Patson Auto Products P.Ltd., V. ACIT,

ITA 471/PUN/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3100 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 03-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Assessee Lawyers: SUNIL GANOOMR S N PURANIK
• Keywords: Wrong claim; Bonafide mistake
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER & SHRI G.S.PANNU ACCOUNTANT MEMBER ITA NO 471/PN/07 (A.Y. 2004-05) PATSON AUTO PRODUCTS PVT. LTD., APPELLANT J-248, MIDC, EAGLE ESTATE, BHOSARI, PUNE (PAN AABCPO353R) VS. ASSTT.CIT, CIR. 1(2), PUNE RESPONDENT APPELLANT BY : MR. SUNIL GANOO/MR. S.N. PURANIK RESPONDENT BY : MR. ABHAY DAMLE ORDER PER G.S.PANNU, AM THIS APPEAL PREFERRED BY THE ASSESSEE FOR THE ASSE SSMENT YEAR 2004-05 IS DIRECTED AGAINST THE ORDER OF CIT(A) DA TED 30/01/08 AND THE SOLITARY ISSUE RAISED RELATES TO THE PENALTY OF RS. 13,06,365/- IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF T HE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2. THE FACTUAL COMPASS IN THIS APPEAL CAN BE SUMMAR IZED AS FOLLOWS. THE APPELLANT IS A COMPANY INCORPORATED UN DER THE PROVISIONS OF THE COMPANIES ACT, 1956, AND IS ENGAGED IN THE B USINESS OF MANUFACTURING OF AUTOMOBILE SPARE PARTS. FOR THE YE AR UNDER CONSIDERATION, IT FILED A RETURN OF INCOME ON 28/10 /04 DECLARING A LOSS OF RS. 42,77,980/-. THE SAID RETURN WAS SUBJECT TO SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT ON 21/09/06 WHEREIN THE TOTAL LOSS WAS DETERMINED AT RS. 6,36,543/-. THE ONLY DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS ON ACCOUNT OF SECTION 43B(E) OF THE ACT WITH REGARD TO INTEREST OUTSTANDING TO A SCHEDULED BANK OF RS. 36,41,437/-. THE SAID ADDITION HAS BECOME FINAL, SINCE THE ASSES SEE HAS NOT ITA NO 471/PN/07 PATSON AUTO PRODUCTS PVT. LTD. . 1998 2 PREFERRED ANY APPEAL AGAINST SUCH ADDITION AS STATE D BEFORE US IN THE COURSE OF HEARING. SUBSEQUENTLY, THE ASSESSING OFFI CER HELD THE ASSESSEE GUILTY OF FURNISHING OF INACCURATE PARTICU LARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT WITH RE SPECT TO THE SAID SUM OF RS. 36,41,047/-. ACCORDINGLY, BY WAY OF AN O RDER DATED 22/03/07, THE ASSESSING OFFICER IMPOSED A PENALTY O F RS.13,06,365/-, EQUIVALENT TO 100% OF THE TAX SOUGHT TO BE EVADED O N THE AFORESAID ADDITION. THE CIT(A) HAS ALSO SUSTAINED THE LEVY OF PENALTY, AGAINST WHICH, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE STAND OF THE ASSESSEE BEFORE US AS WELL AS B EFORE THE LOWER AUTHORITIES IS THAT HAVING REGARD TO THE FACTS AND IN LAW THE PENALTY U/S 271(1)(C) OF THE ACT IS NOT LEVIABLE IN THIS CASE. IT IS CONTENDED THAT THE DISALLOWANCE U/S 43B(E) OF THE ACT ON ACCOUNT O F OUTSTANDING INTEREST PAYABLE TO A SCHEDULED BANK COULD NOT BE MADE IN THE RETURN OF INCOME BECAUSE THE SAME WAS ALSO NOT REPORTED BY THE TAX AUDITOR IN THE REPORT ISSUED IN TERMS OF SECTION 44AB OF TH E ACT. THE LEARNED COUNSEL POINTED OUT THAT OTHER DISALLOWANCES REQUIR ED UNDER SECTION 43B OF THE ACT, AND WHICH HAVE BEEN REPORTED IN THE AUDIT REPORT U/S 44AB OF THE ACT, HAVE BEEN DULY MADE BY THE ASSESSE E COMPANY AND, THEREFORE, THE OMISSION TO MAKE THE IMPUGNED DISALL OWANCE OCCURRED ON ACCOUNT OF INADVERTENCE ON THE PART OF THE AUDIT OR. FURTHER, IT IS POINTED OUT THAT THE ASSESSEE HAS INCURRED HEAVY LO SSES AND EVEN AFTER THE AFORESAID DISALLOWANCE, THE FINALLY ASSESSED IN COME HAS REMAINED A LOSS AND THUS, THERE WAS NO EFFORT ON THE PART OF THE ASSESSEE TO SAVE TAXES BY DELIBERATELY MAKING A WRONG CLAIM. IT WAS, THEREFORE, CONTENDED THAT THE OMISSION TO MAKE THE DISALLOWANC E IN THE RETURN WAS A BONAFIDE MISTAKE WITH NO INTENTION TO EVADE T AXES. IT IS ALSO POINTED OUT THAT DIRECTORS OF THE ASSESSEE COMPANY ARE TECHNICAL ITA NO 471/PN/07 PATSON AUTO PRODUCTS PVT. LTD. . 1998 3 PERSONS AND ARE NOT AWARE OF THE LEGAL PROVISIONS A ND THEY BONAFIDELY RELIED UPON THE PROFESSIONAL ADVICE AND, THEREFORE, DID NOT MAKE THE IMPUGNED DISALLOWANCE IN THE RETURN OF INCOME ITSEL F. IT HAS ALSO BEEN SUBMITTED THAT THE CONCERNED CHARTERED ACCOUNTANT H AS FURNISHED AN AFFIDAVIT IN THIS REGARD, WHICH HAS BEEN SUMMARILY BRUSHED ASIDE BY THE CIT(A). IN THE COURSE OF HEARING, LEARNED COUNS EL HAS RELIED UPON THE FOLLOWING JUDGMENTS:- 1. CIT VS. DEEP (TOOLS) P. LTD. [2005] 274 ITR 603 (P&H) 2. T. ASHOK PAI VS. CIT[2007] 292 ITR 11(SC) 3. CONCORD OF INDIA INSURANCE CO. LTD. VS. SMT. NIR MALA DEVI & OTHERS, 118 ITR 507 (SC) 4. SSD REFINERYPVT. LTD. VS. ACIT IN ITA NO. 1252/P N/06, DT. 30/06/08. 4. FURTHER, A REFERENCE WAS ALSO MADE TO THE DECISI ON OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2003-04 VIDE ITA NO. 975/PN/07 DATED 11/09/09, WHEREIN SIMI LAR DISALLOWANCE HAS BEEN HELD NOT EXIGIBLE FOR THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. HOWEVER, THE LEARNED COUNSEL QUITE FAIRLY SUBM ITTED THAT IN THE SAID PRECEDENT, THE TRIBUNAL SPECIFICALLY NOTED THA T THE AMOUNT OF PENALTY INVOLVED WAS VERY SMALL. 5. ON THE OTHER HAND, LEARNED DR HAS RELIED UPON TH E ORDERS OF AUTHORITIES BELOW IN SUPPORT OF THE CASE OF THE REV ENUE. FURTHER IT IS POINTED OUT BY THE LEARNED DR THAT THE ASSESSEE HAS NOT ESTABLISHED THE BONAFIDES OF THE CLAIM MADE IN THE RETURN OF IN COME AND, THEREFORE, THE PENALTY HAS BEEN RIGHTLY CONFIRMED B Y THE CIT(A). ITA NO 471/PN/07 PATSON AUTO PRODUCTS PVT. LTD. . 1998 4 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. SECTION 271(1)(C) OF THE ACT, EMPOWERS THE ASSESSING OFFICE R TO IMPOSE PENALTY IF HE IS SATISFIED THAT THE ASSESSEE HAS C ONCEALED THE PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE P ARTICULARS OF INCOME. IT IS A TRITE LAW THAT IN ORDER TO JUSTIFY IMPOSITI ON OF PENALTY, EITHER OF THE TWO INGREDIENTS IS REQUIRED TO BE FULFILLED. TH E ASSESSING OFFICER HAS TO ESTABLISH EITHER THAT THE ASSESSEE HAS CONC EALED ITS INCOME OR THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS A WELL SETTLED PROPOSITION THAT MAKING OF A CLAIM, WHICH IS UNSUSTAINABLE IN LAW, BY ITSELF, WOULD NOT RESULT IN LEVY OF PENALTY U/S 271(1)(C) OF THE ACT FOR CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 7. FACTUALLY SPEAKING, IN THE PRESENT CASE, THE DIS ALLOWANCE OF RS. 36,41,047/-, MADE IN TERMS OF SECTION 43B(E) OF THE ACT, HAS RESULTED IN THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. S ECTION 43B(E) OF THE ACT PRESCRIBES THAT NO DEDUCTION ON ACCOUNT OF ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON A TERM LOAN FROM A SCHEDULE D BANK SHALL BE ALLOWED UNLESS THE SAME IS ACTUALLY PAID BY HIM. TH E AFORESAID AMOUNT OF INTEREST WAS OUTSTANDING FOR PAYMENT TO A SCHEDU LED BANK AND, THEREFORE, THE SAME WAS DISALLOWED IN THE ASSESSMEN T. OSTENSIBLY, THE ASSESSEE ERRED IN NOT APPLYING THE PROVISIONS OF SE CTION 43B(E) OF THE ACT AND MAKING THE DISALLOWANCE IN THE RETURN OF IN COME. ON THE MERITS OF THE ADDITION, THERE IS NO DISPUTE INASMUCH AS TH E APPELLANT HAS FAIRLY CONCEDED THAT THE SAME COMES WITHIN THE PURVIEW OF SECTION 43B(E) OF THE ACT. THE CIRCUMSTANCES IN WHICH THE SAID AMOUNT REMAINED TO BE ADDED BACK IN THE RETURN OF INCOME HAS BEEN EXPLAIN ED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AS WELL AS BEFORE US. THE CLAIM OF THE ASSESSEE IS THAT THE SAME WAS NOT REFLECTED IN REPO RT OF THE AUDITOR ITA NO 471/PN/07 PATSON AUTO PRODUCTS PVT. LTD. . 1998 5 ISSUED U/S 44AB OF THE ACT INSPITE OF A SPECIFIC RE QUIREMENT THEREOF. THE APPELLANT HAS ALSO EXPLAINED THAT ITS DIRECTORS ARE TECHNICAL PERSONS, NOT WELL VERSED WITH THE LEGAL PROVISIONS. QUITE CLEARLY, THE ASSESSEE FILED A RETURN OF INCOME SHOWING A LOSS A ND EVEN AFTER THE AFORESAID DISALLOWANCE, THE FINALLY ASSESSED INCOME REMAINS A LOSS. WE MAY HASTEN TO ADD HERE THAT WE ARE NOT SAYING THAT IN EVERY CASE OF LOSS RETURN NO PENALTY IS LEVIABLE OR THAT A MISTAK E OF THE PROFESSIONAL WOULD ALWAYS NEGATE THE PENALTY LEVIABLE U/S 271(1) (C) OF THE ACT. WE ARE ONLY TRYING TO GAUGE WHETHER AFTER CONSIDERING THE TOTALITY OF CIRCUMSTANCES, COULD IT BE SAID THAT THE EXPLANATIO N OF THE ASSESSEE IS BONAFIDE OR NOT. IN OUR CONSIDERED OPINION, WITHOUT GOING INTO THE MERITS OR OTHERWISE OF THE AFORESAID PLEAS, IT WOUL D BE SUFFICIENT TO OBSERVE THAT INSOFAR THE BONAFIDES OF THE ASSESSEE S CLAIM IN THE RETURN OF INCOME IS CONCERNED, THE SAME IS WELL-FOUNDED, E SPECIALLY, CONSIDERING THAT AN ADDITION MADE U/S 43B OF THE AC T IS A CASE OF MERE DISALLOWANCE RESULTING FROM AN APPLICATION OF A PRO VISION OF LAW AND WOULD NOT TANTAMOUNT TO CONCEALMENT OR FURNISHING O F INACCURATE PARTICULARS OF INCOME, WITHIN THE MEANING OF SECTI ON 271(1)(C) OF THE ACT IN THE PRESENT CASE. IN THE AFORESAID PROPOSITI ON, WE ARE SUPPORTED BY THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. MSK CONSTRUCTION (P.) LTD., 296 ITR 18(MAD.), W HEREIN IT HAS BEEN OBSERVED THAT A DISALLOWANCE MADE U/S 43B OF THE AC T DOES NOT AMOUNT TO CONCEALMENT WITHIN THE MEANING OF SECTION 271(1) (C) OF THE ACT. 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSION, W E ARE INCLINED TO UPHOLD THE ULTIMATE PRAYER OF THE ASSESSEE THAT PEN ALTY U/S 271(1)(C) OF THE ACT, IS NOT MERITED IN THE PRESENT CASE. AC CORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE AND THE ASSESSING OFFICE R IS DIRECTED TO ITA NO 471/PN/07 PATSON AUTO PRODUCTS PVT. LTD. . 1998 6 DELETE THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 13,06,365/-. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON 30 TH NOVEMBER, 2010. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G.S.PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED THE 30 TH , NOVEMBER, 2010 KV TRUE COPY COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ASSTT.CIT, CIR. 1(2), PUNE 3. CIT(A)-I, PUNE 4. CIT- I, PUNE , 5. D.R. ITAT B BENCH 6. GUARD FILE BY ORDER ASSTT. REGISTRAR I.T.A.T PUNE