M/s New Horizon India Ltd.,, New Delhi v. DCIT, New Delhi

ITA 865/DEL/2010 | 2005-2006
Pronouncement Date: 05-05-2010 | Result: Allowed

Appeal Details

RSA Number 86520114 RSA 2010
Assessee PAN AABCN8178L
Bench Delhi
Appeal Number ITA 865/DEL/2010
Duration Of Justice 2 month(s) 2 day(s)
Appellant M/s New Horizon India Ltd.,, New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 05-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 05-05-2010
Date Of Final Hearing 05-05-2010
Next Hearing Date 05-05-2010
Assessment Year 2005-2006
Appeal Filed On 03-03-2010
Judgment Text
ITA NO. 865/DEL/2010 A.Y. 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 865/DEL/2010 (A.Y. 2005-06) M/S NEW HORIZON INDIA LIMITED VS. DCIT CIRCLE-13(1) SOUTH WING NBCC PLACE 4 TH FLOOR CR BUILDING NEW DELHI BHISHMA PITAMAH MARG LODHI ROAD NEW DELHI 3 (PAN: AABCN 8178 L) [APPELLANT] (RESPONDENT) ASSESSEE BY : SH. RAJNESH AGGARWAL CA & SH. D.L. GANDHI AR DEPARTMENT BY : SH. H.K. LAL SR. DR PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 01.01.20 10 AND PERTAINS TO ASSESSMENT YEAR 2005-06. 2. THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE LEVY OF PENALTY U/S 271(1)(C ) ON THE DISALLOWANCE OF RS. 7 15 276/-. ITA NO. 865/DEL/2010 A.Y. 2005-06 2 3. DURING THE COURSE OF ASSESSMENT THE ASSESSING O FFICER IN THIS CASE HAS HELD THAT EMPLOYEES SHARE OF PROVIDENT FUND AMOUN TING TO RS. 3 30 012/- WAS NOT DEPOSITED INTO THE GOVERNMENT ACCOUNT BY 20 TH OF THE FOLLOWING MONTH. THEREFORE THE SAME WAS DISALLOWED U/S 36(1)(VA) OF THE IT ACT AND ON THIS DISALLOWANCE PENALTY PROCEEDINGS U/S 271(1)(C) WERE ALSO INITIATED. ASSESSING OFFICER HAS FURTHER FOUND THAT ASSESSEE HAD MADE P AYMENT OF ROYALTY ADVERTISEMENT AND PUBLICITY AUDIT FEE AND RECRUITM ENT EXPENSES AMOUNTING TO RS. 715276/- ON WHICH TAX AT SOURCE HAS NOT BEEN DE DUCTED. THE AUDITORS OF THE ASSESSE HAD ITSELF QUANTIFIED THESE PAYMENTS AS INA DMISSIBLE U/S 40(IA) OF THE IT ACT. HOWEVER THE SAME HAD NOT BEEN REDUCED WHILE COMPUTING THE TOTAL LOSS FOR TAXATION PURPOSES. ASSESSEES EXPLANATION IN THIS REGARD WERE AS UNDER:- REPLY DATED 22.10.2007 :- THAT REGARDING TDS ON CE RTAIN PAYMENTS PER ANNEXURE V TO 3CD; SINCE THE BOOKS OF ACCOUNTS WERE FINALIZED ON 29.10.2005 AND THESE LIABILITIES WERE PROVIDED FO R TAX HAS BEEN DEDUCTED IN OCT. 2005 AND PAID IN NOVEMBER 2005. THESE SH OULD HAVE BEEN ADDED TO THIS YEARS TAXABLE INCOME AND ALLOWED IN THE NEXT YEARS TAXABLE INCOME. THE ASSESSEE REQUESTS YOURSELF TO TREAT THE EXPENDITURE ACCORDINGLY. REPLY DATED 23.11.2007 :- THAT REGARDING TDS MADE BUT PAID LATE IN THE NEXT ASSESSMENT YEAR MAY BE DISALLOWED U/S 40(A)(I) IN THIS ASSESSMENT YEAR WITH A NOTE TO BE ALLOWED IN THE NEXT ASSESSMENT YE AR. 3.1 ASSESSING OFFICER HELD THAT ASSESSEE HAD AGREE D TO MAKE THE DISALLOWANCE WITH THE CONDITION THAT IT WILL BE ALLOWED IN THE NEXT YEAR. ASSESSING OFFICER ITA NO. 865/DEL/2010 A.Y. 2005-06 3 HELD THAT AS PER THE PROVISION OF SECTION 40(A)(IA) THE EXPENDITURE OF RS. 715276/- WAS NOT DEDUCTIBLE. HENCE HE DISALLOWED THE SAME AND GAVE FURTHER REMARK THAT AS PER THE PROVISION OF SECTION 40(A)(I A) OF THE IT ACT THE SAME WILL BE ALLOWABLE EXPENDITURE IN THE NEXT ASSESSMENT YEAR I .E THE YEAR IN WHICH IT HAS BEEN PAID BY THE ASSESSEE. 3.2 ON THE ABOVE DISALLOWANCES PENALTY WAS ALSO L EVIED TOTALING TO RS. 3 83 000/-. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INC OME TAX (APPEALS) DELETED THE LEVY OF PENALTY WITH REGARD TO DISALLOWANCE ON ACCOUNT OF LATE DEPOSIT OF PF OF RS. 3 30 012/-. REGARDING THE PENALTY ON THE DISA LLOWANCE OF EXPENDITURE AMOUNTING TO RS. 7 15 276/- THE LD. COMMISSIONER O F INCOME TAX (APPEALS) CONFIRMED THE LEVY OF PENALTY BY INTER-ALIA PLAC ING THE RELIANCE UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS 219 CTR 617. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 6. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT IN THIS CASE THE ASSESSEE HAD MADE PAYMENT AMOUNTING T O RS. 715276/- WHICH WERE SUBJECT TO DEDUCTION OF TDS AS PER SECTION 40(A)(IA ) OF THE IT ACT. IN THE TAX AUDIT ITA NO. 865/DEL/2010 A.Y. 2005-06 4 REPORT ATTACHED WITH THE RETURN IT WAS CLEARLY WRI TTEN THAT THESE AMOUNTS WERE INADMISSIBLE U/S 40(A)(IA). ASSESSEE CLAIMED THA T THE TDS IN THIS CASE WAS DEDUCTED IN OCTOBER 2005 AND PAID IN NOVEMBER 200 5. HENCE IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT AS PER THE PROVI SION OF LAW IN THIS REGARD THE PAYMENT SHOULD BE ALLOWED IN THE YEAR WHEN THE PAYM ENT IS MADE. ACCORDINGLY THE ASSESSING OFFICER DISALLOWED THE PAYMENT FOR THE CURRENT YEAR AND REMARKED THAT THE AMOUNT WILL BE ALLOWED IN THE NEXT ASSESSM ENT YEAR. 7. IN THE BACKGROUND OF THE AFORESAID FACTS WE HAV E TO CONSIDER WHETHER THE ASSESSEE IS LIABLE FOR PENALTY U/S 271(1)(C). WE F IND THAT SECTION 271(1(C) OF THE ACT POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. IN THIS CASE WE FIND THAT I N THE AUDIT REPORT ACCOMPANYING WITH THE RETURN IT WAS CLEARLY MENTION ED THAT THE AMOUNT OF RS. 715276/- WAS NOT ADMISSIBLE U/S 40(A)(IA) OF THE IT ACT. HENCE THERE WAS NEITHER ANY CONCEALMENT NOR FURNISHING OF ANY INACCURATE PA RTICULARS. THE ASSESSEES CASE IS THAT INADVERTENTLY THE SAID AMOUNT WAS NOT REDUCED IN THE COMPUTATION OF INCOME. IT IS ALSO A SETTLED LAW THAT THE SAID AMO UNT IS ALLOWABLE IN THE YEAR IN WHICH THE TDS DEDUCTED IS PAID TO THE GOVERNMENT A CCOUNT. HENCE ASSESSING OFFICER DISALLOWED THE SAME IN THE CURRENT ASSESS MENT YEAR AND REMARKED THAT THE SAME WILL BE ALLOWABLE IN THE NEXT ASSESSMENT Y EAR. IN OUR CONSIDERED ITA NO. 865/DEL/2010 A.Y. 2005-06 5 OPINION. IN THIS BACKGROUND THE ASSESSEE CANNOT BE HELD TO BE GUILTY OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THIS REGARD WE PLACE RELIANCE FROM THE APEX COURT DECISION REND ERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT O F A QUASI-CRIMINAL PROCEEDINGS AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS T HE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CO NDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENA LTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATT ER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED THE AUTHOR ITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENA LTY WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHER E THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 7.1 AS REGARDS THE DECISION OF THE HONBLE APEX CO URT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS WE FIND THAT THE SAM E IS NOT APPLICABLE IN THE ITA NO. 865/DEL/2010 A.Y. 2005-06 6 PRESENT CASE AS IN THE PRESENT CASE WE DO NOT FIND THERE IS ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS BY ASSESSEE. T HE INTERPOLATION OF THIS CASE LAW BY THE LD. DR IS MISPLACED. WE FURTHER FIND THAT THE HONBLE APEX COURT IN THE CASE OF CIT VS. ATUL MOHAN BINDAL 317 ITR 1 HAS ITSELF EXPLAINED THE RATIO OF THE DECISION AS UNDER IN PARA 23 PAGE 13. 23. THE DECISION IN DHARMENDRA TEXTILE MUST THERE FORE BE UNDERSTOOD TO MEAN THAT THOUGH THE APPLICATION OF SECTION 11AC WOULD DEPEND UPON THE EXISTENCE OR OTHERWISE OF THE CONDITIONS E XPRESSLY STATED IN THE SECTION ONCE THE SECTION IS APPLICABLE IN A CA SE THE CONCERNED AUTHORITY WOULD HAVE NOT DISCRETION IN QUANTIFYING THE AMOUNT AND PENALTY MUST BE IMPOSED EQUAL TO THE DUTY DETERMINE D UNDER SUB- SECTION (2) OF SECTION 11A. THAT IS WHAT DHARMENDR A TEXTILE DECIDES. 7.2 WE WOULD ALSO LIKE TO REFER TO THE HONBLE AP EX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010 VIDE ORDER DATED 17.3.2010 HAS HELD THAT THE LAW LAID DO WN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEAL MENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRU LED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILIP SHEROFF CA SE WHERE IT WAS HELD THAT ITA NO. 865/DEL/2010 A.Y. 2005-06 7 MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE R EVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM IS NOT ACCEPTED BY THE AO FOR ANY REASON THE ASSESSEE WILL INVITE THE PENALTY U/S 271(1)(C). TH IS IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 8 IN THE BACKGROUND OF THE AFORESAID DISCUSSION AN D PRECEDENT WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE LEVY OF PENALTY OF RS. 715276/-. 9. IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/05/2010. SD/- SD/- [RAJPAL YADAV] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 05/05/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES