Income Tax Appellate Tribunal - Ahmedabad
The Dcit, Circle-1,, Ahmedabad vs M/S. Aryaman Spinners Pvt.Ltd.,, ... on 9 October, 2018
ITA No. 1301/Ahd/2014
DCIT V/s. Aryaman Spinners Pvt Ltd
Assessment Year: 2004-05
Page 1 of 6
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD 'A' BENCH, AHMEDABAD
[Coram: Pramod Kumar AM and Mahavir Prasad JM]
ITA No. 1301/Ahd/2014
Assessment Year: 2004-05
Dy. Commissioner of Income-tax ..............................Appellant
Circle-1, Ahmedabad
Vs.
Aryaman Spinners Pvt Ltd ...........................Respondent
HP House, Opp. Town Hall,
Ellisbridge, Ahmedabad-380007
[PAN : AABCA 8482 G]
Appearances by:
Rajdeep Singh, for the Appellant
Arti N Shah, for the Respondent
Date of concluding the hearing : 10.07.2018
Date of pronouncing the order : 09.10.2018
O R D E R
Per Pramod Kumar, AM:
1. By way of this appeal, the Assessing Officer has challenged correctness of the learned CIT(A)'s order dated 6th February 2014 upholding imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 2004-05.
2. Grievances raised by the appellant are as follows:-
"1. The CIT(A) has erred in law and on facts in deleting the penalty of Rs.20.39 lacs levied u/s 271(1)(c) despite the fact that the corresponding quantum addition was accepted by the assessee.
2. The CIT(A) has not appreciated the fact that the assessee had claimed interest expenses in contravention of the provisions of section 43B in the Return of Income which tantamount to furnishing of inaccurate particulars of income liable to penalty u/s 271(1)(c) of the Act."
3. The short question that we are thus required to adjudicate is whether or not learned CIT(A) was justified in upholding the impugned penalty of Rs.20,39,809/-.
4. The issue in appeal lies in a narrow compass of material facts. The assessee before us is a company engaged in the business of manufacturing and trading the cotton yarn. The assessee had filed its return of income, disclosing loss of Rs.2,25,52,367/-, on 31.10.2004. In the course of ensuing scrutiny assessment proceedings, the Assessing Officer noted that "the annexure to auditor's report states ITA No. 1301/Ahd/2014 DCIT V/s. Aryaman Spinners Pvt Ltd Assessment Year: 2004-05 Page 2 of 6 that there is default in repayment of dues to financial institutions" and that "from the balance sheet, it is seen that unpaid interest to Gujarat Industrial Corp as on 31.03.2004 is Rs.1,22,61,286 which includes interest of Rs.56,85,881 in respect of year under consideration". It was in this backdrop that a disallowance of Rs.56,85,881, even though it appears that the assessee was under the impression that it has been disallowed by the assessee in its own - something which was not correct. Be that as it may, assessee accepted the disallowance and did not challenge it in further appeal. The matter did not end there. The Assessing Officer also imposed concealment penalty under section 271(1)(c) by observing as follows:-
"Disallowance u/s.43B:-
The Annexure to the Auditors' Report states that there is default in repayment of dues to financial institutions. From the balance sheet, it is seen that unpaid interest to Gujarat Industrial Corporation as on 31.3.2004 is Rs.1,22,61,286/-, which includes interest of Rs.56,85,881/- in respect of the year under consideration. Therefore, vide letter dtd.7.8.2005 the assessee was required to explain why the same should not be added to the income u/s.43-B of the Act. As the assessee has not offered the said unpaid interest of Rs.56,85,881/- in the computation of income. Therefore, the same is added to the total income u/s.43B of the Act.
It is pertinent to note here that that the assessee not preferred an appeal against this issue. This indicates that the assessee has agreed to furnish inaccurate particulars of income. The assessee has furnished the inaccurate particulars after unpaid interest not offered by the assessee. The assessee has to offer the same. It is pertinent to note here that in the present order clear findings have been made with respect to the inaccuracy, error and falsity of details filed by the assessee company in his return of income, thus, the present order is very-much in accordance with the position of Law as laid down by the Hon'ble Supreme Court in the present case.
It has been clearly laid down in the case of A.M. Shah vs. CIT (discussed above) that "Every figure in the return which is set opposite to the item of income is a particular income, whether the figure is one which is stated independently of anything else that appears in the return or the documents accompanying it or whether it is something derived from other figures elsewhere stated in such return or documents. False result may be produced by the falsity of one or more of the constituent items in the return. The words 'inaccurate particulars' would cover falsity in the final figure as also the constituent elements or items. They simply would mean inaccurate in some specific or definite respect whether in the constituent or subordinate items of income or the end result".
It is clear and established that assessee company has filed inaccurate particulars in his return of income, as discussed in preceding paragraphs. Further, in the decision of Dharamendra Textiles Processors (noted above) it has been established that 'mens rea' or deliberate attempt is not essential for levy of penalty, if it is established that assessee has furnished inaccurate particulars or concealment of particulars of income, penalty is leviable.
ITA No. 1301/Ahd/2014DCIT V/s. Aryaman Spinners Pvt Ltd Assessment Year: 2004-05 Page 3 of 6 In light of discussion held in para above, none of the cases cited by the assessee are applicable to the present case.
Had the assessee's case not been selected for scrutiny, the assessee could have been benefited by filling inaccurate particulars of income. The assessee took chance with the department. Had the revenue not detected the inaccurate particulars of income of the assessee, the assessee could have enjoyed the fruits of filing inaccurate of particulars of income and would have caused loss to the revenue.
In view of above facts and legal position discussed in para 3 (supra), the assessee is held to have furnished inaccurate particulars of income in the return of income filed by him and as per decision of Hon'ble Supreme Court in the case of Reliance Petroproduct (P) Ltd. (noted above) the liability of penalty arises.
5. In view of the above facts I am satisfied that the assessee has furnished inaccurate particulars of its income and is liable for penalty u/s 271 (1)(c) of the Act. I, therefore, levy a minimum penalty @ 100% of the amount of tax sought to be evaded on account of filing of inaccurate particulars of income, which works out of Rs. 20,39,809/- against the maximum penalty of Rs. 61,19,429/- on the assessee."
5. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A), in a very well reasoned order, deleted the disallowance on the basis of following reasoning:-
"4.2 Impugned penalty was levied w.r.t. the disallowance u/s 43B of unpaid interest to Gujarat Industrial Corporation of Rs. 56,85,881/-. Appellant had filed return of income admitting loss of Rs.2,25,52,367/-. In the assessment order dtd. 15-12-2006 u/s 143(3) disallowance u/s 43B was made. No appeal was preferred by the appellant against the said disallowance. As seen from the penalty order, A.O. observed that in the Annexure to audit report it was stated that there was default in repayment of dues to financial institutions; as seen from the balance sheet the unpaid interest to Gujarat Industrial Corporation as on 31-03-2004 was Rs.1,22,61,286/- which included interest of Rs. 56,85,881/- pertaining to the year under consideration; no explanation was furnished in response to the show- cause notice; therefore the said sum was added to the total income u/s 43B and therefore penalty was being levied for furnishing inaccurate particulars of income.
4.3 The contentions of the Ld. A.R. are that the appellant had admitted loss of over Rs. 2.25 crores; even after the disallowance u/s 43B the loss determined was over Rs. 1.68 crores; the facts and figures of the interest payable to GIG were duly declared in clause 21B of Annexure-IV to the audit report; however, due to inadvertent human error it was not added in the computation of income; appellant company's business was closed down subsequently; accumulated brought forward losses upto A.Y.2007-08 were of Rs.3.36 crores; thus there was no loss of revenue and therefore levy of penalty was not warranted.
4.4 I have considered the facts of the matter. All the necessary particulars regarding the non-payment of interest were disclosed in the tax audit report. As ITA No. 1301/Ahd/2014 DCIT V/s. Aryaman Spinners Pvt Ltd Assessment Year: 2004-05 Page 4 of 6 seen from the observations of the A.O. this default was noticed only on the basis of tax audit report. Appellant cannot be said to have furnished inaccurate particulars of income or concealed income. As contended by the Ld. A.R. the inadvertent mistake was bonafide. As seen from the proceedings dtd. 24-07- 2006 of Board for Industrial and Financial Reconstruction [BIFR], its final opinion as to winding up of the appellant-company was directed to be forwarded to the High Court for further action. Keeping in view the facts of the case and the Supreme Court's decision in the case of Price Waterhouse Coopers (P) Ltd. Vs. CIT (2012) 11 SCC 316, I am of the view that levy of penalty is not in accordance with law. Impugned penalty order is cancelled. This ground of appeal is allowed."
6. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us.
7. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
8. We have noted that the details about unpaid interest to the GIC were available from the material placed before the Assessing Officer by the assessee on his own. The assessee had accumulated brought forward losses of Rs.3.36 crores and, in the current year itself, the assessee had incurred a loss of Rs.2.25 crores which was claimed for a carry forward. The assessee had subsequently closed down the business and the matter was before Board for Industrial and Financial Reconstruction (BIFR). In the light of these background facts, the assessee's claim of having missed adding back the inadmissible interest deduction on account of a bonafide and inadvertent mistake cannot be rejected as improbable. It is more of a silly mistake than an attempt to evade tax or furnish inaccurate particulars. The explanation of the assessee is thus a plausible explanation. As to what should be the judicial approach to the explanation of the assessee in such a situation, we find guidance from Hon'ble Supreme Court's judgment in the case of Price Waterhouse Coopers Pvt Ltd Vs. CIT [(2012) 348 ITR 306 (SC)] wherein Their Lordships have, inter alia, observed as follows:-
"17. Having heard learned counsel for the parties, we are of the view that the facts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a "silly"
mistake and, indeed this has been acknowledged both by the Tribunal as well as by the High Court
18. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report.
19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened ITA No. 1301/Ahd/2014 DCIT V/s. Aryaman Spinners Pvt Ltd Assessment Year: 2004-05 Page 5 of 6 in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income.
20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars."
9. We may also add that while examining the explanation of the assessee, one has to see is whether the explanation is an explanation acceptable to a fact finding authority and that while "an assessee is not to prove the explanation to the hilt positively but, as a matter of fact, materials must be brought on record to show that what he says is reasonably valid" [CIT v. Nathulal Agarwala and Sons (1983) 153 ITR 292 (Patna Full Bench) approved by Hon'ble Supreme Court in the case of CIT v. Mussadilal Ram Bharose (1987) 165 ITR 14 (SC)]. Viewed thus, the explanation of the assessee, particularly in the light of nature of mistake and quantum of accumulated and current losses, seems to be a reasonable explanation.
10. In the light the above discussions, and bearing in mind entirety of the case, we approve the well reasoned conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.
11. In the result, the appeal is dismissed. Pronounced in the open court today on the th 9 October, 2018 Sd/- Sd/-
Mahavir Prasad Pramod Kumar
(Judicial Member) (Accountant Member)
Ahmedabad, the 9th October, 2018
**bt
Copies to: (1) The appellant
(2) The respondent
(3) Commissioner
(4) CIT(A)
(5) Departmental Representative
(6) Guard File
By order
TRUE COPY
Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad
ITA No. 1301/Ahd/2014
DCIT V/s. Aryaman Spinners Pvt Ltd
Assessment Year: 2004-05
Page 6 of 6
1. Date of dictation: .....order prepared as per 7 pages manuscripts of Hon'ble AM, which are attached....08.10.2018
2. Date on which the typed draft is placed before the Dictating Member: .. 08.10.2018
3. Date on which the approved draft comes to the Sr. P.S./P.S.: ...09.10.2018...
4. Date on which the fair order is placed before the Dictating Member for Pronouncement:
....09.10.2018.
5. Date on which the file goes to the Bench Clerk : . ...09.10.2018....
6. Date on which the file goes to the Head Clerk : ..................................
7. The date on which the file goes to the Assistant Registrar for signature on the order: ....
8. Date of Despatch of the Order: ........................