Mtz Polyfilms Ltd., Mumbai vs Assessee
- CitationI.T.A. No. 2590/Mum/2012
Ratio decidendi
The rule this decision rests on
The Tribunal's reasoning rests on the following principles: Where the assessee has offered a plausible and unrebutted explanation for a default, namely that interest could not be paid to a bank because the company was a BIFR company without funds, and where the authorities below have not found that explanation false or incorrect, the explanation must be considered before penalty under section 271(1)(c) can be sustained. Where a penalty for concealment or inaccurate particulars depends on the outcome of separate proceedings still pending before another forum (here, the BIFR proceedings for restructuring of the loan), that outcome bears significantly on whether the penalty can be levied, and the issue of penalty must be remitted to the Assessing Officer to be reconsidered in light of that outcome. Where a waiver of interest liability in such proceedings would be treated as income, but the claim for that interest has already been disallowed under section 43B, the subsequent waiver is not to be taxed again, so the disallowed amount cannot be taxed twice.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
ी िवजय पाल राव, याियक सद य, एवं ी एन. के . िबलै या, लेखा सद य. के सम । BEFORE SHRI VIJAY PAL RAO , JM AND SHRI N.K. BILLAIYA, AM
आयकर अपील सं./I.T.A. No. 2590/Mum/2012 (िनधारण वष / Assessment Year : 2005-06 )
M/s. MTZ Polyfilms Ltd. बनाम/ DCIT -9(2) th New India Centre, 5 Floor, Vs. Aayakar Bhavan 17, Co-operage Road, Mumbai. Mumbai-400 039. थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAACT 0193 N (अपीलाथ /Appellant) ... ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : None यथ क ओर से/Respondent by : Shri Jeetendra Kumar-DR
सुनवाई क तारीख / Date of Hearing 17/03/2015 घोषणा क तारीख /Date of Pronouncement 26/03/2015
आदेश / O R D E R
PER VIJAY PAL RAO, JM:
This appeal by the assessee is directed against the order dated 16.02.2012 of CIT(A) arising from penalty order passed u/s.271 for the assessment year 2005-06. The assessee has raised the following effective grounds in this appeal :-
"1. The CIT(A) erred in partly confirming the order passed by the Assessing Officer levying penalty u/s. 271(1)(c) of the I.T. Act.
Your appellant submits that the order passed by the CIT(A) is ultra vires, bad in law and contrary to the provision of the Act and deserve to be vacated.
2 ITA No.2590/M/12 MTZ Polyfilms Ltd.
2.(a) The CIT(A) erred in confirming levy of penalty u/s. 271(1)(c) on disallowance of Rs.1,44,00.000/- u/s. 43B of the I.T. Act.
Your appellant submits that on the facts and circumstances of the case, it has neither concealed any income not furnished any inaccurate particulars of such income with reference to the said disallowance so as to justify levy of penalty.
(b) The CIT(A) erred in confirming the income sought to be evaded at Rs.1,44,00,000/- as against the actual figure of Rs.1,39,86,215/-".
2. None has appeared on behalf of the assessee when this appeal was called for hearing. It transpires from record that despite repeated notices issued through RPAD and service as per acknowledgement on record the assessee has not appeared even on the last date of hearing. Accordingly, we propose to hear and dispose off this appeal ex-parte.
3. We have heard the ld. DR and considered the relevant record. The Assessing Officer has levied the penalty in respect of two additions made on account of finance charges of Rs.79,29,330/- u/s. 36(1)(iii) as the capital asset amounting to Rs.34.56 crores was not put to use during the year. The second disallowance of Rs.1,44,00,000/- was made by the Assessing Officer u/s.43B because the assessee did not pay the interest to the bank. Thus, the Assessing Officer levied the penalty of Rs.81,70,859/- being 100% of tax sought to be evaded.
3 ITA No.2590/M/12 MTZ Polyfilms Ltd.
3.1 On appeal, the ld. Commissioner of Income tax(Appeals) deleted the penalty in respect of disallowance of finance charges made u/s. 36(1)(iii) of the Act. However, the penalty in respect of disallowance u/s. 43B has been confirmed by the CIT(A) vide impugned order. We find that the assessee has explained before the Assessing Officer as well as CIT(A) that interest could not be paid to the bank because the assessee is a BIFR company and was having no funds to pay the interest. Further, the assessee has already filed application before BIFR which is pending disposal and the order. The Assessing Officer as well as CIT(A) has not found the explanation of the assessee as false or incorrect that the assessee company had approached the BIFR for restructuring of the loan. Therefore, in our view the outcome of the BIFR will have a significant bearing on the issue of levy of penalty. In case, any part of the above interest liability of the assessee is waived off, the same may be treated as income but since the Assessing Officer has already disallowed the said claim of interest u/s. 43B then the waiver of the interest amount in settlement as per BIFR proceedings would not be taxed again. Accordingly, in the facts and circumstances of the case and in the interest of justice, we set aside the order of authorities below and 4 ITA No.2590/M/12 MTZ Polyfilms Ltd.
remit the issue to the record of the Assessing Officer to reconsider the same as per outcome of the BIFR proceedings.
4. Appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 26/03/2015. आदेश क घोषणा खुले यायालय म दनांकः 26/3/2015 को क गई ।
Sd/- Sd/- (N.K. Billaiya) (Vijay Pal Rao ) लेखा सद य / ACCOUNTANT MEMBER याियक सद य / JUDICIAL MEMBER
ं ई Mumbai; मुब दनांक Dated 26/ 03/2015 व.िन.स./ Jv, Sr. PS
आदेश क ितिलिप अ िे षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT(A)-
4. आयकर आयु / CIT
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER, स यािपत ित //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai
This page reproduces a public judgment and a summary of it. It is research material, not legal advice, and it is no substitute for advice from an advocate on your own facts.
Research this judgment with Miss Lucy
Ask what it holds, what has followed it, and what it means for your matter — in plain English, with the citations.
Try Miss Lucy free