Sh. Manish Jain Prop., New Delhi V. ACIT, New Delhi

CO 4/DEL/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8692 (ITAT-DELHI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 14-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TARUN SEEM SR D R O OO
• Assessee Lawyers: I S GUPTA CAS; SSH RAJIV KUMAR
• Keywords: Bonafide belief; Earning of tax free income; Tax effect
• Section: 14A

Judgement Text

ITA NO. 5999/DEL/2012 & C.O. 4/D/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5999/DEL/2012 A.Y. 2008-09 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 30(1), NEW DELHI VS. MR. MANISH JAIN, PROP.BPB PUBLICATIONS, 20, ANSARI ROAD, DARYA GANJ, NE W DELHI 110002 (PAN:AADPJ3365Q) AND C.O. NO. 4/DEL/2013 (IN I.T.A.NO.5999/DEL/2012) A.Y. 2008-09 MR. MANISH JAIN, PROP. BPB PUBLICATIONS, 20, ANSARI ROAD, DARYA GANJ, NE W DELHI 110002 (PAN : AADPJ3365Q) VS. ACIT, CIRCLE 30(1), ROOM NO. 106, DRUM SHAPE BUILDING, IP ESTATE, NEW DELHI ASSESSEE BY : S/SH. RAJIV KUMAR & I.S. GUPTA, CAS DEPARTMENT BY : SH. TARUN SEEM, SR. D.R. O OO ORDER RDER RDER RDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE EMANATE OUT OF ORDER OF THE LD. COMMISSION ER OF INCOME TAX (A) DATED 7.9.2012 AND PERTAIN TO ASSESSMENT YE AR 2008-09. 2. THE GROUNDS RAISED IN THE REVENUES APPEAL REA D AS UNDER:- ITA NO. 5999/DEL/2012 & C.O. 4/D/2013 2 1. WHERE THE LD. COMMISSIONER OF INCOME TAX (A) I S CORRECT IN HOLDING THAT THE ASSESSING OFFICER HAS NOT FOUND ANY MISTAKE OR CONCEALMENT OF INCOME EITHER IN THE RETURN OF INCOME OR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WHEREAS THE POINTED ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER AFTER OF INCOME WAS DISCUSSING AS TO HOW THE INCOME DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME WAS NOT CORRECT. 2. WHETHER THE LD. COMMISSIONER OF INCOME TAX (A) I S CORRECT IN NOT APPRECIATING THE MISTAKE OF SECTION 271(1B) OF THE I.T. ACT, 1961 IN HOLDING THAT THE INITIATION OF PENALTY U/S. 271(1)(C) WAS ONLY IN RESPECT OF DISALLOWANCE OF EXPENDITURE RELATABLE TO THE EXEMPT INCOME. 3. WHETHER THE LD. COMMISSIONER OF INCOME TAX (A) I S CORRECT IN HOLDING THAT THE ADDITIONS TO THE RETURN ED INCOME WERE GOT MADE BY THE ASSESSEE TO BUY PEACE OF MIND WHEN THERE IS NO DOCUMENTARY EVIDENCE OF ANY SORT TO SUBSTANTIATE ASSESSEES THI S CONTENTION NOT TO SPEAK THAT THERE CANNOT BE STAPL E AGAINST STATUE. 3. IN THIS CASE THE ASSESSING OFFICER OBSERVED THA T THE DIVIDEND INCOME OF THE ASSESSEE WORKS OUT TO RS. 11,35,267/ - (BEING EXEMPT U/S. 10(33) OF THE I.T. ACT, 1961. ASSESSING OFFICE R ASKED THE ASSESSEES COUNSEL THAT WHY EXPENDITURE BEING INTER EST DEBITED TO P&L ACCOUNT BE NOT DISALLOWED IN VIEW OF PROVISIONS OF SECTION 14A R.W.R. 8D OF THE INCOME TAX RULES, 1962. THE ASSESS EE CONTENDED THAT HE HAS NOT CLAIMED THE EXPENDITURE AGAINST EXE MPTED INCOME. ITA NO. 5999/DEL/2012 & C.O. 4/D/2013 3 ASSESSING OFFICER WAS NOT SATISFIED. HE COMPUTED THE DISALLOWANCE AS PER RULE 8D AS UNDER:- AS PER RULE 8D OF THE I.T. RULE, 1962, THE AMOUNT OF EXPENDITURE IN RELATION TO INCOME NOT INCLUDABLE IN TOTAL INCOME IS WORKED OUT AS PER SUB-RULE 2(II) & 2(III) OF THE RULE 8D I.E. A X B/C. A = AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCURRED DURING THE PREVIOUS YEA R. B= AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH D OES NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN T HE BALANCE SHEET OF THE ASSESSEE ON THE FIRST AND LAST DAY OF THE PREVIOUS YEAR. C = == = AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANC E SHEET OF THE ASSESSEE ON THE FIRST AND LAST DAY OF THE PR EVIOUS YEAR. A = INTEREST AS PER P/L A/C ` 6419612/- B= RS. 1,58,75,000/- C = RS. 137288539/- DISALLOWANCE UNDER RULE 2(II) ` 742315/- DISALLOWANCE UNDER RULE 2(III) BEING ONE HALF PER CENT OF AVERAGE VALUE OF INVESTMENT WHICH DOES NOT FORMED PART OF TOTAL INCOME AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE ON THE FIRST AND LAST DAY OF THE PREVIOUS YEAR ` 79375/ - ` 821690/- 4. ON THIS ADDITION OF RS. 821690/-, ASSESSING OFF ICER HELD THAT PROCEEDINGS U/S. 271(1)(C) HAVE BEEN INITIATED SEP ARATELY FOR ITA NO. 5999/DEL/2012 & C.O. 4/D/2013 4 FURNISHING OF INACCURATE PARTICULARS OF INCOME IN T HIS REGARD. APART FROM THE ABOVE ADDITION OF RS. 821690/- THERE WERE SOME OTHER DISALLOWANCES ALSO WHICH WERE NOT SUBJECTED TO PEN ALTY PROCEEDINGS BY THE ASSESSING OFFICER U/S. 271(1)(C). THE TOTAL OF THE DISALLOWANCE IN THIS REGARD (INCLUDING DISALLOWANCE UNDER RULE 8 D) CAME TO RS. 10,38,677/-. THE PENALTY PROCEEDINGS AGAINST THE ASSESSEE WERE INITIATED ON THE ADDITION OF ENTIRE DISALLOWANCE OF RS. 10,38,677/- AND THE PENALTY U/S. 271(1)(C) WAS COMPUTED AT RS. 3,53,047/-. 5. BEFORE THE LD. COMMISSIONER OF INCOME TAX (A), I T WAS SUBMITTED THAT THE ASSESSING OFFICER IS NOT JUSTIF IED TO LEVY THE PENALTY, AS THERE WAS NO CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEE DINGS ONLY IN RESPECT OF THE ADDITION OF RS. 8,21,690/- U/S. 14A VIDE PARA 5 OF THE ORDER OF THE ASSESSING OFFICER. BUT THE ASSESSING O FFICER HAS LEVIED PENALTY IN RESPECT OF THE WHOLE ADDITION OF RS. 10, 38,677/- WHICH INCLUDED GENERAL ADDITIONS UNDER THE HEAD CAR AND T ELEPHONE ETC. WHICH IS NOT JUSTIFIED. IT IS SUBMITTED THAT EVEN I N RESPECT OF DISALLOWANCE U/S. 14A PENALTY IS NOT LEVAIBLE AS TH ERE IS NO CONCEALMENT OF INCOME AS ALL THE DETAILS AND ALL TH E PARTICULARS OF INCOME WERE FURNISHED IN THE RETURN OF INCOME TO TH E ASSESSING OFFICER. IT WAS SUBMITTED THAT THE ASSESSING OFFICE R IS NOT JUSTIFIED TO LEVY THE PENALTY AS THE ASSESSEE HAS DECLARED ALL T HE DETAILS IN THE RETURN. THE ASSESSEE ALSO RELIED ON VARIOUS CASE LA WS INCLUDING THE CASE OF THE SUPREME COURT IN THE CASE OF C.I.T. VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). TH E MAIN SUBMISSION OF THE ASSESSEE IS THAT THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF INCOME AND HAS NOT SUBMITTED ANY WRONG PARTICULARS OF INCOME TO ATTRACT THE PENALTY U/S. 2 71(1)(C). ITA NO. 5999/DEL/2012 & C.O. 4/D/2013 5 6. CONSIDERING THE ABOVE, LD. COMMISSIONER OF INC OME TAX (A) DELETED THE PENALTY. LD. COMMISSIONER OF INCOME TAX (A) CONCLUDED AS UNDER:- I HAVE CONSIDERED THE ORDER OF THE ASSESSING OFFIC ER AND THE SUBMISSION OF THE ASSESSEE AND I FIND CONSIDER ABLE MERIT IN THE APPEAL / SUBMISSION OF THE ASSESSEE TH AT THE ASSESSING OFFICER HAS NOT FOUND ANY MISTAKE OR CONCEALMENT OF INCOME EITHER IN THE RETURN OF INCOM E OR IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IT IS AL SO APPARENT FROM THE ORDER OF THE ASSESSING OFFICER T HAT THE ASSESSING OFFICER HAS INITIATED PENALTY ONLY IN RE SPECT OF THE INCOME DISALLOWED U/S. 14A WHEREAS THE PENALTY HAS BEEN LEVIED ON THE ENTIRE ADDITION WHICH INCLUDES GENERAL DISALLOWANCES LIKE CAR AND TELEPHONE ETC. THE ASSES SEE HAS NOT APPEALED AGAINST THE ADDITIONS AND ORDER OF THE ASSESSING OFFICER WHICH HAS BEEN ACCEPTED BY THE ASSESSEE VOLUNTARILY TO BUY PEACE WITH THE DEPARTME NT AND ALSO TO AVOID LITIGATION AND AS SUCH THE ASSES SING OFFICER IS NOT JUSTIFIED TO LEVY THE PENALTY AS TH ERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C). THE CASE OF THE ASSESSEE IS ALSO SUPPORT ED BY THE CASE OF C.I.T. VS. RELIANCE PETOPRODUCTS PVT. L TD. (2010) 322 ITR 158 (SC) IN WHICH IT HAS BEEN HELD T HAT MERE MAKING OF A CLAIM WHICH IS UNSUSTAINABLE LAW CANNOT BE TREATED AS FURNISHING OF INACCURATE PART ICULARS OF INCOME AND AS SUCH WILL NOT ATTRACT THE PENALTY PROCEEDINGS WHICH IS U/S. 271(1)(C). AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT DETECTED OR FOUND ANY CONCEALMENT OF INCOME IN THE CASE ITA NO. 5999/DEL/2012 & C.O. 4/D/2013 6 OF THE ASSESSEE AND AS SUCH THE ASSESSING OFFICER IS NOT JUSTIFIED TO LEVY THE PENALTY WITHIN THE MEANING OF SECTION 271(1)(C) AND ACCORDINGLY, THE PENALTY LEVIED BY TH E ASSESSING OFFICER IS CANCELLED. 7. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT PENALTY U/S. 271(1)(C) WAS MENTIONED IN THE ASSESSMENT ORDER BY THE ASSESSING OFFICER IN RESPECT OF ADDI TION ON ACCOUNT OF DISALLOWANCE U/S. 14A AMOUNTING TO RS. 8,21,690/-. HOWEVER, THE PENALTY WAS IMPOSED ON THE TOTAL DISALLOWANCE AMOUN TING TO RS. 10,38,677/-. THUS, THE PENALTY LEVIED WAS ARRIVED A T RS. 3,53,047/-. HOWEVER, IF THE PENALTY IS LEVIED CORRECTLY ON THE ACTUAL DISALLOWANCE BY THE ASSESSING OFFICER, THE PENALTY WILL FALL UND ER A SUM OF RS. 3 LACS BEING THE LIMIT FIXED BY THE CBDT FOR FILING T HE APPEAL BEFORE THE TRIBUNAL. IN THIS VIEW OF THE MATTER, THE TOTAL TAX EFFECT OF THE DELETION MADE BY THE LD. COMMISSIONER OF INCOME TAX (A), WILL FALL UNDER THE SUM OF RS. 3 LACS. IN THAT SITUATION, THE APPEAL BY THE REVENUE BEFORE THE TRIBUNAL CANNOT BE MADE, AS PER NECESSARY CBDT CIRCULAR IN THIS REGARD. 9. EVEN ON MERITS, WE FIND THAT LD. COMMISSIONER OF INCOME TAX (A) HAS PASSED A REASONABLE ORDER. THE PENALTY IN THIS CASE HAS BEEN LEVIED ON ACCOUNT OF DISALLOWANCE MADE IN ACC ORDANCE WITH RULE 8D READ WITH SECTION 14A. THERE HAS BEEN NO CO NCEALMENT OR FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSE E IN THIS CASE. THE DISALLOWANCE HAS BEEN MADE BY COMPUTING THE SUMS WH ICH WERE DULY DISCLOSED IN THE RETURN AND ACCOUNTS OF THE AS SESSEE. WE FIND THAT SECTION 271(1)(C) POSTULATES IMPOSITION OF PE NALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALME NT OF INCOME. HENCE, IN OUR CONSIDERED OPINION ON THE FACTS AND C IRCUMSTANCES OF THIS CASE THE ASSESSEES CONDUCT CANNOT BE SAID TO BE CONTUMACIOUS SO AS TO WARRANT LEVY OF PENALTY. HENCE, WE HOLD TH AT THERE IS NO ITA NO. 5999/DEL/2012 & C.O. 4/D/2013 7 INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF I NCOME TAX (A) AND THE SAME DESERVES TO BE UPHELD. 10. WHILE COMING TO THE AFORESAID CONCLUSION, WE PL ACE RELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HE LD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTO RY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DE LIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIO US OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. W HETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTOR Y OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCIS ED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPET ENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVIS IONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE S TATUTE. 11. WE FURTHER PLACE RELIANCE UPON THE HONBLE AP EX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PROD UCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER D ATED 17.3.2010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP S HEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUSE WH AT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A E SSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS A CCEPTED THEN IN ITA NO. 5999/DEL/2012 & C.O. 4/D/2013 8 CASE OF EVERY RETURN WHERE THE CLAIM IS NOT ACCEPT ED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WI LL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INT ENDMENT OF LEGISLATURE. 12. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE DO FIND ANY INFIRMITY IN THE ORDER OF THE LD. C OMMISSIONER OF INCOME TAX (A), ACCORDINGLY, WE UPHOLD THE SAME. 13. THE ASSESSEES CROSS OBJECTION IS ONLY SUPPORT ING THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A). SINCE, WE HAVE ALREADY UPHELD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) IN THE REVENUES APPEAL, THE CROSS OBJECTION FILED BY THE ASSESSEE STANDS INFRUCTUOUS. 14. IN THE RESULT, THE REVENUES APPEAL AS WELL AS ASSESSEES CROSS OBJECTION STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/6/2013. SD/- SD/- [ [[ [U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 14/6/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 5999/DEL/2012 & C.O. 4/D/2013 9