ACIT, CHENNAI V. M/s. Shriram Properties & Construction, CHENNAI

ITA 1296/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58121 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 07-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R SIVARAMAN
• Keywords: Rectification of order; Commercial expediency; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. 1296(MDS)/2011 ASSESSMENT YEAR : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-VI(2), CHENNAI -34. VS. M/S. SHRIRAM PROPERTIES & CONSTRUCTION, NO.14, NEW NO.35, VAIDHYARAM STREET, T.NAGAR, CHENNAI 17. PAN AACCS 0655 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHA JI P. JACOB, IRS, ADDL. COMMISSIONER OF INCOME-TAX RESPONDENT BY : SHRI R. SIVA RAMAN, ADVOCATE DATE OF HEARING : 12 TH MARCH, 2012 DATE OF PRONOUNCEMENT : 16 TH MARCH, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL FILED BY THE REVENUE RELATES TO THE ASSESSMENT YEAR 2007-08. THE APPEAL IS DIRECTED AGAINST THE O RDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) V AT CHENNAI DATED ITA 1296/11 :- 2 -: 15.4.201. THE APPEAL ARISES OUT OF THE PENALTY ORD ER PASSED UNDER SEC.271(1)(C) OF THE INCOME-TAX ACT, 1961. 2. THE GROUNDS RAISED BY THE REVENUE ARE THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DE LETING THE PENALTY LEVIED UNDER SEC.271(1)(C) ON A SUM OF ` 2,01,96,000/- AND THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS FA ILED TO NOTE THAT IT IS ONLY AFTER THE ASSESSING OFFICER TOOK AC TION TO DISALLOW THE CLAIMS MADE BY THE ASSESSEE AND ONLY JUST A DAY BEF ORE THE COMPLETION OF ASSESSMENT, THE ASSESSEE OFFERED THE REVISED ADJUSTED STATEMENTS IN THE GUISE OF AVOIDING PROTRA CTED LITIGATION AND TO BUY PEACE WITH THE DEPARTMENT. IT IS THE CASE O F THE REVENUE THAT THE RELIANCE PLACED BY THE COMMISSIONER OF INCOME-T AX(APPEALS) ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT V. RELIANCE PETRO PRODUCTS LTD. (322 ITR 158) IS MISPL ACED AND HE SHOULD HAVE APPLIED THE RATIO LAID DOWN BY THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT V. ZOOM COMMUNICATIONS P. LTD. (327 ITR 510). 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. THE ASSESSEE FILED ITS RETURN FOR TH E IMPUGNED ITA 1296/11 :- 3 -: ASSESSMENT YEAR ON AN INCOME OF ` 72,96,012/-. IN THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSEE FILED A REVISED M EMO OF COMPUTATION DECLARING THE INCOME OF ` 6,18,75,460/-. THE ASSESSMENT WAS COMPLETED ON 31.12.2009 ON A TOTAL I NCOME OF ` 14,60,47,384/- WHICH WAS LATER REVISED ON 17.1.2010 TO AN INCOME OF ` 8,60,47,384/-. THE REVISION WAS NECESSITATED AS A RESULT OF RECTIFICATION OF MISTAKE IN COMPUTING THE INCOME. 4. IN THE REVISED COMPUTATION OF INCOME THE ASSESSE E HAS OFFERED FOR TAXATION THE FOLLOWING AMOUNTS : I) CONTRIBUTION TO TRUST FUND ` 3,00,00,000/- II) PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS ` 3,00,00,000/- III) SUNDRY BALANCES WRITTEN OFF ` 2,41,71,933/- 5. AS THE ABOVE THREE AMOUNTS WERE DISALLOWED AND A DDED BACK TO THE INCOME OF THE ASSESSEE-COMPANY, PENALTY PROC EEDINGS WERE INITIATED WITH REFERENCE TO THE ABOVE SAID THREE AM OUNTS. REGARDING THE CONTRIBUTION TO TRUST FUND, THE ASSES SEE EXPLAINED THAT THE CONTRIBUTION WAS MADE TO SHRIRAM OWNERSHIP TRUST IN THE INTEREST OF ASSESSEES OWN BUSINESS, AS THE TRUSTEE S RENDERED ITA 1296/11 :- 4 -: VALUABLE SERVICES IN CARRYING ON THE BUSINESS OF TH E ASSESSEE- COMPANY. IN THAT BUSINESS SENSE, THE ASSESSEE CLAI MED IT AS AN ALLOWABLE EXPENDITURE, RELYING ON THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS VS. CIT (2 88 ITR 1). ACCORDING TO THE ASSESSEE, TO AVOID PROTRACTED LITI GATION, IT OFFERED THE SAME FOR THE ASSESSMENT. IN THE MATTER OF DIMI NUTION IN VALUE OF INVESTMENTS, THE ASSESSEE STATED THAT THE INVEST MENTS WERE MADE IN MILLENNIUM BUSINESS SOLUTIONS LTD. FOR THE PURPOSE OF JOINT DEVELOPMENT IN REAL ESTATE. AS THE BUSINESS GENERA TED FROM THAT COMBINATION WAS NOT AT THE EXPECTED LEVEL, THE ASSE SSEE ESTIMATED THAT VALUE OF THE INVESTMENT WOULD HAVE TO COME DOW N. ACCORDINGLY, THAT PORTION OF DIMINUTION REFLECTED I N ITS INVESTMENT HAS BEEN WRITTEN OFF, AS A COMMERCIAL EXPEDIENCY AN D AGAIN RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS VS. CIT (288 ITR 1), THIS AMOUNT WAS ALSO OFFERED BY THE ASSESSEE TO AVOID PROTRACTED LITIGATION. 6. REGARDING THE SUNDRY BALANCES WRITTEN OFF, THE ASSESSEE EXPLAINED THAT THEY WERE IN THE NATURE OF REVENUE E XPENDITURE, AS THEY WERE INCURRED IN THE COURSE OF CARRYING ON THE BUSINESS AND THEY WERE WRITTEN OFF IN BOOKS AND EXPENDED WHOLLY AND EXCLUSIVELY ITA 1296/11 :- 5 -: FOR BUSINESS. THE ASSESSEE STATED THAT THIS ADDITI ON HAS BEEN TAKEN IN FIRST APPEAL BEFORE THE COMMISSIONER OF IN COME- TAX(APPEALS), WHERE THE MATTER IS PENDING. SO, THE ASSESSEE PRAYED FOR DROPPING THE PENALTY PROPOSITIONS. 7. IN THE PENALTY PROCEEDINGS, IT IS THE CONTENTION OF THE ASSESSING AUTHORITY THAT THE ASSESSEE HAS NOT FILED THE REVISED MEMO BEFORE ISSUE OF NOTICE UNDER SEC.143(2) AND, T HEREFORE, IT CANNOT BE HELD THAT THE ASSESSEE HAD VOLUNTARILY OF FERED THESE AMOUNTS FOR ASSESSMENT. HE ALSO HELD THAT FILING O F REVISED COMPUTATION WOULD NOT AMOUNT TO FILING OF REVISED R ETURN. HE ACCORDINGLY, REJECTED THE CONTENTIONS OF THE ASSESS EE AND LEVIED PENALTY. WHILE IMPOSING THE PENALTY, HE LEVIED THE PENALTY WITH REFERENCE TO FIRST TWO ITEMS AND KEPT IN ABEYANCE T HE ISSUE WITH REFERENCE TO THE ADDITION IN THE MATTER OF SUNDRY B ALANCES WRITTEN OFF. 8. IN FIRST APPEAL, THE COMMISSIONER OF INCOME-TAX( APPEALS) HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED I N SPLITTING THE AMOUNTS OF ADDITIONS FOR IMPOSING PENALTY, AS PIECE MEAL LEVY OF PENALTY IS NOT JUSTIFIED. HE DID NOT APPROVE THE A CTION OF THE ITA 1296/11 :- 6 -: ASSESSING OFFICER IN KEEPING THE MATTER OF SUNDRY A MOUNTS WRITTEN OFF, IN ABEYANCE. HE FOUND THAT THE QUESTION OF LE VY OF PENALTY ON THAT AMOUNT HAS ALREADY BECOME ACADEMIC IN VIEW OF THE DECISION IN THE QUANTUM APPEAL. ULTIMATELY, THE COMMISSIONE R OF INCOME- TAX(APPEALS) CONSIDERED THE PENALTY RELATING TO ONL Y THOSE TWO ITEMS OF ` 3 CRORES EACH. 9. THE COMMISSIONER OF INCOME-TAX(APPEALS) FOUND TH AT THE ASSESSEE HAD EXPLAINED THE CIRCUMSTANCES IN WHICH T HE CLAIMS WERE MADE IN THE ORIGINAL RETURN AND ALSO THE CIRCU MSTANCES UNDER WHICH THE AMOUNTS WERE OFFERED FOR TAXATION BY FIL ING REVISED COMPUTATION. IT WAS ALREADY MADE CLEAR BEFORE THE ASSESSING OFFICER THAT THE CLAIMS WERE BEING DROPPED TO AVOID PROTRACTED LITIGATION AND TO BUY PEACE WITH THE DEPARTMENT. T HE COMMISSIONER OF INCOME-TAX(APPEALS) FOUND THAT THE CHARACTER OF OFFERING MADE BY THE ASSESSEE WILL NOT CHANGE FOR T HE REASON THAT THE ASSESSEE HAD NOT FILED A REVISED RETURN BUT FIL ED ONLY A REVISED COMPUTATION. THE COMMISSIONER OF INCOME-TAX(APPEAL S) HELD THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF SA BUILDERS VS. CIT (288 ITR 1) APPLIES TO THE PRESENT CASE. HE HELD THAT THERE IS NO CASE OF ANY CONCEALMENT OR FILING OF INACCURATE ITA 1296/11 :- 7 -: PARTICULARS. HE OBSERVED THAT AS HELD BY THE PUNJA B & HARYANA HIGH COURT IN THE CASE OF CIT VS. SSP LTD. (189 TAX MAN 282), MERE ERRONEOUS CLAIM ON THE ABSENCE OF ANY CONCEALM ENT OR GIVING INACCURATE PARTICULARS IS NO GROUND FOR LEVY OF PEN ALTY. IN THE LIGHT OF THE ABOVE FINDING, THE PENALTY WAS DELETED. 10. WE CONSIDERED THE MATTER IN DETAIL. THE DETAI LS OF THE THREE ITEMS CONSIDERED BY THE ASSESSING AUTHORITY IN HIS PENALTY PROPOSITION WERE PROPERLY DISCLOSED IN THE STATEMEN T OF ACCOUNTS FILED BY THE ASSESSEE. THE QUESTION OF ADDITION MA DE IN RESPECT OF WRITING OFF OF SUNDRY BALANCES HAS ALREADY BECOME A N ACADEMIC ISSUE IN THE LIGHT OF THE ORDER PASSED IN THE QUANT UM APPEAL FILED BY THE ASSESSEE. THE TWO ISSUES CONSIDERED BY THE AS SESSING OFFICER TO LEVY PENALTY ARE ` 3 CRORES AS CONTRIBUTION TO TRUST FUND AND ` 3 CRORES AS PROVISION FOR DIMINUTION IN VALUE OF I NVESTMENTS. REGARDING THE CONTRIBUTION TO TRUST FUND, THE ASSES SEE WAS OF THE VIEW THAT IT COULD BE A PAYMENT DEDUCTIBLE IN COMPU TING THE TAXABLE INCOME, AS THE CONTRIBUTION WAS MADE BY THE ASSESSE E IN THE INTERESTS OF BUSINESS CARRIED ON BY IT. THE ASSESS EE HAS EXPLAINED THAT, DE FACTO SPEAKING, THE CONTRIBUTION WAS MADE IN THE LIGHT OF COMMERCIAL EXPEDIENCY AND THE ASSESSEE CLAIMED IT A S A DEDUCTION ITA 1296/11 :- 8 -: IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS VS. CIT (288 ITR 1). REGARDING THE PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS ALSO THE ASSESSE E HAS FURNISHED ALL THE DETAILS INCLUDING ITS BUSINESS WITH MILLENN IUM BUSINESS SOLUTIONS LTD. THEREFORE, THERE IS NO CASE OF NON -FURNISHING OF PARTICULARS OR FURNISHING OF INACCURATE PARTICULARS . ALTHOUGH THE CLAIMS OF DEDUCTIONS MADE BY THE ASSESSEE MAY NOT B E ADMISSIBLE, BUT THAT DOES NOT MAKE THE PARTICULARS FURNISHED BY THE ASSESSEE AS INACCURATE PARTICULARS. SO AS TO QUALIFY THE PARTICULARS AS INACCURATE, THE PARTICULARS FURNISHED BY THE ASSE SSEE MUST BE SOME WAY DISTANT FROM THE ACTUAL POSITION. HERE, T HE POSITION HAS BEEN CORRECTLY EXPLAINED BY THE ASSESSEE. THE DI SPUTE WAS ONLY ON THE QUESTION, WHETHER THE DEDUCTIONS COULD BE AL LOWED OR NOT. 11. THE CASE IS, WHETHER THERE IS ANY CONCEALMENT, AS SUCH. THE ASSESSEE HAS OFFERED THE AMOUNTS FOR TAXATION BY FI LING A REVISED COMPUTATION. THE FACT THAT THE ASSESSEE HAS NOT FI LED ANY REVISED RETURN, DOES NOT DILUTE THE EFFECT OF THE OFFER MAD E BY THE ASSESSEE. IF THE ASSESSEE WAS MAKING A CLAIM FOR FURTHER DEDU CTION, SOMETIMES IT WOULD HAVE BEEN RELEVANT TO SEE WHETHE R THE ASSESSEE HAD FILED A REVISED RETURN OR NOT. IN THE PRESENT CASE, THE ITA 1296/11 :- 9 -: ASSESSEE IS OFFERING ADDITIONAL ITEMS FOR TAXATION. SUCH OFFER CAN BE MADE IN THE COURSE OF ASSESSMENT PROCEEDINGS, EV EN WITHOUT FILING A REVISED COMPUTATION. THE ACTION OF THE AS SESSEE DOES NOT BECOME PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, THERE IS NO MUCH FORCE IN THE ARGUMENT OF THE ASSES SING AUTHORITY THAT THE ASSESSEE HAD NOT FILED ANY REVISED RETURN. THAT IS TOO A PEDANTIC ARGUMENT. 12. AGAIN, ON THE CONCEALMENT, WHAT WE FIND IS THAT THE ASSESSING AUTHORITY COULD HAVE ADDED THOSE TWO ITEMS EVEN IF THE ASSESSEE HAS NOT OFFERED THOSE ITEMS FOR TAXATION BY FILING A REVISED COMPUTATION. EVEN IN SUCH A CASE WHERE THE ADDITIO NS WERE MADE BY THE ASSESSING AUTHORITY WITHOUT ANY OFFER COMING FROM THE ASSESSEE, IT IS DOUBTFUL WHETHER SUCH ADDITIONS WOU LD MAKE WAY FOR IMPOSING PENALTY. THIS IS BECAUSE, THE ASSESSEE WA S HARPING ON A SITUATION WHICH COULD HAVE BEEN FAVOURABLE TO HIM. THEREFORE, THAT IS A MATTER OF OPINION. IF THERE ARE SOME PREMISES RELEVANT FOR THE ASSESSEE TO FORM AN OPINION, THE ASSESSEE IS FREE T O FORM SUCH AN OPINION TO ITS ADVANTAGE. THERE IS NO FAULT IN THA T. THEREFORE, IN THE PRESENT CASE, IT IS VERY DIFFICULT TO HOLD A VIEW T HAT THERE IS ANY CONCEALMENT OF INCOME. THE LAW BECOMES LIABLE AGAI NST THE ITA 1296/11 :- 10 -: ASSESSEE ONLY WHEN THE ASSESSEE HAS CONCEALED THE P ARTICULARS OF ITS INCOME. HERE, THERE IS NO SUCH CONCEALMENT OF PARTICULARS. 13. THE HONBLE SUPREME COURT IN THE CASE OF CIT V . RELIANCE PETRO PRODUCTS LTD. (322 ITR 158) HAS HELD THAT MER ELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLA IM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY UNDER SEC.271(1)(C). PUNJA B & HARYANA HIGH COURT IN THE CASE OF CIT V. SSP LTD. (189 TAXMAN 28 2) HAS OBSERVED THAT MERE ERRONEOUS CLAIM IN THE ABSENCE O F ANY CONCEALMENT OR GIVING OF INACCURATE PARTICULARS IS NO GROUND FOR LEVY OF PENALTY. THE HONBLE DELHI HIGH COURT IN THE CA SE OF CIT V. DEEKSHA HOLIDAYS LTD. (186 TAXMAN 183) HAS HELD THA T WHERE THE ASSESSEE HAD DISCLOSED ALL THE FACTS BEFORE THE ASS ESSING OFFICER AND THE ASSESSING OFFICER, ON CONSIDERATION OF THE EVIDENCE FURNISHED BY THE ASSESSEE, COME TO THE CONCLUSION T HAT THE CLAIM HAS NOT BEEN SUBSTANTIATED WITH SUFFICIENT EVIDENCE , DOES NOT AUTOMATICALLY RESULT IN LEVY OF PENALTY. WHERE TH E ASSESSEE HAS DISCLOSED ALL MATERIAL FACTS IN REGARD TO THE CLAIM MADE, THE ONUS PLACED UPON THE ASSESSEE STOOD DISCHARGED. AFTER EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF JUDICIAL PRONOUNCEMENTS ITA 1296/11 :- 11 -: MENTIONED ABOVE, WE ARE OF THE CONSIDERED OPINION T HAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS RIGHTLY DEL ETED THE PENALTY. 14. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 16 TH OF MARCH, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 16 TH MARCH, 2012. MPO* COPY TO: (1) PETITIONE R (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.