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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Ms. Annapurna Gupta
Appellant by : Shri Jaimin Shah, A.R. Respondent by : Shri Rameshkumar L Sadhu, S.R. Date of hearing : 07-02-2022 Date of pronouncement : 23-02-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-
The present appeal has been filed by the Assessee against the order passed by the Ld.Commissioner of Income Tax (Appeals)-8, Ahmedabad, (in short referred to as CIT(A)), dated 29-05-2019, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”), confirming the levy of penalty u/s. 271(1)(c) of the Act pertaining to Assessment Year (A.Y) 2012-13.
2. The assessee has taken the following grounds before us.
Page No 2 M/s. Vimalchand Print & Pack Pvt. Ltd. . vs. DCIT 1. That the Ld. CIT(A) -8, Ahmedabad has both erred in law and on facts while upholding the penalty order passed by Ld. DCIT Circle - 4(1 )(2), Ahmedabad U/s 271(1)(c) of the IT. Act, 1961 for Rs. 1,53,358/-, which .requires to be deleted.
That the penalty order passed U/s 271(1)(c) is barred by limitation and as such the penalty order passed is required to be quashed.
3. That the appellant has disallowed the foreign exchange fluctuation of Rs. 11,10,808/- instead of Rs. 15,61,995/- while filling of return of Income is an arithmetical mistake and does not amount of concealment or suppression of facts and therefore the penalty order passed U/s 271(1)(c) on disallowance of claim requires to be deleted.
That the Appellant has suo moto declared the disallowances of Foreign exchange fluctuation loss on capital assets during the course of assessment proceedings which does not amounts to concealment or inaccurate particulars of Income, therefore the penalty imposed u/s 271(1)(c) on wrong facts and circumstances requires to be deleted.
Your appellant craves to leave to add, alter, delete, amend any ground of appeal before the appeal is finally heard and decided.
During the course of hearing before us the only argument made by the Ld.Counsel for the assessee related to the merits of the case and no arguments were made on the legal grounds raised before us. Therefore, ground no. 2 ,raising a legal contention,is dismissed as not pressed and ground no. 1 and 5 being general in nature are not being dealt with by us. The only ground therefore which were argued before us and are being adjudicated are ground no. 3 & 4.
4. During the course of hearing before us, it was pointed out that penalty u/s. 271(1)(c) of the Act for furnishing inaccurate particulars/concealment of particulars of income was levied on the assessee on account of disallowance of Foreign Exchange Fluctuation amounting to Rs. 4,51,186/- treating the same as capital in nature. The contention of the Ld. Counsel for the assessee against the levy of penalty was that it was mistakenly not disallowed in the computation of income and the Page No 3 M/s. Vimalchand Print & Pack Pvt. Ltd. . vs. DCIT assessee had suo moto offered disallowance of the same even before it was detected by the Assessing Officer during assessment proceedings. That therefore the assessee could not be charged with having concealed /furnished any inaccurate particulars of income for levy of penalty u/s 271(1)© of the Act.
5. To substantiate his contentions, our attention was drawn to the assessment order passed u/s. 143(3) of the Act in the impugned assessment year wherein the disallowance was made by the A.O. Copy of the said order was placed before us at paper book page nos. 34 to 46 and our attention was drawn to page no. 42 at point no. 7 of the assessment order where the impugned disallowance was dealt with Assessing Officer are as under: 7. Disallowance of foreign currency fluctuation During the course of assessment proceedings details were called for relating to foreign exchange expense and capitalization of such expense relating to capital goods, if any vide questionnaire date 07.10.2014. In the submission filed by letter dated 24.12.2014 assessee submitted that total foreign exchange fluctuation expense on account of capital goods was Rs. 15,61,995/- however, it has disallowed amount of Rs. 11,10,808/- u/s. 43(a) of the Act. Therefore amount of Rs. 4,51,187/- was left to be disallowed and infact debited in P&L account. Therefore, amount of Rs. 4,51,187/- being foreign exchange fluctuation expense relating to capital goods is liable to be disallowed. In view of the above Rs.4,51,187/- is hereby disallowed and added back total income of the assessee. In view of facts mentioned above, I am satisfied that the assessee has furnished inaccurate particulars of his income and hence penalty proceedings u/s. 271(l)(c) of the Act is initiated separately for furnishing inaccurate particulars on this account.
Referring to the above, Ld. Counsel for the assessee pointed out that when the assessee had been asked for details of Foreign Exchange Fluctuation , the assessee had realized its mistake of having not capitalized these expenses to the tune of Rs. 4,51,187/- and offered disallowing the same during assessment proceedings. Ld. Page No 4 M/s. Vimalchand Print & Pack Pvt. Ltd. . vs. DCIT Counsel for the assessee pointed out that the A.O. had not even detected any such error when the assessee had surrendered the amount of Foreign Exchange Fluctuation failed to be capitalized by it. He thereafter stated that even during assessment proceedings, the assessee had admitted that the capitalization had been left out to be done by mistake. He further pointed out that the fact that this error was committed by mistake was also evident from the fact that while computing its taxable income for the year, this amount of Foreign Exchange Fluctuation had been capitalized to the fixed assets and depreciation claimed thereon, but simultaneously while adding back the Foreign Exchange Expenses which were to be capitalized in the computation of income, the said amount was left to be done so. Our attention was drawn to the copy of computation of income for the impugned year filed before us at paper book page nos. 2, 3 & 4. Our attention was drawn to paper book page no. 3 which exhibited in the computation of business income in the computation of income. Our attention was specifically drawn to the disallowance u/s. 43(a) mentioned therein reflecting an amount of Rs. 11,10,808/-. Ld. Counsel for the assessee drew our attention to the copy of the account of Research and Development expenses placed before us at paper book page no. 33 pointing out there from that while the total expenses amounted 15,61,994/- which included three sums ( 4,51,186/-, 4,05,628/- and 7,05,118/-) Out of which the last two sums totaling 11,10,808/- had been added back u/s. 43(a) while computing the business income of the assessee , leaving out the amount of 4,51,186/- inadvertently which was surrendered during assessment proceedings and on which amount penalty has been levied. Our attention was thereafter drawn to paper book page no. 4, which was the calculation of depreciation allowable under the Income Tax Act, and it was pointed out there from that in the block of assets of machinery and plant, currency difference of 4,51,187/- was included. Ld. Counsel for the assessee stated that it was evident from the above that while the assessee had capitalized the Foreign Exchange Fluctuation of 4,51,186/- for the purposes of computing depreciation it had failed to disallow the said amount while computing its income which showed that it occurred Page No 5 M/s. Vimalchand Print & Pack Pvt. Ltd. . vs. DCIT entirely on account of a mistake. And during assessment proceedings, when assessee became aware of the same, he suo moto surrendered the said amount for addition to its income. Ld. Counsel for the assessee therefore stated that assessee could not be charged with having concealed or furnished inaccurate particulars of income and levy of penalty u/s. 271(1)(c) was therefore unjustified.
Ld. D.R. on the other hand relied on the order of the Ld. CIT(A) at para 3 as under:. 3. I have carefully gone through the impugned penalty order and the submissions made. AO levied penalty u/s,271(1)(c) of the Act on the disallowance of Rs.4,51,187/- during the course of scrutiny assessment orders u/s, 143(3) of the Act. In the course of scrutiny assessment proceedings AO required the appellant to furnish the details of foreign exchange fluctuation expense and capitalization of the same vide notice dated 07.10.2014. In response appellant vide their letter 24,12.2014 furnished before the AO that the foreign Exchange Fluctuation Expense towards capital goods debited to the P&L A/c. was to the tune of Rs.15,61,935/- whereas in the computation of income they have disallowed only a sum of Rs.11,10.808/-. The difference of Rs.4,51,187/- was offered in the course of assessment proceedings. As per the appellant it was an inadvertent mistake which was rectified by them suo motu. However, as per the AO appellant admitted the same only after specific question was asked in this regards vide notice dated 07.10.2014, The fact that the sum o fRs.4,51,187/- not added remain unexplained the fact that AO has asked for specific details vide notice 07.10,2014 and only in response therto appellant as admitted this mistake remain uncontroverted. Hence, on facts there is no doubt that the disclosure is not voluntary. Further, it is not explained as to how from the capital expense of Rs. 15,61,995/- an odd sum of Rs.4,51,187/- was left out to be added back since it was claimed as revenue in the P&L A/c, Hence, on facts it is clear case of deliberate furnishing of inaccurate particulars of income the mistake is not bonafide as is clear from the facts narrated above. The case laws relied upon by the appellant are of no help as the mistake is not genuine or clerical, it is not the that some figure is misspelt or left out. Hence, I do not find any merit in the contention of the appellant and the penalty imposed amounting to Rs. 1,53,358/- being 100% of the tax Page No 6 M/s. Vimalchand Print & Pack Pvt. Ltd. . vs. DCIT sought to be evaded by furnishing inaccurate particulars of income as above is confirmed. Sole ground of appeal is dismissed. In the result, appeal is dismissed.
We have heard the contentions of both the parties and have gone through the orders of the authorities below. We find merit in the contention of the Ld. Counsel for the assessee that the amount of Foreign Exchange Fluctuation of Rs. 4,51,186/- which was added to its income as capital expenditure and on which penalty u/s. 271(1)(c) has been levied, was an inadvertent mistake on the part of the assessee, which on his suo moto discovery, he had offered to tax even before the detection by the Revenue and therefore assessee cannot be charged with having concealed or furnished inaccurate particulars of income. The facts as brought to our notice bring out the same.
As is evident from the assessment order , on the first instance when asked to file details of Foreign Exchange Fluctuation, the assessee had surrendered the said amount to taxation. The revenue was not even in the possession of the details of Foreign Exchange Fluctuation and therefore there was no question of any detection by the revenue of concealment of any inaccurate particular of income on this count. We agree with the Ld.Counsel for the assessee that the impugned foreign exchange fluctuation was surrendered for taxation by the assessee immediately on becoming aware of the fact that it had not done so in the computation of income during assessment proceedings and even before detection by the Revenue
Even otherwise, the undisputed fact that the assessee had added this Foreign Exchange Fluctuation in its block of assets of plant and machinery and claimed depreciation thereon, which is clearly brought out from the computation of income for the year filed before us, lends credence to the explanation of the assessee that it was left out to be added to its income mistakenly. Having capitalized the amount of Page No 7 M/s. Vimalchand Print & Pack Pvt. Ltd. . vs. DCIT foreign exchange fluctuation in the relevant block of assets reveals its clear intent of treating it as capital expense. Not adding it back while computing the income for the year can be safely beleived to be mistakenly done unless otherwise proved.
In view of the entire facts and circumstances as above therefore we agree with the assessee that it was mistake on his part for not having added the amount to his income. There is, therefore we hold no case for levy of penalty u/s 271(1)© of the Act. Penalty so levied, amounting to Rs.1,53,358/-,is directed to be deleted.
In effect, appeal of the assessee is partly allowed.