M/s. Prime Mercantile Pvt. Ltd., Gurgaon V. ITO, New Delhi

ITA 6115/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97166 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 13-08-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 12-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Depreciation
• Section: 43B; 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 6115 /DEL/201 3 ASSESSMENT YEAR: 2003 - 04 M/S PRIME M ERCANTILE PVT. LTD. VS. INCOME TAX OFFICER, [EARLIER - HISAR CEMENT LTD.] WARD - 14(4), NEW DELHI N - 2/6, DLF PHASE - II, GURGAON, HARYANA (PAN: AAACP1480C ) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. AJAY WADHWA, ADV. RESPONDENT BY : SH. VIKRAM SAHAY, SR. DR DATE OF HEARING: 13.08.2015 DATE OF PRONOUNCEMENT: 04.09.2015 ORDER PER INTURI RAMA RAO, A.M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), DATED 03.09.2013 PASSED FOR THE ASSESSMENT YEAR 2003 - 04. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) - XVII, NEW DELHI [BRIEFLY THE CIT(A) ] HAS ERRED IN UPHOLDING LEVY OF PENALTY OF RS. 6,22 , 538/ - UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ( THE ACT ). 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED I N NOT APPRECIATING THAT DEDUCTION OF RS. 16,93,980/ - WAS CLAIMED THROUGH OVERSIGHT. IN THE P&L A/C, GROSS AMOUNT OF RS. 1,00,18,799/ - WAS CREDITED AS OTHER INCOME. OUT OF THE SAID AMOUNT OF RS. 1,00,18,799/ - , A SUM OF RS. 83,24,819/ - WAS NOT TAXABLE, HOWEV ER, INADVERTENTLY DEDUCTION OF ENTIRE AMOUNT WAS CLAIMED. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE C I T(A) ERRED IN NOT APPRECIATING THAT ASSESSEE HAD CARRIED FORWARD LOSSES AND DEPRECIATION OF MORE THAN 1,00,00,000/ - AND THE BUSINESS OF 2 MANUFACTURING OF CEMENT HAD ALREADY BEEN STOPPED, THEREFORE, DEDUCTION MISTAKENLY CLAIMED WAS NOT TO EVADE ANY TAX LIABILITY. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY ANY OF THE GROUND EITHER AT OR BEFORE THE HEARING OF THE APPEAL. 2 . BRIEFLY STATED FACTS OF THE CASE ARE THAT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002 - 03 WAS FILED ON 2 ND DECEMBER, 2013, DECLARING NIL INCOME. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND FINALLY THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) , AT A TOTAL INCOME OF RS. 2,70,99,249/ - AFTER MAKING ADDITIONS ON THE FOLLOWING THREE ITEMS: I. EXPENSES NOT ALLOWED AS NO BUSINESS DONE : RS. 5,53,714/ - II. ADDITION ON ACCOUNT OF CASH CREDIT U/S 68 : RS. 1,47,30,00/ - III. DISALLOWED CLAIM OF THE ASSESSEE U/S 43B : RS. 1,00,18,799/ - ON APPEAL BEFORE THE CIT(A), THE CIT(A) ALLOWED THE GROUND S RELATING TO ADDITION ON ACCOUNT OF CASH CREDIT UNDER SECTION 68 OF THE ACT AND THE INTEREST CLAIMED UNDER SECTION 43B OF RS 83,24,819/ - . THE REVENUE HAD PREFERRE D AN APPEAL BEFORE ITAT, DELHI, WHO VIDE ITS ORDER DATED 18 TH MARCH, 2009 IN ITA NO. 2253/DEL/2007 MADE THE FOLLOWING OBSERVATIONS: WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. SECTION 41(1 ) DEALS WITH ANY AMOUNT OR BENEFIT ETC. RECEIVED BY THE ASSESSEE IN RESPECT OF ANY EXPENDITURE OR LOSS OF TRADING NATURE INCURRED IN ANY EARLIER YEAR AND DEEMS SUCH AMOUNT OR BENEFIT T BE THE INCOME OF THE ASSESSEE IN WHICH IT HAS BEEN OBTAINED. THE ASSESS EE HAD INCURRED EXPENDITURE BY WAY OF INTEREST PAYABLE TO HFC IN FIVE YEARS, WHICH WAS WRITTEN BACK IN THIS YEAR. HOWEVER, IN THE EARLIER YEARS, THE ADMITTED POSITION IS THAT THE EXPENDITURE BY WAY OF INTEREST WAS NOT CLAIMED BY THE ASSESSEE IN COMPUTING THE INCOME. IN SUCH A SITUATION, THE LIABILITIE S BY WAY OF INTEREST DID NOT CONSTITUTE EXPENDITURE INCURRED IN EARLIER YEARS AND, THEREFORE, ON WRITING BACK THE AMOUNT IN PROFIT AND LOSS ACCOUNT, THEY CANNOT BE DEEMED TO BE THE INCOME OF THE ASSESSEE. THEREFORE , WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(APPEALS) IN THIS BEHALF. HOWEVER, THERE IS ANOTHER ASPECT, NAMELY, THAT CERTAIN CREDIT BALANCES AMOUNTING TO 3 RS. 16,90,232/ - AND EXCESS PROVISION IN RESPECT OF WATER BILL AMOUNTING TO RS. 1255/ - WERE ALSO WRITTEN BACK. THESE AMOUNTS WERE ALSO ADDE D BY THE AO IN COMPUTATION OF INCOME. THE CASE OF THE REVENUE IS THAT THESE AMOUNTS CONSTITUTE INCOME IN VIEW OF THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGAR & SONS LTD. (SUPRA). THIS MATTER HAS NOT BEEN CONSIDERED BY THE LEAR NED CIT(APPEALS). THEREFORE, THIS MATTER IS RESTORED TO THE FILE OF THE AO WITH A VIEW TO DECIDE THE SAME DE - NOVO AFTER HEARING THE ASSESSEE AND KEEPING THE AFORESAID DECISION OF THE HON BLE SUPRME COURT IN MIND. THUS, THIS GROUND IS PARTLY ALLOWED, AS DIS CUSSED ABOVE. 2.1 PURSUANT TO THE ABOVE ORDER OF THE TRIBUNAL, A CONSEQUENTIAL ORDER DATED 23 RD DECEMBER, 2010 WAS PASSED ASSESSING TAXABLE INCOME AT RS. 40,44,430/ - . WHILE DOING SO, THE ASSESSING OFFICER MADE THE ADDITION OF RS. 16,90,232/ - ON ACCOUNT OF CREDIT BALANCES WRITTEN BACK, RS. 1,255/ - FOR WATER BILL WRITTEN BACK AND RS. 2,493/ - FOR EXCESS LIABILITY OF SALARY WRITTEN BACK. FOR THESE ADDITIONS, A SHOW CAUSE NOTICE DATED 1 ST JUNE, 2011WAS ISSUED, REQUIRING THE ASSESEE TO EXPLAIN AS T O WHY PENALTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD NOT BE IMPOSED . IN RESPONSE TO THIS SHOW CAUSE NOTICE, THE APPELLANT TENDERED ITS EXPLANATION STATING THAT IN RESPECT OF THESE ITEMS , THE PENALTY PROCEEDINGS WERE NOT INITIATED AT THE TIME OF ORIGINAL ASSESSMENT. HE FURTHER SUBMITTED THAT IT IS A BONA FIDE MISTAKE COMMITTED AT THE TIME OF PREPARATION OF RETURN OF INCOME BY INADVERTENCE IN THE AMOUNT OF RS. 1,00,18,799/ - WHICH WAS ADOPTED IN PLACE OF 83,24,819/ - , WHILE WORKING OUT THE DEDUCTION UNDER SE CTION 43B OF THE ACT. THE EXPLANATION OF THE APPELLANT WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND HE PROCEEDED TO LEVY OF PENALTY OF RS. 6,22,538/ - , PLACING RELIANCE ON THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P.) LTD., (2010) 191 TAXMAN 179 (DELHI). BEING AGGRIEVED, 4 AN APPEAL WAS FILED BEFORE THE CIT(A) WHO VIDE ORDER DATED 3 RD SEPTEMBER, 2013 D ISMISSED THE APPEAL. BEING AGGRIEVED FROM THIS ORDER, THE APPELLANT IS BEFORE US WITH THE PRESENT APPEAL. 3. IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE APPELLANT THAT ON NOTICING THIS MISTAKE OF RS. 16,93 , 980/ - , THE CLAIM FOR DEDUCTION WAS WITHDRAW N. IT WAS FURTHER SUBMITTED THAT WHILE CLAIMING THE DEDUCTION UNDER SECTION 43B OF THE ACT , THE ADDITION MADE EARLIER UNDER THE SAME SECTION IN RESPECT OF INTEREST WAIVED BY HARYANA FINANCIAL CORPORATION BANK . THE SUNDRY CREDITORS FOR EXPENSES OF RS. 16,9 3,980 / - WAS INADVERTENTLY INCLUDED AND THE SUNDRY CREDITORS WRITTEN OFF WERE CLEARLY DISCLOSED IN THE FINANCIAL STATEMENT PREPARED IN THE SCHEDULE XI OF THE BALANCE - SHEET AND EVEN IN SCHEDULE XV OF THE BALANCE SHEET I.E. NOTES TO A CCOUNT , A FULL DISCLOSURE OF INTERESTS OF R S. 83,24,899/ - WAIVED BY HARYANA FINANCE CORPORATION BANK , THE SUNDRY CREDITORS OF R S 16, 93 ,980/ - WRITTEN BACK WAS MADE. THEREFORE, HE SUBMITTED THAT IT IS ONLY ON ACCOUNT OF BONA FIDE MISTAKE THAT OCCURRED AT THE TIME OF FILING RETURN OF INCOME. THE SUNDRY CREDITORS WRITTEN BACK OF RS. 16,98,980/ - WAS WRONGLY INCLUDED IN THE CLAIM MADE UNDER SECTION 43B AND FINALLY SUBMITTED THAT THE CASE IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF PRIC E WATER HOUSE COOPERS (P.) LTD. VS. CIT [2012] 348 ITR 306 (SC) AND ALSO ON THE DECISION OF COORDINATE BENCH OF ITAT, PUNE IN THE CASE OF AMRUTA ORGANICS PVT. LTD. VS. DCIT, DT. 22 ND MARCH, 2013 AND THE HON BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. SANIZ MIRZA, (2013) 259 CTR 386 (AP). 5 4. LEARNED SR. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF PENALTY PROCEEDINGS THE APPELLANT TENDERED AN EXP LANATION SAYING THAT THE ADDITIONS WERE AS A RESULT OF BONA FIDE MISTAKEN OCCURRED AT THE TIME OF PREPARATION OF RETURN OF INCOME. THIS EXPLANATION HAD NOT BEEN ACCEPTED BY THE ASSESSING OFFICER WITHOUT ASSIGNING ANY REASONS AS TO WHY THE EXPLANATION IS NO T BONA FIDE. WE ARE OF THE CONSIDERED OPINION THAT THE APPELLANT HAD NO INTENTION OF CONCEALING THE PARTICULAR OF THE CLAIM MADE, HAVING REGARD TO THE FACT THAT FULL DISCLOSURE WAS MADE OF THE ITEMS WRITTEN OFF IN THE SCHEDULE XI FINANCIAL STATEMENT , AND T HE APPELLANT ON ITS OWN BEFORE THE DETECTION OF THE SAME BY THE ASSESSING OFFICER HAD OFFERED THE SAME TO TAX. THIS GOES TO PROVE THAT MISTAKE IS BONA FIDE AND THEREFORE NO PENALTY CAN BE LEVIED UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT . IN THIS REGARD, WE ALSO PLACE RELIANCE ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF PRICE WATER H OUSE COOPERS (P.) LTD. , 348 ITR 306 . THE RELEVANT PARAGRAPH IS REPRODUCE D BELOW: 17. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW TH AT THE FACTS OF THE CASE ARE RATHER PECULIAR AND SOMEWHAT UNIQUE. THE ASSESSEE IS UNDOUBTEDLY A REPUTED FIRM AND HAS GREAT EXPERTISE AVAILABLE WITH IT. NOTWITHSTANDING THIS, IT IS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A 'SILLY' MISTAKE AND INDEED THIS HAS BEEN ACKNOWLEDGED BOTH BY THE TRIBUNAL AS WELL AS BY THE HIGH COURT. 18. THE FACT THAT THE TAX AUDIT REPORT WAS FILED ALONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOWABLE UNDER SECTION 40A(7) OF THE ACT INDICATES THAT THE ASSESSEE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. APART FROM THE FACT THAT THE ASSESSEE DID NOT NOTICE THE ERROR, IT WAS NOT EVEN NOTICED EVEN BY THE ASSESSING OFFICER WHO FRAMED THE ASSESSMENT ORDER. IN THAT SENSE, EVEN THE ASSESSING OFFICER SEEMS TO HAVE MADE A MISTAKE IN OVERLOOKING THE CONTENTS OF THE TAX AUDIT REPORT. 6 19. THE CONTENTS OF THE TAX AUDIT REPORT SUGGEST THAT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QUESTION OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. IT APPEARS TO US THAT ALL THAT HAS HAPPENED IN THE PRESENT CA SE IS THAT THROUGH A BONA FIDE 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 HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBRE AND EXPERT ISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTED, BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNIS HING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. 20. WE ARE OF 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 HAD COMMITTED AN INADVE RTENT AND BONA FIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS. 21. UNDER THESE CIRCUMSTANCES, THE APPEAL IS ALLOWED AND THE ORDER PASSED BY THE CAL CUTTA HIGH COURT IS SET ASIDE. 6. THEREFO RE, FOLLOWING THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE ABOVE CASE, WE HOLD THAT NO PENALTY IS LEVIABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER SECTION 271(1)(C) OF THE ACT. HENCE, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN FULL. 7. IN THE RESULT, THE APPEAL IS ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER , 2015. S D / - S D / - ( I.C. SUDHIR ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 4 T H SEPTEMBER , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI