Parsben Jivanbhai Vadhiya, Surat V. Dy. Commissioner of Income Tax, Circle -2(3), Surat, Surat

ITA 47/SRT/2023

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The case involves Parasben Jivanbhai Vadhiya, a dealer of Bharat Petroleum Corporation Limited, who appealed against the penalty levied by the Assessing Officer for alleged misreporting of income due to a delayed VAT payment. The Assessing Officer disallowed a deduction of Rs.2.50 lakhs for VAT paid post the due date of filing the income tax return for the assessment year 2017-18, and initiated a penalty under section 270A(2) for misreporting of income. The National Faceless Appeal Centre (NFAC) upheld this penalty, leading to the current appeal before the Income Tax Appellate Tribunal. The Tribunal found that the penalty was incorrectly imposed as the disallowance did not meet the criteria for misreporting under section 270A(9) and that the assessee had provided a bona fide explanation.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128390 (ITAT-SURAT)
• Duration Of Justice: 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 24-01-2023
• Other Referred Cases: Schneider Electric South East Asia (HQ) PTE Ltd. vs. Assistant Commissioner of Income Tax (International Taxation)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: WAY OF TAX DUTY OF CESS
• Section: 43B; 274; 139(1)

Judgement Text

आयकर अपीलȣय अͬधकरण, स ु रत Ûयायपीठ, स ु रत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT “SMC” BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER आ.अ.सं./ITA No.47/SRT/2023 (AY 2017-18) (Hearing in virtual Court) Parasben Jivanbhai Vadhiya 1, Village Budhaleshwar, Tal. Mahuva, Surat-394250 PAN No: APVPV 0109 F Vs Deputy Commissioner of Income-tax, Circle-(3), Surat अपीलाथȸ/Appellant Ĥ×यथȸ /Respondent Ǔनधा[ǐरती कȧ ओर से /Assessee by Shri Sapnesh R Sheth, C.A राजèव कȧ ओर से /Revenue by Shri Vinod Kumar, Sr-DR Date of filing appeal 25.01.2023 सुनवाई की तारीख/Date of hearing 06.03.2023 उɮघोषणा कȧ तारȣख/Date of pronouncement 06.03.2023 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi [for short to as “NFAC/Ld.CIT(A)”] dated 05.01.2023 for assessment year 2017-18, which in turn arises out against the penalty levied by Assessing Officer under section 270A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 26.11.2019. The assessee has raised the following grounds of appeal:- “1. On the facts of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals), NFAC has erred in confirming the action of assessing officer in imposing penalty of Rs.1,54,500/- u/s 270A of the I.T.Act, 1961. ITA No.47/SRT/2023 (A.Y 17-18) Parasben J. Vadhiya 2 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax(Appeals), NFAC has erred in passing ex-parte order although assessee sought adjournment upto 12/01/2023. 3. It is therefore prayed that penalty imposed by assessing officer and confirmed by Commissioner of Income-tax (Appeals) may please be deleted. 4. The Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 2. Brief facts of the case are that assessee is dealer of Bharat Petroleum Corporation Limited (BPCL). The assessee is engaged in sale of petrol and diesel in the name of M/s Suvidha Petroleum, filed his return of income declaring total income of Rs.17,76,340/-. During scrutiny assessment, the Assessing Officer noted that assessee has paid Rs.2.50 lakh on account of Value Added Tax (VAT for short) payment on 18.01.2018, which was paid after due date of filing on Income Tax Return (ITR for short) for the year 2017-18. The Assessing Officer issued show cause notice as to why same should not be disallowed from the expenses. The assessee in response to show cause notice, explained that amount of Rs.2.50 lakh was paid on 18.01.2018, after due date of filing the return of income under section 139(1) of the Act. The copy of challan was filed. The assessee submitted that ITA No.47/SRT/2023 (A.Y 17-18) Parasben J. Vadhiya 3 he has not disallowed the said amount expenses nor claimed its deduction while computing income for assessment year 2018-19. And there is no question of double deduction. It was submitted that in case the same is disallowed while passing the assessment order for assessment year 2017-18, then allowed the assessee in assessment year i.e., 2018-19 and adjust the tax amount accordingly. The reply of assessee was not accepted by Assessing Officer by holding that assessee per section 43B any sum payable by the assessee by way of tax duty of cess, whatever name called shall be allowed in which year such amount is actually paid provided such sum is paid actually paid or before due date applicable under section 139(1). On the basis of such observation, the Assessing Officer disallowed and added back to the income of assessee and initiated penalty of misreporting as per section 270A(2) of the Act. 3. The assessing officer issued show cause notice under section 274 read with section 270A dated 19.05.2021 to offer explanation as to why penalty should not be imposed. The assessee filed its reply dated 08.08.2021. In the reply, ITA No.47/SRT/2023 (A.Y 17-18) Parasben J. Vadhiya 4 the assessee stated that no penalty for under-reporting or misreporting of income should be levied because the disallowance is made only for the reason that payment of VAT was made / deposited after due date of filing of return and the same is tax neutral as the said amount is allowable as deduction in subsequent assessment year, there is no question of drawing presumption that the assessee under reported his income. The explanation of the assessee is bona fide and prayed to drop the penalty. 4. The reply of assessee was not accepted by Assessing Officer by holding that Assessing Officer has applied due diligence while passing the assessment order and in this case, penalty proceedings was initiated for under-reporting of income in consequence of misreporting because there was a misrepresentation of fact while filing return for assessment year 2017-18. Thus, the exception provided in sub-clause section 270A(6) is not applicable. The Assessing Officer levied penalty @ 200% of tax payable on under-reporting income and worked out the penalty of Rs.1,54,000/-. 5. Aggrieved by the penalty levied by Assessing Officer, the assessee filed appeal before Ld. CIT(A). The appeal of ITA No.47/SRT/2023 (A.Y 17-18) Parasben J. Vadhiya 5 assessee was migrated and adjudicated by NFAC/Ld. CIT(A) vide order dated 05.01.2023. The NFAC/Ld. CIT(A) confirmed the action of Assessing Officer. Further aggrieved the assessee has filed present appeal before the Tribunal. 6. I have heard the submission of Ld. Authorized Representative (Ld.AR) for the assessee and learned Senior Departmental Representative (ld. Sr DR) for the Revenue. The Ld. AR for the assessee submits that before NFAC/Ld. CIT(A) the assessee sought adjournment and requested the case may be adjourn till 12.01.2023, however, the appeal of assessee was dismissed on 05.01.2023 without considering the request of assessee for adjournment. The Ld.AR for the assessee submits that in the assessment, disallowance of Rs.2.50 lakh was made on account of fact that VAT was paid after due date of filing of return under section 139(1) of the Act. In response to show cause against levy of penalty, the assessee filed its reply through ITBA portal on 05.01.2021, which was not considered by assessing officer. The assessing officer imposed penalty under section 270A(2) @ 200% of tax payable for alleged under-reporting income in consequence of misreporting. The Assessing Officer worked ITA No.47/SRT/2023 (A.Y 17-18) Parasben J. Vadhiya 6 out the penalty amount of Rs.1,54,500/-. The Ld. AR for the assessee submits that payment of VAT of Rs.2.50 lakh paid after due date of filing return is tax neutral because such payment is allowable as deduction in subsequent year i.e., in the year in which, same is deposited into Government account. Thus, the disallowance under section 43B made in this year has effected in the next year and consequential there is no case of evasion of tax. Further, explanation of assessee is bona fide as per the provision of sub-clasue-6 of Section 270A or the material facts to substantiate explanation were disclosed. The ld AR for the assessee submits that as per the provision of section 270A(9) such disallowance does not fall into the category of mis-reporting of income in item (a) to (f) of section 270A of the Act. Accordingly, penalty @ 200% of tax payment is not leviable. 7. In alternative submission, Ld. AR for the assessee submits while issuing show cause notice, the Assessing Officer issued notice for want i.e. under-reporting of income and penalty order under section 270A of the Act was passed on other limb i.e., under reporting of income in consequence of misreporting. Thus, such notice is not valid. The Ld. AR for ITA No.47/SRT/2023 (A.Y 17-18) Parasben J. Vadhiya 7 the assessee relied on the decision of Hon'ble Delhi High Court in the case of Schneider Electric South East Asia (HQ) PTE Ltd. vs. Assistant Commissioner of Income Tax (International Taxation) (2022) 213 DTR 0134 (Del) (2022) 326 CTR 0374 (Del),(2022) 443 ITR 0186 (Del). 8. On the other hand, Ld. Senior Departmental Representative (Ld. Sr-DR) for the Revenue submits that assessee has not furnished such exhausted explanation either before Assessing Officer or NFAC/Ld. CIT(A), therefore the matter may be restored back to the file of NFAC/Ld. CIT(A) for considering all the submission and to pass order afresh. 9. I have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. I have also deliberated on the case law cited by Ld. AR for the assessee. It is a matter of fact that during the assessment, the Assessing Officer made addition of Rs.2.50 lakhs being VAT amount paid after due date of filing return. I find that assessee before Assessing Officer claimed that the assessee has not claimed deduction of such amount in the return and in case such amount is disallowed / added the assessee be allowed the same in assessment year 20118-19 ITA No.47/SRT/2023 (A.Y 17-18) Parasben J. Vadhiya 8 and adjust the tax amount accordingly. I find that the Assessing Officer simply made disallowance by taking view that such amount was not paid before due date of filing return. It is settled law that disallowance of amount can be made, only on the event if such allowance is claimed in the computation of income. The assessing Officer while passing the assessment order has not given any categorically finding that the assessee claimed deduction of such amount in computation of income of such amount. In response to show cause against levy of penalty under section 270A(2), the assessee again specifically contended that assessee has not claimed the amount as expenditure in the succeeding assessment year. 10. Further I find merit in the submission of Ld.AR for the assessee that the alleged disallowance does not find place in clause (a) to (f) of sub-section (9) of Section 270A. Moreover, I my view, the assessee while filing response to the show cause during the assessment as well as during the penalty proceedings has given bona fide explanation within the scope of sub-section-6 of section 270A and disclosed all the material. Thus, the penalty imposed by Assessing Officer is ITA No.47/SRT/2023 (A.Y 17-18) Parasben J. Vadhiya 9 quashed. The assessing officer is directed accordingly. In the result, the grounds of appeal raised by the assesse is allowed. 11. In the result, the appeal of assessee is allowed. Order pronounced on 06 th March, 2023 in the open court. Sd/- (PAWAN SINGH) [Ɋाियक सद˟ JUDICIAL MEMBER] सूरत /Surat, Dated: 06/03/2023 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Senior Private Secretary/ Private Secretary/Assistant Registrar, ITAT, Surat