Income Tax Appellate Tribunal - Chandigarh
Punjab Tool Room, Mohali vs Department Of Income Tax on 22 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'A', CHANDIGARH
BEFORE Ms. SUSHMA CHOWLA, JUDICIAL MEMBER
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA Nos.672 & 673 /Chd/2011
(Assessment Year: 2004-05 & 2005-06)
The D.C.I.T., Vs. M/s Punjab Tool Room,
Circle-6(1), D-30, Industrial Area, Phase-1,
Mohali. Mohali.
PAN: AAHFP0982B
(Appellant) (Respondent)
Appellant by : Shri N.K.Saini, DR
Respondent by : Shri Jaspal Sharma
Date of hearing : 22.03.2012
Date of Pronouncement : 28.03.2012
ORDER
PER SUSHMA CHOWLA, J.M, :
These two appeals filed by the assessee are against the consolidated order of the Commissioner of Income-tax (Appeals), C h a n d i g a r h d a t e d 2 5 . 0 3 . 2 0 1 1 r e l a t i n g t o a s s e s s m e n t ye a r s 2 0 0 4 - 0 5 a n d 2005-06 against the penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 (in short 'the Act').
2. Common grounds of appeal have been raised by the Revenue which read as under:
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing appeal of the assessee without appreciating the facts of the case.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty imposed u/s 271(1)(c) on account of furnishing inaccurate particulars of income by 2 claiming set off of business losses of proprietary business with the profits of the partnership concern."
3. Both the appeals relating to the same assessees were heard together and are being disposed off by this consolidated order for the sake of convenience. However, reference is being made to the facts in ITA No.672/Chd/2011 for adjudicating the issue raised in both the appeals.
4. The issue raised in the present allowed is against the deletion of penalty imposed u/s 271(1)(c) of the Act.
5. The brief facts of the case are that the assessee is partnership concern which came into existence on 11.3.2004. The assessee firm during the ye a r under consideration had declared the loss of Rs.9,45,165/- after setting off brought forward losses of Rs.9,47,868/- pertaining to proprietary concern upto 10.3.2004. The Assessing Officer while completing the assessment did not set off of the aforesaid brought forward losses pertaining to the proprietary concern. In the penalt y proceedings initiated u/s 271(1)(c) of the Act, the reply of the assessee was that the main reason for wrong claim was attributed to ignorance of Income Tax Law and negligence on the part of the counsel. The Assessing Officer rejecting the plea of the assessee held it to have furnished inaccurate particulars of income to the tune of Rs.9,47,868/- and levied penalty of Rs.3,40,046/- u/s 271(1)(c) of the Act.
6. The CIT (Appeals) noted that in the notes on accounts the auditor in the Audit Report had clarified that as the new firm had taken over the business alongwith all assets and liabilities of the said proprietary concern, the loss incurred in the proprietary concern upto 10.3.2004 were being taken over by the partnership firm and being carried forward in the income-tax return of the partnership firm. Further during the 3 assessment proceedings the authorized Chartered accountant furnished reply dated 11.12.2007 and also reiterated that there was no change in the working at Punjab Tool Room by addition of the partner. The losses had to be carried forward and adjusted. The CIT (Appeals) in view of the abovesaid facts and circumstances, advice of the learned counsel for the assessee and also written submission furnished in the appellate proceedings observed that in my view, this is a very clear case where the appellant guided by 3 counsels was in fact misguided by all the three. Each one of them vehemently arguing for an issue which is totally contradictory to the provisions of the Act, an issue which is not even debatable, an issue which never had any ambiguity whatsoever. The CIT (Appeals) thus held that the assessee could not be penalized where the mistake/omission to declare correct income of the assessee had been committed by the counsel of the assessee. Reliance was placed on the series of decisions in this regard and penalty levied u/s 271(1)(c) of the Act was deleted.
7. The learned D.R. for the Revenue pointed out that the assessee had made a wrong claim in view of the provisions of section 72 of the Act. The aforesaid adjustment of brought forward losses of the proprietary concern was not allowed in the hands of the partnership firm and such a claim tantamounts to furnishing of inaccurate particulars of income making the assessee liable to levy of penalty u/s 271(1)(c) of the Act.
8. The learned A.R. for the assessee placed reliance on the order of the CIT (Appeals).
9. We have heard the rival contentions and perused the record. The assessee firm was constituted on 11.3.2004. The business was being carried on in partnership upto 10.3.2004 and thereafter the said business 4 was taken over by newly constituted firm alongwith all the assets and liabilities w.e.f.11.3.2004. The assessee while filing the return of income had adjusted the brought forward losses of the proprietary concern against the income of the partnership concern for the captioned a s s e s s m e n t ye a r s . The Assessing Officer found the above said claim of the assessee in adjusting the brought forward losses of proprietary concern against profits of partnership firm as not allowable under the provisions of Act and hence the same was dismissed. The issue arising in the present appeal is under the aforesaid facts and circumstances whether by making the aforesaid claim of adjustment of losses of proprietary concern with the profits of newly formed partnership concern can be said to make the assessee exigible to levy of penalty u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income.
10. In order to adjudicate the issue certain facts need to be considered i . e . a c c o u n t s o f t h e a s s e s s e e i n t h e ye a r u n d e r c o n s i d e r a t i o n w e r e a u d i t e d and the auditor in its notes on account annex ed with the Audit Report had stated that the new firm took over the business along with all assets & liabilities of the said proprietary concern. The losses incurred in the proprietary upto the date of conversion (10.3.04) are being taken over by the partnership firm and are being carried forward in the Income Tax return of the said partnership firm. In m y view, this makes it ampl y clear that there was a problem with the understanding of the issue vis-à- vis provisions of the Income Tax Act, 1961 on the part of the C.A. auditing the accounts and representing the appellant. The said Audit Report was given by Shri Pardeep Saini of M/s Pardeep Saini & Associates. During the assessment proceedings the assessee was represented by Chartered Accountant Shri Pankaj Gupta and in the reply dated 11.12.2007 reproduced under para 6 at page 9 of the appellate 5 order after narrating the facts of the case i.e. the take over of business of the proprietary concern by the partnership concern, it was pointed out that in view of above facts, it is clear that there is no change in the working of M/s Punjab Tool Room as was till 10.03.2004 and as of now, except an addition of Sh.Parbodh Kumar Agnihotri. The contention of the Chartered Accountant was that the loss may be allowed to be carried forward in the hands of the firm. Further during the appellate proceedings the assessee was represented by a third counsel Shri M.P.Aggarwal, advocate and reply during the appellate proceedings is reproduced under para 9 at page 11 of the appellate order in which the above said stand was reiterated. The assessee was an Engineering Graduate and had engaged the services of professionals in respect of its income-tax matters and each of the three different professionals had advised that the assessee was entitled to the benefit of set off of brought forward losses of proprietary concern against the profits of the partnership concern. In the aforesaid facts and circumstances, the details furnished in the return of income by the assessee could not be called inaccurate as it was acting in compliance to the directions of his counsel. The said claim made by the assessee was in a bonafide manner on the basis of the advice given by his counsel and denial of deduction in said circumstances could not make the assessee exigible to penalty u/s 271(1)(c) of the Act holding the assessee to have furnished inaccurate particulars of income. We find support from the ratio laid down by the Hon'ble Punjab & Haryana High Court in CIT Vs. S.D. Rice Mills [275 ITR 206 (P&H)] and CIT Vs. Deep Tools Pvt. Ltd. [274 ITR 603 (P&H)].
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11. Further the case made out by the Revenue was that the assessee had made a wrong claim. We find that the Hon'ble Supreme Court in CIT Vs. Reliance Petroproducts Pvt. Ltd. [322 ITR 158 (SC)] had held that "a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing of inaccurate particulars". The Hon'ble Apex Court held 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 finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(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 deductions in respect of 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 had 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 taxable income and, 7 therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do 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 up to 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(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature."
12. The Hon'ble P u n j a b & H a r ya n a H i g h C o u r t i n C I T V s . S h a h a b a d Co-op. Sugar Mills Ltd.[322 ITR 73(P & H)]. have held making of wrong claim is not at par with concealment or giving of inaccurate information, which may call for levy of penalty under section 271(1)(c) of the Act.
13. Following the aforesaid principles laid down by the Hon'ble Supreme Court in CIT Vs. Reliance Petroproducts Pvt. Ltd. (supra) and t h e H o n ' b l e P u n j a b & H a r ya n a H i g h C o u r t i n C I T V s . S h a h a b a d C o - o p . Sugar Mills Ltd. (supra) and in the facts of the present case, we hold that the assessee cannot be held to have furnished inaccurate particulars of income, making it exigible to levy of penalty u/s 271(1)(c) of the Act. A c c o r d i n g l y, w e d i r e c t t h e A s s e s s i n g O f f i c e r t o d e l e t e t h e p e n a l t y l e v i e d u/s 271(1)(c) of the Act.
14. The facts and the issues arising in ITA No.673/Chd/2011 are similar to the facts and issues in ITA No.672/Chd/2011. Our decision in ITA No.672/Chd/2011 shall apply mutatis mutandis to ITA 8 No.673/Chd/2011. The grounds of appeal raised by the assessee are allowed.
15. I n t h e r e s u l t , b o t h t h e a p p e a l s r e l a t i n g t o a s s e s s m e n t ye a r s 2 0 0 4 - 0 5 & 2005-06 filed by the assessee are allowed.
Order Pronounced in the Open Court on 28th day of March, 2012.
Sd/- Sd/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 28th March, 2012 *Rati*
Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
True Copy By Order Assistant Registrar, ITAT, Chandigarh