MODERN SHARES AND STOCKBERS LTD ( FORMERLY KNOWN AS MODERN HOME CREDIT & CAPITAL LTD), MUMBAI V. ITO WD 4(3)(3), MUMBAI

ITA 1007/MUM/2011

• Counselvise Citation: 100719914 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 16-09-2013
• Assessment Year: 1999-2000
• Appeal Filed On: 03-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C P PATHAK
• Keywords: Business income; Difference of opinion; Notional interest; Change of opinion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 1007/MUM/2011 ASSESSMENT YEAR: 1999-00 M/S. MODERN SHARES & STOCKBROKERS LTD. WANKHEDE STADIUM, NORTH STAND, L& M WING, D ROAD, CHURCHGATE MUMBAI- 400 020 PAN :AAACM 3041 N VS. ITO WD-4(3)(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH JOSHI RESPONDENT BY : SHRI C.P. PATHAK DATE OF HEARING : 16.09.2013 DATE OF PRONOUNCEMENT : 23.10.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A)-11, MUMBAI DATED 06.12.2010 CONFIRMING THE PENALTY OF R S.3,40,775/- LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 1999-2000. 2. BRIEFLY STATED, THE ASSESSEE, A COMPANY DERIVING INTEREST INCOME, LEASE RENTALS, SERVICES CHARGES, BROKERAGE AND COMMISSION, SHARES TRADING ETC AGAINST WHICH IN THE ASSESSMENT FRAMED U/S 143(3) OF THE INCOME TAX ACT, THE AO MADE VARIOUS ADDITIONS THEREBY ASSESSED THE INCOME WHICH INTER-ALIA INCLUD E (I) RENTAL INCOME OF RS.6,00,000/- WAS ASSESSED BY THE AO UNDER THE HEAD INCOME FROM H OUSE PROPERTY AS AGAINST UNDER THE BUSINESS INCOME DECLARED BY THE ASSESSEE COMPANY (I I) INCREASED THE RENTAL INCOME BY RS.99,000/- ON ACCOUNT OF NOTIONAL INTEREST ON SECU RITY DEPOSIT (III) DISALLOWED EXPENSES OF RS.2,72,996/- WHICH WERE WRONGLY CLAIMED UNDER THE HEAD BUSINESS INCOME ALTHOUGH EXPENSES WERE NOT ALLOWABLE SINCE THE INCOME WAS TA XABLE UNDER THE HEAD HOUSE PROPERTY ITA NO. 1007/MUM/2011 M/S. MODERN SHARES & STOCKBROKERS LTD. ASSESSMENT YEAR : 1999-00 2 (IV) DISALLOWED A SUM OF RS.4,11,715/- OUT OF THE I NTEREST EXPENSES AS THE FUNDS OF THE COMPANY WERE DIVERTED TO THE SISTER CONCERN FOR NON BUSINESS PURPOSES AND (V) DISALLOWED DEDUCTION CLAIMED FOR SHORTFALL IN INVESTMENT AMOUN TING TO RS.3,66,962/-. THE ADDITIONS MADE BY THE AO ON THE FIRST FOUR ISSUES WERE ACCEPT ED BY THE ASSESSEE COMPANY AND NO APPEAL WAS FILED AGAINST THESE ISSUES. IN THE APPEA L FILED BEFORE THE LD.CIT(A) ON THE DISALLOWANCE OF DEDUCTION CLAIMED FOR SHORTFALL IN INVESTMENT AMOUNTING TO RS.3,66,962/-, THE LD.CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE CO MPANY. CONSEQUENTLY, IN THE PENALTY PROCEEDINGS, THE AO LEVIED A PENALTY OF RS.3,40,775 /- U/S 271(1)(C) OF THE ACT BEING 100% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED BY TH E ASSESSEE ON ACCOUNT OF THE REMAINING ADDITIONS. 3. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED THE PENAL TY LEVIED BY THE AO. ACCORDING TO THE LD.CIT(A), THE ASSESSEE COMPANY HAD SHOWN A REN TAL INCOME OF RS.6,00,000/- UNDER THE HEAD BUSINESS AND CLAIMED VARIOUS EXPENSES TO R EDUCE TAX LIABILITY. FURTHER ALTHOUGH, THE ASSESSEE COMPANY HAD TAKEN 12 MONTHS RENT AS SE CURITY DEPOSIT, NO INTEREST WAS ADDED WHILE WORKING OUT ANNUAL LETTING VALUE (ALV) OF THE PROPERTY. THE AO DETECTED ALL THESE INACCURATE PARTICULARS OF INCOME WHILE COMPLE TING THE SCRUTINY ASSESSMENT. IN CASE, THIS CASE WAS NOT SELECTED FOR SCRUTINY THE ASSESSE E WOULD HAVE NOT PAID ITS TAXES CORRECTLY. LASTLY, THE ASSESSEE COMPANY HAD NOT TAK EN ADEQUATE STEPS TO RECOVER A SUM OF RS.1.33 CRORES FROM ITS SISTER CONCERN. ON THE OTHE R HAND, IT HAS PAID INTEREST ON THE BORROWINGS. THEREFORE, THE ASSESSING OFFICER HAS RI GHTLY ADDED BACK A SUM OF RS.4,11,715/- FOR DIVERSION OF FUND FOR NON BUSINES S PURPOSES. HENCE THE LEVY OF PENALTY BY THE AO IS JUSTIFIED. AGGRIEVED BY THE IMPUGNED O RDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD.AR OF THE ASSESSEE HAS CONTEND ED THAT THE INCOME UNDER HOUSE PROPERTY IS MERE CHANGE OF OPINION BY THE AO WHEREA S THE ASSESSEE HAS OFFERED INCOME UNDER THE HEAD BUSINESS INCOME. AS REGARDS THE OTHE R ADDITIONS, THE ASSESSEE HAS MADE BONA FIDE CLAIM AND HAS NOT PROVIDED ANY INACCURATE PARTICULARS/CONCEALED THE INCOME FOR THE PURPOSE OF SECTION 271(1)(C) OF THE ACT. THE L D.AR HAS FURTHER PLACED HIS RELIANCE ON THE DECISION OF THE APEX COURT IN THE CASE OF RELIA NCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). ON THE OTHER HAND, THE LD.DR HAS RELI ED ON THE ORDERS OF THE LD.CIT(A) AND AO IN SUPPORT OF THE REVENUES CASE. ITA NO. 1007/MUM/2011 M/S. MODERN SHARES & STOCKBROKERS LTD. ASSESSMENT YEAR : 1999-00 3 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. FIRSTLY ON THE ISSUE OF LEVY OF PENALTY ON THE ISSUE OF RENT RECEI VED OF RS.6,00,000/- DECLARED BY THE ASSESSEE AS BUSINESS INCOME BUT ASSESSED AS INCOME FROM HOUSE PROPERTY, THE RESULTANT INCREASE OF THE RENTAL INCOME OF RS.99,000/- MADE B Y THE AO ON ACCOUNT OF NOTIONAL INTEREST ON SECURITY DEPOSIT AND THE DISALLOWANCE O F EXPENSES OF RS.2,72,996/- WHICH WERE WRONGLY CLAIMED ARE DUE TO THE FACT THAT THE ASSESS EE HAS WRONGLY CLAIMED THE RENTAL INCOME UNDER HEAD BUSINESS INCOME. WE FIND THAT THE FACTS ARE NOT IN DISPUTE AND IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS SHOWN THE RENTAL INCOME UNDER THE HEAD 'INCOME FROM BUSINESS WHICH WAS ASSESSED AS 'INCOME FROM H OUSE PROPERTY'. THUS THE AFOREMENTIONED ADDITIONS/DISALLOWANCES ARE ONLY DUE TO THE CHANGE OF THE HEAD OF THE INCOME. IT IS PERTINENT TO MENTION THAT IN THE DECI SION OF THE TRIBUNAL IN ITO VS. ROBORANT INVESTMENTS (P.) LTD., (2006) 7 SOT 181 (MUM), IT H AS BEEN HELD VIDE PARA 10 AS UNDER:- '10. IN VIEW OF THE FOREGOING, WE ARE OF THE OPINIO N THAT MERE REJECTION OF A LEGAL CLAIM OF THE ASSESSEE FOR TAXABILITY OF INCOME UNDE R A PARTICULAR HEAD OF INCOME IS NOT BY ITSELF SUFFICIENT TO WARRANT IMPOSITION OF PENAL TY. TAX MATTERS ARE HIGHLY COMPLEX AND HENCE THERE IS BOUND TO BE A GENUINE DIFFERENCE OF OPINION IN MATTERS OF LAW BETWEEN THE TAX COLLECTORS AND THE TAXPAYERS. IT IS INDEED VERY DIFFICULT FOR THE ASSESSEE TO PREDICT, IN ADVANCE, AS TO WHAT VIEW TH E AO OR APPELLATE AUTHORITIES WOULD TAKE ON THE LEGAL CLAIM MADE BY THE ASSESSEE. CASES INVOLVING GENUINE DIFFERENCE OF OPINION ON MATTERS OF LAW BETWEEN THE ASSESSEE AND THE AO ARE CLEARLY OUTSIDE THE SCOPE OF EXPLN. 1 TO S. 271(1) PROVIDED THE ASSESSE E HAS MADE FULL DISCLOSURE OF ALL THE RELEVANT FACTS AND ALSO ACTED BONA FIDE. TESTED ON THE AFORESAID PARAMETERS, WE FEEL THAT THE LEARNED CIT(A) HAS CORRECTLY CANCELLE D THE IMPUGNED PENALTY. HIS ORDER IS, THEREFORE, CONFIRMED'. ALSO, IT IS PERTINENT TO MENTION THAT THE APEX COUR T IN CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) AFTER CONSIDERING VARI OUS DECISIONS INCLUDING DILIP N. SHROFF VS. JCIT (2007) 291 ITR 519(SC) AND UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC) HAS OBSERVED AND HELD (PAGE 158 HEAD NOTES) AS UNDER : 'A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE H AS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY , THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND T O BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCU RATE PARTICULARS IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRE TCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCUR ATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETUR N FILED Y THE ASSESSEE, BECAUSE ITA NO. 1007/MUM/2011 M/S. MODERN SHARES & STOCKBROKERS LTD. ASSESSMENT YEAR : 1999-00 4 THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FU RNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACC URATE, THE LIABILITY COULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RET URN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS . WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE I S NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING IN ACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RE TURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS' RESPECTFULLY FOLLOWING THE RATIO OF THE AFOREMENTIO NED DECISIONS, WE ARE OF THE VIEW THAT THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE ON THE ADDITIONS/DISALLOWANCES MADE ON ACCOUNT OF CHANGE OF HEAD OF INCOME. SECONDLY, O N THE ISSUE OF LEVY OF PENALTY ON ACCOUNT OF DISALLOWANCE ON A SUM OF RS.4,11,715/- OUT OF THE INTEREST EXPENSES AS THE FUNDS OF THE COMPANY WERE DIVERTED TO THE SISTER CO NCERN FOR NON BUSINESS PURPOSES, IT IS NOTED THAT THE DISALLOWANCE/ADDITION HAS BEEN MADE ON THE BASIS OF APPLYING AVERAGE COST OF INTEREST ATTRIBUTABLE TO THE INTEREST OF FREE AD VANCE WHICH IN OUR VIEW CANNOT BE THE BASIS FOR LEVY OF PENALTY AS THE ASSESSEE HAS NEITH ER PROVIDED INACCURATE PARTICULARS NOR CONCEALED ANY INCOME FOR THE PURPOSE OF SECTION 271 (1) (C) OF THE ACT. IN VIEW OF THE AFOREMENTIONED DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE WHICH MAY CALL FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AND ACCORDINGLY THE PENALTY IMPOSED BY THE AO AND SUSTA INED BY THE LD. CIT(A) IS DELETED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF OCTOBER, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23.10.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR G BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.