ACIT, Circle-2(2), Hyderabad V. M/s Kakinada Sez Private Limited, R.R.Dist

ITA 1012/HYD/2013

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4862 (ITAT-HYDERABAD)
• Duration Of Justice: 7 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2008-2009
• Appeal Filed On: 24-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PATHLAVAT PEERYA
• Keywords: Capital receipt
• Section: 271(1)(c); 195; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER (THROUGH VIRTUAL HEARING) ITA NO.1012/HYD/2013 ASSESSMENT YEAR:2008 - 09 THE INCOME TAX OFFICER, WARD - 2(1), HYDERABAD. VS. M/S. KAKINA D A SEZ PVT. LTD., SHAMSHABAD . PAN: AACCK 5670 R (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI RONAK DOSHI REVENUE BY: SHRI PATHLAVAT PEERYA, DR DATE OF HEARING: 06/10/2020 DATE OF PRONOUNCEMENT: 08 /10/2020 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT (A) - III, HYDERABAD IN APPEAL NO. 0105/ACIT 2(2)/CIT(A) - III/2012 - 13, DATED 26/06/2013 PASSED U/S. 271(1)(C) R.W.S 250(6) OF THE ACT FOR THE AY: 2008 - 09. 2. THE REVENUE HAS RAISED FOUR GROUNDS IN ITS APPEAL HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD. CIT (A) HAS ERRED IN DELETING THE PENALTY LEVIED BY THE LD. AO FOR RS. 2,07, 11,990/ - INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF SETTING UP MULTI PRODUCT SPECIAL ECONOMIC ZONE FILED ITS RETURN OF INCOME ON 27/09/2008 ADMITTING NIL INCOME. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSME NT WAS COMPLETED VIDE ORDER DATED 24/12/2010 . DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD. AO THAT THE ASSESSEE COMPANY HAD OBTAINED HUGE AMOUNT OF SECURED LOAN VIZ., RS. 375 CRS ON 31/3/2008. OUT OF THE AFORESAID LOAN , THE ASSESSEE COMPANY HAD MADE FIXED DEPOSITS IN BANK TO THE TUNE OF RS. 95.48 CRS AND EARNED INTEREST AMOUNTING TO RS. 6,09,35,544/ - DURING THE RELEVANT AY 2008 - 09. IT WAS FURTHER REVEALED THAT THE ASSESSEE HAD NOT DECLARED THE SAME IN THE RETURN OF INC OME , WHICH OUGHT TO HAVE BE EN SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCE. ON QUERY, IT WAS EXPLAINED BY THE ASSESSEE THAT THE INTEREST INCOME EARNED BY THE ASSESSEE WAS NETTED OFF AND THE NETTED AMOUNT WAS SHOWN IN SCHEDULE - 5 OF THE BALANCE SHEET AS PRE - OPERATIVE EXPENSES PENDING ALLOCATION. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION IN THE CASES, CIT VS. BOKARO STEELS LIMITED REPORTED IN 236 ITR 315 (SC), INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED VS. ITO REPORTED IN 3 15 ITR 255 (DELHI), ITAT D ECISION IN THE CASE OF M/S. TIRUMALA HYDEL POWER PROJECTS LTD IN ITA NO.640V/2004, CONTINENTAL CONSTRUCTION LTD VS. CIT (1992) 195 ITR 81/60 TAXMAN (SC), H.K. (INVESTMENT) CO. (P) LTD VS. CIT (1995) 211 ITR 511 (GUJ.), INDIA CEMENT LTD VS. CIT (1966) 3 60 IT R 52 (SC), CIT VS. SRI RAM HONDA POWER EQUIPMENT REPORTED IN 289 ITR 501 (DELHI), J.F. LABORATORIES LTD VS. INCOME TAX OFFICER REPORTED IN 96 ITD 448 (MUMBAI) . HOWEVER, THE LD. AO WAS OF THE VIEW THAT SINCE THE ASSESSEE HAD TAKEN LOAN FROM THE BANK FOR AC QUISITION OF LAND AND DEVELOPMENT OF THE PROJECT BY VIRTUE OF SECTION 57(III) OF THE ACT, THE IN TEREST EARNED FROM THE UNUTILIZED LOAN KEPT AS FIXED DEPOSIT CANNOT BE ALLOWED TO BE NETTED OFF AND FURTHER IT HAS TO BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCE . WHILE HOLDING SO, THE LD. AO RELIED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AN D FERTILIZERS LTD VS. CIT (1997) 227 ITR 172, KEDAR NARAIN SINGH VS. CIT REPORTED IN 6 ITR 167 AND THE DECISION OF THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF MANIDEEP ENGG. & PACKAGING INDUSTRIES (P) LTD VS. DY. CIT REPORTED IN 77 ITD 307 . ACCORDINGL Y, THE LD. AO ASSESSED THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCE FOR RS. 6,09,35,544/ - AND FURTHER INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THEREAFTER THE LD. AO HELD THAT THE ASSESSEE HAD CONCEALED THE PARTICULA RS OF INCOME BECAUSE THE INTEREST EARNED FROM THE FIXED DEPOSIT WAS NOT INCLUDED AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCE IN THE RETURN OF INCOME AND LEVIED MINIMUM PENALTY OF RS. 2,07,11,990/ - . 4. ON APPEAL, THE LD. CIT (A) DELETED THE PENALT Y LEVIED BY THE LD. AO INVOKING THE PENAL PROVISIONS OF SECTION 271(1)(C) OF THE ACT BY OBSERVING AS UNDER: 4 4.4. I HAVE SEEN CAREFULLY THE FACTS AND EVIDENCE. IDENTICAL ISSUE HAS BEEN DECIDED IN THE CASE OF THE APPELLANT BY THE HONBLE CIT(A) - III VIDE IT A NO.0081/ACIT 2(2)/CIT(A) - III/2011 - 12 DATED 22 ND JANUARY, 2013. THE OPERATIVE PART OF THAT JUDGMENT IS QUOTED BELOW: - 4.13. I HAVE ALSO GONE THROUGH THE CASE LAW REFERRED TO BY THE APPELLANT AND I FIND MERIT IN THE CONTENTION OF THE APPELLANT THAT THE ISSUE IS DEFINITELY DEBATABLE. THIS IS EVIDENT FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF NTPC SAIL POWER COMPANY 25 TAXMANN 401 WHERE IT WAS HELD THAT INTEREST ON MONEY RECEIVED AS SHARE CAPITAL IF TEMPORARY PLACED IN A FIXED DEPOSIT DOES NOT ALTER THE NATURE OF THE AMOUNT AS THIS AMOUNT IS INEXTRICABLY LINKED WITH THE SETTING UP OF THE PLANT AND SUCH INTER EST INCOME CANNOT BE TREATED AS INCOME FROM OTHER SOURCES. SIMILARLY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BOKARO STEEL LIMITED 236 ITR 315 (SC) HAS ENDORSED A SIMILAR VIEW STATING THAT IF INTEREST IS EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUS ION INTO THE BUSINESS THEN SUCH INTEREST INCOME CANNOT BE CLASSIFIED AS INCOME FROM OTHER SOURCES. EVEN IF THE INCOME IS EARNED IN A PERIOD PRIOR TO THE COMMENCEMENT OF BUSINESS IT HAD TO BE IN THE NATURE OF A CAPITAL RECEIPT AND WAS REQUIRED TO BE SET OF F AGAINST PREOPERATIVE EXPENSES. THERE ARE MANY OTHER DECISIONS OF VARIOUS COURTS AND TRIBUNALS WHICH SUPPORT THE AFOREMENTIONED VIEW WHILE THERE IS ALSO MANY A DECISION SUPPORTING THE CONTRARY LAW. 4.14. THE AFORESAID DISCUSSION CLEARLY POINTS OUT THAT T HE ISSUE IN HAND IS DEBATABLE. 4.15. GIVEN THE ABOVE FACTS AND CIRCUMSTANCES, THERE IS NO DOUBT ABOUT THE FACT THAT PENALTY IN THIS CASE IS NOT IMPOSSIBLE. ACCORDINGLY, THE SAME IS ORDERED TO BE CANCELLED. 4.5. SINCE THE FACTS ARE IDENTICAL IN THE CURREN T YEAR ALSO, FOLLOWING THE PRINCIPLE OF STARE DECISIS, I TOO HOLD THAT THE ISSUE AT HAND IS DEBATABLE AND NO INFORMATION HAD EVER BEEN CANCELLED BY THE APPELLANT. THEREFORE, PENALTY U/S. 271(1)(C) CANNOT BE LEVIED AND THE SAME IS ORDERED TO BE CANCELLED. 5. AT THE OUTSET, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A). THE ISSUE OF NETTING OFF OF THE INTEREST OR TREATING THE INTEREST INCOME EARNED BY THE ASSESSEE AS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCE IS A DEBATABLE ISSUE CO NSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE. THE ASSESSEE HAS TAKEN ONE POSSIBLE VIEW WHICH WAS REJECTED BY THE LD. REVENUE AUTHORITIES. HOWEVER, THE ASSESSEE HAD BROUGHT OUT ALL THE FACTS BEFORE THE REVENUE 5 ALONG WITH THE RETURN OF INCOME. THEREFORE, AT THE MOST IT CAN BE ONLY TREATED AS A CLAIM OF THE ASSESSEE WHICH MAY NOT BE SUSTAINABLE IN LAW. IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANC E PETROPRODUCT (P.) LTD., [2010] 189 TAXMAN 322 / 322 ITR 158 (SC) WILL BE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE . THE GIST OF THE ORDER OF THE HONBLE APEX COURT CITED SUPRA IS STATED HEREIN BELOW FOR REFERENCE: A GLANCE OF PROVISION OF SECTION 271(1)( C ) WOULD SUGGEST THAT IN ORDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE INSTANT CASE WAS NOT THE CASE O F CONCEALMENT OF THE INCOME. THAT WAS NOT THE CASE OF THE REVENUE EITHER. IT WAS AN ADMITTED POSITION IN THE INSTANT CASE THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT WAS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUP PLIED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESSEE COULD NOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE REVENUE ARGUED THAT SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT T O GIVING INACCURATE PARTICULARS OF SUCH INCOME. SUCH CANNOT BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVI SION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS. [PARA 7] THEREFORE, IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271(1)( C ) EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED, BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARI SE. [PARA 8] THE WORD 'PARTICULARS' MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THE INSTANT CASE, THERE WAS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)( C ). A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. [PARA 9] 6 THE REVENUE CONTENDED THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY WERE INCORRECT, IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TWO FORMS: ( I ) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY; ( II ) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN EXAGGERATED AMO UNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONE'S INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. SUCH CONTENTION COULD NOT BE ACCEPTED AS THE ASSESS EE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAI M IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT, BY ITSELF, WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)( C ). IF THE CONTENTION OF THE REVENUE WAS ACCEPTED, THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE WAS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WOULD INVITE PENALTY UNDER SECTION 271(1)( C ). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. [PARA 10] THEREFORE, TH E APPEAL FILED BY THE REVENUE HAD NO MERITS AND WAS TO BE DISMISSED. 6. FOR THE AFORESTATED REASONS, WE HEREBY UPHOLD THE ORDER OF THE LD. CIT (A) FOR DELETING THE PENALTY LEVIED BY THE LD. AO IN THE HANDS OF THE ASSESSEE INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. HENCE, THE APPEAL OF THE REVENUE IS DEVOID OF MERITS. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 08 TH OCTOBER, 2020. SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 08 TH OCTOBER, 2020. OKK 7 COPY TO: - 1. KAKINADA SEZ PVT LTD., 4 TH FLOOR, GMR AERO TOWERS, RAJIV GANDHI INTERNATIONAL AIRPORT, SHAMSHABAD. 2. THE INCOME TAX OFFICER, WARD - 2(1), R.NO. 506, 5 TH FLOOR, SIGNATURE TOWERS, KONDAPUR, HYDERABAD 500 084. 3. THE CIT(A) - III, HYDERABAD. 4. THE COMMISSIONER OF INCOME TAX - II, HYDERABAD. 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. 6. GUARD FILE .