M/s Som Power Ltd, V. The ACIT 1(1),

ITA 107/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2881 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-05-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 02-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: R N GUPTA
• Keywords: Wrong claim; Capital receipt

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER ITA NOS. 107 & 108/IND/2009 A.YS. 1999-00 & 2000-01 M/S SOM POWER LIMITED BHOPAL APPELLANT PAN AAECS-4536L VS ASSTT. COMMISSIONER OF INCOMETAX 1(1) BHOPAL RESPONDENT APPELLANT BY : SHRI R.N. GUPTA RESPONDENT BY : SMT. APARNA KARAN, SR. DR O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THESE APPEALS ARE BY THE SAME ASSESSEE FOR DIFFEREN T ASSESSMENT YEARS WHEREIN THOUGH THE ASSESSEE HAS TAKEN VARIOUS GROUNDS WHICH CAN BE CONCISED TO ONE I.E. CHALLENGING THE PENALTY OF RS. 1,16,000/- EACH U/S 271(1) OF THE ACT. 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD SHRI R.N. GUPTA, LD. COUNSEL FOR THE ASSESSEE AND SMT. APARNA KARAN, SR. DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THERE WAS NO POSITIVE EVIDENCE TO THE EFFECT THAT EITHER THE ASS ESSEE CONCEALED ITS 2 INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. ON A QUERY FROM THE BENCH ABOUT THE QUANTUM ADDITION, IT WAS C ONTENDED THAT THE QUANTUM APPEAL WAS DECIDED ON THE BASIS OF DIFFEREN T JUDICIAL PRONOUNCEMENTS IN THE CASES OF TUTICORIN ALKALIES & BOKARO STEEL LIMITED. THE LD. COUNSEL FOR THE ASSESSEE RELIED O N THE FOLLOWING JUDICIAL PRONOUNCEMENTS :- 1. CHANDRAPAL BAGGA V. ITAT; 261 ITR 67 (RAJ.) 2. YOGESH R. DESAI V. ACIT; (2010) 2 TTR 267 (MUM) 3. CIT V. RELIANCE PETRO PRODUCTS PVT. 322 ITR 158 (SC) 4. 218 CTR 21 5. 14 ITJ 269 (IND) ON THE OTHER HAND, THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE STRONGLY DEFENDED THE IMPUGNED ORDER/PENALTY ORDER BY ASSERTING THAT THE ASSESSEE DELIBERATELY MADE A FALSE CLAIM AS INT EREST INCOME IS TAXABLE. IT WAS FURTHER PLEADED THAT WHETHER THE A SSESSEE CAN MAKE A CLAIM WHICH IS PATENTLY NOT ALLOWABLE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. BRIEF FACTS ARE THAT DURING TH E IMPUGNED ASSESSMENT YEARS, THE ASSESSEE RECEIVED INTEREST OF RS.12,41,7 42/- AND RS.14,71,375/- RESPECTIVELY. THE BREAK UP OF THE S AME HAS BEEN GIVEN IN THE RESPECTIVE ASSESSMENT ORDER. AS PER THE REVE NUE, NO BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE DURING THE YEAR. THE ASSESSEE 3 INCURRED EXPENDITURE DURING THE CONSTRUCTION PERIOD (PRE-OPERATIVE EXPENSES WORKED OUT TO RS.77,25,258/-) (A.Y. 1998-9 8). THE ASSESSEE DEDUCTED INTEREST OF RS.12,41,742/- FROM THE PRE-OP ERATIVE EXPENSES AND THE BALANCE AMOUNT WAS TAKEN TO THE BALANCE SHE ET AS EXPENDITURE DURING THE CONSTRUCTION PERIOD PENDING ALLOCATION. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED AS TO WHY THE IN TEREST INCOME SHOULD NOT BE TAXED. THE ASSESSEE CLAIMED THAT IN VIEW OF THE DECISION FROM THE HONBLE APEX COURT IN CIT V. BOKARO STEEL LIMITED; 236 ITR 315 THE AMOUNT SHOULD NOT BE TAXED. IT WAS FURTHER CLA IMED THAT THE INTEREST EARNED ON THE CAPITAL WAS DIRECTLY LINKED WITH THE BUSINESS ACTIVITIES OF THE COMPANY. HOWEVER, THE ASSESSING OFFICER TREATED THE INTEREST AMOUNT AS TAXABLE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE QUANTUM ADDITION WAS AFFIRMED. 4. THE LEARNED ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE AS TO WHY PENALTY U/S 271(1) MAY NOT BE IMPOSED ON THE PLEA THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF ITS INCOME. ULT IMATELY PENALTY OF RS.1,16,000/- EACH WAS IMPOSED. ON APPEAL, THE PEN ALTY WAS AFFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS UNDER CHALLENGE BEFORE THE TRIBUNAL. IF THE TOTALITY OF F ACTS IS ANALYSED, THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE MADE TRUE DISCLOSURE OF FACTS/INCOME IN ITS RETURN. WE HAVE PERUSED THE PA PER BOOK, SUBMISSIONS OF THE ASSESSEE. ADMITTEDLY, IN ITS STA TEMENT OF COMPUTATION 4 OF TOTAL INCOME, THE ASSESSEE SPECIFICALLY GAVE A N OTE BELOW THE AUDITED FINAL ACCOUNTS/TDS CERTIFICATES (PAGES 3 AND 4 OF P APER BOOK). THE NOTES ARE AS UNDER :- 1. THE COMPANY HAS NOT COMMENCED ANY OPERATIONS A S YET AND ITS PROJECT IS UNDER IMPLEMENTATION. NO COMMERCIA L PRODUCTION HAS BEEN STARTED. 2. INTEREST RECEIVED DURING THE YEAR HAS BEEN REDU CED FROM PREOPERATION EXPENSES AND NOT CHARGED TO TAX IN V IEW OF JUDGMENT OF HONBLE SUPREME COURT (CIT V. BOKARO STEEL LTD. 236 ITR 315 (SC). THE AUDITORS REPORT TO SHAREHOLDERS WAS ALSO FILED BEFORE THE ASSESSING OFFICER. THE BALANCE SHEET AS ON 31.3.1999 SHOWING THE COMPLETE DETAILS OF INCOME AND EXPENDITURE WAS ALSO FILED AL ONG WITH NOTES ON ACCOUNTS AND SIGNIFICANT ACCOUNTING POLICIES (PAGES 9 TO 11 OF THE PAPER BOOK), BALANCE-SHEET ABSTRACT AND GENERAL BUSINESS PROFILE OF THE ASSESSEE (PAGE 12 OF THE PAPER BOOK) WERE ALSO FILE D. IT IS ALSO A FACT THAT THE ASSESSEE MADE THE TRUE DISCLOSURE OF ALL T HE DETAILS. DURING HEARING OF THIS APPEAL, A QUESTION WAS POSED BY THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE WHETHER THE ASSESSEE C AN MAKE A CLAIM WHICH IS PATENTLY NOT ALLOWABLE. THE QUESTION SEE MS TO BE VERY TEMPTING AND REASONABLE BUT THE FACT REMAINS THAT E VEN IF A WRONG CLAIM IS MADE BY THE ASSESSEE BY DISCLOSING TRUE FACTS AU TOMATICALLY DOES NOT ENTITLE THE ASSESSEE FOR SUCH CLAIM AND IT CAN BE D ISALLOWED. IT IS THE DUTY OF THE ASSESSING OFFICER TO ASSESS THE CORRECT INCO ME/TAX AS PER THE PROVISIONS OF THE ACT. EVEN OTHERWISE, IF A CLAIM HAS BEEN MADE, THAT 5 TOO ON THE BASIS OF A DECISION FROM THE HONBLE APE X COURT BY GIVING A NOTE IN ITS RETURN, DOES NOT MEAN THAT THE ASSESSEE EITHER CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF ITS I NCOME. IF THE CLAIM IS NOT ALLOWABLE, CERTAINLY IT CAN BE DENIED BUT BEFOR E US THE QUESTION IS TO BE DECIDED REGARDING IMPOSITION OF PENALTY. THE LA NGUAGE USED IN SECTION 271(1) IS AS UNDER :- 4 271. (1) IF THE 5 [ASSESSING] OFFICER OR THE 6 [***] 7 [COMMISSIONER (APPEALS)] 8 [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEED INGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON ( C ) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR 13 [* * *] FURNISHED INACCURATE PARTICULARS OF 14 [SUCH INCOME, OR] IF THE LANGUAGE USED IN THE AFORESAID SECTION IS AN ALYSED, IT CAN BE SAID THAT FOR IMPOSITION OF PENALTY U/S 271(1) EITHER T HERE SHOULD BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF SUCH INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION, GIVEN IN THE RETURN, IS FOUND TO BE INCORRECT OR IN ACCURATE, THE ASSESSEE MAY NOT BE HELD GUILTY OF FURNISHING INACCURATE PAR TICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM CAN BE SAID TO BE TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT IT DEPENDS UPON THE RETURN FILED BY THE ASSESSEE BECAU SE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. 6 IN THE IMPUGNED ORDER THERE IS NO FINDING THAT THE DETAILS FILED BY THE ASSESSEE WERE EITHER ERRONEOUS OR FALSE. A MERE MA KING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE, NOR IT CAN BE SAID THAT INACCURATE PARTICULARS WERE FILED. TH E CLAIM OF THE ASSESSEE IS MUCH STRONGER BECAUSE THE RETURN IS SUPPORTED BY A NOTE MENTIONED BELOW THE RETURN/PAN AND LOSS ACCOUNT THAT THE CLAI M IS MADE ON THE BASIS OF NOTE AS MENTIONED IN PARA 4 ABOVE. THE RE TURN WAS SUPPORTED BY COPY OF AUDITED BALANCE SHEET/AUDIT REPORT AND I N THE AUDITED ACCOUNTS, IN SCHEDULE-C THE ASSESSEE HAS CLEARLY ME NTIONED THAT IN THE RELEVANT YEAR IT HAS RECEIVED INTEREST OF RS.12,41, 742/- WHICH HAS BEEN REDUCED FROM THE EXPENDITURE INCURRED DURING CONSTR UCTION YEAR. IN THE NOTES OF ACCOUNTS ATTACHED WITH THE BALANCE SHEET, THE ABOVE FACT WAS ALSO CLEARLY MENTIONED IN NOTE NO. 2 OF SCHEDULE-H ATTACHED WITH THE BALANCE-SHEET. FURTHER IN THE SAID SCHEDULE-H NOTE NO. 12 THE ASSESSEE CLEARLY MENTIONED THAT NO PROVISION FOR INCOME TAX HAS BEEN CONSIDERED NECESSARY IN VIEW OF THE FACT THAT THE ASSESSEE COM PANY HAS NOT YET STARTED ITS COMMERCIAL ACTIVITY AND INTEREST INCOME DURING THE PERIOD IS NOT TAXABLE THAT TOO IN VIEW OF THE DECISION FROM T HE HONBLE APEX COURT IN THE CASE OF CIT V. BOKARO STEELS LIMITED. IN IT S COMPUTATION OF INCOME IT HAS BEEN MENTIONED THAT THE INTEREST RECEIVED DU RING THE YEAR HAS BEEN REDUCED FROM PRE-OPERATIVE EXPENSES AND NOT CH ARGED TO TAX. IF 7 THIS CLAIM OF THE ASSESSEE IS NOT ACCEPTED BY THE A SSESSING OFFICER, DOES NOT MEAN THAT THE ASSESSEE EITHER CONCEALED IT S INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WHICH IS THE PRIME CONDITION FOR IMPOSING PENALTY U/S 271(1). EVEN THE MATTER TRAVELLED TO THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHO RE DUCED THE ADDITION OF RS. 12,41,742/- TO RS. 3,31,368/-. ON F URTHER APPEAL, THE TRIBUNAL ALSO HELD THAT OUT OF RS. 12,41,742/- ONLY RS. 3,31,338/- IS TAXABLE. THE SUSTAINED DISALLOWANCE IS DUE TO THE BONAFIDE INTERPRETATION OF LAW ON THE ISSUE. HOWEVER, WE AR E OF THE VIEW THAT IT MAY BE A CASE FOR QUANTUM ADDITION BUT NOT A GOOD C ASE FOR IMPOSING PENALTY. OUR VIEW FINDS SUPPORT FROM THE DECISIONS QUOTED ABOVE AND ESPECIALLY THE LATEST DECISION DATED MARCH 17, 2010 FROM THE HONBLE APEX COURT IN CIT V. RELIANCE PETRO PRODUCTS PRIVAT E LIMITED (2010) 322 ITR 158 (SC). WHILE COMING TO A PARTICULAR CONCLUS ION, THE HONBLE COURT ALSO CONSIDERED THE OFF-QUOTED DECISION OF DI LIP & SHROFF V. JCIT (291 ITR 519 (SC), SHRIKRISHNA ELECTRICALS V. STATE ; (2009) 23 VST 249 (SC); UNION OF INDIA V. DHARMENDRA TEXTILES PROCESS ORS; 306 ITR 277 (SC), UNION OF INDIA V. RAJASTHAN WEAVING MILLS (20 10) 1 GSTR 66 (SC), ETC. THE HONBLE APEX COURT IN THE AFORESAID CASE OF RELIANCE PETRO PRODUCTS LIMITED HAS IDENTICALLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE DECISIONS IN CHANDRAPAL BAGGA V. ITA T AND ANOTHER 8 (261 ITR 67) (RAJ ) AND YOGESH R. DESAI V. ACIT (SU PRA) SUPPORT OUR VIEW. 5. EVEN IF THE CLAIM OF THE ASSESSEE IS BASED UPON A DECISION FROM THE HONBLE APEX COURT (BOKARO STEEL LIMITED) THOU GH ON DIFFERENT LINE OF REASONING WHICH HAS BEEN MADE A BASE FOR SUCH CL AIM, IT CANNOT BE SAID THAT THE ASSESSEE AT THAT POINT OF TIME WAS WR ONG BECAUSE IT IS THE ASSESSING OFFICER WHO IS SUPPOSED TO ANALYSE THE CA SE ON ITS OWN MERIT AND IF HE FINDS THAT SUCH CLAIM CANNOT BE ALLOWED, IT MAY BE A GOOD CASE FOR ADDITION OR DISALLOWANCE OR ALLOWANCE, AS THE C ASE MAY BE, BUT CERTAINLY IT MAY NOT BE A GOOD CASE FOR IMPOSING PE NALTY U/S 271(1) OF THE ACT. FOR ADOPTION OF A PARTICULAR VIEW WE MAY FIND SUPPORT FROM THE DECISION OF THE HON'BLE HIGH COURT OF RAJASTHAN IN CIT V. KANSARA MODLER LIMITED (2008) 218 CTR (RAJ. ) 21 WHEREIN IT WAS CONCLUDED AS UNDER :- CONCLUSION TRIBUNAL EXAMINED THE DIVERSE JUDGMENTS OF THE SUPREME COURT AND FOLLOWED THE DECISION IN KARNAL COOPERATIVES CASE TO HOLD THA T INTEREST EARNED BY THE ASSESSEE ON THE MARGIN MONEY DEPOSITED WITH BANK FOR OPENING LETTER OF CR EDIT WAS A CAPITAL RECEIPT, IT CANNOT BE SAID THAT THE TRIBUNAL WAS WHOLLY WRONG IN ADOPTING SUCH COURSE . IN THE LIGHT OF THESE FACTS AND JUDICIAL PRONOUNCEM ENTS, EVEN IF A WRONG CLAIM HAS BEEN MADE BY THE ASSESSEE BY DISCLOSING T RUE FACTS, WE ARE OF 9 THE CONSIDERED OPINION THAT NO PENALTY IS LEVIABLE U/S 271(1) OF THE ACT, THEREFORE, BOTH THESE APPEALS OF THEN ASSESSEE ARE ALLOWED. FINALLY, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH MAY, 2010 (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MAY 5 TH , 2010 COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR/GUARD F ILE