The ITO, Ward-12(3), Ahmedabad V. Shri Satishchandra A.Dhomse, Ahmedabad

ITA 1440/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9370 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-11-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 23-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJEET KUMAR
• Keywords: Revenue expenditure
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI G.D.AGARWAL, VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER) ITA NO.1440/AHD/2008 [ASSTT. YEAR : 2003-2004] ITO, WARD-12(3) AHMEDABAD. VS. SHRI SATISCHANDRA A. DHOMSE 91-B, SATELLITE PLAZA NR.MANSI COMPLEX VASTRAPUR, AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ABHIJEET KUMAR ASSESSEE BY : SHRI NITIN PATHAK O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XX, AHMEDABAD DATED 24-12-2007 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX AC T. 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE REV ENUE IS AGAINST THE CANCELLATION OF PENALTY OF RS.2,60,374/- WHICH WAS LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT. 3. THE FACTS OF THE CASE ARE THAT DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INC OME OF RS.13,250/-. THE AO COMPLETED THE ASSESSMENT AT RS.9,13,250/-. THE AO DISALLOWED THE LOSS OF RS.9 LAKHS CLAIMED BY THE ASSESSEE. THE ASSESSEE H AD GIVEN THE SUM OF RS.9 LAKHS TO SHRI PUSHPENDRA AGARWAL FOR RUNNING OF COA CHING CLASS. THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH SHRI PUSHPENDRA AGARWAL IN THIS REGARD. HOWEVER, ULTIMATELY, IT WAS FOUND BY THE ASSESSEE T HAT SHRI PUSHPENDRA AGARWAL WAS A FRAUD AND DESPITE ALL THE EFFORTS, TH E ASSESSEE COULD NEITHER RECOVER BACK THE SAID AMOUNT NOR SHRI PUSHPENDRA AG ARWAL STARTED THE COACHING CLASS ALONG WITH THE ASSESSEE FOR WHICH TH E AMOUNT WAS PAID. THEREFORE, THE ASSESSEE CLAIMED THE AMOUNT OF RS.9 LAKHS AS BUSINESS LOSS. ITA NO.1440/AHD/2008 -2- HOWEVER, THE AO HELD THAT THE LOSS TO BE CAPITAL LO SS AND THEREFORE HE DID NOT ALLOW THE SET OFF OF THE OTHER INCOME AGAINST THE A BOVE LOSS. THE AO ALSO LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT F OR CLAIMING THE CAPITAL LOSS AS BUSINESS LOSS. 4. ON APPEAL, THE CIT(A) CANCELLED THE PENALTY WITH THE FOLLOWING FINDINGS: 3.3 DURING THE APPEAL PROCEEDINGS, THE APPELLANT F ILED COPY OF ASSESSMENT ORDER AND COPY OF APPELLATE ORDER BEFORE ME TO CLARIFY THE FACTS AND TO SUBSTANTIATE HIS CLAIM. I HAVE PERUSE D THE DOCUMENTS FURNISHED AND CONSIDERED THE SUBMISSIONS MADE BY TH E APPELLANT BEFORE ME. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I DO NOT FIND ANY ELEMENT OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS BY THE APPELLANT. IN THIS CASE, THOUGH THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER REJECTING THE CLAIM O F THE APPELLANT IN RESPECT OF BUSINESS LOSS AND TREATING THE SAME AS C APITAL LOSS AND ALSO THE ADDITION HAS BEEN CONFIRMED BY THE CIT(A), IT I S ONLY A MATTER OF CLAIM OF EXPENDITURE WHICH IN THE OPINION OF THE AP PELLANT IS A REVENUE EXPENDITURE. THOUGH THE CLAIM OF THE APPELLANT ON FACTS IS NOT PROVED TO BE GENUINE, BUT EXPLANATION OFFERED BY THE APPELLAN T SUGGESTS THAT THE APPELLANT HAS NOT WILLFULLY AND INTENTIONALLY CLAIM ED THE AMOUNT TO EVADE THE TAX. IT HAS ONLY ON INTERPRETATION OF FA CTS BEEN ESTABLISHED THAT THE APPELLANTS CLAIM IS NOT GENUINE WHICH DOES NOT AUTOMATICALLY LEAD TO ANY CONSCIOUS CONCEALMENT ON THE PART OF THE APP ELLANT. THE APPELLANT DISCLOSED ALL THE RELEVANT FACTS IN RESPE CT OF INVESTMENT OF RS.9 LAKH WITH M/S.AGARWALS COURSES & TEST SERIES, TO R UN COACHING CENTERS AT AHMEDABAD. THE MOTIVE OF THE APPELLANT AS PER H IS PLEA WAS TO RUN COACHING CLASS AND EARN INCOME. SINCE ALL THE FACT S HAVE BEEN CLARIFIED FROM THE BEGINNING BEFORE THE DEPARTMENT, NO ANY PO SITIVE AND COGENT MATERIAL IS THERE AGAINST THE APPELLANT SO AS TO IN VOKE THE PROVISIONS OF SECTION 271(1)(C) OF THE IT ACT. 3.4 IN THIS CASE, DETAILED EXPLANATION WAS OFFERED BY THE APPELLANT AT THE STAGE OF ASSESSMENT PROCEEDINGS AS WELL AS PENA LTY PROCEEDINGS. SINCE THE AUTHORITIES HAVE NOT ACCEPTED HIS EXPLANA TION TO THEIR SATISFACTION, IT DOES NOT MEAN THAT THE ADDITIONS M ADE IS NECESSARILY TO BE CONSIDERED FOR PENALTY PROCEEDINGS U/S.271(1)(C) . THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL T EXTILES 249 ITR 125 HAS DEALT WITH SUCH SITUATION WHERE THE HONBLE COU RT HAS OBSERVED THAT IF THE FACT IS UNPROVED BUT NOT DISPROVED, NO PENAL TY U/S.271(1)(C) CAN BE LEVIED. IN THE APPELLANTS CASE, AS PER FACTS, IT HAS NOT CLEARLY BEEN PROVED BY THE AO THAT THERE EXISTED MENS REA OR GUI LTY MIND WHILE MAKING THE CLAIM OF BUSINESS LOSS BY THE APPELLANT. ITA NO.1440/AHD/2008 -3- 3.5 IN VIEW OF THE ABOVE DISCUSSION AND ON FACTS OF THE CASE, I HOLD THAT THERE HAS NOT BEEN CONSCIOUS CONCEALMENT ON TH E PART OF THE APPELLANT AND THE PENALTY LEVIED BY THE AO U/S.271( 1)(C) IS NOT JUSTIFIED. THEREFORE PENALTY LEVIED BY THE ASSESSING OFFICER A T RS.2,60,374/- IS HEREBY CANCELLED. 5. THE REVENUE AGGRIEVED WITH THE ORDER OF THE CIT( A) IS IN APPEAL BEFORE US. 6. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. AFTER CONSI DERING THE ARGUMENTS OF BOTH THE SIDES AND THE FACTS OF THE CASE, WE ARE OF THE OPINION THAT ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION O F THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD., 32 2 ITR 158 (SC) WHEREIN THEIR LORDSHIPS HELD AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, T HERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICU LARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTI ON 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO IN FORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STR ETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHI NG WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS T HE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INC OME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIE D BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF ITA NO.1440/AHD/2008 -4- THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANN OT AMOUNT TO FURNISHING INACCURATE PARTICULARS. THE ABOVE DECISION OF THE HONBLE APEX COURT WOULD BE SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. IN THIS CASE, TH E ASSESSEE SUFFERED THE LOSS OF RS.9 LAKHS. THE ASSESSEE CLAIMED THE SAME AS BUSIN ESS LOSS, HOWEVER, THE AO CONSIDERED THE SAME AS CAPITAL LOSS. IT IS NOT IN DISPUTE THAT THE FACTS RELATING TO THE INCURRING OF LOSS OF RS.9 LAKHS WERE DULY PLACE D BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS ITSELF. THUS, THERE WAS NO CONCEALMENT OF ANY FACTS BY THE ASSESSEE. MERELY BECAUSE THE BUSINESS LOSS CLA IMED BY THE ASSESSEE WAS TREATED AS CAPITAL LOSS, THE ASSESSEE CANNOT BE SAI D TO BE LIABLE FOR PENALTY UNDER SECTION 271(1)(C). IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 7. IN RESULT, THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 26 TH NOVEMBER, 2010. SD/- SD/- (MUKUL KUMAR SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 26-11-2010 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD