Shri Anil Amrutlal Relia, Ahmedabad V. The Dy. CIT.,Circle-6, Ahmedabad

ITA 1135/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8605 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 05-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Business income; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 1135/AHD/2015 (ASSESSMENT Y EAR: 2006-07) SHRI ANIL AMRUTLAL RELIA, PROP. OF M/S. ARCHER, ARCHER HOUSE, GURUKUL ROAD, MEMNAGAR, AHMEDABAD APP ELLANT VS. THE DCIT, CIRCLE 6, PRATYAKSH KAR BHAVAN, AMBAWADI, AHMEDABAD RESPONDENT PAN: ABLPR4825L /BY ASSESSEE : SHRI S. N. DIVATIA, A.R. /BY REVENUE : SHRI MUDIT NAGPAL, SR. DR. /DATE OF HEARING : 23.08.2017 /DATE OF PRONOUNCEMENT : 30.08.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006-07 ARISES FROM THE CIT(A)-13, AHMEDABADS ORDER DATED 27.03.2015 PASSE D IN CASE NO. CIT(A)- ITA NO. 1135/AHD/15 (SHRI ANIL AMRUTLAL RELIA VS. D CIT) A.Y. 2006-07 - 2 13/AHD/110/CIR.6/2014-15, PARTLY UPHOLDING ASSESSIN G OFFICERS ACTION IMPOSING PENALTY OF RS.5,08,930/- PERTAINING TO QUA NTUM DISALLOWANCE/ADDITION OF RS.15,12,000/-, IN PROCEE DINGS U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH SIDES. CASE FILE PERUSED. 2. RELEVANT FACTS ARE IN A VERY BRIEF COMPASS. THI S ASSESSEE/ASSESSED AS AN INDIVIDUAL IS A SERIGRAPHIC PRINTING DEALER. HE FILED HIS RETURN ON 19.10.2006 STATING INCOME OF RS.1,03,55,340/-. THI S FOLLOWED A REVISED STATEMENT ENHANCING THE SAME TO RS.1,15,66,672/-. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE NOTICED THE ASSESSEE TO HAVE DISCLOSED LONG TERM CAPITAL GAINS ARISING FROM SALE OF PAINTINGS AMOUNTING TO R S.1,75,54,800/-. THE ASSESSEE HAD FURTHER CLAIMED COMMISSION EXPENSES OF RS.15.12LACS. THE ASSESSING OFFICER COMPLETED A REGULAR ASSESSMENT ON 30.12.2008 HOLDING THE ASSESSEES CAPITAL GAINS AS BUSINESS INCOME. HE FU RTHER INITIATED THE IMPUGNED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE A CT. BOTH CIT(A) AS WELL AS THIS TRIBUNAL UPHELD ASSESSING OFFICERS QUANTUM ACTION IN PRINCIPLE. MR. DIVATIA FILES BEFORE US A COPY OF HONBLE JURISDICT IONAL HIGH COURTS JUDGMENT IN A BATCH OF ASSESSEES APPEALS TREATING HIS PAINT INGS AS INVESTMENTS INSTEAD OF STOCK IN TRADE. QUANTUM PROCEEDINGS THEREFORE A TTAINED FINALITY. 3. THE ASSESSING OFFICER TOOK UP THE IMPUGNED PENAL TY PROCEEDINGS IN THE MEAN TIME. HE TREATED ASSESSEES CASE IN SCRUT INY CLAIMING THE ABOVE EXPENDITURE AS AN INSTANCE OF FURNISHING OF INACCUR ATE PARTICULARS OF INCOME TO IMPOSE A PENALTY OF RS.10LACS IN HIS ORDER DATED 30 .08.2013. THE CIT(A) PARTLY UPHOLDS ASSESSING OFFICERS ACTION AS UNDER: ITA NO. 1135/AHD/15 (SHRI ANIL AMRUTLAL RELIA VS. D CIT) A.Y. 2006-07 - 3 5. THE APPELLANT HAS STATED IN HIS WRITTEN SUBMISS ION DURING THE APPELLATE PROCEEDINGS AS UNDER: THE ABOVE APPEAL IS