RAASI REFRACTORIES LIMITED ,HYDERABAD vs. DY. COMMISSIONER OF INCOME TAX , CIRCLE-3(1), HYDERABAD

At the outset, it is seen that there is a delay of 16 days in filing of the appeal before the Tribunal and the assessee has filed an application explaining the reasons for the delay and sought condonation of delay. The contents of the affidavit filed in support of the said application are as under: “1. I, S.Subrahmanya Sastry, s/o late S.A Sarma, aged 56 years r/o H.No.1-6-18/4, Road No.35, Chaitanyapuri, Hyderabad, occupation Manager, accounts in M/s. Raasi refractories Ltd., Hyderabad do solemnly affirm and state as follows.

After hearing the learned DR, we are satisfied that the assessee was prevented by a reasonable cause from filing of the appeal before the Tribunal in time. The delay is accordingly condoned.

As regards the merits of the case, brief facts are that the assessee company, which is in the business of manufacture of refractory bricks and mortar, e-filed its return if income on 30.09.2015 declaring loss of Rs.16,16,39,883/-. The case was taken up for scrutiny under CASS and during the assessment proceedings u/s 143(3) of the Act, the assessee was required to file certain details. The assessee filed such details.

On perusal of the balance sheet of the assessee, the Assessing Officer noticed that there were outstanding statutory liabilities of Rs.4,84,43,411/-. Therefore, the details of the payments made against such statutory liabilities were called for. After perusal of the details filed by the assessee, the Assessing Officer observed that in its computation of income, the assessee had added back only a sum of Rs.10,86,618/- u/s 43B of the Act and further that the balance statutory liabilities which comes to Rs.4,73,56,793/- were not paid before the due date of filing of the return of income. He accordingly brought it to tax.

Further, the Assessing Officer also noticed that the assessee has received interest income of Rs.23,98,370/-, which was not taken into a/c while computing the income of the assessee. When asked to explain, the assessee submitted that the management erroneously omitted to consider the same in its computation of income and therefore, the assessee has no objection to the addition. Accordingly, the sum of Rs.23,98,370/- was also brought to tax.

Thereafter, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act by issuance of notice u/s 274 r.w.s 271(1)(c) of the Act. The assessee submitted its reply. With regard to the addition of Rs.4,73,56,793/-, the assessee submitted that the entire amount does not pertain to the relevant A.Y and due to the change in the management of the company, certain omissions have taken place in the preparation of the compliances to the statutory obligations. The assessee also submitted that mere revision of the figures does not automatically amount to furnishing of any inaccurate particulars of income.

The Assessing Officer, observing that the assessee had agreed for the additions of Rs.23,98,370/- and did not come up with any explanation for not adding the unpaid statutory liabilities to the income, while computing the total income, opined that the assessee has furnished inaccurate particulars of income. Similarly, with regard to the addition of Rs.23,98,370/- the Assessing Officer held that but for the scrutiny, the same would not have come out and the assessee has sought to avoid the payment of tax. Thus observing, he levied the minimum penalty of Rs.1,61,43,100/- being 100% of the tax sought to be avoided.

Aggrieved, the assessee preferred an appeal before the CIT (A) who confirmed the order of the Assessing Officer and the assessee is in second appeal before the Tribunal by raising the following grounds of appeal: “1. The order of the learned CIT (A) is against law, weight of evidence and probabilities of the case. 2. The learned CIT(A) ought to have appreciated the submissions made by the assessee and sought to have held that the penalty proceedings u/s 271(1)(c) were not validly initiated in the case of the assessee and consequently, the learned CIT (A) ought to have quashed the impugned order passed u/s 271(1)(c) of the Act. 3. The learned CIT (A) erred in not accepting the submission of the assessee that most of the amounts of outstanding statutory liabilities pertained to earlier years and were not liable to be disallowed even while completing the assessment and as such the levy of penalty by taking into a/c such liabilities of earlier years was not correct both legally and also on the facts of the assessee’s case. 4. The learned CIT (A) erred in not appreciating the submissions made by the assessee that the omission to disallow outstanding liabilities and to include interest

The learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the assessee had filed an explanation before the Assessing Officer which has not been found to be incorrect and therefore, the penalty should not have been levied by the Assessing Officer. He further submitted that the notice u/s 274 r.w.r 271(1)(c) is also not valid because the Assessing Officer did not strike off the irrelevant portion of the notice for levy of penalty. In support of his contentions that where the notice is not valid, the consequent penalty is not sustainable, he placed reliance upon the decision of the Hon'ble Andhra Pradesh High Court in the case of Pr. CIT vs. Smt. Baisetty Revathy in I.T.T.A. NO.684 of 2016, dated 13th July, 2017. As regards the merits of the issue,, he submitted that the sum of Rs.4,73,53,793/- which is shown to be outstanding in the financial year 2015-16, consists the statutory liabilities of the earlier years and therefore, they ought not to have been disallowed in the relevant assessment year. In support of such contention, he drew our attention to page 111 of the paper book filed by the assessee to show that the outstanding dues were for the periods (i) April, 2004 to March,2008, (ii) June, 2008 to September, 2009, (iii) July 2005 to September, 2006, (iv) May 2007 to September, 2007 and (v) 2003 to December, 2007. Similarly, the service tax was also due during the financial years 2003 to 2010. Therefore, according to him, they were not

Further, in response to the direction of the Tribunal during the course of hearing on 3.8.2021, to furnish the details of payments of these statutory liabilities, the assessee has filed the following details: “The Hon'ble Tribunal during the course of hearing has directed the Counsel for the Appellant to furnish the payments made by the Appellant in the subsequent period out of the amount disallowed of Rs.4,73,56,793/-. The appellant is herewith submitting the following information which is readily available in respect of the payments made during financial 2015-16 out of the amount disallowed u/s 43B of the Act. Details Closing balance as Payments made Mode of payment on 31.3.2015 (Rs.) during financial year 2015-16 (Rs.) CST Payable 2,55,162 2,38,087 Indian Overseas 2014-15 Bank (IOB) ESI Co’s 20,35,363 27,04,920 Issued posted contribution dated cheques Excise provision 40,09,107 40,09,107 Reversed on closing stocks Professional Tax 42,345 16,350 Cash TDS employees 32,760 36,000 IOB TDS 53,036 57,401 IOB Contractors TDS on 52,609 55,805 IOB Professional TDS on rent 80,677 90,162 IOB Total 65,61,059 72,07,832

Thus, the assessee prayed for deleting the penalty levied u/s 274 r.w.s 271(1)(c).

The learned DR, on the other hand, relied upon the orders of the Assessing Officer and submitted that the assessee had not filed its return of income for the relevant A.Y disclosing its income and but for the scrutiny, the above issues would not have come to the notice of the Department and therefore, it is a clear case of concealment of income as well as furnishing of inaccurate particulars. Therefore, he justified the non-striking off of irrelevant portion in the notice u/s 274 r.w.s. 271(1)(c) of the Act. Further, he also submitted that the assessee has not disclosed the interest income of Rs.23,98,370/- and no explanation was offered by the assessee for non such disclosure and hence, according to him penalty on this a/c is also justified.

Having regard to the rival contentions and the material on record, we find that as far as the first issue of validity of notice u/s 274 r.w.s 271 (1)(c) for non-striking off of the irrelevant portion of the notice is concerned, the Assessing Officer has struck of paras 2 & 3 of the notice which are irrelevant to the issue and since according to the Assessing Officer, the assessee concealed the income and also furnished inaccurate particulars of income, he did not strike off any portion of such para. Therefore, the said ground of appeal No.2 of the assessee is not sustainable. It is accordingly dismissed.

As regards the merits of the issue, we find that the assessee has not offered the interest income to tax and therefore, the penalty on such addition is sustainable. However, with regard to the disallowance of Rs. 4,73,56,793/- on which the penalty is levied, we find some strength in the argument of the assessee that these are pertaining to the earlier A.Ys. When they did not pertain

In the result, assessee’s appeal is partly allowed for statistical purposes. Order pronounced in the Open Court on 30th August, 2021. Sd/- Sd/- (LAXMI PRASAD SAHU) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER