DCIT 2(3), MUMBAI v. SHARAD FIBRES & YARN PROCESSORS LTD, MUMBAI

ITA 2423/MUM/2012 | 2004-2005
Pronouncement Date: 23-10-2013 | Result: Dismissed

Appeal Details

RSA Number 242319914 RSA 2012
Assessee PAN AABCS9041L
Bench Mumbai
Appeal Number ITA 2423/MUM/2012
Duration Of Justice 1 year(s) 6 month(s) 11 day(s)
Appellant DCIT 2(3), MUMBAI
Respondent SHARAD FIBRES & YARN PROCESSORS LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 23-10-2013
Date Of Final Hearing 08-10-2013
Next Hearing Date 08-10-2013
Assessment Year 2004-2005
Appeal Filed On 12-04-2012
Judgment Text
` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI . . ! ' #'' '$ % ! & BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI VIVEK VARMA JUDICIAL MEMBER . 2423 / / 2012 A.Y. 2004-2005 ITA NO. : 2423/MUM/2012 (ASSESSMENT YEAR: 2004-2005) ACIT -2(3) R. NO. 552 5 TH FLOOR AAYAKAR BHAVAN MAHARSHI KARVE MARG MUMBAI -400 020 VS M/S. SHARAD FIBRES & YARN PROCESSORS LTD. 202 VENKATESH CHAMBERS PRESCOT ROAD FORT MUMBAI -400 001 .: PAN: AABCS 9041 L (APPELLANT) (RESPONDENT) APPELLANT- REVENUE BY : SHRI ABANIKANT NAYAK RESPONDENT- ASSESSEE BY : SHRI VIJAY MEHTA /DATE OF HEARING : 08-10-2013 !' / DATE OF PRONOUNCEMENT : 23-10-2013 ) O R D E R #'' '$ : PER VIVEK VARMA JM: THE INSTANT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 6 MUMBAI DATED 05.01.2012 WHEREIN THE CIT(A) CAN CELLED THE PENALTY OF RS. 1 82 83 210/- LEVIED BY THE AO U/S 271(1)(C) OF TH E INCOME TAX ACT 1961. 2. THE FACTS ARE THAT THE ASSESSEE IS A MANUFACTURE R AND TRADER IN YARN. IN THE ASSESSMENT PROCEEDINGS IT WAS SEEN THAT THE ASSESSEE HAD DEFAULTED IN PAYMENT OF BANK INTEREST TO THE TUNE OF RS. 7 99 20 976/- WHICH SHOULD HAVE BEEN ADDED BACK. BUT THE ASSESSEE HAD ADDED BA CK ONLY RS. 2 89 57 323/- AS PER THE PROVISIONS OF SECTION 43B( E). THE AO THEREFORE ADDED BACK RS. 5 09 63 653/- TO THE INCOME OF THE A SSESSEE. 3. AGGRIEVED THE ASSESSEE APPROACHED THE CIT(A) IN PENALTY PROCEEDINGS WHO AFTER DELIBERATIONS HELD M/S. SHARAD FI BRES & YARN PROCESSORS LTD. ITA 2423/MUM/2012 2 (A) THEY EVEN AFTER DISALLOWED U/S. 43B THE ASSES SED LOSS IS AT RS. 79 57 815/- (B) PRIOR TO AMENDMENT BY THE FINANCE ACT 2003 W.E. F. 01.04.2004 ONLY INTEREST ON ANY TERM LOAN WAS DISALLOWABLE. THE A PPELLANT ITSELF DISALLOWED INTEREST ON TERM LOAN AND COULD NOT TA KE CONGNIZANCE OF THE RECENT AMENDMENT AND EVEN THE AUDITORS DID NOT POINT OUT THE SAME IN THE AUDIT REPORT THE MISTAKE WAS A BONA FIDE MI STAKE. 3. I HAVE GONE THROUGH THE ORDER OF THE AO AND SUB MISSION OF THE APPELLANT. THE FINANCE ACT 2003 W.E.F. 01.04.2004 AMENDED THE PROVISION OF SECTION 43B CLAUSE (E) TO SUBSTITUTE T HE TERM TERM LOAN WITH THE TERM LOAN OR ADVANCES. IT IS SEEN THAT T HE AUDIT REPORT IN FORM 3CD AT SR. NO.21 HAS INDICATED THE INTEREST PERTAIN ING TO TERM LOAN ONLY OF RS. 2 89 57 3231- AND THE APPELLANT IN THE COMPU TATION OF INCOME HAS DISALLOWED THE BANK INTEREST PERTAINING TO TER M LOAN AND FILED THE RETURN OF INCOME AT LOSS OF RS. 5.94 CRORES. EVEN A FTER DISALLOWANCE OF UNPAID INTEREST ON OTHER LOANS THE TOTAL INCOME OF THE APPELLANT IS AT LOSS OF RS.79.57 LACS. THUS IT IS CLEAR THAT THE A PPELLANT DID NOT HAVE ANY MALA FIDE REASON FOR NOT DISALLOWING THE INTERE ST PERTAINING TO LOAN OTHER THAN TERM LOAN ULS.43B(E) AND THE MISTAKE HAP PENED BECAUSE A THE APPELLANT MAY NOT HAVE BEEN AWARE ABOUT THE AME NDMENT MADE IN CLAUSE (E) OF 43B. AOS OBSERVATION IS CORRECT THAT IGNORANCE OF LAW IS NO EXCUSE BUT AS HAS BEEN HELD BY JUSTICE RADHAKRIS HNAN OF BOMBAY HIGH THOUGH IGNORANCE OF LAW IS NO EXCUSE THAT IT CANNOT BE PRESUMED THAT THE ASSESSEE KNOWS LAW ALWAYS. IN ANY CASE AS IT IS A CASE OF BONA FIDE MISTAKE IT IS NOT A FIT CASE FOR LEVY OF PENALTY FOR CONCEALMENT OF INCOME THE PENALTY LEVIED BY THE AO IS THEREFO RE CANCELLED. 4. THE CIT(A) THUS CANCELLED THE PENALTY. 5. AGGRIEVED THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT. 6. BEFORE US THE DR SUBMITTED THAT THE PENALTY HAS BEEN LEVIED BECAUSE THE ASSESSEE HAD FAILED TO MAKE COMPLETE DISALLOWAN CE AS PER THE PROVISIONS OF SECTION 43B(E). HE ALSO SUBMITTED THAT SINCE THE LOSS HAD BEEN REDUCED THE PENALTY BECOME LEVIABLE BECAUSE IT MEANS THAT THERE IS AN ADDITION. HE ALSO SUBMITTED THAT THE CIT(A) DID NOT GO INTO THE BONAFIDES OF THE ASSESSEE TO CONCLUDE THE CANCELLATION OF PENALTY. HE THEREFORE SUBMITTED THAT THE PENALTY IS RIGHTLY LEVIED BY THE AO. 7. THE AR ON THE OTHER HAND SUBMITTED THAT THE INST ANT CASE PERTAINS TO ASSESSMENT YEAR 2004-05 AND THE AMENDMENT IN SECTIO N ADDING THE WORDS LOAN OR ADVANCE WAS INSERTED BY THE FINANCE ACT 2003 W.E.F. 01.0 4.2004 AND EVEN THE AUDITOR WAS UNAWARE OF THE AMENDMENT BECAUSE IN TAR HE HAS TAKEN THE FIGURES OF TERM LOAN ONLY. THE AR THEREF ORE SUBMITTED THAT BEING THE VERY FIRST YEAR OF AMENDMENT WHEREIN EVEN THE AUDITOR WAS UNAWARE OF THE AMENDMENT WAS A BONAFIDE CASE FOR CANCELLATION OF PENALTY AND THAT THE CIT(A) ACCEPTED THIS BONAFIDE OF THE ASSESSEE. THE AR REFERRED TO THE CASE OF M/S. SHARAD FI BRES & YARN PROCESSORS LTD. ITA 2423/MUM/2012 3 COORDINATE BENCH OF PUNE IN THE CASE OF SHRI SUDHIR M PATHAK VS ACIT ITA NO. 470/PUNE/2008 ASSESSMENT YEAR 2004-05 HELD 6. HAVING GONE THROUGH THE DECISIONS CITED WE FI ND THAT IN ALMOST SIMILAR CIRCUMSTANCES IN THE CASE OF PATSON AUTO PRODUCTS P VT. LTD. V/S. ACIT (SUPRA) THE PUNE BENCH OF THE TRIBUNAL HAS DELETED THE PENALTY FOLLOWING THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V/S. MSK CONSTRUCTION (P.) LTD. 296 ITR 18 (MAD.) WHEREIN IT HAS BEEN OBSERVED THAT A DISALLOWANCE MADE U/S. 43B OF THE A CT DOES NOT AMOUNT TO CONCEALMENT WITHIN THE MEANING OF SECTION 271(1)(C ) OF THE ACT. LIKEWISE IN THE CASE OF ACIT V/S. SMT. UJJWALA SANJAY PAWAR (SUPRA) THE PUNE BENCH OF THE TRIBUNAL FOLLOWING T HE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CHANDRAPAL BAGG A VS. ITAT AND ANOTHER (2003) 182 CTR 185 (RAJ.) HAS DELETED THE PENALTY. IN THE SAID CASE THE HONBLE RAJASTHAN HIGH COURT HAS BEEN PLE ASED TO HOLD THAT IF THE DEFAULT OF ASSESSEE IS ATTRIBUTABLE TO WRONG AD VICE OF TAX CONSULTANT PENALTY FOR CONCEALMENT OF INCOME IS NOT LEVIABLE. IN THE PRESENT CASE ALSO THE TAX AUDITOR HAS VERY CLEARLY ACCEPTED HIS MISTAKE ON AFFIDAVIT (PAGE NO. 55 TO 57) OF THE PAPER BOOK IN NOT ITA NO 470/PN/2008 CONSIDERING THE UNPAID INTEREST ON TERM LOAN WHILE PREPARING THE FINAL ACCOUNT AND STATEMENT OF COMPUTATION OF RETURN DUE TO HIS IGNORANCE OF THE AMENDED PROVISIONS OF SEC. 43B(E) REGARDING INT EREST ON LOAN FROM SCHEDULED BANK CAME TO IN EFFECT FROM THE A.Y. 2004 -05 ITSELF. WE FOLLOWING THE ABOVE CITED DECISION OF PUNE BENCH OF THE TRIBUNAL THUS FIND THAT IN THE PRESENT CASE THE MISTAKE COMMITTE D ON THE PART OF THE CONSULTANT ENGAGED FOR THE PURPOSE WAS BONAFIDE IN NATURE FOR WHICH ASSESSEE CANNOT BE PENALISED. WE THUS WHILE SETTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW DIRECT THE A.O TO DELETE THE PENALTY LEVIED U/S.271(1)(C ) AT RS. 4 04 232/-. THE GROUND IS ACC ORDINGLY ALLOWED. 8. HE ALSO PLACED RELIANCE ON THE DECISION OF COORD INATE BENCH AT MUMBAI IN THE CASE OF SUNILCHANDRA VOHRA VS ACIT I TA NO. 4693/MUM/2006 WHEREIN IT WAS HELD THE TAX LAWS IN THIS COUNTY ARE SO COMPLEX AND COM PLICATED THAT EVEN A PERSON SPECIALIZED IN THIS FILED INCLUDING TAX ADM INISTRATORS MAY NOT UNDERSTAND LAW IN THE CORRECT PERSPECTIVE OR A PART ICULAR PROVISION MAY GO UNNOTICED BECAUSE THE NUMBER OF AMENDMENTS MADE TO THE TAX ENACTMENTS FROM YEAR-TO-YEAR. UNDER THESE CIRCUMSTA NCES IT WOULD BE A TRAVESTY OF TRUTH AND JUSTICE TO HOLD THAT THE ASSE SSEE OUGHT TO HAVE KNOWN THE CORRECT LAW AND COMPLY THEREWITH EVEN TH OUGH WAS NOT AWARE OF THE PROVISIONS. THE ASSESSEES EXPLANATION ABOUT IGNORANCE OF LAW COULD BE SAID TO HAVE BEEN SUBSTANTIATED WHEN I T WAS SHOWN THAT (A) HE WAS ASSISTED BY A PROFESSIONAL C.A. WHO HAD NOT BROUGHT TO HIS NOTICE THE APPLICABILITY OF PROVISIONS OF SECTION 2 (22)(E) AND (B) BY MAKING A STATEMENT THAT THIS WAS THE FIRST YEAR IN WHICH THESE PROVISIONS COME TO BE APPLIED IN THE ASSESSEES CAS E. IT COULD THUS BE SEEN THAT THE ASSESSEE TENDERED AN EXPLANATION WHIC H WAS SUBSTANTIATED AND THUS THE BURDEN WAS CAST UPON T HE REVENUE TO PROVE THAT THE EXPLANATION WAS FALSE SO AS TO INVOK E THE EXPLANATION 1 TO SECTION 271(1)(C). EXCEPT MERELY STATING THAT TH E ASSESSEE OUGHT TO HAVE FURNISHED THE LOAN PARTICULARS VOLUNTARILY AL ONG WITH THE RETURN OF INCOME NO OTHER REASON WAS ASSIGNED BY THE TAX AUT HORITIES TO DISPUTE THE BONA FIDES OF THE EXPLANATION. UNDER THE PECULI AR FACTS AND CIRCUMSTANCES IT WAS TO BE HELD THAT THE EXPLANATIO N OF THE ASSESSEE M/S. SHARAD FI BRES & YARN PROCESSORS LTD. ITA 2423/MUM/2012 4 WAS BONA FIDE AND HENCE THE CASE FELL OUTSIDE THE AMBIT OF THE EXPLANATION 1 TO SECTION 271(1)(C). IN OTHER WORDS NO CASE WAS MADE OUT BY THE TAX AUTHORITIES TO LEVY PENALTY UNDER SE CTION 271(1)(C). THEREFORE THE ORDERS OF THE TAX AUTHORITIES WERE T O BE SET ASIDE AND THE PENALTY LEVIED BY THE ASSESSING OFFICER WAS TO BE C ANCELLED. 9. THE AR ALSO PLACED RELIANCE ON THE DECISION OF P WC PVT. LTD VS ACIT REPORTED IN 348 ITR 306 (SC) ALLOWING THE APPEAL THAT THE FACTS OF THE CASE WERE PECULIAR AND SOMEWHAT UNIQUE. NOTWITHSTANDING THAT THE ASSESSEE WAS A REPUTED FIRM AND HAD GREAT EXPERTISE AVAILABLE WITH IT IT WAS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A 'SILLY' MISTAKE. THE FACT THAT THE TAX AUDIT REPORT WAS FILED ALONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOWABLE UN DER SECTION 40A(7) OF THE ACT INDICATED THAT THE ASSESSEE MADE A COMPU TATION ERROR IN ITS RETURN OF INCOME. THE CONTENTS OF THE TAX AUDIT REP ORT SUGGESTED THAT THERE WAS NO QUESTION OF THE ASSESSEE CONCEALING IT S INCOME OR OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. APA RT FROM THE FACT THAT THE ASSESSEE DID NOT NOTICE THE ERROR IT WAS NOT E VEN NOTICED EVEN BY THE ASSESSING OFFICER WHO FRAMED THE ASSESSMENT ORD ER. ALL THAT HAD HAPPENED WAS THAT THROUGH A BONA FIDE AND INADVERTE NT ERROR THE ASSESSEE WHILE SUBMITTING ITS RETURN FAILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THE ASSESSEE SHOULD H AVE BEEN CAREFUL BUT THE ABSENCE OF DUE CARE IN A CASE SUCH AS THE PRES ENT DID NOT MEAN THAT THE ASSESSEE WAS GUILTY OF EITHER FURNISHING I NACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. ON THE PECULIA R FACTS OF THIS CASE THE IMPOSITION OF PENALTY ON THE ASSESSEE WAS NOT J USTIFIED. 10. THE DR IN THE REJOINDER SUBMITTED THAT IF AT AL L THE MISTAKE IS COMMITTED BY THE CA THEN THE CA SHOULD BE HELD RES PONSIBLE FOR THIS MISTAKE. 11. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD AND CASE LAWS CITED. WE FIND THAT THE CASE SQUARELY FALLS WITHIN THE PARAMETERS OF IGNORANCE EVEN BY THE CA WHO CONDUCTED AUDIT AND TAX AUDIT. IN SUCH A CASE THE BONAFIDE OF THE ASSESSEE GETS EXPLAINED AUTOMATICALLY. IN THESE CIRCUMSTANCES THE PENALTY IN OUR OPINION CANNOT BE LEVIED ON THE ASSESSEE. IN SO FAR AS THE BONAFIDES OF THE CA FIRM IS CONCERNED EVEN THE HONBLE SUPREME COURT HAS ACCEPTED THE FAC T THAT CERTAIN SILLY MISTAKES CAN NEVER BE RULED OUT. WE THEREFORE CANNOT HOLD EVEN THE CA TO BE GUILTY OF COMMITTING A MISTAKE BECAUSE THE REL EVANT EXPRESSION WAS INSERTED IN THE RELEVANT ASSESSMENT YEAR ONLY WHICH WENT UNNOTICED BY EVERYONE. M/S. SHARAD FI BRES & YARN PROCESSORS LTD. ITA 2423/MUM/2012 5 12. WE THEREFORE FOLLOWING THE DECISIONS OF THE C OORDINATE BENCHES AND THE HONBLE APEX COURT SUSTAIN THE ORDER OF THE CI T(A). AS A RESULT THE GROUNDS RAISED IN THE APPEAL ARE REJECTED. 13. AS A RESULT REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER 2013. SD/- SD/- ( . . ) ( #'' '$ ) ! ! (P.M. JAGTAP) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATE: 23 RD OCTOBER 2013 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) & & ' ( ) - 6 MUMBAI / THE CIT (A)-6 MUMBAI. 4) & & ' 2 MUMBAI / THE CIT -2 MUMBAI 5) )*+ & -. / THE D.R. E BENCH MUMBAI. 6) +/ 0 COPY TO GUARD FILE. &12 / BY ORDER / / TRUE COPY / / [ 3 / 4 5 & -. DY. / ASSTT. REGISTRAR I.T.A.T. MUMBAI *784 . . * CHAVAN SR. PS