DIRECTED AGAINST THE ORDER PASS ED U/S 271(1)(C) ON 30-8-2013 BY DOT CIR.6 ABAD FOR A. Y. 2006-07 WHER EIN THE APPELLANT HAS CHALLENGED THE PENALTY OF RS. 10 LACS LEVIED BY AO. 2.1 THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT IS AN INDIVIDUAL AND AT PRESENT, CARRYING ON BUSINESS OF SERIGRAPHIC PRINTI NG DEALER. HE HAD FILED HIS RETURN OF INCOME FOR A.Y.2006-07 ON 19.10.2006 DECL ARING TOTAL INCOME AT RS. 1,03,55,340/-. THEREAFTER, A REVISED STATEMENT WAS FILED DECLARING INCOME OF RS. 1,15, 66,672/-. 2.2 DURING THE COURSE OF ASSTT PROCEEDINGS, THE AO NOT ICED THAT THE APPELLANT HAD DISCLOSED SALE OF PAINTINGS OF RS. 1,75,54,800 AND WHILE COMPUTING ITS LTCG, IT HAD CLAIMED SALES COMMISSION EXPENSES OF R S.15,12,000. THE AO TREATED THE PROFIT ON SALE OF PAINTINGS AS BUSINESS INCOME, BUT ON APPEAL, ITAT CONFIRMED THE ORDER OF CIT(A) HOLDING THE SAME AS L TCG. 2.3 THE APPELLANT HAD IN THE APPEAL BEFORE CIT(A) RAIS ED THE GROUND RELATING TO THE DISALLOWANCE COMMISSION EXPENSES, BUT HE VIDE H IS ORDER DATED 26.3.2010 IN PARA 5.1 HELD THAT SINCE THE SALE PROCEEDS OF PA INTINGS WERE NOT CHARGEABLE TO TAX AS BUSINESS INCOME, THIS GROUND OF APPEAL WA S IN-FRUCTUOUS AND DID NOT CALL FOR ADJUDICATION. EVEN, THE TRIBUNAL IN ITS OR DER HAD NOT DEALT WITH THIS ISSUE AND HENCE A MISC. APPLICATION WAS FILED BEING MA NO.43/A/2013 WHICH WAS DISPOSED OF BY ORDER DATED 31.7.2013 HOLDING TH AT AS PER PARA 2.14 OF THE TRIBUNAL'S ORDER ALL THE GROUNDS BEING NO. 2.1 TO 4 .1 WERE DISPOSED OF SO THAT THERE WAS NO MISTAKE OF THE GROUND NO.4.1 BEING NOT DECIDED. 2.4 MEANWHILE, THE AO HAS COMPLETED PENALTY PROCEEDING S U/S. 271(1)(C). THE APPELLANT HAD SUBMITTED REPLY DATED 29.7.2013. THE AO CONCLUDED THAT THE APPELLANT HAD FAILED TO PROVIDE INFORMATION OF THE SERVICES RENDERED BY THE THREE PARTIES TO WHOM COMMISSION WAS PAID, THERE CO NFIRMATION WERE ALSO NOT FURNISHED, HENCE, IT WAS A CASE OF FURNISHING INACC URATE PARTICULARS OF INCOME. 3.1 THE FIRST EFFECTIVE GROUND OF APPEAL RELATES TO TH E IMPOSITION OF PENALTY OF RS.10 LACS U/S. 271(L)(C). IT IS DISCUSSED IN PARA 4 OF THE IMPUGNED ORDER. THE AO HAS OBSERVED THAT THE APPELLANT HAD FAILED TO PR OVIDE INFORMATION OF THE SERVICES RENDERED BY 3 PERSONS TO WHOM COMMISSION W AS CLAIMED TO BE PAID NOR FURNISHED THEIR CONFIRMATION LETTER SO THAT IT AMOUNTED TO FURNISHING INACCURATE PARTICULARS OF INCOME LIABLE TO PENALTY U/S. 271(1)(C). 3.2 THE APPELLANT BEGS TO SUBMIT THAT THE IMPUGNED PEN ALTY IMPOSED BY AO IS WHOLLY UNJUSTIFIED BOTH ON FACTS AND IN LAW AS UNDE R : (A) FIRSTLY, THE AO HAS FAILED TO APPRECIATE THAT THE APPELLANT HAD CLAIMED COMMISSION EXPS. PAID TO THE 3 PARTIES IN RELATION TO THE SERVICES RENDERED BY ITA NO. 1135/AHD/15 (SHRI ANIL AMRUTLAL RELIA VS. D CIT) A.Y. 2006-07 - 4 THEM IN THE SALE OF PAINTINGS. THE APPELLANT HAD FU RNISHED EVIDENCE SUCH AS COPY OF RETURN OF INCOME OF THE SAID 3 PARTIES, THE NAME, ADDRESS AND MODE OF PAYMENT, EVEN TD5 U/S. 194H WAS MADE. THUS, IT WAS ESTABLISHED BY THE APPELLANT THAT THE PAYMENT OF COMMISSION WAS GENUIN E. HOWEVER CIT(A) DISALLOWED THE CLAIM SIMPLY ON THE GROUND THAT WHEN THE SALE PROCEEDS OF PAIR: WERE HELD AS BUSINESS INCOME, THIS GROUND OF APPEAL HAD BECOME IN FRUCTUOUS AND DID NOT CALLED FOR ADJUDICATION. EVEN ON APPEAL BEFORE TRIBUNAL, THIS GROUND WAS NOT SEPARATELY DEALT A.TH AS POINTED OUT HEREIN ABOVE. UNDER THE CIRCUMSTANCES, WHEN THE QUESTION OF ALLOWABILITY OR OTHERWISE OF THE SAID EXPENDITURE WAS NOT FINALLY ADJUDICATED BY ANY AUTH ORITY, THERE WAS NO QUESTION OF FURNISHING INACCURATE PARTICULARS OF INCOME SO A S TO BE LIABLE TO PENALTY. (B) SECONDLY, THE AO HAS FAILED TO APPRECIATE THAT THE CLAIM OF C OMMISSION EXPS. WAS NOT FOUND TO BE BOGUS OR FALSE DURING THE ASST, PROCEEDINGS. WHEN THE APPELLANT HAS PROVED IDENTITY AND ITS GENUINENESS B Y FILING EVIDENCE SUCH AS RETURN OF INCOME AND TD5 U/S. 194H, THE CLAIM MADE BY THE APPELLANT WAS PROVED TO BE JUSTIFIED AND GENUINE. IT IS NOW WELL SETTLED POSITION IN LAW THAT UNLESS THE EXPLANATION OFFERED BY THE ASSESSEE OR T HE CLAIM OF EXEMPTION/DEDUCTION IS FOUND TO BE FALSE, THE PROVI SIONS OF SECTION 271(1)(C) ARE NOT ATTRACTED. (C) THIRDLY, THE AO HAS FAILED TO APPRECIATE THAT MERELY BECAUSE THE CLAIM OF ANY EXPS. HAS BEEN REJECTED BY AO FOR WANT OF SO CA LLED EVIDENCE, IT CANNOT BE SAID TO BE FURNISHING INACCURATE PARTICULARS OF INC OME AS HELD IN CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (322 ITR 158) (SC ). THE APPELLANT HAS A/SO POINTED OUT VARIOUS OTHER DECISIONS ON THIS ISSUE A S REPRODUCED IN THE BODY OF THE IMPUGNED ORDER. 6. DECISION: I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER PASSE D BY THE AO AND SUBMISSIONS OF THE APPELLANT FILED DURING THE APPEL LATE PROCEEDINGS. THE AO HAS DISCUSSED IN DETAIL (AT PARA 4 OF HIS ORDER AS TO) WHY THE COMMISSION EXPENSES HAVE BEEN DISALLOWED IN THE CASE OF THE AP PELLANT. THE APPELLANT'S CONTENTION THAT THE IDENTITY OF THE RECIPIENT HAS B EEN PROVED AND TDS DEDUCTED ON THE COMMISSION PAID IS NOT ACCEPTED AS THIS DOES NOT PROVE THAT THE COMMISSION PAID IS RELATED TO BUSINESS OF THE APPEL LANT AND THEREFORE APPARENTLY INADMISSIBLE ITEM. RELIANCE IS PLACED ON THE ORDER OF HON'BLE ITAT, AH MEDABAD IN THE CASE OF SPICA FINSTOCK LTD. V/S ACIT [2010] 1ITR (TRIB) 437 (AHD) WHEREIN IT HAS BEEN HELD AS FOLLOWS: 'HELD THAT, THE DEDUCTIONS CLAIMED BY THE ASSESSEE COMPANY WERE NOT LEGITIMATE. IT AMOUNTED TO FURNISHING OF INACCURATE PARTICULARS AS THE ASSESSEE HAD CLAIMED DEDUCTION OF INADMISSIBLE ITEMS. THIS W AS NOT A CASE OF DIFFERENCE OF OPINION OR ADDITIONS ON LEGAL OR TECH NICAL GROUNDS. ADDITION HAS ITA NO. 1135/AHD/15 (SHRI ANIL AMRUTLAL RELIA VS. D CIT) A.Y. 2006-07 - 5 BEEN MADE AS THE ASSESSES COMPANY HAD RETURNED ITS INCOME AFTER DEDUCTING APPARENTLY INADMISSIBLE ITEMS. THEREFORE, THIS CASE CAME UNDER THE CLAUSE OF FURNISHING OF INACCURATE PARTICULARS. HENCE, PENALT Y WAS RIGHTLY IMPOSED ON THE ASSESSES.' IN VIEW OF THE ABOVE DISCUSSION AND, THE JUDICIAL P RONOUNCEMENT WHICH IS DIRECTLY APPLICABLE IN THE CASE OF APPELLANT, TH E PENALTY IMPOSED BY THE AO IS UPHELD. HOWEVER, THE PENALTY IMPOSED U/S. 271(1)(C) IS REST RICTED TO 100% OF TAX ON INCOME WITH REGARD TO WHICH INACCURATE PARTICULA RS WERE FILED BY THE APPELLANT WHICH WORKS OUT TO RS. 5,08,939/-. 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL SUBMISSIONS. BOTH THE LOWER AUTHORITIES ARE OF THE OPINION THAT ASSES SEES COMMISSION EXPENSES AS DISALLOWED TO THE TUNE OF RS.15.12 LACS PAID TO S/SHRI BHIKHBHAI PRAJAPATI, MANGALDAS PRAJAPATI AND MANGALDAS KEVALDAS IS AN IN STANCE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSEES C ASE ON THE OTHER HAND IS THAT THESE PERSONS HAD HELPED HIM IN EXECUTING SALE OF PAINTINGS. CASE FILE REVEALS THAT THE ASSESSEE HAD FILED NECESSARY CONFI RMATIONS, LEDGER ACCOUNTS, TDS CERTIFICATES ETC. IN SUPPORT OF HIS IMPUGNED CL AIM. THE ASSESSING OFFICER PARTICULARLY TREATED THE SAME AS UNSATISFA CTORY EVIDENCE WHILST ASSESSING ASSESSEES LONG TERM CAPITAL GAIN AS BUSI NESS INCOME. ALL THIS SUFFICIENTLY INDICATES THAT THERE IS NO DISPUTE ABO UT GENUINENESS OF COMMISSION EXPENDITURE IN PRINCIPLE. THERE IS NO R EMARK IN ASSESSMENT ORDER QUESTIONING GENUINENESS OF ASSESSEES CLAIM. IT IS RATHER EVIDENT THAT THE ASSESSEE DID NOT PURSUE THE ABOVE QUANTUM DISALLOWA NCE VERY SERIOUSLY SINCE HE HAD LOST THE ISSUE OF HEAD OF INCOME RIGHT UPTO HONBLE JURISDICTIONAL HIGH COURT. WE THEREFORE OBSERVE THAT THE ABOVE COMMISS ION DISALLOWANCE MADE IN COURSE OF ASSESSMENT PROCEEDINGS DOES NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME U/S.271(1)(C) OF THE ACT IN V IEW OF ABOVE OVERWHELMING FACTUAL EVIDENCE. WE FURTHER CONCLUDE THAT WE ARE DEALING IN PENALTY PROCEEDINGS WHEREIN EACH AND EVERY DISALLOWANCE/ADD ITION MADE IN THE COURSE OF ASSESSMENT DOES NOT IPSO FACTO INVITE PEN AL ACTION U/S.271(1)(C) OF ITA NO. 1135/AHD/15 (SHRI ANIL AMRUTLAL RELIA VS. D CIT) A.Y. 2006-07 - 6 THE ACT AS HELD IN HONBLE APEX COURTS JUDGMENT IN CIT VS. RELIANCE PETROPRODUCTS (P) LTD. 322 ITR 158 (SC). THE IMPUG NED PENALTY OF RS.5,08,930/- STANDS DELETED ACCORDINGLY. 3. THIS ASSESSEES APPEAL IS ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 3 0 TH DAY OF AUGUST, 2017.] SD/- SD/- ( MANISH BORAD ) (S. S. GOD ARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 30/08/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0