DCIT, Sirsa V. Sh.Rameshwar Dass Prop., Sirsa

ITA 701/CHANDI/2010

• Counselvise Citation: 70121514 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 28-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Assessee Lawyers: SHARMA
• Keywords: Rule of consistency; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.701/CHD/2010 (ASSESSMENT YEAR: 2004-05) THE D.C.I.T., VS. SH.RAMESHWER DASS SIRSA. PROP.M/S RAMESHWAR DASS & SONS, NOHARIA BAZAR, SIRSA. PAN: ABKPD0073F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH GUPTA RESPONDENT BY : SHRI M.R.SHARMA DATE OF HEARING : 07.03.2012 DATE OF PRONOUNCEMENT : 24.05.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS), ROHTAK DATED 26.3.2010 RELATING TO ASSESSMENT YEAR 2004-05 AGAINST THE PENALTY LEVI ED U/S 271(1)(C) OF THE INCOME-TAX ACT (IN SHORT THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT (A) HAS ERRED IN CANCELING THE PENALTY OF RS.2,04,750/- LEVIED U/S 271(1)(C) BY HOLDING THAT CONFIRMATION OF ADDITION FORMING BASIS OF PENALTY DOES NOT ENTAIL THE IMPOSITION OF PENALTY WITHOUT APPRECIATING THAT ADOPTION OF CASH OR HYBRID SYSTEM OF ACCOUNTING IN RESPECT OF A PARTICULAR ITEM OF RECEIPT WITH THE DELIBERATE INTENTION OF BRINGING DOWN THE TAX LIABILITY AMOUNTED TO CONCEALMENT AND DELIBERATE FILING OF INACCURATE PARTICULARS OF INCOME. 3. IN THIS APPEAL FILED BY THE REVENUE THE ONLY IS SUE RAISED IS AGAINST THE DELETION OF PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 2 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE AS SESSEE HAD ADOPTED CASH SYSTEM OF ACCOUNT FOR COMPUTING ITS INCOME. T HOUGH THE ASSESSEE HAD SHOWN INTEREST INCOME ON RECEIPT BASIS, THE EXP ENSES I.E. INTEREST TO THE CREDITORS AND OTHER EXPENSES WERE CLAIMED ON ME RCANTILE BASIS. THE ASSESSEE HAD CLAIMED EXPENDITURE OF INTEREST AT RS. 6,84,350/-, WHICH WAS NOT ACTUALLY PAID. FURTHER SALARY TO SHRI NITIN KU MAR OF RS.18,000/- AND RENT OF RS.15,000/- WAS ACCOUNTED FOR ON MERCANTILE BASIS. THE ASSESSING OFFICER MADE ADDITION OF RS.7,17,350/- ON THE ABOVE SAID THREE ACCOUNTS WHICH WERE CONFIRMED BY THE CIT (APPEALS). THE TRIBUNAL UPHELD THE ORDER OF THE CIT (APPEALS) IN VIEW OF TH E AMENDMENT OF PROVISIONS OF SECTION 145(1) OF THE ACT W.E.F. 1.4. 1997. THE PLEA OF THE ASSESSEE THAT IT WAS REGULARLY FOLLOWING THE SAID M ETHOD, WAS REJECTED BY HOLDING THAT THE PRINCIPLE OF CONSISTENCY HAD TO FA IL TO GIVE EFFECT TO LEGISLATIVE MANDATE. THE ASSESSING OFFICER, DURING THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ISSUED SHOW CA USE NOTICE TO THE ASSESSEE. THE PLEA OF THE ASSESSEE BEFORE THE ASSE SSING OFFICER WAS THAT BOTH THE DISALLOWANCE/ADDITION WAS UPHELD DURING TH E YEAR BUT THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO CONSIDER THE ALLOWANCE OF EXPENSES IN QUESTION IN THE YEARS OF THEIR PAYMENTS IN ACCORDANCE WITH LAW. THE ASSESSEE CLAIMS TO HAVE FILED REVISED RET URN OF INCOME FOR ASSESSMENT YEAR 2006-07 AND PLEADED THAT THE TOTAL INCOME ASSESSED IN THE HANDS OF THE ASSESSEE DURING THE YEAR HAS BEEN CLAIMED AS AN EXPENDITURE IN THE REVISED RETURN FILED FOR ASSESSM ENT YEAR 2006-07. THE ASSESSING OFFICER REJECTING THE PLEA OF THE ASSESSE E AND IN VIEW OF THE UPHOLDING OF THE ADDITION BY THE TRIBUNAL, WAS OF T HE VIEW THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE WAS N OT THE PRESCRIBED METHOD UNDER SECTION 145(1) OF THE ACT AND IN VIEW THEREOF THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. TH E PLEA OF THE ASSESSEE 3 IN SHOWING SAID INCOME IN ASSESSMENT YEAR 2006-07 W AS HELD NOT TO ABSOLVE THE ASSESSEE FROM DEFAULT OF FURNISHING INA CCURATE PARTICULARS OF INCOME IN ASSESSMENT YEAR 2004-05. CONSEQUENTLY, P ENALTY OF RS.2,04,750/- WAS LEVIED U/S 271(1)(C) OF THE ACT. 5. THE CIT (APPEALS) DELETED THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT OBSERVING THAT MERELY BECAUSE THE ADDITION HAD BEEN MADE IN THE ASSESSMENT YEAR AND CONFIRMED IN APPEAL, DOES NOT E NTAIL IMPOSITION OF PENALTY. THE CIT (APPEALS) FURTHER HELD THAT THE M ETHOD OF ACCOUNTING BEING FOLLOWED BY THE ASSESSEE I.E. HYBRID SYSTEM O F ACCOUNTING DOES NOT APPEAR TO BE DELIBERATE TO DEFRAUD THE REVENUE. CO NSEQUENTLY, PENALTY LEVIED U/S 271(1)(C) OF THE ACT WAS DELETED BY THE CIT (APPEALS). 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT (APPEALS). BOTH THE LEARNED COUNSEL FOR THE ASSESSEE AND LEARN ED D.R. FOR THE REVENUE HAVE FILED WRITTEN SUBMISSIONS, WHICH ARE P LACED ON RECORD. BOTH THE COUNSELS HAVE ELABORATELY ARGUED THE ISSUE . 7. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE RATIO LAID DOWN IN CIT VS. ECS LIMITED, 2010-TIOL-287-HC-DEL-I T. 8. THE LEARNED A.R. FOR THE ASSESSEE STRESSED THAT THE COMPUTATION OF PENALTY IN THE HANDS OF THE ASSESSEE IS INCORRECT. THE ASSESSING OFFICER WHILE LEVYING PENALTY HAD HELD THE ASSESSEE TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF RS.5,58,611/ - AND 30% OF SUCH DEFAULT WAS LESS THAN RS.2 LACS AND CONSEQUENTLY TH E APPEAL FILED BY THE REVENUE WAS NOT MAINTAINABLE. FURTHER THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE IN CIT VS. SSP LIMITED, 189 TAXMAN 282 (P&H) THAT WHERE DEBATABLE ISSUE WAS RAISED FOR CLAIMING EXPE NDITURE, ITS DISALLOWANCE WAS NO GROUND FOR LEVYING PENALTY. TH E LEARNED A.R. FOR 4 THE ASSESSEE ALSO PLACED RELIANCE ON CIT VS. RELIAN CE PETRO PRODUCTS PVT. LTD., 322 ITR 158 (SC). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS THE ASSESSEE WAS FOUND TO HAVE CLAIMED THE EXPENDITURE ON INTEREST ON MERCANTILE BASIS THOUGH THE INCOME FROM INTEREST WA S BEING REFLECTED ON CASH SYSTEM OF ACCOUNTING. THE ASSESSEE WAS FOLLOW ING THE CASH SYSTEM OF ACCOUNTING. HOWEVER, CERTAIN EXPENSES I.E. INTE REST ETC. WAS CLAIMED ON MERCANTILE BASIS. WE FIND THE CLAIM OF INTEREST EXPENDITURE OF THE ASSESSEE WAS NOT FOUND TO BE BOGUS BUT DISALLOWANCE WAS MADE IN THE HANDS OF THE ASSESSEE FOR NOT FOLLOWING THE CORRECT SYSTEM OF ACCOUNTING OF THE SAID EXPENDITURE. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS WHETHER IN THE SAID CIRCUMSTANCES, THE ASSESSEE IS LIABLE TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME MAKING H IM EXIGIBLE TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. FROM THE FACT S NARRATED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DURING THE PE NALTY PROCEEDINGS WE FIND THAT THE SAID EXPENDITURE ON RECEIPT BASIS HAS BEEN CLAIMED IN THE HANDS OF THE ASSESSEE IN ASSESSMENT YEAR 2006-07. NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO POINT OUT THAT THE SAID CLAIM OF THE ASSESSEE WAS FOUND TO BE FALSE. IN THE ENTIRETY OF THE FACTS AN D CIRCUMSTANCES OF THE CASE THE ASSESSEE HAD MERELY CLAIMED EXPENDITURE ON MERCANTILE BASIS WHICH CLAIM OF THE ASSESSEE WAS NOT FOUND TO BE FAL SE THOUGH NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION, IN VIEW OF THE SYSTEM OF ACCOUNTING PRESCRIBED UNDE R SECTION 145(1) OF THE ACT. THE CLAIM OF THE ASSESSEE VIS--VIS EXPEN DITURE WAS PREMATURE BUT THE SAME DOES NOT RESULT IN FURNISHING OF INACC URATE PARTICULARS OF INCOME ON THE GROUND THAT THE SAID EXPENDITURE WAS NOT ALLOWED IN THE 5 HANDS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDE RATION. WE FIND NO MERIT IN THE ORDER OF THE ASSESSING OFFICER IN THIS REGARD AND UPHOLDING THE ORDER OF CIT (APPEALS) WE HOLD THAT THE ASSESSE E IS NOT EXIGIBLE TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE GROU ND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. THE PRESENT DECISION REN DERED IN THE PECULIAR FACT SITUATION WILL NOT OPERATE AS JUDICIAL PRECEDE NT. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF MAY, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24 TH MAY, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH