Income Tax Appellate Tribunal - Mumbai
Assistant Commissioner Of Income-Tax vs Hindustan Conductors (P.) Ltd. on 19 March, 1996
Equivalent citations: [1996]58ITD410(MUM)
ORDER
J.K. Verma, A.M.
1. It is an appeal by the revenue against the order of the ld. CIT (Appeals) whereby he has deleted a penalty of Rs. 10,94,050 which had been imposed by the Assessing Officer on the assessee under section 271 (1)(c).
2. We have heard the rival submissions and we find that both the Assessing Officer as well as the ld. CIT (Appeals) have discussed all the facts and circumstances of the case so also case law on the subject in great detail. We have also taken into account the various material brought on record by both the parties.
3. Very briefly speaking, it is a case in which the allegation of the revenue is that the assessee had made a claim of relief under section 80J in respect of Nadiad Unit in the assessment year 1972-73 through a letter addressed to the ITO dated 30-12-1974, although this claim was not there in the return filed by the assessee. The assessee contested the disallowance of its claim upto the Tribunal stage and the Tribunal vide its order dated 6-12-1978 for the assessment year 1972-73 held in para 8 of the order that Rule 19A (3) (dealing with deduction of borrowed moneys and debts owned by the assessee) is repugnant to section 80J and, therefore, the total value of the assessee's assets of the new industrial undertaking should be taken as the capital employed for the purpose of computing the relief under section 80J without deducting any sum by way of liabilities. In para 7 of the order, the Tribunal had mentioned that the next ground of appeal was regarding deduction of liabilities for working out relief under section 80J in respect of capital employed (Nadiad and Baroda Units). That order became final. Thereafter the CIT wanted to initiate action under section 263 of the IT Act but the assessee objected to it that since this matter had already been the subject matter of appeals before the ld. CIT (Appeals), no action under section 263 could be taken and hence the CIT had dropped the proceedings under section 263.
4. For the assessment year 1980-81, i.e., the assessment year under consideration, the assessee filed a return of income on 20-8-1980 at Rs. 9,73,800. It revised it on 19-9-1981 to 'Nil'. The revision was because the assessee had given a remark that as against claim of brought forward losses, unabsorbed depreciation and development rebate of Rs. 34 lakhs, now the claim was being made at Rs. 43,73,795 and hence the income had become 'Nil'. According to the Assessing Officer the ITO informed the assessee on 7-1-1982 that the relief of unabsorbed depreciation, etc., worked out to only Rs. 24,20,555. Thereafter on 12-3-1982, the assessee filed yet another revised return at 'Nil'. This time the assessee adjusted brought forward relief of Rs. 16,92,203 under section 80J and brought forward losses, unabsorbed depreciation and development rebate at Rs. 26,77,952. Assessee's claim for deduction of unabsorbed relief under section 80J was rejected by the Assessing Officer on the ground that the Nadiad Unit of the appellant started production on 26-4-1971 relevant to the assessment year 1972-73 and, therefore, the deficiency of section 80J relief for earlier years could not be carried forward beyond he assessment year 1979-80. The Income-tax (Appeals) after considering all the facts and circumstances of the case and the arguments of the assessee held that the assessee had started production in assessment year 1972-73 and, therefore, the deficiency of section 80J relief could be carried forward only upto the assessment year 1979-80. He, therefore, upheld the rejection of the claim by the ITO. The assessee went in further appeal to the Tribunal. However, it filed a letter before the Tribunal on 7-3-1986, in which its is stated that since in view of the Supreme Court decision in the case of Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308, the quantum of section 80J relief would be reduced to a small amount. It may be given permission to withdraw its appeal. In this letter, the assessee also referred to the CBDT Circulars and clarifications regarding press note dated 17-2-1986. The Tribunal vide its short order dated 3-4-1986 held that the assessee had sought permission to withdraw its appeal in view of Supreme Court's decision in the case of Lohia Machine Ltd. (supra) and that permission was granted and the appeal was dismissed. In this background the Assessing Officer took the view that the assessee had made a false claim for relief of Rs. 16,96,203 and after discussing all the facts and circumstances of the case, imposed the minimum penalty under section 271(1)(c) amounting to Rs. 10,94,050.
5. In the appeal filed by the assessee, the ld. CIT(Appeals) again took all the facts and circumstances of the case into account. While he did not accept many of the arguments advanced on behalf of the assessee, he accepted that assessee had in fact made the claim under section 80J for the assessment year 1973-74, and that since for the assessment year 1972-73 no relief was allowable, for the first time it could be allowed and considered only in the assessment year 1973-74 and hence the explanation of the assessee would be taken as bona fide. He also took the view that merely because the Tribunal had held for the assessment year 1972-73 that it was the first year in which section 80J relief was admissible could not be conclusive because according to him the point of commercial production was not at all before the Tribunal. He also found no substance in the conclusion of the ITO that the assessee had made the claim of Rs. 16,96,203 under section 80J to compensate for the difference between the original figures of profit at Rs. 43,73,795 and the allowable brought forward losses of Rs. 24,20,555 because according to him, the ITO could not have allowed the entire claim made by the assessee. According to him, the figures of brought forward losses also keep on fluctuating with the different appellate orders being passed. He, further held that the provisions of Explanation to section 271(1)(c) were also not applicable because assessee's explanation was bona fide and was based on the decision of the ITAT.
6. He also held that the quantum of penalty worked out by the Assessing Officer was not correct and further that even if the penalties were to be imposed, in view of the Supreme Court decision now available, the relief for the assessment year 1973-74 and 1974-75 would work out to only Rs. 1,52,877 and at the most the penalty could be imposed with reference to the amount.
7. The ld. D.R. strongly supported the order of the Assessing Officer and pointed out that it was not merely that the assessee had written a letter dated 30-12-1974 to allow relief in respect of Nadiad Unit for the assessment year 1972-73. The assessee had contested this issue upto the Tribunal stage and had been allowed the relief in respect of Nadiad Unit for the assessment year 1972-73 at Rs. 2,57,609 and hence could not be said that the assessee had made no claim for the assessment year 1972-73. In fact, according to held D.R. the assessee contested its false claim upto the Tribunal stage for assessment year 1980-81 and when it realised that it had no way out, it withdrew the appeal. The ld. D.R. referred us to the decisions in the case of Western Automobiles (India) v. CIT [1978] 112 ITR 1048 (Bom.), and V.P. Samtani v. CIT [1983] 140 ITR 693 (Cal.) to the effect that when an assessee agrees to an addition, the onus shifts on him to prove that it was not his concealed income. He also referred to the decisions in the cases of Addl. CIT v. Jeevanlal Sah [1994] 205 ITR 244 (SC) and CIT v. M. Habibullah [1982] 136 ITR 716 (All.) to support his arguments.
8. The ld. counsel for the assessee emphasised that the assessee's claim for the assessment year 1972-73 was only for the Baroda Unit and that it had only suggested to the Assessing Officer if it could be allowed relief in the assessment year 1972-73. But Assessing Officer had rejected it. She vehemently relied on the fact that assessee's commercial production had started in the later year and hence only assessment year 1973-74 would be taken as the initial year and there was nothing wrong when the assessee claimed section 80J relief in the assessment year 1980-81 which was the 8th year starting from 1973-74. The ld. counsel for the assessee argued that merely because the assessee had made a claim but it was not actually allowed would not make the assessee liable for penalty. She reiterated that the question in appeal for the assessment year 1972-73 was merely academic as to whether borrowed capital should be allowed as a deduction or not. She further submitted that the appeal for the assessment year 1980-81 was withdrawn not because the assessee conceded that its claim was false but because of the decision in the case of Lohia Machines Ltd. (supra) by the Supreme Court.
9. Finally, she argued that even if the penalty were to be imposed, the quantum had to be reduced as mentioned by the ld. CIT(Appeals). The ld. counsel drew our attention to various decision in Impulse India (P.) Ltd. v. ITO [1992] 40 ITD 36 (Delhi), Associated Cement Companies Ltd. v. Dy. CIT [1992] 40 ITD 70 (Bom.), and 39 TTJ 212 not available to support her arguments.
10. We have carefully considered the rival submissions and the material on record. In our view, the decision at our stage is not as to whether the commercial production had started in 1972-73 or not. In our opinion, the dispute before us is that when the assessee made a claim for the assessment year 1972-73 for relief under section 80J, could it still make the claim in the assessment year 1980-81 for the unabsorbed portions of 80J relief when the 8th year had expired in assessment year 1979-80. After taking into account at the facts and circumstances of the case discussed by the Assessing Officer and ld. CIT(Appeals), we are of the opinion that it cannot be said that the assessee is innocent. Even if the assessee had not made the claim in the income-tax return for the assessment year 1972-73, it consciously made the claim through its letter dated 30-12-1974 and contested it upto the Tribunal stage. We have also referred to the decision of the Tribunal for the assessment year 1972-73 where the Tribunal had directed that the relief in respect of the Nadiad Unit should be allowed and hence we do not find force in the arguments of the ld. counsel for the assessee that the claim for the assessment year 1972-73 was not for Nadiad Unit. As mentioned by us earlier, the Tribunal had considered and directed that the relief would be allowed both for Nadiad Unit as well as for Baroda Unit. In this background it cannot be said that when the assessee made the claim for relief under section 80J for the assessment year 1980-81, it was not conscious of the fact that the relief under section 80J for the assessment year 1980-81 was not allowable. This is gathered from the fact that such a relief was not claimed in the original return nor in the first revised return and it was claimed only after the ITO had written to the assessee that its brought forward losses were only about Rs. 14,00,000 that it decided to lodge the claim of relief under section 80J and increased it by the amount of Rs. 16,96,203. We are not also inclined to accept that the assessee, which is assisted by the competent taxation advisors should have altogether omitted or forgotten about the relief of Rs. 16,96,203 while filing 2 returns if it had not been conscious of the fact that those claims are not admissible. We find substance in the arguments of the ld. D.R. and the Assessing Officer that only when the assessee realised that its returned income would be much higher than originally returned and may result in imposition of various penalties and charging of interests that it thought of the devices to lodge a claim of relief under section with the idea that if the assessee succeeds, it would be saving tax besides penalties and interests to the tune of about Rs. 10,94,000. Alternatively, if at all it is deducted, the assessee may get away by giving various explanations which it had given and may in the process succeeded in establishing its bona fides which may save it from impositions of various penalties and interests leviable under the Income-tax Act. In our opinion, if the ITO was not so vigilant as to verify in great detail the record for the assessment year 1972-73 including the appellate orders and had just gone by the declaration of the assessee, and the return of income held by assessee for that year, the assessee should have really got away by not paying tax of about Rs. 10,96,000 and the penalties and interests, etc., connected with it. In this view of the matter the question is not whether commercial production had really started in the assessment year 1972-73 or not but the question is that once the assessee had claimed and have got relief in the assessment year 1972-73 and once in that process it had made that assessment year as the initial assessment year as mentioned in section 80J(1) of the IT Act, whether the assessee could again make a claim in the assessment year 1980-81. In our view the answer is that the assessee could not have done it and when it has done it, it is presumed to be conscious of the legal position and hence, in out view, is liable for penalty under section 271(1)(c) for having filed inaccurate particulars of its income.
11. At this stage we may also mention that it has been noted by us that the assessee had filed a return claimed to be under Amnesty Scheme and a reference to that has been given in its application filed before the Tribunal for withdrawing its appeal. This point was argued before the ld. CIT(Appeals) also. It appears that the revenue has not accepted that return as a return under the Amnesty Scheme but this only goes to show that the assessee was conscious of the fact that it had made a wrong claim in the assessment year 1980-81 and hence it cannot be said that when it made the claim for relief under section 80J in the assessment year 1980-81 it was a bona fide claim or a bona fide mistake.
12. Regarding the arguments of the ld. counsel that lesser penalty may be imposed, we again do not find force in them because the question is not what amount of deduction the ITO should have allowed or should not have allowed. But the question pertains to the assessment year 1980-81 and in the return filed on 12-3-1982 by which time the decision of the Supreme Court in the case of Lohia Machines Ltd. (supra) had not been pronounced and hence if the claim of the assessee were to be accepted at that time, it should have meant the tax effect of Rs. 10,96,050. The issue has to be decided with reference to the inaccurate particulars filed by the assessee and not with reference to the inaccurate particulars filed by the assessee and not with reference to what the AO should have allowed or what actually he has allowed. In fact if the argument is carried further, it may also to be taken to the extent that since the claim of the assessee has not been allowed, no penalty should be imposed. But such argument cannot be accepted.
13. Taking all these factors into accounts, we uphold the quantum of penalty also.
14. The appeal filed by the revenue is allowed.