THE ACIT, 2(1), Bhopal V. M/S. M.P.STAE CO-OPM MARKETING FEDERATION LTD., Bhopal

ITA 557/IND/2013

• Counselvise Citation: 55722714 RSA 2013
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 27-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANIL KHAA; SUMIT KHAA CAS
• Keywords: Tax effect
• Section: 43B; 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NO.557/ IND/2013 A.Y. : 2003-04 ACIT, M.P.STATE CO-OP. BHOPAL VS MARKETING FEDERATION LTD., BHOPAL. APPELLANT RESPONDENT P.A.N. NO A ACCM0331R APPELLANT BY SHRI RAHUL RAMAN, DR RESPONDENT BY SHRI ANIL KHABYA AND SHRI SUMIT KHABYA, CAS DATE OF HEARING : 04.08.2015 DATE OF PRONOUNCEMENT : 27 .08.2015 -: 2: - 2 O R D E R PER GARASIA, J.M. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CIT(A) -I, BHOPAL, DATED 28.06.2013 FOR THE ASSESSMENT YEAR 20 03-04. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A GOVERNMENT CORPORATION ENGAGED IN BUSINESS OF MARKE TING AND STORAGE OF AGRICULTURE PRODUCE. THE ASSESSEE F URNISHED ITS RETURN OF INCOME FOR A.Y. 2003-04 ON 31/10/2003 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION U/S 8 0P. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/ S 143(2) AND ASSESSMENT U/S 143(3) WAS COMPLETED AT NIL INCO ME AFTER ALLOWING DEDUCTION U/S 80P. HOWEVER, IN THE A SSESSMENT ORDER, THE AO MADE SOME ADDITIONS IN THE COMPUTATIO N OF INCOME, WHICH INTER-ALIA INCLUDES FOLLOWING ADDITIO NS /DISALLOWANCE : -: 3: - 3 S.NO. PARTICULARS AMOUNT (I) DISALLOWANCE ON ACCOUNT OF DELAYED PAYMENT OF EMPLO YEES CONTRIBUTION TO PROVIDENT FUND 1,32,40,359 (II) DISALLOWANCE ON ACCOUNT OF DELAYED PAYMENT OF EMPLO YERS CONTRIBUTION TO PROVIDENT FUND 54,27,522 (III) PRIOR PERIOD EXPENSES 20,09,306 TOTAL 2,06,77,187 4. 5. PENALTY PROCEEDINGS U/S 271(1)(C) WERE ALSO INITIAT ED BY THE AO. THE ASSESSEE HAD FURNISHED AN APPEAL AGAINST TH E ASSESSMENT ORDER. DURING APPELLATE PROCEEDINGS BY T HE LD. CIT (A), IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE IN REGARD TO THE ABOVE ISSUES THAT AS INCOME ASSESSED U/S 143(3) WAS NIL AND THERE WAS NO TAX EFFECT, THEREFORE, GROUNDS RELATED TO THESE ISSUES WERE NOT PRESSED AND, ACCORDINGLY, THE LD. C IT (A) TREATED THESE GROUNDS AS DISMISSED. AFTER THE CIT ( A)S ORDER, THE AO AFTER GIVING SHOW-CAUSE NOTICE AND CONSIDERI NG THE SUBMISSION OF THE ASSESSEE HELD THAT THE ASSESSEE H AD FURNISHED INACCURATE PARTICULARS OF INCOME OF ITS I NCOME WITHIN THE MEANING OF SECTION 271(1)(C) IN RESPECT OF ABOVE ITEMS OF INCOME AND, THEREFORE, IT WAS A LIT CASE F OR LEVY OF PENALTY U/S 271(1)(C). ACCORDINGLY, THE AO LEVIED M INIMUM PENALTY U/S 271(1)(C) AT RS.76,00,000/- VIDE ORDER DATED -: 4: - 4 30.03.2012. THE ASSESSEE HAS FURNISHED APPEAL AGAIN ST THIS ORDER. 6. THE MATTER CARRIED TO LD. CIT(A). THE LD. CIT(A) H AS DELETED THE PENALTY BY OBSERVING AS UNDER :- 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. IT MAY BE NOTED THAT THE AO LEVIED PENALTY U/S 271(1)(C) ON THE ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE OF APPELLANTS CLAIM FOR EMPLOYEES CONTRIBUTION AS WELL AS EMPLOYERS CONTRIBUTION TOWARDS PROVIDENT FUNDS, BECAUSE AS PER THE AO, THESE PAYMENTS WERE NOT MADE ON OR BEFORE DUE DATES AND ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENSES ON THE GROUND THAT THE APPELLANT WAS MAINTAINING ITS BOOKS OF ACCOUNT ON MERCANTILE SYSTEM OF ACCOUNTING AND, THEREFORE, PRIOR PERIOD EXPENSES WERE NOT ALLOWABLE AS DEDUCTION. BUT IT IS FOUND THAT EVEN AFTER THESE DISALLOWANCE, THE ASSESSED -: 5: - 5 INCOME WAS NIL BECAUSE THE APPELLANT WAS ELIGIBLE FOR DEDUCTION U/S 80P. THEREFORE, THE DISALLOWANCE PER SE SHOULD NOT HAVE BEEN THE SUBJECT MATTER OF PENALTY U/S 271(1)(C) AS THERE WAS NO TAX SOUGHT TO BE EVADED DUE TO DEDUCTION U/S 80P. FURTHER, IT IS NOTICED FROM THE DETAILS OF EMPLOYEES CONTRIBUTION AND EMPLOYERS CONTRIBUTION TOWARDS PF PAID BY THE APPELLANT DURING THE F.Y. 2002-03 RELEVANT TO A.Y. 2003-04 UNDER CONSIDERATION THAT THE APPELLANT HAD MADE PAYMENTS WITHIN THE GRACE PERIOD OF 5 DAYS. THIS ISSUE IS HIGHLY DEBATABLE AS THERE ARE NUMBER OF DECISIONS, WHEREIN IT HAS BEEN HELD THAT PAYMENTS MADE WITHIN THE GRACE PERIOD OF 5 DAYS TOWARDS PROVIDENT FUNDS HAS TO BE CONSIDERED THAT IT WAS MADE WITHIN DUE DATE AND NO DISALLOWANCE CAN BE MADE U/S 43B OR U/S 36(VA). THUS, IN REGARD TO DISALLOWANCE ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYEES AND EMPLOYERS CONTRIBUTION -: 6: - 6 TOWARDS PF, IT CANNOT BE SAID THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS OR CONCEALED THE PARTICULARS OF INCOME. SIMILARLY, IN THE CASE OF DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.20.09,306/-, IT WAS NOTICED THAT THE APPELLANT HAD SHOWN PRIOR PERIOD INCOME OF RS.4,63,450/- AND PRIOR PERIOD EXPENSES OF RS. 15,45,855/-. THE AMOUNT OF RS.4,63,450/- OF PRIOR PERIOD INCOME WAS ALREADY CREDITED TO P & L ACCOUNT. AS REGARDS PRIOR PERIOD EXPENSES OF RS. 15,45,855/-, THE APPELLANT HAD ALREADY ADDED PRIOR PERIOD EXPENSES OF RS.7,06,646/- IN THE COMPUTATION OF INCOME. THE BALANCE AMOUNT REPRESENTS RS.25,000/- TOWARDS PAYMENT TO M.P. COOPERATIVE UNION LTD., BHOPAL FOR THE YEAR 2001-02 AS REGULAR SUBSCRIPTION AND RS. 8,14,209/- TOWARDS PAYMENT OF INTEREST TO M.P. STALE COOPERATIVE BANK CHARGED BY THE BANK DURING THE YEAR UNDER CONSIDERATION PERTAINING TO EARLIER YEARS. THE CONTENTION OF THE APPELLANT -: 7: - 7 IN REGARD TO THE INTEREST WAS THAT THIS INTEREST CLAIM WAS RAISED DURING THE YEAR BY THE BANK CONSEQUENT TO STATUTORY AUDIT OBSERVATION ABOUT SHORT LEVY AND. THUS, THE EXPENDITURE WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. THESE FACTS CLEARLY SHOW THAT THOUGH THE AO DISALLOWED THE AMOUNT AND THE APPELLANT HAD NOT PRESSED THESE GROUNDS OF APPEAL BEFORE THE CIT (A) CONSIDERING THE FACT THAT ASSESSED INCOME WAS NIL AND THERE WAS NO TAX EFFECT, IT CANNOT BE SAID THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS OR CONCEALED THE PARTICULARS OF INCOME .THUS, IT WAS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1 )(C). IT MAY BE NOTED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE DIFFERENT AND SEPARATE. THOUGH FINDINGS RECORDED IN THE QUANTUM PROCEEDINGS ARE GERMANE AND RELEVANT BUT IT DOES NOT FOLLOW THAT EVERY ADDITION/ -: 8: - 8 DISALLOWANCE JUSTIFIES AND COMPULSORILY MANDATES IMPOSITION OF PENALTY. SUBJECT MATTER OR THE CORE QUESTION IN QUANTUM OR ASSESSMENT PROCEEDINGS IS COMPUTATION OF CORRECT INCOME AS PER INCOME TAX ACT AND SUBJECT MATTER OF PENALTY PROCEEDINGS IS THE CONDUCT OF THE ASSESSEE I.E. CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS WHICH HAS RESULTED IN ADDITION IN QUANTUM PROCEEDINGS. THOUGH MENS- REA IS NOT REQUIRED OR NECESSARY TO IMPOSE PENALTY FOR CONCEALMENT, BUT WHERE AN ASSESSEE SHOW THAT HE HAS MADE CLAIM OF EXPENSES BONA- FIDELY AND THE EXPLANATION IS NOT FOUND TO BE FALSE, PENALTY U/S 271(1 )(C) CANNOT BE IMPOSED. THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CALCUTTA CREDIT CORPORATION (1987) 166 ITR 29 (CAL.) HELD THAT MERE ADDITIONS DID NOT AUTOMATICALLY LEAD TO PENALTY, MORE PARTICULARLY WHEN TWO OPINION ON THE SAME FACTS WERE POSSIBLE. -: 9: - 9 IT MAY BE NOTED THAT MERELY MAKING A CLAIM WHICH IS HELD AS NOT SUSTAINABLE UNDER LAW, SHOULD NOT LEAD TO PENALTY U/S 271(1)(C), WHEN THE ASSESSEE HAD FURNISHED FULL DETAILS IN THE RETURN ITSELF AND THE CLAIM IS A DEBATABLE, REASONABLY PLAUSIBLE OR MAY WELL HAVE BEEN ACCEPTED. [CIT VS RELIANCE PETRO PRODUCT PVT. LTD. (2010) 322 ITR 158 (SC), CIT VS. DHARAMPAL PREMCHAND LTD (2011) 329 ITR 572 (DEL.), KARAN RAGHAV EXPORTS VS. CIT (2012) 349 ITR 112 (DEL.) AND DEVSONS LOGISTICS PVT. LTD. VS. CIT (2010) 329 ITR 483 (DEL.)]. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND LEGAL POSITION ON THE ISSUE, AM OF THE CONSIDERED VIEW THAT IT WAS NOT A FIT CASE FOR LEVYING PENALTY U/S 271(1)(C) ON DISALLOWANCES OF EMPLOYEES AND EMPLOYERS CONTRIBUTION TOWARDS PROVIDENT FUND AND PRIOR PERIOD EXPENSES. ACCORDINGLY, PENALTY ORDER U/S -: 10: - 10 271(1)(C) DATED 30.03.2012 FOR A.Y. 2003-04 LEVYING PENALTY OF RS.76.00.000/- PASSED BY THE AO IS CANCELLED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ADDITION HAS BEEN MADE ON ACCOUNT OF DISALLOWANCE OF ASSESSEES CLAIM FOR EMPLOYEES CON TRIBUTION AS EMPLOYERS CONTRIBUTION TOWARDS THE PROVIDENT FU ND, BECAUSE AS PER AO, THESE PAYMENTS WERE NOT MADE ON OR BEFORE DUE DATES AND ADDITION ON ACCOUNT OF PRIOR P ERIOD EXPENSES ON THE GROUND THAT THE ASSESSEE WAS MAINTA INING BOOKS OF ACCOUNT ON MERCANTILE SYSTEM OF ACCOUNTING . THEREFORE, THE EXPENSES WERE NOT ALLOWABLE FOR DEDU CTION. 8. WE FIND THAT THE ASSESSEE HAS FILED ALL THESE PARTI CULAR BEFORE THE AO. THE ASSESSEES CLAIMS WERE NOT ALLOW ED ON METHOD OF ACCOUNTING. THEREFORE, AS PER THE DECISIO N OF RELIANCE PETRO PRODUCTS PRIVATE LIMITED , 322 ITR 1 58 ( S.C.), WE ARE OF THE VIEW THAT THE PENALTY IS RIGHTLY DELE TED BY THE LD. CIT(A) AND OUR INTERFERENCE IS NOT CALLED FOR. -: 11: - 11 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 27 TH AUGUST, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 27 TH AUGUST, 2015. CPU* 2425