TRANS POLYURETHANE P. LTD, MUMBAI V. DCIT RG 8(3), MUMBAI

ITA 8125/MUM/2010

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9160 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 12-01-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 24-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 8125/MUM/2010 ( / ASSESSMENT YEAR: 2003-04) TRANS POLYURETHANE PVT. LTD. 27A, LAXMI INDL. ESTATE, OFF. LINK ROAD, ANDHERI (W), MUMBAI-400 053 / VS. DY. CIT, RANGE-8(3), MUMBAI ./! ./PAN/GIR NO. AAACT 6526 H ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) ' % & / APPELLANT BY : SHRI RAKESH JOSHI #$ ' % & / RESPONDENT BY : SHRI NEIL PHILIP ' ()* % +, / DATE OF HEARING : 12.01.2015 -./ % +, / DATE OF PRONOUNCEMENT : 25.03.2015 0 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE CON FIRMATION OF THE LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE AC T HEREINAFTER) BY THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-18, MUMBAI (C IT(A) FOR SHORT) DATED 11.10.2010, FOR THE ASSESSMENT YEAR (A.Y.) 2003-04. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE-COMP ANY, IN THE BUSINESS OF MANUFACTURE OF INSULATION PANELS AND DISTRIBUTION OF ICE CREAM, RETURNED ITS INCOME FOR THE YEAR ON 01.12.2003 AT A LOSS OF RS.374.48 LACS. THE ASSESSE E WAS DURING THE COURSE OF ASSESSMENT PROCEEDINGS CALLED UPON TO, I.E., VIDE NOTICE U/S.1 42(1) DATED 27.09.2005, JUSTIFY ITS CLAIM 2 ITA NO. 8125/MUM/2010 (A.Y. 2003-04) TRANS POLYURETHANE PVT. LTD. VS. DY. CIT FOR INTEREST, MADE IN THE SUM OF RS.2,73,95,100/-, SPECIFICALLY REQUIRING THE DETAILS OF THE PAYMENTS MADE, IN-AS-MUCH AS INTEREST TO BANK IS AM ONG THE SUMS SPECIFIED IN SECTION 43B, SO THAT ITS DEDUCTION IS SUBJECT TO PAYMENT. T HE ASSESSEE, IN RESPONSE, FILED A REVISED COMPUTATION OF INCOME ON 09.02.2006, DISALLOWING IT S INTEREST CLAIM AFORE-SAID. IT WAS FURTHER EXPLAINED THAT AS ITS RECORDS AND FACTORY W ERE IN THE POSSESSION OF THE BANK, IT COULD NOT BE ASCERTAINED AS TO HOW MUCH OF THE AMOU NT RECOVERED BY THE BANK HAD BEEN APPROPRIATED BY IT AGAINST THE INTEREST AND, CONSEQ UENTLY, HOW MUCH OF INTEREST IS UNPAID. IN THE ABSENCE OF THE RELEVANT EVIDENCE, I.E., TO S UBSTANTIATE ITS SAID CLAIM, THE ENTIRE INTEREST, AS CLAIMED WAS DISALLOWED, AND THE ASSESS MENT FRAMED EFFECTING THE SAID DISALLOWANCE VIDE ORDER U/S.143(3) DATED 20.02.2006 (COPY ON RECORD), ALSO INITIATING THE PENALTY PROCEEDINGS U/S.271(1)(C) BY ISSUE OF NOTIC E U/S.274 OF EVEN DATE. THE ASSESSEE PLEADED ITS CASE BEFORE THE REVENUE ON THE SAME BA SIS, I.E., OF IT BEING CONSTRAINED FOR WANT OF INFORMATION AS TO THE EXTENT OF THE BANK LI ABILITY OUTSTANDING, WHICH FACT HAD BEEN IN FACT MENTIONED IN THE TAX AUDIT REPORT AS WELL. THE COMPANY WAS IN FACT A SICK COMPANY, REGISTERED WITH BIFR, REPORTING NO PROFIT EVEN IN THE SUBSEQUENT YEARS. THERE WAS AS SUCH NO LOSS OF REVENUE, AND THE CHARGE OF E VASION OF TAX THUS DOES NOT STICK. THE COMPANY HAD IN FACT MADE A ONE-TIME SETTLEMENT (OTS ) WITH ITS BANK, DCB, OFFERING THE GAIN ON OTS, AT RS.926.30 LACS, TO TAX FOR A.Y. 200 6-07. THE SAME NOT FINDING FAVOUR WITH THE REVENUE, THE ASSESSEE IS IN SECOND APPEAL BEFORE US. BEFORE US, THE ASSESSEES PRINCIPAL CONTENTION WAS THAT WHILE THE IMPUGNED INTEREST COMPRISED INTEREST ON BOTH TERM LOAN AND CASH CREDI T TO ITS BANK (DCB), ONLY THE INTEREST ON THE TERM LOAN QUALIFIES AS A SPECIFIED SUM U/S. 43B, SO THAT ITS ALLOWANCE ALONE WOULD BE SUBJECT TO PAYMENT. THE SUBSTITUTION OF THE WORD S TERM LOAN BY THE WORDS LOANS OR ADVANCES IN SECTION 43B(E) WAS DONE ONLY BY FINANC E ACT, 2003 W.E.F. 01.04.2004, SO THAT IT WOULD IMPACT ONLY ASSESSMENTS A.Y. 2004-05 ONWARDS. THE A.O., IN FACT, OUGHT TO HAVE FACTORED THE SAME AND MADE ONLY A PROPORTIONAT E DISALLOWANCE OF INTEREST, I.E., RATHER THAN FOR THE ENTIRE AMOUNT OF RS.273.95 LACS, MAKIN G A SUGGESTIVE CALCULATION BASED ON THE BALANCE OUTSTANDING IN THE TWO ACCOUNTS, I.E., TERM LOAN AND CASH CREDIT, BY APPLYING THE AVERAGE INTEREST RATE, DETERMINED AT 19.10% P.A ., WHICH IT CONTENDED WAS IN FACT 3 ITA NO. 8125/MUM/2010 (A.Y. 2003-04) TRANS POLYURETHANE PVT. LTD. VS. DY. CIT INCUMBENT ON THE A.O. TO DO IN VIEW OF THE BOARDS CIRCULAR NO. 14-XL-35 DATED 11.04.1955. FURTHER ON, INADVERTENT MISTAKE SHOULD NOT WARRANT PENALTY, RELYING FOR THE PURPOSE ON THE DECISION IN PRICE WATERHOUSE COOPERS (P.) LTD. V. CIT [2012] 348 ITR 306 (SC), BESIDES ON OTHERS BY THE TRIBUNAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ON THE OT HER HAND, WOULD SUBMIT THAT THE QUESTION OF A MISTAKE DOES NOT ARISE IN THE PRE SENT CASE IN-AS-MUCH AS THE ASSESSEE ITSELF CONCEDES TO BEING CONSTRAINED FOR WANT OF TH E RELEVANT INFORMATION, I.E., THE PAYMENT APPROPRIATED BY ITS BANK, AND WHICH IT HAS BEEN UNABLE TO EXHIBIT. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEES CASE RESTS ON ITS CLAIM BEING AN IN ADVERTENT MISTAKE, AND WHICH STOOD CORRECTED IN THE FIRST INSTANCE. HOWEVER, AS POINTED OUT BY THE REVENUE AUTHORITIES, THE SAME CANNOT BE SAID TO BE VOLUNTARY, BUT ONLY O N THE REVENUE MAKING A SPECIFIC ENQUIRY IN THE MATTER. FURTHER, THE ASSESSEES CONT ENTION OF BEING CONSTRAINED FOR WANT OF NECESSARY OR RELEVANT INFORMATION IS WITHOUT SUBSTA NTIATION. WHY WOULD NOT THE BANK GIVE OR SHARE THE RELEVANT INFORMATION WITH THE ASSESSEE , WHO RESPONDED ALMOST IMMEDIATELY DURING THE ASSESSMENT PROCEEDINGS, I.E., VIDE WRITT EN SUBMISSIONS DATED 31.01.2006, FOLLOWED BY THE REVISED COMPUTATION, EFFECTING DISA LLOWANCE OF INTEREST, ON 09.02.2006. IT WOULD RATHER BE A CONTRADICTION IN TERMS TO SUGGEST THAT WHILE THE ASSESSEE IS IN THE KNOW OF THE AMOUNT OF THE INTEREST CHARGED BY THE BANK F OR THE YEAR, AND FOR BOTH ITS ACCOUNTS, DULY REFLECTED AS INTEREST ACCRUED AND DUE IN ITS B ALANCE-SHEET AS AT THE RELEVANT YEAR-END, IT DOES NOT KNOW IF, OR TO THE EXTENT, THE SAME IS PAID UP. ALL IT WAS REQUIRED TO DO WAS TO ISSUE A LETTER TO THE BANK SEEKING THE SAID INFORMA TION, I.E., EVEN IF, WHICH AGAIN HAS NOT BEEN SHOWN, THE PAYMENT/S STOOD REALIZED BY THE BAN K DIRECTLY, I.E., ON DISPOSAL OF THE ASSETS UNDER ITS CHARGE. IN FACT, THE SAME COULD BE READILY SHOWN IN-AS-MUCH AS THE ASSESSEE, HAVING BOOKED THE ENTIRE INTEREST ON BOTH THE ACCOUNTS, WHICH IS ONLY ROUTED THROUGH THE SAID ACCOUNTS, NON-PAYMENT OF INTEREST WOULD LEAD TO A CORRESPONDING DIFFERENCE IN THE BANK BALANCE/S, I.E., WITH REFERE NCE TO THAT REFLECTED PER THE BOOKS OF THE 4 ITA NO. 8125/MUM/2010 (A.Y. 2003-04) TRANS POLYURETHANE PVT. LTD. VS. DY. CIT BANK, SO THAT THE ASSESSEE HAS, BY IMPLICATION, NOT RECONCILED ITS BANK ACCOUNT/S WITH THE BANK. EVEN THIS, HOWEVER, HAS NOT BEEN SHOWN. FURTHER STILL, THE ASSESSEE IS A REGULAR ASSESSEE, WELL SERVICED BY TAX AND AUDIT PROFESSIONALS. THE LATTER ISSUING A DISCLAIMER FOR BEING UNABLE TO STATE THE AMOUNT DISALLOWABLE U/S.43B IN THE ABSENCE OF THE RELEVANT INFORMATION, DEFEATS ITS CASE OF IT BEING AN INADVERTENT MISTAKE. ON WHAT BASIS, THEN, ONE MAY ASK, WAS THE DEDUCTION CLAIMED ? THE ONLY COURSE, IN THE ABSENCE OF THE INFORMATIO N, WAS THAT THE ASSESSEE SEEK LEAVE TO REVISE ITS RETURN, WHICH THE LAW EVEN OTH ERWISE EXTENDS, I.E., WHERE SUBSEQUENTLY IT DISCOVERS A CLAIM AS ARISING IN THE FACTS OF ITS CASE. A LEGAL CLAIM, IN FACT, COULD BE PRESSED AT ANY STAGE OF THE ASSESSMENT PROCEEDINGS. THE ASSESSEES PLEA OF NO LOSS TO THE REVENUE IS O F NO CONSEQUENCE IN VIEW OF THE CLEAR PROVISION OF LAW DEFINING THE TERM TAX SOUGH T TO BE EVADED, UNDER EXPLANATION 4 THERETO, AND WITH REFERENCE TO WHICH THE PENALTY IS TO BE LEVIED, AND FOR WHICH REFERENCE STANDS MADE BY THE LD. CIT(A), AND ONLY RIGHTLY SO, TO THE DECISIONS IN CIT V. GOLD COIN HEALTH FOODS (P.) LTD . [2008] 304 ITR 308 (SC) AND UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277 (SC). THE ASSESSEE, THUS, AS APPARENT, HAS NO VALID BASIS IN MAKING A CLAIM FOR BANK INTEREST, MADE AT RS.273.95 LACS, I.E., TO THE EXTE NT COVERED BY SECTION 43B. THAT IS TO SAY THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF IT BEING BASED EITHER ON ANY MATERIAL OR EVEN AS ARISING ON ACCOUNT OF A BONA FIDE MISTAKE, VALIDATING THE CHARGE OF PENALTY IN TERMS OF EXPLANATION 1 TO SECTION 271(1)(C). INCOME TO THAT EXTENT, BUT FOR ITS SCRUTINY BY THE REVENUE, WOULD HAVE ESCAPED ASSESSMENT. THE DEC ISION IN THE CASE OF PRICE WATERHOUSE COOPERS (P.) LTD. (SUPRA) IS INAPPLICABLE IN THE FACTS AND CIRCUMSTAN CES OF THE CASE. WE, ACCORDINGLY, CONFIRM THE PENALTY THEREON, LEVIED AT THE MINIMUM RATE OF 100% OF THE CORRESPONDING TAX SOUGHT TO BE EVADED, TO TH AT EXTENT, SO THAT NO PENALTY COULD BE LEVIED ON THE INTEREST ATTRIBUTABLE TO THE CASH CRE DIT ACCOUNT, WHICH THE A.O. SHALL VERIFY TO HIS SATISFACTION, EXCLUDING ALSO THE INTEREST PAID, IF ANY, ON THE TERM LOAN UP TO THE DUE DATE OF THE FILING THE RETURN, WHICH AGAIN THE A.O. SHALL VERIFY. WE DECIDE ACCORDINGLY, AND THE ASSESSEE SUCCEEDS PARTLY. 5 ITA NO. 8125/MUM/2010 (A.Y. 2003-04) TRANS POLYURETHANE PVT. LTD. VS. DY. CIT 4. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. 1/+2 (341+ % 0 ) 5 + % + 6 ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 25, 201 5 SD/- SD/- (JOGINDER SINGH) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' 7* MUMBAI; 8( DATED : 25.03.2015 ).(. ./ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT 3. ' 9+ ( ) / THE CIT(A) 4. ' 9+ / CIT - CONCERNED 5. <)= #+(3 , , 3/ , ' 7* / DR, ITAT, MUMBAI 6. ?4 @* / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , ' 7* / ITAT, MUMBAI