The DCIT, Circle-5,, Ahmedabad v. Riddhi Siddhi Gluco Biols Ltd.,, Ahmedabad

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : A HMEDABAD (BEFORE HON'BLE SHRI G.D. AGRAWAL V.P. (AZ) & HON BLE SHRI T.K. SHARMA J.M.) I.T.A. NO. 4045/AHD./2007 ASSESSMENT YEAR : 2002-2003 DEPUTY COMMISSIONER OF INCOME TAX -VS.- R IDDHI SIDDHI GLUCO BIOLS LTD. CIRCLE-5 AHMEDABAD AHMEDABAD (PAN : AABCR 3417 Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHELLEY JINDAL CIT D.R. RESPONDENT BY : SHRI S.N. SOPARKAR O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 14.09.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI AHMEDABAD C ANCELLING THE PENALTY OF RS.12 42 035/- LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1 )(C) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2002-03. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER MADE THE ADDITION OF RS.1 62 35 7 55/- TO THE BOOK PROFITS SHOWN BY THE ASSESSEE AT RS.74 01 650/- TO ARRIVE THE BOOK PROFI TS IN VIEW OF THE FACT THAT THE ASSESSEE HAD WITHDRAWN THE ABOVE SAID AMOUNT FROM GENERAL RESERV E. THE SAID ADDITION MADE IS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). SU BSEQUENTLY THE ASSESSING OFFICER LEVIED THE PENALTY OF RS.12 42 035/- UNDER SECTION 271(1)( C) FOR THE REASONS DISCUSSED AT LENGTH IN THE PENALTY ORDER. 3. ON APPEAL AGAINST THE PENALTY ORDER BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE MADE THE FOLLOWING SUBMI SSIONS :- (A) THE LD. A.O. HAS LEVIED PENALTY OF RS.12 42 035 /- ON ACCOUNT OF AMOUNT WITHDRAWN FROM GENERAL RESERVE OF RS.1 62 35 755/- FOR COMPUTING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT. (B) THE ADJUSTMENT MADE INTO THE BOOK PROFIT IS NOT A CONCEALMENT OF INCOME THE BOOK PROFIT HAS BEEN DETERMINED ON THE BASIS OF FORM NO. 29B ISSUED BY A CHARTERED ACCOUNTANTS AND COPY OF THE S AME HAS BEEN FILED 2 ITA NO. 4045/AHD/2007 ALONG WITH THE RETURN OF INCOME AND ON THE BASIS OF THAT WE HAVE PAID TAXATION ON THE MAT AND THEREFORE IT IS BONAFIDE A PPARENT MISTAKE OF LAW AND THE APPELLANT DID NOT CONSCIOUSLY CONCEAL INCOM E. IN THIS REGARD WE MOST RESPECTFULLY RELY ON THE FOLLOWING JUDGMENT OF HON'BLE ITAT AMRITSAR IN THE CASE OF KANISKA TRADERS VS.- ACIT 63 TTJ 34 8 (ASR.)1 ITD 586 AND 50 TTJ 91. (C) THAT THE LD. A.O. HAS NOT CONSIDERED OUR REPLY DATED 21.02.2007 (DULY ACKNOWLEDGED AS 22 JAN. 2007 CORRECT DATE SHOULD BE 22.02.2007) COPY OF THE SAID REPLY IS SUBMITTED HEREWITH FOR YOUR REFER ENCE AS ANNEXURE 1. THE SAID FACT WAS ALSO BROUGHT TO THE NOTICE OF THE LD. A.O. VIDE LETTER DATED 30.03.2007. COPY OF THE SAID LETTER IS ALSO SUBMITT ED HEREWITH FOR YOUR READY REFERENCE AS ANNEXURE-2. (D) THAT THE REASONABLE OPPORTUNITY OF BEING HEARD WAS NOT GIVEN BY THE LD. A.O. BEFORE LEVYING THE PENALTY UNDER SECTION 271(1 )(C). VIDE OUR LETTER DATED 21.02.2007 WE HAVE CLEARLY STATED THAT IF OUR SUBMISSION GIVEN IN OUR SAID LETTER IS NOT AGREEABLE A PERSONAL HEARING MA Y BE FIXED WHICH THE LD. A.O. HAS FAILED TO GIVE AND THEREFORE THE PENALTY LEVIED U/S. 271(1)(C) IS BAD IN LAW. IN THIS REGARD RELIANCE IS PLACED ON T HE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF MADANLAL KISHOR ILAL VS.- CIT (145 TAXMAN 131)(2005) (ALLAHABAD). (E) THAT ALL THE FACTS AND FIGURES WERE AVAILABLE B EFORE THE LD. A.O. AT THE TIME OF FILING OF THE RETURN OF INCOME ITSELF AND W HICH WERE DULY CERTIFIED BY CHARTERED ACCOUNTANT AND WHOSE OPINION WHICH HAS BE EN RELIED UPON BY US ALSO CANNOT BE A BASE FOR LEVY OF PENALTY U/S. 271 (1)(C). (F) THAT THE LD. A.O. HAS NOT RECORDED SPECIFIC REA SON FOR LEVY OF SAID PENALTY AND IN GENERAL THE LD. A.O. HAS INITIATED P ENALTY PROCEEDINGS U/S. 271(1)(C). THE SAID FACT IS VERY CLEAR FROM THE ASS ESSMENT ORDER AND NO WHERE THE LD. A.O. HAS RECORDED THE SATISFACTION FO R THE CONCEALMENT OF THE PARTICULARS OF THE INCOME AND A.O. SHOULD HAVE TO F ORM HIS OWN OPINION AND RECORD HIS SATISFACTION BEFORE INITIATION OF PE NALTY PROCEEDINGS MERELY BECAUSE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED IT CANNOT BE ASSUMED THAT SUCH A SATISFACTION WAS ARRIVED AT. IN THIS RE GARD RELIANCE IS PLACED ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS.- AUTO LAMPS LIMITED REPORTED IN 278 ITR 32 (DELHI). FURTH ER RELIANCE IS PLACED ON THE JUDGMENT OF HON'BLE HIGH COURT IN THE CASE O F CIT VS.- RAM COMMERCIAL ENTERPRISES LTD. (2000) 246 ITR 568 (DEL HI) AND CIT VS.- B.R. SHARMA (2005) 275 ITR 303 (DELHI). (G) WITHOUT PREJUDICE TO ABOVE WE WOULD LIKE TO SU BMIT THAT FOR THE A.Y. 2001-02 SAID TYPE OF PENALTY UNDER SECTION 271(1)( C) WAS LEVIED WHICH HA BEEN DELETED BY YOUR HONOUR ALSO. COPY OF THE AID O RDER IS SUBMITTED HEREWITH AS ANNEXURE-3. 3 ITA NO. 4045/AHD/2007 BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) IT WAS ALSO CONTENDED THAT THERE IS NO JUSTIFICATION TO LEVY PENALTY BECAUSE ASSESSING OFFICER MERELY COMPUTED THE BOOK PROFIT AS PER SECTION 115JA OF THE INCOME TAX ACT 1961. FURT HER INCOME COMPUTED UNDER SECTION 143(3) IS ONLY NIL. THE ASSESSEE MADE PAYMENT OF TAX AS PE R BOOK PROFIT UNDER SECTION 115JB OF THE INCOME TAX ACT 1961. AFTER CONSIDERING THE AFORESA ID SUBMISSIONS THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CANCELLED THE PENALTY OBSERV ING THAT THE ASSESSEE-COMPANY ITSELF HAS SHOWN THE FIGURE OF RS.1 62 35 755/- ON ACCOUNT OF AMOUNT WITHDRAWN FROM THE GENERAL RESERVE IN ITS BALANCE-SHEET ON WHICH THE ASSESSING OFFICER HAS MADE THE ADDITION. THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS ABOUT RESERVES IN BAL ANCE-SHEET AND THEREFORE THE ASSESSEE HAD NOT CONCEALED ANY FACTS OF THE CASE. REGARDING THE FACT THAT THE RESERVES WERE TAKEN WHILE COMPUTING THE BOOK PROFIT IS ONLY ON ACCOUNT OF REPORT GIVEN BY THE AUDITOR IN FORM NO. 29B. THE ASSESSEE HAD FOLLOWED THE SAID AUDIT REPORT AND FILED THE RE TURN OF INCOME BY ADMITTING THE BOOK PROFIT. THEREFORE THE ASSESSEE HAD NO KNOWLEDGE ABOUT THE MISTAKE COMMITTED BY IT UNTIL IT WAS POINTED OUT BY THE ASSESSING OFFICER WHEN THE ASSESSMENT WA S TAKEN UP UNDER LIMITED SCRUTINY. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) CANCELLING THE PENALTY OF RS.12 42 035/- THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US ON BEHALF OF R EVENUE SHRI SHELLEY JINDAL CIT D.R. APPEARED AND CONTENDED THAT IN THIS CASE THE ASSES SEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME THEREFORE PENALTY UNDER SECTION 271(1)(C) IS RIGHTLY LEVIED BY THE ASSESSING OFFICER. WITH REGARD TO THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THAT ALL THE FACTS WERE DISC LOSED THE LD. D.R. SUBMITTED THAT DISCLOSING OF ALL FACTS IS NOT ENOUGH. THE CLAIM MADE BY THE A SSESSEE WAS NOT BONAFIDE THEREFORE PENALTY WAS RIGHTLY LEVIED BY THE ASSESSING OFFICER. 5. ON THE OTHER HAND SHRI S.N. SOPARKAR SR. ADVO CATE APPEARING ON BEHALF OF ASSESSEE SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCO ME TAX(APPEALS). HE POINTED OUT THAT BOOKS OF ACCOUNTS OF THE ASSESSEE WERE AUDITED. THE BOOK PROFIT IS COMPUTED BY THE CONCERNED CHARTERED ACCOUNTANT. THE CONCERNED CHARTERED ACCOU NTANT WAS OF THE BONAFIDE BELIEF THAT HE IS COMPUTING THE CORRECT BOOK PROFIT. BE THAT AS IT MA Y BY MISTAKE FOR DEFAULT COMMITTED BY THE CHARTERED ACCOUNTANT THE ASSESSEE CANNOT BE LIABLE PENALTY UNDER SECTION 271(1)(C) PARTICULARLY IN RESPECT OF COMPUTATION OF BOOK PROFIT UNDER SECT ION 115JB OF THE INCOME TAX ACT 1961. IN 4 ITA NO. 4045/AHD/2007 SUPPORT OF THIS HE RELIED ON THE LATEST DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.- RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 IT R 158 (SC). THE LD. COUNSEL OF THE ASSESSEE EXPLAINED THAT IN THIS JUDGMENT THE HON'BLE SUPREME COURT HELD THAT WHEN NO INFORMATION GIVEN IN RETURN FOUND TO BE INCORRECT MAKING INCORRECT C LAIM DOES NOT AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME WITHIN THE MEANING OF SECTI ON 271(1)(C). THE LD. COUNSEL OF THE ASSESSEE ALSO RELIED ON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF BTX CHEMICAL P. LTD. [2007] 288 ITR 196 (GUJ.) WHEREIN IT WAS HELD THAT WHEN DOUBLE CLAIM FOR LOSS OF STOCK WAS MADE DUE TO MISTAKE PENALTY UNDER SECTION 271( 1)(C) IS NOT LEVIABLE. SINCE THE ASSESSEE HAD A BONA FIDE BELIEF ON THE BASIS OF ADVICE RECEIVED FROM ITS CHARTERED ACCOUNTANT THAT THE LOSS OCCURRED AS A RESULT OF DESTRUCTION OF ASSETS SUCH AS PLANT AND MACHINERY BUILDINGS ELECTRICAL INSTALLATIONS ETC. WAS OF REVENUE NATURE AND CLAIM ED IT BY WAY OF DEDUCTION IT WAS NOT A CASE OF CONCEALMENT WITHIN THE AMBIT AND SCOPE OF SECTION 271(1)(C). HE ACCORDINGLY CONTENDED THAT THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) IS FAIR AND REASONABLE THEREFORE THE SAME BE UPHELD. 6. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSEE FI LED THE RETURN OF INCOME WHEREIN HE COMPUTED BOOK PROFIT AS ADVISED BY HIS CHARTERED ACCOUNTANT. ALL THE FACTS AND FIGURES WERE DISCLOSED IN THE RETURN OF INCOME WITH ACCOMPANIED DOCUMENTS. TH E HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) HELD AS UN DER :- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT T HERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 2 71(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INF ORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORD ER TO EXPOSE THE ASSESSEE TO PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGI NATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE BECAUSE THAT IS THE ONLY DOCUMENT WHE RE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PA RTICULARS ARE FOUND TO BE INACCURATE THE LIABILITY WOULD ARISE. TO ATTRAC T PENALTY THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE NOT EX ACT OR CORRECT NOT ACCORDING TO THE TRUTH OR ERRONEOUS. 5 ITA NO. 4045/AHD/2007 WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FA LSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFFIRMED. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF BTX C HEMICAL P. LTD. (SUPRA) HELD THAT PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE IN RESPECT OF DISALLOWANCE OF CLAIM WHICH THE ASSESSEE HAD A BONA FIDE BELIEF ON THE BASIS OF ADVICE FROM ITS CHARTERED ACCOUNTANT THAT IT IS ALLOWABLE AS DEDUCTION. IN OUR OPINION THE RATIO OF THE AFORESA ID TWO JUDGMENTS IS SQUARELY APPLICABLE TO THE FACTS OF ASSESSEES CASE. THEREFORE IN OUR OPINION PENALTY OF RS.12 42 035/- LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) IS RIGHTL Y CANCELLED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). WE THEREFORE INCLINE TO UPHO LD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). RESULTANTLY THE GROUND TAKEN BY THE REVENUE IS REJECTED. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 14.05.201 0 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 14 / 05 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.