1 ITA No. 1457/Del/2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH:`H' NEW DELHI
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
&
SMT. BEENA PILLAI, JUDICIAL MEMBER
I.T.A .No. 1457/Del/2010
(ASSESSMENT YEAR-2006-07)
Tristar Intech (P) Ltd., vs ACIT,
(Now known as Tristar Global Circle 16(1),
Infrastructure (P) Ltd.), New Delhi.
C-207, Ground Floor, Soami
Nagar, New Delhi.
AAOPG6268N
Appellant by Sh. Salil Kapoor, Adv.
Sh. Sanat Kapoor, Adv.
Respondent by Sh. J.P. Chandrekar, Sr. DR
Date of Hearing 02.09.2015
Date of Pronouncement 07.09.2015
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER:
This is an appeal filed by the assessee against the order of ld.
CIT(A)-XIX, New Delhi dated 10.02.2010 for A.Y. 2006-07 on the
following ground:
"That in the facts and circumstances of the case, the ld.
CIT(A) has grossly erred by sustaining levy of penalty
amounting to Rs. 11,49,000/- u/s 271(1)(c) without
appreciating the facts of the case."
2. Brief facts of the case are that the assessee company is
engaged in the business of contractors of waterproofing projects,
2 ITA No. 1457/Del/2010
construction related to infrastructure projects, dismantling of
existing buildings etc.
3. The assessee filed its return of income on 30.11.2006 declaring
total income of Rs. 10,28,830/-. The same was processed u/s
143(1). Statutory Notice u/s 143(2) was duly issued and the
representative of the assessee attended from time to time, to file
necessary details and evidences and produced books of account. The
assessing office concluded the assessment on 30.12.2008, by
making the following additions to the returned income:
1. Excess depreciation on Plant & Machinery Rs. 24,56,003
2. Non-capitalization of expenditure
a) Custom duty Rs. 3,50,021
b) Shipping expenses Rs. 98,766
3. Unpaid statutory liabilities u/s 43B Rs. 3,14,215
4. Late deposit of employees' share of PF & ESI Rs. 1,94,244
Rs. 34,13,249
4. There was no appeal against that was preferred by the assessee
before the first appellate authority against the assessment order
passed. Hence, the AO initiated the penalty proceedings u/s. 271(1)
(c ) and finalized the penalty proceedings by levying penalty of Rs.
11,49,000/- by giving following reasons:
"5. In the light of above observations, it is concluded that
in all of the above issues the assessee furnished
inaccurate particulars of income to reduce the taxable
income and did not substantiate its claim of expenses.
Therefore, by virtue of Explanation 1 of Section
271(1)(c) penalty is levied. In this year, normal tax rate
is 30% and surcharge is 10% and educational cess is 2%
therefore, tax sought to be evaded is computed at Rs.
11,48,900/- on the disallowance/additions of Rs.
34,13,249/-. And therefore, penalty of Rs. 11,49,000/-
(which is not less than 11,48,900/-, which is amount of
3 ITA No. 1457/Del/2010
tax sought to be evaded and not exceeding three time to
this) is levied after approval of the Addl. CIT, Range-16,
New Delhi."
5. Aggrieved by the penalty order the assessee went into appeal
before ld. CIT(A). The ld. CIT(A) confirmed the order of ld. AO.
6. The ld. AR submitted in respect of each addition made by the
Assessing Officer under section 143(3) proceedings. It is submitted
that the assessment order was passed on 30.12.2008 by making
following additions:
1. Excess depreciation on Plant & Machinery Rs. 24,56,003
2. Non-capitalization of expenditure
c) Custom duty Rs. 3,50,021
d) Shipping expenses Rs. 98,766
3. Unpaid statutory liabilities u/s 43B Rs. 3,14,215
4. Late deposit of employees' share of PF & ESI Rs. 1,94,244
7. The Ld. A.R dealt with each addition on merits in the following
manner;
1) Addition in respect of Excess depreciation on Plant & Machinery:
The ld. AO made addition to an extent of Rs. 24,56,003/- under
the head "plant and machinery". At the time of assessment the ld.
AO pointed out certain discrepancies in the calculation arrived at
by the assessee (PB pg. 36, 37). To which the ld. AR submitted
vide letter dated 12.12.2008 and conceded the discrepancies. As a
mistake in recording the figure. The assessee immediately revised
the claim of depreciation to Rs. 47,60,903/- against the original
claim of Rs. 72,16,906/-. It was submitted that due to the
mistake, the value of Plant and Machinery was taken at Rs.
1,85,56,622/- instead of Rs. 18,55,862/-.
2) Addition in respect of custom duty and shipping expenses:
4 ITA No. 1457/Del/2010
The assessee in the revised return had added excess claim of
custom duty amounting to Rs. 3,50,021/- and shipping expenses
amounting to Rs. 98,766/-. The assessee did not capitalize the
expenses, and treated the same to be revenue in nature. The AO
did not allow the claim of the assessee and added the same to the
income.
3) Addition in respect of Unpaid statutory liabilities u/s 43B:
The assessee had revised the statutory liabilities paid u/s 43B to
an extent of Rs. 3,14,215/-. In the audit report annexed to the
paper book at page 58, it was pointed out that the same has been
paid before the due date for furnishing the return of income of the
previous year u/s 139(1). However, the AO included the said
amount while computing the income for the year under
consideration being in violation of sec.43B of the Act.
4) Addition on the basis of late deposit of employees contribution
towards PF & ESI
The AO added an amount of Rs. 1,94,244/- on the ground that the
amount was not paid within the due date prescribed under the
Act. It is brought to the notice that there is a delay in depositing
the employees contribution and it is submitted by the ld. AR that
the same has been deposited beyond the due date which is 15th
day of subsequent month. However the Ld. AR submitted that the
same was deposited before the filing of the return.
8. The ld. AR also made his submissions that in the assessment
order passed u/s.143(3) by the ld. AO, the satisfaction has been
recorded for concealment of income u/s 271(1)(c) of the Act.
5 ITA No. 1457/Del/2010
Accordingly, the penalty proceedings were initiated by the AO as the
assessee did not prefer any appeal against the quantum assessment.
The ld. AR further pointed out that the penalty has been levied by the
ld. AO for furnishing of inaccurate particulars of income and the ld.
AO by virtue of Explanation 1 to Section 271(1)(c) has levied penalty.
It is argued by ld. A.R that the AO has recorded the satisfaction for
concealment of income and the penalty has been levied for furnishing
of inaccurate particulars of income by considering Explanation 1 to
Section 271(1)(c). Ld. AR further submitted that Explanation 1 to
Section 271(1)(c) cannot be applied if the charge is for filing
inaccurate particulars. The deeming fiction is that the Explanation 1
could be invoked only if there is a concealment of income.
9. Without prejudice to the above arguments the ld. AR submitted
that, to the facts and circumstances of the case, Explanation 1 to
Section 271(1)(c) of the Act could not be invoked for the following
reasons;
(i) that the assessee has offered explanation to the AO at the time
of assessment;
(ii) that the explanation so offered by the assessee has not been
found to be false by the Ld.A.O;
(iii) that the assessee in bonafide belief has filed all the details and
records in respect of the additions made were placed before the
AO.
10. For the above submission, the ld. AR placed reliance on the
judgment passed by the Hon'ble Apex Court in the case of CIT vs.
Reliance Petro Products reported in 322 ITR 158. The ld. AR also
6 ITA No. 1457/Del/2010
placed reliance on the judgment passed by the Indore Tribunal in
the case of DCIT vs. Nepa Limited reported in (2015) 58
taxmann.com 137, wherein an identical issue was addressed.
11. On the contrary, the ld. DR argued that there was a willful
attempt on behalf of the assessee to evade tax.
12. The ld. DR placed reliance on the judgment of Hon'ble
jurisdictional High Court in the case of CIT vs. Arcotech Ltd. in ITA
No. 71/2013. The ld. DR further argued that the assessee had filed
inaccurate particulars, which was brought to the notice of the
assessee at the time of assessment proceedings and, therefore, there
was a willful attempt to evade tax.
13. We have considered the rival submissions of both the parties,
perused the material available on the record and the judgments
relied upon by them. On merits it is observed that mistake of the
assessee was bonafide which has been corrected by filing revised
return before completion of assessment. Merely because there were
some discrepancies, it cannot be held that the assessee intended to
evade tax. The assessee had rectified the same and had accepted the
mistake before the AO. The assessee also chose not to prefer appeal
before the first appellate authority, itself shows that the mistakes
were not wilfull. For this act of assessee penalty u/s 271(1)(c) may
not be levied in respect of the addition made u/s 43B, the assessee
had declared in the audit report the bonafide error which do not find
place in the return filed by the assessee (PB page 58). The delayed
payment in respect of employees' contribution to PF & ESI needs to
be given liberal approach in view of the ratio laid down by the
7 ITA No. 1457/Del/2010
Hon'ble Delhi High Court in the case of CIT v. P.M. Electronics Ltd.,
220 CTR 635 (Delhi) while relying upon the decision of Hon'ble Apex
Court in the case of CIT Vs. Vinay Cement Ltd.,213 CTR (SC) 268 ,
concurred with the view taken by the Hon'ble Madras High Court in
Nexus Computer (P) Ltd.,219 CTR(Mad) 54 that employer/employees'
contribution towards provident fund payments made after the due
date prescribed under the Employees' Provident Fund Act and Rules
made there under but before the due date for furnishing the return of
income under sub sec. 1 of sec. 139 of the Act, are allowable under
s.36(1)(va) read with sec. 2(24(x) and sec. 43B of the Act. Moreover,
Hon'ble Apex Court in the case of CIT vs Alom Extrusions Ltd., 319
ITR 306 (SC) held that the omission of the first proviso to section 43B
of the Act by the Finance Act, 2003, operated, retrospectively, with
effect from, April 1, 1988 and not prospectively from April 1, 2004.
14. The decision relied on by the DR of the jurisdictional High Court
in the case of Arcotech (supra) are distinguishable on the facts
because in the said case, the assessee had not substantiated the
claims and thus had not discharged the onus and even the audit
report was silent in respect of the facts which was not disclosed. The
assessee therein claimed the ignorance of law for substantiating the
wrong claims. Whereas the facts before us the assessee has
demonstrated the manner in which the mistake has been corrected,
thereby discharging the onus.
15. Furthermore, the AO in the assessment order passed u/s.143(3),
had initiated penalty for concealing the particulars of income,
however, at the time of passing penalty order the AO levied the
8 ITA No. 1457/Del/2010
penalty for filing of inaccurate particulars of income under the virtue
of Explanation 1 to Section 271(1)(c) of the Act.
16. For dealing with the above observation let us analyze the
relevant provision u/s. 271(1)(c) Explanation 1, which is reproduced
herein below:
Failure to furnish returns, comply with notices,
concealment of income, etc.
"271. (1) If the Assessing Officer or the Commissioner
(Appeals) or the Principal Commissioner or Commissioner in
the course of any proceedings under this Act, is satisfied
that any person--
(c) has concealed the particulars of his income or furnished
inaccurate particulars of [such income, or
Explanation 1.--Where in respect of any facts material to
the computation of the total income of any person under
this Act,--
(A) such person fails to offer an explanation or offers an
explanation which is found by the Assessing Officer or
the Commissioner (Appeals) or the Principal Commissioner
or Commissioner to be false, or
(B) such person offers an explanation which he is not able to
substantiate and fails to prove that such explanation
is bona fide and that all the facts relating to the same and
material to the computation of his total income have been
disclosed by him,
then, the amount added or disallowed in computing the
total income of such person as a result thereof shall, for the
purposes of clause (c) of this sub-section, be deemed to
represent the income in respect of which particulars have
been concealed."
17. From the said provision, it is apparent that, if the ld.AO in the
course of assessment proceedings is satisfied that, any person has
concealed the particulars of income or furnished inaccurate
9 ITA No. 1457/Del/2010
particulars of such income, then he may levy penalty on the
assessee. Thus, there are two different charges i.e. concealment of
particulars of income or furnishing of inaccurate particulars of
income. The penalty can be imposed only for a specific charge.
Furnishing inaccurate particulars of income means, when the
assessee has not disclosed the particulars correctly or the particulars
disclosed by the assessee are found to be incorrect whereas,
concealment of particulars of income means, when the assessee has
concealed the income and has not shown the income in its return or
in its books of accounts. Explanation 1 is a deeming provision and is
applicable when an amount is added or disallowed in computation of
total income which is deemed to represent the income in respect of
which particulars have been concealed. Explanation 1 cannot be
applied in a case where the assessee furnishes inaccurate particulars
of income.
18. In the present case, we observe that the ld.AO has initiated
penalty proceeding u/s 271(1)(c) on the basis that the assessee has
concealed the particulars of income and the penalty ultimately levied
on the assessee has been for furnishing inaccurate particulars by
observing that the case of the assessee is covered by the Explanation
1 to Section 271(1)(c).
19. On the above findings and reasoning, we hold that this is not a
fit case for levy of penalty u/s 271(1)(c) as there has been no
concealment on behalf of the assessee. The error that was brought
to the notice in respect of depreciation was a bonafide error, which
was corrected by the assessee by filing revised return during the
10 ITA No. 1457/Del/2010
assessment proceedings. The remaining additions made by the AO
do not call for levy of penalty under this provision because these are
mere disallowances made by the AO but not conclusive evidence of
concealment. We, therefore, by keeping in view the ratio laid down in
the judgment of Reliance Petro Products (supra) and Price Water
House Coopers Pvt. Ltd. vs. CIT reported in (2012) 348 ITR 306
passed by the Hon'ble Supreme Court and jurisdictional High court
in the case of of DCIT vs. Nepa Limited reported in (2015) 58
taxmann.com 137, delete the penalty u/s 271(1)(c) of the Act levied
by the AO and confirmed by the ld. CIT(A).
20. In the result, the assessee's appeal is allowed.
The order is pronounced in the open court on 07/09/2015
Sd/- Sd/-
(N.K. SAINI) (BEENA PILLAI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 07/09/2015
*Kavita, P.S.
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
11 ITA No. 1457/Del/2010
Date
1. Draft dictated on 02.09.2015
2. Draft placed before author 03.09.2015
3. Draft proposed & placed before the 07.09.2015
second member
4. Draft discussed/approved by Second 07.09.2015
Member.
5. Approved Draft comes to the 07.09.2015
Sr.PS/PS
6. Kept for pronouncement on 07.09.2015
7. File sent to the Bench Clerk 07.09.2015
8. Date on which file goes to the AR
9. Date on which file goes to the Head
Clerk.
10. Date of dispatch of Order.
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