Income Tax Appellate Tribunal - Delhi
Bakers Circle India Pvt. Ltd., New Delhi vs Assessee
ITA NO. 5112/Del/2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A", NEW DELHI
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 5112/Del/2012
A.Y. : 2008-09
M/s Bakers Circle India Pvt. Ltd., Vs. DCIT, Circle 2(1),
2nd floor, 3, Taimoor Nagar, New Delhi
New Delhi - 110 065
(PAN/GIR NO. : AABCB7681G)
(Appellant ) (Respondent )
Assessee by : Sh. K.V.S.R. Krishna, CA
Department by : Sh. Prithi Lal, Sr. D.R.
ORDER
PER SHAMIM YAHYA: AM This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-V, New Delhi dated 10.10.2011 pertaining to assessment year 2008-09.
2. The issue raised is that Ld. Commissioner of Income Tax (A) erred in confirming the levy of penalty of ` 6,08,000/- u/s. 271(1)(c) of the I.T. Act.
3. The assessee company in this case is engaged in the business of manufacturing frozen food items covered under bakery and confectionary items. The return was filed on 3.10.2008 declaring a loss of ` 3,16,19,027/-. The assessment u/s. 143(3) was completed in this case on 18.3.2010 and the assessment was framed at a loss of ` 2,98,25,260/-, after making the following additions as under:-
1ITA NO. 5112/Del/2012
i) Disallowance of ROC fee ` 2,41,000/-
ii) Disallowance of loss on sale of assets ` 15,47,764/-
iii) Disallowance of donation ` 5,000/-
The Assessing Officer also initiated penalty proceedings in the
said case and imposed a penalty u/s. 271(1)(c) amounting to ` 6,09,700/- for furnishing of inaccurate particulars of income thereby concealment of income in respect of wrong claims and the additions made by the Assessing Officer. Assessee accepted the additions and did not file further appeal.
4. Upon assessee's appeal against the penalty order, Ld. Commissioner of Income Tax (A) sustained penalty on account of disallowance of ROC fee and disallowance of loss on sale of fixed assets, but deleted the penalty on disallowance of donation.
5. Against the above order the Assessee is in appeal before us.
6. We have heard the rival contentions and perused the records. Ld. Counsel of the assessee submitted that the addition were based on clear inadvertent mistake on the part of the assessee and hence he claimed that penalty in such circumstances is not leviable. Ld. Counsel of the assessee submitted that assessee company was in deep loss and the return for the year under consideration was at loss of ` 313,16,19,027/-. The assessee cannot be benefited by claiming the expenses which he knows that the same will not be allowed. Even after disallowance of the aforesaid items, assessee's loss came down to ` 29825260/-. He further submitted that the income tax return for the assessment year 2008-09 was filed after duly considering the Tax Audit Report u/s. 44AB by the Chartered Accountant who is also a 2 ITA NO. 5112/Del/2012 Statutory Auditor of the company. The disallowance in the return were made as per the Tax Audit Report. Nothing was pointed out in respect of the above disallowance in the Tax Audit Report by the Tax Auditors. The same came to the knowledge of the assessee during the course of the assessment proceedings. On realizing the mistake assessee for the next assessment year had filed revised return of income voluntarily and corrected the mistake which proves the bonafide of the assessee. He further submitted that the business activity undertaken by the assessee was entitled for exemption u/s. 80IC for a period of 10 years from A.Y. 2008-09 onwards as the assessee has set up a manufacturing facility in a notified area namely Kashipur in Uttaranchal. Hence, even if the assessee had taxable income for the aforesaid assessment year, the same would have been exempt u/s. 80IC. Therefore, it is obvious that there should not be any reason on the part of the assessee to deliberately conceal the particulars of his income or furnishing of inaccurate particulars of such income. He further submitted that the loss of sale of fixed assets of ` 1547764/- has been clearly reflected on the face of the profit and loss account. There is no concealment of particulars. The loss was added back while computing income of the assessee thereby indicating that it was more of an inadvertent mistake on the part of the assessee and there was no intention of concealment of income.
7. As regards the payment of ROC fee also, ld. Counsel of the assessee submitted that the treatment for the ROC fee paid as revenue expenditure was due to inadvertent mistake. Hence in the background of the aforesaid pleadings, he submitted that the penalty should be deleted. He further placed reliance upon the decision of 3 ITA NO. 5112/Del/2012 the Hon'ble Apex Court in the case of Price Waterhouse Coopers Pvt. Ltd. vs. C.I.T. and Anr. 348 ITR 306 (SC) and the decision of the Hon'ble Jurisdictional High Court decision in the case of C.I.T. vs. Societex in I.T.A. No. 1190/2011 vide order dated 19.7.2012.
8. Ld. Departmental Representative on the other hand relied upon the orders of the authorities below and further placed reliance upon the Hon'ble Jurisdictional High Court decision in the case of C.I.T. vs. Zoom Communication Pvt. Ltd. (2010) 327 ITR 510 as well as decision of C.I.T. vs. Escorts Finance Ltd. (2010) 328 ITR 44.
9. We have carefully considered the submissions and perused the records. We find that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. We find that in this case penalty has been imposed for disallowance on account of ROC fee and disallowance of loss of sale of assets. Assessee's submission in this regard is that the same happened because of bonafide mistake on the part of the assessee. There was no intention of concealment of income. It has been claimed that the assessee did not stand to gain anything by not disclosing the aforesaid items. We find that the assessee was having deep loss for the year under consideration and the return filed was at a loss of ` 31619027/-. After the impugned disallowance the loss was reduced to ` 29825260/-. Thus, it is clear that the assessee cannot be benefited by claiming these expenses. Moreover, another cogent plea of the assessee is that the assessee has relied upon the advise of the Expert Tax Auditor and these items were not reported by the Tax Auditors in the Tax Auditor Report. We further find that assessee was entitled to exemption u/s. 80IC for the period of 10 years from A.Y. 2008-09.
4ITA NO. 5112/Del/2012 Hence, even if the assessee has taxable income the same would have been exempted u/s. 80IC. In view of the aforesaid discussion, we are in agreement with the contention of the assessee that there was no contumacious conduct on the part of the assessee, rather the disallowances were result of inadvertent mistake. Ld. Counsel of the assessee further submitted that assessee could not revise the return of the year under consideration as the time for revision of income has passed, but considering the same for the next assessment year, assessee has revised the return. In the background of above discussion, we find that assessee should not be visited with penalty u/s. 271(1)(c).
9.1 In coming to the aforesaid decisions, we draw support from the Hon'ble Apex Court decision in the case of Price Waterhouse Coopers Pvt. Ltd. vs. C.I.T. and Anr. 348 ITR 306 (SC). In this case it was held, allowing the appeal, that the facts of the case were peculiar and somewhat unique. Notwithstanding that the assessee was a reputed firm and had great expertise available with it, it was possible that even the assessee could make "silly" mistake. 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 indicated that the assessee made a computation error in its return of income. The contents of the tax audit report suggested that there was no question of the assessee concealing its income or of the assessee furnishing any inaccurate particulars. 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. All that had happened was that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for 5 ITA NO. 5112/Del/2012 gratuity to its total income. The assessee should have been careful but the absence of due care, in a case such as the present, did not mean that the assessee was guilty of either furnishing inaccurate particulars or attempting to conceal its income. On the peculiar facts of this case, the imposition of penalty on the assessee was not justified."
9.2 We further draw support from the Hon'ble Jurisdictional High Court decision in the case of C.I.T. vs. Societex in I.T.A. No. 1190/2011 vide order dated 19.7.2012. In the said decision the Hon'ble Jurisdictional High Court vide para no. 5 & 6 held as under:-
5. Mr. Maratha relied upon the decision of CIT vs. Zoom Communication Pvt. Ltd. (2010) 327 ITR 510 as well as decision of CIT Vs. Escorts Finance Ltd. (2010) 328 ITR 44.
It was urged that in this case, the assessee's behaviour was not one of furnishing a claim that was incorrect in law but showed a conscious knowledge of the claim which could not be granted. It was emphasized that under no circumstances the assessee could have claimed provision for tax as that is not deductable under any provision of law. Therefore, the penalty order made by the Assessing Officer was warranted in the circumstances. Ld. counsel also relied upon the decision reported as CIT vs. Escorts Finance Ltd. (supra). Ld. counsel for the assessee contended that it is evident that the CIT(Appeals) has partially accepted the assessee's claims to the extent that the depreciation was granted in respect of the Bangalore property. Ld. counsel stressed upon the fact that the Khan Market property had 6 ITA NO. 5112/Del/2012 been let out only from August, 1996 and under the circumstances there seems to have been a mechanical repetition of the claim in the return filed. So far as the question of furnishing inaccurate particulars with regard to the provision of taxation is concerned, ld. counsel submitted that it was inadvertent and even the record showed that such a claim had been made for the first time during the assessment year.
6. Zoom Communication Pvt. Ltd. (supra) is premised on the footing that even if inadvertent by particulars are not given, if the authority finds that the explanation given is not bona fide penalty u/s. 271 would be warranted. Similar observations were made in CIT v. Reliance Petro Products Pvt. Ltd., (2010) 322 ITR 158. In the present case, so far as the question of depreciation is concerned what emerges from the previous discussion is that the CIT(Appeals) had accepted the assessee's claim for depreciation to the extent of 2/3rd in respect of the Bangalore property. It is also the matter of record that the Khan Market property was let out for the first time in the latter part of the concerned assessment year i.e. in August, 1996. In these circumstances, the benefit of inadvertence or mechanical or repetitive claim being made can be given to the assessee. Similarly, as far as the provision for taxation is concerned, we notice that the Tribunal by the impugned order had stated in the extract reproduced above that the assessee had made a claim for deduction of the provision for the first time in the year under appeal; in 7 ITA NO. 5112/Del/2012 other words, there was no history of furnishing such accurate particulars by the assessee for the previous years. Having regard to these circumstances and the fact that the CIT(Appeals) as well as the Tribunal had held in favour of the assessee, this Court is of the opinion that no substantial question of law arises in this case.
10. On the basis of the aforesaid case laws, we find that if due to an advertent mistake on the part of the assessee & where assessee's conduct is not contumacious, penalty u/s. 271(1)(c) of the I.T. Act cannot be imposed. The case laws relied upon by the Ld. Departmental Representative are distinguishable on the facts of the case. They have also been distinguished by the Hon'ble Jurisdictional High Court cited above.
11. We further place reliance from the Apex Court decision rendered by a larger Bench comprising of three of their Lordships in the case of Hindustan Steel vs. State of Orissa in 83 ITR 26 wherein it was held that "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether 8 ITA NO. 5112/Del/2012 penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute."
12. We further place reliance upon the Hon'ble Apex Court decision in the case of CIT vs. Reliance Petro Products Ltd. in Civil Appeal No. 2463 of 2010. In this case vide order dated 17.3.2010 it has been held that the law laid down in the Dilip Sheroff case 291 ITR 519 (SC) as to the meaning of word 'concealment' and 'inaccurate' continues to be a good law because what was overruled in the Dharmender Textile case was only that part in Dilip Sheroff case where it was held that mensrea was a essential requirement of penalty u/s 271(1)(c). The Hon'ble Apex Court also observed that if the contention of the revenue is accepted then in case of every return where the claim is not accepted by the Assessing Officer for any reason, the assessee will invite the penalty u/s 271(1)(c). This is clearly not the intendment of legislature.
9ITA NO. 5112/Del/2012
13. In the background of the aforesaid discussions and precedents, we find that the levy of penalty in this case is not justified. Accordingly, we set aside the orders of the authorities below and delete the levy of penalty.
14. In the result, the appeal filed by the Assessee is allowed.
Order pronounced in the open court on 14/12/2012.
Sd/- Sd/-
[U.B.S. BEDI]
BEDI] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date 14/12/2012
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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