ITO 9(2)(3), MUMBAI v. MANEK CONSUCTIONS P. LTD, MUMBAI

ITA 4539/MUM/2010 | 2005-2006
Pronouncement Date: 15-07-2011 | Result: Dismissed

Appeal Details

RSA Number 453919914 RSA 2010
Assessee PAN AACCM6127F
Bench Mumbai
Appeal Number ITA 4539/MUM/2010
Duration Of Justice 1 year(s) 1 month(s) 13 day(s)
Appellant ITO 9(2)(3), MUMBAI
Respondent MANEK CONSUCTIONS P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 15-07-2011
Assessment Year 2005-2006
Appeal Filed On 02-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S. SYAL A.M. AND SHRI V. DURGA RAO J.M. ITA NO. 4539/MUM/2010 ASSESSMENT YEAR: 2005-06 INCOME TAX OFFICER-9*2)(3) . APPELLANT ROOM NO. 225 AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020. VS. MANEK CONSTRUCTIONS PVT. LTD. RESPONDENT 213 HAJI UMER BUILDING BAZAR ROAD BANDRA(W) MUMBAI 400 050 (PAN AACCM6127F) APPELLANT BY : MR. P.C. MAURYA RESPONDENT BY : MR. SANJUKTA CHOWDHURY ORDER PER V. DURGA RAO J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- 20 MUMBAI PASSED ON 18/03/2010 FOR THE AS SESSMENT YEAR 2005-06 WHEREIN THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING PENALTY U/S 271(1) (C) OF RS. 4 88 064/- WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAD CONCEALED INCOME BY FILING INACCURATE PARTICULARS O F INCOME BY NOT COMPUTING BOOK PROFIT U/S 115JB ON PLEA THAT WRONG ADVICE GIVEN BY THE TAX CONSULTANT WHICH PLEA OF IGNORANCE OF L AW CANNOT BE TAKEN BY THE CORPORATE ASSESSEE. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET SIDE AND THAT OF THE AO BE RESTORED. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASESSSEE F ILED ITS RETURN OF INCOME SHOWING TOTAL INCOME AT RS. NIL. THE AO COMP LETED THE ASSESSMENT AT TOTAL INCOME OF RS. 2 18 806/- AND BO OK PROFIT OF RS. ITA NO. 4539/M/2010 M/S MANEK CONSTRUCTIONS PVT. LTD. 2 62 24 314/- U/S 115JB OF THE ACT. SINCE THE BOOK PR OFIT WAS MORE THAN THE INCOME COMPUTED UNDER THE NORMAL PROVISION S THE SAME WAS ADOPTED AS THE TOTAL INCOME. WHILE COMPLETING THE A SSESSMENT THE AO NOTICED THAT EVEN THOUGH THE ASSESSEE RETURNED INCO ME UNDER THE NORMAL PROVISIONS AT RS. NIL ON ACCOUNT OF SETTING OFF OF BROUGHT FORWARD LOSS OF EARLIER YEARS IT HAD FAILED TO COM PUTE BOOK PROFIT U/S 115JB. ACCORDINGLY AO INITIATED PENALTY PROCEEDING S U/S 271(1)(C) OF THE ACT FOR FAILING TO DECLARE THE INCOME U/S 115J B OF THE ACT AND PAY THE TAX THEREUPON. ON BEING ASKED BY THE AO TO EXPL AIN AS TO WHY BOOK PROFIT AS PER PROFIT & LOSS ACCOUNT SHOULD NOT BE COMPUTED U/S 115JB(1) THE EXPLAINED THAT THE COMPANY WAS ADVISED BY TAX PRACTITIONER THAT IN VIEW OF CARRIED FORWARD LOSSES THE PROVISION OF SECTION 115JB WAS NOT APPLICABLE AND HENCE TAX A T THE RATE OF 7.5% WAS NOT PAID. THE SAID EXPLANATION WAS NOT FOUND FAVOUR WITH THE AO THEREFORE HE LEVIED PENALTY OF RS. 4 88 06 4/- BEING 100% OF TAX SOUGHT TO BE EVADED U/S 271(1)(C) R.W.S. 274 OF THE ACT ON THE GROUND OF FURNISHING INACCURATE PARTICULARS AND CON CEALING THE INCOME LIABLE TO TAX. AGGRIEVED THE ASSESSEE CARRIE D THE MATTER IN APPEAL BEFORE THE CIT(A). 3. BEFORE THE CIT(A) THE ASSESSEE REITERATED THE S UBMISSION MADE BEFORE THE AO AND FURTHER SUBMITTED THAT IT ACCEPTE D ITS ERROR AND ALSO PAID THE TAX ON THE BOOK PROFIT COMPUTED U/S 1 15JB THEREFORE IT HAD A BONAFIDE EXPLANATION AND THE PENALTY LEVIED S HOULD BE CANCELLED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE CIT(A) CANCELLED THE PENALTY BY OBSERVING AS UNDER: - 4. I HAVE CONSIDERED THE ISSUE. IT IS TRUE THAT THE APPELLANT WAS LIABLE TO COMPUTE BOOK PROFIT U/S 115JB ON OWN VOLI TION. HOWEVER IT OMITTED TO DO SO BUT UNDER THE WRONG AD VICE OF THE TAX PRACTITIONER. THE ADVICE GIVEN BY THE TAX PRACT ITIONER WAS COMMUNICATED TO THE AO BY THE APPELLANT VIDE ITS LE TTER DT. 10/10/07 AS MENTIONED IN THE REPLY DT. 10/11/2007 T O THE SHOW CAUSE NOTICE ISSUED U/S 271(1)(C). THE AO DOES NOT DISPUTE THIS. IN MY OPINION THE APPELLANT WAS UNDER A BONAFIDE B ELIEF UNDER THE ADVICE OF ITS TAX CONSULTANT THAT THE PROVISION S OF SECTION 115JB DID NOT ATTRACT IN ITS CASE. I HOLD THAT THE APPELLANT HAD GIVEN AN ACCEPTABLE EXPLANATION AND HAD ALSO FURNIS HED ALL ITA NO. 4539/M/2010 M/S MANEK CONSTRUCTIONS PVT. LTD. 3 MATERIALS NECESSARY FOR COMPUTATION OF TOTAL INCOME . THUS THE CONDITIONS PRESCRIBED U/S 271(1)(C) READ WITH EXPLA NATION 1 THERETO DO NOT EXIST FOR LEVY OF PENALTY. I THERE FORE CANCEL THE PENALTY LEVIED OF RS. 4 88 064/-. 4. THE LEARNED DR HAS STRONGLY RELIED UPON THE ORDE R OF THE AO AND SUBMITTED THAT THE ASSESSEE HAD CONCEALED INCOME BY FILING INACCURATE PARTICULARS OF INCOME BY NOT COMPUTING BOOK PROFIT U/S 115JB AND THE PLEA OF THE ASSESSEE THAT THE TAX CONSULTANT GAVE WRONG ADVICE CANNOT STAND IN THE EYE OF LAW. 5. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE A SSESSEE PLACED RELIANCE ON THE ORDER OF CIT(A) AND SUBMITTED THAT THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF UNDER THE ADVICE OF ITS T AX CONSULTANT THAT THE PROVISION OF SECTION 115JB IS NOT APPLICABLE TO IT AND ALSO THE ASSESSEE HAD GIVEN AN ACCEPTABLE EXPLANATION AND AL SO HAD FURNISHED ALL MATERIAL NECESSARY FOR COMPUTATION OF ITS TOTAL INCOME. THEREFORE THE LEARNED COUNSEL PLEADED THAT THE CASE OF THE AS SESSEE IS NOT A FIT CASE FOR LEVY OF PENALTY. THE LEARNED COUNSEL HAS R ELIED UPON VARIOUS CASE LAWS IN SUPPORT OF ASESSEES CASE WHICH ARE F ILED ON RECORD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW. THE CONTENTION OF THE LEARNED CO UNSEL IS THAT THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF UNDER THE AD VICE OF ITS TAX CONSULTANT THAT THE PROVISION OF SECTION 115JB IS N OT APPLICABLE TO IT THEREFORE IT DID NOT SHOW ANY BOOK PROFIT U/S 115J B OF THE ACT. THE AO WAS OF THE VIEW THAT FAILING TO OFFER BOOK PROF IT TO TAX LEADING TO FURNISHING OF INACCURATE PARTICULARS OF INCOME OR C ONCEALED THE PARTICULARS OF INCOME IN TERMS OF SECTION 271(1)(C) OF THE ACT. WHEREAS THE CIT(A) HELD THAT THOUGH THE ASSESSEE WAS LIABLE TO COMPUTE BOOK PROFIT U/S 115JB ON OWN VOLITION HOWEVER IT OMITT ED TO DO SO BUT UNDER THE WRONG ADVICE OF THE TAX PRACTITIONER THE FACT OF WHICH WAS COMMUNICATED TO THE AO BY THE ASSESSEE VIDE ITS LET TER CT. 10/10/2007. HE FURTHER HELD THAT THE AO DID NOT DIS PUTE THE SAID ITA NO. 4539/M/2010 M/S MANEK CONSTRUCTIONS PVT. LTD. 4 FACT THEREFORE THE ASSESSEE WAS UNDER A BONAFIDE BELIEF UNDER THE ADVICE OF TAX CONSULTANT THAT THE PROVISIONS OF SEC TION 115JB DID NOT ATTRACT ITS CASE WHICH IS AN ACCEPTABLE EXPLANATIO N AND THE ASSESSEE HAD FURNISHED ALL MATERIALS NECESSARY FOR COMPUTATI ON OF TOTAL INCOME. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(A) AND APPROVE THE FINDINGS GIVEN BY HIM WHILE CANCELING THE PENALTY O F RS. 4 88 064/- LEVIED BY THE AO U/S 271(1)(C). ACCORDINGLY THE O RDER OF CIT(A) IS HEREBY CONFIRMED AND THE GROUND RAISED BY THE REVEN UE IS DISMISSED. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JULY 2011. SD/- SD/- (R.S. SYAL) (V. D URGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 15 TH JULY 2011 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE B BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI.