M/s. EQUEST (I) P. LTD., Mumbai V. ITO - 3(1) 3, MUMBAI

ITA 1548/MUM/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1229 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-06-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 06-03-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA
• Section: 271(1)(c)

Judgement Text

ITA NO. 1548/MUM/06 ASSESSMENT YEAR 1999- 2000 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH, MUMBAI BEFORE SHRI D K AGARWAL (JUDICIAL MEMBER), AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER). ITA NO. 1548/MUM/06 ASSESSMENT YEAR 1999-2000 EQUEST INDIA PRIVATE LIMITED .APPELLANT 75-77, PARK HOUSE ANNEXE WOODHOUSE ROAD, COLABA, MUMBAI 400 005(PAN : AAACE2414P) VS. INCOME TAX OFFICER - WARD 3(1)(3), MUMBAI . RESPONDENT APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI VIRENDRA OJHA O R D E R PER PRAMOD KUMAR: 1. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THIS APPEAL IS WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN UPHOLDIN G THE PENALTY OF RS 6,39,040 IMPOSED ON THE ASSESSEE UNDER SECTION 271( 1)(C) OF THE INCOME TAX ACT, 1961. THE ASSESSMENT YEAR INVOLVED IS 1999 -2000. 2. THE ISSUE IN APPEAL LIES IN A VERY NARROW COMPAS S OF FACTS. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF, I NTER ALIA, INVESTMENT, ITA NO. 1548/MUM/06 ASSESSMENT YEAR 1999- 2000 PAGE 2 OF 7 HORSE BREEDING, AND HORSE RACING. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE HAS INCURRED CERTAIN EXPENSES FOR MAINTAINING HORSE RACES FOR RU NNING IN HORSE RACES. THESE EXPENSES WERE QUANTIFIED AT RS 56,44,906, TH OUGH IN APPEAL THE QUANTUM OF THESE EXPENSES WAS REDUCED TO RS 18,25,8 28. THE ASSESSING OFFICER FURTHER OBSERVED THAT, IN TERMS OF PROVISIO NS OF SECTION 74 A OF THE INCOME TAX ACT, THE EXPENSES SO INCURRED ON MAI NTENANCE OF RACE HORSES COULD ONLY BE SET OFF AGAINST GAINS FROM RAC E HORSES. ON THIS BASIS, THE EXPENSES WERE DISALLOWED IN COMPUTATION OF BUSI NESS PROFITS, THOUGH CARRIED FORWARD TO BE SET OFF AGAINST GAINS, IF ANY , FROM HORSE RACING IN ENSUING ASSESSMENT YEARS. THIS STAND HAS ALSO BEEN CONFIRMED BY A COORDINATE BENCH OF THIS TRIBUNAL, VIDE ORDER DATED 27 TH MARCH 2007. IT IS IN CONNECTION WITH THIS DISALLOWANCE THAT THE ASSES SING OFFICER ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C) FOR, WHAT H E TERMED AS, CONCEALMENT OF PARTICULARS OF INCOME. AGGRIEVED, AS SESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US . 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. ITA NO. 1548/MUM/06 ASSESSMENT YEAR 1999- 2000 PAGE 3 OF 7 4. A PLAIN READING OF THE TRIBUNALS ORDER IN THE Q UANTUM PROCEEDINGS WOULD SHOW THAT THE STAND OF THE ASSESSING OFFICER HAS BEEN CONFIRMED ON THE GROUND THAT THE BUSINESS ACTIVITY OF THE ASSES SEE IS TO OWN AND MAINTAIN THE RACE HORSES, SINCE DOMINANT PURPOSE OF ALL HIS ACTIVITIES IS TO ACQUIRE AND MAINTAIN THE RACE HORSES AND THAT THE ACTIVITY OF LEASING MARES FOR BREEDING, ENTERING INTO LEASE OPTIONS AND ALL OTHER ACTIVITIES ARE WHOLLY INCIDENTAL TO THE MAIN ACTIVITY OF OWNING AN D MAINTAINING THE RACE HORSES. AS TO WHETHER THE DOMINANT PURPOSE OF A LL THE ACTIVITIES IS TO OWN AND MAINTAIN RACE HORSES OR NOT IS ESSENTIALLY A SUBJECTIVE AREA, AND THE PERCEPTIONS MAY DIFFER. MERELY BECAUSE THE ASSE SSEE HAS A DIFFERENT PERCEPTION OF THE SITUATION THAN THE ASSESSING OFFI CER, EVEN THOUGH, IN THE ULTIMATE ANALYSIS, THE STAND OF THE ASSESSING OFFIC ER IS TO BE UPHELD, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ANY PARTICULARS. THE EXPRESSION FURNISHING OF INACCURATE PARTICULARS OF INCOME HAS ALSO NOT BEEN DEFINED IN THE ACT. THE EXPRESSION INACCURATE REFERS TO NOT IN CONFORMITY WITH THE FACT OR TRUTH AND THAT IS THE MEANING WHICH, IN OUR CONSIDERED VIEW, IS RELEVANT IN THE CONTEXT OF FUR NISHING OF INACCURATE PARTICULARS. THE EXPRESSION PARTICULARS REFERS TO FACTS, DETAILS, SPECIFICS, OR INFORMATION ABOUT SOMEONE OR SOMETHIN G. THEREFORE, THE PLAIN MEANING OF THE EXPRESSION FURNISHING OF INAC CURATE PARTICULARS OF INCOME IMPLIES FURNISHING OF DETAILS OR INFORMATIO N ABOUT INCOME WHICH ARE NOT IN CONFORMITY WITH THE FACTS OR TRUTH. TH E DETAILS OR INFORMATION ITA NO. 1548/MUM/06 ASSESSMENT YEAR 1999- 2000 PAGE 4 OF 7 ABOUT INCOME DEAL WITH THE FACTUAL DETAILS OF INCOM E AND THIS CANNOT BE EXTENDED TO AREAS WHICH ARE SUBJECTIVE SUCH AS THE STATUS OF TAXABILITY OF AN INCOME, ADMISSIBILITY OF A DEDUCTION AND INTERPR ETATION OF LAW. THE FURNISHING OF INACCURATE INFORMATION THUS RELATES T O FURNISHING OF FACTUALLY CORRECT DETAILS AND INFORMATION ABOUT INC OME. THE ADMISSION OR REJECTION OF A CLAIM IS A SUBJECTIVE EXERCISE AND W HETHER A CLAIM IS ACCEPTED OR REJECTED HAS NOTHING TO DO WITH FURNISH ING OF INACCURATE PARTICULARS OF INCOME. THE AUTHORITIES BELOW HAVE APPARENTLY PROCEEDED TO TREAT ASSESSEES MAKING AN INCORRECT CLAIM OF IN COME AS FURNISHING OF INACCURATE PARTICULARS. WHAT IS A CORRECT CLAIM AND WHAT IS AN INCORRECT CLAIM IS A MATTER OF OPINION. IN OUR CONSIDERED VIE W, RAISING A LEGAL CLAIM, EVEN IF IT IS ULTIMATELY FOUND TO BE LEGALLY UNACCE PTABLE, CANNOT AMOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN ACCURATE, AS WE HAVE NOTED ABOVE, IS SOMETHING FACTUALLY INCORRECT AND I NTERPRETATION OF LAW CAN NEVER BE A FACTUAL ASPECT. THE DEVELOPMENT OF LAW IS A DYNAMIC PROCESS WHICH IS AFFECTED BY THE INNUMERABLE FACTOR S, AND IT IS ALWAYS AN ONGOING EXERCISE. IN SUCH CIRCUMSTANCES, A BONAFIDE LEGAL CLAIM BY THE ASSESSEE BEING VISITED WITH PENAL CONSEQUENCES ONL Y BECAUSE IT HAS NOT BEEN ACCEPTED THUS FAR BY THE TAX AUTHORITIES OR JU DICIAL AUTHORITIES IS AN ABSURDITY. IN ANY EVENT, AS WE HAVE NOTED ABOVE, TH E CONNOTATIONS OF EXPRESSION PARTICULARS OF INCOME DO NOT EXTEND TO THE ISSUES OF INTERPRETATION OF LAW AND AS SUCH MAKING A CLAIM, W HICH IS FOUND TO BE UNACCEPTABLE IN LAW, CANNOT BE TREATED AS FURNISHIN G OF INACCURATE ITA NO. 1548/MUM/06 ASSESSMENT YEAR 1999- 2000 PAGE 5 OF 7 PARTICULARS OF INCOME. IN THIS VIEW OF THE MATTER, THE CASE OF THE ASSESSEE CAN NOT BE SAID TO BE A CASE OF FURNISHING OF INAC CURATE PARTICULARS OF INCOME, IN ITS NATURAL SENSE, EITHER. THIS SCHOOL OF THOUGHT HAS NOW BEEN CONFIRMED BY THE HONBLE SUPREME COURT, IN THE CASE OF RELIANCE PETROCHEM LIMITED VS CIT ( 322 ITR 158 ) WHEREI N THEIR LORDSHIPS WERE CONCERNED WITH THE QUESTION WHETHER IN THIS C ASE, AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS , AS HAS BEEN THE QUESTION IN THE PRESENT CASE, AND IT IS IN THIS CON TEXT THAT THEIR LORDSHIPS NOTED THAT IN THIS CASE, THERE IS NO FIN DING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND T O BE INCORRECT OR ERRONEOUS OR FALSE AND ADD THAT SUCH BEING THE CA SE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1)(C) OF THE ACT AND THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUST AINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING INCOME OF THE ASSESSEE. THE SITUATION THAT WE ARE DEALING WITH IS MATERIALLY SIMILAR INASMUCH THE PENALTY HAS BEEN I MPOSED ONLY FOR CONCEALMENT OF PARTICULARS AND IT HAS NOT BEEN THE CASE OF THE REVENUE AT ANY STAGE THAT ANY FACTUAL PARTICULARS FURNISHED BY THE ASSESSEE ARE FALSE. THE PENALTY HAS BEEN IMPOSED BECAUSE OF LEGAL INADM ISSIBILITY OF THE CLAIM OF DEDUCTION, WHICH IS REJECTED ON THE GROUND S OF APPLICATION OF SECTION 74 A OF THE ACT. IN VIEW OF THESE DISCUSSI ONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDER ED VIEW THAT IT WAS INDEED NOT A FIT CASE FOR IMPOSITION OF PENALTY UND ER SECTION 271(1)(C) OF ITA NO. 1548/MUM/06 ASSESSMENT YEAR 1999- 2000 PAGE 6 OF 7 THE ACT. WE, THEREFORE, DIRECT THE ASSESSING OFFICE R TO DELETE THE IMPUGNED PENALTY. 5. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 25 TH DAY OF JUNE, 2010. SD/XX SD/XX (D K AGARWAL) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 25 TH DAY OF MAY, 2010. COPY FORWARDED TO : 1. THE APPLICANT 2. THE RESPONDENT 3. CIT, , MUMBAI 4. COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, C BENCH, ITAT, MUMB AI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI ITA NO. 1548/MUM/06 ASSESSMENT YEAR 1999- 2000 PAGE 7 OF 7 DATE INITIAL 1. DRAFT DICTATED ON 18.6.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 21.6.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 21.6.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 21.6.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 21.6.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 25.6.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 25.6.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER