Tca/618/2019 Of M/S.vinay Autoparts Pvt Ltd v. The Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.618 of 2019 M/s.Vinay Autoparts P. Ltd.,2F(NP), SIDCO Industrial Estate,Chennai-600 098. .. Appellant/Appellant-vs- The Income-tax Officer,Company Ward 3(1),121, Uttamar Gandhi Road,Nungambakkam, Chennai-600 006... Respondent/RespondentAppeal under Section 260A of the Income-tax Act, 1961against the order dated 10.05.2019 on the file of the Income-taxAppellateTribunal'C'Bench,Chennai,inI.T.A.No.2384/Chny/2018 for the assessment year 2009-10 againstthe order of Commissioner of Income Tax (Appeals)I, Chennai inITA No 548/13-14 dated 20/06/18 and against the order of IncomeTax Officer, Company Ward-III (I) Chennai in PANAABCU9229N/27/6/2016.For Appellant:Mr.V.S.JayakumarFor Respondent:Mr.M.Swaminathan,Senior Standing Counsel :assisted by Ms.S.Premalatha,Standing Counsel JUDGMENT(Delivered by T.S.Sivagnanam, J.) This appeal, filed by the appellant/assessee under Section260A of the Income-tax Act, 1961 (hereinafter referred to as“the Act”), is directed against the order dated 10.05.2019,passed by the Income-tax Appellate Tribunal 'C' Bench, Chennai(for brevity, “the Tribunal”), in I.T.A.No.2384/Chny/2018 forthe assessment year 2009-10. https://hcservices.ecourts.gov.in/hcservices/ 2.The above appeal has been filed raising the followingsubstantial question of law:-“Whether on the facts and in the circumstancesof case, the Tribunal was right in law inconfirming the levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961.” 3.The assessee, a company incorporated under the CompaniesAct, 1956, filed its return of income for the assessment year2009-10, on 28.09.2010, admitting total income as Rs.NIL. Theassessment was completed under Section 143(3) of the Act, videorder dated 01.12.2011, determining the loss at Rs.9,18,109/-and book profits as determined under Section 115JB of the Act atRs.28,69,799/-. The assessment order had become final, as theassessee accepted the assessment and paid taxes. 4.The Assessing Officer initiated penalty proceedings byissuing notice dated 01.12.2011. Though in the notice the exactallegations as regards furnishing inaccurate particulars orregarding concealment of particulars were not specificallymentioned, in the penalty order dated 27.06.2012, under Section271(1)(c) of the Act, the reason has been set out. The reasonassigned by the Assessing Officer is that the assessee is liablefor payment of Minimum Alternate Tax (MAT) under Section 115JBof the Act. However, the assessee had neither filed Form 29B,nor paid taxes as required to be paid under Section 115JB of theAct. Therefore, the Assessing Officer opined that penalty hasto be imposed. 5.In reply to the show cause notice, the assessee statedthat penalty can be imposed only when there is a consciousconcealment or furnishing of inaccurate particulars and themistake occurred at the time of filing the return was on accountof wrong advice given to the assessee resulting in omission ofthe applicability of Section 115JB of the Act. Further, theassessee stated that they were under the impression that sincethey are an STPI unit and eligible for the benefits underSection 10B of the Act, there is no liability for tax. Theassessee stated that it was their bona fide belief that there isno liability for tax and there is no intention to conceal orfurnish inaccurate particulars and immediately, on receipt ofthe assessment order, the tax demanded to the tune ofRs.4,80,060/- was remitted by the assessee on 27.12.2012.Therefore, the assessee requested that the penalty proceedingsbe dropped. However, the Assessing Officer did not agree withthe assessee and passed the order under Section 271(1)(c) dated27.06.2012 and imposed minimum penalty of Rs.2,95,589/-. 6.Aggrieved by such order, the assessee preferred appealbefore the Commissioner of Income-tax (Appeals)-11, Chennai (forbrevity, “the CIT(A)”). In the appeal petition, apart from thegrounds canvassed before the Assessing Officer, it was contendedthat penalty ought not to have been imposed without taking noteof the representation given by the assessee that they wereimproperly advised. Further, it was contended that the tax paidunder Section 115JB of the Act is only a presumptive tax andclaimed credit in the subsequent assessment years as and whenliability arises to the assessee. 7.Before the CIT(A), the Assessing Officer stated that theassessee had furnished inaccurate particulars in the return ofincome and hence, penalty under Section 271(1)(c) of the Actwill be attracted. On the other hand, the assessee contendedthat the Assessing Officer has observed that the assessee hasrightly claimed deduction under Section 10B of the Act and hasdeclared NIL taxable income under the normal provisions of theAct. 8.Further, it was contended that the details relating tobook profits were made available to the Assessing Officer at thetime of assessment proceedings for his consideration regardingMAT. Further, the Assessing Officer, has not recorded anyfinding that the details provided by the assessee in its returnof income were found to be incorrect or erroneous or false andin such circumstances, the question of levying penalty will notarise. Further, it was pointed out that the assessee has notprovided any inaccurate particulars neither in the return ofincome, nor to the Assessing Officer while submitting the booksof accounts. 9.The assessee placed reliance on the decision of theHon'ble Supreme Court in CIT vs. Reliance Petroproducts Pvt.Ltd., (2010) 322 ITR 158. The CIT(A) held that the assessee wasbound to have declared income under both the provisions as wellas under Section 115JB of the Act and there can be no exceptionor lenience. 10.Referring to the decisions in the case of Sri GolulamHotels India (P) Ltd. vs. ACIT, (2014) 49 taxmann.com 543(Madras HC) and Terra Energy Ltd., 12 taxmann.com 405 (ChennaiITAT), the CIT(A) upheld the order of the Assessing Officer. 11.The assessee carried the matter by way of appeal to theTribunal. Before the Tribunal, it was contended that the incomewas assessed under Section 115JB of the Act and not under normalprovision and it is not denied that there is a concealment ofincome, but that had its repercussions only when the assessmentwas done under the normal procedure. Further, it was argued https://hcservices.ecourts.gov.in/hcservices/ that the assessment as per normal procedure was, however, notacted upon. On the contrary, it is the deemed income assessedunder Section 115JB of the Act and hence, when the computationwas made under Section 115JB of the Act, the concealment had norole to play and was totally irrelevant. Therefore, theconcealment did not lead to tax evasion at all and hence,penalty should not be imposed under Section 271(1)(c) of theAct. 12.In support of their contention, reliance was placed onthe decision in CIT vs. Nalwa Sons Investments Ltd., (2010) 327ITR 543 (Delhi). The Tribunal by the impugned order dismissedthe appeal filed by the assessee holding that the explanationoffered by the assessee, in response to the show cause noticeissued under Section 271(1)(c) of the Act, is not a plausibleexplanation and there is no material on record to establish asto why the assessee had entertained the belief that profit isexempt from tax under the provision of Section 10B of the Actand not liable to tax under Section 115JB of the Act. 12.In support of their contention, reliance was placed onthe decision in CIT vs. Nalwa Sons Investments Ltd., (2010) 327ITR 543 (Delhi). The Tribunal by the impugned order dismissedthe appeal filed by the assessee holding that the explanationoffered by the assessee, in response to the show cause noticeissued under Section 271(1)(c) of the Act, is not a plausibleexplanation and there is no material on record to establish asto why the assessee had entertained the belief that profit isexempt from tax under the provision of Section 10B of the Actand not liable to tax under Section 115JB of the Act. 13.Further, the Tribunal pointed out that the explanationoffered by the assessee was a bald explanation and cannot be aplausible explanation and levy of penalty was justified. Thedecision in the case of Nalwa Sons Investments Ltd. (supra)relied on by the assessee was held to be not applicable to thefacts of the case. This is how the assessee is before us by wayof this tax case appeal. 14.We have elaborately heard Mr.V.S.Jayakumar, learnedcounsel for the appellant/assessee; and Mr.M.Swaminathan,learned Senior Standing Counsel assisted by Ms.S.Premalatha,learned Standing Counsel appearing for the respondent/Revenue. 15.In order to levy penalty under Section 271(1)(c) of theAct, the Assessing Officer should be satisfied that in thecourse of any proceedings under the Act, any person hasconcealed the particulars of his income or furnished inaccurateparticulars of such income and if the Assessing Officer arrivesat such satisfaction, it would be a case for imposition ofpenalty under the said Section. Therefore, it has to be seen asto why the Assessing Officer was satisfied in the assessee'scase to levy penalty. 16.As pointed out by us, in the penalty notice dated01.12.2011, it is not clearly indicated as to on what basis, theAssessing Officer was of the prima facie view that penalty isimposable. We find that irrelevant portions of the penaltynotice have not been deleted and the space have been left blankexcept for the hearing date, which has been mentioned in thenotice. However, the assessee has not raised such a plea before the Assessing Officer and therefore, at this juncture, we do notpropose to invalidate the penalty proceedings on the ground thatthe penalty notice dated 01.12.2011 is devoid of material. Thereason for imposition of penalty is on the ground that theassessee is liable for payment of MAT under Section 115JB of theAct and that the assessee had neither filed Form 29B, nor paidtaxes as required to be paid under Section 115JB of the Act. 17.The explanation given by the assessee is that, at thetime of filing the e-return, they were advised by a CharteredAccountant, who had helped them to file the necessary details.Copy of the return of income dated 28.09.2009 has been filed bythe assessee in the form of an additional paper book. From thereturn of income, we find that so far as the deduction underSection 10B of the Act is concerned, the assessee has mentionedthe figure as Rs.3979312/-. With regard to the MinimumAlternate Tax, in column 5(b), relating to “deductions”, theassessee has shown the amount as Rs.39,79,312/-. So far as theMAT credit is concerned, in Column 1, referring to “tax underSection 115JB” of the Act, in the assessment year 2008-09, theassessee has shown Rs.“zero”. 18.According to the learned counsel for the assessee, alongwith the return of income, the statement of total of income wasfiled by the assessee which shows the computation as per Section115JB of the Act. It is the further case of the assesseethat Form 29B was filed though not along with the e-return, butsubsequently during the assessment proceedings. 18.According to the learned counsel for the assessee, alongwith the return of income, the statement of total of income wasfiled by the assessee which shows the computation as per Section115JB of the Act. It is the further case of the assesseethat Form 29B was filed though not along with the e-return, butsubsequently during the assessment proceedings. 19.The objection of Mr.M.Swaminathan, is that when theassessee has shown Rs.“zero” in the column “tax under Section115JB of the Act in the assessment year 2008-09, it definitelyamounts to furnishing inaccurate particulars or concealing theparticulars of the assessee's income. Further, Mr.M.Swaminathan,would contend that the assessee is not an individual, but aprivate limited company and the plea raised by them isabsolutely far fetched and the Assessing Officer and the CIT(A)and the Tribunal have concurrently held against the assessee andthe finding of the Tribunal should not be disturbed. 20.It is true that when there are concurrent findings offact, this Court exercising power under Section 260A of the Actwill not interfere unless and until a case of perversity isestablished. It is a settled legal principle that merelybecause the assessee has accepted the quantum assessment asassessed by the Assessing Officer, based on the return of incomeand paid taxes, it will not automatically lead to levy ofpenalty and the assessee is entitled to contest the levy ofpenalty and the onus is on the Department to show that there hasbeen concealment of particulars of income of the assessee or furnishing inaccurate particulars of income. 21.In the instant case, the penalty proceedings wereinitiated solely for the reason that the assessee had not filedForm No.29B, nor paid taxes as required to be paid under Section115JB of the Act. After the assessee filed e-return on28.09.2009, the same was processed under Section 143(1) on25.11.2010. Subsequently, the case was selected for scrutinyunder CASS and notice under Section 143(2) was issued on23.08.2010. In response to the said notice, the CharteredAccountant of the assessee appeared. The Assessing Officer fromtime to time called for details and the Assessing Officeraccepts that those details were furnished by the assessee andthe books of account and bank statement were produced andexamined by the Assessing Officer. 22.At the time when the assessment proceedings were goingon, it was pointed out by the Assessing Officer that theassessee had not filed Form 29B, nor paid taxes as required tobe paid under Section 115JB of the Act. The assessee's case wasthat the Chartered Accountant, whom they have engaged, hadprepared form 29B on 01.09.2009, but the same was not filedalong with the return, but subsequently, the CharteredAccountant passed away and they were advised in a particularmanner to file the return of income and there is no intention toconceal particulars or furnish inaccurate particulars. TheAssessing Officer notes that the authorised representative ofthe assessee during the assessment proceedings, when theAssessing Officer pointed out the omission, filed Form 29B.This was examined and tax was computed and the same has beenremitted by the assessee along with interest levied underSection 234B and 243C of the Act. 23.The allegation against the assessee is that they hadfurnished inaccurate particulars, which would mean that theparticulars are not accurate or not exact or not correct or itis untrue. However, on a reading of the assessment order dated01.12.2011, we find that there is absolutely no finding renderedby the Assessing Officer that the assessee had furnishedinaccurate or incorrect or untrue particulars or erroneousparticulars in the return of income. In such circumstances, weare of the considered view that it is not a case where penaltycould have been imposed on the assessee. 23.The allegation against the assessee is that they hadfurnished inaccurate particulars, which would mean that theparticulars are not accurate or not exact or not correct or itis untrue. However, on a reading of the assessment order dated01.12.2011, we find that there is absolutely no finding renderedby the Assessing Officer that the assessee had furnishedinaccurate or incorrect or untrue particulars or erroneousparticulars in the return of income. In such circumstances, weare of the considered view that it is not a case where penaltycould have been imposed on the assessee. 24.In Reliance Petroproducts Pvt. Ltd., (supra) the Hon'bleSupreme Court pointed out that for Section 271(1)(c) to beattracted, there has to be concealment of particulars of incomeof the assessee and secondly, the assessee must have furnishedinaccurate particulars of his income. Admittedly, there is noallegation against the assessee before us that they had https://hcservices.ecourts.gov.in/hcservices/ concealed particulars of their income. However, the allegationis inaccurate particulars have been furnished. The AssessingOfficer while completing the assessment vide order dated01.12.2011, does not record any finding that the particularsgiven by the assessee in the return of income is incorrect orinaccurate, but the conclusion of the Assessing Officer is basedupon an interpretation of the legal position and held that taxis payable under Section 115JB. 25.The assessee's specific case was that they were advisedto file the return of income in a particular fashion and priorto the assessment proceedings, their Chartered Accountant hadpassed away and this had led to the mistake, which the AssessingOfficer pointed out during the assessment proceedings. Thus, inour considered view, the assessee's case is not a case where theprovisions of Section 271(1)(c) of the Act could have beeninvoked, as there has been no finding recorded by the AssessingOfficer that they have furnished inaccurate particulars or forconcealing particulars. Therefore, we find that the orderpassed by the Assessing Officer imposing penalty vide orderdated 27.06.2012 is perverse. Consequently, the orders passedby the CIT(A) and the Tribunal confirming such orders are liableto be interfered with. 26.For all the above reasons, the appeal filed by theassessee is allowed and the substantial question of law isanswered in favour of the assessee. Sd/-Assistant Registrar(CS-VI) //True copy// abrTo Sub Assistant Registrar 1.The Income-tax Officer, Company Ward 3(1), 121, Uttamar Gandhi Road, Nungambakkam, Chennai-600 006. 2.The Commissioner of Income-tax (Appeals)-11, 121, Mahatma Gandhi Road, Nungambakkam, Chennai-600 034. 121, Mahatma Gandhi Road, Nungambakkam, Chennai-600 034. 3.The Income-tax Appellate Tribunal 'C' Bench, Chennai. +1cc to Mr.V.S.Jayakumar, Advocate SR.No.71910 +2cc to Mr.M.Swaminathan, Advocate SR.No.72333, 72416 T.C.A.No.618 of 2019 SJ(CO)GMY(14/11/2019)