ACIT, New Delhi V. M/s. Overseas Connextion Ltd., Delhi

ITA 4754/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66017 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 26-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 01-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AROOP KUMAR SINGH
• Assessee Lawyers: ORS CAS HEARING ON
• Keywords: Bonafide belief
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI A. N. PAHUJA, ACCOUNTANT MEMBER I.T.A. NO. 4754/DEL/2011 ASSESSMENT YEAR: 2006-07 ACIT M/S OVERSEAS CONNEXTION LTD. CIRCLE-13 (1), 921, HAMILTON ROAD, KASHMIRI NEW DELHI VS. GATE, DELHI-110006 PAN: AAACO0317P (REVENUE) (ASSESSEE) REVENUE BY : SH. AROOP KUMAR SINGH, SR. DR ASSESSEE BY : SH. VED JAIN, & ORS, CAS. HEARING ON : 26/09/2012 ORDER PRONOUNCED ON THE DATE: .. ORDER PER I.C.SUDHIR, JM: THE REVENUE HAS IMPUGNED FIRST APPELLATE ORDER ON T HE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY IMPO SED U/S 271 (1)(C) OF THE IT ACT, AMOUNTING TO RS.17,12,200/- BY THE AO BY ITA NO.4754/DEL/2011 2 HOLDING THAT THE FACTS PERTAINING TO BOTH THE ISS UES HAS BEEN DISCLOSED BY THE ASSESSEE IN THE TAX AUDIT REPORT . 2. THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE A ND IN LAW, THE LD. CIT (A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD DELIBERATELY FILED INACCURATE PARTICULARS BY NOT A DDING BACK AMOUNTS CLEARLY INDICATED AS DISALLOWABLE IN THE T AX AUDIT REPORT. 3. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS NOT APPRECIATED THE FACTS STATED IN THE C ASE OF M/S ZOOM COMMUNICATION PVT. LTD. IN ITA NO. 7/2010 DT. 24. 05.2010 AS MENTIONED BY THE ASSESSISNG OFFICER IN THE PENALT Y ORDER. 2. THE RELEVANT FACTS ARE THAT THE ASSESSEE COMPANY EN GAGED IN THE BUSINESS OF IMPORTING AND TRADING OF MODULAR KITCHE NS AND ITS ACCESSORIES, HOME APPLIANCES AND FURNITURE ITEMS IS BEING REGULA RLY ASSESSED TO INCOME TAX. RETURN OF INCOME FOR THE A.Y. 2006-07 UNDER CO NSIDERATION WAS FILED ELECTRONICALLY ON 30.11.2006 DECLARING AN INCOME OF RS.49,74,460/-. THE RETURN WAS PROCESSED U/S 143 (1) ON 14.2.2007 AT TH E RETURNED INCOME. SUBSEQUENTLY THE SAID RETURN WAS SELECTED FOR SCRUT INY AND NOTICE U/S 143(2) WAS ISSUED. IN RESPONSE THE ASSESSEE APPEARED BEFOR E THE AO AND SUBMITTED THE DOCUMENTS AND DETAILS AS ASKED BY HIM. IN THE A SSESSMENT THE AO ADDED ITA NO.4754/DEL/2011 3 AN AMOUNT OF RS.1,04,74,550/- TO THE GROSS TOTAL IN COME OF THE ASSESSEE BY DISALLOWING VARIOUS EXPENSES CLAIMED BY IT IN ITS R ETURN OF INCOME. OUT OF THESE DISALLOWANCES A DISALLOWANCE OF RS.13,62,303/ - WAS MADE ON ACCOUNT OF TDS. THE ASSESSEE WENT IN FIRST APPEAL WHEREIN V ARIOUS ADDITIONS MADE BY THE AO WERE DELETED. THE LD. CIT (A) HOWEVER, CONFI RMED THE ADDITION U/S 43 B OF THE ACT MADE BY THE AO. IT WAS HELD THAT ON PRINCIPAL AMOUNT OF RS.13,62,303/- TDS WAS DEDUCTED UP TO 28.2.2006 BUT IT WAS DEPOSITED LATE INTO THE GOVT. A/C I.E. AFTER 31.3.2006. THE DISALL OWANCE WAS MADE U/S 40(A) (IA) OF THE IT ACT. PENALTY PROCEEDINGS U/S 271 (1) (C) OF THE ACT WERE INITIATED AND A PENALTY OF RS.17,12,200/- AT THE R ATE OF 100% OF THE TAX SOUGHT TO BE EVADED HAS BEEN LEVIED ON THE BASIS TH AT THE ASSESSEE COMPANY HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME AMOUNTING TO RS.50,86,742/-. THE LD. CIT (A) HAS HOWEVER, DELETE D THIS PENALTY LEVIED BY THE AO ON THE BASIS THAT DETAILS OF EXPENDITURE INC URRED IN REGARD TO DEDUCTION AND ALSO OF TDS ETC. ON WHICH THE ADDITIO NS TO INCOME WERE BASED, WERE AVAILABLE IN THE TAX AUDIT REPORT FILED BY THE ASSESSEE WITH THE RETURN OF INCOME AND THUS IT CANNOT BE SAID THAT TH ERE WAS FILING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. 3. IN SUPPORT OF THE GROUNDS THE CONTENTION OF THE LD. DR BEFORE US REMAINED THAT MISTAKES RELATING TO THE ADDITION IN QUESTION WERE POINTED OUT ITA NO.4754/DEL/2011 4 IN THE AUDIT REPORT DESPITE IT THE ASSESSEE DID NOT BOTHER TO RECTIFY ITS RETURN OF INCOME. THERE WAS ALSO NO EXPLANATION SHOWING BONA FIDE OF MISTAKE ON THE PART OF THE ASSESSEE IN NOT RECTIFYING ITS RETURN O F INCOME. WITHOUT APPRECIATING THIS MATERIAL FACT AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION P. LTD. ( 2010) 191 TAXMAN 179 (DEL), THE LD. CIT (A) HAS GIVEN RELIEF BY DELE TING THE PENALTY. 4. THE LD. AR ON THE OTHER HAND TRIED TO JUSTIFY THE F IRST APPELLATE ORDER. HE SUBMITTED THAT THE MISTAKE OCCURRED IN THE RETUR N OF INCOME WAS BONA FIDE AS LOT OF CHANGE HAS TAKEN PLACE IN THE PROVIS IONS OVER THE LAST FEW YEARS WHEREIN SOME RELAXATION HAS BEEN GIVEN TO THE ASSES SEE IN DEPOSITING THE TDS AMOUNT. HE SUBMITTED FURTHER THAT AN ACTION LIK E PENALTY WHICH IS QUASI CRIMINAL IN NATURE SHOULD NOT BE TAKEN FOR DISALLOW ANCE MADE U/S 40 (A) (IA) SPECIFICALLY WHEN AT THE END THE AMOUNT DUE TO THE GOVERNMENT HAS BEEN DULY DEPOSITED BY THE ASSESSEE AND ALLOWED IN THE COMPUT ATION OF INCOME OF SUBSEQUENT YEARS. HE SUBMITTED THAT IT IS NOT THE C ASE OF THE ASSESSEE THAT HE HAD NOT DEPOSITED THESE AMOUNTS NOR IS IT THE CASE THAT THESE EXPENSES WILL BE DISALLOWED IN FUTURE. RATHER THEY ARE ALLOWABLE WHE N THE RESPECTIVE DUES ARE PAID WHICH WAS DONE BY THE ASSESSEE AT ANY COST. H E ALSO POINTED OUT THAT VIDE LETTER DATED 20.11.2008 THE ASSESSEE ITSELF HA D ADMITTED ITS MISTAKE AND THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE. HE SUBMITTED THAT RELEVANT ITA NO.4754/DEL/2011 5 CONTENTS OF THE SAID LETTER HAS BEEN QUOTED IN PARA NO. 3.1 OF THE ASSESSMENT ORDER. THE LD. AR POINTED OUT THAT ADDITION OF RS. 13,62,303/- HAS BEEN MADE BY THE ASSESSING OFFICER ON THE GROUND THAT TH E TDS IN THIS CASE WAS NOT DEPOSITED BEFORE THE CLOSE OF THE YEAR, WHEREAS AN ADMITTED POSITION REMAINED THAT TAX DEDUCTED AT SOURCE WAS DEPOSITED BEFORE DUE DATE OF FILING THE RETURN. HE PLACED RELIANCE ON THE DECISIONS CIT ED BEFORE THE LD. CIT (A) AND IN THE CASE OF CIT VS. VIRGIN CREATIONS, ITAT N O. 302 OF 2011, GA 3200/2011 (CLHC). HE HAS ALSO FURNISHED COPY OF THE SAID DECISION OF HONBLE CALCUTTA HIGH COURT AS WELL AS OF DELHI BEN CH OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF ON QUANTUM I.E. ITA NO. 1743/DEL/2010 (A.Y. 2006-07) ORDER DATED 30.6.2010. THE LD. AR SUBMITTE D THAT THE ASSESSEE HAS ITSELF ADMITTED ITS MISTAKE OF NOT ADDING BACK UNPA ID STATUTORY LIABILITIES AMOUNTING TO RS. 38,75,014/- IN ITS TOTAL INCOME AS PER SECTION 43B OF INCOME TAX ACT AND OFFERED THE SAME FOR TAXATION, T HEREFORE, THE AMOUNT OF RS. 38,75,014/- WAS DISALLOWED UNDER SECTION 43B AN D ADDED BACK TO THE TOTAL INCOME DECLARED BY THE ASSESSEE. 5. CONSIDERING THE ABOVE SUBMISSIONS AND HAVING GONE T HROUGH THE ORDERS OF THE AUTHORITIES BELOW WE FIND THAT THE EX PLANATION SUBMITTED BEFORE THE LD. CIT(A) IN THE APPEAL PREFERRED AGAINST THE PENALTY ORDER ON BEHALF OF ITA NO.4754/DEL/2011 6 THE ASSESSEE REMAINED THAT A LOT OF CHANGE HAS TAKE N PLACE IN THE PROVISIONS OVER THE LAST FEW YEARS WHEREIN SOME RELAXATION HAS BEEN GIVEN TO THE ASSESSEE IN DEPOSITING THE TDS AMOUNT AND THAT PENA LTY SHOULD NOT BE IMPOSED FOR DISALLOWANCE MADE U/S 40(A) (IA) SPECIF ICALLY WHEN AT THE END THE AMOUNT DUE TO THE GOVERNMENT HAS BEEN DULY DEPO SITED BY THE ASSESSEE THAT IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAD NOT DEPOSITED THESE AMOUNTS AND ALSO IT IS NOT CASE THAT THESE EXPENSES WILL BE DISALLOWED IN FUTURE. RATHER THEY ARE ALLOWABLE WHEN THE RESPECTI VE DUE ARE PAID WHICH WAS DONE BY THE ASSESSEE AT ANY COST. IT WAS ALSO E XPLAINED BY THE ASSESEE THAT AMOUNT OF RS. 38,75,014/- DISALLOWED U/S 43B WAS INADVERTENTLY NOT ADDED BACK IN THE COMPUTATION OF INCOME AS IT IS E VIDENT FROM THE ASSESSMENT ORDER WHEREBY THE ASSESSEE VIDE LETTER D ATED 20.11.2008 ITSELF HAD ADMITTED ITS MISTAKE AND THE AO HAD MADE THE DI SALLOWANCE. THE FURTHER SUBMISSION OF THE LD. AR REGARDING DISALLOWANCE OF RS. 13,62,303/- MADE U/S 40 (A) (IA) REMAINED THAT THE AO HAS MADE THE A DDITION ON THE GROUND THAT THE TDS IN THIS CASE WAS NOT DEPOSITED BEFORE THE C LOSE OF THE YEAR WHEREAS IT IS ADMITTED POSITION THAT TAX DEDUCTED AT SOURCE WAS DEPOSITED BEFORE DUE DATE OF FILING THE RETURN. THE AO HAS LEVIED PENALT Y ON THE BASIS THAT DESPITE HAVING BEEN POINTED OUT BY THE AUDITOR THAT THERE I S STATUTORY LIABILITY AGGREGATING TO RS. 40,84,343/- SHOWN PAYABLE AS ON 31.3.2006, THE SAME WAS ITA NO.4754/DEL/2011 7 NOT PAID TILL THE FILING OF THE RETURN. NOW THE IS SUE BEFORE US IS AS TO WHETHER EXPLANATION FURNISHED BY THE ASSESSEE FOR THE DEFAU LT IS BONAFIDE TO EXTEND THE BENEFIT OF EXPLANATION 1 TO S.271(1)(C) OF THE ACT. IN OPPOSITION THE LD. DR HAS PLACED RELIANCE ON THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LTD. (SUPRA) . IN THIS DECISION THE HONBLE DELHI HIGH COURT HAS BEEN PLEASED TO HOLD T HAT THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF T HE INCOME TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLA IM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BA SIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOU ND TO BE BONAFIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT B E LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THERE IS NO DISPUTE T HAT IN THE PRESENT CASE BEFORE US THE RETURN WAS PROCESSED U/S 143(1) OF TH E ACT AND SUBSEQUENTLY THE SAID RETURN WAS SELECTED FOR SCRUTINY AND NOTIC E U/S 143(2) WAS ISSUED. BUT THE ASSESSEE HAD NOT MADE ANY INCORRECT CLAIM L IKE IN THE CASE OF ZOOM COMMUNICATIONS. IT REMAINED THE CASE OF THE ASSESSE E THAT INADVERTENTLY THE AMOUNT DISALLOWED WAS NOT ADDED BACK IN THE FILING OF RETURN OF INCOME DESPITE THIS FACT THAT IN ITS AUDIT REPORT THE AUDI TOR HAD POINTED OUT THAT THE AMOUNT IS A STATUTORY LIABILITY SHOWN PAYABLE AS ON 31.3.2006. NOW THE QUESTION IS AS TO WHETHER SUCH EXPLANATION CAN BE T REATED AS BONAFIDE IN ITA NO.4754/DEL/2011 8 NATURE. WE HAVE OCCASION TO GO THROUGH THE RECENT D ECISION OF HONBLE SUPREME COURT IN THE CASE OF PRICE WATER COOPERS (P ) LTD. VS CIT 348 ITR 306 (SC) WHEREIN IT HAS BEEN HELD THAT NO PENALTY I S LEVIABLE IN CASE OF AN INADVERTENT ERROR COMMITTED IN THE COMPUTATION OF I NCOME. IN THAT CASE ALSO THE TAX AUDIT REPORT WAS FILED ALONG WITH THE RETUR N WHEREIN IT WAS UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOWED U/S 40A (7) OF THE ACT. THE ASSESSEE THEREIN WAS UNDOUBTED LY A REPUTED FIRM AND HAD GREAT EXPERTISE AVAILABLE WITH IT. DESPITE THAT THE ASSESSEE HAS MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. THE HON BLE SUPREME COURT CONSIDERING THE TOTALITY OF THE FACT OF THAT CASE H ELD THAT EVEN THE ASSESSEE COULD MAKE SILLY MISTAKES. THE HONBLE SUPREME C OURT OBSERVED THAT THE CONTENTS OF THE TAX AUDIT REPORT SUGGEST THAT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QU ESTION OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. IT WAS NOTED THAT ALL THAT HAS HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONAFIDE AND INADVERTENT ERROR THE ASSESSEE WHILE SUBMITTING ITS RETURN FAILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESCRIBED AS A H UMAN ERROR WHICH ARE PRONE TO MAKE. THE HONBLE SUPREME COURT HELD FURTH ER THAT THE CALIBER AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. IT WAS OBSERVED THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE ITA NO.4754/DEL/2011 9 DOUBTED BUT THE ABSENCE OF DUE CARE IN CASES SUCH AS THE PRESENT DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHI NG INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. IN PARA NO. 20 OF THE DECISION, THE HONBLE SUPREME COURT HAS BEEN PLEASED TO NOTE AS WE ARE O F THE OPINION, GIVEN THE PECULIAR FACTS OF THIS CASE, THAT THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIFIED. WE ARE SATISFIED THAT THE ASSESSEE H AD COMMITTED AN INADVERTENT AND BONAFIDE ERROR AND HAD NOT INTENDED TO OR ATTEM PTED TO CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS. ALMOST SI MILAR ARE THE FACTS OF THE PRESENT CASE BEFORE US, WHEREIN DESPITE IT WAS POIN TED OUT BY THE AUDITOR IN ITS AUDIT REPORT THAT THERE IS STATUTORY LIABILITY AGGREGATING TO RS. 40,84,343/- SHOWN PAYABLE AS ON 31.3.2006, THE SAME WAS NOT PAI D TILL THE FILING OF THE RETURN AND EXPLANATION OF THE ASSESSEE REMAINED THA T INADVERTENTLY ASSESSEE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME PO SSIBILITY OF WHICH CANNOT BE DOUBTED. WE THUS RESPECTFULLY FOLLOWING THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF PRICE WATER HOUSE COOPERS (P) LTD. (SUPRA) HOLD THAT THE ASSESSEE HAS COMMITTED AN INADVERTENT AND BONAF IDE ERROR AND HAD NOT INTENDED TO ATTEMPT TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS.EVEN THE HONBLE DELHI HIGH COURT IN I TS RECENT DECISION IN THE CASE OF CIT VS. MTNL, ITA NO. 626/2011, JUDGMENT PR ONOUNCED ON 10.10.2011, WHEREIN ITS EARLIER DECISION IN THE CAS E OF CIT VS. ZOOM ITA NO.4754/DEL/2011 10 COMMUNICATION PVT. LTD. WAS ALSO REFERRED TO, HAS B EEN PLEASED TO HOLD THAT FOR PENALTY TO GET ATTRACTED, THE CONDITIONS IS STI PULATED IN THE CONCERNED PROVISIONS ARE REQUIRED TOBE FULFILLED. IT WAS HELD THAT A SIMILAR ERRONEOUS CLAIM MADE BY THE ASSESSEE, THOUGH UNDER A BONAFIDE BELIEF THAT IT WAS A CLAIM WHICH WAS MAINTAINABLE IN LAW, CANNOT LEAD TO AN IMPOSITION OF PENALTY. AS WE HAVE ALREADY DISCUSSED HEREIN ABOVE THAT IN THE PRESENT CASE BEFORE US NO CLAIM WHICH WAS NOT MAINTAINABLE IN LA W WAS MADE BUT DESPITE HAVING BEEN POINTED OUT BY THE AUDITOR THAT SOME ST ATUTORY LIABILITY WAS PAYABLE AS ON 31.3.2006, THE ASSESSEE MADE ERROR IN COMPUTATION OF INCOME IN THE RETURN OF INCOME BY NOT ADDING BACK THOSE AM OUNT IN THE COMPUTATION OF INCOME. THE ASSESSEE HAD DISCLOSED ALL THE MATER IAL FACTS ON THE BASIS OF WHICH ONLY THE ERROR IN COMPUTATION WAS LOCATED. UN DER THESE FACTS AND CIRCUMSTANCES WE THUS DO NOT FIND ANY REASON TO INT ERFERE WITH THE FIRST APPELLATE ORDER AS THE LD. CIT(A) HAS RIGHTLY DELET ED THE PENALTY. THE SAME IS UPHELD. THE GROUNDS ARE THUS REJECTED. 6. CONSEQUENTLY APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 0.12.2012 SD/- SD/- ( A. N. PAHUJA ) (I.C. SUDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 /12/2012 *AK VERMA* ITA NO.4754/DEL/2011 11 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR