KESAJI CHAUDHARI VS ACIT (ITA NO. 1296/PUN/2015) DCIT VS PURTI SAKHAR KARKHANA LTD (153 TTJ 12) (NAGPUR ITAT PENALTY CANNOT BE LEVIED ON BONFIDE AND INADVERTENT ERROR OF THE ASSESSE E : - RELIANCE PETROCHEMICAL PVT LTD (322 ITR 158) (SUPREME COURT) PRICE WATERHOUSE COOPERS PVT. LTD. 348 ITR 306 (SUPREME COURT) PENALTY CANNOT BE LEVIED WHEN ASSESSEE VOLUNTARILY DISCLOSES WRONG CLAIM DURING ASSESSMENT PROCEEDINGS. MITSUBOSHI BELTING INDIA P. LTD 5 CIT VS BLUE STAR LTD (357 ITR 669) (BOM HC) APPROVING THE DECISION OF THE ITAT DATED 20 JULY 2012 (ITA NO. 4481/MUM/2011 10 . PER CONTRA, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 1 1 . THE FIRST GROUND RAISED BY THE ASSESSEE IS THAT THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT IS INVALID INASMUCH AS THE INAPPROPRIATE LIMB IN THE NOTICE IN THE PENALTY WAS NOT STRUCK OFF. WE FIND THAT THIS ISSUE WAS RAISED BEFORE THE LEARNED CIT - A. L EARNED CIT - A HAS DULY NOTED THE ASSESSEE S S UBMISSION IN HIS ORDER . HOWEVER WHILE ADJUDICATING THE ISSUE HE HAS OMITTED TO ADJUDICATE THIS GROUND RAISED BEFORE HIM. HENCE IN OUR CONSIDERED OPINION THE INTEREST OF JUSTICE REQUIRES THAT THIS ISSUE SHOULD BE REMITT ED TO THE FILE OF LEARNED CIT - A . L EARN ED CIT - A IS DIRECTED TO CONSIDER THE ISSUE AFRESH AFTER GIVING THE ASSESSEE PROPER' OPPORTUNITY OF BEING HEARD. THE LEARNED CIT - A SHOULD ALSO TAKE INTO ACCOUNT THE VARIOUS CASE LAWS ON THE SUBJECT AS AVAILABLE AND AS CANVASSED BY THE ASSESSEE AS AFORESAID. THE LEARNED CIT - A SHOULD ALSO TAKE INTO ACCOUNT THE DECISION OF HONOURABLE OF APEX COURT IN THE CASE OF CIT VS. S.V. ANGI D I CHETTIAR (XLIV ITR 739). A CCORDINGLY THIS ISSUE RAISED IS REMITTED TO THE FILE OF LEARNED CIT - A WITH DIRECTIONS AS ABOVE . 1 2 . A NO THER GROUND RAISED IS THAT PENALTY PROCEEDING IS INVALID AS SATISFACTION IS NOT RECORDED BY THE ASSESSING OFFICER AT THE TIME OF INITIATION OF PENALTY. 13 . IN OUR CONSIDERED OPINION THE ASSESSEE DOESN'T DESERVE TO SUCCEED ON THIS GROUND. THE ASSESSING OFF ICER HAS AFTER DISALLOWANCE OF THE IMPUGNED AMOUNT DULY NOTED IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT IS INITIATED . C ONSEQUENT TO AMENDMENT IN SECTION 271 BY INSERTION OF SECTION 271(1B) DULY APPLICABLE IN THE EXTANT AS SESSMENT YEAR , T HIS IS SUFFICIENT SATISFACTION AND THE PENALTY CANNOT BE ANNULLED ON THE GROUND OF LACK OF SATISFACTION BY THE ASSESSING OFFICER. WE MAY GAINFULLY REFER TO THE RELEVANT PROVISIONS OF SECTION 271(1B) AS UNDER : - MITSUBOSHI BELTING INDIA P. LTD 6 271 (1B) WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSESSMENT OR REASSESS MENT AND THE SAID ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDING UNDER CLAUSE (C) OF SUB - SECTION (1), SUCH AN ORDER OF ASSESSMEN T OR REASSESSM ENT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS UNDER THE SAID CLAUSE (C) . 14. THE ASSESSEES CASE IS FULLY COVERED UNDER THE ABOVE PROVISION. THERE IS A DISALLOWANCE AND SUBS EQUENTLY NOTING OF INITIATION OF PENALTY PROCEEDINGS. I N VIEW OF THE AFORESAID AMENDMENT THE CASE LAWS REFERRED BY THE LEARNED COUNSEL OF THE ASSESSEE DO NOT OXYGENATE THE CASE OF THE ASSESSEE . 15. A NOTHER GROUND RAISED IS THAT PENALTY MAY NOT BE LEVIED O N BONAFIDE AND INADVERTENT ERROR OF THE ASSESSEE . 16. IN OUR CONSIDERED OPINION SHOWING A HUGE AMOUNT OF FOREIGN CURRENCY TRANSLATION LOSS ON CAPITAL ACCOUNT BY A MULTINATIONAL COMPANY AS REVENUE LOSS CAN BY NO STRETCH OF IMAGINATION BE CONSIDERED TO BE A BONAFIDE AND INADVERTENT ERROR. THIS ARGUMENT OF THE ASSESSEE IS FURTHER DEVOID OF COGENCY IN VIEW OF FOLLOWING SUBMISSION OF THE ASSESSEE BEFORE THE LEARNED CIT - A. AO HAS TO ADOPT PRINCIPLE OF CONSISTENCY: IT IS PERTINENT TO NOTE THAT MBIPL HAS ADOPT ED A CONSISTENT APPROACH WHILE FILING RETURN OF INCOME FOR AY 2013 - 14 VIZ. TREATING THE FOREIGN EXCHANGE FLUCTUATION LOSS ON ACCOUNT OF CAPITAL ASSETS AS REVENUE 'IN NATURE AND HENCE DEDUCTIBLE AGAINST THE BUSINESS INCOME BASIS THE POSITION ADOPTED IN AY 2 012 - 13 VIZ. TREATING THE FOREIGN EXCHANGE FLUCTUATION GAIN ON CAPITAL ASSETS AS REVENUE IN NATURE AND OFFERING THE SAME TO TAX. THE AO ACCEPTED THE POSITION OF MBIPL FOR AY 2012 - 13 IE TREATING THE SAME AS REVENUE IN NATURE, ACCORDINGLY, IT IS SUBMITTED THA T PRINCIPLE OF CONSISTENCY SHOULD BE APPLICABLE IN THE INSTANT CASE . 17. H ENCE THE ASSESSEE WAS VERY WELL AWARE THAT IT WAS DELIBERATELY SHOWING CAPITAL ACCOUNT TRANSACTION LOSS AS LOSS ON REVENUE ACCOUNT . H ENCE BY NO STRETCH OF IMAGINATION IT CAN BE SAI D THAT THERE WAS ANY INADVERTENT ERROR. IT WAS FULLY CONSIDERED DECISION OF THE ASSESSEE TO SHOW THE CAPITAL LOSS AS REVENUE LOSS. HENCE THIS LIMB OF THE ARGUMENT IS DISMISSED MITSUBOSHI BELTING INDIA P. LTD 7 18. A NOTHER GROUND RAISED IS THAT PENALTY CANNOT BE LEVIED AS ASSESSEE VOLUNTARI LY DISCLOSED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 19. UP ON CAREFUL CONSIDERATION WE ARE OF THE CONSIDERED OPINION THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT THERE WAS ANY INVOLUNTARY DISCLOSUR E BY THE ASSESSEE. THE ASSESSING OFFICER HAS DULY DETECTED THE HUGE AMOUNT OF CAPITAL TRANSACTION LOSS. HE HAD ASKE D THE ASSESSEE THE DETAIL THERE OF I N THESE CIRCUMSTANCES ASSESSEE HAD NO OPTION BUT TO DISCLOSE THE SAME. BY NO STRETCH OF IMAGINATION IT CAN BE SAID TO BE VOLUNTARILY DISCLOSURE. THE DECISION OF THE APEX COURT IN THE CASE OF K.P.M ADHUSUDANAN FULLY APPLIES ON THE FACTS OF THE CASE. H ENCE THIS GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 20. ANOTHER LIMB OF ASSESSEE S ARGUMENT IS THAT IT HAD RELI ED UPON THE TAX AUDITORS REPORT. WE FIND THAT THE TAX AUDIT IS CONDUCTED ON THE BASIS OF INFORMATION AND EXPLANATION OF THE ASSESSEE. THE ASSESSEE , A MULTINATIONAL COMPANY CAN NOT PUT THE BLAME ON TAX AUDITOR, WHEN THE TAX AUDITOR IS NOT PRESENT TO DE FEND. IT IS NOT THE CASE THAT THERE IS ACCEPTANCE ON RECORD BY THE TAX AUDITOR THAT HE IS GUILTY OF ANY MISTAKE. HENCE, THIS PLEA OF THE ASSESSEE IS NOT ACCEPTABLE. 2 1 . IN THE RESULT ASSESSEE S APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURP O SES O RDER HAS BE EN PRONOUNCED IN THE COURT ON 9 . 7 . 201 9 . SD/ - SD/ - (AMARJIT SINGH) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 9 / 7 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI MITSUBOSHI BELTING INDIA P. LTD 8 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI