Aarge Drugs Pvt. Ltd, Parwanoo V. DCIT, Parwanoo

ITA 781/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90267 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 09-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO.781/CHD/2014 ASSESSMENT YEAR:2010-11 AARGE DRUGS PVT. LTD, VS. DCIT PLOT NO. 5 PARWANOO SECTOR 1, PARWANOO, PAN NO. AABCA1833H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SURINDER BABBAR RESPONDENT BY : DR. AMARVEER SINGH DATE OF HEARING : 15/07/2015 DATE OF PRONOUNCEMENT : 23/07/2015 ORDER PER BHAVNESH SAINI.J.M THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER PASSED BY THE LD. CIT(A), SHIMLA, H.P. DT. 23/07/20 14 FOR THE AY 2010-11. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONCURRENCE WITH THE LD. A.O. I N UPHOLDING THE PENALTY OF RS. 11,51,610/- AND THE SA ME IS LIABLE TO BE DELETED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN CONCURRING WITH THE LD. A.O. IN HOLDING THAT THE ASSESSEE HAS DELIBERATELY FURNISHE D 2 INACCURATE PARTICULARS OF MAT CREDIT B/FD FROM EARL IER YEARS AND THEREBY MADE CONCEALMENT OF SUCH TAX CREDIT WHI CH HAS BEEN WORKED OUT TO BE RS. 11,32,386/- WITHOUT APPRE CIATING THE FACT THAT AT THE TIME OF FILING RETURN OF INCOM E, THE ASSESSED INCOME OF TWO EARLIER YEARS WAS NOT AVAILA BLE EITHER WITH THE DEPARTMENT OR WITH THE ASSESSEE, HENCE LEV Y OF PENALTY OF RS. 11,32,386/- IS LIABLE TO BE QUASHED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS GROSSLY ERRED IN CONCURRING WITH THE LD. A.O. I N UPHOLDING PENALTY ON THE DISALLOWANCE OF EXPENSES OF RS. 56,5 56/- ALLEGING THAT THE ASSESSEE HAS DELIBERATELY FURNISH ED INACCURATE PARTICULARS, HENCE LEVY OF PENALTY OF RS . 19,224/- IS LIABLE TO BE QUASHED . 3. WE HAVE HEARD LD. REPRESENTATIVE OF BOTH PARTIES AN D PERUSED MATERIAL ON RECORD. 4. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASS ESSEE FILED ITS RETURN OF INCOME ON 26/09/2010 DECLARING INCOME OF RS. 1,51,1 3,970/- AFTER CLAIMING DEDUCTION UNDER SECTION 80IC AMOUNTING TO RS. 57,50 ,045/-. ASSESSMENT UNDER SECTION 143(3) WAS FRAMED ON THE ASSESSEE ON 01/02/ 2013 AND THE INCOME WAS ASSESSED AT RS. 1,56,06,655/- , AFTER DISALLOWING E XPENSES AMOUNTING TO RS. 56,556/- BEING EXPENSES RELATING TO EXEMPT INCOME A ND RS. 4,36,128/- BEING DEDUCTION CLAIMED UNDER SECTION 80IC, SINCE IT WAS IN THE NATURE OF DIVIDEND AND WAS NOT DERIVED FROM MANUFACTURING ACTIVITY. FU RTHER THE AO REDUCED THE ASSESSEES CLAIM OF BROUGHT FORWARD MAT CREDIT OF R S. 90,25,449/- TO RS. 78,93,063/-, ON ACCOUNT OF ADJUSTMENT MADE TO MAT C REDIT OF EARLIER YEARS DUE TO INCREASE IN ASSESSED INCOME OF THOSE YEARS. PENA LTY PROCEEDINGS WERE INITIATED ON THE ADDITION / DISALLOWANCES MADE AND ALSO ON THE REDUCTION OF MAT CREDIT BROUGHT FORWARD BY THE ASSESSEE. 5. DURING THE PENALTY PROCEEDINGS, AFTER GIVING DUE OP PORTUNITY OF HEARING TO THE ASSESSEE, THE AO DROPPED THE PENALTY LEVIED ON THE DISALLOWANCE OF 3 DEDUCTION CLAIMED UNDER SECTION 80IC AMOUNTING TO R S. 4,36,128/-. ON RESTRICTION OF CLAIM OF BROUGHT FORWARD MAT CREDIT BY RS. 11,32 ,386/-, THE AO HELD THAT THE ASSESSEE HAD CLAIMED WRONG AMOUNT IN THE RETURN OF INCOME. AS PER THE AO IF THE ASSESSEE COMPANY WAS NOT AWARE OF THE ASSESSED INCOME OF EARLIER YEARS AT THE TIME OF FLING OF ITR OF ASSESSMENT YEAR 2010-1 1, IT OUGHT TO HAVE REVISED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 I.E.; THE IMPUGNED ASSESSMENT YEAR, BY 31/03/2012, WHICH THEY FAILED TO DO. AS PE R THE A.O.THE ASSESSEE HAD DELIBERATELY CARRIED FORWARD EXCESS MAT CREDIT DESP ITE KNOWING THE PROVISIONS OF THE ACT AND THE CLAIM OF WRONG AMOUNT OF TAX CREDIT CLEARLY FELL WITHIN THE PURVIEW OF THE PROVISIONS OF SECTION 271(1)(C). PLA CING RELIANCE ON THE JUDGMENT OF HONBLE ITAT MUMBAI IN THE CASE OF HARISH P. MA SHRUWALA VS. ACIT(ITAT, SB- MUM) 38 SOT 398 ,WHEREIN IT WAS HELD THAT IF TAX SO UGHT TO BE EVADED AROSE BECAUSE OF LOWER RATE OF TAX PAID AND NOT BECAUSE O F ANY ADDITION TO INCOME THEN ALSO PENALTY U/S 271(1)(C) IS LEVIABLE ,THE A. O HELD THAT IT WAS A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) AND IMPOSE D THE PENALTY @ 100% OF TAX SOUGHT TO BE EVADED I.E RS. 11,32,386/-, BEING WRON G CLAIM OF MAT CREDIT. 6. ON THE ISSUE OF DISALLOWANCE OF EXPENSES UNDER SECTION 14A , THE AO REJECTED THE ASSESSEES ARGUMENT THAT SUCH DISALLOW ANCE DID NOT ATTRACT PENALTY UNDER SECTION 271(1)(C).THE A.O. HELD THAT THE DISALLOWANCE UNDER SECTION 14 A IS A STATUTORY DISALLOWANCE AND OUGHT TO HAVE BEEN INCULCATED BY THE ASSESSEE COMPANY WHILE COMPUTING ITS INCOME FOR THE RELEVANT ASSESSMENT YEAR.THE A.O STATED THAT FAILURE TO DO SO TANTAMOU NTED TO FURNISHING INACCURATE PARTICULARS OF INCOME. PENALTY @ 100% OF TAX SOUGH T TO BE EVADED OF RS. 19,224/- WAS IMPOSED ON THE ASSESSEE. 4 7. THE LD. CIT(A) UPHELD THE ACTION OF THE AO ON B OTH COUNTS AND CONFIRMED THE LEVY OF PENALTY. 8. BEFORE US THE LD. COUNSEL OF THE ASSESSEE ARGUED THAT NO INACCURATE PARTICULARS OF INCOME WERE FURNISHED BY THE ASSESSE .THE A.R STATED THAT THE MAT CREDIT BROUGHT FORWARD IN THE RETURN OF INCOME FILE D WAS CORRECT AS IT WAS ONLY SUBSEQUENTLY THAT THE ASSESSMENTS OF A.Y 08-09 &09- 10 WERE FRAMED AND THE AMOUNT OF ELIGIBLE MAT CREDIT REDUCED.THE A.R. FURT HER ARGUED THAT THERE WAS NO LOSS TO THE REVENUE,AS THE ONLY EFFECT OF THE REDUC TION WAS ADJUSTMENT IN THE FIGURE OF MAT CREDIT CARRIED FORWARD.THE D.R. ON TH E OTHER HAND STATED THAT THE ASSESSEE HAD CONCEALED THE FACTS IN THE CASE AND IT SHOULD HAVE REVISED ITS CLAIM OF MAT CREDIT ONCE THE ASSESSMENTS OF THE REL EVANT YEARS WERE FRAMED.AS PER THE D.R.,FAILURE TO DO SO AMOUNTED TO FURNISHIN G INACCURATE PARTICULARS OF INCOME,JUSTIFYING THE LEVY OF PENALTY U/S 271(1)(C) .ALSO ON THE ISSUE OF LEVY OF PENALTY ON DISALLOWANCE MADE U/S 14A, WHILE THE A.R .PLACED RELIANCE ON THE DECISION OF THE APEX COURT IN RELIANCE PETROPRODUCT S PVT. LTD.(2010) 322 ITR 158(SC),THE D.R PLEADED THAT THE ASSESSEE OUGHT TO HAVE MADE THE DISALLOWANCE SINCE IT WAS STATUTORY.THE D.R STATED THAT BY NOT HAVING MADE THE DISALLOWANCE ,THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME, THEREBY JUSTIFYING THE LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT ,1961. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE PAPER BOOK PLACED BEFORE US. WE FIND THAT THE BRIEF ISSUE BEFORE US IS THE LEVY OF PENALTY UNDER SECTION 271(1)(C) ON TWO COUNTS 1. EX CESS CLAIM OF BROUGHT FORWARD MAT CREDIT AND 2.DISALLOWANCE OF EXPENSES I NCURRED ON EARNING EXEMPT INCOME. 5 9.1. ON THE ISSUE OF BROUGHT FORWARD MAT CREDIT,TH E UNDISPUTED FACTS BEFORE US ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 26/09/2010 AND CLAIMED BROUGHT FORWARD MAT CREDIT OF RS. 90,25,449/- THE D ETAILS OF WHICH , DISCLOSED IN THE COMPUTATION OF INCOME FOR AY 2010-11 AND PRODUC ED AT PAPER BOOK PAGE NO. I/3 ARE AS FOLLOWS : A.Y BROUGHT FORWARD MAT CRED IT 06-07 17,85,626/- 07-08 25,95,946/- 08-09 22,82,722/- 09-10 23,61,155/- 90,25,449/- THEREAFTER ASSESSMENT OF AY 2008-09 WAS FRAMED ON 0 2/12/2010 AND AY 2009-10 ON 19/09/2011 REDUCING BROUGHT FORWARD MAT CREDIT B Y RS. 6,31,893/- AND RS. 4,25,299/- RESPECTIVELY. 9.2. IN THE LIGHT OF THE ABOVE FACTS THE IMPOSITION OF PENALTY UNDER 271(1)(C) ON EXCESS BROUGHT FORWARD MAT CREDIT HAS TO BE ANALYZE D. 9.3. PENALTY UNDER SECTION 271(1)(C) IS LEVIED FOR CONCEALING OR FURNISHING INACCURATE PARTICULARS OF INCOME. IN THE CASE BEFOR E US THE ISSUE RELATES TO LEVY OF PENALTY ON ACCOUNT OF EXCESS BROUGHT FORWARD MAT CREDIT. WHETHER THE TERM INCOME USED UNDER SECTION 271(1)(C) INCLUDES MAT CREDIT, HAS TO BE ADJUDICATED UPON. INCOME IS UNDERSTOOD TO MEAN TH E MONEY THAT A PERSON EARNS FROM WORK, BUSINESS ETC. THE DEFINITION OF I NCOME UNDER SECTION 2(24) OF THE INCOME TAX ACT,1961, ALSO INDICATES LIKEWISE. M AT ON THE OTHER HAND IS TAX PAID ON BOOK PROFITS. MAT CREDIT IS INCOME TAX PAID ON BOOK PROFITS IN EARLIER 6 YEARS WHICH IS ALLOWED TO BE SETOFF AGAINST TAXES PAID ON BUSINESS INCOME IN SUCCEEDING YEARS. IT IS IN THE NATURE OF TAXES PAID IN ADVANCE. INCOME CONTEMPLATED UNDER SECTION 271(1)(C), IS THE INCOME ON WHICH TAXES ARE TO BE COMPUTED AND PAID. THIS IS EVIDENT FROM SECTION 271 (1)(C) ITSELF WHICH QUANTIFIES THE AMOUNT OF PENALTY, TO THE TAX SOUGHT TO BE EVAD ED BY CONCEALING / FURNISHING INACCURATE PARTICULARS OF INCOME. TAXES PAID OR PAYABLE ARE THUS NOT INCOME FOR THE PURPOSES OF SECTION 271(1)(C). PARTI CULARS OF MAT CREDIT FURNISHED IN THE RETURN OF INCOME CANNOT THEREFORE BE SAID TO BE PARTICULARS OF INCOME FOR THE PURPOSE OF LEVYING PENALTY U/S 271(1)(C). 9.4. MOREOVER THE ACT OF FURNISHING INACCURATE PART ICULARS OF INCOME / CONCEALING PARTICULARS OF INCOME IS TO BE SEEN IN RELATION TO THE POINT OF TIME WHEN THE RETURN IS FILED. FROM THE FACTS BEFORE US ,AS ON THE DATE OF FILING RETURN OF INCOME I.E; 26/09/2010, THE FIGURE OF BROUGHT FORWA RD MAT CREDIT OF AY 2008-09 AND 2009-10 WAS AS PER RETURNED INCOME, WHICH WAS C ORRECT, SINCE NO ASSESSMENT FOR THOSE YEARS WAS FRAMED TILL THEN. IT WAS ONLY THEREAFTER THAT THE ASSESSMENTS FOR AY 2008-09 AND 2009-10 WERE FRAMED. THEREFORE, VIS-A-VIS THE RETURN FILED NO INACCURATE PARTICULARS WERE FURNISH ED. IN ANY CASE THE ONLY IMPACT OF THE REDUCTION IN THE FIGURE OF BROUGHT FO RWARD MAT CREDIT HAS BEEN A CONSEQUENTIAL REDUCTION IN THE FIGURE OF MAT CREDIT CARRIED FORWARD. THE SAME HAS NOT EFFECTED THE TAX PAYABLE BY THE ASSESSEE. 9.5. THE REVENUES ARGUMENT THAT THE ASSESSEE OUGH T TO HAVE RECTIFIED ITS RETURN IS NOT RELEVANT FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 271(1) (C). THE CONCEALMENT OF PARTICULARS OF INCOME/FURNI SHING INACCURATE PARTICULARS OF INCOME FOR THE PURPOSE OF LEVY OF PENALTY HAS TO BE WITH RESPECT TO THE RETURN ALREADY FILED.THE INCOME TAX ACT ,IN ANY CASE,DOES NOT CONTAIN ANY PROVISION WHICH REQUIRES THE ASSESSEE TO RECTIFY ITS RETURN T O ACCOUNT FOR ADJUSTMENTS MADE IN ASSESSMENT PROCEEDINGS. THERE IS THEREFORE NO CO NCEALMENT OF INCOME OR 7 FURNISHING INACCURATE PARTICULARS OF INCOME IN THIS CASE BECAUSE THE ASSESSEE FILED RETURN OF INCOME ON THE BASIS OF MAT DISCLOSE D IN EARLIER YEARS RETURN OF INCOME. THEREFORE IT IS HELD THAT PENALTY IMPOSED UNDER SEC TION 271(C) AMOUNTING TO RS.11,32,386/- QUA REVISED MAT CREDIT BE HEREBY DEL ETED . 10. AS TO THE PENALTY LEVIED ON DISALLOWANCE OF RS . 56,556/- BEING EXPENSES INCURRED ON EARNING EXEMPT INCOME , THE ASSESSEE HA S DISCLOSED BOTH THE FIGURES OF EXPENSES AS WELL AS INCOME IN ITS P&L AC COUNT FILED ALONGWITH RETURN OF INCOME AND PRODUCED BEFORE US AT PAPER BOOK 21 & 22 OF PAPER BOOK II. THERE IS NO QUESTION OF CONCEALING OR FURNISHING INACCURA TE PARTICULARS OF INCOME. THE AO ON PART OF DEDUCTION U/S 80IC ON SAME FACTS HAS ALREADY DROPPED THE PENALTY PROCEEDINGS. THE CASE OF THE ASSESSEE IS SQ UARELY COVERED BY THE DECISION OF THE APEX COURT IN RELIANCE PETROPRODUCT S PVT. LTD. (2010) 322 ITR 158 (SC). THE PENALTY IMPOSED OF RS.19,224/- IS THEREF ORE HEREBY DELETED. 11. IN RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/07/2015 SD/- SD/- (T.R. SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23/07/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR