ITO 1(1)(4), MUMBAI V. HDFC ERGO GENERAL INSURANCE CO. LTD, MUMBAI

ITA 1206/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84118 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 12-11-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 09-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: MADHUR AGRAWAL
• Section: 143(3); 260A

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNALH BENCH, MUMB AI , , ,, , !'. $ , ,, , %& % ' BEFORE SHRI JOGINDER SINGH, JM AND SHRI D. KARUNAKARA RAO, AM ITA NOS.1206/MUM/2011 ASSESSMENT YEARS-2004-05 ITO - 1(1) - 4, ROOM NO.579, AAYAKAR BHAVAN, MUMBAI-40020 ( ( ( ( / VS. M/S HDFC ERGO GENERAL INSURANCE COMPANY LTD. 78, MARINE CHAMBERS 311, V THACKERSEY MARG, NEW MARINE LINES MUMBAI-400020 ) %& ./ PAN :AABCH0738E ( )* / APPELLANT ) .. ( +,)* / RESPONDENT ) )* - . % / ASSESSEE BY: SHRI JEETENDRA KUMAR - DR +,)* - . % / RESPONDENT BY : SHRI MADHUR AGRAWAL ( - /'& / DATE OF HEARING 12/11/2014 01 - /'& / DATE OF PRONOUNCEMENT : 12/11/2014 %2 / O R D E R PER JOGINDER SINGH, JM: THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 07/10/2010 OF THE LD. FIRST APPELLATE AUTHORITY, MUM BAI. THE ONLY GROUND RAISED PERTAINS TO DELETING THE PENALTY OF RS.2,18,83,833/- IMPOSED U/S 271(1)(C) OF THE INCOM E-TAX ACT 1961( HEREINAFTER THE ACT ). 2 HDFC ERGO GENERAL INSURANCE COMPANY LTD . 2. DURING HEARING, THE LD. DR SHRI JEETENDRA KUMAR CONTENDED THAT THE PENALTY HAS BEEN DELETED WITHOUT ASSIGNING A VALID REASON OVERLOOKING THE FACT THAT APPEAL U/S 260A OF THE AC T HAS BEEN FILED AGAINST THE DECISION OF THE TRIBUNAL, DELETING QUAN TUM ADDITION, BEFORE THE HONBLE HIGH COURT. ON THE OTHER HAND, SHRI MADHUR AGRAWAL, LD. COUNSEL FOR THE ASSESSEE, DEFENDED THE CONCLUSION DRAWN IN THE IMPUGNED ORDER BY CONTENDING THAT SINC E THE QUANTUM ADDITION HAS BEEN DELETED, THEREFORE, THE P ENALTY DOES NOT SURVIVE. THE LD. COUNSEL ALSO PRODUCED COPY OF THE ORDER OF THE TRIBUNAL DATED 17/09/2010 (ITA NO.338/MUM/2009) . 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF A RE THAT THE ASSESSEE IS IN THE BUSINESS OF GENERAL INSURANCE, E ARNED PROFIT OF RS.6,10,00,234/- ON SALE OF INVESTMENT AND CLAIMED THE SAME AS EXEMPT IN ITS RETURN FILED ON 27 TH OCTOBER 2004. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. THE ASSESSING OFFICER OPINED THAT INVESTMENT IN SECURITIES OR SHARES, BEI NG NON OBLIGATORY, CANNOT BE CONSIDERED AS A PART OF LEGIT IMATE INSURANCE BUSINESS AND THUS THE PROFIT ON SALE OF INVESTMENT WAS TREATED AS INCOME FROM BUSINESS. PENALTY PROCEEDINGS U/S 271(1 )(C) OF THE ACT WERE ALSO INITIATED. ON APPEAL THE QUANTUM ADD ITION TRAVELLED UP TO THE TRIBUNAL WHEREIN SUCH ADDITION WAS DELETE D. SINCE, THE QUANTUM ADDITION WAS DELETED BY THE TRIBUNAL, THE L D. COMMISSIONER OF INCOME TAX (APPEALS), FOLLOWED THE DECISION OF THE TRIBUNAL AND DELETED THE PENALTY AGAINST WHICH THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 3 HDFC ERGO GENERAL INSURANCE COMPANY LTD . 2.2. BEFORE US, THE STAND OF THE REVENUE IS TWO FOL D, FIRSTLY, THE PENALTY WAS WRONGLY DELETED AND SECONDLY THE DEPART MENT HAS FILED AN APPEAL U/S 260A OF THE ACT BEFORE THE HON BLE HIGH COURT AGAINST THE ORDER OF THE TRIBUNAL DELETING QUANTUM ADDITION. (A). SO FAR AS, DELETING THE PENALTY BY THE LD. COM MISSIONER OF INCOME TAX (APPEALS), IS CONCERNED, WE NOTE THAT TH E TRIBUNAL FOUND THAT RULE 5(B) WAS DELETED WITH EFFECT FROM 1 /4/1989. THE CBDT VIDE CIRCULAR NO. 528 DT. 16/12/1988, CLARIFIE D THE EFFECT OF SAID DELETION OF RULE 5(B) ON TAXABILITY OF PROFIT ON SALE OF INVESTMENT IN PARA 45.1, WHICH HAS BEEN REPRODUCED AT PAGE 2 ONWARDS OF THE ORDER OF THE TRIBUNAL (ITA NO.338/MU M/2009 ORDER DATED 17/09/2010, IN THE CASE OF THE ASSESSEE ITSELF, ON QUANTUM ADDITION). FINALLY, THE TRIBUNAL CONCLUDED THAT AFTER DELETION OF RULE 5(B) OF THE FIRST SCHEDULE, PROFIT ON SALE OF INVESTMENT IN CASE OF GENERAL INSURANCE COMPANIES C ANNOT BE TAXED U/S 44 OF THE ACT AFTER PLACING RELIANCE UPON THE DECISION IN THE CASE OF M/S RELIANCE GENERAL INSURANCE COMPANY LIMITED (ITA NO. 3083/MUM/2008) AND BAJAJ ALLIANZ GENERAL I NSURANCE COMPANY VS ADDL. CIT (ITA NO. 1447/PN/2007). OUR V IEW FURTHER FINDS SUPPORT FROM THE DECISION AND THE RATIO LAID DOWN IN CIT VS S.P VIZ CONSTRUCTION COMPANY 176 ITR 47 (PATNA) AND K.C. BUILDERS VS ACIT 265 ITR 562 (SUPREME COURT). WE AR E OF THE VIEW WHERE THE PENALTY FOR CONCEALMENT OR FURNISHING INA CCURATE PARTICULARS WAS LEVIED AND AFTER DELETING THE QUANT UM ADDITION, THERE REMAINS NO BASIS AT ALL FOR LEVYING THE PENAL TY. ORDINARILY, PENALTY CANNOT STAND IF THE ASSESSMENT ITSELF IS SE T ASIDE OR CANCELLED BY THE TRIBUNAL OR OTHERWISE. THE PENALT Y CANNOT STAND 4 HDFC ERGO GENERAL INSURANCE COMPANY LTD . BY ITSELF BECAUSE FALSE RESULT MAY BE PRODUCED BY T HE FALSITY OF ONE OR MORE OF THE CONSTITUENT ITEMS IN THE RETURN. TH E WORD INACCURATE PARTICULARS WOULD COVER FALSITY IN THE FINAL FIGURE AND ALSO THE CONSTITUENT ELEMENTS OR ITEMS. THEY SIMPL Y WOULD MEAN INACCURATE IN SOME SPECIFIC OR DEFINITE RESPECT WHE THER IN THE CONSTITUENT OR SUBORDINATE ITEMS OF INCOME OR THE E ND RESULT. CONCEALMENT OR FURNISHING INACCURATE PARTICULARS IM PLIES SOME DELIBERATE ACT ON THE PART OF THE ASSESSEE IN WITHH OLDING THE TRUE FACTS FROM THE AUTHORITIES. SINCE, THE BASIS OF LE VYING PENALTY REMAINS NO MORE IN EXISTENCE, AFTER DELETION OF QUA NTUM ADDITION, THEREFORE, FROM THIS ANGLE THE STAND OF THE LD. COM MISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED. (B). SO FAR AS, THE CONTENTION OF THE LD. DR THAT A PPEAL U/S 260A OF THE ACT HAS BEEN FILED BEFORE THE HONBLE HIGH C OURT AGAINST THE DELETION OF QUANTUM ADDITION BY THE TRIBUNAL, IS CO NCERNED, NO ORDER HAS BEEN PRODUCED BEFORE US REVERSING/STAYING THE ORDER OF THE TRIBUNAL, THEREFORE, AS ON TODAY, THE ORDER OF THE TRIBUNAL STANDS, CONSEQUENTLY, MERE FILING OF APPEAL IS NOT ENOUGH. HOWEVER, IF AT ANY STAGE, THE ORDER OF THE TRIBUNAL IS REVERSED, THE CONSEQUENCES MAY FOLLOW AND THE DEPARTMENT IS FREE TO TAKE THE LEGAL RECOURSE. THEREFORE, WE FIND NO FORCE IN THE ARGUMENT OF THE LD. DR FROM THIS ANGLE ALSO. 3. FINALLY, WE FIND NO INFIRMITY IN THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), CONSEQUENTLY, THE APPEAL OF THE REVENUE IS DISMISSED. 5 HDFC ERGO GENERAL INSURANCE COMPANY LTD . THIS ORDER WAS PRONOUNCED IN THE OPEN COURT, IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF HEARING ON 12/11/2014. SD/- SD/- D.KARUNAKARA RAO JOGINDER SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI; 3( DATED.- 12/11/2014 F{X~{T? P.S/. ( . . %2 %2 %2 %2 - -- - +/4 +/4 +/4 +/4 5%41/ 5%41/ 5%41/ 5%41/ / COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 2. +,)* / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. 6 / CIT CONCERNED, MUMBAI 5. 4 7 +/( , , / DR, ITAT, MUMBAI E BENCH 6. !8 9 / GUARD FILE. %2( %2( %2( %2( / BY ORDER, ,4/ +/ //TRUE COPY// : :: : / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI