ACIT - 25(3), MUMBAI V. Sri. ALKESH K. PATEL, MUMBAI

ITA 145/MUM/2007

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4087 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1996-1997
• Appeal Filed On: 05-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AJAY R SINGH; DR K SHIVARAM
• Keywords: Bonafide belief; Bonafide mistake
• Section: 143(3); 147; 148; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 1462/MUM/04 ASSESSMENT YEAR : 1995-96 ITA NO. 145/MUM/07 ASSESSMENT YEAR : 1996-97 ACIT - 25(3 ) C-11, ROOM NO.308 PRTYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (E) MUMBAI-400 051. VS. SHRI ALKESH K. PATEL B-2/401, KAMLA NAGAR M.G. ROAD KANDIVALI (W) MUMBAI-400 067. PAN NO.AFNPP 7953 F (APPELLANT) (RESPONDENT) ASSESSEE BY : DR. K. SHIVARAM & SHRI AJAY R. SINGH REVENUE BY : SHRI MANOJ KUMAR DATE OF HEARING : 24/06/2013 DATE OF PRONOUNCEMENT : 31/ 07/2013 O R D E R PER B. RAMAKOTAIAH, AM: THESE TWO APPEALS ARE REVENUE APPEALS AGAINST DELET ION OF PENALTY BY THE CIT(A) UNDER SECTION 271(1)(C), UPHELD BY TH E ITAT BUT RESTORED TO THE FILE OF THE ITAT BY THE ORDERS OF THE HONBLE H IGH COURT OF BOMBAY. 2. BRIEFLY STATED, THE ASSESSEE IS A PARTNER IN REA L ESTATE FIRM BY THE NAME OF DHARTI ESTATE. ACCORDING TO ASSESSEE, THE AFORESAID FIRM HAD ADVANCED A LOAN TO DHARTI BUILDERS AND DEVELOPERS P RIVATE LIMITED IN THE ITA NO.1462/04 & 145/07 A.Y.95-96 & 96-97 ALKESH K. PATEL 2 AMOUNT OF RS.3.45 CRORES, AGAINST WHICH THE COMPANY HAD ADVANCED A SUM OF RS.1.31 CRORES TO ASSESSEE. THE ASSESSEE WA S A DIRECTOR AND SHAREHOLDER OF THE COMPANY AND HELD IN EXCESS OF 25 PERCENT OF THE EQUITY CAPITAL. THE ASSESSEE FILED A RETURN OF INCO ME ON 31 ST MARCH 1997 DECLARING AN INCOME OF RS.4,14,270/-. THE RETURN WA S PROCESSED U/S. 143(1). THE ASSESSMENT WAS SUBSEQUENTLY RECTIFIED B Y AN ORDER DATED 5 TH FEBRUARY, 1998. A NOTICE WAS ISSUED TO THE ASSESSEE U/S. 148 ON 28 TH MARCH 2002, IN PURSUANCE OF WHICH AN ORDER OF ASSES SMENT WAS PASSED U/S. 143(3) READ WITH SECTION 147 ON 19 TH MARCH 2003. BY THE ORDER OF AO, TOTAL INCOME WAS COMPUTED AT RS.30,12,440/- AFT ER MAKING AN ADDITION OF RS.25,21,000/- ON ACCOUNT OF DEEMED DIV IDEND U/S. 2(22)(E). A NOTICE TO SHOW CAUSE WAS ISSUED TO THE ASSESSEE F OR IMPOSITION OF A PENALTY U/S. 271(1)(C). AO IMPOSED A PENALTY IN THE AMOUNT OF RS.10,08,400/-, FOLLOWING WHICH AN APPEAL WAS FILED BY ASSESSEE. THE CIT(A) ALLOWED THE APPEAL AND ORDERED DELETION OF T HE PENALTY. THE TRIBUNAL CONFIRMED THE ORDER OF THE APPELLATE AUTHO RITY BY ITS ORDER DATED 28 TH JULY, 2006. ON APPEAL BY REVENUE TO THE HON'BLE HIGH COURT IN IT NO.24 OF 2007 DT. 30 MARCH 2010 FOR ASSESSMENT YEAR 1995-96, THE HONBLE HIGH COURT RESTORED THE MATTER TO THE FILE THE TRIBUNAL FOR A FRESH DECISION WITHOUT EXPRESSING ANY OPINION, ONE WAY OR THE OTHER ON THE MERITS OF THE RIVAL CONTENTIONS. SIMILARLY FOR ASSE SSMENT YEAR 1996-97 THE ADDITION MADE UNDER SECTION 2(22)(E) WAS AN AMO UNT OF RS.61,29,198/- AND PENALTY LEVIED WAS RS.19,53,000/ -. THIS WAS ALSO DELETED BY LD.CIT(A) AND WAS UPHELD BY ITAT. IN TH IS YEAR ALSO THE HON'BLE HIGH COURT IN ITA NO.2427 OF 2009 DATED 30 TH MARCH 2010 RESTORED THE MATTER TO THE FILE OF THE ITAT FOR FRE SH ADJUDICATION. 4. THE LD. DR REFERRING TO THE FINDINGS OF AO IN TH E ASSESSMENT ORDER SUBMITTED THAT CIT(A) WAS NOT CORRECT IN REJECTING THE FINDINGS OF THE AO AND SUBMITTED THAT THERE IS NO EVIDENCE THAT ASSESS EE IS NOT AWARE OF THE PROVISIONS OF THE LAW AND THIS CANNOT BE A BONAFIDE MISTAKE. HE RELIED ON ITA NO.1462/04 & 145/07 A.Y.95-96 & 96-97 ALKESH K. PATEL 3 THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD. (327 ITR 510) AND DECISION OF HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF SUBHASH S. SHAH VS. ITO (30 TAXMANN.COM 244). 4.1 THE LD. COUNSEL HOWEVER, REFERRED TO THE FINDIN GS OF THE CIT(A) AND ITAT GIVEN EARLIER, TO SUBMIT THAT THE ASSESSEE HAS NEITHER CONCEALED NOR FILED ANY INACCURATE PARTICULARS OF INCOME. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS ALWAYS HAVING OWN FUNDS FOR INTER- ENTITY LOANS WHICH WOULD OFFSET EACH OTHER AND SO THE ASSESSEE WAS UND ER IMPRESSION THAT HE WAS ULTIMATELY USING OWN FINDS. FURTHER IT WAS A LSO SUBMITTED THAT THE AO HAS TAKEN PROFITS AT THE END OF THE YEAR AND NOT AS ON THE DATE OF TAKING ADVANCE AND RELIED ON THE DECISION OF M.B. STOCK HOLDING (P) LTD. VS. ACIT (84 ITD 542)(AHD.) AND ALSO DECISION OF ITAT VISHAKAPATTANAM BENCH IN THE CASE OF SHRI P. SATYA PRASAD VS. ITO IN ITA NO. 293/(VIZAG) OF 2012 DATED 16.11.2012. IT WAS SUBMITTED THAT IN THE PENALTY PROCEEDINGS THE ASSESSEE CAN SUBSTANTIATE THAT THE ADDITION UNDER SECTION 2(22)(E) NEED NOT BE MADE, W.R.T. LEVY OF P ENALTY WHEN THE CLAIMS ARE BONAFIDE. HE RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BENNETT COLEMAN & CO. LTD.(2013) 33 TAXMANN .COM 227(BOMBAY) THAT ANY INADVERTENT MISTAKE ON THE PART OF THE AS SESSEE DOES NOT ATTRACT PENALTY U/S. 271(1)(C). FURTHER HE RELIED ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF SUNIL CHANDRA VOHRA VS. ACIT (2009) 32 SOT 365(MUM.) WHERE ON SIMILAR FACTS IT WAS HELD THAT WHEN ASSES SEE IS NOT CONVERSANT WITH THE PROVISIONS OF THE ACT, T HEN PENALTY U/S. 271(1)(C) FOR THE ADDITION U/S. 2(22)(E) DOES NOT A RISE. LD. COUNSEL ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT [2012] 348 ITR 306 AND CIT VS. RELIANCE PETROPRODUCTS (P.) LTD.[2010] 322 ITR 158( SC) FOR VARIOUS PROPOSITIONS THAT PENALTY IS NOT ATTRACTED. THE LD . COUNSEL ALSO RELIED ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. ITA NO.1462/04 & 145/07 A.Y.95-96 & 96-97 ALKESH K. PATEL 4 SUDHIRKUMAR CHOTTUBHAI [2001] 250 ITR 528(BOM.) FOR THE PROPOSITION THAT WHEN THE ASSESSEE WAS UNDER BONAFIDE BELIEF TH AT AMOUNT WAS NOT TAXABLE, LEVY OF PENALTY WAS NOT HELD TO BE JUSTIFI ED. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, ORDERS OF THE AUTHORITIES AND ALSO CONTENTIONS OF THE REVENUE BEFORE THE HON' BLE HIGH COURT. THE FACTS IN THIS PRESENT CASE ARE THAT IN ASSESSMENT Y EAR 1996-97, THE AO FOR THE FIRST TIME EXAMINED THE ISSUE OF SECTION 2( 22)(E), EVENTHOUGH THERE WERE SIMILAR TRANSACTIONS IN THE EARLIER YEARS, AS SEEN FROM THE STATEMENT OF ACCOUNTS PLACED ON RECORD. ASSESSEE ALSO FURNISH ED ALL INFORMATION AS REQUIRED UNDER STATUTE, WHILE FILING RETURN INCLUDI NG INTRA-UNIT TRANSACTIONS. THE PROCEEDINGS AND ASSESSEE SUBMISSI ONS DO INDICATE THAT ASSESSEE IS UNDER BONAFIDE BELIEF THAT INTRA-UNIT T RANSACTION MAY NOT ATTRACT PROVISIONS OF SECTION 2(22)(E). TO THAT EXT ENT AS FAR AS ASSESSMENT YEAR 1996-97 IS CONCERNED, AN INFERENCE CAN BE DRAW N THAT THERE IS A BONAFIDE BELIEF ON THE PART OF THE ASSESSEE THAT TR ANSACTIONS UNDERTAKEN WITH COMPANY DOES NOT ATTRACT PROVISIONS OF SECTION 2(22)(E). THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SUDHIRKUMA R CHOTTUBHAI (SUPRA), HAS HELD THAT WHEN ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THE AMOUNT WAS NOT TAXABLE WHEN HE FILED RETURN OF INCO ME, LEVY OF PENALTY U/S. 271(1)(C) WAS NOT HELD TO BE JUSTIFIED. AS PER PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF T. ASHOK P AI VS. CIT [2007]292 ITR 11(SC), CONCEALMENT REFERS TO DELIBERATE ACT ON PART OF ASSESSEE. A MERE NEGLIGENCE OR OMISSION WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSIO VARY OR SUGGESTIO FALSI . THEREFORE, WE ARE OF THE OPINION THAT THERE IS A BONAFIDE BELIEF ON THE PART OF THE ASSES SEE THAT INTRA- UNIT TRANSACTIONS OF LOANS/BORROWALS FOR THE PURPOSE OF BUSINESS DOES NOT ATTRACT PROVISIONS OF SECTION 2(22)(E). THEREFORE, IN OUR CONSIDERED OPINION THE LD. CIT(A) IS CORRECT IN HOLDING THAT THE ASSES SEE WAS UNDER BONAFIDE BELIEF AND THIS DOES NOT ATTRACT PENALTY U/S. 271(1 )(C). ACCORDINGLY, TO THAT EXTENT THE ORDER OF CIT(A) IN AY 1996-97 STAN DS AFFIRMED. ITA NO.1462/04 & 145/07 A.Y.95-96 & 96-97 ALKESH K. PATEL 5 6. WITH REFERENCE TO LEVY OF PENALTY U/S. 271(1)(C) FOR THE ASSESSMENT YEAR 1995-96, THERE WAS ORIGINALLY NO SCRUTINY ASSE SSMENT IN THAT YEAR. AO FOR THE FIRST TIME HAS STARTED EXAMINING INTER SE TRANSACTIONS OF THE ASSESSEE WITH THE COMPANY IN AY 1996-97 BY OBTAININ G VARIOUS DETAILS AND ALSO EXAMINING ACCUMULATED PROFITS AND VARIOUS OTHER ISSUES. THIS ASSESSMENT ORDER IN AY 1996-97 WAS ORIGINALLY PASSE D ON 26.02.99. SUBSEQUENTLY, THE MATTER WENT IN APPEAL BEFORE CIT( A), WHO CONFIRMED QUANTUM ADDITION. THE ASSESSEE FURTHER TOOK THE MAT TER IN APPEAL AND ITAT VIDE ORDERS IN ITA NO.1959/MUM/2000 DATED 25.1 1.2005 CONFIRMED THE ADDITION MADE BY ASSESSING OFFICER IN THAT ASSESSMENT YEAR. AO INITIATED THE PROCEEDINGS U/S. 147 AFTER L D CIT(A) CONFIRMED THE QUANTUM IN AY 1996-97, BY ISSUANCE OF A NOTICE ON 2 8.3.2002 FOR THE ASSESSMENT YEAR 1995-96. THUS, AS FAR AS ASSESSMENT YEAR 1995-96 IS CONCERNED, THE ASSESSEE WAS AWARE THAT INTER SE TRANSACTIONS ATTRACT PROVISIONS OF SECTION 2(22)(E), AS ORDERS OF ASSESS ING OFFICER IN ASSESSMENT YEAR 1996-97 AND ORDERS OF CIT(A) AFFIRM ING THE SAME WERE ALREADY AVAILABLE. THEREFORE, WHEN THE PROCEEDINGS OF ASSESSMENT YEAR 1995-96 WERE INITIATED U/S 147, THE ASSESSEE SHOULD HAVE FILED RETURN OF INCOME AS ADMITTING INCOME U/S. 2(22)(E), IN LINE W ITH THE WORKING OF AO OR SHOULD HAVE AT LEAST FILED A RETURN UNDER PROTES T. THERE SEEMS TO BE NO SUCH ACTION FROM THE ASSESSEE. BE THAT AS IT MAY, T HE ASSESSMENT IN ASSESSMENT YEAR 1995-96 WAS IN RESPONSE TO THE PROC EEDINGS INITIATED U/S. 147, AFTER THE ADDITIONS WERE MADE IN ASSESSME NT YEAR 1996-97 AND CONFIRMED BY CIT(A). ULTIMATELY, THE ORDER OF 1996- 97 STANDS CONFIRMED BY THE ITAT IN QUANTUM PROCEEDINGS, THEREBY IT CAN NOT BE STATED THAT THE ASSESSEE WAS UNDER BONAFIDE BELIEF, AT THE TIME OF INITIATION OF THE PROCEEDINGS U/S. 147, ABOUT THE PROVISIONS OF SECTI ON 2(22)(E) AND CONSEQUENCES THEREOF. ASSESSEE HAS NOT CONTESTED T HE ORDER U/S. 143(3) R.W.S. 147 DATED 9.8.2003, THEREFORE, THERE IS AN A DMISSION ON THE PART OF THE ASSESSEE IN QUANTUM PROCEEDINGS. THEREFORE, THE FACTS OF ASSESSMENT ITA NO.1462/04 & 145/07 A.Y.95-96 & 96-97 ALKESH K. PATEL 6 YEAR 1995-96 ARE ENTIRELY DIFFERENT FROM THE FACTS AS IN 1996-97. THE ORDER WAS PASSED UNDER SECTION 143(3) READ WITH SEC .147 WHICH ITSELF AFFIRMS THAT THERE IS ESCAPEMENT OF INCOME. THEREFO RE, WE ARE OF THE OPINION THAT THE PLEA OF BONAFIDE BELIEF AVAILABLE FOR THE ASSESSMENT YEAR 1996-97, CAN NOT BE CONSIDERED IN ASSESSMENT YEAR 1 995-96. THERE MAY BE A BONAFIDE BELIEF AT THE TIME OF FILING RETURN O RIGINALLY, BUT NOT WHILE FILING RETURN IN RESPONSE TO A NOTICE U/S 147. FOLL OWING THE PRINCIPLES ON THE ISSUE, SINCE ASSESSMENT WAS COMPLETED INVOKING PROVISIONS OF SECTION 147 FOR ESCAPEMENT OF INCOME AND AS THE ASS ESSEE HAS NOT CONTESTED QUANTUM ADDITION, WE ARE OF THE OPINION T HAT PENALTY U/S. 271(1)(C) IS WARRANTED UNDER FACTS OF THE CASE. ACC ORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) FOR ASSESSMENT YEAR 1995-96 AND RESTORE THE ORDER OF AO, LEVYING PENALTY OF RS.10,08,400/- U/S 271(1)(C) . 7. WE HAVE NOT CONSIDERED NECESSARY TO EXTRACT THE CASE LAW RELIED ON BY THE PARTIES IN THE ORDER, BUT WE HAVE KEPT IN MI ND VARIOUS PRINCIPLES AND PROPOSITIONS, IN DECIDING THE ABOVE APPEALS. 8. IN THE RESULT, THE APPEAL IN ITA NO.1462/M/2004 OF THE REVENUE IS ALLOWED WHEREAS THE APPEAL IN ITA NO.145/M/2007 OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2013. SD/- SD/- (VIVEK VARMA) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 31/07/2013. JV. ITA NO.1462/04 & 145/07 A.Y.95-96 & 96-97 ALKESH K. PATEL 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.