Income Tax Appellate Tribunal - Chandigarh
Dcit, Panchkula vs M/S Haryana Agro Industries Corpn. ... on 18 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.1186/Chd/2016
(Assessment Year : 2011-12)
The D.C.I.T., Vs. M/s Haryana Agro Industries
Panchkula Circle, Corpn. Ltd.,
Panchkula. Bay No.15-20, Sector-04,
Panchkula.
PAN: AAACH4686C
(Appellant) (Respondent)
Appellant by : Shri Ravi Sarangal, CIT DR
Respondent by : Shri B.K. Nohria
Date of hearing : 25.05.2017
Date of Pronouncement : 18.08.2017
O R D E R
PER ANNAPURNA GUPTA, A.M. :
Th i s a p p e a l h a s b e e n f i l ed b y t h e R e v e n u e a ga i n s t the order p as s ed by the CI T( Ap p e a l s ) , Pa n c h ku l a dated 27.9.2016 p e r ta i n i n g to a s se s s m e n t ye a r 2 0 0 1 1 - 1 2, c a n c e l l i ng t h e pe n a l t y l e v i e d u/ s 2 7 1 ( 1 ) ( c) o f th e I nc o m e Ta x A c t , 1 9 6 1 ( i n s h o r t ' th e A c t' ) .
2. Th e R e v e n u e h a s t a k e n t he o n l y ef f e c t i v e g r o u n d:
"1. Whether on the facts and circumstances of the case the Ld. C1T(A) has erred in allowing the appeal of the assessee and cancelled the penalty u/s 271(l)(c) which is not correct because the assessee has deliberately furnished the. inaccurate particular of its income.
3. P e n a l t y i n t h e p r e s e n t c a s e h as b e e n l e v i e d on a c c o u n t o f d i sa l l o w a n c e o f t h e f ol l o w i n g p r ov i s i o ns d e b i t ed t o t h e P ro f i t & Lo s s A c c o un t :
2a) Provisions for bad and doubtful
debt =Rs.10,99,45,270/-
b) Provision for performance awards =Rs. 45,00,000/-
4. Th e q u a n t u m ad d i t i o n s o n a c co u n t o f th e s a me w e r e u p h el d b y t h e L d .CI T( A p p e a l s ) a n d s u b s eq u e n t l y by t h e I . T. A . T. a l s o v i d e i t s o r de r i n I TA N o . 1 1 9/ C h d / 2 0 1 5 d a t e d 2 4 . 6 . 2 01 6 . A f t e r t h e C I T( A p p e a l s ) ' s o r de r i n q u a n t u m p r o c e e d i ng s , t he A s s e s s i ng O f f i ce r l e v i e d p e n a l t y @ 1 5 0 % for the reason that t h e a s s e s se e h a d c l a i m e d e x p e n s e s k n o w i n g t h a t i t w a s i n c o r r e ct a n d w h i c h t h u s t a nt a m o u n t e d t o c o n c e a l m e n t a n d f u r n i sh i n g of i n a c c u r at e p a rt i c u l a r s of income. Th e A s s e s s i n g O f f i ce r a l s o h e l d t h a t t h e a s s e s s e e 's c l a i m w a s w h o l l y u n t e n a b l e i n l a w a n d t h a t t h e a s s e s s e e 's c a s e w as c o ve r ed b y th e d ec i s i on o f th e Ho n ' b l e A p e x C o ur t i n t h e c a s e o f M a k D a t a P v t . L t d . V s . CI T, 3 58 I TR 5 9 3 .
Th u s , penalty of R s . 5 ,6 9 , 2 4 , 13 5 / - was l e v i ed on t he assessee.
5. Th e matter wa s c a r r i ed in a pp e a l b ef o r e the L d . CI T( A p p e a l s ) w h e r e t h e as s e ss e e c o n t e nd e d th a t i t w as not a case of f u r n i s h i ng any i n a c c u r a te particulars of i n c o m e o r co n c ea l i n g a n y pa r t i cu l a r s o f i nc o m e s i n c e a l l p a r t i c u l ar s r el at i n g to the sa i d e x p en s e s were d ul y d i s c l o s e d i n t h e B a l a n c e S h ee t o f t h e a s s e s s ee . It was also contended that the decision of the Hon'ble Apex Court in M a k D a t a Pv t . L td . ( s u p r a) w a s no t a p p l i ca b l e i n t h e c a s e of t h e a s s e ss e e si nc e t h e r e w a s no s e a r c h o n t h e a ss e s s e e a nd f u r t h e r t h at n o pe n a l t y w a s l e vi ab l e i n v i e w o f t he j u d g m e n t o f t h e H o n ' b l e A p e x C o u r t i n th e c a s e o f R e l i a n c e P e t r o 3 P r o d u c t s P v t . L td . , 3 2 2 I TR 1 5 8 w h er e i n i t w a s h e l d t h at m e r e m a k i ng o f a w r o n g c l a i m d i d n o t a m o u n t to f u r n i s h i ng i n a c c u r a te particulars of i n co me . Th e L d . C I T( A p p e a l s ) , a f t e r c o n s i d er i n g a s s e s s e e ' s s u b mi s s i o n , d e l e te d t h e p e n a l t y levied holding th a t all p a rt i c u l a r s relating to the said expenses ha d be e n duly di s c l os e d by t h e a s se s s e e and m e r e l y t he c l a i m o f t h e as s e s s e e v i s - à - v i s t h e sa i d p r o v i s i o n h a d b e e n d i s a l l o w e d w h i c h c o ul d n o t b e t h e g r o un d f o r l e v y of penalty. Th e L d . CI T( A p p e a l s ) a l s o h e l d t h a t t he a s s e s s e e w a s n o t h i t b y th e E x p l an a t i o n-1 t o se c t i o n 2 7 1 ( 1 ) ( c ) of t h e Act also. F u r t he r r e l y i ng o n t he d e c i s i on o f t he H o n ' b l e A p e x C o u r t i n t he c a s e o f R e l i a n ce P e t r o P r o d u c ts P v t . L t d .
( s u p r a ) t he L d . CI T( A p p e a l s ) h e l d t h a t t h e a s se s se e h a v i ng furnished all de t a i l s o f i t s e xp e n d i t u r e w h i c h w e r e n o t found to be inaccurate it co u l d not be viewed as c o n c e a l m en t of i n c o m e an d m er el y b e c au s e th e a s s e s s e e 's c l a i m of s u ch e x p e n d i t u re h a d n o t b e e n a c ce p te d b y t h e A s s e s s i n g O ff i c er i t w o u l d n o t ta n t a m o u n t t o f ur n i s h i n g o f i n a c c u r a te particulars of i n c om e . Th e L d . C I T( A p p e a l s ) f u r t h e r d i s t i n g ui s h e d t h e d e ci s i on o f t h e H o n ' bl e A p e x C o u r t i n t h e c a s e of Ma k D a t a P v t . L td . ( s u p ra ) s ta t i ng t h a t t h e s a i d d e c i si o n wa s b a s e d o n d i ff e r e n t f a ct s p e rt a i n i n g t o d i s c l o s u re o f i nc o m e m a d e d u r i n g s u r v e y . Th e r e l e v a nt f i n d i n g s o f t h e L d . CI T( A p p e a l s ) a t p a r a 6 .3 t o 6 . 6 o f t he o r d e r i s a s u n de r:
"6.3 After considering the facts, submission, assessment and penalty orders, it is noted that the AO found the provisions for bad and doubtful debtors and performance 4 award from schedule 15 of the annual report and point no. 26 of the notes to account of annual report respectively. Both were in the nature of provision debited to P&L account whereas during assessment it was found that as per provisions of section 36(l)(vii) only bad debts written off as irrecoverable are allowed and the performance award pertained to the prior period which is in the nature of prior period expenses. From these facts, it is apparent that the amounts which were disallowed on these accounts were declared by the appellant in its audited books of account and annual report placed before the AO. The filing of return of income is subsequent to such audit of books of account. The appellant had claimed the entire amount of provision whereas the AO found that claim was not justified as per provisions of Act. The AO while imposing penalty for furnishing inaccurate particulars of income is of the view that the wrong claim of expenditure is an attempt to reduce the taxable income.
6.4 Further, a reference is made to Explanation 1 tosection271(l)©.The Explanation 1 provides where in respect of any facts material to the computation of total income, the additions are made because the person offers an explanation which he is not able to substantiate and fails to provide that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount so added shall be deemed to be income in respect of which particulars have been concealed. So, the Explanation 1 raises an initial presumption that the additions represent concealed income of the assessee, however, the presumption is rebuttable. The initial burden of discharging the onus to rebut the above presumption is on the assessee, i.e., the assessee need to explain that the explanation offered by him about a particular expenditure is bona fide and all material to the computation of his income has been disclosed. Further, failure to substantiate the explanation is not enough to warrant penalty. The AO has to establish that the explanation offered was not substantiated. In the instant 5 case, the disallowance of provisions made for expenditures were made but the assessee established its conduct that the provisions were disclosed in the notes to account to the annual report based on audit of account. The explanation regarding claim of such expenditure in the P&L account was also provided which were not accepted by the AO and the claim was disallowed. This shows the appellant's conduct and the explanation is considerable as bona fide. It was the rejection of appellant's claim which was done as per opinion of the AO. Such addition by the AO on rejection of appellant's explanation on having difference of opinion would not warrant for imposition of penalty either for concealment of particulars of income or furnishing of inaccurate particulars of income.
6.5 Further, a reference is made to the judgment of Hon'ble Supreme Court in Reliance Petroproducts Pvt. Ltd. (supra) wherein the Hon'ble Supreme Court observed as under :-
"9) We are not concerned in the present case with the mens rea. However, we have to only see as to -whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word.
'inaccurate' has been defined as :-
"not accurate, not exact or correct; not according to truth: erroneous: as an inaccurate statement, copy or transcript".
We have already seen the meaning of the word 'particulars' in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no f inding that any details supplied by the assessee in its return were found to be incorrect or erroneous or 6 false. Such not being the case, there would be no question of inviting the penalty u/s 271(l)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.
10) It was tried to be suggested that section 14A of the Act specifically excluded'-the deduction in respect to the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer has correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income, it was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the tax ab l e in c o me an d , th e r e f o r e , bo th ty p e s a mo u n t to c o n c e al me n t of particulars of one's income as well as furnishing of inaccurate particulars of income. We does not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was upto the authorities to accept its claim in the return or not. Merely, because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(l)(c). it we accept the contention of the revenue then in case of every return where the claim made is 7 not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(l)(c). That is clearly not the intendment of the legislature. "
6.6 In the backdrop of aforesaid judgment, I find that the appellant has furnished all the details of its expenditure as well as the return of income, which details, in themselves were not found to be inaccurate nor could be viewed as the concealment of income. The appellant's claims on provisions for bad debt and prior period expense of performance award were not accepted by the AO. Merely, because the appellant had claimed expenditure which was not accepted by the AO, that by itself would not amount to furnishing of inaccurate particulars of income. Further, the AO has ignored the law in Reliance Petroproducts Pvt. Ltd. (supra) by placing reliance on judgment of Hon'ble Supreme Court in MAK Data Pvt. Ltd. (supra). The observation of Hon'ble Supreme Court in MAK Data Pvt. Ltd. (supra) is as under :-
"7) The AO, in our view, shall not be carried away by the plea of the assessee like "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", etc. to-
explain away its conduct. The question is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income explanation to section 271(1) raised a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in questions constituted the income and not otherwise.
8) Assessee has only stated that he had surrendered the additional sum of Rs.40,74,000/- with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make 8 amicable settlement with the income tax department. Statute does not recognize those types of defences under the Explanation1toSection271(l)(c) of the Act. It is trite law that the voluntary disclosure does not release the appellant-assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty.
9) We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of income tax returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosures of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings u/s 271 read with section 274 of the Income Tax Act, 1961.
96.7 Therefore, in view of above observations of Hon'ble Supreme Court it is found that the judgment in Reliance Petroproducts Pvt. Ltd. (supra) is applicable on the facts of the instant case. Since, the judgment in MAK Data Pvt. Ltd. (supra) was based on different facts pertaining to disclosure of income made during survey; therefore, the same is not applicable on the facts of the instant case. Moreover, the decision in Reliance Petroproduct Pvt. Ltd. has not been overruled in MAK Data (supra). So, the AO was not justified by applying the judgment in MAK Data Pvt. Ltd. (supra). Therefore, in view of the facts of the istant case, I am of opinion, based on the decision of Hon'ble Supreme Court in Reliance Petroproduct Pvt. Ltd. (supra) that a mere claim of expenditure which was not accepted on acceptable to revenue, that by itself would not attract the penalty u/s 271(l)(c) of the Act. Therefore, the AO was not justified in imposition of penalty of Rs.5,69,24,135/- u/s 271(l)(c) for furnishing inaccurate particulars of income."
6. A g g r i e v e d b y th e s a m e , th e R e ven u e h a s c o m e up i n a p p e al b e f or e u s . D u ri n g th e c o u r s e of h e a ri ng b e f o r e u s t h e L d . DR h e a vi l y r e l i ed u p o n th e o r d e r of t h e A s s e s s i n g O f f i c e r a nd s t a te d t h a t t h e cl a i m o f t h e a s s es se e v i s - à - vi s t h e a f o r e s ai d p ro v i s i o n s w as c l ea r l y u n t e n ab l e i n l a w s i n c e t h e c l ai m s f o r p r o v i s i o ns a re no t a l l o w a b l e and i t i s on l y B a d D e b t s a c tua l l y w r i t te n o f f i n t h e B o o k s w h i c h a r e statutorily a l l o w e d a s p e r t h e pr o v i s i o n o f s e c t i on 3 6 ( 1 ) ( v i i ) of the Act. A s f a r t h e p r o v i s i o n f o r p e r f o r m a nc e a w a r d t h e L d . D R p o i n t ed o u t t h a t t h e s a m e p e r t a i n e d t o t h e p r e c e d i ng y e a r s a n d w a s th u s n o t a l l o w a bl e i n t h e i m p u gn e d y e a r .
Th e Ld. DR s ta t e d , t h e re f o r e , that by c l ai m i n g such 10 e x p e n s e s t h e a s se s s e e h a d f u r n i sh e d i n a c c u r a te p a r t i c u l a rs of i n c om e a nd penalty u/s 271(1)(c) of t he Act had, t h e r e f o r e, b e e n ri g h t l y l e v i e d b y th e A s s e s si n g O ff i c e r .
7. Th e L d . c o u n s e l f o r a s s e ss e e , on t h e o t h er h a nd r e l i e d u po n t h e or d e r o f th e L d .CI T( A p p e a l s ) a n d po i n t e d o ut t h a t i t h a d d i s c l o s e d a l l p ar t i c u l a r s a n d f a ct s r e la t i n g t o t he aforesaid claim of p r ov i s i o ns and, t h er e f o r e, had no t f u r n i s h e d a n y i na c c u r a t e p a r t i c ul a r s o f i n c om e an d f u r t he r t h a t m e r el y b e c au s e i t s sa i d c l ai m h a d b e e n d e n i e d b y t h e Revenue, it wo u l d n ot t a nt am o u n t to f u rni s h i n g of i n a c c u r a te particulars of i n c om e . Heavy reliance was p l a c e d o n t he d ec i s i o n o f th e H on' b l e A pe x C ou r t i n t h e c a s e o f R e l i a nc e P e tr o P r o d u c t s P v t . L td . ( s u p r a) .
8. We have heard the c o n t e n t i on s of both the p a r t i e s , p e r u s e d t h e o r d e r s o f t h e a u t h o r i ti e s b e l ow . W e f i n d n o i n f i rm i t y i n th e o r d e r o f th e L d . CI T( A p p e a l s ) . L d . CI T( A ) h a s r i g h t l y he l d t h a t t h e a s s es s ee h a s n e i t h e r con c e a l e d n o r furnished i n a cc u r a t e pa r t i c ul a r s of i n c om e s i n ce u n d i s p u t ed l y all material f ac ts relating to the said p r o v i s i o ns had been d i s c l os e d b y the a s s e s se e in the a n n u a l a c c o un t s w h i c h f o r m e d th e b a s i s o f t h e i n c o m e t a x r e t u r n f i l e d b y t h e a s s e s s e e . Mo r e o v e r u n d i sp ut e d l y the s a i d p r o vi s i o n s w e r e d e b i t e d t o i t s p r o f i t a n d l os s a c c o u n t w h i c h w er e d ul y a u d i t e d. Al s o th e a s s e ss e e ha d d i s c l o se d t h e s a i d c l a i m i n t h e n o t e s t o t h e a c c o u n t s t o th e a n n u a l r e p o r t o f i t s aud i t e d ac c o u n ts . I n th i s b a c k d rop o f f a c t s , t h e a s se s s e e h ad c l a i me d th a t i t h a d n o t d e l i be r a t e l y or 11 i n t e n t i o na l l y c l ai m e d t h e s a i d pr o v i s i o n s wh i l e c o m p u t i n g i t s t a x a b l e i n c om e . L d . CI T( A ) , w e h o l d , has rightly held t h a t t h e e x p l an at i o n o f t h e a ss es s e e w a s b o n a fi d e a n d th e a s s e s s e e th e r e f or e c o u l d n ot b e d e e m e d t o ha v e c o n c e a l e d p a r t i c u l ar s o f h i s i n c o m e a s p e r E x p l a n a t i on 1 t o s e c t i on 2 7 1 ( 1 ) ( c ) o f th e Ac t .
9. M o r e o v e r , we f i n d t h a t i t i s o nl y t h e c l a i m v i s- à - v i s s a i d p ro v i s i on wh i c h h ad b ee n de n i e d by t he R e ve n u e . The H o n ' b l e A p e x C ou r t i n t h e c a s e o f R e l i a n c e P et ro P r o d u c t s P v t . L t d. ( s up r a ) h a s c l e a r l y h e l d t h a t w h e r e t he a s s e s se e h a s f u r n i s h ed a l l d e t a i l s o f e x p e nd i t u r e a s w e l l a s i n c o m e i n i t s r e t u r n a n d w h i c h d e t ai l s i n t h e m s e l v es h a ve n o t b e en f o u n d t o b e i n a cc u r a t e or c o u l d b e v i e w ed a s c o nc e a l m e n t o f income me r e l y because the assessee h ad c l a i m ed e x p e n d i t ur e w h i c h w a s n ot a c ce p t e d o r a c c e p ta b l e t o the Revenue, that by i t s el f wo u l d not at t r a c t pe n a l t y u/s 2 7 1 ( 1 ) ( c ) o f t he A c t . Th e i s s u e b e f o r e u s b e i n g i d e n t i c a l to that in R e l i a n ce Petro P r o d u ct s Pvt. Ltd. ( su p r a ) t he L d . CI T( A p p e a l s ) w e h o l d h a s r i gh t l y h e l d t h a t i t i s c o v e r ed b y t h e s ai d d e ci si o n a n d no p e n al t y i s , th e r e f or e , l e v i a b l e .
10. W e m a y a d d t h a t o n g o i n g t h ro u g h t h e a s s e s sm e n t o r d e r a n d p e n al t y o r d e r i t w a s r e v e a l e d t ha t p en a l t y w a s i n i t i a t ed a n d l e vi e d f o r f u r ni s h i ng i n a c c u r a te p a rt i c u l a r s of income. As s t at e d above the details p e r ta i n i n g to the aforesaid c l a i ms were f ou n d to be in or d e r . Both the p r o v i s i o ns w e r e d e b i t e d i n t h e P ro f i t a n d l o s s a c co u n t o f t he assessee. Th e r e fo r e it cannot be said to be a case of 12 f u r n i s h i ng i n a c cu r a t e p a r ti c u l a r s o f i n c o m e . F or th i s r e a s on a l s o w e h o l d t hat t h e p e n a l t y l e vi e d w a s n o t s u sta i n a b l e i n law.
11. In vi e w of the above we u p ho l d the o r d er of t he L d . CI T( A ) d e l et i ng t h e p en a l t y l e vi e d u / s 2 7 1 ( 1 ) ( c ) o f t h e A c t a m o u n t i n g t o R s.
G r o u n d s o f ap p ea l r a i s e d by t h e R e v e n u e a r e t h e re f o r e d i s m i s s e d.
12. In the r es u l t , the a p p e al of the R e v e nu e is d i s m i s s e d.
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 18 t h August, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh