TANGRAM DESIGN, MUMBAI v. ITO RG 17(2)(2), MUMBAI

ITA 746/MUM/2009 | 2004-2005
Pronouncement Date: 28-01-2011 | Result: Allowed

Appeal Details

RSA Number 74619914 RSA 2009
Assessee PAN AABFT0589L
Bench Mumbai
Appeal Number ITA 746/MUM/2009
Duration Of Justice 1 year(s) 11 month(s) 24 day(s)
Appellant TANGRAM DESIGN, MUMBAI
Respondent ITO RG 17(2)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 28-01-2011
Date Of Final Hearing 16-09-2010
Next Hearing Date 16-09-2010
Assessment Year 2004-2005
Appeal Filed On 03-02-2009
Judgment Text
ITA NO.: 746/MUM/09 ASSESSMENT YEAR: 2004-05 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH MUMBAI [BEFORE SHRI D MANOMHAN VICE PRESIDENT AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER ] ITA NO.: 746/MUM/09 ASSESSMENT YEAR: 2004-05 TANGRAM DESIGN .. APPELLANT 3 DEVI SADAN 209 B DR AMBEDKAR ROAD MATUNGA MUMBAI 400 019 PAN: AABFT0589L VS. INCOME TAX OFFICER WARD 17(2)(2) MUMBAI RESPONDENT APPEARANCES: J D MISTRY FOR THE APPELLANT ANKUR GARG FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: AM 1. THE SHORT QUESTION THAT WE ARE REQUIRED TO ADJU DICATE IN THIS APPEAL IS WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE PE NALTY OF RS 4 66 199 IMPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2004-05. 2. THE ISSUE IN APPEAL LIES IN A RATHER NARROW COMP ASS OF MATERIAL FACTS. THE ASSESSEE IS A PARTNERSHIP FIRM MAINLY ENGAGED IN TH E BUSINESS AS AN INTERIOR DECORATOR. IN THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE THE ASSESSEE CLAIMED THAT ITS BUSINESS INCOME OF RS 23 17 927 IS TO BE SET OFF AGAINST BUSINESS LOSS ITA NO.: 746/MUM/09 ASSESSMENT YEAR: 2004-05 PAGE 2 OF 5 BROUGHT FORWARD AMOUNTING TO RS 21 68 663. HOWEVER WHEN THE ASSESSEE WAS REQUIRED TO FURNISH DETAILS OF LOSS CARRIED FORWARD IT WAS FOUND THAT BUSINESS LOSS BROUGHT FORWARD AMOUNTED TO ONLY RS 8 69 166. WHEN THE ASSESSEE WAS REQUIRED TO SHOW REASONS OF THIS INACCURATE CLAIM IT WAS SUBMI TTED BY THE ASSESSEE THAT THE MISTAKE WAS AN INADVERTENT MISTAKE AND IT HAD NO MA LAFIDES. IT WAS IN THIS BACKDROP THAT THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C ) FOR FURNISHING INACCURATE PARTICULARS WERE INITIATED AGAINST THE ASSESSEE. IN THE PENALTY PROCEEDINGS THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DEFAULT COMMITTED BY THE ASSESSEE WAS AN INTENTIONAL ONE THAT THIS FACT CAME TO LIGHT ONL Y WHEN THE CASE WAS TAKEN UP FOR SCRUTINY AND THAT HAD THE CASE ESCAPED SCRUTINY THE INACCURATE SET OFF CLAIMED BY THE ASSESSEE WOULD NOT HAVE COME TO THE FOREFRONT A T ALL AND THEREBY THE ASSESSEE WOULD HAVE DEFRAUDED THE REVENUE ON THE INCOME OF R S 12 99 497. ACCORDINGLY PENALTY EQUIVALENT TO 100% OF TAX SOUGHT TO BE EVAD ED WHICH WORKED OUT TO RS 4 66 199 WAS IMPOSED ON THE ASSESSEE. AGGRIEVED A SSESSEE CARRIED THE MATTER IN APPEAL BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NO T SATISFIED AND IS IN SECOND APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. 4. IN THE COURSE OF THE PROCEEDINGS BEFORE US BOTH THE PARTIES MAINLY REITERATED THEIR RESPECTIVE STAND. WHILE LEARNED COUNSEL MAINL Y REITERATED ASSESSEES STAND THAT THE MISTAKE IN ADOPTING WRONG FIGURE OF BROUGHT FOR WARD BUSINESS LOSS WAS AN INADVERTENT ERROR AND THEREFORE FACTS AND CIRCUM STANCES OF THIS CASE DONOT WARRANT OR JUSTIFY IMPOSITION OF PENALTY UNDER SECTION 271( 1)(C) THE STAND OF THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS THAT THE ASSESSEE C LEARLY HAD MALAFIDES IN NOT FURNISHING THE CORRECT FIGURE OF LOSS BROUGHT FORWA RD. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT BONAFIDES CANNOT BE INF ERRED OR ASSUMED; THERE HAS TO BE MATERIAL ON RECORD TO ESTABLISH THE SAME. IN RESPON SE TO BENCHS REQUISITION TO HIGHLIGHT THE PRECISE CIRCUMSTANCES IN WHICH THIS M ISTAKE HAS OCCURRED LEARNED COUNSEL HAS FILED AN AFFIDAVIT DATED 15 TH SEPTEMBER 2010 WHICH READS AS FOLLOWS : I BEHRAM MANECK PARDIWALA RESIDING AT 669 KATRA K ROAD WADALA MUMBAI- ITA NO.: 746/MUM/09 ASSESSMENT YEAR: 2004-05 PAGE 3 OF 5 400 031 HEREBY SOLEMNLY SWEAR AND AFFIRM AS UNDER: 1. THAT I AM A PRACTICING CHARTERED ACCOUNTANT HAVING MEMBERSHIP NUMBER 36633. 2. THAT I INTER ALIA HANDLE THE FINALIZATION OF ACCOUN TS AND INCOME TAX RETURN FILING WORK OF TANGRAM DESIGNS A PARTNERSHIP FIRM HAVING ITS OFFICE AT 3 DEVI SADAN 209-B DR. AMBEDKAR ROAD MATUNGA (C.R) MUMBAI-400 019. 3. THAT WHILE PREPARING THE ORIGINAL RETURN OF INCOME OF TANGRAM DESIGNS FOR THE ASSESSMENT YEAR 2004-05 (FILED ON 14 OCTOBER 2 004 VIDE ACKNOWLEDGEMENT NO.1720003554) I HAD SET OFF A SUM OF ` .8 85 852 OUT OF THE BROUGHT FORWARD UNABSORBED BUSINESS LOSS OF THE ASSESSMENT YEAR 2000-2001 VIZ. ` .21 68 663 BEING BUSINESS LOSS AS PER THE ORIGINAL RETURN OF INCOME FILED FOR THAT YEAR A COPY OF THE STATEMEN T SHOWING COMPUTATION OF TOTAL INCOME FOR ASSESSMENT YEAR 2004-05 AND THE ST ATEMENT SHOWING COMPUTATION OF TOTAL INCOME FOR ASSESSMENT YEAR 200 0-2001 WHICH I HAD RELIED UPON MARKED APPEND0069-A & B RESPECTIVELY ARE ATTACHED HEREWITH. 4. THAT SUBSEQUENTLY I REALIZED THAT THE INCOME RETUR NED FOR THE ASSESSMENT YEAR 2004-05 WAS INCORRECT IN SO FAR AS A SUM OF ` .14 32 075 BEING AGENCY COMMISSION RECEIVABLE FOR THE YEAR WAS LEFT OUT TO BE CONSIDERED AND CONSEQUENTLY THE RETURN OF INCOME WAS REVISED ON 02 DECEMBER 2004 VIDE ACKNOWLEDGEMENT NO.1720005889- A COPY EACH OF THE R EVISED COMPUTATION OF INCOME AND THE ACKNOWLEDGEMENT FOR THE REVISED R ETURN MARKED APPENDIX-C IS ATTACHED HEREWITH. 5. THAT WHILE CONSIDERING THE FIGURE OF BROUGHT FORWAR D UNABSORBED BUSINESS LOSS OF ` .21 68 663 FOR THE ASSESSMENT YEAR 2000-2001 DURING THE FILING OF BOTH THE ORIGINAL AND REVISED RETURN I HAD CONSIDER ED THE LOSS AS PER THE ORIGINAL RETURN OF INCOME FILED FOR THAT YEAR I.E. AY. 2000-2001; WHEREAS THE LOSS FOR THE ASSESSMENT YEAR 2000-2001 AS PER THE R EVISED RETURN OF INCOME FILED WORKED OUT TO ` .16 88 853 A COPY EACH OF THE REVISED COMPUTATION OF INCOME AND THE ACKNOWLEDGEMENT FOR THE REVISED RETU RN MARKED APPENDIX- D IS ATTACHED HEREWITH. 6. THAT THIS ERROR TOOK PLACE BECAUSE WHILE CARRYING F ORWARD THE BUSINESS LOSS OF THE ASSESSMENT YEAR 2000-2001 TO THE SUBSEQUENT ASSESSMENT YEARS THE AMOUNT OF ` .21 68 663 BEING THE LOSS AS PER THE ORIGINAL RETUR N OF INCOME FILED FOR THAT YEAR WAS ERRONEOUSLY CONSIDERED. 7. THAT FURTHER I HAD ALSO FAILED TO CONSIDER THAT A S UM OF ` .8 19 687 OUT OF THE AFORESAID SUM OF ` .21 68 663 HAD ALREADY BEEN SET OFF AGAINST THE INC OME FOR THE ASSESSMENT YEAR 2003-04. 8. THAT THESE ERRORS REMAINED UNDETECTED BOTH BY ME AS WELL AS THE PARTNERS OF TANGRAM DESIGNS SINCE AS IS USUAL THE CONCENTR ATION WAS ON THE FIGURE OF INCOME FOR THE YEAR FOR WHICH THE RETURN WAS BEING FILED VIZ; A.Y. 2004-05. 9. THAT THESE ERRORS WERE NOTICED BY MESSERS. DELOITTE HASKINS & SELLS CHARTERED ACCOUNTANTS WHO HAVE BEEN ENGAGED BY TAN GRAM DESIGNS TO LOOK AFTER THEIR TAX ASSESSMENTS. I FURTHER DECLARED THAT THE ABOVE STATEMENTS ARE T RUE AND CORRECT TO THE BEST OF MY KNOWLEDGE AND BELIEF. ITA NO.: 746/MUM/09 ASSESSMENT YEAR: 2004-05 PAGE 4 OF 5 MUMBAI: 15 SEPTEMBER 2010 SD/- (B.M.PARDIWALA) 5. WE FIND THAT THERE IS NO DISPUTE THAT THE FIGURE OF THE LOSS BROUGHT FORWARD IS INDEED INCORRECT AND THE ISSUE BEFORE US IS REALLY CONFINED TO THE SHORT QUESTION WHETHER THE EXPLANATION GIVEN BY THE ASSESSEE FOR T HIS MISTAKE IS A REASONABLE EXPLANATION OR NOT. A LAPSE COMMITTED BY THE ASSES SE IN FURNISHING OF INACCURATE PARTICULARS OR AN ADDITION BEING MADE TO THE INCOM E RETURNED BY THE ASSESSEE CANNOT BY ITSELF LEAD TO EVEN INITIATION OF PENAL TY PROCEEDINGS AS EVEN INITIATION OF PENALTY PROCEEDINGS REQUIRES SATISFACTION OF THE AS SESSING OFFICER WHETHER EXPRESS OR IMPLIED AND IT CANNOT BE CONSIDERED AS AN AUTO MATIC CONSEQUENCE. IT IS THEREFORE FUTILE TO SUGGEST THAT A PENALTY UNDER S ECTION 271(1)(C) CAN BE A SORT OF AUTOMATIC CONSEQUENCE OF INACCURATE PARTICULARS BEI NG FURNISHED. IN OUR HUMBLE UNDERSTANDING THE ASSESSING OFFICER IS REQUIRED TO EXAMINE THE EXPLANATION OF THE ASSESSEE IN A FAIR AND OBJECTIVE MANNER AND IT IS ONLY AFTER REJECTING THE EXPLANATION THAT HE CAN PROCEED TO IMPOSE THE PENALTY. WHEN EXA MINING THE EXPLANATION OF THE ASSESSEE WE ARE NOT TO PONDER OVER AS TO WHAT OUGH T TO HAVE BEEN DONE IN THE IDEAL CIRCUMSTANCES BUT ALL THAT WE HAVE TO SEE IS WHETH ER EXPLANATION OF THE ASSESSEE IS A REASONABLY VALID EXPLANATION DOES NOT SUFFER FROM ANY INCONSISTENCIES AND MEETS THE TESTS OF PREPONDERANCE OF PROBABILITIES. IT IS IN THIS LIGHT THAT WE HAVE PERUSED THE AFFIDAVIT FILED BY THE ASSESSEE AND THE ACCOMPANYIN G DOCUMENTS. IT IS NOT IN DISPUTE THAT THE ORIGINAL INCOME TAX RETURN FILED BY THE AS SESSEE FOR THE ASSESSMENT YEAR 2000-01 DISCLOSED THE RETURNED LOSS OF RS 21 68 663 WHILE THE FINALLY REVISED LOSS WORKED OUT TO RS 16 88 853. THIS FACT COUPLED WITH EXCLUSION OF LOSS CLAIMED FOR SET OFF IN THE ASSESSMENT YEAR 2004-05 LEAD TO THE WRO NG FIGURE OF BROUGHT FORWARD OFG CARRIED FORWARD LOSS BEING ADOPTED. IT IS CLEARLY I NCORRECT BUT THEN IT IS EXPLAINED ON AN AFFIDAVIT AS MISTAKE COMMITTED BY THE CHARTERE D ACCOUNTANT HANDLING THE TAX MATTERS. ON PERUSING THE ABOVE AFFIDAVIT AS ALSO T HE DOCUMENTS ACCOMPANYING THE AFFIDAVIT IN SUPPORT OF ITS AVERMENTS WE SEE NO REASONS TO REJECT THE EXPLANATION AS UNACCEPTABLE. IN OUR CONSIDERED VIEW THEREFORE TH ERE IS A REASONABLE EXPLANATION FOR THE LAPSE OF THE ASSESSEE AND WE ARE SATISFIED THA T IT WAS NOT A FIT CASE FOR IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS . ITA NO.: 746/MUM/09 ASSESSMENT YEAR: 2004-05 PAGE 5 OF 5 6. FOR THE REASONS SET OUT ABOVE WE VACATE THE ORD ERS OF THE AUTHORITIES BELOW AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTY. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 7. IN THE RESULT THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 28 TH DAY OF JANUARY 2011. SD/- SD/- (D MANMOHAN ) (PRAMOD KUMAR ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI; 28 TH _ DAY OF JANUARY 2011 . COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER -17 MUMBAI 4. COMMISSIONER (APPEALS)-XVII MUMBAI 5. DEPARTMENTAL REPRESENTATIVE E BENCH MUMBA I 6. GUARD FILE TRUE COPY BY O RDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI