M/S TRIVENI QUALITY MINERALS PRIVATE LIMITED,JAIPUR vs. INCOME TAX OFFICER, WARD-6-3, JAIPUR

PER VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 12TH March, 2018 arising from penalty order passed under section 271(1)(c) of the IT Act for the assessment year 2013-14. The assessee has raised the following grounds :-

“ 1. On the facts and in the circumstances of the case, ld. Assessing Officer erred in imposing penalty of Rs. 1,72,000/- u/s 271(1)(c) of the I.T. Act, 1961 and thereafter CIT (A) erred in sustaining such penalty being on the disallowance u/s 43B on account for non-payment of VAT which was further paid in next F.Y. year hence disallowable in the year but allowable in the next year as per cash payment basis therefore the disallowance is of academic nature and the penalty is unjustified and liable to be quashed.”

2 ITA No. 531/JP/2018 M/s. TriveniQuality Minerals Pvt Ltd., Jaipur. The assessee filed its return of income on 30th September, 2013 declaring loss 2.

of Rs. 5,62,668/-. During the scrutiny assessment, the AO noted that the assessee

has shown VAT payable at Rs. 5,55,346/- and assessee has not filed the proof of

payment of the same. Accordingly, the AO asked the assessee to furnish the details.

In response, the assessee filed revised computation of income disallowing the VAT

payable of Rs. 5,55,346/- under section 43B of the Act. The AO completed the

assessment by making an addition on account of disallowance under section 43B of

Rs. 5,55,346/-. The AO initiated the penalty proceedings under section 271(1)(c)

and levied the penalty of Rs. 1,72,000/- being 100% of tax sought to be evaded vide

order dated 27.06.2015. The assessee challenged the order of the AO passed under

section 271(1)(c) before the ld. CIT (A), however, could not succeed.

issued under section 143(2) the assessee found that VAT outstanding of Rs.

5,55,346/- was not deposited upto the last date of filing of the return under section

139(1), accordingly the assessee itself suo moto made the disallowance of the said

amount and filed the revised computation of income. Thus when the said amount

was paid in the subsequent year and the claim was allowed under section 43B in the

subsequent year, then there is no revenue effect by making the disallowance for the

year under consideration. The ld. A/R further submitted that the assessee disclosed all the relevant facts and details regarding the VAT payable as on 31st March, 2013.

However, the disallowance was made only because of the technical reason of non-

payment of the same before the due date of filing the return of income and

consequently the provisions of section 43B were attracted. Thus the ld. A/R has

submitted that when the disallowance was made by the assessee voluntarily and

3 ITA No. 531/JP/2018 M/s. TriveniQuality Minerals Pvt Ltd., Jaipur.

before it was detected by the AO, then the case of the assessee would not fall under

the category of concealment of income or furnishing inaccurate particulars of

income. In support of her contention, she has relied upon the decision of Hon’ble

Gujarat High Court in the case of Manu Engineering reported in 122 ITR 306 (Guj.)

as well as the decision of Hon’ble Delhi High Court in the case of Virgo Marketing,

171 Taxman 156 (Delhi) and submitted that once the assessee has disclosed all the

relevant facts and details relating to the issue and books of accounts were accepted

by the AO which were duly audited, then the disallowance made under section 43B

would not attract the penalty proceedings. The ld. A/R has also relied upon the

decision of Kolkata Benches of the Tribunal dated 16.03.2016 in the case of DCIT vs.

Budge Budge Jute Ltd. in ITA No. 979/Kol/2013 and submitted that in identical facts

the Tribunal has confirmed the order of the ld. CIT (A) deleting the penalty levied

under section 271(1)(c) on account of disallowance made under section 43B of the

Act.

3.1 On the other hand, the ld. D/R has submitted that it is not a voluntary

disallowance made by the assessee but only when the AO issued a show cause

notice to the assessee the assessee had filed the revised computation of income

making the disallowance under section 43B, but for the scrutiny assessment and the

show cause notice issued by the AO, the assessee would not have offered the said

income to tax and, therefore, it is a clear case of furnishing inaccurate particulars of

income. She has relied upon the orders of the authorities below.

record. The AO during the scrutiny assessment noted that on perusal of details it

was found that the assessee has shown VAT payable at Rs. 5,55,346/-. Thus it is

4 ITA No. 531/JP/2018 M/s. TriveniQuality Minerals Pvt Ltd., Jaipur.

clear that the assessee itself in the audited books of account have shown the said amount of VAT as payable as on 31st March, 2013 and it is not a case of claiming the

said amount as paid by the assessee. Therefore, once all the relevant details which

were disclosed by the assessee in the return of income and books of account were

found to be correct, then the case would not fall in the category of furnishing

inaccurate particulars of income or concealment of income. It is also not in dispute

that the VAT of Rs. 5,55,346/- was due and payable and, therefore, the same is an

allowable business expenditure except the condition under section 43B that the

assessee has to pay the said amount on or before the due date of filing the return of

income under section 139(1). Once the claim of the assessee is not found to be

bogus or false but because of the reason that the assessee could not pay the

amount as required under section 43B, the same was to be disallowed. The

disallowance under section 43B is only because of technical reason of non payment

of the amount and not because of the reason that the claim itself is not an allowable

claim. Further, the AO has not disputed the fact that the assessee subsequently

paid the said amount and claimed the same in the subsequent year which was

allowed by the AO. Therefore, there will be no revenue effect due to the

disallowance made for the year under consideration and the claim was allowed in

the subsequent year except on account of interest. The Kolkata Benches of the

Tribunal in the case of DCIT vs. Budge Budge Jute Ltd. (supra) while considering an

identical issue has held in para 4-5 as under :-

“4. We have heard rival submissions and gone through facts and circumstances of the case. We find from the facts of the case that the assessee during the course of

5 ITA No. 531/JP/2018 M/s. TriveniQuality Minerals Pvt Ltd., Jaipur.

assessment proceedings explained the claim of deduction u/s. 43B of the Act on account of taxes, cess, PF and also filed all the relevant details. The assessee has also furnished all the necessary particulars in Tax audit Report and also given notes in its computation of total income. We find that now this issue, in the given facts, is covered by the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC), wherein Hon’ble Surempe Court has held as under:

"We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster 's Dictionary, the word "inaccurate" has been defined as :

"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript. "

We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.

It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two

6 ITA No. 531/JP/2018 M/s. TriveniQuality Minerals Pvt Ltd., Jaipur.

forms; an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature.

In this behalf the observations of this court made in Sree Krishna Electricals v. State of Tamil Nadu [2009} 23 VST 249 as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings under the Tamil Nadu General Sales Tax Act, the court had found that the authorities below had found that there were some incorrect statements made in the return. However, the said transactions were reflected in the accounts of the assessee. This court, therefore, observed (page 251) :

"So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities includes these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside. "

The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its return.

The Tribunal, as well as, the Commissioner of Income-tax (Appeals) and the High Court have correctly reached this conclusion and, therefore, the appeal filed by the Revenue has no merits and is dismissed. "

7 ITA No. 531/JP/2018 M/s. TriveniQuality Minerals Pvt Ltd., Jaipur. 5. In view of the above facts of the case that the assessee has filed complete particulars in respect to claim of deduction u/s. 43B of the Act and when all particulars were filed in the Tax Audit Report and its computation of income along with return of income, it cannot be a case of furnishing of inaccurate particulars of income or concealment of income. It is only a case of opinion whether the deduction is to be allowed or not. Once this is the case, the assessee is not liable for penalty u/s. 271(1)(c) of the Act. Respectfully following the decision of Hon’ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. supra, we confirm the order of CIT(A) deleting the penalty. Appeal of revenue is dismissed.”

Accordingly, in view of the facts and circumstances of the case when all the relevant

details and facts were disclosed by the assessee and available before the AO during

the course of assessment proceedings, then the mere disallowance under section

43B would not amount to concealment of income or furnishing inaccurate particulars

of income attracting the levy of penalty under section 271(1)(c). Hence, we delete

the penalty levied by the AO on this account.

Order pronounced in the open court on 01/08/2018.

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