ACIT, New Delhi V. M/s. Consolidated Finvest & Holdings Ltd., New Delhi

ITA 1173/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91256 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 06-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: RUPES JAIN GAURAV JAIN
• Keywords: Wrong claim
• Section: 143(3); 14A

Judgement Text

ITA NO. 1173/DEL/2012 ASSTT.YEAR: 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `B NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.1173/DEL/2012 ASSTT.YEAR: 2005-06 ACIT, VS CONSOLIDATED FINVEST & HOL DINGS LTD. CIRCLE-3(1), H.NO. 11/5B, BASEMENT-01, NEW DELHI. OPP. TELEPHONE EXCHANGE, PUSA ROAD, NEW DELHI-110055 (PAN: AAACJ0090N) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.K. JAISWAL, SR. DR RESPONDENT BY : S/SHRI RUPES JAIN, GAURAV JAIN, ADV. DATE OF HEARING: 11.5.2015 DATE OF PRONOUNCEMENT:19.6.2015 O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE HAS BEEN DIRECTED AGAINS T THE ORDER OF CIT(A)- VI, NEW DELHI DATED 02.12.2011 IN APPEAL NO. 2/10-1 1 FOR AY 2005-06 BY WHICH PENALTY ORDER DATED 5.3.2010 PASSED U/S 271(1 )(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) HAS BEEN SET ASIDE AND THE AO WAS DIRECTED TO DELETE THE IMPUGNED PENALTY. THE SOLE GROUND RAISED BY THE RE VENUE READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N DELETING PENALTY IMPOSED U/S 271(1)(C) OF THE IT AC T IN RESPECT ITA NO. 1173/DEL/2012 ASSTT.YEAR: 2005-06 2 OF EXPENDITURE OF RS.52,30,121/- CLAIMED BY THE ASS ESSEE U/S 35D OF THE ACT. 2. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ASSESSEE IS AN INVESTMENT COMPANY REGISTERED AS NON-BANKING FINANC IAL COMPANY (NBFC) WITH RESERVE BANK OF INDIA. FOR THE RELEVANT FINANCIAL YEAR UNDER CONSIDERATION, RETURN OF INCOME WAS FILED SHOWING TAXABLE INCOME O F RS.5,29,14,607/- ON 28.10.2005 AND THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AT AN INCOME OF RS.5,93,93,381/- AFTER MAKING SEVERAL DIS ALLOWANCES INCLUDING DISALLOWANCE OF RS.52,30,121/- U/S 35D OF THE ACT. 3. THE AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE TH E CIT(A) WHEREIN THE ASSESSEE DID NOT PRESS DISALLOWANCE MADE BY THE AO U/S 35D OF THE ACT. SUBSEQUENTLY, THE AO ISSUED NOTICE DATED 19.2.2010 REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S 271(1)(C) OF THE A CT BE NOT IMPOSED WITH REFERENCE TO ADDITIONS SUSTAINED ON FURTHER APPEAL BEFORE THE CIT(A) VIZ. DISALLOWANCE OF RS.52,30,127 U/S 35D OF THE ACT AND DISALLOWANCE OF RS.97,381 U/S 14A OF THE ACT. AFTER CONSIDERING DETAILED REPL Y DATED 26.2.2010 OF THE ASSESSEE, THE AO DID NOT FIND HIMSELF SATISFIED WIT H THE EXPLANATION FURNISHED BY THE ASSESSEE AND IMPOSED PENALTY U/S 271(1)(C) OF T HE ACT IN RESPECT OF AFORESAID BOTH DISALLOWANCES. BEING AGGRIEVED BY THE SAID PE NALTY ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALL OWED ON BOTH THE COUNTS AND THE CIT(A) DIRECTED THE AO TO DELETE THE PENALT Y. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL WITH THE SOLE GROUN D AS REPRODUCED HEREINABOVE. ITA NO. 1173/DEL/2012 ASSTT.YEAR: 2005-06 3 4. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. AT THE VERY OU TSET, FROM THE OPERATIVE PART OF THE PENALTY ORDER DATED 5.3.2010, WE NOTE THAT T HE AO IMPOSED PENALTY OF RS.19,49,466 ON ACCOUNT OF BOTH THE DISALLOWANCES W HICH WERE UPHELD BY THE CIT(A) WHEN THESE GROUNDS WERE NOT PRESSED BY THE A SSESSEE BEFORE FIRST APPELLATE AUTHORITY AND THE ISSUE ATTAINED FINALITY . FROM THE GROUNDS RAISED BY THE REVENUE AS REPRODUCED HEREINABOVE, WE NOTE THAT THE REVENUE HAS ONLY AGITATED THE ISSUE OF DELETION OF PENALTY IN RESPEC T OF EXPENDITURE CLAIMED BY THE ASSESSEE U/S 35D OF THE ACT. IN THIS SITUATION, WE PRESUME THAT THE DEPARTMENT HAS NOT CHALLENGED THE DELETION OF PENALTY IN RESPE CT OF DISALLOWANCE U/S 14A OF THE ACT. 5. LD. DR POINTED OUT PARA 5.2 AT PAGE 7 OF THE IMP UGNED ORDER AND SUBMITTED THAT IN THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE CLAIMED DEDUCTION U/S 35D OF THE ACT IN RESPECT OF UNIT AT DADRA, UP FOR A PERIOD OF 10 YEARS W.E.F. AY 1996-97 IN ACCORDANCE WITH THE PROVISIONS OF SEC TION 35D OF THE ACT. THE DR FURTHER SUBMITTED THAT THE RELEVANT ASSESSMENT Y EAR WAS THE LAST YEAR FOR THIS CLAIM. LD. DR FURTHER SUBMITTED THAT DADRA UNIT WA S DEMERGED UNDER THE SCHEME OF DEMERGER W.E.F. 1.4.2004 INTO TRANSFEREE COMPANY VIZ. CONSOLIDATED PHOTO PRODUCTS LTD. (NOW KNOWN AS JINDAL PHOTO LIMI TED). LD. DR FURTHER SUBMITTED THAT THE ASSESSEE CLAIMED DEDUCTION U/S 3 5D OF THE ACT BY FURNISHING INACCURATE PARTICULARS OF ITS INCOME, THEREFORE, TH E AO WAS JUSTIFIED IN IMPOSING ITA NO. 1173/DEL/2012 ASSTT.YEAR: 2005-06 4 THE PENALTY. LD. DR FURTHER SUBMITTED THAT THE ONU S WAS ON THE ASSESSEE TO PROVE THAT THERE WAS NO CONCEALMENT OF INCOME AND A SSESSEE HAS NOT FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND THE ASSESS EE HAS FAILED TO DISCHARGE ITS ONUS AND THE EXPLANATION OFFERED BY THE ASSESSEE WA S NOT FOUND TO BE SATISFACTORY AND ACCEPTABLE BY THE AO, THEREFORE, T HE PENALTY WAS RIGHTLY IMPOSED U/S 271(1)(C) OF THE ACT. LD. DR VEHEMENTL Y POINTED OUT THAT THE CIT(A) DELETED THE SAID PENALTY WITHOUT ANY JUSTIFI ED REASON AND BASIS, THEREFORE, THE IMPUGNED ORDER MAY BE SET ASIDE BY R ESTORING THAT OF THE AO. 6. REPLYING TO THE ABOVE, LD. ADVOCATE OF THE ASSES SEE SUPPORTED THE IMPUGNED ORDER AND SUBMITTED THAT THE UNAMORTIZED A MOUNT OF PUBLIC ISSUE EXPENSE LYING IN THE BOOKS OF ACCOUNT WAS NOT DESCR IBED WITH ASSETS OF DEMERGED UNIT AT DADRA BY THE ACCOUNTANTS WHILE PRE PARING THE SCHEME OF DEMERGER AND DUE TO THIS INADVERTENT AND BONA FIDE MISTAKE, THE ASSESSEE COMPANY CLAIMED DEDUCTION U/S 35D OF THE ACT IN THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. LD. COUNSEL OF THE ASSES SEE FURTHER SUBMITTED THAT EVEN IN THE CASE OF DISALLOWANCE IN THE HANDS OF AS SESSEE COMPANY, THE SAME AMOUNT WOULD BE ELIGIBLE FOR DEDUCTION IN ACCORDANC E WITH THE PROVISIONS OF SUB-SECTION (5A) OF SECTION 35D OF THE ACT FOR THE UNEXPIRED PERIOD IN THE HANDS OF RESULTING COMPANY I.E. CONSOLIDATED PHOTO PRODUC TS LTD. WHICH DID NOT CLAIM ANY DEDUCTION IN THIS REGARD IN THE RETURN OF INCOM E FOR THE YEAR UNDER CONSIDERATION. LD. COUNSEL STRENUOUSLY CONTENDED T HAT THE ASSESSEE COMPANY ITA NO. 1173/DEL/2012 ASSTT.YEAR: 2005-06 5 WAS NOT AT ANY ADVANTAGEOUS POSITION TO CLAIM DEDUC TION U/S 35D OF THE ACT AS BOTH THE COMPANIES I.E. APPELLANT COMPANY AND THE T RANSFEREE COMPANY BELONG TO THE SAME GROUP, THEREFORE, THE MISTAKE WAS BONA FIDE AND INADVERTENT AND HENCE PENALTY WAS NOT LEVIABLE. 7. LD. COUNSEL OF THE ASSESSEE HAS FURTHER DRAWN OU R ATTENTION TOWARDS PAPER BOOK PAGE NO. 106 AND 107 AND SUBMITTED THAT NO DED UCTION FOR THE AFORESAID EXPENDITURE WAS CLAIMED IN THE RETURN OF INCOME OF CONSOLIDATED PHOTO PRODUCTS LTD. FOR AY 2005-06 WHICH AGAIN SHOWS THE BONA FIDE OF THE ASSESSEE IN THIS REGARD. 8. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS FR OM BOTH THE SIDES, FROM OPERATIVE PART OF THE IMPUGNED ORDER, WE NOTE THAT THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND CONCLU SION:- 5.2 REGARDING THE ISSUE OF DISALLOWANCE U/S 350 I T IS SEEN THAT THE AFORESAID DEDUCTION WAS CLAIMED BY TH E APPELLANT COMPANY IN RESPECT OF EXPLANATION OF A UNIT AT DADR A, UP FOR A PERIOD OF 10 YEARS W.E.F. A.Y. 1996-97 IN ACCORDANC E WITH THE PROVISIONS OF SECTION 350 OF THE ACT. THE RELEVANT ASSESSMENT YEAR WAS THE LAST YEAR FOR A CLAIM OF DEDUCTION IN TERMS OF SECTION 35D OF THE ACT. HOWEVER, THIS UNIT AT DADRA WAS DEMERGED UNDER THE SCHEME OF DEMERGER W.E.F. 1.4.20 04 INTO TRANSFEREE COMPANY VIZ. CONSOLIDATED PHOTO PRODUCTS LTD. (NOW KNOWN AS JINDAL PHOTO LTD.). THE UNAMORTIZED A MOUNT OF PUBLIC ISSUE EXPENSE LAYING IN THE BOOKS OF ACCOUNT WAS NOT DESCRIBED WITH ASSETS OF DEMERGED UNIT AT DADRA BY THE ACCOUNTANT WHILE 'PREPARING THE SCHEME OF DEMERGER. AS PER THE LD. AR , THIS MISTAKE WAS INADVERTENT AND BONAF IDE. AS A RESULT THEREOF THE APPELLANT COMPANY INADVERTENTLY CLAIMED DEDUCTION U/S 35D OF THE ACT IN THE RETURN OF INCO ME FOR THE RELEVANT ASSESSMENT YEAR. I FIND FORCE IN THE SUBMI SSIONS MADE ITA NO. 1173/DEL/2012 ASSTT.YEAR: 2005-06 6 BY THE ID. AR. EVEN IN THE CASE OF DISALLOWANCE IN THE HANDS OF THE APPELLANT COMPANY, THE SAME AMOUNT WOULD BE ELI GIBLE FOR DEDUCTION IN ACCORDANCE WITH PROVISION OF SUB-SECTI ON (5A) OF SECTION 35D OF THE ACT FOR THE UNEXPIRED PERIOD IN THE HANDS OF RESULTING COMPANY I.E. CONSOLIDATED PHOTO PRODUCTS LTD. IT IS FURTHER SEEN THAT NO DEDUCTION FOR THE AFORESAID EX PENDITURE WAS CLAIMED IN THE RETURN OF INCOME OF CONSOLIDATED PHOTO PRODUCTS LTD. WHICH WAS OTHERWISE ELIGIBLE IN TERMS OF SECTION 35D(5A) OF THE ACT. THE RETURN OF INCOME WAS FILED BY M/S CONSOLIDATED PHOTO PRODUCTS LTD. AT TOTAL INCOME OF RS. 26,68,67,560/- ON WHICH TAX WAS ALSO DULY PAID BY T HE COMPANY. THE IMPUGNED CLAIM OF DEDUCTION U/S 350 OF THE ACT IN THE HANDS OF CONSOLIDATED PHOTO PRODUCTS LTD. WO ULD HAVE REDUCED THE AFORESAID INCOME AND CONSEQUENTIAL PAYM ENT OF TAXES. THEREFORE, IN MY OPINION, THE APPELLANT COMP ANY WAS NOT AT ANY ADVANTAGEOUS POSITION TO CLAIM DEDUCTION U/S 35D OF THE ACT, SINCE BOTH THE APPELLANT COMPANY AND TH E TRANSFEREE COMPANY BELONGS TO THE SAME GROUP. THEREFORE, IN M Y OPINION, THE APPELLANT'S CONTENTION IS BONAFIDE AND THE MIST AKE IS INADVERTENT. THEREFORE, THE AO IS DIRECTED TO DELET E THE IMPUGNED PENALTY IMPOSED U/S 271(1) (C). 9. IN VIEW OF ABOVE, AT THE VERY OUTSET, WE NOTE TH AT ALTHOUGH THE ASSESSEE CLAIMED DEDUCTION U/S 35D OF THE ACT, THE UNAMORTIZ ED AMOUNT OF PUBLIC ISSUE EXPENSE LYING IN THE BOOKS OF ACCOUNT WAS DISALLOWE D BY THE AO AND ADDITION WAS MADE. WE FURTHER NOTE THAT THIS DISALLOWANCE A TTAINED FINALITY WHEN THE ASSESSEE ACCEPTED THE CONCLUSION OF THE AO BY NOT P RESSING THE GROUND BEFORE THE CIT(A) PERTAINING TO THIS ISSUE. HOWEVER, IT I S A WELL-SETTLED PROPOSITION THAT THE QUANTUM OF PENALTY PROCEEDINGS ARE SEPARAT E PROCEEDINGS AND PENALTY CANNOT BE IMPOSED MERELY ON THE GROUND THAT THE ASS ESSEE DID NOT CHALLENGE OR AGITATE THE ISSUE BEFORE HIGHER FORUM AND ACCEPTED THE DISALLOWANCE MADE BY THE AO. AS PER SECTION 271(1)(C) OF THE ACT, PENALTY I S IMPOSABLE IF THE AO IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICU LARS OF HIS INCOME OR HAS ITA NO. 1173/DEL/2012 ASSTT.YEAR: 2005-06 7 FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. E XPLANATION 1 TO SECTION 271(1) (C) OF THE ACT FURTHER MAKES IT CLEAR THAT W HERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON UNDER THIS ACT, SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN E XPLANATION WHICH IS FOUND BY THE AO TO BE FALSE OR SUCH PERSON OFFERS AN EXPLANA TION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN THE AMOUNT ADDED O R DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRES ENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. IN THE PRES ENT CASE, THE AO HAS NOT DISPUTED THAT THERE WAS AN UNAMORTIZED AMOUNT OF PU BLIC ISSUE EXPENSES LYING IN THE BOOKS OF ACCOUNT OF DADRA UNIT. THE MAIN EX PLANATION OF THE ASSESSEE IS THAT DUE TO INADVERTENT MISTAKE AND UNDER BONA FIDE BELIEF, THE AMOUNT OF UNAMORTIZED PUBLIC ISSUE EXPENSE WAS CLAIMED AS DED UCTION U/S 35D OF THE ACT AS THE SAME WAS NOT DESCRIBED WITH ASSETS OF DEMERG ED UNIT AT DADRA BY THE ACCOUNTANT OF THE ASSESSEE WHILE PREPARING THE SCHE ME OF DEMERGER. THE CONTENTION OF LD. DR IS THAT THE DADRA UNIT WAS SHO WING LOSS WHICH WAS SUBSEQUENTLY MERGED WITH THE ASSESSEE AND IN THIS S ITUATION, THE ASSESSEE PLACED CLAIM U/S 35D OF THE ACT WITH THE INTENTION TO REDU CE TAX LIABILITY OF THE ASSESSEE AND THEREFORE, THE AO WAS RIGHT IN IMPOSING PENALTY FOR CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS OF INCOME OF T HE ASSESSEE. ITA NO. 1173/DEL/2012 ASSTT.YEAR: 2005-06 8 10. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS O F BOTH THE SIDES, WE NOTE THAT IN ACCORDANCE WITH THE PROVISIONS OF SECTION ( 5A) OF SECTION 35D OF THE ACT, THE RESULTING COMPANY WAS ELIGIBLE FOR DEDUCTION BU T NO DEDUCTION WAS CLAIMED BY THE RESULTING COMPANY I.E. CONSOLIDATED PHOTO PR ODUCTS LTD. AS PER COMPUTATION OF INCOME FOR THE YEAR UNDER CONSIDERAT ION AVAILABLE AT PAGES 106 AND 107 OF THE ASSESSEES PAPER BOOK. IN VIEW OF A BOVE NOTED FACTS, WE ARE INCLINED TO AGREE WITH THE CONCLUSION OF THE CIT(A) THAT THE IMPUGNED CLAIM OF DEDUCTION U/S 35D OF THE ACT IN THE HANDS OF CONSOL IDATED PHOTO PRODUCTS LTD. WOULD HAVE REDUCED THE AFORESAID INCOME AND CONSEQU ENTIAL PAYMENT OF TAXES AND HENCE, THE ASSESSEE COMPANY WAS NOT AT ALL IN A NY ADVANTAGEOUS POSITION TO MAKE A FALSE CLAIM OF DEDUCTION U/S 35D OF THE ACT AS THE ASSESSEE COMPANY AND THE TRANSFEREE COMPANY BELONG TO THE SAME GROUP OF COMPANIES. AT THIS JUNCTURE, WE RESPECTFULLY TAKE NOTE OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS 322 ITR 158 (SC) AND PRICEWATERHOUSE COOPERS PVT. LTD. VS CIT ( 2012) 3 48 ITR 306 (SC) WHEREIN IT WAS HELD THAT PENALTY IS NOT IMPOSABLE M ERELY ON THE GROUND THAT THE ASSESSEE SUBMITTED THE CLAIM UNDER A BONA FIDE BELI EF AND DUE TO INADVERTENT MISTAKE WHICH WAS NOT FOUND TO BE ACCEPTABLE OR WAS NOT ACCEPTED BY THE REVENUE. RESPECTFULLY FOLLOWING THE RATIO OF THESE JUDGEMENTS OF HONBLE APEX COURT, WE FINALLY HOLD THAT THE VIEW TAKEN BY THE C IT(A) IS JUSTIFIED AND REASONABLE AND WE ARE UNABLE TO SEE ANY VALID REASO N TO INTERFERE WITH THE SAME. ACCORDINGLY, SOLE GROUND OF THE REVENUE BEING DEVOI D OF MERITS IS DISMISSED. ITA NO. 1173/DEL/2012 ASSTT.YEAR: 2005-06 9 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.06.2015. SD/- SD/- (N.K. SAINI) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 19TH JUNE 2015 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR