Income Tax Appellate Tribunal - Ahmedabad
Matra Ahar Pvt.Ltd.,, Surat vs Department Of Income Tax on 23 October, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "D"
Before Shri N.S. SAINI, ACCOUNTANT MEMBER and
Shri MAHAVIR SINGH, JUDICIAL MEMBER
Date of hearing: 23.10.2009 Drafted on: 23.10.2009
ITA No.110/AHD/2007
Assessment Year : 1999-2000
Income Tax Officer, Vs. Matra Ahar Pvt. Ltd.,
Ward 1(3), Room 34, Swaminarayan Industrial
No.113, Estate, Vill: Tanyithiaya,
Ayakar Bhavan, Tal: Palsana,
Majura Gate, Dist: Surat.
Surat
PAN/GIR No. : AABCM 5106 F
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri C.K.Mishra D.R.
Respondent by: Shri Gyan Pepana, A.R.
ORDER
PER N.S.SAINI , ACCOUNTANT MEMBER :-
This is an appeal filed by the Revenue against the order of the ld.CIT(Appeals)-I, Surat, dated 2.11.2006.
2. The sole issue involved in this appeal is that the Learned Commissioner of Income Tax(Appeals) has erred in deleting the penalty of Rs.4,09,862/- levied under section 271(1)(c) of the Act.
3. The statement of facts filed by the revenue along with the memo of appeal reads as follows:
ITA No.110/Ahd/2007M/s.Matra Ahar Pvt. Ltd.
Asst.Year -1999-2000 -2- "1. The assessee company filed its return declaring Nil income. The assessee-company is engaged in the business of Manufacturing of Bread & Bread related items. In the year under consideration, there was a survey action U/S.133A was carried out on 8-12-1999. On account of certain transactions of the assessee-company found in the books of account of its sister concern M/s. Hind Roadways Ltd. Therefore, the case was reopened u/s.147 and the assessment was finalized after making the following additions:- :
1. Rs.7,78,000/- u/s.69 of the Act
2. Disallowance of sales commission payment of Rs.2,27,432/-
3. Rs.26,130/- on account of salary expenses .
4. Rs.1,39,471/- being difference of transactions of the assessee company not recorded in its books.
The A.O. has initiated penalty u/s.271(l)(c) of the Act. However, the assessed income was Rs. Nil in view of the brought forward unabsorbed business losses of earlier years. The above additions were confirmed by the CIT(A). The A.O. levied penalty of Rs.4,09,862/- u/s.271(l)(c) of the Act vide order dated 27-3-2006.
2. During the appellate proceedings, the assessee company argued that the return of income was filed declaring nil income. The reassessment proceedings were finalized on 28-11-2003 after making addition of Rs.12,63,028/- but the assessed income was determined at Rs. Nil in view of the brought forward loss of A.Y. 1996-97. Therefore, even though the CIT(A) has confirmed all the additions and dismissed the appeal of the assessee vide order dated 25-3-2004, the assessed income remains nil and therefore, penalty u/s.271(l)(c) is not leviable keeping in view of the decision of the Hon'ble Supreme Court in the case of CIT Vs. Prithipal Singh & Co. 249 ITR 670 and the decision of Special Bench, ITAT Ahmedabad in the case of ACIT Vs. Apsara Processors Pvt. Ltd. (2 SOT
132) in ITA No.284/Ahd/2004 dated 17-12-2004. The CIT(A) following the argument of the assessee-company held that as the income has been assessed at Nil, no penalty can be levied following the ratio of the decision of the Hon'ble ITAT in the case of Apsara Processors P.Ltd. (Supra). The CIT(A) deleted the penalty levied u/s.271(l)(c) of the Act of Rs.4,09,862/-.
3. The decision of the CIT(A) is not acceptable on account of the following :-
3.1 The decision of Apex Court in the case of Prithipal Singh pertains to A.Y. 1970-71, where it was held that no penalty could be levied in the cases of assessed loss i.e. where income finally assessed remains a negative figure. In this decision the explanation-4 to Sec.271 was not discussed as the same was introduced w.e.f. 1/4/1976 by Taxation Law ITA No.110/Ahd/2007 M/s.Matra Ahar Pvt. Ltd.
Asst.Year -1999-2000 -3- (Amendment Act) 1975. As per the Explanation, the expression 'the amount of tax sought to be evaded' has been defined to mean, where the amount of income in respect of which particulars of income have been concealed or inaccurate particulars have been furnished exceeds the total income, the tax that would have been chargeable on the concealed income, had such income been the total income. Accordingly the Explanation inserted w.e.f. 1/4/1976 links the quantum of penalty with the amount of tax sought to be evaded. Thus, the Explanation is applicable to the cases where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished, has the effect of reducing the loss declared in the return or it has the effect of converting the loss into income.
3.2. As regards there are several High Courts' decisions which are in favour of the Department on the issue of levy of penalty in respect of assessed loss in view of the above Explanation referred to above. The Hon'ble Allahabad High Court in the case of Sankar Traders vs.CIT (168 CTR 538) in para-7 has taken cognizance of the Explanation 4 to sec.271(l)(c). Similarly, in the case of P.R.Basavappa & Sons Vs. (243 ITR
776) it has clearly been observed that Explanation-4 to sec.271 was inserted after the decision in Prithipal singh & Co.'s case (supra) was delivered. Therefore, the Apex Court decision in Prithipalsing's case is not applicable to the cases pertaining to A.Y. 1976-77 and onwards. In the case of CIT V/s. Chemiequick Ltd. 182 CTR 144, the Bombay High Court has also held that penalty is leviable in the cases of assessed loss, following the Karnataka High Court decision P.R.Basavappa & Sons (Supra) and distinguishing the Supreme Court decision (Supra) in Prithipal Singh & Co.
3.3 As regards the CIT(A)-I, Surat's reliance upon the decision in the case of Apsara Processors, it may be noted that in this decision, the Hon'ble Tribunal has placed unwarranted emphasis upon the substitution to Explanation-4, w.e.f. 01/04/2003. As per the substituted Explanation, the expression "the amount of tax sought to be evaded" means that "in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income'.
3.4. Nevertheless, it may be added that the aforesaid substitution is merely clarificatory in nature and does not detract from the legislature's intention to penalise the inaccurate furnishing of the particulars of ITA No.110/Ahd/2007 M/s.Matra Ahar Pvt. Ltd.
Asst.Year -1999-2000 -4- income or the amount of income of which particulars have been concealed.
4. In view of the above, the decision of the Learned Commissioner of Income Tax(Appeals) is not acceptable. The tax effect involved on this issue is Rs.4,09,862/-.
5. In the circumstances, the Department, being aggrieved by the order of the CIT(A), wishes for prefer an appeal to the Hon'ble ITAT as per the grounds of appeal annexed separately."
4. The Learned Departmental Representative submitted that the Learned Commissioner of Income Tax(Appeals)has deleted the penalty following the decision of Ahmedabad Special Bench of the Tribunal in the case of ACIT Vs. Apsara Processors Pvt. Ltd. 92 TTJ 645 (Ahd) (SP) wherein it was held that no penalty under section 271(1)(c) can be levied if the assessed income is loss. In the present case, since no tax has been levied as the income has been assessed at nil, no penalty can also be levied following the ratio of the decision of the Tribunal in the case of Apsara Processors Pvt. Ltd. (Supra). The Learned Departmental Representative submitted that the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Gold Coin Health Food (P) Ltd. (2008) 11 DTR 185, has held that Explanation 4 to s. 271(1)(c) intended to levy the penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss; the said Explanation being clarificatory is applicable retrospectively. Therefore, he submitted that the order of the Learned Commissioner of Income Tax(Appeals) should be set aside and that the matter should be remanded back to the file of the Learned Assessing Officer for deciding the appeal on merits.
ITA No.110/Ahd/2007M/s.Matra Ahar Pvt. Ltd.
Asst.Year -1999-2000 -5-
5. The Learned Authorised Representative of the Assessee also concurred with the submissions made by the Learned Departmental Representative.
6. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In the instant case, the Learned Assessing Officer levied penalty of Rs.4,09,862/- under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income by the assessee. In appeal, the Learned Commissioner of Income Tax(Appeals) observing that Ahmedabad Special Bench of Tribunal in the case of Apsara Processors Pvt. Ltd. (Supra) has held that no penalty can be levied if the assessed income was a loss and in the present case of the assessee as no tax has been levied as the income has been assessed at nil, no penalty can also be levied following the ratio of the decision in the case of Apsara Processors Pvt. Ltd deleted the penalty. We find that Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Gold Coin Health Food (P) Ltd. (2008) 11 DTR 185, has held that Explanation 4 to s. 271(1)(c) intended to levy the penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss; the said Explanation being clarificatory is applicable retrospectively. Further, the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Moser Baer India Ltd. (2009) 19 DTR (SC) 283, has held that Explanation 4 to s. 271(1)(c) is clarificatory and applicable retrospectively and therefore, penalty could be levied for Assessment Year 1996-97 even though there was no positive assessed ITA No.110/Ahd/2007 M/s.Matra Ahar Pvt. Ltd.
Asst.Year -1999-2000 -6- income; regarding penalty for concealment, matter remitted to Tribunal. Respectfully following the above cited decisions of the Hon'ble Supreme Court, we set aside the order of the Learned Commissioner of Income Tax(Appeals) and remand the matter back to his file to decide the issue of levy of penalty on merits. Needless to state that he shall allow proper opportunity of hearing to both the parties before adjudicating the matter afresh on merits. Thus, the grounds of appeal of the Revenue are allowed for statistical purposes.
7. In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced at the close of the hearing in the presence of the parties on 23/10/2009.
Sd/- Sd/-
( MAHAVIR SINGH) (N.S. SAINI )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 23/10/2009
Paras#
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT Concerned
4. The ld. CIT(Appeals)-I, Surat.
5. The DR, Ahmedabad Bench
6. The Guard File.
BY ORDER,
स᭜यािपत ᮧित //True Copy//
(Dy./Asstt.Registrar), ITAT, Ahmedabad