Mechelec Steel Products, Baroda vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL " D " BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA Kr. YADAV, J.M. & SHRI ANIL CHATURVEDI, A.M.)

I.T. A. No.2489/AHD/2011 (Assessment Year: 2005-06)

M/s. Mechelec Steel V/S Income-tax Officer, Ward- Products 3/13, Industrial 2(3), Baroda Estate, Gorwa, Baroda

(Appellant) (Respondent)

PAN: AAEFM1861D

Appellant by : Written submission Respondent by : Smt. Sonia Kumar, Sr. D.R.

(आदे श)/ORDER

Date of hearing : 29-04-2015 Date of Pronouncement : 07-05-2015

PER SHRI ANIL CHATURVEDI,A.M.

1. This appeal filed by the Assessee is against the order of CIT(A)-III, Baroda dated 12.07.2011 for A.Y. 2005-06.

2. In this case, none appeared on behalf of Assessee but however written submissions dated 16.04.2015 were filed by the Assessee. We therefore proceed to decide the appeal, ex parte qua the Assessee on the basis of material on record and written submissions.

2 ITA No 2489/AHD/2011 . A.Y. 2005-06

3. Assessee is a partnership firm stated to be engaged in the business of manufacturing of water coolers and furniture. Assessee filed its return of income for A.Y. 2005-06 on 14.10.2005 declaring total income at Rs. 4,01,800/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 06.09.2007 and the total income was determined at Rs. 5,83,970/- by interalia disallowing expenditure of Rs. 1,82,172/- u/s. 40(a)(ia) on account of non deduction of TDS. On the aforesaid addition made u/s. 40(a)(ia), A.O vide order dated 25.03.2008 levied penalty of Rs. 70,000/- u/s. 271(1)(c) on account of concealment of income. Aggrieved by the aforesaid penalty order, Assessee carried the matter before ld. CIT(A) who vide order dated 12.07.2011 dismissed the appeal of the Assessee. Aggrieved by the aforesaid order of ld. CIT(A), Assesses is now in appeal before us and has raised the following ground:-

1. That the ld. CIT(A) erred in confirming levy of penalty of Rs. 70,000/- u/s. 271(1)(c) of the I.T. Act, on the alleged ground of concealment of income.

4. Before us, in the written submissions it is interalia submitted that at the time of making of payment of labour charges, packing and forwarding expenses, on some of the payments, TDS was not deducted but subsequently the TDS was deducted and was also deposited in subsequent years. It was further submitted that the payment of labour charges have not been held to be non genuine or bogus but the disallowance has been made on account of legal fiction created by Section 40(a)(ia) of the Act. It was further submitted that there was no concealment or furnishing of any inaccurate particulars regarding the income that were submitted in the return of income and it was the case of technical default. Further reliance was also placed on the decision 3 ITA No 2489/AHD/2011 . A.Y. 2005-06 of Ahd. Tribunal in the case of ITO vs. Kothari Brothers ITA No. 1081/AHD/2009 order dated 12.06.2009. It was thus submitted that the penalty levied u/s. 271(1)(c) be deleted. The ld. D.R. on the other hand supported the order of A.O.

5. We have heard the ld. D.R. and perused the material on record. In the present case, disallowance on account of 40(a)(ia) was made on account of non deduction of TDS. It is Assessee's submission that the TDS was deducted late and was paid in subsequent years. It is also a fact that the expense on account of packing and forwarding expenses and labour charges have not been held to be bogus or non genuine but the disallowance has been made on account of legal fiction u/s. 40(a)(ia). Before us, Revenue has not brought any material on record to controvert the aforesaid submissions of Assessee. Further the Revenue has not placed any material on record to demonstrate that the submissions made by the Assessee were incorrect or false. Further the disallowance u/s. 40(a)(ia) in our view in the present case can only be considered to be a technical fault. Further there is nothing on record to demonstrate that on the part of the Assessee there was any concealment of income or furnishing of inaccurate particulars of income. We further find that the Hon'ble Gujarat High Court in the case of CIT vs. L.G. Chaudhary Tax Appeal No. 536/A/2012 order dated 15.01.2013 has held that no penalty u/s. 271(1)(c) can be levied when the non deduction of TDS was in the nature of technical fault. Before us, Revenue has not brought any contrary binding decision in its support. In view of the aforesaid facts, we are of the view that the present case is not a case where penalty for concealment of income u/s. 271(1)(c) could have been levied. We therefore direct its deletion. In the result, this ground of Assessee is allowed.

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

Order pronounced in Open Court on 07 - 05 - 2015.

Sd/- Sd/- (SHAILENDRA Kr. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad. TRUE COPY Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad