DCIT, New Delhi V. M/s Vikram Bakshi & Co. Pvt. Ltd, New Delhi

ITA 1841/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61785 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 12-07-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 22-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH H HH H : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.1841/DEL/2010 1841/DEL/2010 1841/DEL/2010 1841/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2002 2002 2002 2002- -- -03 0303 03 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -17(1), 17(1), 17(1), 17(1), NEW DELH NEW DELH NEW DELH NEW DELHI. I.I. I. VS. VS. VS. VS. M/S VIKRAM BAKSHI & CO.PVT.LTD., M/S VIKRAM BAKSHI & CO.PVT.LTD., M/S VIKRAM BAKSHI & CO.PVT.LTD., M/S VIKRAM BAKSHI & CO.PVT.LTD., TOP FLOOR, MOHAN DEV BUILDING, TOP FLOOR, MOHAN DEV BUILDING, TOP FLOOR, MOHAN DEV BUILDING, TOP FLOOR, MOHAN DEV BUILDING, 13, TOLSTOY MARG, 13, TOLSTOY MARG, 13, TOLSTOY MARG, 13, TOLSTOY MARG, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. PAN : AAACV0661P. PAN : AAACV0661P. PAN : AAACV0661P. PAN : AAACV0661P. (APPELLANT) (RESPONDENT) APPELLANT BY : DR.B.R.R.KUMAR, SR.DR. RESPONDENT BY : SHRI SUMANT CHADHA, CA. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THE ONLY GROUND RAISED IN THIS APPEAL BY THE REVEN UE IS AGAINST THE CANCELLATION OF PENALTY OF ` 10,98,757/- LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME-TAX A CT, 1961. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF BUILDING MAINTENANCE AND RENTING OF PROPERTIES. DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE HAS SECURED THE LOAN OF ` 7.71 CRORES FROM HDFC BANK WHICH WAS PARTLY INVESTED IN THE SHARE OF TWO COMPANIES. THE ASSESS ING OFFICER DISALLOWED THE INTEREST AMOUNTING TO ` 30,77,750/- BY INVOKING THE PROVISIONS OF SECTION 14A OF THE IT ACT. HE ALSO L EVIED THE PENALTY UNDER SECTION 271(1)(C) THEREON AMOUNTING TO ` 10,98,757/-. THE CIT(A) CANCELLED THE PENALTY. HENCE, THIS APPEAL B Y THE REVENUE. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED DR THAT THE ASSESSEE HAS UTILIZED THE BORROWED MONEY F OR ACQUISITION OF SHARES. THESE SHARES WERE HELD AS AN INVESTMENT AN D NOT AS A TRADING ITA-1841/DEL/2010 2 STOCK, THEREFORE, THE INVESTMENT WAS EITHER FOR THE PURPOSE OF EARNING CAPITAL GAIN OR EARNING OF DIVIDEND. THAT THE DIVI DEND INCOME WAS EXEMPT UNDER SECTION 10(33), THEREFORE, ANY EXPENDI TURE INCURRED FOR EARNING OF DIVIDEND WAS TO BE DISALLOWED UNDER SECT ION 14A. THE ASSESSEE KNOWING ALL THE FACTS CLAIMED THE DEDUCTIO N OF INTEREST WITHOUT MAKING ANY DISALLOWANCE UNDER SECTION 14A, THEREFORE, THE CLAIM OF DEDUCTION FOR INTEREST WAS CERTAINLY FURNI SHING OF INACCURATE PARTICULARS AND PENALTY WAS RIGHTLY LEVIED UNDER SE CTION 271(1)(C). IN SUPPORT OF THIS CONTENTION, HE RELIED UPON THE DECI SION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. ZOOM COMMUNICATION P.LTD. 327 ITR 510 AND SUBMITTED THAT THE PENALTY UNDER SECTION 271(1)(C) WAS RIGHTLY LEVIED BY THE ASSESSING OFFICER AND THE SAME SHOULD BE UPHELD. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, STATED THAT THE ASSESSEE DISCLOSED ALL THE FACTS IN THE RE TURN OF INCOME. MERELY BECAUSE THE ASSESSEES CLAIM OF INTEREST WAS DISALLOWED, IT WOULD NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNIS HING OF INACCURATE PARTICULARS. THAT THE ISSUE OF DISALLOW ANCE OF INTEREST UNDER SECTION 14A IS A HIGHLY DEBATABLE ISSUE. THAT THIS PROVISION WAS NEWLY INTRODUCED BY THE FINANCE ACT, 2001. THEREFORE, WH EN THE ASSESSEE FILED THE RETURN FOR AY 2002-03, IT WAS AN ABSOLUTE LY NEW PROVISION. THERE WERE NO JUDICIAL PRONOUNCEMENTS AND EVEN RECE NTLY, THE DECISIONS CAME FROM A JURISDICTIONAL HIGH COURT OR OTHER HIGH COURTS HAVE MAINLY SET ASIDE THE MATTER TO THE ASSESSING O FFICER FOR REWORKING OF THE DISALLOWANCE. HE STATED THAT THERE IS NO DI SPUTE THAT THE MONEY WAS BORROWED BY THE ASSESSEE COMPANY AND INTEREST W AS PAID THEREON. MERELY BECAUSE PART OF THE INTEREST WAS DISALLOWED BY INVOKING THE DEEMING PROVISION OF SECTION 14A, IT CANNOT BE SAID THAT THE ASSESSEE EITHER FURNISHED INACCURATE PARTICULARS OR CONCEALE D THE INCOME. IN SUPPORT OF THIS CONTENTION, HE RELIED UPON THE FOLL OWING DECISIONS:- ITA-1841/DEL/2010 3 (I) CIT VS. RELIANCE PETRO PRODUCTS PVT.LTD. 322 ITR 158 (SC). (II) CIT VS. NALWA SONS INVESTMENT LTD. (SUPREME COURT) SPECIAL LEAVE TO APPEAL (CIVIL) NO.18564/2011 DATED 4.5.2012. (III) CIT VS. MAHANAGAR TELEPHONE NIGAM LIMITED (DELHI HI GH COURT) ITA NO.626 OF 2011 DATED 10.10.2011. (IV) KARAN RAGHAV EXPORTS PVT.LTD. VS. CIT (DELHI HIGH C OURT) ITA NO.1152 OF 2011 DATED 14.3.2012. (V) CIT VS. KAS MOVIE PVT.LTD. (DELHI HIGH COURT) ITA NO.793 OF 2011 DATED 18.11.2011. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ZOOM COMMUNICATION P.LTD. (SUPRA) RELIED UPON BY THE LEARNED DR CONSIDERED TH E DECISION OF HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA) RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE AND HELD AS UNDER:- IN THE CASE OF RELIANCE PETROPRODUCTS P.LTD. [2010 ] 322 ITR 158 (SC), THE ADDITION MADE BY THE ASSESSING OF FICER IN RESPECT OF THE INTEREST CLAIMED AS A DEDUCTION UNDE R SECTION 36(1)(III) OF THE ACT WAS DELETED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THOUGH IT WAS LATER RESTORED, BY THE TRIBUNAL, TO THE ASSESSING OFFICER . THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF T HE TRIBUNAL WAS ADMITTED BY THE HIGH COURT. IT WAS, I N THESE CIRCUMSTANCES, THAT THE TRIBUNAL CAME TO THE CONCLU SION THAT THE ASSESSEE HAD NEITHER CONCEALED THE INCOME NOR FILED INACCURATE PARTICULARS THEREOF. IN RECORDING THIS FINDING, THE TRIBUNAL FELT THAT IF TWO VIEWS OF THE CLAIM OF THE ASSESSEE WERE POSSIBLE, THE EXPLANATION OFFERED BY IT ITA-1841/DEL/2010 4 COULD NOT BE SAID TO BE FALSE. THIS, HOWEVER, IS N OT THE FACTUAL POSITION IN THE CASE BEFORE US. THE FACTS OF THE PRESENT CASE THUS ARE CLEARLY DISTINGUISHABLE. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCUR ATE PARTICULARS OF THE INCOME OF THE ASSESSEE, BUT IT C ANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALA FIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSES SEE. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMAL L PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS N OT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BAS IS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAI M IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTI ON 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW THAT A C LAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FO UNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT B E LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO MAKE WH OLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BE ING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR R ETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF-ASSESSMENT UNDER SECT ION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTE D FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TA X, WHICH IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAI MS ITA-1841/DEL/2010 5 OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION T O EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOU T PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CA SES ARE NOT PICKED UP FOR SCRUTINY. THIS WOULD TAKE AWAY T HE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. WE FIND THAT THE ASSESSEE BEFORE US DID NOT EXPLAI N EITHER TO THE INCOME-TAX AUTHORITIES OR TO THE INCO ME-TAX APPELLATE TRIBUNAL AS TO IN WHAT CIRCUMSTANCES AND ON ACCOUNT OF WHOSE MISTAKE, THE AMOUNTS CLAIMED AS DEDUCTIONS IN THIS CASE WERE NOT ADDED, WHILE COMPU TING THE INCOME OF THE ASSESSEE-COMPANY. WE CANNOT LOSE SIGHT OF THE FACT THAT THE ASSESSEE IS A COMPANY WH ICH MUST BE HAVING PROFESSIONAL ASSISTANCE IN COMPUTATI ON OF ITS INCOME, AND ITS ACCOUNTS ARE COMPULSORILY SUBJE CTED TO AUDIT. IN THE ABSENCE OF ANY DETAILS FROM THE ASSE SSEE, WE FAIL TO APPRECIATE HOW SUCH DEDUCTIONS COULD HAVE B EEN LEFT OUT WHILE COMPUTING THE INCOME OF THE ASSESSEE-COMP ANY AND HOW IT COULD ALSO HAVE ESCAPED THE ATTENTION OF THE AUDITORS OF THE COMPANY. 6. THUS, AFTER CONSIDERING THE DECISION IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA), IT WAS STATED BY TH E HONBLE JURISDICTIONAL HIGH COURT THAT MERE SUBMITTING A CL AIM WHICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCUR ATE PARTICULARS OF THE INCOME OF THE ASSESSEE BUT IF THE CLAIM, BESIDE S BEING INCORRECT IN LAW IS MALA FIDE , EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INT O PLAY. IF THE ASSESSEES CLAIM IS BONA FIDE, THEN H E WILL NOT BE LIABLE FOR PENALTY. THEREFORE, THE PRECISE QUESTION TO BE ADJ UDICATED BY US IS WHETHER THE ASSESSEES CLAIM WAS BONA FIDE OR MALA FIDE . ITA-1841/DEL/2010 6 7. AFTER CONSIDERING THE FACTS OF THE CASE AND THE ARGUMENTS OF BOTH THE SIDES, WE ARE CLEARLY OF THE OPINION THAT THE A SSESSEES CLAIM WAS BONA FIDE . THE PROVISION OF SECTION 14A WAS INSERTED IN THE INCOME-TAX ACT BY THE FINANCE ACT, 2001. THE ASSESSMENT YEAR UNDER CONSIDERATION IS AY 2002-03. THUS, THE ASSESSEES CLAIM THAT AT THE TIME OF FILING OF THE RETURN IT WAS A NEW PROVISION FOR WHICH NO JUDICIAL PRONOUNCEMENT WAS AVAILABLE, APPEARS TO BE CORRECT. IT IS NOT IN DISPUTE THAT THE ASSESSEE CORRECTLY DISCLOSED THE M ONEY BORROWED BY IT AND ITS UTILISATION WHICH WAS PARTLY FOR THE PURCHA SE OF SHARES. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE FURNISHED EITHER ANY INACCURATE FACTS OR WRONG FACTS. THEREFORE, MERELY BECAUSE THE ASSESSING OFFICER DISALLOWED PART OF INTEREST, IT W OULD NOT AMOUNT TO EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACC URATE PARTICULARS. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA), AND ALSO THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF ZOOM COMMUNICATION P.LTD. (SUPRA), UPHOLD THE ORDER OF LEARNED CIT(A) CANCELLING THE PENALTY LEVIED UNDER SECTION 271(1)( C). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 13 TH JULY, 2012. SD/- SD/- ( (( (RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 13.07.2012 VK. COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -17(1), 17(1), 17(1), 17(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. 2. RESPONDENT : M/S VIKRAM BAKSHI & CO.PVT.LTD., M/S VIKRAM BAKSHI & CO.PVT.LTD., M/S VIKRAM BAKSHI & CO.PVT.LTD., M/S VIKRAM BAKSHI & CO.PVT.LTD., TOP FLOOR, MOHAN DEV BUILDING, TOP FLOOR, MOHAN DEV BUILDING, TOP FLOOR, MOHAN DEV BUILDING, TOP FLOOR, MOHAN DEV BUILDING, ITA-1841/DEL/2010 7 13, TOLSTOY MARG, 13, TOLSTOY MARG, 13, TOLSTOY MARG, 13, TOLSTOY MARG, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR