1 ITA No.1972/Del/2012
Asstt. Year: 2006-07
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `B' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
ITA No. 1972/Del/2012
Assessment Year: 2006-07
DCIT vs Eastern India Powertech Ltd.
Circle-11(1), (Formerly known as DLF Power LTd.)
Room No. 312, 10th Floor, DLF Centre, Sansad Marg,
C.R. Building New Delhi
New Delhi. (PAN AAACD0187C)
(Appellant) (Respondent)
Appellant by: Shri R.S. Singhvi, CA
Respondent by: Shri Satyajeet Goyal, CA
Mrs. Ashima Neb , Sr. DR
ORDER
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
This appeal has been preferred by the revenue against the order of the
Commissioner of Income Tax (Appeals) V New Delhi dated 17.2.2011 in appeal
No. 42/10-11 for asstt. year 2006-07 by which the penalty imposed by the AO
vide penalty order dated 26.3.2010 passed u/s 271 (1)© of the Income Tax Act
1961 (in short the Act) has been deleted and cancelled.
2. The sole ground raised by the revenue in this appeal reads as under :-
"On the facts and circumstances of the case and in law, the Ld. CIT(A)
has erred in deleting the penalty of Rs. 1,53,65,958/- imposed u/s
271(1)(c) of the Income Tax Act, 1961"
2 ITA No.1972/Del/2012
Asstt. Year: 2006-07
3. We have heard arguments of both the sides and carefully perused the
relevant material on record. At the outset the Ld. assessee's representative (AR)
submitted that the point in issue is fully covered in favour of the assessee by
virtue of the order of ITAT Delhi Bench B New Delhi in assessee's own case ITA
No. 531/D/2013 vide order dated 13.9.2013 for asstt. year 2007-08 whereby
appeal of the revenue has been dismissed by upholding the order of the CIT(A).
The Ld. AR has also placed a copy of order of the Tribunal (Supra) and further
submitted that the CIT(A) was right in deleing the penalty which was wrongly
imposed by the AO based on the retrospective amendment of the provisions of
the Act.
4. The Ld. AR fairly accepted that the Tribunal in assessee's own case order
vide dated 13.9.2013 (supra) has deleted and cancelled the penalty imposed by
the AO.
5. On careful consideration of above submission we are of the considered
view that on careful perusal of the order of the Tribunal in assessee's own case
for asstt. year 2007-08 vide dated 13.9.2013 we fairly observe that the
coordinate bench of the Tribunal has deleted the penalty by holding as under :-
3.2 It is seen that considering these arguments, the penalty imposed was
quashed by the CIT(A) on the following reasoning:-
"5.2. Decision
I have considered the submission of the appellant observation of
the Assessing Officer and decisions of ITAT Delhi on this issue. It is seen
that appellant had declared book profit during the year at Rs.
6,74,14,418/- u/s 115JB of the I.T. Act. While doing so the appellant did
not include provision for doubtful debts of Rs. 13,75,00,000/- in the book
profit so declared in the return of income. The assessing Officer included
the provision for doubtful debts of Rs. 13,75,00,000/- in the book profit
3 ITA No.1972/Del/2012
Asstt. Year: 2006-07
determined and total book profit was determined at Rs. 20,49,14,418/-.
This was done on the basis of amendment made by the Finance Act 2009,
in section 115JB with retrospective effect from 1st April 2001. Prior to this
amendment there were judgments of various High Court's and Supreme
Court on this issue wherein it was held that in respect or provision or
diminution in the value of any assets, no adjustment was required to be
made. It is contended by the appellant that at the time of filing return of
income, the appellant was not aware about the future amendments and
the return was filed on the basis of Supreme Court judgment in the case
of Apollo Tyres Ltd. vs. CIT 255 ITR 273 (SC) and Commissioner of
Income-tax, Delhi-IV v. HCL Commet Systems & Services Ltd. (2008) 172
TAXMAN 217 (DELHI) wherein it was held that provision for bad debt and
doubtful debt made in the profit and loss account is an ascertained liability
and , therefore, cannot be included in its book profit u/s Section 115B.
When the return of income was filed by the appellant, the retrospective
amendment to section 115JB regarding the claim bad debts was not on
the statutes. The appellant claims that while filing the return or income
based on various judicial pronouncements available on the subject, no
wrong or malafide claim said to have been made by the appellant in the
return of income. At the time of filing return of income no clear cut ruling
in favour of such amendment was available, therefore, the appellant did
not include the provision for doubtful debts in the book profit declared in
the return of income. The appellant has also relied upon the ITAT, Delhi
decision in the case of DCIT Circle 10(1) vs. DCM Shriram Consolidated
Ltd. ITA No. 2140/Del/2012 dated 10.7.2012 and ACIT vs. Colorbar
Cosmetics Pvt. Ltd. ITA No. 144/Del/2012 dated 02.05.2012 where in
penalty levied u/s 271(1)© on the issue of not including provision for
doubtful debts in the book profit u/s 115JB has been deleted since the
return of income was filed by the appellant before the introduction of
amendment in section 115JB in 2009. Therefore, there was no
concealment or furnishing of inaccurate particulars. The relevant para of
the decision is reproduced hereunder :-
"We have carefully considered the submission and perused the
records. We find that similar addition was levied in the hands of
the assesee for asstt. year 2006-07 & 2007-08. For A.Y. 2007-08
Tribunal had noted that for A.Y. 2006-07 the matter had traveled
to the Hon'ble High Court and the Hon'ble High Court confirmed
the deletion of penalty by observing as under :-
"CIT (Appeals) and the Tribunal have deleted the said penalty
observing that the position became clear when the retrospective
amendment was made w.e.f. 1.4.2001 vide Finance (No. 2) Act,
2009. In the present case, the assesee had filed the return on
4 ITA No.1972/Del/2012
Asstt. Year: 2006-07
income on 29.11.2006, which was revised on 31.3.2008. These are
before the retrospective amendment in 2009. The assesee had
relied on CIT vs. HCL Comnet Systems and Services Ltd. (2008)
305 ITR 409 (SC) and submitted that no adjustment was required
to be made for provision for and doubtful debts under clause © of
tile Explanation to section 115JB. In these circumstances, we feel
the Tribunal was justified in accepting and holding that the case is
covered by Explanation I Clause (B) to section 271(!) and had
correctly dismissed the appeal of the Revenue deleting the
penalty."
No substantial question of law arises. The appeal is dismissed."
The facts of the appellant's case are similar to the above cited
decisions of Hon'ble ITAT, Delhi therefore ratio of the above cited judicial
pronouncements is squarely applicable to the case of appellant. Hence,
penalty u/s 271(1)© of the IT Act cannot be levied for not including the
provision for doubtful debts in the book profit declared by the appellant.
Accordingly, penalty levied of Rs. 1,03,12,500/- by the Assessing Officer is
cancelled.
Since on merit the levy of penalty has been cancelled and ground No. 2 to
2.3 has been decided in favour of the appellant, therefore, the technical
ground raised by the appellant vide ground No. 1 to 1.3 have become
infructuous and same are not being decided."
4. In the afore-mentioned peculiar facts and circumstances taking into
consideration the arguments on behalf of the parties before the Bench, we are of
the view that the impugned order deserves to be upheld as the legal position is
very well-settled and the assessee cannot anticipate on the date of filing of the
return which admittedly was 28.09.2007 that a retrospective amendment in law
would be introduced by the Finance (No. 2) Act, 2009 w.e.ef. 1.4.2001 that is
subsequent to the date of filing of the return. In the facts of the case even
otherwise neither it can it be said that the assesee's claim was not bonafide nor
it can be said that the material facts were not properly disclosed at the time of
filing of the return. Admittedly as per record, the return was filed on 28.9.2007
based on the past position on the very same facts supported by the judgement
of the jurisdictional High Court and the amendment to the statute was
introduced with retrospective effect by the Finance Act, 2009. In the afore
mentioned peculiar facts and circumstances, the finding of the CIT(A) quashing
the penalty order is upheld.
5. In the result, the appeal of the Revenue is dismissed."
5 ITA No.1972/Del/2012
Asstt. Year: 2006-07
6. Coming to the facts of the present case from bare reading of the
impugned order we observed that the CIT(A) deleted the penalty on the same
line with following observations and findings :-
"On perusal of the assessment order, as well as the penalty order, it is noticed
that it is not the case of the assessing officer that the appellant had furnished
any wrong/incorrect fact and /or concealed any material fact. In fact, it si
noticed that the assessing officer, in the assessment order, had made the
addition by applying clause© of Explanation No. 1 to section 115JB of the I.T.
Act, which is not at all sustainable in view of the decision of the Supreme Court
in the case of CIT vs. HCL Comnet and Services Ltd. 305 ITR 409 and also the
jurisdictional Delhi High Court in the appellant's own case for the assessment
year 2002-03 reported in 329 ITR 289. It is also noticed that the retrospective
amendment in clause (1) of Explanation 1 to section 115 JB of the I.T. Act was
suo moto pointed out by the appellant during the appellate proceedings before
the CIT(A)-XIII, New Delhi. In these circumstances, it cannot be held that the
appellant had furnished any inaccurate particulars or concealed any material fact.
There is difference of opinion between the AO and CIT(A) as to the clause under
which addition is to be made.
On perusal of the contention regarding application of clause (!) of Explanation
1 to section 115 JB of the I.T. Act reproduced hereinabove, I find that the issue
is highly debatable question of law. It is also noticed that the claim of the
appellant is supported by legal opinion of one Mr. S.S. Bagai, a copy whereof
has been placed on pages 108-109 of the paper book. It is all the more
important to note that clause (1) was retrospectively inserted by the Finance
(No.2) Act, 2009 and the same was not available at the time of filing return of
income by the appellant on 29th November, 2006.
(a) The Hon'ble Supreme Court in the case of CIT vs. HEG Ltd. : 243 ITR 48
held in the context of imposition of additional tax under section 143(A) of the
I.T. Act, which was held to be bearing all the characteristics of penalty, that no
additional tax is leviable on the basis of subsequent retrospective amendment in
law. In the following decisions, referred to by the Ld. AR for the appellant,
penalty imposed on the basis of retrospective amendment in law has been
deleted by the Tribunal :
- HMA Udyog (P) Ltd. v. DCIT : ITA No. 2293/Del/2005
- DCIT vs. Ford Credit Kotak Mahindra Ltd.:ITA No.1219/Mum/2007
The aforesaid decisions are applicable in the present case since addition as
discussed above, has been confirmed by the CIT(A) by applying the
6 ITA No.1972/Del/2012
Asstt. Year: 2006-07
retrospectively inserted clause (i) of Explanation 1 to section 115JB of the I.T.
Act.
(b) That apart, the Delhi High Court in the recent case of CIT vs. Kas Movie
Private Limited in ITA No. 793 of 2011 held that no penalty is leviable where
claim made by the assessee is supported by legal advice of the Counsel. It has
similarly been held in the following cases, relied upon by the Ld. AR for the
appellant :
CIT v. Mitsui & Co. Ltd. : 272 ITR 565 (Del.)
Shyam Gopal Charitable Trust V. DIT (Exemption) : 290 ITR 99 (Del)
CIT v. Amar Nath : 173 Taxman 395 (P & H)_
Asian Packaging (P) Limited, ITA No. 315/D/2006
CIT v. Sidhartha Enterprises: 322 ITR 80 (P&H)
Carnation Nutra Analogue Foods Ltd. v. ITO (2009) 34 SOT 203 (Ahd.)
DCIT v. A. Tosh & Sons (India) Ltd. ITA Nos. 1930 & 1931/Kol/2011 (Kol)
The aforesaid decisions are applicable in the present case since the claim made
by the appellant is on the basis of legal advice taken from one Mr. S.S. Bagai. On
that reason, too, in my view, no penalty is leviable.
© Above all, in the following cases, it has been held that no penalty is leviable
on legal issues involving bonafide dispute between the assesee and the revenue:
CIT v. Reliance Petroproducts (P) Ltd. 332 ITR 158 (SC)
CIT vs. Vamchampigons & Agro Produce: 284 ITR 408 (Del)
CIT v. Bacardi Martini India Limited : 288 ITR 585 (Del)
CIT vs. Vibros Organics Limited : 159 Taxman 567 206 CTR 582 (Del)
CIT vs. Nath Brotehrs Exim International Limited : 288 ITR 670 (Del)
CIT vs. International Audio Visual Co: 288 ITR 570 (Del)
The aforesaid decisions are applicable in the appeal under consideration since in
the present case, there is a bonafide dispute between the appellant and the
Revenue on the addition of provision made while computing book profits. The
appellant has also not furnished any inaccurate particulars or concealed any
material fact.
(d) I also find merit in the alternative contention of the Ld. A.R. for the
appellant that since the very basis of addition was changed by the CIT(A) as the
addition was confirmed by applying clause (1) of Explanation 1 to section 115 JB
of the I.T. Act whereas addition was made by the assessing officer by applying
clause (c) of the said section, the foundation of the addition ceased to exist. In
similar circumstances, in the following cases penalty imposed has been held to
be unsustainable in law
7 ITA No.1972/Del/2012
Asstt. Year: 2006-07
CIT v. Ananda Bazar Patrik (P) Limited: 116 ITR 416 (Cal)
Gujarat Credit Corp Limited : 113 ITD 133/116 TTJ 619 (Ahd.) (SB):
Sudesh Khanna V ACIT: 98 TTJ 106 (Ahd.)
For the aforesaid reasons, penalty of Rs. 1,53,65,958/- imposed by the assessing
officer under section 271 (!)© of the I.T. Act is deleted."
7. In view of above and peculiar facts and circumstances of the case we are
of the considered view that there is no other valid reason to interfere with the
observations and findings of the CIT(A) in the impugned order as the legal
position is well settled that the assessee cannot anticipate on the date of fling of
return which was admittedly filed on 29.11.2006, that a retrospective
amendment in law would be introduced by Finance Act 2009 w.e.f. 1.4.2001 i.e.
subsequent to the date of filing return. Even otherwise neither it can be said that
the assesee's claim was not bonafide nor the material facts were not properly
disclosed by the assesee at the time of filing of return. Admittedly, the return
was filed on 29.11.2006 based on the past position on the very same facts
supported by they decisions of Hon'ble Jurisdiction High Court and prior to the
amendment to the provision of the Act was introduced which subsequently
inserted with retrospective effect by Finance Act 2009. Under these
circumstances the CIT(A) was right in cancelling and deleting the penalty as the
provisions retrospective inserted by Finance Act 2009 was not before the
assessee at the time of filing of return on 29.11.2006. Therefore, the CIT(A) was
8 ITA No.1972/Del/2012
Asstt. Year: 2006-07
right in deleting and cancelling the penalty. Accordingly the sole ground of the
revenue being devoid of merits is dismissed and impugned order is upheld.
8. In the result appeal of the revenue is dismissed.
The order was pronounced on conclusion of the hearing on 22nd August,
2014.
sd/- sd/-
(G.D. AGRAWAL) (CHANDRA MOHAN GARG)
VICE PRESIDENT JUDICIAL MEMBER
Dated 22nd August, 2014
Veena
Copy of order forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
By Order
Asstt Registrar, ITAT
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