DIANA WATCHES AND ANCILLARIES P. LTD, MUMBAI v. DCIT 5(1), MUMBAI

ITA 1459/MUM/2009 | 2004-2005
Pronouncement Date: 01-07-2011 | Result: Allowed

Appeal Details

RSA Number 145919914 RSA 2009
Assessee PAN AAACD4235D
Bench Mumbai
Appeal Number ITA 1459/MUM/2009
Duration Of Justice 2 year(s) 3 month(s) 27 day(s)
Appellant DIANA WATCHES AND ANCILLARIES P. LTD, MUMBAI
Respondent DCIT 5(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 01-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 01-07-2011
Date Of Final Hearing 23-03-2010
Next Hearing Date 23-03-2010
Assessment Year 2004-2005
Appeal Filed On 04-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI R.S.SYAL AM AND SMT.ASHA VIJAYARAGHAVAN JM ITA NO.1459/MUM/2009 : ASST.YEAR 2004-2005 M/S.DIANA WATCHES AND ANCILLARIES P.LTD. FLAT NO.22 A/B ROYAL ACCORD PLOT NO.17 OPP. LOKHANDWALA COMPLEX ANDHERI (WEST) MUMBAI 400 053. PA NO.AAACD4235D. VS. THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 5(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI BHARAT SHAH RESPONDENT BY : SHRI T.T.JACOB O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 16.12.2008 UPHOLDING THE PENALTY OF RS.5 00 000 IMPOSED BY THE ASSESSING OFFICER U/S.27 1(1)(C) OF THE ACT IN RELATION TO THE ASSESSMENT YEAR 2004-2005. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED ITS RETURN DECLARING LOSS OF RS.97 42 070. THE BOOK PROFIT U/S .115JB WAS DECLARED AT RS.53 42 241. IN THE ASSESSMENT MADE U/S.143(3) TH E ASSESSING OFFICER DETERMINED THE LOSS OF RS.97 42 070 AS PER NORMAL PROVISIONS. HOWEVER THE BOOK PROFIT U/S.115JB WAS DETERMINED AT RS.87 42 965. THE DIFFE RENTIAL AMOUNT IN THE BOOK PROFIT AS OFFERED BY THE ASSESSEE AND AS COMPUTED B Y THE AO OF RS.34 00 725 REPRESENTED THE CLAIM MADE TOWARDS REDUCTION FROM T HE BOOK PROFIT ON ACCOUNT OF UNABSORBED ACCUMULATED DEPRECIATION. THE A.O. NOTED THAT THERE WERE NO SUCH UNABSORBED ACCUMULATED BOOK DEPRECIATION OR BOOK LO SS AS ON 31.3.2004 TO BE SET OFF FROM NET PROFIT FOR THE CURRENT YEAR. ON CONFRO NTED THE ASSESSEE AGREED THAT THE SAID AMOUNT OF RS.34.00 LAKHS WAS IN FACT ADJUST ED AGAINST THE INCOME IN THE ITA NO.1459/MUM/2009 M/S.DIANA WATCHES AND ANCILLARIES P.LTD. 2 IMMEDIATELY PRECEDING YEAR AND THE SAME MAY NOT BE ALLOWED AS REDUCTION AGAINST THIS YEARS BOOK PROFIT. IN THIS BACKDROP OF THE FA CTS THE A.O. IMPOSED PENALTY OF RS.5 LAKHS ON THE ADDITION OF RS.34.00 LACS MADE BY HIM WHICH CAME TO BE APPROVED IN THE FIRST APPEAL. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTED THAT SECTION 115JB CONTAINS A SP ECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COMPANIES. EXPLANATION (1) TO THIS SECTION DEFINES BOOK PROFIT TO MEAN THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCO UNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF THE COMPANIES ACT 1956 AS INCREASED AND REDUCED BY THE ITEMS ENUMERATED IN THE EXPLANATION. THIS `BOOK PROFIT FORMS THE BASIS FOR COMPUTATION OF PAYMENT OF TAX BY CERTAIN COMPANIES. SUB-SECTION (4) OF SECTION 115JB PROVIDES THAT EVERY COMPANY TO WHICH THIS SECTION APPLIES SHALL SUBMIT A REPORT IN THE PRESCRIBED FORM FROM AN ACCO UNTANT AS DEFINED IN EXPLANATION BELOW SECTION (2) OF SECTION 288 CERTIFYING THAT T HE BOOK PROFIT HAS BEEN COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION. THE EFFECT OF SUB- SECTION (4) IS THAT EVERY COMPANY WHICH IS COVERED U/S.115JB IS SUPPOSED TO GET ITS ACCOUNTS AUDITED AND OBTAIN REPORT IN FORM NO.29B. SUCH REPORT IS TO BE FURNISHED BY THE AUDITORS OF THE COMPANY DETERMINING THE AMOU NT OF BOOK PROFIT ON THE BASIS OF WHICH THE LIABILITY U/S.115JB IS DETERMINED. 4. ADVERTING TO THE FACTS OF THE INSTANT CASE IT IS AN ADMITTED POSITION THAT THE REDUCTION OF RS.34.00 LAKHS FROM THE BOOK PROFIT WA S NOT AVAILABLE INASMUCH AS SUCH AMOUNT WAS ADJUSTED AGAINST THE PROFIT OF EARL IER YEAR. TO THIS EXTENT WE APPROVE THE VIEW OF THE ASSESSING OFFICER THAT THE SAID AMOUNT OF RS.34.00 LAKHS COULD NOT HAVE BEEN REDUCED FROM THE BOOK PROFIT. H OWEVER IN THE INSTANT PROCEEDINGS WE ARE CONCERNED WITH THE IMPOSITION O F PENALTY U/S.271(1)(C) WHICH DEALS WITH THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. IF THE ASSESSEE HAD UNDER OBLIGATION TO COMPUTE THE BOOK ITA NO.1459/MUM/2009 M/S.DIANA WATCHES AND ANCILLARIES P.LTD. 3 PROFIT AS PER SECTION 115JB AND IT HAD WRONGLY CLAI MED DEDUCTION FOR AN AMOUNT WHICH WAS OTHERWISE NOT AVAILABLE THE CASE WOULD H AVE BEEN COVERED WITHIN THE MISCHIEF OF SECTION 271(1)(C). HOWEVER IN THE INST ANT CASE THE REQUIREMENT OF COMPUTING THE BOOK PROFIT HAS BEEN LEFT OVER TO THE AUDITOR FOR MAKING COMPUTATION. THE COMPUTATION OF SUCH BOOK PROFIT A ND THE ULTIMATE TAX LIABILITY IS A TEDIOUS JOB WHICH HAS BEEN ASSIGNED TO THE C.AS. WHO ARE EXPERT IN THE FIELD OF ACCOUNTING. HERE IS A CASE IN WHICH THE COMPUTATIO N OF BOOK PROFIT WAS REQUIRED TO BE DONE BY THE AUDITOR WHO WHILE WORKING OUT SUCH BOOK PROFIT INADVERTENTLY CLAIMED DEDUCTION OF RS.34.00 LAKHS WHICH WAS OTHER WISE NOT AVAILABLE. THE RESTING OF ASSESSEES CLAIM ON THE STRENGTH OF SUCH CERTIFICATE ISSUED BY THE AUDITOR WHICH WAS EVENTUALLY FOUND TO BE NOT ENTIRELY CORRE CT CANNOT BE BROUGHT WITHIN THE PURVIEW OF CONCEALMENT OR FURNISHING OF ACCURATE PA RTICULARS OF INCOME. RECENTLY THE MUMBAI BENCH OF THE TRIBUNAL IN M/S.FINOGLOBAL EXPORTS LIMITED VS. DCIT IN ITA NO.685/MUM/2008 HAS DELETED THE PENALTY IMPOSED BY THE A.O. U/S.271(1)(C) WHICH WAS BASED ON DISCREPANCY IN THE CERTIFICATE I SSUED BY THE CHARTERED ACCOUNTANT FOR THE PURPOSE OF CLAIMING DEDUCTION U/ S.80HHC. THE ORDER DT. 7 TH APRIL 2010 HAS BEEN RENDERED BY THE PRESENT COMBIN ATION OF MEMBERS. 5. THE HONBLE DELHI HIGH COURT IN CIT VS. S.DHANABAN [(2009) 309 ITR 268 (DEL.)] WAS ALSO PLEASED TO CANCEL THE PENALTY U/S.271(1) (C) WHICH WAS IMPOSED BY THE ASSESSING OFFICER IN VIEW OF HIGHER CLAIM OF DEDUCTION ON THE GROUND THAT THE ASSESSEE FILED CLAIM ON THE BASIS O F INCORRECT ADVICE GIVEN BY HIS CHARTERED ACCOUNTANT. SIMILAR VIEW WAS EXPRESSED B Y THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. DEEP TOURS PRIVATE LIMITED [(2005) 274 ITR 603 (P&H)] . 6. THE ABOVE DISCUSSION LEADS TO INESCAPABL E CONCLUSION THAT WHERE A PARTICULAR CLAIMED LODGED BY THE ASSESSEE ON THE B ASIS OF HIS C.A.S CERTIFICATE TURNS OUT TO BE PARTLY INCORRECT THAT CANNOT BE A CASE CALLING FOR IMPOSITION OF ITA NO.1459/MUM/2009 M/S.DIANA WATCHES AND ANCILLARIES P.LTD. 4 PENALTY U/S 271(1) OF THE ACT. IN VIEW OF THE FORE GOING DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S.271(1) (C). WE THEREFORE ORDER FOR THE DELETION OF THIS PENALTY. 7. IN THE RESULT THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 7 TH DAY OF MAY 2010. SD/- SD/- ( ASHA VIJAYARAGHAVAN ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 7 TH MAY 2010 . DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A) - V MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI. ITA NO.1459/MUM/2009 M/S.DIANA WATCHES AND ANCILLARIES P.LTD. 5 DATE INITIAL 1. DRAFT DICTATED ON 28.04.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 29.04.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.