Income Tax Appellate Tribunal - Chandigarh
M/S H.P. Tourism Development ... vs Dcit, Shimla on 22 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'A', CHANDIGARH
BEFORE MS. DIVA SINGH, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 891/CHD/2017
Assessment year: 2011-12
H.P.Tourism Development Vs The DCIT,
Corporation Ltd., Circle 1(1),
Ritz Annexe, Chandigarh.
Shimla.
PAN : AAACH4038E
(Appellant) (Respondent)
Appellant by : Shri Vishal Mohan
Respondent by : Smt.Chander Kanta, Sr.DR
Date of hearing : 15.01.2018
Date of Pronouncement : 22.02. 2018
ORDER
PER DIVA SINGH,JM The present appeal has been filed by the assessee assailing the correctness of the order dated 24/03/2017 of CIT(A) Shimla pertaining to 2011-12 assessment year
2. The Registry has pointed out a defect in the filing of the present appeal in as much as the appeal is delayed by one day. The Ld. AR inviting attention to the application for condonation of delay supported by an affidavit of Shri Dinesh Kumar Malhotra, Managing Director of the assessee submitted that the delay has occurred on account of the fact that the appeal had been sent by post on 27/05/2017 and instead of being delivered either on 28th or 29th of May, it was delivered on 30th of May,2017. Accordingly, it was his prayer that there was no willful or intentional default on the part of the assessee. In these circumstances it was his prayer that the delay may be condoned.
3. The Ld. DR on considering the material available on record and the submissions, had no objection if the delay is condoned.
4. We have heard the rival submissions and perused the material available on record. We have taken into consideration the application moved on behalf of the assessee supported alongwith the affidavit of the ITA 891/CHD/2017 A.Y. 2011-12 Page 2 of 6 Managing Director. Considering the contents thereof and the submissions of the parties before the Bench wherein we find that the delay in the peculiar facts has occurred for reasons beyond the control of the assessee. We note that on account of the delay no advantage has been gained by the assessee and nor has any loss been caused to the revenue. Accordingly accepting the explanation offered as bonafide and true, we deem it appropriate to condone the delay. Ordered accordingly.
5. The Ld. AR addressing the grounds raised in the present appeal submitted that the assessee in the facts of the present case is assailing the decision of the CIT(A) wherein the penalty imposed under section 271 (1)(c) has been confirmed in appeal by the CIT(A). Inviting attention to the facts on record it was submitted the assessee is a Government Corporation of the HP Government and is in the business of running of hotels and restaurants and providing of other facilities for promotion of tourism in the State. It was his submission that in the facts of the present case, the unpaid liability was clearly pointed out in the tax audit Report, however while punching the amounts, there was an inadvertent error in the preparation of accounts which mistake when pointed out at the assessment stage, was accepted by the assessee in good faith and the issue was not challenged in appeal. However, on account of this inadvertent mistake, the penalty under Section 271(1)(c) has been imposed. Carrying us through the findings of the AO recorded in the assessment order it was his submission that there was a bonafide mistake/inadvertent error and it is not a case of either filing inaccurate particulars or concealing the particulars of income. For ready reference the relevant extract from order dated 03/02/2014 is reproduced hereunder :
During the course of assessment proceedings it was noticed that assessee has only disallowed a sum of Rs. 10,701/- on account of house tax liability u/s. 43 B of the Income. Tax Act, 1961 not discharges till filing of return of income tax. Whereas the disallowance is to be made of Rs. 40,52,701/- as the assessee has only paid a sum of Rs. 18,95,888/- out of Rs.39,48,589/- outstanding as on 31.03.2010 on account of house tax liability. Accordingly the assessee was asked to reconcile the discrepancy. Vide letter dated 16.11.2013 the counsel of the assessee has submitted as under: -
"As regards house tax it is submitted that it is admitted out of total bill raised of. Rs. 59,48,589/- only a sum of Rs. 18,95,888/- was paid -within the time laid down under section 43B of the Income Tax Act, 1961. Inadvertently the same was not disallowed at the time of finalization of the return and as such it is prayed that the assessee has no objection if the same is added to the taxable income of the assessee and the inadvertent error be excused."
ITA 891/CHD/2017 A.Y. 2011-12 Page 3 of 6 5.1 Inviting attention to the order passed in the penalty proceedings the Ld. AR submitted that the assessee itself is not in a position to address how the inadvertent mistake has occurred. Probably some wrong figure was inadvertently lifted in copying pasting. Various decisions of the courts were relied upon to state that in case of a bonafide mistake, no penalty under section 271(1)(c) could be imposed. However the assessee was not successful in the proceedings and the issue was carried in appeal before the CIT(A). Inviting attention to the impugned order it was submitted that the written submissions of the assessee have been extracted in the order on which heavy reliance was being placed in the present proceedeings also. However, the assessee having failed to get relief is before the present forum. It was his submission that in terms of the decision of the Apex Court in the case of Reliance Petrochemicals Ltd. and Price Water Cooper which had been cited before the CIT(A) also in the facts of the present case in the absence of any material on record to suggest that the mistake was deliberate and it was an act of concealment the penalty imposed may be quashed.
6. The Ld. Sr. DR relies upon the orders of the Assessing Officer and the CIT(A).
7. We have heard the rival submissions and perused the material available on record. The facts leading to the addition of the said amount to the income of the assessee in the quantum proceedings there is no dispute. The issue which devolves for our consideration is whether in the facts of the present case as have been set out in the earlier part of this order, penalty imposed under section 271 (1) (C) of the Act was attracted or not. No authority need be cited for the well-settled proposition that the penalty proceedings and the assessment proceedings are separate and distinct. It is equally well-settled that the penalty proceedings are not automatic and thus merely because addition is made in the assessment order, that fact itself is not sufficient reason to impose penalty under section 271(1)(c). No authority also need be cited for the authority that merely because explanation offered in the quantum proceedings qua the addition has not been accepted, thus the explanation qua the penalty proceedings necessarily has to be rejected. The mere fact that for the purposes of determining the taxable income of the assessee the explanation of the assessee was rejected would not mean that ITA 891/CHD/2017 A.Y. 2011-12 Page 4 of 6 automatically it has to be rejected in the penalty proceedings also. The explanation necessarily in the penalty proceedings has to be re-considered in the light of the requirements of the penalty proceedings. Thus, in order to determine whether the penalty is attracted in the facts of a particular case the explanation offered in the quantum proceedings necessarily has to be re-consideration, however, in the light of the requirements of the penalty proceedings. In the facts of the present case we note that the explanation offered before the assessing officer in the penalty proceedings was further elaborated by the assessee in the appellate proceedings before the CIT(A). For ready reference relevant explanation is reproduced from the impugned order :
1. The Present appeal has been filed against the imposition of penalty under Section 271(1)(c) of the Income Tax Act. 1961 of Rs. 12,52,284/-. The brief facts leading to the imposition of penalty are that the assessee had filed return of income declaring NIL income after setting off B.F. losses of Rs. 2,84,04 703/. That during the course of assessment year, it was found that though the disallowance in respect of the unpaid amount of House Tax has not been made as per the schedule annexed to the tax audit report. The assessee had not disallowed a sum of Rs. 40.52.701/- in respect of the unpaid house tax during the assessment year under consideration.
2. That when the said query was put, the said fact was admitted and the same was offered for taxation by the assessee. The reason for the same was explained as the picking of the wrong figure of M.C. Tax of Rs 10701 and disallowance of the same was made under section 43B of the Income Tax Act. 1961.
3. It is settled law that findings recorded at the time of assessment proceedings though relevant are not conclusive for imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961. Reliance in this regard is placed on the Judgment of the Hon'ble supreme Court of India in the case of Anwar Ali reported as 76ITR 696 Page (SC)
4. In the instant case though the disallowance under section 43&B had been made as apparent from computations of income, the copy of which is being placed on record. Inadvertently, Out of the figure of house tax only a sum of Rs. 10,701/-was disallowed. On careful scrutiny the same was found to be erroneous. The assessee is a government Corporation and has been regularly filing its return of income. Just because of inadvertence, a mistake has taken place at the behest of the assessee, the same does not amount to either concealment of Income or filing of inaccurate particulars in respect of the same.
5. It is settled law that even in cases where the assessee claims any disallowance which is not found to be allowable, the same does not call for imposition of penalty under section 271(1)(C) of the Income Tax Act, 1961.
Reliance in this regard is placed on the judgement of the Hon'ble Supreme Court of India in the case of Reliance Petrochemicals reported as 322 ITR 158 page (SC). Law to this effect is also placed on the judgment of the Hon'ble Punjab and Haryana High court in the case titled as CIT verus Ajaib Singh and Company reported as 253 ITR 630 (Punjab and Haryana)
6. It is pertinent to mention that in a similarly situated case where the auditors had opined that disallowance under section 40A(7) had to be made but, inadvertently the same was not made by the assessee. The Hon'ble supreme Court held the same not to be a fit case for imposition of penalty in the case of Price Water house Cooper Pvt. Ltd versus CIT reported as 348 ITR 306 page (Supreme Court). Relevant Portion of the said judgement is being reproduced hereunder for the kind perusal and ready reference of this Hon'ble Forum:-
ITA 891/CHD/2017 A.Y. 2011-12 Page 5 of 6 " That contents of the tax audit report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to that all that has happened in the present case is that through a bonafide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can be described as a human error which we are all prone to make. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. Does not mean that the assessee is guilty of either furnishing inaccurate particular or attempting to conceal its income." It is also pertinent to mention that otherwise deduction was allowable to the assessee and the same only because of the virtue of section 43-B had to be disallowed.
As the said disallowance was inadvertently left on the part of the assessee, the same cannot be termed as either concealment of income or filing of inaccurate particulars in respect of the same and as such, penalty has illegally been imposed. That being the case, it is most respectfully prayed that penalty be ordered to be deleted or any other relief be given which this Hon'ble Forum deems fit and proper in the facts and circumstances of the present case.
7.1 We note on a reading of the impugned order that the CIT(A) has observed that the return was filed on 30/09/2011 and the municipal taxes amounting to rupees Rs. 40,52,701/- were not paid before the due date and thus added back to the returned income under Section 43B of the Income Tax Act, 1961. The CIT(A) takes note of the fact that only when the assessee was confronted with this fact the assessee filed letter dated 16/11/2013 accepting the addition as a bonafide mistake. The said explanation was not accepted in view of the fact that the assessee it was noted was a government company and was necessarily required to get its accounts audited. Considering the fact that the return had been filed on 30/09/2013 and auditing of accounts for and AY 2012-13 and 2013-14 also would have started he questioned the fact that how the mistake could not be noticed by the auditors. He further held that it was only when the underreporting of the income was deducted by the assessing officer that the assessee by the specific letter pleaded that the mistake was inadvertent. The Ld. AR was specifically required to address this aspect also. In response thereto the Ld. AR submitted that the assessee itself is in a fix as it is unable to find out how a wrong figure has been imported. The assessee despite its best efforts is unable to understand at which stage while copying pasting the figure was lifted and from where. The Ld. Sr. DR had also been heard on this issue. Considering the legal position as set out by the Apex Court in the case of Reliance Petroproducts and Price Water Cooper, we are of the view that in the peculiar facts and circumstances of the present case the explanation of inadvertent error can ITA 891/CHD/2017 A.Y. 2011-12 Page 6 of 6 operate in assessee's favour. We further take note of the fact that the assessee is not shown either to be a habitual offender and nor has such a mistake occurred in assessee's case in the past and has occurred infact only for the first time. We note that in the face of the consistent arguments on behalf of the assessee, nothing has been placed on record before us to show that this was a deliberate and willful mistake on the part of the assessee with malafide reasons. On the other hand considering the consistent explanation of the assessee we are of the view that the benefit of doubt operates in favour of the assessee as the mistake has occurred inadvertently on account of some lifting of some wrong figures as a typo while cutting pasting figures from some unrelated figures. Accordingly, we quash the penalty proceedings.
8. In the result the appeal of the assessee is allowed.
Order Pronounced in the Open Court on 22.02. 2018.
Sd/- Sd/-
(ANNAPURNA GUPTA) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
'Poonam'
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
Asstt. Registrar
ITAT,Chandigarh.