Cornerstone Financial Services Ltd., V. DCIT, Circle-3(1),

ITA 13/DEL/2005

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 7101 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 07-06-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 03-01-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Keywords: Retrospective amendment; Initiation of penalty proceedings; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E DELHI) BEFORE SHRI A.D. JAIN AND SHRI R.C. SHARMA ITA NO. 13(DEL)2005 ASSESSMENT YEAR: 1999-2000 M/S. CORNERSTONE FINANCIAL SERVICES LTD. COMMI SSIONER OF I. TAX, 708, EROS APARTMENTS, NEHRU PLACE, V. CIRC LE 1(7), NEW DELHI. NEW DELHI-110019. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AJAY VOHRA, ADVOCATE RESPONDENT BY: SHRI G.S. SAHOTA, SR. DR ORDER PER A.D. JAIN, J.M. THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 1 999-2000. THIS APPEAL HAS BEEN FILED AGAINST THE ORDER DATED 15.9. 2004 PASSED BY THE LEARNED CIT(A), CONFIRMING THE CONCEALMENT PENALTY LEVIED O N THE FOLLOWING FOUR ITEMS:- ` 1. DISALLOWANCE OF SHIFTING EXPENSES .. 9, 73,069/- 2. DISALLOWANCE OF LEGAL AND PROFESSIONAL CHARGES .. 5,00,000/- 3. DEFERRED REVENUE EXPENDITURE .. 8,38,935/- 4. DISALLOWANCE OF LOSS ON TRANSFER OF ASSET . 71,351/- ITA 13(DEL)05 2 2. THE LEARNED COUNSEL FOR THE ASSESSEE HAS MADE EL ABORATE SUBMISSIONS REGARDING THE MERITS OF THE CASE. LASTLY, HE HAS ALSO RAISED THE ISSUE OF THERE BEING NO SATISFACTION RECORDED IN THE ASSESSMENT OR DER WITH REGARD TO INITIATION OF PENALTY PROCEEDINGS. SINCE THIS LAS T ISSUE PERTAINS TO A JURISDICTIONAL ISSUE WHICH GOES TO THE ROOT OF THE MATTER, WE ARE TAKING UP THIS MATTER FIRST OF ALL. 3. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEND ED THAT THERE IS NO SATISFACTION RECORDED IN THE ASSESSMENT ORDER WITH REGARD TO INITIATION OF PENALTY PROCEEDINGS, NOR IS SUCH SATISFACTION EVEN EVIDENT OR DISCERNABLE FROM THE BODY OF THE ASSESSMENT ORDER. HE HAS DRAW N OUR ATTENTION TO PAGES 33 TO 35 OF THE ASSESSEES PAPER BOOK, WHICH COMPRI SE A COPY OF THE ASSESSMENT ORDER DATED 15.3.2002. THE LEARNED COU NSEL FOR THE ASSESSEE HAS SOUGHT TO PLACE RELIANCE ON MS. MADHUSHREE GUPTA & ANOTHER V. UNION OF INDIA & ANOTHER 317 ITR 307(DEL). 4. ON THE OTHER HAND, ON THIS ISSUE, THE LD. DR HAS CONTENDED THAT PENALTY PROCEEDINGS WERE INITIATED AS PER ASSESSMENT ORDER, WHICH FACT IS DISCERNABLE FROM THE ASSESSMENT ORDER. 5. WE HAVE HEARD THE PARTIES ON THIS ISSUE. IN THE ASSESSMENT ORDER, IT IS SEEN, THE AO HAS OBSERVED, IN THE END OF THE ASSESS MENT ORDER, AS FOLLOWS:- PENALTY PROCEEDINGS, U/S 271(1)(C) ARE INITIATED SEPARATELY. ITA 13(DEL)05 3 6. AS PER SECTION 271(1)(C), IF THE AO, IN THE COUR SE OF ANY PROCEEDINGS UNDER THE INCOME TAX ACT, IS SATISFIED THAT ANY PER SON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME, HE MAY DIRECT PAYMENT OF PENALTY IN ACCORDANCE WITH THE SAID SECTION. THE REQUIREMENT OF THE SECTION IS VERY CLEAR TO THE EFF ECT THAT IN ORDER TO BE ABLE TO DIRECT IMPOSITION OF PENALTY, THE AO HAS TO BE S ATISFIED, IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, REGARDING CONCEALMEN T OF PARTICULARS OR FURNISHING OF INACCURATE PARTICULARS OF AN ASSESSEE S INCOME. IN MS. MADHUSHREE GUPTA & ANOTHER V. UNION OF INDIA & ANOT HER(SUPRA), IT HAS BEEN HELD THAT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT INTRODUCED A DEEMING FICTION WITH RETROSPECTIVE EFFECT THAT A DI RECTION IN THE ASSESSMENT ORDER TO INITIATE PENALTY PROCEEDINGS IS TO BE DEEM ED AS A SATISFACTION OF THE AO; THAT HOWEVER, SUCH SATISFACTION MUST BE DISCERN ABLE FROM THE ASSESSMENT ORDER. 7. IN THE PRESENT CASE, WE FIND THAT EVEN FROM THE BODY OF THE ASSESSMENT ORDER, NO SUCH SATISFACTION IS DISCERNABLE. THE P RESENCE OF PRIMA FACIE SATISFACTION OF THE AO FOR INITIATION OF PENALTY PR OCEEDINGS, IS A JURISDICTIONAL FACT, AS HELD IN MS. MADHUSHREE GUPTA & ANOTHER V. UNION OF INDIA & ANOTHER(SUPRA). TO REITERATE, IN THE PRESENT CAS E, NO PRIMA FACIE ITA 13(DEL)05 4 SATISFACTION OF THE AO THAT THE CASE MAY DESERVE T HE IMPOSITION OF PENALTY, IS DISCERNABLE FROM THE ASSESSMENT ORDER 8. THEREFORE, THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD IS JUSTIFIED AND IS ACCEPTED AS SUCH. IN VIEW THEREOF, ONCE THE JUR ISDICTIONAL FACT OF PRIMA FACIE SATISFACTION OF THE AO FOR INITIATION OF CONC EALMENT PENALTY PROCEEDINGS IS CONSPICUOUS BY ITS ABSENCE AND IS NOT DISCERNABLE FROM THE ASSESSMENT ORDER, NO CONCEALMENT PENALTY COULD HAVE BEEN IMPOSED. THE PENALTY IMPOSED IS THUS VOID AB INITIO AND IS LIABL E TO BE SET ASIDE. 9. IN VIEW OF THE ABOVE, THE PENALTY IMPOSED ON THE ASSESSEE IS HEREBY SET ASIDE. 10. SINCE THE PENALTY IMPOSED ON THE ASSESSEE HAS BEEN, AS ABOVE, SET ASIDE FOR THE REASON OF NO SATISFACTION HAVING BEEN RECORDED IN THE ASSESSMENT ORDER, NO OTHER ISSUE SURVIVES. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, AS INDICATED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.09.2010. SD/- SD/- (R.C. SHARMA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24.09.2010 *RM ITA 13(DEL)05 5 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR