DCIT.,-8(2), MUMBAI V. PFIZER PRODUCTS INDIA PVT.LTD., MUMBAI

ITA 4576/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62504 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-05-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 06-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AATIQ AHMED
• Assessee Lawyers: CHARUL TOPRANI
• Keywords: Revised return; Bonafide mistake; Reassessment proceedings
• Section: 80IB; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C , MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL, J.M. AND SHRI N. K. BILLAIYA, A.M. ITA NO. : 4576/MUM/2011 ASSESSMENT YEAR : 2003-04 THE D CIT , 8(2), R. NO.216-A, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 VS. M/S. PFIZER PRODUCTS INDIA PVT. LTD. (FORMERLY KNOWN AS PHARMACEA INDIA PVT. LTD.) PFIZER CENTER, 5, PATEL ESTATE, JOGESHWARI (W), MUMBAI-400 102 PAN NO: AABCP 5129 M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AATIQ AHMED RESPONDENT BY : MS. CHARUL TOPRANI DATE OF HEARING : 30.05.2012 DATE OF PRONOUNCEMENT : 06.06.2012 ORDER PER N. K. BILLAIYA, A.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-17, MUMBAI DATED 04.02.2011. 2. THE REVENUE HAS RAISED SEVEN GROUNDS OF APPEALS. THE SUM AND SUBSTANCE OF THESE GROUNDS OF APPEALS IS THAT THE L D. CIT(A) ERRED IN DELETING THE PENALTY OF `. 7,87,968/- U/S.271(1)(C) OF THE ACT. THE ROOTS FOR THE LEVY OF THIS PENALTY IS LIE IN THE ASSESSME NT ORDER PASSED U/S.143(3) READ WITH SECTION 147 OF THE ACT DATED 0 4.12.2008. THE FACTS ITA NO : 4576/MUM/2011 M/S. PFIZER PRODUCTS INDIA PVT. LTD. 2 WERE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 01.12.2008 DECLARING TOTAL INCOME AT `. 1,51,210/-. THE SAID RETURN WAS REVISED ON 30.03.2005 DECLARING INCOME AT `. 7,48,758/- U/S.115JB OF THE ACT. HOWEVER, AS PER THE COMPUTATION SHEET APPENDED TO T HE RETURN, THE ASSESSEE HAS DECLARED NORMAL ASSESSABLE INCOME AT `. 1,56,885/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT. THE ASSESSME NT WAS COMPLETED. THEREAFTER, THE ASSESSMENT WAS RECTIFIE D U/S.154 OF THE ACT ON 12.12.2007 TO RECTIFY THE MISTAKE OF ALLOWING TH E SET OFF OF BROUGHT FORWARD LOSS. SUBSEQUENTLY, THE ASSESSMENT WAS REO PENED BY ISSUE OF NOTICE U/S.148 OF THE ACT ON 27.03.2008. IN RESPON SE TO THE NOTICE U/S. 148, THE ASSESSEE COMPANY FILED A RETURN OF INCOME DECLARING TOTAL INCOME AT `. 7,48,758/- U/S.115JB OF THE ACT AND THE INCOME OF `. 1,56,885/- UNDER THE NORMAL PROVISIONS. DURING THE COURSE OF THE REASSESSMENT PROCEEDINGS IT WAS POINTED OUT BY THE A.O. THAT AS PER SCHEDULE 5 OF TAR SHOWING THE DETAILS OF INVENTORY OF `. 19,34,99,794/-, THE ASSESSEE COMPANY HAS CREATED PROVISIONS FOR RIS K INVENTORY AT `. 21,44,131/- AND THE SAME HAS BEEN CLUBBED UNDER EXP IRED DAMAGED STOCK/ RISK INVENTORY AT `. 81,89,082/- IN SCHEDULE 14 OF MANUFACTURING & ADMINISTRATIVE EXPENSES UNDER THE PROFIT AND LOSS ACCOUNT. THE A.O. SOUGHT EXPLANATION FROM THE ASSESSEE COMPANY TO EXP LAIN HOW THE PROVISION FOR THIS INVENTORY IS ALLOWABLE. IN RESP ONSE TO THIS, THE ASSESSEE COMPANY VIDE LETTER DATED 30.11.2008 SUBMI TTED AS UNDER AS REGARD YOUR QUERY FOR THE PROVISIONS MADE IN THE BO OKS OF ACCOUNT ON THE ACCOUNT OF RISK INVENTORY THERE WAS A MISTAKE IN CL AIMING THIS EXPENSES AND IS ACCEPTABLE TO US TO BE DISALLOWED . AFTER CONSIDERING THE EXPLANATION, THE A.O. DISALLOWED AND ADDED BACK THE CLAIM OF PROVISION FOR RISK INVENTORY OF `. 21,44,131/- TO THE TOTAL INCOME AND INITIATED THE PENALTY PROCEEDINGS FOR FURNISHING OF INACCURATE PA RTICULARS/CONCEALMENT OF INCOME. THE PENALTY PROCEEDINGS WERE INITIATED A ND A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE COMPANY ASKING IT TO EXPLAIN WHY AN ITA NO : 4576/MUM/2011 M/S. PFIZER PRODUCTS INDIA PVT. LTD. 3 ORDER IMPOSING PENALTY SHOULD NOT BE PASSED. THE A SSESSEE COMPANY REPLIED THUS : .IN THIS CONNECTION, WE WISH TO BRING TO YOUR ATT ENTION THAT GROUND OF INITIATING CONCEALMENT IS THAT PROVISION FOR RISK INVENTORY HAS NOT BEEN ADDED TO ARRIVE AT THE TOTAL INCOME. WE WOULD LIKE TO MENTION THAT AMOUNT SUBJECT TO DIS ALLOWANCE WAS REFLECTED SEPARATELY IN ANNUAL REPORT REFER SCH EDULE 5. HOWEVER, INADVERTENTLY SAME LEFT TO BE DISALLOWED W HILE FILING TAX RETURN OF THE COMPANY. IT IS ALSO RELEVANT TO MENTION HERE COMPANY IS DEALING IN MEDICINE AND AS INSISTED BY A UDITORS THIS PROVISION FOR NEAR EXPIRY GOODS MAY NOT BE SAL ABLE WAS MADE IN THE BOOKS OF ACCOUNTS. IT IS RELEVANT TO MENTION HERE THAT RETURN OF INCOM E WAS FILED BY A PERSON WHO HAS LEFT THE ORGANIZATION AND IS FR OM A LEGACY COMPANY. WE UNDERSTAND THIS WAS A BONAFIDE MISTAKE MADE BY THE PERSON FILED THE RETURN AND HENCE COMPANY HA S NOT GONE IN APPEAL ON THE SAME. IN VIEW OF THE ABOVE, WE REQUEST YOU TO DROP THE PENALTY PROCEEDINGS. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E COMPANY, THE A.O. CONCLUDED THAT ALTHOUGH THE AMOUNT OF `. 21,44,131/- WAS QUANTIFIED AS DISALLOWABLE, YET THE COMPANY HAS NOT ADDED BACK THE SAME AND IT WAS ONLY WHEN POINTED OUT BY THE DEPART MENT THE ASSESSEE HAS AGREED FOR THE DISALLOWANCE WHICH SHOWS THAT TH E COMPANY HAS CLAIMED THE PROVISIONS WHICH IS NOT ALLOWABLE WHICH AMOUNTS TO FURNISHING INACCURATE PARTICULARS OF INCOME AS PER THE PROVISION OF SECTION 271(1)(C) OF THE ACT READ WITH EXPLANATION (1). RELYING ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS & ORS. REPORTED IN 30 6 ITR 277 LEVIED MAXIMUM PENALTY OF `. 7,87,968/-. THE ASSESSEE COMPANY ASSAILED THE ORDER BEFORE THE LD. CIT(A). IT WAS ARGUED BY THE ASSESSEE THAT THE CLAIM WAS IN ACCORDANCE WITH THE ACCOUNTING POLICY REGULA RLY FOLLOWED BY THE APPELLANT. FURTHER THE PROVISION FOR RISK INVENTOR Y HAD BEEN SEPARATELY DISCLOSED IN THE PROFIT AND LOSS ACCOUNT FILED ALON G WITH THE RETURN OF ITA NO : 4576/MUM/2011 M/S. PFIZER PRODUCTS INDIA PVT. LTD. 4 INCOME. HENCE THERE WAS NO CONCEALMENT OF INCOME I N THE APPELLANTS CASE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE THAT THE CLAIM WAS IN ACCORDANCE WITH THE REGULAR METHOD OF ACCOUN TING FOLLOWED BY THE APPELLANT AND AFTER RELYING ON THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF VS. DCIT REPOR TED IN 291 ITR 590 AND IN THE CASE OF KANBAY SOFTWARE INDIA (PVT.) LTD. RE PORTED IN 31 SOT 153 (PUNE) THE LD. CIT(A) HELD THAT IN THE FACT AND THE CIRCUMSTANCES AND RELYING ON CASE CITED, THE PENALTY LEVIED U/S.271(1 )(C) OF THE ACT OF `. 7,87,986/- IS DELETED. 4. AGAINST THIS FINDING, THE REVENUE IS BEFORE US. 5. THE LEARNED DR STRONGLY RELIED UPON THE FINDINGS OF THE A.O. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE REITERAT ED ITS STAND THAT THE MISTAKE WAS INADVERTENT AND BONAFIDE. THE LEARNED COUNSEL ALSO PLACED RELIANCE ON THE DECISION OF THE ITAT, MUMBAI C' BE NCH IN ITA NO. 2349/MUM/2009 IN THE CASE OF PRECISION ELECTRICAL W IRING SYSTEM PVT LTD V/S ITO 9[2][4] , MUMBAI ORDER DATED 19/01/2011 AND MUMBAI D BENCH IN ITA NO.3356/MUM/2009 IN THE CASE OF RABO I NDIA FINANCE LTD.V/S ACIT RANGE 1[3] MUMBAI ORDER DATED 29/07/20 11 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE ORDERS OF THE ITAT AS SUP PLIED BY THE COUNSEL IN SUPPORT OF HER SUBMISSIONS . IT IS VERY IMPORTA NT TO ANALYSE THE CONDUCT OF THE ASSESSEE COMPANY AT THE ASSESSMENT / RE-ASSESSMENT STAGE . THE FIRST RETURN WAS FILED ON 01.12.2003 I N WHICH THE NORMAL INCOME WAS DECLARED AT `. 1,51,210/-. THE REVISED RETURN WAS FILED ON 30.03.2005 UNDER WHICH INCOME U/S.115JB WAS DECLARE D AT `. 7,48,758/- AND THE NORMAL PROVISION AT `. 1,56,885/-. AT THIS STAGE, THE ASSESSEE DID NOT ADD BACK THE PROVISION FOR RISK INVENTORY OF `. 21,44,131/-. DURING ITA NO : 4576/MUM/2011 M/S. PFIZER PRODUCTS INDIA PVT. LTD. 5 THE COURSE OF THE ASSESSMENT PROCEEDINGS ALSO THE A SSESSEE COMPANY DID NOT ASK THE A.O. TO ADD BACK THE SAID CLAIM OF THE PROVISION. WHEN THE ASSESSMENT WAS SUBJECTED TO RECTIFICATION U/S.154 O F THE ACT ON 12.12.2007, THE ASSESSEE DID NOT CARE TO POINT OUT FOR THE DISALLOWANCE OF THE PROVISION FOR RISK INVENTORY. ON RECEIVING THE NOTICE U/S.148 AND FILING THE RETURN IN RESPONSE TO THIS NOTICE, THE A SSESSEE COMPANY FILED THE SAME RETURN I.E. `. 7,48,758/- U/S.115JB OF THE ACT AND `. 1,56,885/- UNDER THE NORMAL PROVISIONS WHICH FIGURES WERE FILE D IN ITS REVISED RETURN ON 30.03.2005. IT WAS ONLY WHEN THE A.O. POINTED O UT IN THE REASSESSMENT PROCEEDINGS THE ASSESSEE AGREED FOR TH E DISALLOWANCE OF THE PROVISIONS FOR RISK INVENTORY. THE ABOVE FACTUAL M ATRIX CLEARLY SHOW THAT THE INTENTION OF THE ASSESSEE COMPANY WAS NOT BONAF IDE. THE LD. CIT(A) HAS CANCELLED THE PENALTY ON THE SUBMISSION OF THE ASSESSEE THAT THE CLAIM WAS IN ACCORDANCE WITH THE REGULAR METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT. HOWEVER, BEFORE US, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT IN THE EARLIER YEAR SUC H A PROVISION WAS ADDED BACK IN THE COMPUTATION OF INCOME WHICH AGAIN SHOW THAT THE OMISSION FOR NOT ADDING BACK THE PROVISION THIS YEA R IS NOT A BONAFIDE MISTAKE. RELIANCE PLACED BY THE LEARNED COUNSEL ON THE TWO DECISIONS OF THE ITAT CITED (SUPRA) IS AGAINST THE FACTS OF THE PRESENT CASE. IN ITA 2349 / MUM/2009 [SUPRA] THE INCOME-TAX APPELLATE TR IBUNAL CANCELLED PENALTY ON FINDING THAT THE EXCESS CLAIM U/S 80IB I N THE SIXTH ASSESSMENT YEAR WAS AN INADVERTENT MISTAKE AND THE ASSESSEE IMMEDIATELY WITHDREW ITS CLAIM OF DEDUCTION FOR THE SIXTH YEAR ACKNOWLEDGING THAT IT WAS ENTITLED FOR DEDUCTION ON LY FOR FIVE ASSESSMENT YEARS . IN ITA 3356/M/09 [SUPRA ] THE PENALTY WAS L EVIED FOR CLAIM OF INTEREST ON FCNR LOANS FROM SCHEDULED BANKS WHICH W ERE NOT PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME , THE INCOME-TAX APPELLATE TRIBUNAL WAS CONVINCED THAT THE MISTAKE W AS BONAFIDE AS THE ASSESSEE COULD SUCCESSFULLY DEMONSTRATE THAT THE CL AIM WAS ALLOWABLE IN ITA NO : 4576/MUM/2011 M/S. PFIZER PRODUCTS INDIA PVT. LTD. 6 SUBSEQUENT YEARS AND YET THE ASSESSEE DID NOT CLAIM IT SO THE INCOME-TAX APPELLATE TRIBUNAL CANCELLED THE PENALTY . THE FACT UAL MATRIX AS EXPLAINED ABOVE SHOW THAT THE FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHABLE . OUR VIEW FINDS SUPPORT FROM THE DECISION IN THE CASE OF ZOOM COMMUNICATION (P.) LTD. [2010] 327 ITR 510 IN WHICH THE HON'BLE DELHI HIGH COURT HAS HELD THAT THE CLAIM FOR DEDUCT ION BEING NOT BONAFIDE AMOUNTS TO CONCEALMENT OF INCOME. WHEN TH E ASSESSEE IN COMPUTATION OF INCOME CLAIM EXPENSES / PROVISIONS N OT ALLOWABLE AS DEDUCTIONS, THE ASSESSEE IS LIABLE TO PAY PENALTY. AS POINTED OUT BY US IN THE FACTUAL MATRIX, THE CONDUCT OF THE ASSESSEE SHO WS THAT IT HAS CLAIMED THE PROVISION AS EXPENDITURE IN PROFIT AND LOSS ACC OUNT IN SPITE OF THE FACT THAT IT GOT THREE OPPORTUNITIES TO DEMONSTRATE ITS BONAFIDES , BUT DID NOT DO IT , THIS CANNOT BE TERMED AS A BONAFIDE MISTA KE. FOLLOWING THE OBSERVATIONS OF THE HON'BLE DELHI HIGH COURT THE FI NDINGS OF THE LD. CIT(A) ARE REVERSED. THE LEVY OF PENALTY IS CONFIR MED. THE PENALTY ORDER OF THE A.O. IS RESTORED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED. ORDER PRONOUNCED ON THIS 06 TH DAY OF JUNE, 2012. SD/ - SD/ - (DINESH KUMAR AGARWAL) ( N. K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 06.06.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) ITA NO : 4576/MUM/2011 M/S. PFIZER PRODUCTS INDIA PVT. LTD. 7 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI