Income Tax Appellate Tribunal - Delhi
Jai Parabolic Springs Ltd., New Delhi vs Department Of Income Tax on 30 November, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'D' NEW DELHI
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A. NO. 6085/Del/2010
Assessment Year: 2004-05
DCIT Vs. M/s Jai Barabolic Springs
Circle 4 (1), Ltd. 2-Park Lane, Behind 3-D
Room No. 407, Vasant Kunj, Kishan Garh,
C.R. Building I.P. Estate, New Delhi-70
New Delhi.
PAN: AAACJ1830C
(APPELLANT) (RESPONDENT)
Revenue by: Ms. Renuka Jain, DR.
Assessee by: Shri. Sandeep Sapra, Adv.
ORDER
PER RAJPAL YADAV, JM:
The present appeal is directed at the instance of revenue against the order of ld. CIT (A)-VII, New Delhi, dated 30.11.2010 passed for A.Y. 2004-05. The solitary grievance of revenue is that ld. CIT (A) has erred in deleting the penalty of Rs. 6,23,377/- imposed by the AO u/s 271 (1) (C) of the IT Act, 1961.
2 I.T.A. NO. 6085/Del/2010
2. The brief facts of the case are that assessee has filed its return of income on 1.11.2006 declaring a loss of Rs.(-) 23690470/-. The assessment was completed u/s 143(3) on 20.12.2006 and the loss of the assessee was reduced to Rs.13109850/-. The ld. AO has basically disallowed two amounts:
(a) Rs.1737636/- claimed as royalty expenses disallowed by the AO with the help of section 40 (a) (i).
(b) Rs.8842980/- shown as deferred revenue expenditure but claimed in the return.
3. On appeal the disallowance of Rs.8842980/- was deleted by the ld. CIT (A) and the deletion was confirmed by the ITAT. The AO has initiated the penalty proceeding qua the disallowance of Rs.1737636/-, it emerges out from the record that this amount was claimed by the assessee towards royalty payments, it was disallowed to the assessee on the ground that it failed to deduct TDS while making the payments. Hence as per section 40
(a) (i) deduction of this amount is not admissible. The ld. AO had issued a notice u/s 271 (1) (C) r.w.s. 274 and invited the explanation of assessee, as to why penalty u/s 271 (1) (C) be not imposed upon it. In response to the query of AO, it was contended by the assessee that it had substantial losses during the year. The auditor in the audit report has not pointed out anywhere 3 I.T.A. NO. 6085/Del/2010 to add back this amount for not deducting the TDS. The return was prepared by Shri D.K. Sharma a graduate from Agra University, and employed by the assessee company as a functional had (accounts), he proceed in accordance with audit report. The assessee referred column no. 17F page 14 of the audit report, the auditor had observed as under:
"Amount in admissible u/s 40 (a) (i); "NIL"
4. The ld. AO was not satisfied with the explanation of assessee and imposed the penalty of Rs.6,23,377/- which is equivalent to the tax sought to be evaded.
5. On appeal the ld. CIT (A) has observed that a similar penalty was imposed by the ld. AO in A.Y. 2003-04. He has deleted the penalty and order has been upheld by the Tribunal in ITA No. 4020/Del/2010. The ld. CIT (A) has followed his order in A.Y. 2003-04, the reasons assigned by the ld. CIT (A) in that A.Y. are contained in paragraph 4.4 which read as under:
"4.4 Coming to the facts of the case it is noted that the Assessing Officer in this case has initiated penalty proceedings for furnishing the inaccurate particulars of income on the issue relating to the disallowance of Rs.34,28,372/- under section 40
(a) (i) on account of royalty payments. It is also noted that in this case the assessee had duly submitted the explanation. The assessee made the claim during the year on the basis of auditor's report filed with the Assessing Officer in Form No. 4 I.T.A. NO. 6085/Del/2010 3CD under section 44AB of the Act. However the AO made the disallowance of Rs.34,38,372/- u/s 40 (a) (i) on account of royalty payment while completing assessment u/s 143(3) on 27-
01-06 which was ultimately upheld by the CIT (A) and ITAT. Now the question arises whether the claim made by the assessee was a bona fide or not. It is not denied that the claim made by the assessee and, subsequently, disallowed by the AO was duly supported by the auditor's report. In the instant case a reasonable cause was available with the assessee for not disallowing the royalty payments in terms of section 40 (a) (i) as the auditors did not point out the same in the relevant column vide Para 17 (f) of the Tax Audit Report. On that basis, it can be safely concluded that the auditor gave wrong accounting advice that no such disallowance was required and that was the reason for the impugned default and the assessee was prevented by this advice, which constituted a reasonable cause. Whether the assessee is entitled to rely on the Expert's or auditor's opinion or not while making a claim, the Hon'ble Gujarat High Court in the case of BTX Chemical (P) Ltd. Vs. CIT [2007] 288 ITR 196 (Guj) in this regard has held as under:-
"Held (i) that it could not be said that the assessee knew or had reasons to believe that its claim of Rs.1,83,492/- as revenue loss, was untrue. The assessee has filed its return of income on June 30, 1980, claiming deduction of Rs.1,83,492/- on the basis of its claim lodged with the insurance company on account of loss and damage to its plant and machinery on replacement 5 I.T.A. NO. 6085/Del/2010 cost basis. Since the assessee had a bona fide belief on the basis of advice received from its chartered accountant that the loss occurred as a result of destruction of assets such as plant and machinery, buildings, electrical installations etc., was of revenue nature and claimed it by way of deduction, it was not a case of "concealment" within the ambit and scope of section 271 (1) (c). Penalty could not be levied, in relation to the disallowance of loss of Rs.1,83,492/-."
6. The ld. DR while impugning the order of ld. CIT (A) submitted that ld. CIT (A) has placed reliance upon the judgment of Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. reported in 322 ITR 158. She submitted that ld. first appellate authority has erred in placing reliance upon this judgment, according to the ld. DR, judgment of Hon'ble Supreme Court is applicable where confusion had arisen in the mind of assessee on account of interpretation of any provision of law. She further submitted that, if any, amount representing "royalty" paid by an assessee to non resident then, assessee is bound to deduct the TDS otherwise that amount will not be admissible as deduction. There is no confusion in this position of law and assessee must be well versed about it. Therefore, there is no explanation at the end of assessee, why it failed to add back the amount of royalty expenses on which no TDS was deducted while making the payment? As far as the stand of assessee that in assessment year 2003-04 6 I.T.A. NO. 6085/Del/2010 the penalty imposed was deleted by the ld. CIT (A) and the order of ld. CIT (A) has been upheld by the ITAT is concerned, she submitted that every year there cannot be a bona fide error.
7. On the other hand ld. counsel for the assessee has relied upon the order of ld. CIT (A) as well as of ITAT.
8. We have duly considered the rival contentions and gone through the record carefully. As far as facts are concern i.e. nature of payment made by the assessee, non deduction of TDS etc. are concern they were brought on record by the assessee itself. The disallowance has been made on the ground that it fail to deduct the TDS. Thus the charge against the assessee about concealment of income is to be launched with the help of explanation-1 appended with section 271 (1) (c). It is to be seen whether explanation of the assessee is a bona fide or not. Assessee has submitted that the functional head 'accounts' has prepared the return with the help of audit report and an error was committed by the auditor. This explanation of the assessee was found to be bona fide in the earlier year. We could appreciate the contention of ld. DR that every year the error cannot be a bona fide, error. Had the assessee continued with the error even after it be brought to its notice? No such facts are brought on record that even after bringing this fact to the notice of the assessee, it continued with its claim. Thus it emerges out that 7 I.T.A. NO. 6085/Del/2010 the person who prepared the return of income has committed the error by relying upon the audit report. He failed to error verify the details. It is a bona human error. Following decision of Coordinate bench in the earlier year. We do not find any error in the order of ld. CIT (A) hence appeal of the revenue is rejected.
Order pronounced in the open Court on 26/07/2013.
Sd/- Sd/-
( T. S. KAPOOR ) (RAJPAL YADAV)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 26/07/2013
*AK VERMA*
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(Appeals)
5.DR: ITAT
ASSISTANT REGISTRAR