The West Bengal State Co - Operative Marketing Federation Ltd., Kolkata V. D.C.I.T Cir - 36,kolkata., Kolkata

ITA 85/KOL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0511 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 15-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA [ BEFORE SHRI P.K.BANSAL , A . M . & SHRI MAHAVIR SINGH , J.M. ] I.T. A . NO. 85 /KOL/20 1 3 : ASSESSMENT YEAR : 2008 - 09 THE W.B.STATE CO - OPT. MARKETING FEDERATION LTD. ( APPELLANT) V S - (PAN: AABAT 0010H ) D.C.I.T., CIRCLE - 36, KOLKATA ( RESPONDENT ) DATE OF CONCLUDING THE HEA RING : 26 . 05 .201 5 DATE OF PRONOUNCING THE ORDER : 10 .06 .201 5 APPEARANCES : F OR THE ASSESS EE : SHRI MIRAJ D. SHAH, FCA : FOR THE DEPARTM ENT : SHRI KANHIYA LAL KANAK, SR.DR O R D E R PER SHRI P.K.BANSAL, A .M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - XX, KOLKATA DATED 05 . 11 .20 12 FOR THE ASS ESSMENT YE AR 2008 - 09, BY WHICH THE CIT(A) PARTLY ALLOWED THE PENALTY IMPOSED ON THE ASSESSEE BY THE AO VIDE ORDER DATED 27.06.2011. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE SUSTENANCE OF THE PENALTY LEVIED BY THE AO UNDER SECTION 271(1)(C). BRIEF F ACTS OF THE CASE ARE THAT THE ASSESSEE IS AN APEX MARKETING SOCIETY IN COOPERATIVE SECTOR IN WEST BENGAL. ITS ACTIVITIES INCLUDE MARKETING, PROCUREMENT AND DISTRIBUTION OF FERTILIZER AND OTHER AGRICULTURAL INPUTS LIKE JUTE, PADDY, SEEDS, AND PESTICIDES, ET C. THROUGH VARIOUS MEMBER PRIMARY CO - OPERATIVE SOCIETIES. IN THIS 2 IT A NO. 85/KOL/2013 WB STATE CO - OP. MARKETING FEDRN. LTD. : A. Y R: 2008 - 09 CASE, THE ASSESSEE HAS FILED THE RETURN AT AN INCOME OF RS.1,32,45,463/ - ON 03.11.2009. THE ASSESSMENT WAS COMPLETED ON THE RETURNED INCOME OF RS.1,32,45,460/ - BY MAKING CERTAIN DIS ALLOWANCE S AND ALLOWING THE SET - OFF OF THE BUSINESS LOSS FOR THE ASSESSMENT YEAR S 2003 - 04 AND 2004 - 05 IN THE FOLLOWING MANNER: INCOME FROM BUSINESS RS. 5,66,06,763/ - ADD: PROVISIONS FOR AUDIT FEES RS. 30,000/ - PROVISIONS FOR SUNDRY DEBTORS RS. 2,43,00,000/ - (JUTE PRODUCTS) PROVISIONS FOR CLOSING STOCK SUSPENSE RS. 61,60,000/ - PROVISIONS FOR H/TRANSPORT RECEIVABLE RS. 38,37,000/ - PROVISIONS FOR SUSPENSE RS. 1,23,32,000/ - GODOWN MAINTENANCE RS. 3,37,700/ - U/S. 14A RS. 36,950/ - RS.12,69,41,255/ - LESS: BUSINESS LOSS SET - OFF - 1 ) A.Y. 2003 - 04 RS.6,48,15,260/ - 2 ) A.Y. 2004 - 05 RS.5,85,25,995/ - RS.12,69,41,255/ - NIL BALANCE BUSINESS LOSS FOR A.Y. 2004 - 05 & OTHER A.YRS C ARRIED FORWARD AS PER ACT. INCOME FROM OTHER SOURCES RS. 4,69,99,816/ - GROSS TOTAL INCOME RS. 4,69,99,816/ - LESS: DEDUCTION UNDER SECTION 80P RS. 3,37,54,353/ - TOTAL INCOME RS. 1,32,45,463/ - R/OFF RS. 1,32,45,460/ - 2.1 TH E ASSESSEE HAD NOT GONE ON APPEAL IN RESPECT OF THE DISALLOWANCES MADE, AS, ACCORDING TO HIM, HE HAS TO MAKE CERTAIN PROVISIONS IN ACCORDANCE WITH THE WEST BENGAL STATE COOPERATIVE ACT. THE ASSESSEE HAS ADDED BACK THE PROVISIONS FOR FBT, DEPRECIATION ON WI P IN ITS COMPUTATION OF INCOME BUT DID NOT ADD BACK OTHER DISALLOWANCES. THE AO INITIATED THE PENALTY UNDER 3 IT A NO. 85/KOL/2013 WB STATE CO - OP. MARKETING FEDRN. LTD. : A. Y R: 2008 - 09 SECTION 271(1)(C) FOR CONCEALMENT OF INCOME AND FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. ULTIMATELY, AFTER GIVING THE OPPORTUNITY TO THE ASSESSEE, THE AO LEVIED THE PENALTY AT RS.1,45,22,000/ - , BEING 100% OF TAX SOUGHT TO BE EVADED. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND SUSTAINED THE PENALTY IN RESPECT OF ADDITION MADE DUE TO PROVISION FOR SUNDRY DEBTORS AND PROVISION FOR SUSPENSE. 3. BEFORE US, THE LD. AR HAS VEHEMENTLY CONTENDED THAT IT IS NOT A CASE OF CONCEALMENT OF PARTICULARS OF INCOME OR FILING OF INACCURATE PARTICULARS. THE ASSESSEE HAS DULY DISCLOSED ALL THE PARTICU LARS. THE PROVISION HAS BEEN MADE BY THE ASSESSEE, AS PER THE SUGGESTION OF THE GOVERNMENT AUDITOR, VIDE THEIR REPORT DATED 20.06.2008. THE ASSESSEE IS NOT AWARE OF AND WHILE MAKING THE COMPUTATION, THE PROFIT HAS NOT TO BE TAKEN AS PER THE AUDITED PROFIT & LO SS A/C. AND THEREFORE, A BONA FIDE MISTAKE HAS BEEN COMMITTED BY THE ASSESSEE BUT THAT BONA FIDE MISTAKE DOES NOT ENVISAGE THE PENALTY AS THERE WAS PROPER DISCLOSURE ABOUT THE PARTICULARS OF THE INCOME AS WELL AS PARTICULARS OF EACH OF THE PROVISIONS MADE BY THE ASSESSEE. THERE WAS NO INTENTION OF THE ASSESSEE TO CONCEAL THE PARTICULARS OF ITS INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE AO HAS APPLIED THE PROVISION OF EXPLANATION 4(A) TO SECTION 271(1)(C). THIS EXPLANATION IS APPLICABLE WHEN THE AMOUNT OF THE INCOME HAS THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERTING THE LOSS INTO INCOME. IN THE CASE OF THE ASSESSEE, NEITHER NET LOSS DECLARED IN THE RETURN WAS REDUCED NOR THE LOSS HAS BEEN CONVERTED INTO THE INCOME. RELIAN CE WAS PLACED ON 4 IT A NO. 85/KOL/2013 WB STATE CO - OP. MARKETING FEDRN. LTD. : A. Y R: 2008 - 09 THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT - VS - RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158. 3.1 THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE TAX AUTHORITIES BELOW. 4. WE HEARD THE RIVAL SUBMISSIONS AND CA REFULLY CONSIDERED THE SAME. WE HAVE ALSO GONE THROUGH THE CASE LAWS AS WELL AS RELEVANT PROVISION OF SECTION 271(1)(C). WE NOTED THAT UNDER SECTION 271(1)(C), PENALTY CAN BE IMPOSED, IF THE AO, IN THE COURSE OF ANY PROCEEDING UNDER THE ACT, IS SATISFIED T HAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IF THE AO WAS SATISFIED IN THIS REGARD THAT THE ASSESSEE HAS COMMITTED EITHER OF THE DEFAULTS, THE AO MAY DIRECT SUCH PERSON TO PAY BY WAY OF P ENALTY IN ADDITION TO THE TAX, IF ANY PAYABLE, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FURNISHING OF INACCURATE PARTICULA RS OF SUCH INCOME. THIS IS AN UNDISPUTED FACT THAT THE PROVISIONS, WHICH HAVE BEEN DISALLOWED BY THE AO, ARE NOT DEDUCTIBLE, WHILE COMPUTING THE TOTAL INCOME, AS PER THE PROVISIONS OF INCOME - TAX ACT. THESE PROVISIONS MIGHT HAVE BEEN MADE ON THE SUGGESTION OF GOVERNMENT AUDITORS BUT WILL NOT BECOME AN ALLOWABLE EXPENDITURE UNDER THE INCOME - TAX ACT. IF THOSE PROVISIONS WERE ALLOWABLE, THE ASSESSEE WOULD HAVE COME IN APPEAL BEFORE THE APPELLATE AUTHORITIES. CLAIMING THOSE PROVISIONS AS DEDUCTION UNDER THE INCO ME TAX ACT, IT SHALL PROVE THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED THE INACCURATE PARTICULARS OF INCOME. THEREFORE, WE DO NOT AGREE WITH THE LD. A.R. THAT THE ASSESSEE HAS NOT CONCEALED THE PARTICULARS OF 5 IT A NO. 85/KOL/2013 WB STATE CO - OP. MARKETING FEDRN. LTD. : A. Y R: 2008 - 09 INCOME OR FURNISHED THE INACCURATE PARTICULARS OF THE INCOME. IT IS NOT A CASE WHERE THE ASSESSEE HAS CLAIMED AN EXPENDITURE WHICH MAY OR MAY NOT BE ALLOWABLE UNDER THE INCOME - TAX ACT AS IS IN THE CASE OF CLAI M OF INTEREST BY THE ASSESSEE I N THE CASE OF RELIANCE PETRO PRODUC TS PVT. LTD. ( SUPRA ), THE DECISION AS RELIED ON BY THE ASSESSEE, IN OUR OPINION, WILL NOT ASSIST THE ASSESSEE. THE ASSESSEE IN THIS CASE HAS CLAIMED THE DEDUCTION OF THE PROVISIONS , WHICH , HE WAS FULLY AWARE OF , THAT THE PROVISIONS ARE NOT DEDUCTIBLE UNDER THE LAW. IT IS NOT THE PLEA OF THE ASSESSEE THAT THE ASSESSEE HAS COMMITTED A BONA FIDE MISTAKE BY CLAIMING THE SAID DEDUCTION. THUS, IN OUR OPINION, THE ASSESSEE HAS COMPLIED WITH THE BASIC CONDITION THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INC OME OR FURNISHED THE INACCURATE PARTICULARS OF INCOME. 4.1 NOW, THE QUESTION ARISES HOW THE PENALTY SHOULD BE COMPUTED. SECTION 271(1)(C)(III) AUTHORIZED THE AO TO IMPOSE THE PENALTY WHICH SHOULD NOT BE LESS THAN 100% OR MORE THAN 300% OF THE TAX SOUGHT TO BE EVADED. THE AMOUNT OF TAX SOUGHT TO BE EVADED HAS BEEN DEFINED UNDER EXPLANATION 4, WHICH READS AS UNDER: EXPLANATION 4. FOR THE PURPOSES OF CLAUSE (III) OF SUB - SECTION, THE EXPRESSION THE AMOUNT OF TAX SOUGHT TO BE EVADED , - (A) IN ANY CASE WHERE THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAS THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERTING THAT LOSS INTO INCOME, MEANS THE TAX THAT WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAD SUCH INCOME BEEN THE TOTAL INCOME ; 6 IT A NO. 85/KOL/2013 WB STATE CO - OP. MARKETING FEDRN. LTD. : A. Y R: 2008 - 09 (B) IN ANY CASE TO WHICH EXPLANATION 3 APPLIES, MEANS THE TAX ON THE TOTAL INCOME ASSESSED ( AS REDUCED BY THE AMOUNT OF ADVANCE TAX, TAX DEDUCTED AT SOURCE, TAX COLLECTED AT SOURCE AND SELF - ASSESSMENT TAX PAID BEFORE THE ISSUE OF NOTICE UNDER SECTION 148); (C) IN ANY OTHER CASE, MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED. 4.2 THE AO, WE NOTED IN THE INSTANT CASE, H AS LEVIED THE PENALTY BY APPLYING EXPLANATION 4(A). FROM THE READING OF EXPLANATION 4(A), IT IS APPARENT THAT THIS CLAUSE DEFINES THE AMOUNT OF TAX TO BE EVADED. THE TAX THAT WOULD HAVE BEEN CHARGEABLE ON THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEAL ED OR THE INACCURATE PARTICULARS HAVE BEEN FURNISHED, HAD SUCH INCOME BEEN THE TOTAL INCOME, T HE PROFIT THAT IT HAS THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERTING THAT LOSS INTO THE INCOME. IN THE CASE OF THE ASSESSEE, WE NOTED THAT T HE ASSESSEE HAS RETURNED THE INCOME AT RS.1,32,45,460/ - AND THE INCOME HAS BEEN ASSESSED AT RS.1,32,45,460/ - , EVEN THOUGH THERE HAS BEEN ADDITION MADE BY THE AO IN RESPECT OF PROVISION FOR SUNDRY DEBTORS AND PROVISION FOR SUSPENSE, FOR WHICH THE PENALTY HA S BEEN SUSTAINED BY THE CIT(A) BUT THE ADDITION SO MADE DOES NOT A FFECT EITHER REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERTING THE LOSS DECLARED IN THE RETURN INTO INCOME. THE ASSESSEE HAS NOT DECLARED LOSS IN THE RETURN. THEREFORE, IN OUR OPINION, EXPLANATION 4(A) ON THE BASIS OF WHICH, THE PENALTY HAS BEEN IMPOSED AND CONFIRMED BY THE CIT(A), WILL NOT APPLY . T HE CLAUS E (B) AND (C) OF EXPLANATION 4 , EVEN THOUGH DEFINES THE AMOUNT OF TAX SOUGHT TO BE EVADED BUT THEY ARE ALSO NOT 7 IT A NO. 85/KOL/2013 WB STATE CO - OP. MARKETING FEDRN. LTD. : A. Y R: 2008 - 09 APPLICAB LE IN THE CASE OF THE ASSESSEE , AS TAX ON THE TOTAL INCOME ASSESSED REMAINS THE SAME AND EVEN THERE IS NO DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABLE AS SUCH TOTAL INCOME BE REDUCED BY THE AMOUNT OF T HE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED. THIS IS A SETTLED LAW IF THE COMPUTATION PROVISION FAILS, THERE CANNOT BE ANY PENALTY. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HON BLE SUPREM E COURT IN THE C ASE OF CIT - VS - GOLD COIN HEALTH FOOD PVT. LTD. 304 ITR 308 . IN THIS CASE, WE NOTED THAT QUESTION INVOLVED WAS: - (WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLATE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT THE PENALTY UNDE R SECTION 17(1)(C) OF THE INCOME TAX ACT, 1961 CANNOT BE LEVIED, IF THE RETURNED INCOME IS A LOSS IN THE CASES PRIOR TO THE AMENDMENT IN THE YEAR 2002) 4.3 ON THIS QUESTION, THE HON BLE SUPREME COURT TOOK THE VIEW THAT EXPLANATION 4 TO SECTION 271(1)(C)(I II) OF THE INCOME TAX ACT, 1961 REGARDING THE IMPOSITION OF PENALTY, EVEN IF THE RETURNED INCOME IS A LOSS, IS CLARIFICATORY AND NOT SUBSTANTIVE. IT APPLIES EVEN TO THE ASSESSMENT YEARS PRIOR TO APRIL 2003, THE DATE ON WHICH IT WAS BROUGHT INTO FORCE. THE FACTS INVOLVED IN THIS CASE WERE THAT THE INCOME DISCLOSED AND THE INCOME ASSESSED WAS NEGATIVE. THE FACTS OF THIS CASE WERE DIFFERENT FROM THE FACTS OF THE ASSESSEE S CASE. IN THE CASE OF THE ASSESSEE, THE INCOME DISCLOSED AND THE INCOME ASSESSED ARE THE SAME. SINCE, IN OUR OPINION, EXPLANATION 4(A) IS NOT APPLICABLE AS THE ADDITION MADE DOES NOT A FFECT THE LOSS DECLARED IN THE RETURN OR CONVERTS THE LOSS INTO INCOME, THE 8 IT A NO. 85/KOL/2013 WB STATE CO - OP. MARKETING FEDRN. LTD. : A. Y R: 2008 - 09 EXPLANATION 4(A) IS NOT APPLICABLE. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE PENALTY IMPOSED BY THE AO UNDER SECTION 271(1)(C). 5 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDE R PRONOUNCED IN THE OPEN C OURT ON 10.06. 2015 . SD/ - SD/ - ( MAHAVIR SINGH ) (P.K.BANSAL) JUDICIAL MEM BER ACCOUNTANT MEMBER DATED : 10.06. 2015 TALUKDAR(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . THE W.B. STATE CO - OPERATIVE MARKETING FEDERATION LTD.1582 , RAJDANGA MAIN ROAD, SOUTH END ENCLAVE, 3 RD FLOOR, KOLKATA 700 0 17 2 DCIT, CIRCLE - 36, KOLKATA 3 . THE CIT(A), 4. CIT, 5 . DR, TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA