Deep Industries Limited,, Ahmedabad vs Assessee

आयकर अपील सं./I.T.A. No.1750/Ahd/2011 ( नधा रण वष / Assessment Year : 2006-07) M/s.Deep Industries Ltd. बनाम/ The DCIT (OSD) Opp: Suryanarayan Bungalow Vs. Range-1 Sabarmati Bungalow Ahmedabad Ahmedabad थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAACD 6915 E (अपीलाथ# /Appellant) .. ($%यथ# / Respondent)

अपीलाथ# ओर से / Appellant by : Shri Tushar P.Hemani, AR $%यथ# क' ओर से/Respondent by : Shri Nimesh Yadav, Sr.DR

ु वाई क' तार*ख / सन Date of Hearing 06/04/2015 घोषणा क' तार*ख /Date of Pronounce ment 13/05/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-VI, Ahmedabad ('CIT(A)' in short) dated 26/04/2011 pertaining to Assessment Year (AY) 2006-07. The Assessee has raised the following grounds of appeal:-

1. The ld.CIT(A) has erred in law and on the facts of the case in confirming the action of ld.AO in levying penalty of Rs.1,12,760/-

u/s.271(1)(c) of the Act, which is wholly unsustainable in law and ITA No.1750/Ahd/2011 M/s.Deep Industries Ltd. vs. DCIT (OSD) Asst.Year - 2006-07 -2-

on facts and as such the appellant could not be charged with any guilt of furnishing inaccurate particulars of income or concealing particulars of income within mischief of Section 271(1)(c) of the Act. The levy of penalty being without jurisdiction and totally uncalled for, deserves to be quashed.

2. In any case, the impugned penalty order is barred by limitation and thus without jurisdiction and illegal.

3. In any case, quantification f the penalty is erroneous and excessive.

4. The learned CIT(A) has erred in law and on facts in confirming the action of AO in initiating and levying penalty under section 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act at the time of framing the assessment order.

5. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserve to be quashed.

The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 26/12/2008, thereby the Assessing Officer (AO in short) made addition of Rs.3,35,000/- as short-term capital gain. During the course of assessment proceedings, the AO observed that as per Scheudle-1 of the Tax Audit Report, i.e. depreciation schedule, it was mentioned that block of Tankers was reduced to NIL during the year. The assessee in ITA No.1750/Ahd/2011 M/s.Deep Industries Ltd. vs. DCIT (OSD) Asst.Year - 2006-07 -3-

response to query of the AO submitted that the profits on sales of tankers was not recorded in the statement of total income by mistake. However, the AO proceeded to make addition of Rs.3,35,000/- and also initiated penalty proceedings u/s.271(1)(c) of the Act. Subsequently, the AO imposed a penalty of Rs.1,12,760/-. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions, dismissed the appeal

3. The ld.counsel for the assessee submitted that the authorities were not justified in imposing the penalty and confirming the same. He submitted that it is not the case where the assessee has concealed the material particulars. He submitted that in the Audit Report, it was categorically mentioned that block of tankers has been reduced to NIL, but due to inadvertent mistake, the profit resulting into tankers were not taken into income-tax return. It was a genuine mistake as this being the first year for which e-filing was made. He submitted that from the tax audit report it can be inferred that there was no intention to conceal the income. During the assessment proceedings, the amount was offered for tax. He placed reliance on the judgement(s) of Hon'ble Apex Court rendered in the case of CIT vs. Reliance Petroproducts Pvt.Ltd. CIT vs. Reliance Petroproducts Pvt.Ltd. reported at (2010) 322 ITR 158 (SC) and of Price Waterhouse Coopers (P.) Ltd. vs. CIT reported 348 ITR 306(SC).

ITA No.1750/Ahd/2011 M/s.Deep Industries Ltd. vs. DCIT (OSD) Asst.Year - 2006-07 -4-

3.1. On the contrary, Sr.DR has supported the orders of the authorities below.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) dismissed the appeal of the assessee by observing as under:-

"2.3. I have considered the facts of the case, penalty order and appellant's submission. It is not in dispute that appellant did nto disclose capital gain under section 50 in the computation of income. If the assessment would not have been picked up in scrutiny, the fact of no inclusion of capital gain in total income would not have come to light. Therefore appellant had definitely not disclosed true income in the return filed electronically. The argument of including the capital gain in tax audit report is not relevant since it was not filed with the Department. Further appellant's only defense is that since it was the first year of mandatory E filing of return, this mistake has happened. However appellant did not specify as to how this mistake continued till the assessing officer raised query on the issue. There is always a provision of taking printout of what has been filed electronically. In the printout appellant could have come to know if it was having mistake and would have filed revised return in time. By not doing so, appellant has concealed the particulars of income as far as taxable capital gain is concerned. Appellant submitted the explanation that it was mistake in electronic filing of return but appellant was not able to substantiate how it happened and why timely remedial action by way of revised return was not taken. This clearly disproves appellant's explanation. By accepting the same after assessing officer issued show cause will not help appellant from its liability to penalty. By no stretch of imagination such mistake can be treated as Bonafide because appellant did not act till assessing officer pointed out to him. The decision of jurisdictional High Court relied upon by the assessing officer is relevant. Concealment and inaccurate particulars of income go till the end of ITA No.1750/Ahd/2011 M/s.Deep Industries Ltd. vs. DCIT (OSD) Asst.Year - 2006-07 -5-

filing return of income. I find that this decision is clearly applicable to this case.

As against this the decisions relied upon by the appellant including the Supreme Court decision in the case of Reliance Petro products Ltd. do not help appellant. In the case of Reliance Petro products, honourable court held that concealment or inaccurate particulars are with reference to return of income. In this case appellant did not disclose capital gain in the return of income which resulted in concealment of income or furnishing of inaccurate particulars of capital gain. Therefore even as per this decision, appellant is clearly liable for penalty. Accordingly I confirm the penalty levied by the assessing officer."

4.1. There is no dispute with regard to the fact that the assessment proceedings and penalty proceedings are two different and distinct proceedings. The contention of the assessee is that the mistake was bona fide due to e-filing of the income-tax return. In the instant case, it is not disputed by the Revenue that in the audit report the assessee has reflected the block of assets as NIL and when it was pointed out by the AO the assessee accepted the mistake and offered the short-term capital gain as the same was not offered for tax in the income-tax return. Under the peculiarity of the present case, we are of the considered view that the mistake per se should not be the ground for levy of penalty. Therefore, respectfully following the ratio laid down in the judgements of the Hon'ble Apex Court in the case(s) of CIT vs. Reliance Petroproducts Pvt.Ltd.(supra) and Price Waterhouse Coopers (P.) Ltd. vs. CIT (supra), ITA No.1750/Ahd/2011 M/s.Deep Industries Ltd. vs. DCIT (OSD) Asst.Year - 2006-07 -6-

grounds raised in the assessee's appeal are allowed. We hereby direct the AO to delete the penalty.

5. In the result, the appeal of the Assessee is allowed.

Order pronounced in the Court on Wednesday, the 13th day of May, 2015 at Ahmedabad.

Sd/- Sd/- (एन.एस.सैनी) (कुल भारत) लेखा सद य या यक सद य ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 13/ 05 /2015 ट*.सी.नायर, व. न.स./T.C. NAIR, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ# / The Appellant

2. $%यथ# / The Respondent.

3. संबं4धत आयकर आयु6त / Concerned CIT

4. आयकर आयु6त(अपील) / The CIT(A)-VI, Ahmedabad

5. 7वभागीय $ त न4ध, आयकर अपील*य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड; फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स%या7पत $ त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 28.4.15 (dictation-pad 9+ pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member .. 12.5.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......13.5.15

7. Date on which the file goes to the Bench Clerk......................13.5.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................