GENUS INNOVATION LIMITED, Jaipur V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR

ITA 824/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5942 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 31-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUNI PAL JCIT DHK
• Keywords: Question of law; Reasonable cause; Wrong claim; Condonation of delay
• Section: 271(1)(c); 43B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH SMC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 824/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12. M/S. GENUS INNOVATION LTD., SPL-2B, RICO INDUSTRIAL AREA, SITAPURA, TONK ROAD, JAIPUR. CUKE VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACCG 4460 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. RUNI PAL (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 18.09.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 19/09/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER D ATED 22.12.2017 OF LD. CIT (APPEALS), KOTA ARISING FROM THE PENALTY ORDER PASS ED UNDER SECTION 271(1)(C) OF THE IT ACT FOR THE ASSESSMENT YEAR 2011-12. THERE IS A DELAY OF 86 DAYS IN FILING THE PRESENT APPEAL. THE ASSESSEE HAS FILED AN APPLICAT ION FOR CONDONATION OF DELAY ALONG WITH THE MEDICAL RECORD OF THE A/R OF THE ASSESSEE TO EXPLAIN THE CAUSE OF DELAY. 2. I HAVE HEARD THE LD. A/R OF THE ASSESSEE AS WELL AS THE LD. D/R AND CAREFULLY PERUSED THE MEDICAL RECORD PRODUCED IN SUPPORT OF T HE APPLICATION FOR CONDONATION OF DELAY. I AM SATISFIED THAT THE ASSESSEE WAS HAVING A REASONABLE CAUSE FOR NOT PRESENTING THE APPEAL WITHIN THE PERIOD OF LIMITATI ON. ACCORDINGLY THE DELAY OF 86 2 ITA NO. 824/JP/2018 M/S. GENUS INNOVATION LTD., JAIPUR. DAYS IN FILING THE PRESENT APPEAL IS CONDONED. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT (APPEALS) ERRED IN LAW AND ON FACT S ON BOTH WHILE NOT ALLOWING THE APPEAL FILED BY THE ASSESSEE. 2. THE LD. CIT (APPEALS) ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE WRITTEN SUBMISSIONS AND RELEVANT EV IDENCES FILED BY THE ASSESSEE DURING THE HEARING OF APPEAL IN REG ARD TO IMPOSE THE PENALTY, BY ALLEGING THAT THE ASSESSING OFFICER IMPOSED THE PENALTY AFTER CLEAR PROVISIONS CONTAINE D IN SECTION 271(1)(C). 3. ANY OTHER GROUND OF APPEAL WHICH MAY BE RAISED D URING THE COURSE OF HEARING OF APPEAL. 3. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HE ASSESSEE CLAIMED DEDUCTION IN RESPECT OF ADVANCE PAYMENT OF SALES TA X/VAT UNDER SECTION 43B WHICH WAS DISALLOWED BY THE AO. THOUGH THE MATTER WAS CA RRIED TO THIS TRIBUNAL, HOWEVER, THIS TRIBUNAL IN THE QUANTUM APPEAL HAS CONFIRMED T HE DISALLOWANCE MADE BY THE AO UNDER SECTION 43B IN RESPECT OF THE ADVANCE PAYMENT OF SALES TAX/VAT. THE LD. A/R HAS POINTED OUT THAT THE TRIBUNAL WHILE DECIDING TH E ISSUE AGAINST THE ASSESSEE HAS FOLLOWED THE DECISION OF DELHI BENCHES OF THE TRIBU NAL IN CASE OF MARUTI UDYOG VS. DCIT, 92 ITD 119. HOWEVER, THE SAID DECISION HAS B EEN SUBSEQUENTLY REVERSED BY THE HONBLE DELHI HIGH COURT VIDE JUDGMENT DATED 07 .12.2017 IN ITA NO. 31/2005. EVEN OTHERWISE, THE CLAIM OF DEDUCTION IN RESPECT O F THE ADVANCE PAYMENT OF VAT UNDER SECTION 43B IS A DEBATABLE ISSUE AND, THEREFO RE, IT WAS A BONAFIDE CLAIM OF THE ASSESSEE WHICH WAS DISALLOWED BY THE AO AND CONSEQU ENTLY THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE NOT ATTRACTED ON THE IS SUE OF DISALLOWANCE OF CLAIM BEING DEBATABLE ISSUE. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF 3 ITA NO. 824/JP/2018 M/S. GENUS INNOVATION LTD., JAIPUR. HONBLE SUPREME COURT IN CASE OF CIT VS. MODIPON LT D. 400 ITR 1 (SC) AS WELL AS THE DECISION IN CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD. 322 ITR 158 (SC). THUS THE LD. A/R HAS SUBMITTED THAT WHEN THE CLAIM IN RESPEC T OF ADVANCE PAYMENT OF VAT IS A BONAFIDE CLAIM, THEN THE DISALLOWANCE OF THE SAME B Y THE AO WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C). 4. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE DISALLOWANCE OF CLAIM OF THE ASSESSEE HAS BEEN CONFIRMED BY THIS TRIBUNAL IN THE PENALTY PROCEEDIN GS, THEREFORE, IT IS A CLEAR CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME BY MAKI NG A WRONG CLAIM. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, THERE IS NO DISPUTE THAT THE PENALTY UNDER SECTION 271(1)(C) HAS BEEN LEVIED BY THE AO IN RESPECT OF DISALLOWANCE OF CLAIM OF AD VANCE PAYMENT OF VAT. THE ASSESSEE CLAIMED THE SAID AMOUNT UNDER SECTION 43B WHICH PROVIDES THAT THE CLAIM TO BE ALLOWED ONLY ON THE PAYMENT AND NOT ON ACCRUA L BASIS. THOUGH THE SAID DISALLOWANCE BY THE AO HAS BEEN UPHELD BY THIS TRIB UNAL, HOWEVER, IT IS CLEAR FROM THE DECISION OF THE TRIBUNAL IN QUANTUM PROCEEDINGS THAT THE TRIBUNAL HAS FOLLOWED THE DECISION OF DELHI BENCHES OF THE TRIBUNAL IN CA SE OF MARUTI UDYOG VS. DCIT (SUPRA) WHICH WAS SUBSEQUENTLY REVERSED BY THE HON BLE DELHI HIGH COURT (SUPRA). EVEN THE HONBLE SUPREME COURT IN FURTHER APPEAL IN CASE OF CIT VS. MODIPON LTD (SUPRA) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASS ESSEE AND AGAINST THE REVENUE IN PARA 8 TO 13 AS UNDER :- 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE ON BEHALF O F THE PARTIES. NOTWITHSTANDING THE ACCEPTANCE BY THE REVENUE OF TH E PRACTICE ADOPTED BY THE ASSESSEE-MODIPON LTD. IN ALL THE ASSESSMENT YEARS E XCEPT FOR THE ONES UNDER DISPUTE AS ENUMERATED ABOVE AND THE ABSENCE OF ANY CHALLENGE TO THE DECISIONS 4 ITA NO. 824/JP/2018 M/S. GENUS INNOVATION LTD., JAIPUR. OF THE DELHI AND THE PUNJAB & HARYANA HIGH COURTS, THE PRESENT CHALLENGE WOULD STILL BE ENTERTAINABLE SO LONG AS IT DISCLOSE S A SUBSTANTIAL QUESTION OF LAW OR AN ISSUE IMPACTING PUBLIC INTEREST OR THE SAME H AS THE POTENTIAL OF RECURRENCE IN FUTURE. THE REVENUE CANNOT BE SHUT OU T FROM THE PRESENT PROCEEDINGS MERELY BECAUSE OF ITS ACCEPTANCE OF THE PRACTICE OF ACCOUNTING ADOPTED BY THE ASSESSEE OR ITS ACCEPTANCE OF THE DE CISION OF THE TWO HIGH COURTS IN QUESTION. AN ADJUDICATION OF THE QUE STION(S) ARISING CANNOT BE REFUSED MERELY ON THE ABOVE BASIS. WE WILL, THEREFO RE, HAVE TO PROCEED TO ANSWER THE MERITS OF THE CHALLENGE MADE BY THE REVE NUE IN THE PRESENT APPEALS. 9. DEPOSIT OF CENTRAL EXCISE DUTY IN THE PLA IS A STAT UTORY REQUIREMENT. THE CENTRAL EXCISE RULES, 1944, SPECIFY A DISTINCT PROC EDURE FOR PAYMENT OF EXCISE DUTY LEVIABLE ON MANUFACTURED GOODS. IT IS A PROCED URE DESIGNED TO BRING IN ORDERLY CONDUCT IN THE MATTER OF LEVY AND COLLECTIO N OF EXCISE DUTY WHEN BOTH MANUFACTURE AND CLEARANCES ARE A CONTINUOUS PROCESS . DEBITS AGAINST THE ADVANCE DEPOSIT IN THE PLA HAVE TO BE MADE OF AMOUN TS OF EXCISE DUTY PAYABLE ON EXCISABLE GOODS CLEARED DURING THE PREVI OUS FORTNIGHT. THE DEPOSIT ONCE MADE IS ADJUSTED AGAINST THE DUTY PAYABLE ON R EMOVAL AND THE BALANCE IS KEPT IN THE ACCOUNT FOR FUTURE CLEARANCES/REMOVAL. NO WITHDRAWAL FROM THE ACCOUNT IS PERMISSIBLE EXCEPT ON AN APPLICATION TO BE FILED BEFORE THE COMMISSIONER WHO IS REQUIRED TO RECORD REASONS FOR PERMITTING AN ASSESSEE TO WITHDRAW ANY AMOUNT FROM THE PLA. SUB-RULES (3), (4 ), (5) AND (6) OF RULE 173G INDICATES A STRICT AND VIGOROUS SCRUTINY TO BE EXERCISED BY THE CENTRAL EXCISE AUTHORITIES WITH REGARD TO MANUFACTURE AND R EMOVAL OF EXCISABLE GOODS BY AN ASSESSEE. THE SELF REMOVAL SCHEME AND PAYMENT OF DUTY UNDER THE ACT AND THE RULES CLEARLY SHOWS THAT UPON DEPOSIT IN TH E PLA THE AMOUNT OF SUCH DEPOSIT STANDS CREDITED TO THE REVENUE WITH THE ASS ESSEE HAVING NO DOMAIN OVER THE AMOUNT(S) DEPOSITED. 10. IN CIT V. PANDAVAPURA SAHAKARA SAKKARE KARKHANE LTD. [1992] 198 ITR 690 (KAR.) AND CIT V. NIZAM SUGAR FACTORY LTD. [2002] 120 TAXMAN 378/253 ITR 68 (AP) , CITED AT THE BAR, THE HIGH COURTS OF KARNATAKA AN D ANDHRA PRADESH RESPECTIVELY HAD OCCASION TO CONSIDER AS TO WHETHER THE AMOUNTS CREDITED TO THE MOLASSES STORAGE FUND OUT OF THE SA LE PROCEEDS OF MOLASSES RECEIVED BY THE ASSESSEE CONSTITUTE TAXABLE INCOME OF THE ASSESSEE. UNDER THE SCHEME, THE ASSESSEE HAD NO CONTROL OVER THE AMOUNT S DEPOSITED IN THE FUND AND THE ASSESSEE WAS ALSO NOT ENTITLED TO WITHDRAW ANY AMOUNT THEREFROM WITHOUT THE APPROVAL OF THE AUTHORITIES. FURTHER TH E AMOUNT DEPOSITED COULD BE UTILIZED ONLY FOR THE PURPOSE SPECIFIED. IN THOSE C IRCUMSTANCES, THE HIGH COURT HELD AND IN OUR VIEW CORRECTLY, THAT THE DEPOSITS MADE, THOUGH A PART OF THE SALE PROCEEDS OF THE ASSESSEE, DID NOT CONSTITUTE TAXABLE INCOME AT THE HANDS OF THE ASSESSEE. WE DO NOT SEE WHY THE SA ME ANALOGY WOULD NOT BE APPLICABLE TO THE CASE IN HAND. 11. THE DELHI HIGH COURT IN THE APPEALS ARISING FROM T HE ORDERS PASSED BY IT HAS ALSO TAKEN THE VIEW THAT THE PURPOSE OF INTRODU CTION OF SECTION 43B OF THE CENTRAL EXCISE ACT (SIC. INCOME-TAX ACT) WAS TO PLU G A LOOPHOLE IN THE STATUTE WHICH PERMITTED DEDUCTIONS ON AN ACCRUAL BASIS WITH OUT THE REQUISITE OBLIGATION TO DEPOSIT THE TAX WITH THE STATE. RESUL TANTLY, ON THE BASIS OF MERE 5 ITA NO. 824/JP/2018 M/S. GENUS INNOVATION LTD., JAIPUR. BOOK ENTRIES AN ASSESSEE WAS ENTITLED TO CLAIM DEDU CTION WITHOUT ACTUALLY PAYING THE TAX TO THE STATE. HAVING REGARD TO THE O BJECT BEHIND THE ENACTMENT OF SECTION 43B AND THE PRECEDING DISCUSSIONS, IT WO ULD BE CONSISTENT TO HOLD THAT THE LEGISLATIVE INTENT WOULD BE ACHIEVED BY GI VING BENEFIT OF DEDUCTION TO AN ASSESSEE UPON ADVANCE DEPOSIT OF CENTRAL EXCISE DUTY NOTWITHSTANDING THE FACT THAT ADJUSTMENTS FROM SUCH DEPOSIT ARE MADE ON SUBSEQUENT CLEARANCES/REMOVAL EFFECTED FROM TIME TO TIME. 12. THE ABOVE DISCUSSIONS, COUPLED WITH THE PECULIAR F EATURES OF THE CASE, NOTICED ABOVE I.E. CONSISTENT PRACTICE FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE REVENUE; THE DECISIONS OF THE TWO HIGH COURTS I N FAVOUR OF THE ASSESSEE WHICH HAVE ATTAINED FINALITY IN LAW; AND NO CONTRAR Y VIEW OF ANY OTHER HIGH COURT BEING BROUGHT TO OUR NOTICE, SHOULD LEAD US TO THE CONCLUSION THAT THE HIGH COURTS WERE JUSTIFIED IN TAKING THE VIEW T HAT THE ADVANCE DEPOSIT OF CENTRAL EXCISE DUTY CONSTITUTES ACTUAL PAYMENT OF D UTY WITHIN THE MEANING OF SECTION 43B OF THE CENTRAL EXCISE ACT (SIC. INCOME- TAX ACT) AND, THEREFORE, THE ASSESSEE IS ENTITLED TO THE BENEFIT OF DEDUCTIO N OF THE SAID AMOUNT. 13. WE, THEREFORE, DISMISS THE APPEALS AND AFFIRM THE ORDERS OF THE HIGH COURTS OF DELHI AND CALCUTTA IMPUGNED IN THE P RESENT APPEALS. FROM THE ABOVE FACTS AND CIRCUMSTANCES AS WELL AS T HE DECISION OF THE HONBLE SUPREME COURT, IT IS CLEAR THAT THE CLAIM OF THE AS SESSEE WAS A BONAFIDE CLAIM AND RATHER AN ALLOWABLE CLAIM. THEREFORE, EVEN IF THE SAID CLAIM WAS DISALLOWED BY THE AO, IT WOULD NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME TO ATTRACT THE PROVISIONS OF SECTION 271(1)(C). THE HONBLE SUPREME COURT IN CASE OF CIT VS. RELIA NCE PETROPRODUCTS LTD.(SUPRA) HAS HELD THAT A MERE DISALLOWANCE OF THE CLAIM OF E XPENDITURE, DETAILS OF WHICH HAS BEEN FURNISHED BY THE ASSESSEE WOULD NOT BE VIEWED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. AC CORDINGLY, THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT IS DELETED. 6. THOUGH THE LD. A/R HAS ALSO CHALLENGED THE PENAL TY ORDER ON THE GROUND OF LIMITATION, HOWEVER, IN VIEW OF THE FINDING ON THE MERITS OF THE APPEAL, I DO NOT PROPOSE TO GO INTO THE ISSUE OF VALIDITY OF PENALTY ORDER. 6 ITA NO. 824/JP/2018 M/S. GENUS INNOVATION LTD., JAIPUR. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19/09/201 9. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 19/09/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. GENUS INNOVATION LTD., JAIPU R. 2. THE RESPONDENT THE DCIT CIRCLE-2, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 824/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR