Global Auto Parts Alliance India Private Limited, New Delhi V. DCIT, Circle 12(1), New Delhi

ITA 7883/DEL/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2261 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 27-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure; Liquidation
• Section: 271(1)(c); 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BEN CH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE, JUDICIAL M EMBER ITA NO. 7883/DEL/2019 [A.Y 2012-13] M/S GLOBAL AUTO PARTS INDIA PVT. LTD VS. THE DY. C.I.T A 1/291, JANAKPURI CIRCLE 12(1) NEW DELHI NEW DELHI PAN: AACCG 7502 L (APPLICANT) ( RESPONDENT) ASSESSEE BY : SHRI KAMAL SA WHNEY, ADV SHRI PRASHANT MEHARCHANDANI, ADV DEPARTMENT BY : SHRI BHUVNESH KUL SHRESTHA, CIT, DR DATE OF HEARING : 03.12.2019 DATE OF PRONOUNCEMENT : 04.12.2019 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] - 4, NEW DELHI DATED 31.07.2019 PERTAINING TO ASSESSMENT YEAR 2012-13. 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE LEVY OF PENA LTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO A S 'THE ACT' FOR SHORT]. 3. THE ROOTS FOR LEVY OF PENALTY LIE IN THE ASSESSM ENT ORDER FRAMED U/S 143(3) OF THE ACT. THE APPELLANT COMPANY IS EN GAGED IN THE BUSINESS OF MANUFACTURING OF AUTO PARTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE FINANCE COST OF RS. 26.11 CRORES INCLUDES LOSS OF FOREIGN C URRENCY OF RS. 21.22 CRORES. THE ASSESSEE FURNISHED DETAILS OF EXTERNAL COMMERCIAL BORROWINGS ON WHICH FOREIGN FLUCTUATION LOSS HAS BE EN CLAIMED. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASONS FOR CLAIM ING LOSS AS REVENUE EXPENDITURE. 4. IN ITS REPLY, THE ASSESSEE EXPLAINED THAT DURING THE PERIOD OF ESTABLISHMENT OF MANUFACTURING UNIT/PRODUCTION FACI LITY WHICH WAS BEFORE THE COMMENCEMENT OF PRODUCTION FACILITY, FOR EIGN EXCHANGE LOSS INCURRED ON ACCOUNT OF REPAYMENT OF ECB FOR TH E PURPOSE OF SETTING UP OF MANUFACTURING UNIT/PRODUCTION FACILIT Y IN INDIA WAS TREATED AS CAPITAL COST AND WAS ADDED TO THE COST O F ASSETS. IT WAS 3 EXPLAINED THAT SUCH FOREIGN CURRENCY LOSS WAS ADDED TO THE COST OF ASSETS ON THE BASIS OF ACCEPTED ACCOUNTING PRINCIPL E AND IT WAS DULY BROUGHT TO THE NOTICE OF THE TAX AUDITORS. IT WAS FURTHER BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT WHILE PREPARIN G THE RETURN OF INCOME/COMPUTATION OF INCOME, INADVERTENTLY FOREX L OSS WAS NOT ADDED BACK. SINCE THE FOREIGN EXCHANGE LOSS WAS NOT ALLO WABLE AS REVENUE EXPENDITURE, THE ASSESSING OFFICER ADDED THE SUM TO THE DECLARED LOSS OF RS. 29.54 CRORES AND ASSESSED THE ASSESSEE AT A LOSS OF RS. 9.36 CRORES. 5. THE ASSESSING OFFICER SEPARATELY INITIATED PENAL TY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND DRAWING SUPPORT FROM T HE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF ZOOM COM MUNICATIONS PVT LTD ITA NO. 07/2010 VIDE ORDER DATED 24.05.2010, L EVIED PENALTY OF RS. 6,54,85,242/-. 6. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 12. BEFORE US, THE LD. AR VEHEMENTLY STATED THAT DU E TO INADVERTENT ERROR OF THE TAX AUDITOR/ RETURN PREPARER FOREX LOS S COULD NOT BE ADDED 4 TO THE RETURNED INCOME AND WAS SHOWN AS REVENUE EXP ENDITURE. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT TH E ASSESSING OFFICER HIMSELF HAS ACCEPTED THAT THE ASSESSEE HAS FOLLOWED THE ACCOUNTING STANDARDS AND HAS MENTIONED ITS AUDIT REPORT. 13. REFERRING TO THE DECISION OF THE HON'BLE SUPREM E COURT IN THE CASE OF PRICE WATERHOUSE COOPERS [P] LTD CIVIL APPE AL NO. 6924 OF 2012, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT A BONAFIDE AND INADVERTENT ERROR SHOULD NOT FORM BASIS FOR IMPOSIT ION OF PENALTY. THE LD. COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT TH AT THE APPELLANT COMPANY IS IN LIQUIDATION AND HAS ALREADY ASSESSED LOSS OF RS. 69.60 CRORES AND AT THE FAG END OF ITS BUSINESS, THE ASSE SSEE COULD NOT HAVE DERIVED ANY BENEFIT BY CLAIMING FOREX LOSS AS REVEN UE EXPENDITURE. THE LD. COUNSEL FOR THE ASSESSEE PLEADED THAT THERE WAS NO INTENTION FOR ANY REVENUE LEAKAGE AND IN FACT, INADVERTENT ER ROR HAS NOT CAUSED ANY LOSS OF REVENUE. 14. PER CONTRA, THE LD. DR SUPPORTED THE FINDINGS O F THE ASSESSING OFFICER AND RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATIONS [SUPRA]. 5 15. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE APPELLANT COMPANY IS IN LIQUIDATION AND HAS ASSESSED LOSS OF RS. 69.6 0 CRORES. IT IS TRUE THAT THE ASSESSEE HAS CLAIMED FOREX LOSS AS REVENUE EXPENDITURE. IT IS EQUALLY TRUE THAT ONCE THE ASSESSING OFFICER HAS DI SALLOWED THE SAME, THE ASSESSEE DID NOT AGITATE THE MATTER BEFORE THE FIRST APPELLANT AUTHORITY WHICH IS EVIDENT FROM THE ORDER OF THE LD . CIT(A) 35, NEW DELHI DATED 04.10.2017 WHEREIN WE CAN FIND GROUNDS RELATING TO FOREIGN EXCHANGE LOSS OF RS. 21.22 CRORES WAS NEVER PRESSED BY THE ASSESSEE AND THE SAME WERE DISMISSED. 16. GOING DEEP INTO THE FACTS OF THE CASE, WE FIND THAT THE APPELLANT COMPANY IS OPERATING WITH NO EMPLOYEES AND IS UNDER LIQUIDATION WITH NO BUSINESS OPERATIONS. IT IS HAS SOLD ITS ENTIRE BUSINESS VIDE AGREEMENT DATED 31.07.2012 W.E.F 01.04.2012. ALL T HE EMPLOYEES OF THE ASSESSEE GOT TRANSFERRED AND IT IS MANAGED BY A LIQUIDATOR. WE FIND THAT THE ASSESSEE HAD DISCLOSED ECB TO THE TAX AUDI TOR. HOWEVER, WHILE PREPARING THE RETURN OF INCOME, DUE TO INADVE RTENT UNINTENTIONAL ERROR, FOREX LOSS WAS CLAIMED AS REVENUE EXPENDITUR E. 6 17. IN OUR HUMBLE OPINION, INADVERTENT CLAIM OF EXP ENDITURE WOULD NOT, IPSO FACTO, AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME TO LEVY PENALTY U/ 271(1)(C) OF THE ACT. FOR THIS PROPOSITION, WE DERIVE SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS 322 ITR 158 AND THE HON'BLE SUPREME COURT IN THE CASE OF PR ICE WATERHOUSE COOPERS PVT LTD [SUPRA]. CONSIDERING THE FACTS OF THE CASE IN TOTALITY, WE DO NOT FIND THIS TO BE A FIT CASE FOR LEVY OF PE NALTY U/S 271(1)(C) OF THE ACT. WE ACCORDINGLY, DIRECT THE ASSESSING OFFI CER TO DELETE THE PENALTY SO LEVIED. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 7883/DEL/2019 IS ALLOWED THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 04.12. 2019. SD/- SD/- [ SUCHITRA KAMBLE ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04 TH DECEMBER, 2019 VL/ 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER