HDFC ASSET MANAGEMENT COMPANY LTD, MUMBAI V. ITO 1(1)(4), MUMBAI

ITA 1458/MUM/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78711 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2002-2003
• Appeal Filed On: 03-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SINGH
• Assessee Lawyers: D V LAKHANI
• Keywords: Depreciation; Non-deduction of tax; Wrong claim; Difference of opinion; Revenue expenditure; Capital expenditure
• Section: 147; 37; 115JB; 37(1)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - H BENCH. . , !'#$ '%&'( , &' )* BEFORE S/SH.D.MANMOHAN, VICE-PRESIDEN T & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.1458/MUM/2014, ' ' ' ' + + + + / ASSESSMENT YEAR-2002-03 HDFC ASSET MANAGEMENT COMPANY LTD. (SUCCESSOR TO HDFC AMC SERVICES PVT. LTD.), HUL HOUSE, 2 ND FLOOR, 165-166 H.T. PAREKH MARG, BACKBAY RECLAMATION, CHURCHGATE, MUMBAI-400020 VS ITO 1(1)(4) MUMBAI-400020 PAN: AAACH7614L ( ',- / APPELLANT) ( ./,- / RESPONDENT) /. ITA NO.1459/MUM/2014, ' ' ' ' + + + + / ASSESSMENT YEAR-2003-04 HDFC ASSET MANAGEMENT COMPANY LTD. (SUCCESSOR TO HDFC AMC SERVICES PVT. LTD.), HUL HOUSE, 2 ND FLOOR, 165-166 H.T. PAREKH MARG, BACKBAY RECLAMATION, CHURCHGATE, MUMBAI-400020 VS ITO 1(1)(4) MUMBAI-400020 PAN: AAACH7614L ( ',- / APPELLANT) ( ./,- / RESPONDENT) '01 '01 '01 '01 2 2 2 2 & && & / ASSESSEE BY : SHRI D.V.LAKHANI '%* 3 2 & / REVENUE BY : SHRI P.K.SINGH ' ' ' ' 3 33 3 1' 1' 1' 1' / DATE OF HEARING : 25-03-2014 4+ ' 3 1' / DATE OF PRONOUNCEMENT : 09-04-2014 , 1961 3 33 3 '' '' '' '' 254 )1( & && & '151 '151 '151 '151 )&6 )&6 )&6 )&6 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM &' &' &' &' )* )* )* )* '%&'( '%&'( '%&'( '%&'( & && & ' ' ' ' : CHALLENGING THE ORDERS OF THE CIT(A)-1,MUMBAI,ASSES SEE-COMPANY HAS FILED APPEALS FOR THE ABOVE REFERRED TWO AY.S.IT HAS RAISED FOLLOWING GROUNDS O F APPEAL FOR THE AY.2002-03: 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271 (1)(C) OF INCOME TAX ACT, 1961. THE APPELLANT PRAYS THAT THE BASIC CONDITIONS FOR LEVY OF PENALTY U/S 271(1)(C) ARE NOT SATISFIED AND ORDER PASSED BY LEARNED ASSESSING OFFICER AND CONFIRM BY CIT (AP PEALS) IS BAD IN LAW. THE APPELLANT PRAYS THAT THE PENALTY LEVIED U/S. 271(1)(C) BE DELETED. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMR. OF INCOME TAX (APPEALS) HAS SUMMARILY REJECTED THE GROUND OF THE APPELLANT THAT WITHOUT GIVING AN OPPORTUNITY OF HEARING THE LEARNED ASSESSING OFFICER HAS PASSED THE ORDER U/S. 271(1)(C). THE CONCLUSION REACHED BY THE LEARNED COMMR. OF INCOME TAX (APPEALS) THAT THE CLA IM IS NOT SUPPORTED WITH THE FACTS AND ARE IN 2 ITA NO. 1458 & 1459/MUM/2014 HDFC ASSET MANAGEMENT CO MPANY LTD. THE NATURE OF VAGUE AND GENERAL STATEMENT IS ERRONE OUS AND WITHOUT CONSIDERING THE SUBMISSIONS MADE BEFORE HIM. THE CONCLUSION REACHED BY THE LEAR NED COMMR. OF INCOME TAX (APPEALS) THAT THE CLAIM OF THE APPELLANT IS BASELESS IS ERRONEOUS . THE APPELLANT PRAYS THAT THE PENALTY LEVIED U/S. 271(L)(C) IS AGAINST THE PRINCIPLES OF NATURAL JUST ICE AND BE DELETED. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN CONCLUDING THAT THE CLAIM OF THE APPEL LANT WAS NOT BONAFIDE AND WAS NOT AS PER LEGAL PROVISIONS. THE APPELLANT PRAYS THAT THE CONCLUSION REACHED BY THE LEARNED COMMR. OF INCOME TAX (APPEALS) IS ERRONEOUS AND CONTRARY TO THE FACTS. 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN CONCLUDING THE DISALLOWANCE OF CLAIM O F EXPENDITURE EXHIBITS CONCEALMENT OF INCOME. THIS CONCLUSION OF THE LEARNED COMNIR. OF INCOME TA X (APPEALS) IS CONTRARY TO FACTS OF THE CASE AND ALSO AGAINST THE PRINCIPLES LAID DOWN BY VARIOU S JUDICIAL PRONOUNCEMENT. 5. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT PRAYS THAT LEARNED COMMR. OF INCOME TAX (APPEALS) HAS NOT CONSIDERED AND APPRECI ATED THE FACTS AND THE LEGAL SUBMISSIONS MADE BEFORE HIM AND HAS SUMMARILY REJECTED THE CLAIM OF THE APPELLANT AND CONFIRMED THE PENALTY LEVIED U/S. 271(1) (C) BY THE LEARNED INCOME TAX OFFICER. 6. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT PRAYS THAT THE PENALTY LEVIED U/S. 271(1)(C)AMOUNTING TO RS. 63,95,262!- BE DELETED. 7.THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D THE GROUNDS OF APPEAL WHICH ARE WITHOUT PREJUDICE TO ONE OTHER. GROUNDS OF APPEAL FILED BY THE ASSESSEE,FOR THE AY. 2003-04 READ AS UNDER: 1.ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEAR NED COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271(1)( C) OF INCOME TAX ACT,1961. THE APPELLANT PRAYS THAT THE BASIC CONDITIONS FOR LEVY OF PENALTY U/S 2 71(1)(C) ARE NOT SATISFIED AND ORDER PASSED BY LEARNED ASSESSING OFFICER AND CONFIRM BY CIT (APPEA LS) IS BAD IN LAW. THE APPELLANT PRAYS THAT THE PENALTY LEVIED U/S. 271(1)(C) BE DELETED. 2.ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEAR NED COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN CONCLUDING THAT THE CLAIM OF THE APPELLANT WAS NOT BONAFIDE AND WAS NOT AS PER LEGAL PROVISIONS. THE APPELLANT PRAYS THAT THE CONCLUSION REACHED BY THE LEARNED COMMR. OF INCOME TAX (APPEALS) IS ERRONEOUS AND CONTRARY TO THE FACTS. 3.ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEAR NED COMMR. OF INCOME TAX (APPEALS) HAS ERRED IN CONCLUDING THE DISALLOWANCE OF CLAIM OF EX PENDITURE EXHIBITS CONCEALMENT OF INCOME. THIS CONCLUSION OF THE LEARNED COMMR. OF INCOME TAX (APP EALS) IS CONTRARY TO FACTS OF THE CASE AND ALSO AGAINST THE PRINCIPLES LAID DOWN BY VARIOUS JUDICIA L PRONOUNCEMENT. 4.ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APPE LLANT PRAYS THAT LEARNED COMMR. OF INCOME TAX (APPEALS) HAS NOT CONSIDERED AND APPRECIATED THE FA CTS AND THE LEGAL SUBMISSIONS MADE BEFORE HIM AND HAS SUMMARILY REJECTED THE CLAIM OF THE APPELLA NT AND CONFIRMED THE PENALTY LEVIED U/S. 271(L)(C)BY THE LEARNED INCOME TAX OFFICER. 5.ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APPE LLANT PRAYS THAT THE PENALTY LEVIED U/S. 271(L)(C) AMOUNTING TO RS. 58,29,312/-BE DELETED. 6.THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL WHICH ARE WITHOUT PREJUDICE TO ONE OTHER. AS THE ISSUES INVOLVED IN BOTH THE APPEALS ARE IDEN TICAL I.E.LEVY OF PENALTY U/S.271(1)(C)OF THE ACT, SO,WE ARE ADJUDICATING THE APPEALS BY A SINGLE COMM ON ORDER. ITA NO. 1458/MUM/2014-AY.2002-03 2. ASSESSEE-COMPANY HAD FILED ITS RETURN OF INCOME ON 29.10.2002 DECLARING TOTAL TAXABLE INCOME OF RS. NIL.ASSESSMENT WAS FINALISED U/S.143(3) R.W. SECTION 147 OF THE ACT WAS COMPLETED BY THE ASSESSING OFFICER(AO)ON 18.03.2005 DETERMINING THE TOTAL TAXABLE INCOME OF THE COMPANY AT RS. 7.89 LACS.AFTER SETTING OFF BROUGHT FORWARD LOSSES, AO MADE FOLLOWING ADDITIONS TO THE INCOME OF THE ASSESSEE- I).ADDITION ON ACCOUNT OF SALES LOAD RECEIVED (RS.1 .43 CRORES) 3 ITA NO. 1458 & 1459/MUM/2014 HDFC ASSET MANAGEMENT CO MPANY LTD. II).DISALLOWANCE U/S. 40(A)/40A(2)(B) (RS.1.7 CRORE S ) III).DISALLOWANCE OF EXPENSES U/S. 37(1) OF THE ACT (RS. 4.82 LACS) HE ALSO INITIATED PENALTY PROCEEDING U/S.271(1)(C) OF THE ACT IN RESPECT OF THE ABOVE ADDITIONS. MEANWHILE ASSESSEE-COMPANY FILED AN APPEAL BEFORE T HE FIRST APPELLATE AUTHORITY (FAA), WHO DELETED THE ADDITION MADE ON ACCOUNT OF SALES LOAD RECEIVED.BUT,ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE U/S. 40(A)/40A(2)(B) AND 37(1) OF THE ACT WERE SUSTAINED. 2.1. DURING THE PENALTY PROCEEDINGS,AFTER CONSIDERING TH E REPLY FILED BY THE ASSESSEE WITH REGARD TO THE SHOW CAUSE NOTICE ISSUED,AO HELD THAT ASSESSEE DID NOT MAKE ANY SUBMISSION,THAT THE ASSESSEE HAD MADE PAYMENT TO TWO OF ITS GROUP CONCERNS WHICH WERE IN THE NATURE OF FEES FOR TECHNICAL SERVICES (FTS),THAT SUCH PAYMENTS ATTRACTED TDS PRO VISIONS OF SECTION 195 OF THE ACT, THAT THE ASSESSEE HAD NOT DEDUCTED ANY TAX AS PER THE PROVIS IONS OF THE ACT,THAT SAID EXPENSES WERE INADMI -SSIBLE U/S.40(A) OF THE ACT,THAT THE ASSESSEE HAD NOT MADE ANY SUCH DISALLOWANCE IN COMPUTATION OF INCOME IN THE RETURN FILED,THAT THE ASSESSEE MAD E INCORRECT SUBMISSION STATING THAT PAYMENTS WERE IN THE NATURE OF REIMBURSEMENT,THAT SUBMISSION S MADE BY THE ASSESSEE WERE FOUND TO BE NOT CORRECT BY THE AO AS WELL AS FAA IN THE QUANTUM PRO CEEDINGS,THAT SUBMISSION OF THE ASSESSEE WAS NOTHING BUT AN ATTEMPT TO CLAIM INADMISSIBLE EXPEND ITURE UNDER THE LAW,THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF TAXABLE INCOME, THAT DISALLOWANCE U/S.37(1) OF THE ACT WAS MADE ABOUT THE MEMBERSHIP FEES AND PAYMENTS TO CLUB ,THAT THE AO AND THE FAA HAD FOUND THAT THOSE EXPENSES WERE NOT REQUIRED TO BE INCURRED FOR THE ASSESSEES BUSINESS,THAT ASSESSEE HAD MADE FALSE CLAIM OF INADMISSIBLE EXPENSES.FINALLY,AO LEV IED PENALTY OF RS. 63.95 LACS,VIDE HIS ORDER DATED 28.03.2012,U/S.271(1)(C) OF THE ACT. 3. ASSESSEE-COMPANY FILED AN APPEAL BEFORE THE FAA.IT WAS SUBMITTED BEFORE HIM THAT ASSESSEE HAD NOT FURNISHED ANY INACCURATE PARTICULARS OF INC OME LEADING TO CONCEALMENT, THAT ASSESSEE HAD MADE A PAYMENT OF RS. 1.74 CRORES TO ITS ASSOCIATE ENTERPRISES, THAT THE PAYMENTS IN QUESTION WERE MADE BY WAY OF REIMBURSEMENT OF EXPENSES, THAT IT H AD DISCLOSED THESE TRANSACTION IN THE RETURN OF INCOME AS WELL AS IN THE TAX AUDIT REPORT, THAT THE NAME OF THE PARTIES AND NATURE OF PAYMENT ALONG WITH AMOUNT PAID WAS DISCLOSED VOLUNTARY BY THE ASS ESSEE. 3.1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND PENALTY ORDER,FAA HELD THAT AO HAD TAKEN NOTE OF SUBMISSION OF THE ASSESSEE AND HELD T HAT SAME WERE MISLEADING, THAT PENALTY WAS IMPOSED BY THE AO FOR CONCEALMENT OF PARTICULARS OF INCOME, THAT DISALLOWANCE MADE U/S. 40(A) OF THE ACT FOR DEFAULT OF TDS AS PER THE PROVISIONS OF SECTION 195 OF THE ACT HAD BEEN SUSTAINED IN THE APPELLATE PROCEEDINGS,THAT PROVISIONS OF SECTIO N 197/197A COULD HAVE BEEN AVAILED BY IT IN BONAFIDE MANNER,THAT THE EXPENDITURE WAS CLAIMED IN THE RETURN WITHOUT ANY DISCLOSURE,THAT SUCH NON-DISCLOSURE RAISED DOUBT ON THE ARGUMENT OF BONA FIDE CLAIM, THAT THE ARGUMENTS OF THE ASSESSEE WERE NOT SUPPORTED BY THE FACTS OF THE CASE.REFERRI NG TO THE JUDGMENT OF THE DHARMENDRA TEXTILE PROCESSORS(306ITR277),HE HELD THAT THE ARGUMENT AND SUBMISSION FOR BONA FIDE CLAIM OF EXPENDI - TURE WAS NOT SUSTAINABLE FOR IMPOSING CONCEALMENT P ENALTY,THAT THE DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSESSEE WAS BASED ON DEFAULT MADE B Y THE COMPANY U/S.195 OF THE ACT,THAT THE DISALLOWANCE WAS NOT BASED ON DIFFERENCE OF OPINION THAT DISALLOWANCE OF EXPENDITURE CLAIMED U/S. 37 OF THE ACT ALSO EXHIBITED CONCEALMENT OF INCOME. AS A RESULT, HE CONFIRMED THE PENALTY ORDER PASSED BY THE AO. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR) SUBMITTED T HAT ASSESSEE HAD DISCLOSED FULLY ALL THE MATERIAL FACTS,THAT IT HAD COMPLIED WITH THE PROVIS IONS OF THE ACT AND THE PROVISIONS OF FEMA REGARDING REMITTANCE OF FUNDS TO ITS ASSOCIATE ENTE RPRISES, THAT EVERY PAYMENT WAS SUPPORTED WITH VOUCHERS AND CERTIFICATES OF CHARTERED ACCOUNTANT A ND AN UNDERTAKING GIVEN TO THE AO, THAT ASSESSEE HAD CHALLENGED THE ORDER OF THE AO BEFORE THE FAA,THAT FAA HAD PARTLY ALLOWED THE APPEAL, THAT AFTER GIVING EFFECT TO THE ORDER OF TH E FAA, THERE WAS A LOSS, THAT IT DID NOT PURSUE THE MATTER BEFORE THE TRIBUNAL AS THERE WAS NO TAX LIAB ILITY FOR THE YEAR UNDER CONSIDERATION, THAT THE 4 ITA NO. 1458 & 1459/MUM/2014 HDFC ASSET MANAGEMENT CO MPANY LTD. LOSS SUFFERED BY ERSTWHILE ZURICH ASSET MANAGEMENT CO. LTD.(ZAMC) HAD LAPSED, THAT ZAMC HAD MERGED WITH THE ASSESSEE-COMPANY WHO WAS THE SU CCESSOR TO IT, THAT THERE WAS NO BENEFIT TO THE ASSESSEE TO CONTEST THE ADDITION,THAT AS A PRUD ENT BUSINESS DECISION ASSESSEE HAD NOT FILED APPEAL BEFORE THE TRIBUNAL,THAT THAT ASSESSEE HAD M ADE PAYMENTS TO ITS AES UNDER THE HEAD INTER - CONNECTION,NETWORK AND EXCESS CHARGES (RS.1,12,87,8 20/-), REGIONAL MANAGEMENT COST (RS. 43,43,965/-) AND TRAINING CHARGES (RS. 18 LACS ) FO R THE AY 2002-03, THAT DURING THE AY 2003-04 IT HAD INCURRED EXPENDITURE OF RS. 66.42 LACS AND R S. 91.33 LACS UNDER THE HEADS INTERCONNECTION, NETOWRK AND EXCESS CHARGES AND REGIONAL MANAGEMENT COST, THAT ASSESSEE WAS UNDER THE BONA - FIDE BELIEF THAT TAX WAS NOT TO BE DEDUCTED, THAT T HE PAYMENT MADE FOR LEASE LINE WAS NOT SUBJECT MATTER OF TDS,THAT THERE WAS NO INTENTION OR INCENT IVE FOR CONCEALING PARTICULARS OF INCOME, THAT BROUGHT FORWARD LOSS,AMOUNTING TO RS.7 CRORES,HAD L APSED.HE REFERRED TO PAGE NO. 19 OF PAPER BOOK SPECIALLY CLAUSE NO.18.HE ALSO REFERRED TO PA GE NO. 83,145-149 OF THE PB.HE RELIED UPON THE CASES OF IEMENS AKTIONGESELLSCHAFT(310 ITR 320),MAH INDRA & MAHINDRA(313ITR-AT-263,SB, MUMBAI),COCO COLA(7SOT234-DELHI). DEPARTMENTAL REPR ESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.BEFORE PROCEEDING FURTHER,WE WOULD LIKE TO MENTION SOME GENERAL PRINC IPLES THAT GOVERN THE IMPOSITION OF CONCEAL - MENT PENALTY.THEY CAN BE SUMMARISED AS UNDER: I .FOR LEVYING PENALTY U/S.271(1)(C) TWO FACTS SHOUL D CO-EXIT-FIRST THAT AMOUNT IN QUESTION SHOULD PART AND PARCEL OF THE INCOME OF THE ASSESSE E.SECONDLY,THE ASSESSEE SHOULD HAVE FILED INACCU -RATE PARTICULARS/CONCEALED PARTICULARS OF SUCH IN COME. II. EVIDENCES PRODUCED AND ISSUES DECIDED DURING ASSESS MENT PROCEEDINGS ARE NOT FINAL OR BINDING IN PENALTY PROCEEDINGS.PROVISIONS FOR FINALISING AS SESSMENT PROCEEDINGS AND FOR IMPOSING PENALTY HAVE BEEN INCORPORATED IN TAX LAWS FOR DIFFERENT PU RPOSES.DURING THE ASSESSMENT OR APPELLATE PROCEEDINGS AO OR THE FAA CAN DRAW A CONCLUSION THA T PARTICULAR ITEM FORMS PART OF INCOME OF THE ASSESSEE.BUT, SUCH CONCLUSION OR FINDING CANNOT OR SHOULD NOT BECOME SOLE BASIS FOR IMPOSING PENALTY.IN OTHER WORDS CONFIRMATION OF ANY DISALLOW ANCE OR ADDITION DURING THE ASSESSMENT OR APPELLATE PROCEEDINGS CANNOT BE BASIS FOR INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. III. THERE IS A DIFFERENCE BETWEEN A FALSE CLAIM AND A G ENUINE CLAIM.IN THE FIRST CASE,THE FACT OF INCURRING OF EXPENDITURE IS MISSING, WHERE AS IN TH E SECOND SITUATION, INCURRING OF EXPENDITURE IS NEVER IN DISPUTE.THE ONLY DISPUTE IS HOW TO TREAT T HAT EXPENDITURE -REVENUE EXPENDITURE OR CAPITAL EXPENDITURE.IN SUCH A CASE,PENALTY CANNOT BE IMPOSE D U/S. 271(1)( C ) OF THE ACT. IV. NON-DEDUCTION OF TAX AS PER THE PROVISIONS OF CHAPT ER XVII OF THE ACT,SHOULD NOT RESULT IN IMPOSITION OF PENALTY U/S.271(1)(C) OF THE ACT.NON DEDUCTION OF TAX AT SOURCE CAN RESULT IN OTHER CONSEQUENCES,BUT IMPOSITION OF CONCEALMENT PENALTY IN SUCH CASES IS IMPERMISSIBLE. V. IN THE MATTER OF KARAN RAGHAV EXPORTS P.LTD.(349 IT R112)HONBLE DELHI HIGH COURT HAS HELD THAT IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961,IS NOT AKIN TO OR LIKE CRIMINAL PROCEEDING,THAT IT IS NOT MANDATORY T HAT IN EACH CASE WHERE ADDITION OR DISALLOWANCE IS MADE BY THE AO,PENALTY MUST AND SHOULD BE IMPOSE D,THAT WHEN AN ASSESSEE ESTABLISHES THAT HE HAD ACTED BONA FIDE AND ALL FACTS AND MATERIAL WERE DISCLOSED BY HIM PENALTY SHOULD NOT BE IMPOSED.ON THE BASIS OF THE ABOVE DECISION IT CAN S AFELY SAID THAT THE CAVEAT,WITH REGARD TO IMPOSITION OF PENALTY U/S.271(1)(C)OF THE ACT,IS TH AT THE ASSESSEE MUST HAVE PLACED ALL HIS CARDS ON THE TABLE BY DISCLOSING EACH AND EVERY FACT TO THE DEPARTMENTAL AUTHORITIES.IF THE ASSESSEE DOES SO,THEN MERELY BECAUSE THE DEPARTMENTAL AUTHORITIES CONCERNED DOES NOT CONCUR WITH THE LEGAL STAND ADOPTED BY THE ASSESSEE THAT WILL NOT BE REAS ON ENOUGH TO HOLD THAT THE ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OR OF FURNISHING INACCURATE D ETAILS. 5.1. WE FIND THAT AS PER THE FAA,THE FAILURE OF THE ASSE SSEE TO FILE SOME CLARIFICATION REGARDING 5 ITA NO. 1458 & 1459/MUM/2014 HDFC ASSET MANAGEMENT CO MPANY LTD. TDS PROVISIONS, NON AVAILING PROVISIONS OF 197 BY I T AND VIOLATION OF PROVISIONS OF SECTION 195 AS WELL AS OF 40(A) OF THE ACT BY THE ASSESSEE-COMPANY JUSTIFIED THE LEVYING CONCEALMENT PENALTY.IN OUR OPINION, NONE OF THESE REASONS CAN JUSTIFY IMPO SITION OF PENALTY U/S.271(1)(C)OF THE ACT.IT IS A FACT THAT BEFORE MAKING PAYMENT TO THE AES THE ASSE SSEE HAD INFORMED THE AO AS WELL AS THE RBI.AO HAS NOT CHALLENGED THE FACT THAT THE ASSESSE E HAD FURNISHED THE CERTIFICATES ISSUED BY THE CA ABOUT THE PAYMENTS MADE OUTSIDE INDIA.IF EACH AN D EVERY PAYMENT MADE BY THE ASSESSEE WAS REPORTED BY IT TO THE AO,THEN IT CANNOT BE HELD THA T THERE WAS CONCEALMENT OF FACTS.AO AND THE ASSESSEE HAD DIFFERENT OPINION ABOUT THE PAYMENTS M ADE.AS PER THE AO ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE,WHEREAS ASSESSEE WAS OF THE OPINION THAT PROVISIONS OF CHAPTER XVII WERE NOT APPLICABLE.EVEN IF THE STAND TAKEN BY THE ASSES SEE WAS NOT CORRECT AND TAX WAS TO BE DEDUCTED ACTION AGAINST IT SHOULD HAVE BEEN TAKEN UNDER THAT CHAPTER AND NOT AS PER THE PROVISIONS OF CHAPTER XXI OF THE ACT.WHETHER THE PAYMENTS MADE BY THE ASS ESSEE WERE REIMBURSEMENT OR NOT IS TOTALLY DIFFERENT ISSUE AS FAR AS IMPOSING OF PENALTY U/S.2 71(1)(C) IS CONCERNED.WE HAVE TAKEN NOTE OF THE FACT THAT BROUGHT FORWARD LOSSES OF THE ASSESSEE AM OUNTING TO RS.7 CRORES HAD LAPSED.IT IS NOT DECIDING FACTOR,BUT ONE OF THE RELEVANT FACTOR. CONSIDERING THE TWO PECULIAR FACTS OF THE CASE;ONE- BASIS FOR IMPOSING PENALTY IS VIOLATION OF PROVISIONS OF SECTION 195 AND TWO-THE REPORTING OF THE PAYMENTS BY THE ASSESSEE TO THE AO IN FORM OF THE CERTIFICATE OF THE CA;WE ARE OF THE OPINION THAT IT IS NOT A FIT CASE FOR LEVYING PENALTY U/S.271(1)(C) OF THE ACT.SO, REVERSING THE ORDER OF THE FAA,WE DECIDE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. ITA NO. 1459/MUM/2014-AY-2003-04. 6. ASSESSEE HAD FILED ITS RETURN OF INCOME FOR THE YEA R UNDER APPEAL AT RS. NIL AND ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT DETERMINING THE TOT AL INCOME AT RS. 37.31 LACS AFTER ALLOWING THE SET OFF BROUGHT FORWARD LOSSES.DURING THE ASSESSMEN T PROCEEDINGS,AO HAD MADE DISALLOWANCE OF RS.1.57 CRORES U/S.40(A)/40A(2)(B) OF RS. 85,685/- FOR THE EXPENSES CLAIMED U/S. 37 OF THE ACT. AO ALSO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C ) FOR THE SAID ADDITIONS AND THE FAA SUSTAINED THE DISALLOWANCES.AO ISSUED A SHOW CAUSE NOTICE FOR LEVYING PENALTY AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HE LEVIED PENALTY OF RS . 58,29,312/- FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS.ASSESS EE PREFERRED AN APPEAL BEFORE THE FAA, WHO CONFIRMED THE ORDER OF THE AO ON THE IDENTICAL BASE THAT WAS ADOPTED BY HIM FOR THE EARLIER AY. 7. BEFORE US,AR SAME SUBMISSIONS THAT WERE MADE FOR TH E EARLIER YEAR.IN ADDITION TO THAT HE FURTHER THAT THE ASSESSEE HAD RETURNED NIL INCOME UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION, THAT CAPITAL GAINS WERE NOT ALLOWED BY THE AO AGAIN ST THE BROUGHT FORWARD DEPRECIATION,THAT IT HAD BROUGHT FORWARD LOSS AND DEPRECATION MORE THAN RS. 1 CRORE,THAT IT WAS ASSESSED AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT,THAT AS PER THE JUDGMENT OF HONBLE HIGH COURT OF DELHI DELIVERED IN THE CASES OF NALWA SONS INVESTMENTS LT D.(327ITR543)PENALTY U/S. 271(1)(C) COULD NOT BE LEVIED WHERE ASSESSEE HAD BEEN TAXED AS PER THE MAT PROVISIONS.DR RELIED UPON THE ORDER OF THE AO AND FAA. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT ASSESSEE WAS ASSESSED TO TAX UNDER THE MAT PROVISIONS.IN THE CASE OF NALWA SONS INVESTMENTS LTD.(SUPRA) HONBLE DELHI HIGH COURT HAS HELD AS UNDER: UNDER THE SCHEME OF THE INCOME-TAX ACT, 1961, THE TOTAL INCOME OF THE ASSESSEE IS FIRST COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT AND TAX PAYA BLE ON SUCH TOTAL INCOME IS COMPARED WITH THE PRESCRIBED PERCENTAGE OF THE BOOK PROFITS COMPUTED UNDER SECTION 115JB OF THE ACT. THE HIGHER OF THE TWO AMOUNTS IS REGARDED AS TOTAL INCOME AND TAX IS PAYABLE WITH REFERENCE TO SUCH TOTAL INCOME. IF THE TAX PAYABLE UNDER THE NORMAL PROVISI ONS IS HIGHER, SUCH AMOUNT IS THE TOTAL INCOME OF THE ASSESSEE, OTHERWISE, THE BOOK PROFITS ARE DE EMED AS THE TOTAL INCOME OF THE ASSESSEE IN TERMS OF SECTION 115JB OF THE ACT. WHERE THE INCOME COMPU TED IN ACCORDANCE WITH THE NORMAL PROCEDURE IS LESS THAN THE INCOME DETERMINED BY LEGAL FICTION , NAMELY, THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT AND THE INCOME OF THE ASSESSEE IS ASSESSED UNDER SECTION 115JB AND NOT UNDER THE NORMAL 6 ITA NO. 1458 & 1459/MUM/2014 HDFC ASSET MANAGEMENT CO MPANY LTD. PROVISIONS, THE TAX IS PAID ON THE INCOME ASSESSED UNDER SECTION 115JB OF THE ACT. CONCEALMENT OF INCOME WOULD HAVE NO ROLE TO PLAY AND WOULD NOT LEA D TO TAX EVASION. THEREFORE, PENALTY CANNOT BE IMPOSED ON THE BASIS OF DISALLOWANCES OR ADDITIONS MADE UNDER THE REGULAR PROVISIONS. AS THE FACTS OF THE CASE UNDER CONSIDERATION ARE SI MILAR TO THE FACTS OF THE EARLIER AY.,WE ARE OF THE OPINION THAT CONSIDERING THE PECULIAR FACTS AND CIR CUMSTANCES NO PENALTY SHOULD HAVE BEEN LEVIED U/S.271(1)(C)OF THE ACT. RESPECTFULLY,FOLLOWING THE ABOVE REFERRED DECISION OF THE HONBLE DELHI HIGH COURT AND CONSIDERING THE STAND TAKEN BY US FOR THE EARLIER A SSESSMENT YEAR,WE ALLOW THE APPEAL FILED BY THE ASSESSEE-COMPANY FOR AY.2003-04 ALSO. AS A RESULT,APPEAL FILED BY THE ASSESSEE FOR BOTH THE YEARS STAND ALLOWED. 718 '01 9'' )': 3 5 ) ; +< 3 = %> 3 %'1 ?. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH APRIL,2014 . )&6 3 4+ ' & ''' = A) ' 9 .B ] 201 4 3 5 C SD/- SD/- ( . / D.MANMOHAN) ( '%&'( '%&'( '%&'( '%&'( / RAJENDRA) !'#$ / VICE PRESIDENT &' &' &' &' )* )* )* )* /ACCOUNTANT MEMBER / MUMBAI, A) ' /DATE: 09.04.2014. SK )&6 )&6 )&6 )&6 3 33 3 .1D .1D .1D .1D E&D+1 E&D+1 E&D+1 E&D+1 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / ',- 2. RESPONDENT / ./,- 3. THE CONCERNED CIT(A)/ F G , 4. THE CONCERNED CIT / F G 5. DR H BENCH, ITAT, MUMBAI / DH'5 .1 ,P ,P,P ,P , . . ''' . 6. GUARD FILE/ 5' 7' /'D1 /'D1 /'D1 /'D1 .1 .1.1 .1 //TRUE COPY// )&6' ' / BY ORDER, ! / ' %' DY./ASST. REGISTRAR , /ITAT, MUMBAI