INDIGO JEWELLERY (INDIA) MFG. P.LTD, MUMBAI V. ITO 8(2)(1), MUMBAI

ITA 4893/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3705 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 01-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 26-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHANWAR SINGH RATNOO
• Section: 143(3); 10AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 4893/MUM/2013 (ASSESSMENT YEAR : 2009-10) INDIGO JEWELLERY (INDIA) MFG. PVT.LTD., PLOT NO.GJ-008 SEEPZ, MIDC, ANDHERI (E), MUMBAI 400 096 PAN:AABCI 3591E ... APPELLANT VS. THE INCOME TAX OFFICER 8(2)(1) MUMBAI. .... RESPONDENT APPELLANT BY : SHRI SANJAY PARIKH RESPONDENT BY : SHRI BHANWAR SINGH RA TNOO DATE OF HEARING : 03/03/2016 DATE OF PRONOUNCEMENT : 29/04/2016 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTA INING TO THE A.Y. 2009-10 IS DIRECTED AGAINST AN ORDER PASSED B Y LD. CIT(A)-17, MUMBAI DATED 29.04.2013, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) DATED 25.05.2012. 2 ITA NO. 4893/MUM/2013 (ASSESSMENT YEAR : 2009-10) 2. IN THIS APPEAL, THE SOLITARY GRIEVANCE OF THE AS SESSEE IS AGAINST THE ACTION OF THE INCOME-TAX AUTHORITIES IN IMPOSING PE NALTY OF RS.4,23,449/- UNDER SECTION 271(1)(C) OF THE ACT . 3. IN THIS CONTEXT, THE BRIEF FACTS ARE THAT THE AP PELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT,1956 AND IS, INTER-ALIA, ENGAGED IN THE BUSINESS OF MANUFACTURE OF DIAMOND/GOLD JEWELLERY. FOR THE ASSESSMENT YEAR UNDER CONSIDERA TION, IT FILED A RETURN OF INCOME DECLARING A LOSS OF RS.23,92,146/-, WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT DATED 24/11/2011, WHEREBY THE LOSS WAS ASSESSED AT RS.10,06,419/-. TH E DIFFERENCE BETWEEN THE REPORTED AND THE ASSESSED LOSS WAS ON A CCOUNT OF DISALLOWANCE OF RS.13,70,387/-, REPRESENTING EXCHA NGE RATE DIFFERENCE ON REPAYMENT OF TERM LOAN CAPITALIZED TO THE COST O F ASSETS. SUBSEQUENTLY, THE ASSESSING OFFICER HELD THE ASSESS EE GUILTY UNDER SECTION 271(1)(C) OF THE ACT ON THE AFORESAID DISAL LOWANCE ON THE GROUND THAT IT REPRESENTED CONCEALMENT OR FURNISHIN G OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, A PENALTY OF RS.4,23,449/- BEING 100% OF TAX SOUGHT TO BE EVADED ON SUCH INCOME WAS IMPOSED UNDER SECTION 271 (1)(C) OF THE ACT, WHICH HAS SINCE BEEN AFFIRMED BY THE CIT(APPEALS) A LSO. AS A CONSEQUENCE, THE ASSESSEE IS IN FURTHER APPEAL BEFO RE US. 4. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE VEHEMENTLY POINTED OUT THAT THE AFORESAID WAS A BONAFIDE ERROR ON THE PART OF THE ASSESSEE WHILE FILING THE RETURN OF INCOME. EXPLAI NING THE BACKGROUND, 3 ITA NO. 4893/MUM/2013 (ASSESSMENT YEAR : 2009-10) LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THA T DURING THE YEAR UNDER CONSIDERATION, ASSESSEE COMPANY HAD CONVERTED ITS LIABILITY IN FOREIGN CURRENCY LOAN APPLYING THE YEAR-END EXCHANG E RATE OF RS.1,63,12,047/- AND IT HAD INCURRED EXCHANGE RATE DIFFERENCE ON REPAYMENT OF FOREIGN CURRENCY LOAN AMOUNTING TO RS. 13,70,387/- CUMULATIVELY AMOUNTING TO RS. 1,76,82,434/-. THE EN TIRE AMOUNT WAS CHARGED TO PROFIT & LOSS ACCOUNT, FOLLOWING ACCOUNT ING STANDARD-11 NOTIFIED UNDER THE COMPANIES(ACCOUNTING STANDARD) R ULES 2006. HOWEVER, WHILE COMPUTING TOTAL INCOME FOR THE INCOM E TAX PURPOSES, THE ASSESSEE COMPANY DISALLOWED A SUM OF RS.1,62,12 ,047/-, BUT INADVERTENTLY FAILED TO DISALLOW A SUM OF RS.13,70 ,387/- BEING THE EXCHANGE RATE DIFFERENCE ON REPAYMENT OF FOREIGN CU RRENCY TERM LOAN. LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THA T THERE WAS NO MALAFIDE ON THE PART OF THE ASSESSEE IN MAKING SUCH A CLAIM INASMUCH AS ASSESSEE IS NOT BENEFITTED AT ALL FROM SUCH CLAIM A S THE NET INCOME WAS A FIGURE OF LOSS. MOREOVER, THE LOSS HAS BEEN CARR IED FORWARD AND SET- OFF AGAINST PROFITS IN THE SUBSEQUENT YEAR AND ONLY ON THE BALANCE OF SUCH PROFITS ASSESSEE HAD CLAIMED DEDUCTION UNDER S ECTION 10AA OF THE ACT IN THE SUBSEQUENT YEAR. IT WAS, THEREFORE, C ONTENDED THAT IT WAS A MERE INADVERTENT MISTAKE AND SUCH AN ERROR DOES NOT GIVE RISE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN SUP PORT, RELIANCE HAS BEEN PLACED ON THE DECISION OF THE HON'BLE BOMBAY H IGH COURT IN THE CASE OF CIT VS. BENNETT COLEMAN & CO. LTD.,33 TAXM AN.COM 277(BOM). 5. ON THE OTHERHAND, LD. DEPARTMENTAL REPRESENTATIV E HAS POINTED OUT THAT AN UNDISPUTED ERROR HAD BEEN MADE IN THE R ETURN OF INCOME, 4 ITA NO. 4893/MUM/2013 (ASSESSMENT YEAR : 2009-10) WHICH INCREASED THE LOSS TO RS.23,19,146/-, AS AGAI NST THE CORRECT LOSS OF RS.10,06,419/- AND THUS, THE AFORESAID DISALLOWANC E JUSTIFIED THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. OSTENSIBLY, IN ALL CASES WHERE THERE IS A DIFFERENCE BETWEEN TH E REPORTED AND THE ASSESSED INCOME, PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE JUSTIFIED. IN OTHER WORDS, MERELY BECAUSE THERE I S A DIFFERENCE BETWEEN THE REPORTED AND THE ASSESSED INCOME, IT WOULD NOT JUSTIFY IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. SO FAR AS THE PRESENT CONTROVERSY IS CONCERNED, IT RELATES TO AN INADVERT ENT ERROR ON THE PART OF THE ASSESSEE IN NOT ADDING BACK A SUM OF RS.13,7 0,387/- REPRESENTING EXCHANGE RATE DIFFERENCE ON REPAYMENT OF TERM LOAN CAPITALIZED TO THE COST OF ASSETS IN TERMS OF SECTION 43A OF THE ACT B UT THE SAME WAS NOT ADDED BACK TO THE TOTAL INCOME, AS IT WAS ALREADY D EBITED IN THE PROFIT & LOSS ACCOUNT. THE CIRCUMSTANCES EXPLAINED BY THE A SSESSEE, WHICH HAVE NOT BEEN DOUBTED BY THE REVENUE, CLEARLY ESTABLISH THAT IT IS A CASE OF AN INADVERTENT MISTAKE AND NOT A DELIBERATE ATTEMPT TO CONCEAL THE INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. THE JUDGMENT OF TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF BENNETT COLEMAN & CO. LTD .(SUPRA)CLEARLY SUPPORTS THE STAND OF THE APPELLANT THAT AN INADVER TENT MISTAKE ON THE PART OF THE ASSESSEE WHILE FILING THE RETURN OF INC OME CANNOT BE CONSTRUED AS LIABLE FOR PENALTY UNDER SECTION 271(1 )(C) OF THE ACT. IN VIEW OF THE AFORESAID DISCUSSION, WE HEREBY SET-ASI DE THE ORDER OF THE 5 ITA NO. 4893/MUM/2013 (ASSESSMENT YEAR : 2009-10) CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO DE LETE THE PENALTY OF RS. 4,23,449/- IMPOSED UNDER SECTION 271(1)(C) OF THE A CT. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL , 2016. SD/- SD/- (AMARJIT SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 29/04/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI