M/s. DCM International Ltd., New Delhi V. ACIT, New Delhi

ITA 1776/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7373 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 26-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI J.S. REDDY ITA NO. 1776 /DEL/201 3 ASSESSMENT YEAR: 200 5 - 0 6 DCM INTERNATIONAL LTD., VS. ASSISTANT CIT, UGF SOUTH WING, CIRCLE 1 0(1), NBCC PLACE BISHMA PITMAN MARG, NEW DELHI. NEW DELHI. (P A N: A AACD1018Q ) (APPLICANT) (RESPONDENT) ASSESSEE BY: S H RI RAJNISH AGGARWAL, CA REVEN UE BY: SMT. PAR W INDER KAUR, SR. DR ORDER PER I.C. SUDHIR : JUDICIAL MEMBER THE ASSESSEE HAS QUESTIONED THE FIRST APPELLATE ORDER SUSTAINING THE PENALTY LEVIED UNDER SEC. 271(1)(C) OF THE INCOME - TAX ACT, 1961 ON THE FOLLOW ING GROUNDS: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE A.O. IN LEVYING PENALTY UNDER SEC. 271(1)(C) AMOUNTING TO RS.9,51,405. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE PENALTY LEVIED BY THE ASSESSING OFFICER IN RESPECT OF PROVISION FOR DIMINUTION IN VALUE OF ASSETS WHICH WAS INADVERTENTLY NOT ADDED BACK IN THE COMPUTATION OF INCOME AND WHICH WAS 2 SUBSEQUENTLY OFFERED FOR TAX AS SOON AS IT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN LEVYING THE PENALTY UNDER SEC. 271(1)(C) IN RESPECT OF AN ITEM, THE PARTICULA RS OF WHICH STOOD ALREADY DISCLOSED IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND THE SO - CALLED MISTAKE WAS POINTED OUT BY THE ASSESSING OFFICER ONLY FROM SUCH DETAILS FILED BY THE ASSESSEE. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED C IT(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN LEVYING THE PENALTY UNDER SEC. 271(1)(C) BY IGNORING THE FACT THAT THE ASSESSEE WOULD NOT HAVE GAINED ANY MONETARY BENEFIT BY INTENTIONALLY NOT ADDING BACK THE PROVISION FOR DIMINUTION IN VALUE OF INVESTMENT AS IT HAS BEEN INCURRING HEAVY LOSSES FROM YEAR TO YEAR AND ADDING THIS AMOUNT IN THE COMPUTATION OF INCOME WOULD NOT HAVE MADE ANY EFFECT IN THE TAX LIABILITY, WHICH PROVED THE BONA FIDE OF THE ASSESSEE. 5. IN THE FACTS AND CIRCUMST ANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN NOT FOLLOWING THE RATIO OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF KC BUILDERS V. CIT [2004] 135 TAXMANN 461 (S.C) THAT MERE OMISSION, FROM THE RETURN OF AN ITEM OF RECEIPT/INCOME DOES NEITHER AMOUNT TO CONCEALMENT NOR DELIBERATE FURNISHING OF INACCURATE PARTICULARS OF INCOME UNLESS AND UNTIL THERE IS SOME EVIDENCE TO SHOW OR SOME CIRCUMSTANCES FOUND FROM WHICH IT CAN BE GATHERED THAT THE OMISSION WAS ATTRIBUTABLE TO AN INTENTION OR DESIRE ON T HE PART OF THE ASSESSEE TO HIDE OR CONCEAL THE INCOME SO AS TO AVOID THE IMPOSITION OF TAX THEREON. 3 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT FOLLOWING THE RATIO OF DECISIONS OF VARIOUS COURTS, INCLUDING THE DECISION OF JU RISDICTIONAL HON BLE ITAT DATED 19.11.2008 IN ITA NO.1246/DEL/2008, ON AN IDENTICAL ISSUE, RELIED UPON BY THE ASSESSEE IN SUPPORT OF THE FACT THAT THE FACTS AND CIRCUMSTANCES OF THE CASE DOES NOT WARRANT LEVY OF PENALTY U/S 271(1)(C). 2. HEARD AND CONSIDE RED THE ARGUMENTS ADVANCED BY THE PARTIES. 3. THE ISSUE INVOLVED IS AS TO WHETHER THE AO WAS JUSTIFIED IN IMPOSING PENALTY U/S 271(1)(C) IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, SUSTAINED BY THE LD. CIT(A)? 4. THE FACTS IN BRIEF ARE THAT THE ASS ESSEE IS ENGAGED IN INTERNATIONAL TRADING, EXPORT BUSINESS AND CONSULTANCY. I N ITS RETURN IT HAD CLAIMED EXPENSES OF RS.26,00,000/ - ON ACCOUNT OF PROVISIONS FOR DIMINUTION IN THE VALUE OF INVESTMENTS. THE RETURN WAS PR OC ESSED AND REFUND OF RS.8,06,320/ - WAS ALLOWED. THE REOPENING PROCEEDINGS U / S 147 OF THE ACT WERE INITIATED ON THE BASIS THAT THE ABOVE CLAIMED EXPENSES ON ACCOUNT OF PROVISIONS FOR DIMINUTION IN THE VALUE OF INVESTMENTS WAS NOT AN ASCERTAINED LIABILITY AND CANNOT BE QUANTIFIED AT THE TIME OF FINALIZATION OF ACCOUNTS, HENCE NOT ALLOWABLE. IN THE PENALTY PROCEEDINGS, TH E AO DID NOT AGREE WITH THE EXPLANATION OF THE ASSESSEE AND DISALLOWED THE CLAIMED EXPENSES COMPUTING THE LOSS AT RS.10.63,455/ - AGAINST THE DE CLARED LOSS AT RS.36,63,455/ - ( RS.36,63,455 - RS.26,00,000). THE AO HAS LEVIED PENALTY U/S 271(1)(C) OF THE ACT AT RS.9,51,405/ - ON THE SAID DISALLOWANCE ON THE BASIS THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME. THE LD. CIT(A ) HAS SUSTAINED THE SAME. 5. THE CON TENTION OF LD. AR REMAINED THAT THE CASE OF THE ASSESSEE DOES NOT FALL IN THE CATEGORY OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AS THE 4 CLAIMED EXPENSES IN QUESTION WAS NOT INTENTIONAL MORE SO WH EN IT WAS HAVING HUGE ACCUMULATED LOSSES AND FURTHER THAT THE ASSESSEE WHILE MAKING COMPUTATION OF INCOME RELIED ON THE COMPETENCE OF PROFESSIONAL. THE LD. AR POINTED OUT THAT THE ASSESSEE COMPANY HAD BEEN SUFFERING LOSS FROM THE AY 1999 - 2000 AND BY THE ALLEGED FURNISHING OF INACCURATE PARTICULARS IT WAS NO T GOING TO BE BENEFITTED. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: - I) PRICE WATERHOUSE COOPERS PVT. LTD. VS CIT 348 ITR 306 (SC); II) CIT VS GLOBAL GREEN CO. (2014) 42 TAXMAN. COM 31 (DEL); III) ADIT VS DOLPHIN DRILLING LTD. (2010) 45 TAXMAN.COM 246 (DEL, ITAT ). 6. THE LD. SR. DR ON THE CONTRARY TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW AND RELIED UPON THE DECISIONS FOLLOWED BY THEM INCLUDING THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS ZOOM COMMUNICATION (P.) LTD. (2010) 327 ITR 51 0 (DEL.). 7. AFTER HA V ING GONE THROUGH HE DECISIONS RELIED UPON BY THE PARTIES , WE FIND THAT THE RATIO LAID DOWN THERE IS THAT PENALTY U/S 271(1)(C) CAN NOT BE LEVIED WH EN THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THAT THE COMMITTED MISTAKE WAS AN INADVERTENT AND BONAFIDE AND THE ASSESSEE THEREBY HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CO NCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME. 8. I F WE EXAMINE THE FACTS OF THE PRESENT CASE IN THE BACKGROUND OF THE FACTS OF THE CITED CASES AND THE VERY RATIO LAID DOWN THEREIN, WE DO NOT FIND REASON TO DOUBT THE EXPLANATION OF THE ASSESSEE WHILE DEFENDING THE ALLEGATION OF FURNISHING INACCURATE PARTICULARS OF INCOME TO ATTRACT THE PENAL PROVISIONS U/S 271(1)(C) OF THE ACT. IT IS TRUE THAT THE MISTAKE WA S POINTED OUT BY THE AO DURING THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT BUT IT IS ALSO A FACT THAT ON 5 REALIZATION OF ITS MISTAKE , THE ASSESSEE SURRENDERED THE CLAIMED DISALLOWANCE. BESIDES, ONLY FROM THE DISCLOSED FACTS IN ITS RETURN OF INCOME THE AO COULD GATHER THAT THE CLAIMED EXP ENSE WAS NOT ALLOWABLE. THE UNDISPUTED FACT THA T THE ASSESSEE HAD BEEN SUFFERING LOSS FROM THE A.Y.1999 - 2000 ALSO SUPPORTS THE BONAFIDE OF THE ASSESSEE. WE THUS KEEPING IN MIND THE ABOVE FACTS COME TO THE CONCLUSION T HAT THE CLAIMED EXPENDITURE WAS NOT AN ACT OF FURNISHING INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE, HENCE DOES NOT ATTRACT THE PENAL PROVISIONS LAID DOWN U/S 271(1)(C) OF THE ACT. KEEPING IN VIEW ITS PENAL NATURE THE LEGISLATURE AND TH E HON BLE COURTS IN ITS DECISIONS HAVE MADE IT CLEAR THAT THE PROVISIONS UNDER SECTION 271(1)(C) CANNOT BE INVOKED I N ABSENCE OF CLEAR FINDING THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREFORE AND THE ASSESS EE HAS FAILED TO EXPLAIN ITS BONAFIDE FOR THE SAME OR THE EXPLANATION FURNISHED BY THE ASSESSEE WAS FOUND FALSE. WE THUS WHILE SETTING ASIDE THE ORDERS OF AUTHORITIES BELOW , DIRECT THE AO TO DELETE THE PENALTY. THE GROUNDS ARE THUS ALLOWED. 9. I N THE RES ULT THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 . 1 0.2014 SD/ - SD/ - ( J .S.R EDDY ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 / 1 0/201 4 MOHAN LAL /AMIT KUMAR COPY FORWARDED TO: 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR:ITAT ASSISTANT REGISTRAR