Envair Electrodyne Ltd., V. DCIT,Cir.8,

ITA 595/PUN/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3368 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 02-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Section: 271(1)(c); 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 595/PN/2008 (ASSTT. YEAR : 2004-05) ENVAIR ELECTRODYNE LTD., 117 S BLOCK, M.I.D.C. BHOSARI PUNE 411 026 PAN : AAACK 7292 B .. APPELLANT V. DY. CIT, CIRCLE 8, PUNE 44 . RESPONDENT APPELLANT BY : SHRI C.H. NANIWADEKAR RESPONDENT BY : SHRI ABHAY DAMLE ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER OF THE CITA)- III, PUNE DATED 28.2.2008 FOR THE A.Y 2004-0 5 RAISING THE FOLLOWING GROUND : THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING PENALTY OF RS.1,05,000/- U/S 271( 1)(C) OF THE ACT FOR ALLEGED FURNISHING OF INACCURATE PARTICULARS OF INC OME IN RESPECT OF ALLEGED UNDER VALUATION OF STOCKS (RS.10,108) AND DISALLOWA NCE OF SALES TAX ETC. U/S 43B (RS.2,81,533). HE FAILED TO APPRECIATE THAT AL L THE PARTICULARS WERE ON RECORD WITH THE RETURN. 2. BRIEFLY STATED, RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING THE INCOME OF RS. 27,42,205/- AN D CLAIMED THE BROUGHT FORWARD LOSSES OF RS. 5.6 CRORES ( ROUNDED OFF). ASSESSMENT WAS COMPLETED U/S. 143(3) DETERMINING THE TOTAL INCOME OF RS.32,87,416/- BEFORE SETTING OFF THE BROUGHT FORWARD LOSSES. DURING THE SCRUTINY ASSESSMENT, A.O. M ADE VARIOUS ASSESSMENTS WHICH INCLUDE (I) ADDITION OF RS.10,108/- ON ACCOUN T OF NON-INCLUSION OF THE SAID AMOUNT IN THE CLOSING STOCK AND (II) DISALLOWANCE O F RS.2,81,533/- ON ACCOUNT OF DISALLOWANCES U/S. 43B OF THE INCOME TAX ACT. RELE VANT FACTS RELATING TO THESE TWO ADDITIONS AS DISCUSSED IN PARAGRAPHS 7 AND 8 OF THE ASSESSMENT ORDER ARE AS UNDER : 7. DISALLOWANCE OF SALES TAX AND SERVICE TAX ETC. U /S 43B - ITA NO 595/PN/2008 EVAIR ELECTRODYNE LTD.., A.Y.2004-05 PAGE OF 5 2 IN THE TAX AUDIT REPORT, IT IS POINTED OUT BY THE A UDITOR THAT THE FOLLOWING STATUTORY PAYMENTS REMAINED UNPAID TILL THE DATE OF FILLING RETURN OF INCOME, DETAILS OF WHICH ARE AS UNDER SALES TAX OF RS.20,866/-, SERVICE TAX OF RS. 58,4 71/-, PROPERTY TAX OF RS. 1,26,520/- AND LEAVE ENCASHMENT OF RS.75,676/-, (TOTAL AMOUNT OF RS.2,81,533/-.) HOWEVER, ON PERUSAL OF THE COMPUTA TION OF INCOME IT IS SEEN THAT NO SUCH AMOUNT ARE ADDED BACK TO THE TOTAL INC OME. ON BEING ASKED, IT IS SUBMITTED THAT THE SAID DISALLOWANCES HAS REMAIN ED TO BE MADE INADVERTENTLY AND AGREED FOR THE DISALLOWANCES FOR THE SAID EXPE NDITURE AS PER THE PROVISION OF SEC. 43B. ACCORDINGLY, THE AMOUNT OF RS.2,81,533/- HAS BEEN DISALLOWED AND ADDED TO THE TOTAL INCOME DECLARED BY THE ASSESSEE. SINCE THE ASSESSEE COMPANY HAS CONCEALED THESE PARTICULARS OF ITS INCOME BY FURNISHING INACCURATE PARTICULARS THEREOF , I AM SATISFIED THAT IT HAS COMMITTED DEFAULT WITHIN THE MEANING OF SEC. 271(1) (C ) R.W.S. EXPLANATION 1 OF THE I.T. ACT. 1961. PENALTY PROCEEDINGS U/S 271( 1)(C) R.W.S. EXPLANATION 1 OF THE I.T. ACT 1961 HAS THEREFORE BEEN INITIATED S EPARATELY. 8. VALUATION OF INVENTORIES RS.10,108/- DURING THE COURSE OF HEARING, THE ASSESSEE WAS REQU ESTED TO FURNISH DETAILS OF VALUATION OF CLOSING STOCK. THE RELEVAN T DETAILS ARE BROUGHT ON RECORD. ON PERUSAL OF THE SAME IT IS SEEN THAT THE ASSESSEE HAS NOT CONSIDERED AN AMOUNT OF RS. 10,108/- ON ACCOUNT OF EXCISE DUTY, FREIGHT ETC. IN VALUATION OF CLOSING STOCK. ON BEING ASKED, IT IS SUBMITTED THAT THE SAID AMOUNT OF RS.10,108/- ON ACCOUNT OF EXCISE DUTY, FR EIGHT ETC HAS REMAINED TO BE CONSIDERED INADVERTENTLY AND AGREED FOR THE SAID ADDITION. ACCORDINGLY, THE AMOUNT OF RS.10,108/- HAS BEEN ADDED TO THE TOT AL INCOME DECLARED BY THE ASSESSEE ON ACCOUNT OF REVISED VALUATION OF CLO SING STOCK. SINCE THE ASSESSEE COMPANY HAS CONCEALED THESE PARTICULARS OF ITS INCOME BY FURNISHING INACCURATE PARTICULARS THEREOF, I AM SAT ISFIED THAT IT HAS COMMITTED DEFAULT WITHIN THE MEANING OF SEC. 271(1)(C ), R.W. S. EXPLANATION 1 OF THE I.T. ACT, 1961. PENALTY PROCEEDINGS U/S 271(1)(C ) R.W.S . EXPLANATION 1 OF THE I.T. ACT. 1961 HAS THEREFORE BEEN INITIATED SEPARATELY. 3. AO MADE THE ADDITIONS AS ASSESSEE DID NOT BRING A NY REASONS FOR THE SAME. AGGRIEVED WITH THE ABOVE ADDITIONS, THE ASSESSEE FI LED AN APPEAL BEFORE THE CIT(A) BELATEDLY AND THE DELAY WAS NOT CONDONED BY THE CIT(A). FROM THE PENALTY ORDER OF THE AO, IT IS EVIDENT THAT THE AO DID NOT LEVY P ENALTY ON THE ISSUES EXPLAINED BY THE ASSESSEE IN THE PENALTY PROCEEDINGS. FURTHER, IT I S EVIDENT THAT THE AO LEVIED PENALTY IN RESPECT OF THE ABOVE TWO ISSUES DISCUSSED IN PARAGRAPHS 7 AND 8 OF THE ASSESSMENT ORDER FOR WANT OF SOME EXPLANATION FROM THE ASSESSEE DURING THE PENALTY PROCEEDINGS. THUS, THE A.O LEVIED PENALTY U/ S. 271(1)(C ) IN RESPECT OF THE TWO ADDITIONS IE DISALLOWANCE OF SALES TAX AND SERVI CE TAX ETC. U/S 43B AND VALUATION OF INVENTORIES. ITA NO 595/PN/2008 EVAIR ELECTRODYNE LTD.., A.Y.2004-05 PAGE OF 5 3 4. AGGRIEVED WITH THE SAME THE ASSESSEE FILED AN APP EAL BEFORE THE CIT(A). DURING THE PROCEEDINGS, ASSESSEE SUBMITTED THAT THE A SSESSEE DISCLOSED RELEVANT INFORMATION TO THE REVENUE THROUGH FILING OF THE RETURN OF INCOME ON BOTH THE COUNTS OF THE ADDITIONS. REGARDING EXCLUSION OF THE EXCISE DUTY AND FREIGHT COMPONENT, THE ASSESSEE SUBMITTED THAT THIS METHOD OF ACCOUNTING W AS CONSISTENTLY FOLLOWED AND FAILURE TO INCLUDE THE SAME IN THE INVENTORY ACCOUNT AT THE TIME OF FINALIZATION OF ACCOUNTS IS ATTRIBUTABLE TO THE CLERICAL ENGAGED IN M AINTAINING THE ACCOUNTS. BUT ON CONSIDERING THE SAME, THE CIT(A) DID NOT FIND MERIT I N THE SAID SUBMISSION FOR THE REASON THAT THE SAID MISTAKES ARE RELATED TO THE ASSES SEES MISTAKES AND IN EFFECT THESE MISTAKES HAS THE EFFECT OF INACCURACY OF PARTIC ULARS IN THE RETURN OF INCOME. ACCORDINGLY, THE CIT(A) CONFIRMED THE LEVY OF PENALTY OF RS. 1,05,000/- STATING THAT THE DEFAULT OF NON-FURNISHING OF ACCURATE PARTICULARS S TILL EXISTS DESPITE THE DISCLOSURE OF INFORMATION ON ACCOUNTS OF BOTH THE COUNTS. 5. AGGRIEVED WITH THE SAME, THE ASSESSEE FILED THE P RESENT APPEAL. LD COUNSEL FOR THE ASSESSEE BASICALLY REPEATED THE ARGUMENTS MADE BEFORE THE REVENUE AUTHORITIES. LD COUNSEL ALSO HIGHLIGHTED THE FACT OF FURNISHING OF REQUISITE PARTICULARS IN THE RETURN OF INCOME AND OTHER ENCLOSURES. KANBAY SO FTWARE INDIA (P) LTD., 119 ITD 153 (PUNE) FOR THE PROPOSITION THAT THE MISTAKE O F INADVERTENCE OF CLERKS SHOULD NOT BE EXPOSED TO THE CONCEALMENT PENALTY U/S. 271( 1)(C ). ON THE OTHER HAND, LD DR FOR THE REVENUE DISCUSSED THE CONTENTS GIVEN IN PA RA 6 & 7 OF THE IMPUGNED ORDER. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE DOCUMENT S AND DECISIONS AVAILABLE BEFORE US. ASSESSEES APPEAL FILED BELATED LY BEFORE THE CIT(A) WAS NOT CONDONED. IT IS ALSO A FACT THAT THE ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE OF SALES TAX AND SERVICE TAX ETC. U/S 43B AND VALUATION OF INVENTORIES ARE UNCONTESTED BY THE ASSESSEE BEFORE THE TRIBUNAL. DURING THE ASSESS MENT PROCEEDINGS, ASSESSEE DID NOT FILED ANY COGENT EXPLANATION BEFORE THE AO I N RESPECT OF THESE ADDITIONS EXCEPTING THAT THE INADVERTENCE IS THE EXPLANATION .DURING THE PENALTY PROCEEDINGS, THE ASSESSEE DID NOT ANY EXPLANATION IN RESPONSE TO THE SHOW CAUSE NOTICE DATED 18.5.2007 OF THE AO EXCEPTING THAT THE PENALTY PROCE EDINGS MUST BE KEPT IN ABEYANCE TILL THE ABOVE SAID BELATED APPEAL BEFORE T HE CIT(A) IS DISPOSED OF. IT IS BORNE ON RECORDS (PAGE 2 OF THE PENALTY ORDER DATED 31.5 .2007) THAT THE AO MENTIONED THAT THE NO SUBMISSION WHATSOEVER ON MERITS HAS BEEN MADE IN RESPECT ITA NO 595/PN/2008 EVAIR ELECTRODYNE LTD.., A.Y.2004-05 PAGE OF 5 4 OF THE FOLLOWING ADDITIONS. IT IS ALSO MENTIONED IN PAGE 3 OF THE SAID PENALT Y ORDER THAT AS REGARD PENALTY PROCEEDINGS, THE ASSESSEE DID NO T FURNISH ANY SUBMISSION FOR THE REASONS BEST KNOWN TO THEM ONLY . THUS, THE AO PROCEEDED TO LEVY PENALTY IN THE ABSENCE ANY EXPLANATION FROM THE ASSESSEE. DURING THE FIRST APPELLATE PROCEEDINGS RELATING TO THE PENALTY, ASSESS EE DEFENSE RELATES TO THE DISCLOSURE OF PARTICULARS IN THE RETURN. BEFORE US, LD COUNSEL ESSENTIALLY RELIED ON THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. THUS, WE HAVE TO DECIDE THE ISSUES BASED ON THE ASSESSEES DEFENSE ARGUMENTS REL ATING TO THE DISCLOSURE OF INFORMATION IN THE RETURN OF INCOME AND IF THE PARTICUL ARS DISCLOSED IN THE RETURN ADVOCATES FOR NON CONCEALMENT OF INCOME. IN OUR OPINI ON, WHERE THERE IS DISCLOSURE OF RELEVANT INFORMATION IN THE RETURN, THE CONCEALMENT OF INCOME CANNOT BE ATTRIBUTED TO THE ASSESSEE. CONSIDERING THE ABOVE, WE HAVE EXAMINED THE ASSESSEES CASE WHERE RELEVANT INFORMATION IS FURNISHED IN THE RETURN OR ITS ANNEXURE BUT FAILED TO ADD BACK TO THE INCOME RETURNED AND WHETHER THE PENALTY IS ATTRACTED IN SUCH CASE. IN OUR CONSIDERED OPINION, WHEN THE PARTICULARS ARE AVAILABLE IN THE RETURNS AND ITS ENCLOSURES SAY AUDIT REPORT FILED U/S 44AB O F THE ACT AND FAILURE TO MAKE ADDITIONS ON ACCOUNT OF 43B OF THE ACT AND THE INCL USION OF EXCISE DUTY, FREIGHT ETC DO NOT ATTRACT PENALTY U/S 271(1)(C) OF THE ACT IN VIEW OF PUNE BENCH DECISION IN THE CASE OF KANBAY SOFTWARE P LTD (SUPRA). ACCORDINGLY, THE GROUNDS RAISED IN THE APPEAL ARE ALLOWED . 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 6TH DAY OF SEPT EMBER 2010. SD/- SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER (D. KARUNAKARA RAO ) ACCOUNTANT MEMBER PUNE, DATED THE 6TH SEPT., 2010 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT ITA NO 595/PN/2008 EVAIR ELECTRODYNE LTD.., A.Y.2004-05 PAGE OF 5 5 3. THE CIT- V, PUNE 4. THE CIT(A)-III, PUNE 4. THE D.R. A BENCH, PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE