AMAN GOYAL,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 402/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2014-15. cuke Shri Aman Goyal The DCIT. Vs. 5/29, Sector 5, Circle-4, Vidhyadhar Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AGWPG 9985 A vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Balram Swami, C.A. jktLo dh vksj ls@ Revenue by : Ms Monisha Choudhary (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 07/12/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 2/03/2023

vkns'k@ ORDER

PER: SANDEEP GOSAIN, J.M.

This appeal by the assessee is directed against the order of ld. CIT (Appeals),

National Faceless Appeal Centre, Delhi dated 09.09.2022 for the assessment year 2014-15. The assessee has raised the following grounds of appeal :- 1. On the facts and in the circumstances of the case and in the law the Commissioner of Income Tax (Appeals), NFAC, Delhi, has erred in confirming the penalty u/s 271(1)(c) of Rs. 7,81,660/-, without considering the fact that income assessed u/s 143(3) is Nil and assessed u/s 143(3) w.r.s. 263 is also Nil. The difference in carry forward losses due to Addition in income of subsidy received from Government, however, the same has already being offered for taxation in the next assessment year i.e. 2015-16 in the income tax return filed on 25.09.2015 when the subsidy was actually received. The DCIT had issued notice u/s 263 on 02.07.2019 for addition of subsidy received from Government as income for AY 2014-15. The appellant prays that the said penalty be deleted.

2 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur.

The assessee has not file an appeal due to Not Tax Demand and appellant has rectified the losses for AY 2015-16 as per updated assessment order which has no impact of income or losses of the appellant and hence appellant has not file an appeal against order u/s 143(3) r.w.s. 263.

Income Tax Act, 1961 was initiated against the assessee on the ground that the

assessee had received an amount of Rs. 30,05,184/- from Rajasthan State

Government under the Scheme of Rajasthan Investment Promotion Scheme 2010 as

Investment and Employment subsidy, which according to the revenue was found

added in Capital Reserve Account instead of being credited it in Profit and Loss

account. Apart from this, revenue also noticed that an amount of Rs. 6,07,524/-

was also taken by the assessee to the Capital Reserve Account being subsidy

received under CLSS (Credit Linked Capital Subsidy Scheme) which was also to be

deducted from the value of asset on which the subsidy received and depreciation on

such asset were to be allowed accordingly, and on these grounds penalty of Rs.

7,81,660/- was levied vide order dated 01.02.2022. Aggrieved by the said order,

assessee preferred appeal before the ld. CIT (A) and the ld. CIT (A) dismissed the

appeal of the assessee by holding that since the assessee had not contested the

assessment order and has accepted the assessment order, therefore, the act of not

3 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur.

contesting the assessment order goes to prove that the ‘mens rea’ on the part of the

assessee. Consequently the appeal of the assessee was dismissed.

arguments as were raised by him before the ld. CIT (A) and also before the A.O. and

has also relied upon a detailed written submissions, the same are reproduced below

:- “ 1.The Appellant, proprietorship firm M/s G. R. Industries was amanufacturer of MS Sariya, MS Angel, MS Bar etc. He had started the business in 2010 and closed the factory in 2014 due to continuous losses in the factory. 2. The Appellant had filed his return of income for the Assessment Year 2014-15 on 30th November2014 declaring total Loss of Rs. 40,37,084/-. The Assessment under section 143(3) of Income Tax Act 1961 for the said Assessment Yearhad been completed on 15.12.2016 by the ACIT, Circle 4 by assessingLoss of Rs. 40,37,084/-. 3. The Notice u/s 142(1) read with section 263were issued to the Appellant by the DCIT, Circle 4 on 02.07.2019 and the said assessment u/s 143(3)/263 had been completed by assessing loss ofRs. 9,40,770/-. 4. The Appellant has received Show cause notice for penalty under section 271(1)(C) of the Income Tax Act, 1961 from National E assessment Centre – Delhi on 11.03.2021. The Appellant has submittedsuitable reply mentioning that the subsidy received from government has already offered for Taxation in the next assessment year when all the conditions were satisfied related to subsidy and hence intention of the assesse was not to conceal any income or to furnish any inaccurate particulars of income. 5. The Ld. DCIT had issued order u/s 270(1)(c) and imposed penalty of Rs.7,18,660. The Ld. DCIT has erred to impose penalty u/s 271(1)(c) despite the following facts: (i) The Appellant has already offered the Subsidy received from government as Income in the next assessment year i.e. 2015-16 when conditions of subsidy were satisfied.We were showing the subsidy received from the government under the head “RIPS Capital Investment Subsidy” under reserve and surplus in the Balance Sheet.We have

4 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur. recognized the Subsidy Income as per Accounting Standard 12, “Accounting for Government Grants”. HenceIt cannot be said thatthe appellant has not furnished any inaccurate particulars of income or concealany income.

(ii) Intention of the assesse was not malafied, reason being there were Loss in both the assessment years and no tax liability. The details of losses are as under:

AY 2014-15 AY 2015-16 Income assessed u/s Income Assessed Income Assessed Income as per 143(3) Dt U/s 143(3)/263 Dt. (Original) (Income rectification (If 15.12.2016 24.10.2019 considered in income Current Year) considered in Previous AY) When subsidy Subsidy Income Subsidy Income Subsidy income income effect not effect for Rs. effect taken. effect not taken given in this year. 30,96,314 Given Loss of Rs. Loss of Rs. Loss of Rs. Loss of Rs. 40,37,084/- 9,40,770/- 55,57,269/- 86,83,582/- Difference Rs. 30,96,314/- Difference Rs. 30,96,314/- Tax = Nil Tax = Nil Tax= Nil Tax= Nil

5 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur. 9. As also mentioned in Point 5, the Appellant has recognized the subsidy Income as per AS-12 “Accounting for Government Grant” issued by Institute of Chartered Accountants of India. The Appellant has recognized the subsidy as capital received in the Books of Account shown the same under the head “RIPS Capital Investment Subsidy” in reserve and surplus in the Balance Sheet. The Appellant cannot recognised the subsidy as Income in the Assessment Year 2014-15 as the condition for availing the subsidy benefit was not completed. In the Assessment Year all conditions for availing the subsidy benefits had been fulfilled therefore we had recognized the subsidy as Income in the next assessment year i.e. 2015-16. Hence It cannot be said that the Appellant has hided anything or furnished inaccurate particulars as the Income had already been offered before opening of any assessment and disclosed in the financial statement of the Appellant. 10. Supreme Court in case of Sir Shadilal Sugar Mills (168 ITR 705) held that there may be a hundred and one reasons for not protesting and agreeing to an addition but that does not follow to the conclusion that the amount agreed to be added was concealed income. Indeed, there may be numerous reasons with the tax payer for not approaching the first appellate authority for justice, for example the following:

(i) To avoid the pains of further litigations, numerous hearings and mental tensionsborne in it; (ii) The risk of enhancement at the first appellate authority on various technical issues; (iii) Nowadays commonly seen attitude of assessment in Appellate proceedings; (iv) Heavy litigation cost of Representatives; (v) Withdrawn of appeal at instance of Appellant is the discretion of Appellate authority.

6 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur. concealed any income. Various courts and ITAT Benches has affirmed the same which are as follows:

a. Jaipur Bench in the case of Indo German Electricals v. ITO had held that where total income is assessed at a loss, no penalty under Section 271(1)(c) is leviable.

b. The Hon'ble Allahabad High Court in the case of Indo-Gulf Fertilizers & Chemicals Corporation Ltd. v. Union of India and Anr. had laid down a ratio that income means positive income and it does not mean a case of overall loss. No doubt it was a question of levy of additional income-tax under Section 143(1A), yet the point involved was the same as to whether even after certain additions the overall result was loss.

c. Bombay Bench of the Tribunal in the case of Star Galvanizers v. Asstt. CIT (1990) 38 TTJ (Bom) 12 held that where the assessee was assessed at a loss even often the addition of concealed income provisions of Section 271(1)(c) were not attracted.

d. Likewise again the Bombay Bench in the case of Mutual Plastics v. ITO (1989) 35 TTJ (Bom) 467 had held that the Expln. 4 (a) to Section 271(1)(c) deals with cases of positive income only and it does not specifically provide for levy of any penalty in case of assessed loss. Accordingly, in the said case, penalty imposed was deleted.

e. Again Ahmedabad Bench in the case of H.T. Power Structures (P) Ltd. v. Asstt. CIT (1993) 47 TTJ (Ahd) 146 : (1993) 45 ITD 571 (Ahd) had held that where the assessment had resulted in a loss, penalty under Section 271(1)(c) would not be leviable even on the basis of Expln. 4 to Section 271(1)(c) as inserted w.e.f. 1st April, 1976.”

7 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur.

Authorities.

perusal of the material placed on record and orders passed by the revenue

authorities, we noticed that as far as the amount of subsidy of Rs. 6,07,524/- is

concerned, in this regard the ld. A/R has categorically submitted that the assessee

has not received the said subsidy till date and in this regard the ld. A/R placed on

record duly signed and attested affidavit of the assessee wherein it is specifically

submitted that assessee has not received the subsidy of Rs. 6,07,524/-. The said

affidavit was un-rebutted and no counter affidavit has been filed by the revenue.

Therefore, in these circumstances, we are of the view that no penalty proceedings

could have been initiated against the assessee once it is established that assessee

has not even received the subsidy of Rs. 6,07,524/-. However, as far as the second

issue of receipt of subsidy of Rs. 30,05,184/- is concerned, in this regard it has been

specifically submitted by the ld. A/R that the assessee has already offered the said

subsidy received from the Government of Rajasthan as Income in the next

assessment year i.e. 2015-16, when conditions of subsidy were satisfied. As per the

ld. A/R, the assessee was showing the subsidy received from the Government under

the head “RIPS Capital Investment Subsidy” under reserve and surplus in the

Balance Sheet and since the assessee has recognized the subsidy income as per

Accounting Standard 12, therefore, it cannot be said that assessee has furnished any

inaccurate particulars of income or concealed any income. It was submitted that

since the assessee could not recognize the subsidy as Income in the assessment

year 2014-15 as the condition for availing the subsidy benefit was not completed

8 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur.

and as soon as the condition for availing the subsidy benefit was fulfilled in the

subsequent assessment year, the assessee has recognized the said subsidy as

Income in the next assessment year 2015-16. Therefore, in any eventuality it cannot

be held that assessee had hidden anything or furnished inaccurate particulars of

income as the income had already been offered before opening of any assessment

and disclosed in the financial statement of the assessee. The ld. A/R submitted that

the intention of the assessee was not malafide as there were losses in both the

assessment years and no tax liability had accrued. The details of losses have

already been placed on record in both the assessment years and the same are also

reproduced below :-

A.Y. 2014-15 A.Y. 2015-16

Income assessed Income Assessed Income Assessed Income as per u/s 143(3) dt. u/s 143(3)/263 dt. (original)(Income rectification (If 15.12.2016 24.10.2019. considered in income considered Current Year) in Previous AY)

When subsidy Subsidy Income Subsidy Income Subsidy income income effect not effect for Rs. effect taken. effect not taken given in this year. 30,96,314 Given

Loss of Rs. Loss of Rs. Loss of Rs. Loss of Rs. 40,37,084/- 9,40,770/- 55,57,269/- 86,83,582/-

Difference Rs. 30,96,314/- Difference Rs. 30,96,314/-

Tax = Nil Tax = Nil Tax = Nil Tax = Nil

meticulously going through the documents placed on record, we find that the first

Appellate Authority has dismissed the appeal of the assessee merely by holding that

9 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur.

no appeal was filed by the assessee against the assessment order from which the

penalty proceedings originated, therefore, it is clear that there has been an intention

of the assessee to defraud and evade tax. In our view, the said finding recorded by

the first appellate authority is not in accordance with law as there may be hundred

and one reasons for not protesting and agreeing to an addition but that does not

leads to the conclusion that the amount agreed to be added was concealed income.

Indeed, there may be numerous reasons with the tax payer for not approaching the

first Appellate Authority for justice. While reaching to the said conclusion, we drew

strength from the decision of Hon’ble Supreme Court in the case of Sir Shadilal

Sugar Mills, 168 ITR 705 (SC) wherein it was held that there may be a hundred and

one reasons for not protesting and agreeing to an addition but that does not follow

to the conclusion that the amount agreed to be added was concealed income.

Indeed, there may be numerous reasons with the tax payer for not approaching the

first appellate authority for justice, for example the following :

(i) To avoid the pains of further litigations, numerous hearings and mental tensions borne in it ; (ii) The risk of enhancement at the first appellate authority on various technical issues ; (iii) Now a days commonly seen attitude of assessment in Appellate proceedings; (iv) Heavy litigation cost of Representatives; (v) Withdrawn of appeal at instance of Appellant is the discretion of Appellate Authority.

From the records, we also appreciate that assessee had incurred losses and after

disallowance of loss the result is also loss. Therefore, in such circumstances, it

10 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur.

cannot be said that the assessee had evaded tax and concealed any income. In this

regard various courts and the coordinate benches of the ITAT under the similar set

of facts had reached to the conclusion that no penalty under section 271(1)(c) is

leviable and in this regard we rely on the decision of –

(a) Jaipur Bench in the case of Indo German Electricals v. ITO had held that

where total income is assessed at a loss, no penalty under section

271(1)(c) is leviable.

(b) The Hon’ble Allahabad High Court in the case of Indo-Gulf Fertilizers &

Chemicals Corporation Ltd. v. Union of India and Anr. Had laid down a

ratio that income means positive income and it does not mean a case of

overall loss. No doubt it was a question of levy of additional income-tax

under section 143(1A), yet the point involved was the same as to whether

even after certain additions the overall result was loss.

(c) Bombay Bench of the Tribunal in the case of Star Galvanizers v. Asstt. CIT

(1990) 38 TTJ (Bom.) held that where the assessee was assessed at a loss

even often the addition of concealed income provisions of section

271(1)(c) were not attracted.

(d) Likewise again the Bombay Bench in the case of Mutual Plastics v. ITO

(1989) 35 TTJ (Bom.) 467 had held that the Expln. 4(a) to Section

271(1)(c) deals with cases of positive income only and it does not

specifically provide for levy of any penalty in case of assessed loss.

Accordingly, in the said case, penalty imposed was deleted.

(e) Again Ahmedabad Bench in the case of H.T. Power Structures (P) Ltd. v.

Asstt. CIT (1993) 47 TTJ (Ahd) 146 : (1993) 45 ITD 571 (Ahd) had held

11 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur. that where the assessment had resulted in a loss, penalty under section 271(1)(c) would not be leviable even on the basis of Expln. 4 to Section 271(1)(c) as inserted w.e.f. 1st April, 1976.”

Therefore, considering the decisions of Hon’ble High Court and also of the coordinate benches of the Tribunal, we are of the view that no penalty is leviable on the assessee. We delete the penalty. 7. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 2/03/2023.

Sd/- ¼lanhi xkslkbZ½ (SANDEEP GOSAIN) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 2/03/2023. Das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant-Shri Aman Goyal, Jaipur. 1. 2. izR;FkhZ@ The Respondent- The DCIT Circle-4, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 5. 6. xkMZ QkbZy@ Guard File {ITA No. 402/JP/2022} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत

12 ITA NO. 402/JP/2022 Shri Aman Goyal, Jaipur.