ITO 13(2)(4), MUMBAI V. SHIVANI STEELS, MUMBAI

ITA 6967/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8302 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 07-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K MEHTA
• Keywords: Non-deduction of tax; Wrong claim
• Section: 143(3); 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , . / BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 6967/MUM/2010 / ASSESSMENT YEAR 2005-06 INCOME TAX OFFICER, WARD 13(2)(4), R.NO. 477, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. M/S. SHIVANI STEELS, M-SA, MEZZAINE FLOOR, GIRIRAJ BUILDING, S.T. ROAD, CARNAC BUNDER, MUMBAI-400 009. PAN: AACFS 2977 E ( / APPELLANT ) ( ! / RESPONDENT ) REVENUE BY : SHRI M.K. MEHTA ASSESSEE BY : NONE ' #$% / DATE OF HEARING : 23-10-2012 &' ' #$% / DATE OF PRONOUNCEMENT : 07-11-2012 () / O R D E R PER RAJENDRA, AM THE APPELLANT HAS FILED THIS APPEAL AGAINST THE ORD ER DT. 08-07-2010 OF THE CIT(A)-24, MUMBAI ON THE FOLLOWING GROUNDS OF APPEA L: 1. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY OF RS. 15,00,000/- LE VIED U/S. 271(1)( C ) OF THE I.T. ACT, 1961. (II) WHILE DOING SO, THE LD. CIT(A) FAILED TO APPRE CIATE THAT THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION TO THE SHOW CAUSE NOTICE. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY G ROUND OR ADD ANY NEW GROUND, IF NECESSARY. ITA NO. 6967/MUM/2010 M/S. SHIVANI STEELS, 2 2. ASSESSEE-FIRM, ENGAGED IN THE BUSINESS OF RESELLIN G OF IRON AND STEEL, FILED ITS RETURN OF INCOME ON 31-10-2005 DECLARING TOTAL INCO ME AT RS. 2.79 LAKHS. ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT,1961 ( ACT) WAS FINALISED BY THE ASSESSING OFFICER (AO) ON 28-12-2007 DETERMINING T OTAL INCOME AT RS. 44 LAKHS. 3. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD MADE PAYMENT OF AN AMOUNT OF RS. 4.65 LAKHS TO A.S. TRAN SPORT, HOWEVER, IT HAD NOT DEDUCTED THE TAX AS PER THE PROVISIONS OF SECTION 1 94C OF THE ACT.AO FURTHER FOUND THAT ASSESSEE HAD DEBITED P&L A/C BY AN AMOUNT OF R S.20.97 LAKHS UNDER THE HEAD BROKERAGE AND COMMISSION AND RS.15.14 LAKHS UNDER THE HEAD CUTTING CHARGES AND THAT THE ASSESSEE HAD NOT DEDUCTED THE TAX AS P ER THE PROVISIONS OF ACT. AO HELD THAT ASSESSEE HAD COMMITTED DEFAULT WITHIN THE MEAN ING OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT.AO DIS-ALLOWED EXPENSES AMOUNT ING TO RS. 40.58 LAKHS (4.65 LAKHS, 15.14 LAKHS AND RS. 20.79 LAKHS). 3.1. AO INITIATED PENALTY U/S.271(1)(C) OF THE ACT AFTER ISSUING A SHOW CAUSE NOTICE AS PER THE PROVISIONS OF THE ACT. AFTER CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE, IN THIS REGARD, HE HELD THAT ASSESSEE HAD SHOWN NET PR OFIT LESS BY AN AMOUNT OF RS.40.58 LAKHS, THAT IT HAD NOT DEDUCTED THE TAX ON TRANSPOR T CHARGES, BROKERAGE AND COMMISSION AND CUTTING CHARGES, THAT IT HAD CLAIMED EXPENSES AND DEBITED TO P&L A/C WHICH WERE NOT ALLOWABLE AS PER THE PROVISIONS OF S ECTION40(A)(IA) OF THE ACT. HE HELD THAT ASSESSEE HAD SUBMITTED INACCURATE PARTICULARS OF INCOME. INVOKING EXPL.1(B) OF THE SEC.271(1) (C), HE IMPOSED PENALTY AMOUNTING TO RS. 15 LAKHS ON THE ASSESSEE- FIRM. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE AO, HE HELD THAT TRANSPORT CHARGES WERE NOT COVERED U/S.194C OF THE ACT, THAT THE SAID PAYMENTS WERE ALSO NOT COVERED BY SECTION 194-I THAT FOR THE RELEVANT YEAR SECTION 194-I DID NOT COVER PAYMENT OF HIRING OF PLANT AND MACHINERY I.E., TRUC KS, THAT DEFAULT IN DEDUCTING TAX ON RENTAL EXPENSES WAS ALSO NOT SUBJECT TO DIS-ALLOWAN CE U/S. 40(A)(IA) OF THE ACT, THAT THE AO HAD NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE CLAIM OF TRANSPORT CHARGES WERE COVERED BY SECTION 194C/194-I OF THE A CT. WITH REGARD TO CUTTING CHARGES OF RS. 15.14 LAKHS, HE HELD THAT THE PAYMEN TS WERE IN NATURE OF STORAGE/RENTAL CHARGES FOR COILS AND OTHER ITEMS, THAT SAME WERE N OT COVERED BY SECTION 194C OR 194- I OF THE ACT, THAT TDS PROVISIONS WITH REGARD TO ST ORAGE/RENTAL CHARGES WERE APPLICABLE FROM 01-04-2006, THAT THE DISALLOWANCE MADE BY THE AO COULD NOT BE CONSIDERED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. WI TH REGARD TO DISALLOWANCE OF BROKERAGE AND COMMISSION OF RS. 20.79 LAKHS, HE HEL D THAT A BROKERAGE WAS PAID TO SEVERAL PARTIES FOR PURCHASE AND SALE OF GOODS, THA T THE PAYMENTS MADE WERE BELOW THE SPECIFIED LIMITS, THAT AO HAD NOT BROUGHT ANY MATER IAL ON RECORD TO PROVE THAT CLAIM MADE BY THE APPELLANT WAS FALSE, THAT THE CLAIM OF THE APPELLANT THAT IT WAS NOT LIABLE TO TDS ON VARIOUS EXPENSES WAS MADE UNDER BONAFIDE BEL IEF, THAT DISALLOWANCE IS ONE THING AND PENALTY FOR CONCEALMENT WAS ANOTHER, THAT MERELY BECAUSE EXPENSES WERE DISALLOWED DID NOT MEAN THAT ASSESSEE WAS ALSO LIAB LE FOR PENALTY. HE RELIED UPON THE CASE OF RELIANCE PETRO PRODUCTS P. LTD., (322 ITR 1 58) DELIVERED BY HONBLE SUPREME COURT. FINALLY HE HELD THAT APPELLANT HAD MADE BONA FIDE CLAIM, THAT THE CLAIM OF VARIOUS EXPENSES WAS RIGHTLY MADE BY THE ASSESSEE, THAT BOOKS OF ACCOUNT OF THE APPELLANT WERE AUDITED, THAT THE ACT OF CLAIMING A DEDUCTION AS PER THE ADVICE FROM A TAX CONSULTANT CONSTITUTED THE BONA FIDE BELIEF ON PART OF THE ASSESSEE. REFERRING TO THE ITA NO. 6967/MUM/2010 M/S. SHIVANI STEELS, 3 CASE OF T. ASHOK PAI (292 ITR 11), DELIVERED BY THE HONBLE SUPREME COURT, HE HELD THAT IF A CLAIM WAS MADE RELYING UPON THE CASE OF T HE CONSULTANT, THE ASSESSEE COULD NOT BE SADDLED WITH A LIABILITY OF PENALTY, THAT TH E ASSESSEE WAS UNDER BONA FIDE BELIEF OF ALLOWABILITY OF SAID AMOUNTS. HE FINALLY DELETE D THE ADDITION MADE BY THE AO. 5. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO, NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE P ERUSED THE MATERIAL AVAILABLE ON FILE. WE FIND THAT IN THE CASE UNDER CONSIDERATION PENALTY FOR FILING INACCURATE PARTICULARS HAS BEEN LEVIED BY THE AO AS THE ASSESS EE HAD FAILED TO DEDUCT TAX AT SOURCE FOR VARIOUS PAYMENTS MADE DURING THE YEAR. NON-DEDUCTION OF TAX HAS ITS OWN CONSEQUENCES, BUT IN OUR HUMBLE OPINION, IT CANNOT AND SHOULD NOT RESULT IN IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE ACT. COURTS HAVE HELD THAT ADDITIONS MADE IN THE ASSESSMENT PROCEEDINGS DO NOT RESULT IN AUTOMATIC L EVY OF PENALTY. PENAL PROVISIONS OF SECTION 271(1)(C) OF THE ACT ARE INVOKED WHEN AN ASSESSEE FILES INACCURATE PARTICULARS OR CONCEALS THE PARTICULARS OF HIS INC OME. WE FIND THAT AO HAS NOT ALLEGED THAT PAYMENTS WERE NOT MADE AND THAT THE ASSESSEE H AD MADE FALSE CLAIM WITH REGARD TO SUCH PAYMENTS. GENUINENESS OF PAYMENTS ON ACCOUN T OF BROKERAGE, TRANSPORT CHARGES, CUTTING CHARGES HAVE NOT BEEN DOUBTED. AO WAS OF THE OPINION THAT ASSESSEE SHOULD HAVE DEDUCTED TAX BEFORE MAKING PAYMENTS TO VARIOUS PERSONS AS PER THE PROVISIONS OF SECTION 194.WE ARE OF THE OPINION THA T IMPOSING PENALTY FOR NOT FOLLOWING THE TDS PROVISIONS IS NOT JUSTIFIED. CHA PTER XXI OF THE ACT DEALING WITH VARIOUS PENALTIES HAS BEEN INTRODUCED IN THE ACT FO R A SPECIFIC PURPOSES. BEFORE IMPOSING PENALTY IT HAS TO BE SEEN THAT ASSESSEE HA S CONTRAVENED THE PENAL PROVISIONS. IF HIS OMISSION OR COMMISSION IS NOT COVERED BY THE PROVISIONS OF SECTION 271 OR 272 HE SHOULD NOT BE VISITED BY PENALTIES. IN A GIVEN SITUATION ADDITION TO THE TOTAL INCOME OF THE ASSESSEE OR CHARGING OF INTEREST CAN BE THE A PROPER REMEDY FOR NON-COMPLIANCE OF THE PROVISIONS OF THE ACT, BUT SECTIONS DEALING WITH PENALTIES CANNOT BE SUBSTITUTE THEM. IN THE CASE UNDER CONSIDERATION, PROVISIONS OF SECTION 194 WERE APPLICABLE OR NOT IS NOT THE ISSUE - THE REAL ISSUE IS THAT IF TH ERE IS DEFAULT IN DEDUCTING TAX CAN PENALTY BE LEVIED FOR FURNISHING INACCURATE PARTICU LARS? IN OUR OPINION, AS STATED EARLIER, ANSWER IS AN EMPHATIC NO. BESIDES WE ARE A WARE THAT THE FAA HAS GIVEN A CATEGORICAL FINDING THAT SECTION 194 C/194 I WERE N OT APPLICABLE IN THE CASE UNDER CONSIDERATION BECAUSE OF THE PECULIAR FACTS OF THE CASE. THEREFORE, AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE WANT TO UPHOLD THE ORDERS OF THE FAA. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH NOVEMBER, 2012. SD/- SD/- ( . . / B.R. MITTAL ) ( / RAJENDRA ) (* / JUDICIAL MEMBER % (* / ACCOUNTANT MEMBER MUMBAI, +( DATE: 7 TH NOVEMBER, 2012 TNMM ITA NO. 6967/MUM/2010 M/S. SHIVANI STEELS, 4 () () () () ' '' ' #, #, #, #, -,# -,# -,# -,# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. T HE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE !,# # //TRUE COPY// () () () () / BY ORDER, . .. . / / / / / DY./ASSTT. REGISTRAR , / ITAT, MUMBAI