Bhurji Super-Tek Industries Private Limited , Delhi V. ACIT, Circle-4(2), New Delhi

ITA 9691/DEL/2019

AI Insights

Bhurji Super-Tek Industries Pvt. Ltd. appealed against the order of the CIT(A)-2, New Delhi, which confirmed the addition made by the Assessing Officer (AO) under Section 40(a)(ia) of the Income Tax Act, 1961, due to a default in TDS (Tax Deducted at Source) and a TDS mismatch. The AO had also levied a penalty under Section 271(1)(c) for concealment of income. The Tribunal examined the applicability of the penalties under Sections 271(1)(c) and 40(a)(ia), referencing several Supreme Court judgments to determine the necessity of mens rea for penalty imposition. Ultimately, the Tribunal concluded that the penalty was improperly levied as the requisite mens rea was not present.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 131713 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-10-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 22-12-2019
• Other Referred Cases: Union of India Vs. Dharmendra Textiles Processors 295 ITR 244 (SC), CIT Vs. Zoom Communication Pvt. Ltd. 327 ITR 510 (SC), CIT Vs. Reliance Petro Products Pvt. Ltd. in CA No. 2463 of 2010
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 271(1)(c)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHIBENCH ‘A’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 9691/Del/2019 : Asstt. Year : 2016-17 Bhurji Super-Tek Industries Pvt. Ltd., C/o M. K. Bhatt & Co., CAs, 302, Triveni Complex, E-10/12, Jawahar Park, Laxmi Nagar, New Delhi-110092 Vs ACIT, Circle-4(2), New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AAACB1403D Assessee by : Sh. M. K. Bhatt, CA & Sh. Malav Goswami, Adv. Revenue by : Sh. Kanav Bali, Sr. DR Date of Hearing: 19.10.2022 Date of Pronouncement: 28.12.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT(A)-2, New Delhi dated 08.11.2019. 2. The AO made addition on account of default of TDS u/s 40(a)(ia) of the Income Tax Act, 1961 and disallowance of Rs.24,591/- on account of TDS mis-match. 3. We have referred to the page no. 4 of the penalty Order wherein with regard to penalty u/s 271(1)(c) of the Income Tax Act, 1961, the Assessing Officer has noted that “the case of the assessee falls within the mischief of Explanation 1 of Section 271C as set out hereinabove.” At para no. 7, the AO calculated tax and levied penalty @ 100% of the tax sought to be evaded. ITA No. 9691/Del/2019 Bhurji Super-Tek Industries Pvt. Ltd. 2 4. The ld. CIT(A) confirmed the order of the AO relying on the judgments of Union of India Vs. Dharmendra Textiles Processors 295 ITR 244 (SC) and CIT Vs. Zoom Communication Pvt. Ltd. 327 ITR 510 (SC). 5. We have gone through both the case laws cited by the revenue. The issue before us involves disallowance made on account of Section 40(a)(ia). We have also gone through the judgment of Hon’ble Apex Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. in CA No. 2463 of 2010 wherein the Hon’ble Apex Court held as under: “ 8 . T h e r e f o r e , i t i s o b v i o u s t h a t i t m u s t b e s h o w n t h a t t h e c o n d i t i o n s u n d e r S e c t i o n 2 7 1 ( 1 ) ( c ) m u s t e x i s t b e f o r e t h e p e n a lt y i s i m p o s e d . T h e r e c a n b e n o d i s p u t e t h a t e v e r y t h i n g w o u l d d e p e nd u p o n t h e R e t u r n f i l e d b e c a u s e t h a t i s t h e o n l y d o c u m e n t , w h er e t h e a s s e s s e e c a n f u r n i s h t h e p a r t i c u l a r s o f h i s i n c o m e . W h e n s u ch p a r t i c u l a r s a r e f o u n d t o b e i n a c c u r a t e , t h e l i a b i l i t y w o u l d a r i s e . I n D i l i p N . S h r o f f V s . J o i n t C o m m i s s i o n e r o f I n c o m e T a x , M u m b a i & A n r . [ 2 0 0 7 ( 6 ) S C C 3 2 9 ] , t h i s C o u r t e x p l a i n e d t h e t e r m s " c o n c e a l m e n t of i n c o m e " a n d " f u r n i s h i n g i n a c c u r a t e p a r t i c u l a r s " . T h e C o u r t w e n t o n t o h o l d t h e r e i n t h a t i n o r d e r t o a t t r a c t t h e p e n a l t y u n d e r S e c t i o n 2 7 1 ( 1 ) ( c ) , m e n s r e a w a s n e c e s s a r y , a s a c c o r d i n g t o t h e C o u r t , t h e wo r d " i n a c c u r a t e " s i g n i f i e d a d e l i b e r a t e a c t o r o m i s s i o n o n b e h a l f o f t h e a s s e s s e e . I t w e n t o n t o h o l d t h a t C l a u s e ( i i i ) o f S e c t i o n 2 7 1 ( 1 ) p r o v i d e d f o r a d i s c r e t i o n a r y j u r i s d i c t i o n u p o n t h e A s s e s s i n g A u t h or i t y , i n a s m u c h a s t h e a m o u n t o f p e n a l t y c o u l d n o t b e l e s s t h a n t h e a mo u n t o f t a x s o u g h t t o b e e v a d e d b y r e a s o n o f s u c h c o n c e a l m e n t of p a r t i c u l a r s o f i n c o m e , b u t i t m a y n o t e x c e e d t h r e e t i m e s t h e r e o f . I t w a s p o i n t e d o u t t h a t t h e t e r m " i n a c c u r a t e p a r t i c u l a r s " w a s n o t d e f i n e d a n y w h e r e i n t h e A c t a n d , t h e r e f o r e , i t w a s h e l d t h a t f u r n i s hi n g o f a n a s s e s s m e n t o f t h e v a l u e o f t h e p r o p e r t y m a y n o t b y i t s e l f b e ITA No. 9691/Del/2019 Bhurji Super-Tek Industries Pvt. Ltd. 3 f u r n i s h i n g i n a c c u r a t e p a r t i c u l a r s . I t w a s f u r t h e r he l d t h a t t h e a s s e s s e e m u s t b e f o u n d t o h a v e f a i l e d t o p r o v e t h a t h i s e x p l a n a t i o n i s n o t o n l y n o t b o n a f i d e b u t a l l t h e f a c t s r e l a t i ng t o t h e s a m e a n d m a t e r i a l t o t h e c o m p u t a t i o n o f h i s i n c o m e w e r e n o t d i s c l o s e d b y h i m . I t w a s t h e n h e l d t h a t t h e e x p l a n a t i o n m u s t b e p r e c ed e d b y a f i n d i n g a s t o h o w a n d i n w h a t m a n n e r , t h e a s s e s s e e h a d f u r ni s h e d t h e p a r t i c u l a r s o f h i s i n c o m e . T h e C o u r t u l t i m a t e l y w e nt o n t o h o l d t h a t t h e e l e m e n t o f m e n s r e a w a s e s s e n t i a l . I t w a s o n l y o n t h e p o i n t o f m e n s r e a t h a t t h e j u d g m e n t i n D i l i p N . S h r o f f V s . Jo i n t C o m m i s s i o n e r o f I n c o m e T a x , M u m b a i & A n r . w a s u p s e t . I n U n i o n o f I n d i a V s . D h a r a m e n d r a T e x t i l e P r o c e s s o r s ( c i t e d s u p r a ) , a f t e r q u o t i n g f r o m S e c t i o n 2 7 1 e x t e n s i v e l y a n d a l s o c o n s i d e r i n g S e c t i on 2 7 1 ( 1 ) ( c ) , t h e C o u r t c a m e t o t h e c o n c l u s i o n t h a t s i n c e S e c t i o n 2 7 1( 1 ) ( c ) i n d i c a t e d t h e e l e m e n t o f s t r i c t l i a b i l i t y o n t h e a s s e s s e e f o r t h e c o n c e a l m e n t o r f o r g i v i n g i n a c c u r a t e p a r t i c u l a r s w h i l e f i l i n g R e t ur n , t h e r e w a s n o n e c e s s i t y o f m e n s r e a . T h e C o u r t w e n t o n t o h o l d t ha t t h e o b j e c t i v e b e h i n d e n a c t m e n t o f S e c t i o n 2 7 1 ( 1 ) ( c ) r e a d w i t h E x pl a n a t i o n s i n d i c a t e d w i t h t h e s a i d S e c t i o n w a s f o r p r o v i d i n g re m e d y f o r l o s s o f r e v e n u e a n d s u c h a p e n a l t y w a s a c i v i l l i a b i l i t y a nd , t h e r e f o r e , w i l l f u l c o n c e a l m e n t i s n o t a n e s s e n t i a l i n g r e d i e n t f o r - a t tr a c t i n g c i v i l l i a b i l i t y a s w a s t h e c a s e i n t h e m a t t e r o f p r o s e c u ti o n u n d e r S e c t i o n 2 7 6 - C o f t h e A c t . T h e b a s i c r e a s o n w h y d e c i s i o n i n D i l i p N . S h r o f f V s . J o i n t C o m m i s s i o n e r o f I n c o m e T a x , M u m b a i & A n r . ( c it e d s u p r a ) w a s o v e r r u l e d b y t h i s C o u r t i n U n i o n o f I n d i a V s . D h a r am e n d r a T e x t i l e P r o c e s s o r s ( c i t e d s u p r a ) , w a s t h a t a c c o r d i n g t o t h is C o u r t t h e e f f e c t a n d d i f f e r e n c e b e t w e e n S e c t i o n 2 7 1 ( 1 ) ( c ) a n d S e c t i on 2 7 6 - C o f t h e A c t w a s l o s t s i g h t o f i n c a s e o f D i l i p N . S h r o f f V s. J o i n t C o m m i s s i o n e r o f I n c o m e T a x , M u m b a i & A n r . ( c i t e d s u p r a ) . H o w e v e r, i t m u s t b e p o i n t e d o u t t h a t i n U n i o n o f I n d i a V s . D h a r a m e n d r a T e x t i l e P r o c e s s o r s ( c i t e d s u p r a ) , n o f a u l t w a s f o u n d w i t h th e r e a s o n i n g i n t h e d e c i s i o n i n D i l i p N . S h r o f f V s . J o i n t C o m m i s s i on e r o f I n c o m e T a x , M u m b a i & A n r . ( c i t e d s u p r a ) , w h e r e t h e C o u r t e x p l a in e d t h e m e a n i n g o f t h e t e r m s " c o n c e a l " a n d i n a c c u r a t e " . I t w a s o n l y t h e u l t i m a t e ITA No. 9691/Del/2019 Bhurji Super-Tek Industries Pvt. Ltd. 4 i n f e r e n c e i n D i l i p N . S h r o f f V s . J o i n t C o m m i s s i o n e r o f I n c o m e T a x , M u m b a i & A n r . ( c i t e d s u p r a ) t o t h e e f f e c t t h a t m e n s r e a w a s a n e s s e n t i a l i n g r e d i e n t f o r t h e p e n a l t y u n d e r S e c t i o n 2 7 1 ( 1 ) ( c ) t h a t t h e d e c i s i o n i n D i l i p N . S h r o f f V s . J o i n t C o m m i s s i o n e r o f I n c o m e T a x , M u m b a i & A n r . ( c i t e d s u p r a ) w a s o v e r r u l e d . ” 6. Hence, keeping in view, the rationale of the Hon’ble Court, the penalty levied in the instant case is liable to be deleted. 7. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 28/12/2022. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 28/12/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR