GARRON TRADING COMPANY PRIVATE LIMITED , MUMBAI V. INCOME TAX OFFICER-8(1)(4), MUMBAI

ITA 5936/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8768 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 19-09-2017
• Court: TRIBUNAL

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 5936/MUM/2017 (ASSESSMENT YEAR 2011-12 ) GARRON TRADING COMPANY PVT. LTD., B-202, NEW USHA NAGAR, VILLAGE ROAD, BHANDUP (WEST), MUMBAI-400078 PAN: AAACG8957B VS. ITO -8(1)(4) ROOM NO. 206, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : SHRI P.V. THOMBRE (AR) RESPONDENT BY : SHRI SATISH RAJORE (SR. DR) DATE OF HEARING : 13.06.2019 DATE OF PRONOUNCEMEN T : 13.06.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-16, [THE LD. CIT(A)], MUMBAI D ATED 25.07.2017, WHICH IN TURN ARISE FROM THE PENALTY LEVIED BY ASSE SSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT (THE ACT) D ATED 23.04.2014 FOR ASSESSMENT YEAR (AY) 2-11-12. THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT (APPEALS) OUGHT TO HAVE DELETED THE ENTI RE AMOUNT OF PENALTY IMPOSED AT RS.3,26,850/- U/S 271(1)(C) WHEREAS RETA INED THE PENALTY AT RS 34,219/- ON THE ADDITION OF RS. 1,01,662/- WHEN THE APPELLANT HAD PROVED THAT IT WAS A BONAFIDE ERROR IN CALCULATION OF INTEREST INC OME ON REFUND OF INCOME TAX. 2. THE CIT (APPEALS) ERRED IN RETAINING THE PENALTY AT RS.34,219/- ON RS.1,01,622/- WHEN APPELLANT DISCLOSED ALL THE RELE VANT FACTS AND PROVED THE ITA NO. 5936 MUM 2017-GARRON T RADING COMPANY PVT. LTD. 2 APPELLANT WAS NOT GUILTY OF FURNISHING ANY INACCURA TE PARTICULARS OR WAS ATTEMPTING TO CONCEAL ITS INCOME AS THERE WAS A BON AFIDE HUMAN ERROR. 3. THE CIT(APPEALS) HAS ERRED IN IMPOSING THE PENAL TY OF 100% WHEN THE APPELLANT HAD EXPLAINED/CLARIFIED THE CIRCUMSTANCES UNDER WHICH THE ERROR HAD CREPT ON THE RECORD. 4. EACH OF THE ABOVE GROUND IS WITH PREJUDICE TO OT HER. 2. THOUGH, THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, HOWEVER, THE ONLY SUBSTANTIAL GROUNDS OF APPEAL BEFORE, US ONLY RELATES THE SUSTAINING THE PENALTY OF RS 34,219/- ON THE ADDITION OF RS. 1,01 ,662/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 27.09.2011 DECLARING TO TAL INCOME AT RS. 16,77,194/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 29.10.2013. T HE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER BESIDES THE OTHE R ADDITION AND DISALLOWANCES, MADE THE ADDITION ON ACCOUNT OF EXCE SS INTEREST OF RS 1,01,662/-. THE ASSESSING OFFICER MADE ADDITION HOL DING THAT ASSESSEE RECEIVED REFUND OF RS. 18,21,969/- PERTAINING TO A SSESSMENT YEAR 2008-09 WHICH CONSIST OF INTEREST OF RS. 2,37,648/-. THE AS SESSEE DECLARED INTEREST OF RS. 1,35,986/- IN THE COMPUTATION OF INCOME. THE AS SESSING OFFICER ASKED TO EXPLAIN WHY THE ENTIRE INTEREST OF RS. 2,37,648/- O N REFUND SHOULD NOT BE CONSIDERED UNDER THE HEAD INCOME FROM OTHER SOURCE S. THE ASSESSEE FILED ITS REPLY AND CONTENDED THAT THERE IS A CREDIT IN R ESPECT OF SERVICE CHARGE OF RS. 1,35,986/- WHICH HAS BEEN WRONGLY TAKEN TO THE CREDIT ON PROFIT & LOSS ACCOUNT INSTEAD OF INTEREST INCOME PROVIDED IN THE REFUND. THE ASSESSEE ITA NO. 5936 MUM 2017-GARRON T RADING COMPANY PVT. LTD. 3 OFFERED THE REMAINING (EXCESS) OF INTEREST OF RS. 1 ,01,662/- FOR TAXATION. THE ASSESSING OFFICER AFTER ADDED THE INTEREST OF RS. 1 ,01,662/- TO THE INCOME OF THE ASSESSEE AND INITIATED THE PENALTY. NO APPEAL W AS FILED BY THE ASSESSEE AGAINST SUCH ADDITION OF INTEREST INCOME. SHOW-CAUS E NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) DATED 18.11.2013 WAS SERVED UP ON THE ASSESSEE. THE ASSESSEE FILED ITS REPLY. IN THE REPLY, THE ASSESSE E EXPLAINED THAT DURING THE ASSESSMENT, THE ASSESSEE VIDE THEIR LETTER DATED 05 .09.2013 SUBMITTED THAT IN THE AUDITED PROFIT & LOSS ACCOUNT, THERE WAS A CRED IT APPEARING IN RESPECT OF SERVICE CHARGE OF RS. 1,35,986/-. IT WAS EXPLAINED THAT THE SERVICE CHARGE WAS NOTHING BUT INTEREST INCOME PROVIDED ON THE REFUND FOR ASSESSMENT YEAR 2008-09. IT WAS FURTHER EXPLAINED THAT ERROR WHICH CREPTED IN CONNECTION WITH THE HEAD OF INCOME NOMENCLATURE AS SERVICE CHARGE INSTEAD OF INTEREST INCOME. THE ACTUAL RECEIPT OF INCOME (INTEREST INC OME UNDER SECTION 244A) AS COMPUTATION FORM WAS AMOUNTING TO RS. 2,37,648/- . DURING THE ASSESSMENT, THE EXCESS INTEREST OFFERED FOR ASSESSM ENT PURPOSE AND WAS CHARGED TO TAX. A REVISED COMPUTATION WAS ALSO FURN ISHED. THE ASSESSEE FURTHER STATED THAT THEY HAVE OFFERED/DISCLOSED THE INCOME, THE PENALTY SHOULD NOT BE INITIATED AS THERE IS NO CONCEALMENT OF INCO ME OR FILING INACCURATE PARTICULARS AS IT WAS A SHORT PROVISION OF INCOME. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OF FICER LEVIED THE PENALTY @ 100% OF TAX SOUGHT TO BE EVADED. ITA NO. 5936 MUM 2017-GARRON T RADING COMPANY PVT. LTD. 4 4. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSE SSING OFFICER QUA PENALTY ON INTEREST INCOME WAS UPHELD. THUS, FURTHER AGGRIE VED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL B EFORE US. 5. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) F OR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. A R OF THE ASSESSEE SUBMITS THAT INTEREST ON REFUND OF INCOME TAX WAS PROVIDED AT RS. 1,35,986/- AND WAS INCLUDED UNDER THE HEAD SERVICE CHARGE INSTEAD OF INTEREST INCOME IN THE BOOKS OF ACCOUNT. THE INTEREST EARNED ON REFUND WAS RS. 2,37,648/-. THE ASSESSEE INADVERTENTLY AND BY ERROR ACCOUNTED INTER EST INCOME SHORT BY RS. 1,01,662/-. THE ERROR WAS ACCEPTED DURING THE ASSES SMENT. THE ASSESSEE FURNISHED FRESH COMPUTATION OF INCOME AND OFFERED T HE SHORT OF INTEREST INCOME OF RS. 1,01,662/-. THE ASSESSEE OFFERED THE SAID SHORT OF RS. 1,01,662/- FOR ASSESSMENT. THE ASSESSING OFFICER AC CEPTED THE OFFER OF THE ASSESSEE. THE SAID AMOUNT WAS TAXED BY ASSESSING OF FICER. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE PENALTY IS NOT JU STIFIED AS THE ASSESSEE HAS NOT DELIBERATELY CONCEALED ANY INCOME NOR FURNISHED INACCURATE PARTICULARS. THE SHORT INTEREST INCOME WAS DUE TO INADVERTENT MI STAKE. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT IN VIEW OF MINIMUM AL TERNATIVE TAX (MAT) CARRIED FORWARD FOR EARLIER YEARS AND AVAILABILITY OF THE SAME DURING THE YEAR, THERE WAS NO OUTCOME OF ANY TAX FROM ASSESSEES ACC OUNT. THUS, THE ASSESSEE HAS NO INTENTION TO EVADE THE TAX IN FACT IT WAS IN ADVERTENT/HUMAN ERROR WHICH ITA NO. 5936 MUM 2017-GARRON T RADING COMPANY PVT. LTD. 5 THE ASSESSEE FAILED TO ADD FOR ACCOUNTING INTEREST. THE ASSESSEE HAS SHOWN SUBSTANTIAL INCOME FOR THE YEAR UNDER CONSIDERATION . 6. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASS ESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CIT VS. RELIAN CE PETROPRODUCTS PVT. LTD. [322 ITR 158 (SC)], PRICE WATER HOUSE COOPER P VT. LTD. VS. CIT (2012) [25 TAXMANN.COM 400 (SC)], HONBLE BOMBAY HIGH COUR T IN CIT VS. S.M. CONSTRUCTION (ITA NO. 412/2013 DATED 03.03.2015, DE CISION OF TRIBUNAL IN ACIT VS. STELMET MARKETING (ITA NO. 6168/MUM/2012 D ATED 11.05.2016 AND IN RICHA DUBEY VS. ITO (ITA NO. 4887/MUM/2014 D ATED 08.02.2016. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE RELIED UPON THE ORDER OF LOWER AUTHORITIES. THE LD. DR SUPPORTED THAT THE ASSESSEE HAS INTENTIONALLY AND DELIBERATELY CONCEAL ED THE INCOME OF INTEREST INCOME. THE ASSESSEE OFFERED ONLY WHEN IT WAS DETEC TED BY THE ASSESSING OFFICER DURING THE ASSESSMENT. IN SUPPORT OF HIS SU BMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN ZOOM COMMUNICATION PVT. LTD. (327 ITR 510), SUPREME COU RT IN MAK DATA PVT. LTD. (358 ITR 593 SC) 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THERE IS N O DISPUTE THAT WHILE FILING THE RETURN OF INCOME, THE ASSESSEE HAS OFFERED INTE REST INCOME OF RS. 1,35,986/-. DURING THE ASSESSMENT, THE ASSESSING OF FICER NOTED THAT ASSESSEE RECEIVED REFUND OF RS. 18,21,969/- PERTAINING TO AS SESSMENT YEAR 2008-09 ITA NO. 5936 MUM 2017-GARRON T RADING COMPANY PVT. LTD. 6 WHICH INCLUDED THE INTEREST OF RS. 2,37,648/-. THOU GH THE ASSESSEE DECLARED/OFFERED INTEREST INCOME OF RS. 1,35,986/- ONLY. WHEN ASSESSEE WAS CONFRONTED WITH THE FACT, THE ASSESSEE ADMITTED ITS MISTAKE AND OFFERED THE REMAINING EXCESS INTEREST OF RS. 1,01,662/- FOR TAX ATION. THE ASSESSING OFFICER INITIATED THE PENALTY UNDER SECTION 271(1)( C). IN REPLY THE SHOW-CAUSE NOTICE, THE ASSESSEE VIDE ITS REPLY DATED 05.09.201 3 STATED THAT THERE WAS CREDIT APPEARING IN RESPECT OF SERVICE CHARGES OF R S. 1,35,986/-. IT WAS EXPLAINED THAT THE SERVICE CHARGES WERE NOTHING BUT AN INTEREST INCOME PROVIDED ON THE REFUND FOR ASSESSMENT YEAR 2008-09, THE ASSESSEE PLEADED THAT ERROR WAS CREPT IN CONNECTION WITH THE HEAD OF NOMENCLATURE AS SERVICE CHARGE INSTEAD OF INTEREST INCOME. THE ASSESSEE CON CEDED THAT ACTUAL INTEREST INCOME UNDER SECTION 244A AS PER THE COMPUTATION FO RM WAS RS. 2,37,648/-. THE ASSESSEE FURTHER STATED THAT THERE WAS NO CONCE ALMENT OF INCOME. THE ASSESSING OFFICER NOT ACCEPTED THE CONTENTION OF AS SESSEE AND LEVIED THE PENALTY ON DISALLOWANCES/ADDITION ON INTEREST INCOM E. THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER HOLDING T HAT THE ASSESSEE HAS TAKEN A STAND THAT MISTAKE WAS EITHER BONAFIDE OR THERE W AS A DIFFERENT VIEW OF THE ISSUE INVOLVED. THE LD. CIT(A) CONCLUDED THAT THE M ISTAKE WAS NEITHER BONAFIDE NOR THERE WAS ANY DOUBT ABOUT THE TAXABILI TY OF INCOME OF TAX REFUND. 9. BEFORE US, THE LD. AR OF THE ASSESSEE VEHEMENTLY SU BMITTED THAT ASSESSEE HAS NOT DELIBERATELY CONCEALED THE INCOME NOR FURNISHED ANY INACCURATE ITA NO. 5936 MUM 2017-GARRON T RADING COMPANY PVT. LTD. 7 PARTICULARS THEREOF. IT WAS ONLY AN INADVERTENT AND BONAFIDE ERROR IN PASSING ENTRY WITHOUT LOOKING AT THE REQUISITE DOCUMENTS. T HE ASSESSEE HAS ACCEPTED THE MISTAKE DURING THE ASSESSMENT AND OFFERED THE I NTEREST INCOME FOR TAXATION. BESIDES THAT THE LD. AR ALSO VEHEMENTLY S UBMITTED THAT MAT CREDIT FOR EARLIER YEAR WAS AVAILABLE DURING THE YEAR. THE REFORE, IT CANNOT BE HELD THAT THE ASSESSEE HAS INTENTION TO EVADE THE TAX. C ONSIDERING THE REPLY OF ASSESSEE AND EXPLANATION OFFERED BY ASSESSEE IN REP LY TO SHOW-CAUSE NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) DATED 18.11.2013 , WE FIND THAT ASSESSEE HAS SHOWN A REASONABLE CAUSE WITHIN THE SCOPE OF SE CTION 273B. CONSIDERING THE FACTS AND THE REPLY OF THE ASSESSEE AND THE STA ND TAKEN THROUGHOUT THE PROCEEDING THERE WAS NO DELIBERATE ACT OF THE ASSES SEE. THE ASSESSEE HAS ACCEPTED ITS BONAFIDE MISTAKE DURING THE ASSESSMENT ITSELF AND FILED REVISED COMPUTATION, WHICH WAS ACCEPTED BY THE ASSESSING OF FICER. MOREOVER, THERE WAS NO TAX EVASION. THEREFORE, IN OUR VIEW ON THE F ACTS OF THE PRESENT CASE, THE PENALTY UNDER SECTION 271(1)(C) IS NOT JUSTIFIA BLE. SIMILAR VIEW WAS TAKEN BY COORDINATE BENCH OF THIS TRIBUNAL IN RICHA DUBEY (SUPRA). THE FACT OF THE CASE LAW ON WHICH LD. DR RELIED ARE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. 10. IN MAC DATA PVT. LTD. (SUPRA), THE ASSESSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT CERTAIN DOCUMENTS COMPRISING OF SHARE APPLICATION FORMS, BANK STATEMENTS, MEMORANDU M OF ASSOCIATION OF COMPANIES, AFFIDAVITS, COPIES OF INCOME-TAX RETURNS AND ASSESSMENT ORDERS ITA NO. 5936 MUM 2017-GARRON T RADING COMPANY PVT. LTD. 8 AND BLANK SHARE TRANSFER DEEDS DULY SIGNED HAD BEEN IMPOUNDED IN THE COURSE OF SURVEY PROCEEDINGS CONDUCTED IN THE CASE OF (A S ISTER CONCERN OF THE ASSESSEE) . ON SHOW CAUSE NOTICE, THE ASSESSING OFFICER SOUGHT SPECIFIC INFORMATION REGARDING THE DOCUMENTS PERTAINING TO S HARE APPLICATIONS FOUND IN THE COURSE OF SURVEY, PARTICULARLY, BANK TRANSFE R DEEDS SIGNED BY PERSONS, WHO HAD APPLIED FOR THE SHARES . IN REPLY, THE ASSESSEE MADE AN OFFER TO SURRENDER A SUM OF RS. 40.74 LAKHS WITH A VIEW TO A VOID LITIGATION AND BUY PEACE AND TO MAKE AN AMICABLE SETTLEMENT OF THE DIS PUTE. THUS, THE FACTS OF MAK DATA (SUPRA) ARE ENTIRELY ON DIFFERENT FACTS. 11. IN ZOOM COMMUNICATION PVT. LTD. (SUPRA), THE HONBL E DELHI HIGH COURT HELD THAT THE ACCOUNTS OF THE ASSESSEE WERE MANDATO RILY SUBJECTED TO AUDIT. IT WAS NOT THE CASE OF THE ASSESSEE THAT IT WAS ADVISE D THAT THE AMOUNT OF INCOME-TAX PAID BY IT COULD BE CLAIMED AS A REVENUE EXPENDITURE. IT WAS ALSO NOT THE CASE OF THE ASSESSEE THAT DEDUCTION OF INCO ME-TAX PAID BY IT WAS A DEBATABLE ISSUE. IN FACT, IN VIEW OF THE SPECIFIC P ROVISIONS CONTAINED IN SECTION 40(II), NO SUCH ADVICE COULD BE GIVEN BY AN AUDITOR OR OTHER TAX EXPERT. NO SUCH ADVICE HAD BEEN CLAIMED BY THE ASSE SSEE EVEN WITH RESPECT TO THE AMOUNT CLAIMED AS DEDUCTION ON ACCOUNT OF CERTA IN EQUIPMENT HAVING BECOME USELESS AND HAVING BEEN WRITTEN OFF. THE TRI BUNAL WAS ENTIRELY WRONG IN SAYING THAT SECTION 32(1)(III) APPLIED TO SUCH A DEDUCTION. IT WAS NOT THE CONTENTION THAT CLAIMING OF SUCH A DEDUCTION UNDER SECTION 32(1)(III) WAS A DEBATABLE ISSUE ON WHICH THERE WERE TWO OPINIONS PR EVAILING AT THE RELEVANT ITA NO. 5936 MUM 2017-GARRON T RADING COMPANY PVT. LTD. 9 TIME. IN FACT, THE ASSESSEE DID NOT CLAIM, EITHER B EFORE THE ASSESSING OFFICER OR BEFORE THE COMMISSIONER (APPEALS), THAT SUCH A D EDUCTION WAS PERMISSIBLE UNDER SECTION 32(1)(III). NO SUCH CONTENTION ON BEH ALF OF THE ASSESSEE WAS FOUND NOTED IN THE ORDER OF THE TRIBUNAL. THUS, IT WAS THE TRIBUNAL WHICH TOOK THE VIEW THAT SECTION 32(1)(III ) COULD BE ATTRACTE D TO THE DEDUCTION CLAIMED BY THE ASSESSEE. IT WAS ALSO NOT THE CASE OF THE ASSES SEE THAT IT WAS UNDER A BONA FIDE BELIEF THAT THOSE TWO AMOUNTS COULD BE CLAIMED AS REVENUE EXPENDITURES. THE ASSESSEE, IN FACT, OUT RIGHTLY CONCEDED BEFORE THE ASSESSING OFFICER THAT THOSE AMOUNTS COULD NOT HAVE BEEN CLAIMED AS REVENU E DEDUCTIONS. THE ONLY PLEA TAKEN BY THE ASSESSEE BEFORE THE INCOME-TAX AU THORITIES WAS THAT IT WAS DUE TO OVERSIGHT THAT THE AMOUNT OF INCOME-TAX PAID BY IT AS WELL AS THE AMOUNT CLAIMED AS DEDUCTION ON ACCOUNT OF CERTAIN E QUIPMENT BEING WRITTEN OFF COULD NOT BE ADDED BACK IN THE COMPUTATION OF I NCOME. 12. THEREFORE, IN OUR HUMBLE VIEW, THE RATIO OF THE DEC ISIONS RELIED BY LD. DR IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. HE NCE, THE GERUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 13. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 /06/2019. SD/- SD/- M. BALAGANESH, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 13 .06.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE ITA NO. 5936 MUM 2017-GARRON T RADING COMPANY PVT. LTD. 10 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI