ACIT, CHENNAI v. FL Smidth Limited, CHENNAI

ITA 1229/CHNY/2016 | 2002-2003
Pronouncement Date: 30-09-2016

Appeal Details

RSA Number 122921714 RSA 2016
Assessee PAN AABCR0346N
Bench Chennai
Appeal Number ITA 1229/CHNY/2016
Duration Of Justice 4 month(s) 25 day(s)
Appellant ACIT, CHENNAI
Respondent FL Smidth Limited, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Department
Bench Allotted B
Date Of Final Hearing 25-07-2016
Next Hearing Date 25-07-2016
Assessment Year 2002-2003
Appeal Filed On 05-05-2016
Judgment Text
IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH CHENNAI . . BEFORE SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY JUDICIAL MEMBER ./ I T.A. NO. 1 229 /MDS/201 6 / ASSESSMENT YEAR :20 0 2 - 0 3 THE ASSISTANT COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 2( 1 ) CHENNAI 600 034 . VS. M/S. FL SMIDTH LIMITED NO. 34 EGATOOR KELAMBAKKAM OLD M AHABALIPURAM ROAD CHENNAI 603 103. [PAN:AA BCR0346N ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI SUPRIYO PAL JCIT / RESPONDENT BY : SHRI N. VIJAYAKUMAR PAUNA / DATE OF HEARING : 2 5 . 0 7 .201 6 / DATE OF P RONOUNCEMENT : 30 . 0 9 .201 6 / O R D E R PER DUVVURU RL REDDY JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS ) 6 CHENNAI DATED 2 4 . 0 2 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 0 2 - 0 3. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 [ ACT IN SHO RT] . I.T.A. NO . 1 229 /M/ 16 2 2 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DESIGN FABRICATION AN D SUPPLY OF CEMENT EQUIPMENT AND . T HE ASSESSEE HAS FILED ITS RETURN OF FRINGE INCOME FOR THE ASSESSMENT YEAR 2002 - 03 ON 31.10.2002 DECLARING TOT AL INCOME OF .3 10 70 066/ - . THE ASSESSMENT WAS COMPLETED UNDER S ECTION 143(3) OF THE ACT DETERMINING THE INCOME AT .9 22 42 335/ - . SUBSEQUENTLY THE ASSESSMENT WAS REVISED UNDER SECTION 154 OF THE ACT DETERMINING AN INCOME OF .9 26 68 392/ - . THEREAFTE R AGAIN ON 31.12.2008 A REVISION WAS MADE GIVING EFFECT TO THE ORDER DATED 22.06.2007 OF THE ITAT CHENNAI DETERMINING THE INCOME AT .9 16 60 121/ - . REASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUANCE OF NOTICE UNDER S ECTION 148 OF THE ACT ON 23.03.2009 AND THE REASSESSMENT WAS COMPLETED AT THE TOTAL INCOME OF .9 99 04 240/ - ON 24.1 2. 2009 . PE NALTY WAS IMPOSED UNDER S ECTION 271(1)(C) OF THE ACT VIDE THE IMPUGNED ORDER DATED 28.06.2010 AMOUNTING TO .29 43 150/ - . THE PENALTY WAS LEVIED IN RESPECT OF REST RICTION OF CLAIM OF DEDUCTION UNDER S ECTION 80HHB OF THE ACT. 3. AGAINST THE PENALTY ORDER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND BY RELYING ON VARIOUS CASE LAW FILED A DETAILED WRITTEN SUBMISSIONS DATED 19.02.2016 WHEREI N THE ASSESSEE HAS SUBMITTED AS UNDER: 1.1 APPELLANT IS AN ENGINEERING MULTINATIONAL COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE SUPPLY AND SUPERVISION OF ERECTION & COMMISSIONING OF LARGE CEMENT PLANTS IN INDIA AS WELL AS OUTSIDE INDIA. I.T.A. NO . 1 229 /M/ 16 3 1.2 IN RE SPECT OF PROJECTS CARRIED OUTSIDE INDIA THE APPELLANT HAD BEEN CLAIMING DEDUCTION U/S. 80HHB OF THE ACT. COPIES OF CERTIFICATES ISSUED BY THE CHARTERED ACCOUNTANTS (CA CERTIFICATE) IN FORM NO.10CCAH FOR THE AY'S 2000 - 01 & 2001 - 02 IS ENCLOSED IN ANNEXURE - I FOR YOUR IMMEDIATE REFERENCE. 1.3 AS PER SECTION 80HHB(1) OF THE ACT AN ASSESSEE IS ENTITLED TO CLAIM DEDUCTION ON THE PROFITS DERIVED FROM THE BUSINESS OF THE EXECUTION OF FOREIGN PROJECTS. 1.4 UPTO THE FINANCIAL YEAR 1999 - 2000 DEDUCTION WAS ALLO WABLE AT THE RATE OF 50% OF THE PROFITS DERIVED FROM FOREIGN PROJECTS U/S 80HHB. CLAUSE (II) TO SUB - SECTION (3) OF SECTION 80HHB STIPULATED A CONDITION THAT 50% OF THE SAID PROFITS IS TO BE TRANSFERRED TO A RESERVE ACCOUNT KNOWN AS 'FOREIGN PROJECTS RESERV E ACCOUNT'. 1.5 FROM THE FINANCIAL YEAR 2000 - 2001 THE QUANTUM OF DEDUCTION AVAILABLE TO AN ASSESSEE WAS REDUCED TO 40% 30% 20% AND 10% RESPECTIVELY FOR THE PREVIOUS YEARS ENDED 31.03.2001 31.03.2002 31.03.2003 AND 31.03.2004. CONSEQUENTIAL AMENDMEN T WAS ALSO MADE TO CLAUSE (II) TO SUB - SECTION (3) OF SECTION 80HHB TO PROVIDE FOR THE RESPECTIVE PERCENTAGE OF PROFITS TO BE TRANSFERRED TO THE 'FOREIGN PROJECTS RESERVE ACCOUNT'. 1.6 FOR THE SUBJECT AY 2002 - 03 THE APPELLANT IS ELIGIBLE TO CLAIM 80HHB D EDUCTION AT THE RATE OF 30% OF THE PROFITS DERIVED FROM FOREIGN PROJECTS. 1.7 DURING THE SUBJECT AY 2002 - 03 THE APPELLANT HAD OBTAINED THE CA CERTIFICATE IN FORM 10CCAH FROM A CHARTERED ACCOUNTANT TO CERTIFY THE COMPUTATION OF DEDUCTION U/S 80HHB AS REQ UIRED U/S 80HHB(3)(IA). A COPY OF THE SAID CERTIFICATE IS ATTACHED AS ANNEXURE 2. 1.8 THE APPELLANT SUBMITS THAT THE CHARTERED ACCOUNTANT WHILE COMPUTING THE AMOUNT TO BE TRANSFERRED TO 'FOREIGN PROJECTS RESERVE ACCOUNT' UNDER CLAUSE (II) TO SUB - SECTION (3) OF SECTION 80HHB ERRONEOUSLY APPLIED THE RATE OF 50% ON THE DEDUCTION U/S 80HHB INSTEAD OF APPLYING A RATE OF 30% ON THE PROFITS. CONSEQUENTLY THE AMOUNT TRANSFERRED TO FOREIGN PROJECTS RESERVE ACCOUNT WAS LOWER BY RS. 82 44 120 ALTHOUGH THE APPELLANT COULD HAVE TRANSFERRED A HIGHER AMOUNT TO THE RESERVE ACCOUNT AS MAY BE EVIDENT FROM THE PROFIT AND LOSS ACCOUNT FOR THE FINANCIAL YEAR ENDED MARCH 2002 (REFER ANNEXURE 3). I.T.A. NO . 1 229 /M/ 16 4 1.9 DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE LEARNED AO RESTRIC TED THE CLAIM OF DEDUCTION UNDER SECTION 80HHB TO THE EXTENT OF THE AMOUNT TRANSFERRED TO 'FOREIGN PROJECTS RESERVE ACCOUNT. THE APPELLANT ACKNOWLEDGED THE INADVERTENT ERROR; RECOMPUTED THE BUSINESS INCOME AND ALSO PAID DUE TAXES THEREON. 1.10 HOWEVER THE AO INITIATED PENAL PROCEEDINGS U/S 271(1)(C) FOR CONCEALMENT/FURNISHING OF INACCURATE PARTICULARS OF INCOME AND LEVIED A PENALTY OF RS.29 43 150 BEING 100% OF THE CONSEQUENTIAL TAX LEVY. 1.11 WE SUBMIT THAT THE COMPANY HAD SUFFICIENT PROFITS AVAILAB LE FOR TRANSFER TO 'FOREIGN PROJECTS RESERVE ACCOUNT' AND AS SUCH THE APPELLANT HAD TRANSFERRED THE SAID SUM RELYING ON THE CERTIFICATE ISSUED BY THE CHARTERED ACCOUNTANT (REFER P&L ACCOUNT IN ANNEXURE 2). 1.12 IT MAY ALSO BE NOTED THAT IN THE PRECEDING PREVIOUS YEARS THE APPELLANT HAD BEEN DULY TRANSFERRING THE REQUISITE QUANTUM TO THE 'FOREIGN PROJECTS RESERVE ACCOUNT' AS REQUIRED U/S 80HHB EVEN WHEN THE APPELLANT HAD INCURRED OVERALL LOSSES. THEREFORE WE SUBMIT THAT THERE IS NO MALA - FIDE INTENTION ON THE PART OF THE APPELLANT TO TRANSFER A LOWER AMOUNT TO SUCH RESERVES. THE APPELLANT HAS A GOOD TRACK RECORD OF PAYING TAXES DULY AND WAS BEING COMPLIANT WITH SECTION 80HHB FOR ALL OF PREVIOUS YEARS. 1.13 THE AO HAS FAILED TO APPRECIATE THE FACT THAT THERE WAS ALL INADVERTENT HUMAN ERROR ON THE PART OF THE CHARTERED ACCOUNTANT (WHO WAS DIFFERENT FROM THE CA WHO ISSUED THE CERTIFICATE IN EARLIER YEARS) WHILE ISSUING THE CERTIFICATE U/S 80HHB AND AS SUCH THE AO HAS NOT EXAMINED THE AFORESAID FACTS IN THE RIGHT PERSPECTIVE WHILE PROCEEDING TO LEVY PENALTY U/S 271(1)( C) OF THE ACT. 3.1. AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE AND ALSO BY CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS THE LD. CIT(A) DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 4. ON BEING AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND BY RELYING ON THE GROUNDS RAISED IN THE APPEAL THE LD. DR HAS SUBMITTED THAT SINCE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS THE DELETION OF LEVY I.T.A. NO . 1 229 /M/ 16 5 OF PENALTY IS UNWARRANTED AND PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERTED. ON THE OTHER HAND BY REITERATING THE SUBMISSIONS AS MADE BEFORE THE LD.CIT(A) THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS WARRANTING LEVY OF PENALTY AND PRAYED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE SUSTAINED. 5. WE HAVE HEARD BOTH SIDES PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. CONSEQUENT UPON THE ORDER OF THE TRIBUNAL VIDE ITS ORDER DATED 22.06.2007 THE DEPARTMENT HAS REALIZED THAT THERE WAS INCOME ESCAPED ASSESSMENT AND THEREAFTER REASSESSMENT PROCEEDINGS WERE INITIATED AND COMPLETED THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ON 23.03.2009. AS SUCH BASED ON THE PARTICULARS FURNISHED BY THE ASSESSEE THE DEPARTMENT HAS NOT PROPERLY VERIFIED THE PARTICULARS OF THE ASSESSEE WHILE DOING THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT DATED 31.03.2005. 6. DURING THE COURSE OF PENALTY PROCEEDINGS THE ASSESSEE HAS REPRESENTED THAT WHILE ISSUING THE CERTIFICATE THE CHARTERED ACCOUNTANT HAS INADVERTENTLY OMITTED TO CONSIDER THE CEILING IN RESPECT OF AMOUNT CREDITED BY THE ASSESSEE TO FOREIGN PROJECTS RESERVE ACCOUNT THEREBY THE CLAIM MADE BY THE ASSESSEE WAS DISALLOWED. OTHERWISE THE DEPARTMENT DID NOT HAVE ANY INCRIMINATING MATERIAL EVIDENCE FOR EVEN FOR INITIATING REASSESSMENT I.T.A. NO . 1 229 /M/ 16 6 PROCEEDINGS OR LEADING TO LEVY OF PENALTY DURING THE COURSE OF PENALTY PROCEEDI NGS EXCEPT RELYING ON VARIOUS CASE LAW BY THE ASSESSING OFFICER. IN THE FIRST APPELLATE ORDER THE LD. CIT(A) HAS GIVEN A CONCURRENT FINDINGS THAT THE ASSESSING OFFICER HAS NOT DISCHARGED HIS ONUS. IN THE PENALTY ORDER THE ASSESSING OFFICER HAS NOT BROUGH T ANY MATERIAL ON RECORD AS TO WHAT CONSTITUTES INACCURATE PARTICULARS OF INCOME IN THE ASSESSEE S CASE AND HOW HE HAS ARRIVED AT THE SATISFACTION THAT THE SAME CONSTITUTE FURNISHING OF INACCURATE PARTICULARS WITHIN THE MEANING OF SECTION 271(1)(C) OF TH E ACT. IN THIS CASE THE ASSESSEE HAS FURNISHED ALL THE DETAILS OF EXPENDITURE AS WELL AS INCOME IN ITS RETURN FOR ASSESSMENT. THERE WAS NO FINDING OF THE ASSESSING AUTHORITY THAT ANY OF THE DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE I NCORRECT OR ERRONEOUS OR FALSE. IT IS AN A DMITTED FACT THAT ONLY ON THE INADVERTENT MISTAKE OF THE CHARTERED ACCOUNTANT THE ASSESSEE HAS MADE A CLAIM UNDER SECTION 80HHB OF THE ACT. APART FROM THE ASSESSEE EVEN THE ASSESSING OFFICER WHO FRAMED THE ORIGIN AL ASSESSMENT ORDER MADE A MISTAKE IN OVERLOOKING THE CONTENTS OF THE TAX AUDIT REPORT AND THE TAX AUDIT REPORT SUGGEST THAT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QUESTION OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. ALL THAT HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONAFIDE AND INADVERTENT ERROR THE C.A. FAILED TO NOTE THE CEILING IN RESPECT OF AMOUNT CREDITED BY THE ASSESSEE TO FOREIGN PROJECT RESERVE ACCOUNT WHILE COMPUTING THE DEDUCTION UNDER SE CTION 80HHB OF THE ACT THAT I.T.A. NO . 1 229 /M/ 16 7 BY ITSELF WOULD NOT IN OUR CONSIDERED OPINION ATTRACT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. OUR ABOVE VIEW HAS BEEN DULY FORTIFIED BY THE HON BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PRIVATE LTD VS. CIT 348 ITR 306 (SC). MOREOVER IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 THE HON BLE SUPREME COURT HAS OBSERVED THAT A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INAC CURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS . UNDER THE ABOVE FACTS AND CIRCUMSTANCES WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. THUS THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7 . IN THE RESULT THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 30 TH SEPTEMBER 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) A CCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI DATED THE 30 . 0 9 .201 6 VM/ - / COPY TO: 1. / APPELLANT 2. / RESPONDENT 3. ( ) / CIT(A) 4. / CIT 5. / DR & 6. / GF.