M/S THE SHAHABAD CO-OP SUGAR MILLS LTD.,SHAHABAD vs. ACIT, KURUKSHETRA

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ITA 523/CHANDI/2017Status: DisposedITAT Chandigarh16 January 2019AY 2001-024 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that while the quantum addition was upheld by the High Court, the assessee had a bonafide belief that the interest income was doubtful. Therefore, it was not a case of intentional concealment or furnishing inaccurate particulars of income.

What were the facts?

The Assessing Officer added interest income of Rs. 54,08,245/- to the assessee's income, which was credited under 'Current Liability Provisions' instead of the Profit and Loss account. The assessee contested this addition and the subsequent penalty proceedings.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the assessee had a bonafide belief regarding the accrual of income, even if the addition was upheld by higher authorities.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 03.01.2017 of the Commissioner of Income Tax (Appeals), Karnal [hereinafter referred to as ‘CIT(A)’] agitating the levy of penalty u/s 271(1)(c) of the Act.

2.

The brief facts of the case are that during the assessment proceedings the Assessing officer observed that assessee had credited interest income of Rs. 54,08,245/- under the head “Current Liability Provisions” whereas, the same was to be credited to the Profit and Loss account. Since, the assessee was following mercantile system of accounting, the interest amount of Rs. 54,08,245/- should have been reflected in the income during the year. The Assessing officer, therefore, added this amount of Rs.

ITA No. 523/Chd/2017- M/s Shahabad Co-op Sugar Mills Ltd, Shahabad 2 54,08,245/- and initiated penalty proceedings u/s 271(1)(c) of the Income

Tax Act.

3.

The assessee contested the quantum additions made by the Assessing

officer up to the level of the Hon’ble Punjab & Haryana High Court,

however, the Hon'ble High Court upheld the findings of the authorities

below and confirmed the addition made by the Assessing officer into the

income of the assessee. The assessee has also unsuccessfully contested the

appeal against the levy of penalty u/s 271(1)(c) of the Act before the Ld.

CIT(A).

4.

Before us, Ld. Counsel for the assessee has submitted that though the

quantum appeal has been decided against the assessee, however, this is not

a case of furnishing of inaccurate particulars of income or concealment of

income. The Ld. Counsel has submitted that the assessee had bonafide

belief that the interest income receivable from the other societies since was

doubtful, hence, would not constitute income of the assessee. It has been

submitted that the assessee had given loans to other cooperative sugar

mills way back in 1992-93. That they had not paid any amount to the

assessee either on account of principle or interest. Initially, the assessee

had been declaring interest on accrual basis in the books of account but

later on finally no amount was being received as principle or interest. It

credited the interest amount to the suspense account. The case of the

assessee was that since the interest receivable was doubtful, hence, it could

not be said that the same would constitute as income of the assessee on

accrual basis. The assessee also relied in this respect on certain case laws.

However, the assessee remained unsuccessful not only before the Assessing

ITA No. 523/Chd/2017- M/s Shahabad Co-op Sugar Mills Ltd, Shahabad 3 officer but also before the higher authorities i.e CIT(A), ITAT and even

before the Hon'ble High Court.

4.

The Ld. DR, on the other hand, has submitted that the assessee

pressed for a wrong claim and the contention of the assessee has been

rejected up to the level of the High Court, as the penalty has rightly been

levied by the Assessing officer.

5.

We have heard the rival contentions and have also gone through the

record. No doubt, in the quantum proceedings, the addition made by the

Assessing officer has been upheld by the Hon'ble Punjab & Haryana High

Court vide its decision dated 24.10.2013 passed in ITA No.235 of

2009(O&M). However, the fact on the file is that the assessee had

contested its claim of not accrual of income upto the level of the Hon'ble

High Court and since it was under bonafide belief that its claim was

allowable though the said belief did not find favour with the higher

authorities. It is also a fact on the file that the issue raised by the assessee

was admitted by the Hon'ble High Court as substantial question of law

which though has been answered against the assessee .

6.

The assessee had also relied upon certain case laws to press for its

claim. Considering the overall facts and circumstances of the case, we do

not think that this is a case where the assessee had intentionally concealed

its particulars of income or had furnished inaccurate particulars of income

to evade payment of due taxes. It has now been time and again held that

every case of disallowance or addition cannot automatically be said to be

a case of concealment of income of furnishing of inaccurate particulars of

ITA No. 523/Chd/2017- M/s Shahabad Co-op Sugar Mills Ltd, Shahabad 4 income. The Hon'ble Delhi High Court in the case of ‘PR CIT-8 Vs. Samtel India Ltd.’ order dated 9.7.2018 passed in ITA 43/2017 has held that the Legislature does not intend to penalize every person whose claim is disallowed.

7.

In view of the facts and circumstances of the case, we do not think this is a fit case of levy of penalty us 271(1)(c) of the Act and the same is accordingly ordered to be deleted. In the result, the appeal of the assessee is hereby allowed . Order pronounced in the Open Court on 16.01.2019

Sd/- Sd/- ( बी , आर . आर . कुमार / B.R.R. KUMAR) (संजय गग� / SANJAY GARG ) लेखा सद�य/ Accountant Member �या�यक सद�य /Judicial Member Dated : 16.01.2019 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

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