CHEROKEE INDIA P. LTD, MUMBAI v. ACIT 8(1), MUMBAI

ITA 2909/MUM/2010 | 2004-2005
Pronouncement Date: 20-07-2011 | Result: Allowed

Appeal Details

RSA Number 290919914 RSA 2010
Assessee PAN AABCC5480G
Bench Mumbai
Appeal Number ITA 2909/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 7 day(s)
Appellant CHEROKEE INDIA P. LTD, MUMBAI
Respondent ACIT 8(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 20-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 20-07-2011
Date Of Final Hearing 12-07-2011
Next Hearing Date 12-07-2011
Assessment Year 2004-2005
Appeal Filed On 13-04-2010
Judgment Text
1 ITA2909 /M/2010 M/ S CHEROKEE INDIA P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C BEFORE SHRI D.K. AGARWAL J.M. AND SHRI R.K. PANDA A.M. ITA NO. 2909/MUM/2010 ASSESSMENT YEAR 2004-05 CHEROKEE INDIA PVT. LTD. UNIT 94/95 SDF III SEEPZ ANDHERI (E) MUMBAI -96. PAN AABCC5480G VS. ACIT 8(1) CIT-VIII AAYKAR BHAWAN M.K. ROAD MUMBAI.400020. APPELLANT RESPONDENT APPELLANT BY SHRI RAMESH IYER RESPONDENT BY SHRI P.K.B. MENON ORDER PER R.K. PANDA A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DT. 01.02.2010 OF CIT(A)- 16 MUMBAI RELATING TO A.Y. 2004-05. 2. THE ASSESSEE IN ITS GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE PENALTY LEVIED BY THE A.O. U/S 271(1 )(C) OF THE ACT. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PCB ASSEMBLIES AND MAGNETIC COMPONENTS. THE ASSESSEE COMPANY IN THE RETURN OF INCOME FILED HAD CLAIMED DEDUCTION U/S 80HHC AMOUNTING TO ` 15 40 527/-. DURING THE COURSE OF ASSESSMENT PROCEEDING THE A.O. NOTED THAT THE ASSESSEE HAS CL AIMED DEDUCTION U/S 80HHC WITHOUT SETTING OFF THE BROUGHT FORWARD LOSSE S OF EARLIER YEARS. IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF IPCA LABORATORIES VS. DCIT REPORTED IN 266 ITR 521 THE A.O. WAS OF THE O PINION THAT THE ASSESSEE IS 2 ITA2909 /M/2010 M/ S CHEROKEE INDIA P. LTD. NOT ENTITLED TO CLAIM DEDUCTION U/S 80HHC SINCE IT WAS HAVING BROUGHT FORWARD LOSSES OF EARLIER YEARS RESULTING IN NET LOSSES. H E THEREFORE CONFRONTED THE SAME TO THE ASSESSEE. REJECTING THE VARIOUS EXPLAN ATIONS GIVEN BY THE ASSESSEE THE A.O. DISALLOWED THE CLAIM OF DEDUCTIO N U/S 80HHC ON THE GROUND THAT AFTER TAKING INTO ACCOUNT BOTH THE UNABSORBED DEPRECIATION AS WELL AS BROUGHT FORWARD LOSS THE ASSESSEE IS NOT ENTITLED TO GET ANY DEDUCTION U/S 80HHC. 3.1 THE A.O. FURTHER NOTED THAT THE ASSESSEE HAS PA ID EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESIC AFTER THE S PECIFIED DUE DATE. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE A.O. DISALLOWED AN AMOUNT OF ` 3 46 083/- BEING THE AMOUNT PAID AFTER SPECIFIED D UE DATE. THE A.O. ALSO DISALLOWED AN AMOUNT OF ` 9812/- BEING THE INTEREST ON DELAYED PAYMENT OF TDS. 3.2 SUBSEQUENTLY THE A.O. INITIATED PENALTY PROCEE DINGS U/S 271(1)(C) OF THE ACT . REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE A.O. HELD THAT HAD THE ASSESSEES CASE NOT BEEN SELECTED FOR SCRUTINY THE ASSESSEE COULD HAVE BENEFITED BY FILING INACCURATE PARTICULARS OF INCOME AND THE ASSESSEE TOOK A CHANCE WITH THE DEPARTMENT BY FILING INACCURATE P ARTICULARS OF INCOME. SINCE THE ASSESSEE IN THE INSTANT CASE HAS CLAIMED EXCESS DEDUCTION WHICH IT WAS NOT ENTITLED TO CLAIM THEREFORE PROVISIONS OF SECTION 271(1)(C) ARE CLEARLY ATTRACTED. HE ACCORDINGLY LEVIED PENALTY OF ` 5 66 390/- BEING THE MINIMUM PENALTY LEVIABLE U/S 271(1)(C). IN APPEAL THE LD. CIT(A) UPHELD THE ACTION OF THE A.O. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE AS SESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATOR IES (SUPRA) RELIED ON BY THE A.O. IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE DECISION OF THE HONBLE SUPREME COURT CAME IN THE MONTH OF MARCH 2 004 AND THE ASSESSEE 3 ITA2909 /M/2010 M/ S CHEROKEE INDIA P. LTD. FILED ITS RETURN IN THE MONTH OF OCTOBER 2004. HE SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AGROVET LTD . ACIT REPORTED IN 164 TAXMAN 256 AFTER CONSIDERING THE DECISION IN THE CA SE OF IPCA LABORATORY LTD. (SUPRA) HAS HELD THAT IF THERE IS PROFIT FROM EXPOR T ACTIVITY THE QUESTION OF ADJUSTING ANY LOSSES AS ENUNCIATED BY THE APEX COUR T IN THE CASE OF IPCA LABORATORY LTD. (SUPRA) DOES NOT ARISE AT ALL. THU S INSPITE OF THE ORDER OF THE HONBLE APEX COURT IN THE CASE OF IPCA LABORATORY L TD. (SUPRA) THE MATTER IS NOT CONCLUSIVE IN CASE THE ASSESSEE HAS PROFITS FRO M EXPORT ACTIVITIES. THE SAME IS THE CASE WITH THE ASSESSEE FOR THE RELEVANT YEAR SINCE IT IS HAVING PROFITS DURING THE YEAR. IT WAS ONLY IN THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SHRIKE CONSTRUCTION EQUIPMENT L TD. REPORTED IN 161 TAXMAN 212 THAT THE HONBLE SUPREME COURT HELD THA T FOR DETERMINING BUSINESS PROFITS U/S 80HHC THE UNABSORBED BUSINESS LOSSES OF THE EARLIER YEARS SHOULD BE SET OFF U/S 72 OF THE ACT BEFORE CL AIMING DEDUCTION U/S 80HHC. THE ABOVE DECISION OF THE HONBLE APEX COURT CAME A FTER FILING OF THE RETURN. THEREFORE WHEN A LEGAL DECISION IS NOT FREE FROM D OUBTS AT THE TIME OF FILING OF THE RETURN OF INCOME AND SINCE THE ASSESSEE HAS TAK EN THE BENEFIT OF THE DECISION WHICH IS IN ITS FAVOUR THEREFORE IT CANN OT BE SAID THAT THE ASSESSEE HAS MADE A WRONG CLAIM AND THEREFORE NO PENALTY U/S 271(1)(C) OF THE ACT IS ATTRACTED. 4.1 SO FAR AS THE PENALTY LEVIED ON ACCOUNT OF ADDI TION OF DELAYED PAYMENT OF PF AND ESIC BEYOND THE GRACE PERIOD HE SUBMITTED T HAT OUT OF THE TOTAL DISALLOWANCE OF ` 3 46 083/- MADE BY THE A.O. AN AMOUNT OF ` 56 326/- WAS SUSTAINED BY THE LD. CIT(A). HE SUBMITTED THAT THE RE WAS NO WILLFUL DEFAULT OR DELIBERATE ACT ON THE PART OF THE ASSESSEE TO CONCE AL THE SAID FACTS SINCE FULL DETAILS WERE FILED IN THE TAX AUDIT REPORT FILED AL ONG WITH THE RETURN OF INCOME. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME. 4 ITA2909 /M/2010 M/ S CHEROKEE INDIA P. LTD. 4.2 AS REGARDS THE PENALTY LEVIED ON ACCOUNT OF DIS ALLOWANCE OF INTEREST PAID ON DELAYED PAYMENT OF TDS HE SUBMITTED THAT IT WAS DUE TO OVERSIGHT THAT THE SAID AMOUNT WAS NOT ADDED TO THE TOTAL INCOME. HE SUBMITTED THAT THE AMOUNT IS VERY SMALL AND IS NEGLIGIBLE AND WAS CLEARLY DIS CLOSED IN SCHEDULE M TO THE ACCOUNTS WHICH WERE FILED ALONG WITH THE RETURN OF INCOME. HE ALSO RELIED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- 1. UOI VS. RAJASTHAN SPG. & WVG. MILLS (2009) 23DT R(SC)158 2. CIT VS. HARYANA WAREHOUSING CORPORATION(2009) 2 5 DTR(P&H)194 3. IPCA LABORATORY LTD. V. DCIT[2004] 135 TAXMAN 5 94(SC) 4. CIT V. SHIRKE CONST. & EQUIPMENT LTD. [2007] 16 1 TAXMAN 212(SC) 5. GODREJ AGROVET LTD. V. ACIT [2007] 164 TAXMAN 2 58 (BOM) 6. CIT V. RELIANCE PETROPRODUCTS PVT. LTD. 7. PFIZER V. DCIT [2011] 9 TAXMANN.COM 105 (MUM)- TRIB) 8. UOI V. DHARMENDRA TEXTILE PROCESSORS 5. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE O RDER OF THE LD. CIT(A). HE SUBMITTED THAT HAD THE ASSESSEES CASE NOT BEEN SEL ECTED FOR SCRUTINY THE ASSESSEE WOULD NOT HAVE PAID THE LEGITIMATE TAX DUE TO THE GOVERNMENT. THIS IS A CLEAR CASE OF FILING OF INACCURATE PARTICULARS OF INCOME. THEREFORE PROVISIONS OF SECTION 271(1)((C) OF THE ACT ARE CLEARLY ATTRAC TED. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE LD. CIT(A) BE UPHELD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES PERUSED THE ORDERS OF THE A.O. AND THE CIT(A) AND T HE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND THE PENALTY HAS BEEN LEVIED U/S 271(1)(C) IN THE IMPUGNED CASE ON ACCOUNT OF THREE ADDITIONS NAMELY (A) DISAL LOWANCE OF DEDUCTION U/S 80HHC OF ` 15 40 527/- (B) ADDITION OF ` 56 326/- ON ACCOUNT OF DELAY IN 5 ITA2909 /M/2010 M/ S CHEROKEE INDIA P. LTD. PAYMENT OF PF AND ESIC BEYOND THE GRACE PERIOD AND (C) DISALLOWANCE OF ` 9812/- ON ACCOUNT OF INTEREST PAID ON DELAYED PAYME NT OF TDS. 6.1 SO FAR AS THE DISALLOWANCE OF DEDUCTION U/S 80H HC IS CONCERNED IT IS AN ADMITTED FACT THAT THE GROSS TOTAL INCOME OF THE AS SESSEE DURING THE YEAR ` 55 73 812/-. THE ASSESSEE CLAIMED DEDUCTION U/S 80H HC FROM THE ABOVE GROSS TOTAL INCOME AND THEREAFTER ADJUSTED THE BROUGHT FO RWARD LOSSES. ACCORDING TO THE REVENUE IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORY LTD. (SUPRA) THE BROUGHT FORWAR D LOSS HAS TO BE FIRST ADJUSTED AND IF ANY FURTHER PROFIT IS AVAILABLE AFTER ADJUST ING THE SAME BROUGHT FORWARD LOSS THEN ONLY SUCH PROFIT IS ELIGIBLE FOR DEDUCTIO N U/S 80HHC. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AGROVET LTD. (SUPRA) WHEN THERE IS PROFIT FROM EXPORT ACTIVITY THE QUESTION OF ADJUSTING ANY LOSSES AS ENUNCIATED BY THE HONBLE APEX COURT IN THE CASE OF IPCA LABORATORY LTD. (SUPRA) DOES NOT ARISE AT ALL. THUS EVEN AFTER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORY LTD. (SUPRA) T HERE WAS A FAVOURABLE DECISION BY THE JUDGMENT OF HONBLE HIGH COURT. THE MATTER WAS SETTLED ONLY AFTER SUBSEQUENT DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF SHIRKE CONSTRUCTION EQUIPMENT LTD. (SUPRA). THE ABOVE DECI SION OF THE HONBLE APEX COURT CAME AFTER THE FILING OF THE RETURN OF INCOME . THEREFORE THE CLAIM OF DEDUCTION U/S 80HHC OUT OF THE CURRENT YEAR PROFIT BEFORE ADJUSTING THE BROUGHT FORWARD LOSS MAY NOT BE CORRECT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT. HOWEVER THE SAME IN OUR OPINION WI LL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME OR C ONCEALMENT OF INCOME SO AS TO ATTRACT LEVY OF PENALTY U/S 271(1)(C). IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AFTER THE DECISION IN THE CASE OF IPCA LABORATORY LTD. THE ISSUE WAS NOT FREE FROM DOUBTS AND WAS A DEBATA BLE ISSUE. IT IS THE SETTLED PROPOSITION THAT PENALTY U/S 271(1)(C) CANNOT BE LE VIED ON DEBATABLE ISSUES. FURTHER FULL PARTICULARS WERE FURNISHED BY THE ASS ESSEE IN THE AUDIT REPORT FILED 6 ITA2909 /M/2010 M/ S CHEROKEE INDIA P. LTD. ALONG WITH THE RETURN OF INCOME. UNDER THESE CIRCUM STANCES WE ARE OF THE CONSIDERED OPINION THAT THIS IS NOT A FIR CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 6.2 SO FAR AS THE PENALTY LEVIED ON ADDITION ON ACC OUNT OF DELAYED PAYMENT OF PF AND ESIC IS CONCERNED WE FIND ALTHOUGH SOME OF THE PAYMENTS HAVE BEEN PAID AFTER THE GRACE PERIOD BUT ALL THE PAYMENT WER E MADE BEFORE FILING OF RETURN OF INCOME WHICH IS EVIDENT FROM PARA 5 OF TH E ASSESSMENT ORDER. MERELY BECAUSE ADDITION HAS BEEN SUSTAINED IN THE APPELLAT E ORDER WHICH HAS NOT BEEN CHALLENGED BY THE ASSESSEE IN APPEAL THE SAME IN O UR OPINION CANNOT AUTOMATICALLY ATTRACT LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. FULL PARTICULARS WERE FURNISHED BY THE ASSESSEE IN THE AUDIT REPORT FILED. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ITS PARTICULAR S OF INCOME. IN THIS VIEW OF THE MATTER WE ARE OF THE CONSIDERED OPINION THAT T HE CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE PENALTY ON ADDITION OF ` 56 326/-. 6.3 AS REGARDS THE LEVY OF PENALTY ON ACCOUNT OF AD DITION OF ` 9812/- BEING INTEREST ON DELAYED PAYMENT WE FIND MERIT IN THE S UBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THIS WAS A MISTAKE COMMITTED BY THE ASSESSEE. DUE TO SMALLNESS OF THE AMOUNT IT WENT UN-NOTICED AND COU LD NOT BE ADDED TO THE COMPUTATION OF INCOME ALTHOUGH FULL DETAILS ARE AVA ILABLE IN THE SCHEDULE M OF THE AUDITED ACCOUNTS WHICH WERE FILED ALONG WITH TH E RETURN OF INCOME. THEREFORE IN OUR OPINION IT IS NOT A FIT CASE FOR LEVY OF PENALTY ON ACCOUNT OF ADDITION OF ` 9812/-. 6.4 CONSIDERING THE TOTALITY OF THE FACTS OF THE CA SE AND IN THE LIGHT OF THE RATIO OF THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE WE ARE OF THE CONSIDERED OPINION THAT THIS IS NOT A FI T CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. WE THEREFORE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE A.O. TO CANCEL THE PENALTY. 7 ITA2909 /M/2010 M/ S CHEROKEE INDIA P. LTD. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 20.7.2011. SD/- SD/- (D.K. AGARWAL) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED 20.7.2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 16 MUMBAI 4. THE CIT - 8 MUMBAI 5. THE DR BENCH C 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI 8 ITA2909 /M/2010 M/ S CHEROKEE INDIA P. LTD. DATE INITIALS 1 DRAFT DICTATED ON 12.7.2011 14.7.11 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 13.7.2011 14.7.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER