Acit Chennai v. Celebrity Fashions Ltd Chennai

In The Income Tax Appellate Tribunal B Bench Chennai Before Shri Abraham P George Accountant Member And Shri George Mathan Judicial Member I T A No 38 Mds 2017 C O No 33 Mds 2017 In Ita No 38 Mds 2017 Assessment Year 2012 2013 The Assistant Commissioner Of Income Tax Corporate Circle 1 2 Chennai 600 034 Vs M S Celebrity Fashions Ltd Sdf Iv And C 2 3 Rd Main Road Mepz Sez Tambaram Chennai 600 045 Pan Aaacc 3696 D Appellant Respondent Cross Objector Department By Dr G Ganesan Irs Jcit Assessee By Shri S Sridhar Advocate Shri Anil Nair C A Date Of Hearing 06 12 2017 Date Of Pronouncement 06 12 2017 O R D E R Per Bench These Are Appeal And Cross Objection Of The Reven Ue And Assessee Respectively Directed Against An Order Da Ted 03 10 2016 Of Ld Commissioner Of Income Tax Appeals 1 Chennai Revenue Is Ita No 38 17 Co 33 17 2 Aggrieved That The Ld Commissioner Of Income Tax Appeals Deleted Penalty Of 50 28 975 Levied U S 271 1 C Of T He Income Tax Act 1961 In Short The Act 2 Facts Apropos Are That Assessee Engaged In The Bu Siness Of Manufacturing Exporting Trading And Dealing In Ga Rments Had Filed Its Return Of Income For The Impugned Assessment Ye Ar Declaring Loss Income Of 14 95 34 377 Assessment Was There After Completed U S 143 2 Of The Act After Scrutiny Making The Fol Lowing Disallowance Additions I Disallowance U S 14 A 63 00 143 Ii Disallowance U S 40 A I 2 98 830 Iii Disallowance U S 40 A Ia 12 26 598 Iv Non Payment Of Interest To Bank 1 55 00 000 Ld Assessing Officer Thereafter Issued Notice To T He Assessee As To Why Penalty Should Not Be Levied On The Disallowanc E Additions Based On The Reply Given By The Assessee Ld Assessing O Fficer Was Of The Opinion That No Penalty Was Leviable On The Disal Lowance U S 14 A Sec 40 A I And Sec 40 A Ia Of The Act Howev Er According To Ita No 38 17 Co 33 17 3 Him Assessee Was Exigible To Penalty On Interest O F 1 55 00 000 Disallowed By Him As Per The Ld Assessing Office R Assessees Contention That Non Payment Of Interest To Bank Was Inadvertently Claimed As Expenditure Due To A Bonafide Mistake Could Not Be Accepted According To Him If It Were An Inadverte Nt Mistake Assessee Would Have Filed A Revised Return Once It Learned That The Claim Was Not Allowable U S 43 B E Of The Act As Per The Ld Assessing Officer Assessee Though It Was Aware That Interest On Loa Ns Taken From Banks Could Be Claimed Only On Actual Payment Basi S And Not On Accrual Basis They Knowingly Ignored This In The Opinion Of The Ld Assessing Officer There Was Nothing Debatable On T He Issue At All He Held That Assessee Had Furnished Inaccurate Partic Ulars In So Far As The Sum Of 1 55 00 000 Was Concerned Penalty Of 50 28 975 Was Levied U S 271 1 C Of The Act 3 Aggrieved Assessee Moved In Appeal Before The Ld Commissioner Of Income Tax Appeals Argument Of The Assessee Was That Interest Which Was Not Paid To The Bank Wa S Disclosed In The Statutory Audit Report Filed Alongwith Return Of I Ncome According To It There Was No Furnishing Of Inaccurate Partic Ulars Further As Per The Assessee It Had Substantial Loss Available For Carry Forward And No Benefit Would Have Accrued To It By Making A Claim Not Allowable Ita No 38 17 Co 33 17 4 Under The Act Reliance Was Placed On The Judgme Nt Of Honble Apex Court In The Case Of Price Waterhouse Coopers Vs Cit 348 Itr 306 4 Ld Commissioner Of Income Tax Appeals After Cons Idering The Submissions Of The Assessee Held That Explanati On 4 A Of Sec 271 1 C Of The Act Relied On By The Ld Asse Ssing Officer For Fastening Penalty On The Assessee Was Not At All Ap Plicable As Per The Ld Commissioner Of Income Tax Appeals Assessee Had Offered The Sum Of 1 55 00 000 As Remission Of Liability In Its Return For Assessment Year 2013 14 According To Him Audit R Eport For Relevant Previous Year Also Mentioned This Sum Ld Commiss Ioner Of Income Tax Appeals Came To A Conclusion That The Claim Was Made Inadvertently Thus According To Him The Judgment Of Honble Apex Court In The Case Of Price Waterhouse Coopers Supra Came To The Aid Of The Assessee He Deleted The Levy Of Penalty 5 Now Before Us The Ld Departmental Representative Strongly Assailing The Order Of The Ld Commissioner Of Inco Me Tax Appeals Submitted That Assessee Was A Company Which Was Sub Ject To Statutory Audit Under Companies Act 1956 Accord Ing To Him Assessee Could Not Say That It Was Not Properly A Dvised As Per The Ita No 38 17 Co 33 17 5 Ld Departmental Representative Clause E To Sec 4 3 B Was Clear Regarding Interest On Loans Taken From Scheduled Ba Nk Contention Of The Ld Departmental Representative Was That Such Interest Could Be Claimed Only On Actual Payment Basis As Per The Ld Departmental Representative It Was Not A Case Of Bonafide Mista Ke According To Him Ld Cit A Erred In Deleting The Levy Of Penalt Y 6 Per Contra Ld Authorised Representative Strongly Supported The Order Of The Ld Cit A 7 We Have Considered The Rival Contentions And Peruse D The Orders Of The Authorities Below During The Course Of Assessment Proceedings Ld Assessing Officer Had Put The Asse Ssee On Notice As To How It Could Claim Interest Of 1 55 00 000 On Lo Ans Taken From Hdfc When Such Amount Was Not Actually Paid R Eply Of The Assessee To The Query Was As Under The Companys Net Worth Was Eroded As On 3 F T March 2010 Under The Provisions Of Sick Industrial Companies Act Sica Accordingly The Company Filed For Reference With The Board For Industrial And Financial Reconstruction Bifr Under Section 15 1 Of Sica The Reference Was Considered By Bifr And Upon Submissions Made And Material On Record Bifr Has Declared The Company As Sick Industrial Company U S 3 1 0 Of Sica Vide Its Order Dated 19 Th April Ita No 38 17 Co 33 17 6 2011 Bifr Issued Directions To The Lenders And To The Company To Submit A Rehabilitation Scheme As Per Section 18 Of Sica The Term Loan Obligations And Interest Commitments Have Been Met In Full With Respect To The State Bank Of India In Accordance With The Terms And Conditions Of The Sanction Letter However The Company Has Defaulted In Repayments Of Term Loans Amounting To Rs 0 22 Crs And Interest Commitments Amounting To Rs 1 55 Crs With Respect To Hdfc Banks Borrowings The Term Loan Repayment Is Pending Since February 2012 While The Interest Commitment Remains Unpaid Since January 2011 The Company Submitted Its Draft Rehabilitation Proposal Drs To The Operating Agency State Bank Of India And Is Awaiting The Sanction Of The Second Re Structuring Package The Cut Off Date For The Drs Is 3 F T March 2011 As Per The Orders Of Bifr And The Company Has Sought Certain Reliefs Concessions In Terms Loans Interest Rates With The Lenders However Please Note That During The Year Ended 3 F T March 2014 Hdfc Bank Opted For A One Time Settlement Ots Of Dues Accordingly The Company Settled The Dues Of Hdfc Bank Under Ots And The Net Gain Of Rs 9 97 Crs Upon Settlement Has Been Recognized Under Extra Ordinary Income In The Statement Of Profit Loss And The Same Has Been Offered For Tax Assessee Thereafter Made A Further Submission Also And This Read As Under Ita No 38 17 Co 33 17 7 The Company Has Defaulted In Payment Of A Sum Of Rs 1 55 Crores Of Interest Due To Hdfc Bank The Said Amount Has Been Debited In The P L Account Also The Company Has However Offered The Amount And The Tax In The Subsequent Year U S 41 1 On The Basis Of Cessation Of Liability The Said Amount Maybe Considered For Disallowance U S 43 B E Of The Income Tax Act And The Return Treated As Amended To That Extent It Is Clear From The Above Reply That Assessee Had Offered The Sum As Income In The Subsequent Assessment Year Considerin G It As A Cessation Of Liability Interest To The Extent Of 1 55 00 000 Debited In Profit And Loss Found Specific Mention In The Au Dit Report And Annual Accounts Also Thus The Omission To Make A Suo Motu Disallowance U S 43 B E Of The Act Was In Our Opini On Inadvertent And Not With An Intention Of Understating The Income That Apart Assessee Having Mentioned The Amount In Its Audit R Eport And Annual Accounts We Cannot Say That The Particulars Furnis Hed By It Were Inaccurate In Our Opinion The Ld Commissioner Of Income Tax Appeals Was Justified In Relying The Case Of Price Waterhouse Coopers Supra For Deleting The Penalty Levied On The Assessee We Do Not Find Any Reason To Interfere With The Order Of The Ld Commissioner Of Income Tax Appeals Ita No 38 17 Co 33 17 8 8 Ld Authorised Representative Submitted That Cross Objections Filed By The Assessee Is Only For Supp Orting The Order Of The Ld Commissioner Of Income Tax Appeals 9 In The Result Appeal Of The Revenue Stands Dismis Sed Whereas Cross Objection Of The Assessee Is Dismisse D As Infructuous Order Pronounced In The Open Court At The Time Of H Earing On 6 Th December 2017 At Chennai Sd Sd George Mathan Judicial Member Abraham P George Accountant Member Chennai Dated 6 Th December 2017 Kv Copy To 1 0 Appellant 3 1 Cit A 5 45 6 Dr 2 70 Respondent 4 1 Cit 6 58 9 Gf