ITO, New Delhi V. Ms. Amita Batra, New Delhi

ITA 1966/DEL/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8885 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-02-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 04-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Business income; Bonafide belief; Reasonable cause
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI H.S. SIDHU , JUDICIAL MEMBER ITA NO S. 1966 & 1967/DEL/2013 ASSESSMENT YEAR S : 2003 - 04 & 1994 - 95 ITO, VS. AMITA BATRA, WARD 47(3), A - 114, NEW FRIENDS COLONY, NEW DELHI. NEW DELHI. ACMPB1633J (APPELLANT) (RESPONDENT) APPELLANT BY: SH. Y. KAKKAR, DR RESPONDENT BY: SH. M.P. RASTOGI, ADV. DATE OF HEARING: 19.02.2015 DATE O F PRONOUNCEMENT: ORDER PER S.V. ME HROTRA, A.M. THESE APPEALS ARE FILED BY THE REVENUE AND DIRECTED AGAINST THE SEPARATE PENALTY ORDER S U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 DATED 22/11/2011 & 29/03/2012 FOR THE A.Y S. 2003 - 04 & 1994 - 95 . 2. BRIEF FACT S OF THE CASE ARE THAT THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING AN INCOME OF RS. 2,64,630/ - . THE ASSESSMENT WAS REOPENED U/S 148 AFTER RECORDING REASONS. THE ASSESSEE OBJECTED TO THE REASONS RECORDED. HOWEVER, THE SAME WERE DISPOSED OFF BY AO B Y OBSERVING AS UNDER: ON PERUSAL OF RETURN IT WAS NOTICED THAT THE ASSESSEE HAD WRITTEN A NOTE BELOW THE COMPUTATION OF INCOME THAT ASSESSEE S PROPERTIES BEARING NO. A - 21/7, QUTAB ITA N OS. 1966 & 1967/D/ 2013 2 ENCLAVE, PHASE - 1, GURGAON AND D - 22/5 OKHLA INDL. AREA, PHASE - II, NEW DELHI WHICH WERE MORTGAGED WITH VYSA BANK LTD. AGAINST CREDIT FACILITIES WERE SOLD THROUGH PUBLIC AUCTION ON 26.02.2003 AND 25.02.2003 RESPECTIVELY BY THE DEBTS RECOVERY TRIBUNAL - II, DELHI. 3. THE AO NOTICED FROM THE DOCUMENT ISSUED BY THE DEBT RECOVERY TRIBUN AL - II, DELHI DATED 20/03/2005 THAT THE TOTAL SALE CONSIDERATION OF THE TWO PROPERTIES SOLD IN PUBLIC AUCTION WAS RS. 1,91,00,000/ - AND AFTER CONSIDERING THE ASSESSEE S SUBMISSION MADE AN ADDITION OF RS. 1,63,99,656/ - AGAINST WHICH ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A), WHO VIDE HIS ORDER DATED 11/11/2009 IN APPEAL NO. 323/2008 - 09 ALLOWED THE ASSESSEE S APPEAL FOLLOWING THE DECISION OF THE HON BLE KEARALA HIGH COURT IN THE CASE OF CIT VS. SMT. THRESSIAMMA ABRAHAM (1997) 227 ITR 802 AND THE DECISION OF DELHI TRIBUNAL IN ADDL. CI T VS. GLAD INVESTMENTS P. LTD. R EPORTED IN 102 ITD 227 (DEL.). THE MATTER TRAVELLED TO THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 04/03/2011 IN ITA NO. 292/DEL/2010 REVERSE D THE FINDINGS OF LD. CIT(A). THE AO LEVIED PENA LTY U/S 271(1)(C) REJECTING THE ASSESSEE S CONTENTION THAT SHE WAS UNDER A BONAFIDE BELIEF THAT NO INCOME HAD ACCRUED TO HER. HE ALSO DID NOT ACCEPT THE ASSESSEE S CONTENTION THAT SHE HAD MADE FULL DISCLOSURE OF THE INCOME IN HER COMPUTATION BY WAY OF A F OOT NOTE AND THAT NO CONSIDERATION WAS RECEIVED BY THE ASSESSEE FROM THE AUCTION. HE LEVIED A PENALTY OF RS. 51,66,476/ - . LD. CIT(A) DELETED THE PENALTY OBSERVING IN PARA 4 AS UNDER: 4. I HAVE DISCUSSED THE MATTER WITH THE AR AND WANTED TO KNOW THE BAL ANCE SHEET DETAILS OF HER COMPANY AS ON 31.03.2009, 31.03.2010 & 31.03.2011. THE AR ADMITTED THAT THERE IS NO APPEAL PENDING AGAINST QUANTUM ASSESSMENT OF THE ITA N OS. 1966 & 1967/D/ 2013 3 APPELLANT FOR THE ABOVE TWO ASSESSMENT YEARS 1994 - 95 & 2003 - 04 AT ANY LEVEL OF JUDICIARY. THUS, THERE IS APPROXIMATE TAX DEMAND OF RS. 8.20 CRORES UPON THE APPELLANT. THE APPELLANT IS THE ONLY LADY MEMBER IN HER FAMILY AT PRESENT. THE BANK HAD SOLD HER PROPERTY D - 22/5, OKHLA INDUSTRIAL AREA, PHASE - II, NEW DELHI AND FLAT NO. A - 21/7, DLF BANK LOAN. THE APPELLANT COULD NOT REALIZED THE SALE PROCEEDS TOWARDS DEBTORS AS THEY ALL WENT BANKRUPT. SHE IS NOW PAYING ABOUT RS. 8000/ - PER MONTH FROM HER SALARY OF RS. 24,000/ - PER MONTH TOWARDS INCOME TAX. TO REALIZE RS. 8.2 CRORES @ RS. 8000/ - P.M., IT WILL TAKE 10250 MONTHS OR 854 YEARS. WHEN THE APPELLANT CANNOT PAY THE TAX LIABILITY IN HER LIFE TIME, HOW SHE WILL PAY THE PENALTY LIABILITY FURTHER. THIS IS THE ONLY REASONABLE CAUSE BEFORE ME TO DELETE THE PENALTY OF RS. 51,66,476/ - (A.Y. 2003 - 04) & RS. 8 4,52,490/ - (A.Y. 1994 - 95) IMPOSED BY THE AO. THE AO & TRO SHOULD TAKE UP THE WAIVER PROCEEDINGS BEFORE THE HIGHER AUTHORITIES TO BE DECIDED AS PER LAW. 4. LD. DR SUBMITTED THAT ADMITTEDLY THE ASSESSEE HAD NOT DISCLOSED THE CAPITAL GAIN IN THE COMPUTATION OF INCOME AND HAD ONLY GIVEN A NOTE IN THE COMPUTATION OF INCOME. THEREFORE, ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. SHE SUBMITTED THAT ASSESSEE HAD TAKEN LOAN BY MORTGAGING ITS PROPERTY TO VIJYA BANK LI MITED AND WHEN SHE COULD NOT MAK E THE PAYMENT OF LOAN , THE MORTGAGE D PROPERTIES WERE SOLD IN PUBLIC AUCTION BY DEBT RECOVERY TRIBUNAL FOR RECOVERY OF DUES PAYABLE TO BANK. IT WAS A NORMAL TRANSACTION OF SALE AND, THEREFORE, ASSESSEE WAS REQUIRED TO RETURN THE CAPITAL GAIN. SHE SUBMITTED THAT LD. CIT(A) WRONGLY DELETED THE PENALTY BECAUSE THERE WERE NO DETAILS OF BANKRUPTCY OF DEBTORS, NO DETAILS OF FOREIGN DEBTORS, NO SALARY STATEMENT. SH E SUBMITTED THAT LD. CIT(A) DID NOT APPLY HIS MIND AND THE ORDER IS LEGALLY UNACCEPTABLE. THE ASSES SEE FAILED TO ESTABLISH HER BONAFIDE AND, THEREFORE, THE CIT(APPEALS) ORDER DESERVES TO BE SET ITA N OS. 1966 & 1967/D/ 2013 4 ASIDE. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE WAS IN BUSINESS OF GARMENT MANUFACTURING. HE SUBMITTED THAT BY THE TIME WHEN THE APPEAL WAS DECIDED ALL BUSINESS HAD CLOSED DOWN AND, THEREFORE, LD. CIT(A) RIGHTLY DELETED THE PENALTY FOR EQUITABLE REASONS . HE REFERRED TO PAGE 2 & 3 OF THE PAPER BOOK, WHEREIN THE COMPUTATION OF INCOME/LOSS IS CONTAINED AND POINTED OUT THAT ASSESSEE HAD GIVEN FOLLOWING THE FOOTNOTE IN THE COMPUTATION: 3. THE ASSESSEE S PROPERTIES BEARING NO. A - 21/7, QUTAB ENCLAVE, PHASE - 1, GURGAON AND D - 22/5, OKHLA INDUSTRIAL AREA, PHASE - II, NEW DELHI MORTGAGED WITH THE VYSYA BANK LTD. AGAINST CREDIT FACILITIES WERE SOLD THROUGH PUBCLI AUCTION ON 26.02.2003 AND 25.02.2003 RESPECTIVELY BY DEBTS RECOVERY TRIBUNAL III, DELHI FOR RECOVERY OF DUES PAYABLE TO BANK. IN THE ABSENCE OF NECESSARY DETAILS FROM BANK/DEBT RECOVESRY TRIBUNAL TOWARDS SETTLEMENT/ADJUSTMENT/CREDIT OF SALE PROCEEDS OF T HE AFORESAID PROPERTIES TOWARDS BANK DUES AND ALSO NON - RECEIPT OF PROCEEDS IN THE HANDS OF THE ASSESSEE, THE CAPITAL GAIN/LOSS ON AUCTION OF THESE PROPERTIES HAVE NOT BEEN WORKED OUT. THE NECESSARY ADJUSTMENT ENTRIES IN ACCOUNTS AND CAPITAL GAIN/LOSS THER EON SHALL BE MADE ON RECEIPT OF NECESSARY INFORMATION. 5. HE SUBMITTED THAT THERE IS NO DISPUTE ON THE FACTS DISCLOSED IN THE ABOVE NOTE. THE AO COMPUTED THE CAPITAL GAIN ON THE BASIS OF THESE VERY PARTICULARS. HE REFERRED TO PAGE 15 OF PAPER BOOK, WHER EIN THE CIT(A) S ORDER IS CONTAINED THAT ASSESSEE HAD CHALLENGED THE FINDINGS OF AO BEFORE LD. CIT(A), INTER - ALIA, ON THE G ROUND THAT THE PROPERTY SOLD IN AUCTION TO DISCHARGE THE DEBT WERE NOT EXIGIBLE TO CAPITAL GAIN TAX. HE RELIED ON 102 ITD 22 7 IN THE CASE OF ADDL. CIT VS. GLAD INVESTMENTS PVT. LTD. TO SUBMIT THAT WHERE ASSESSEE DID NOT RECEIVE ANY AMOUNT THE ITA N OS. 1966 & 1967/D/ 2013 5 PROVISIONS OF SEC. 45 (3) ARE NOT APPLICABLE. HE FURTHER SUBMITTED THAT ASSESSEE WAS HAVING NO FUNDS AT ALL AND, THEREFORE, SHE COULD NOT FILE AP PEAL BEFORE HIGH COURT . LD. COUNSEL FURTHER REFERRED TO THE ASSESSMENT ORDER TO POINT OUT THAT AO HAS NOT RECORDED ANY SATISFACTION AND HAS NOT LEVIED ANY SPECIFIC CHARGE AS TO WHETHER IT IS A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INAC CURATE PART ICULARS OF INCOME. H E RELIED ON THE FOLLOWING DECISIONS: 1. 97 ITR 22 8, N.N. SUBRAMANIA IYER VS. UNION OF INDIA & ANOTHER (KER.) (HC); 2. 282 ITR 64 2, NEW SORATHIA ENGINEERING CO. VS. CIT (2006) (GUJ.) (HC); 3. 308 ITR 438 , CIT VS. PEAREY LAL & SONS LTD. (2008) (P&H) HE SUBMITTED THAT ASSESSEE S BONAFIDE CANNOT BE DOU BTED IN VIEW OF THE DISCLOSURES MADE BY HER AND THERE IS NO FINDING THAT THE EXPLANATION WAS NOT BONAFIDE. 6. IN THE REJOINDER LD. DR RELIED ON THE DECISION OF 311 ITR 353, WHEREIN IT HAS BEEN HELD T HAT THERE IS NO PARTICULAR PROFORMA FOR RECORDING SATISFACTION IS THERE AND THERE WAS ONLY ONE ADDITION. 7. THE LD. DR ALSO RELIED ON 308 ITR 438 (P&H) IN THE CASE OF CIT VS. PEAREY LAL & SONS LTD . 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUS ED THE RECORD OF THE CASE. 9. ADMITTEDLY IN THE COMPUTATION OF INCOME THE ASSESSEE HAD CLEARLY STATED THE FACT IN REGARD TO SALE THROUGH PUBLIC AUCTION BY DRT WHICH DISCLSOURE HAS BEEN REPRODUCED EARLIER. THE COMPUTATION OF CAPITAL GAINS IN THE HANDS OF A SSESSEE HAS BEEN DONE BY AO ON THE BASIS OF THESE PARTICULARS ONLY. ITA N OS. 1966 & 1967/D/ 2013 6 10. LD. COUNSEL IN COURSE OF HEARING SUBMIT TED THAT ON ACCOUNT OF ASSESSEE S ENTIRE BUSINESS HAVING BEEN CLOSED BY THE TIME TRIBUNAL DECIDED THE APPEAL , THE ASSESSEE COULD NOT MOVE TO HI GH COURT TO DISPUTE THE FINDINGS OF TRIBUNAL ON THE BASIS OF VARIOUS DECISIONS RELIED UPON BY LD. CIT(A) FOR DECIDING THE ASSESSEE S APPEAL IN ITS FAVOUR. THE AO HAS NOWHERE DOUBTED THE ASSESSEE S BONAFIDE WHICH IS EVIDENT FROM THE DISCLOSURE MADE BY THE ASSESSEE AT THE VERY FIRST INSTANCE WHILE FILING THE RETURN. 11. IN VIEW OF ABOVE FACTS, THE ASSESSEE S CASE IS SQUARELY COVERED BY THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD. 12. WE, THEREFORE, CONFIRM THE ORDER OF LD. CIT(A) FOR THE ABOVE REASONING AND DO NOT SUBSCRIBE TO HIS REASONING GIVEN ON EQUITABLE CONSIDERATIONS. AS FAR AS LD. COUNSEL S PLEA ON THE BASIS OF SATISFACTION BEING NOT RECORDED IN THE PENALTY ORDER IS CONCERNED, WE ARE NOT IN AGREEMENT WITH LD. CO UNSEL BECAUSE AS RIGHTLY POINTED OUT BY LD. DR , THERE IS NO PARTICULAR PROFORMA FOR RECORDING THE SATISFACTION AND IN THE ASSESSMENT ORDER ONLY ONE ADDITION HAD BEEN MADE. IN VIEW OF ABOVE DISCUSSION THE DEPARTMENT S APPEAL IS DISMISSED. ITA NO. 1967/D/2 013 FOR A.Y. 1994 - 95 : 13. THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 16,57,380/ - WHICH WAS ASSESSED AT A TOTAL INCOME OF RS. 2,04,98,000/ - . IN THE ORIGINAL ASSESSMENT THE AO TREATED THE SALE OF SCRA P AMOUNTING TO RS. 18,52,755/ - AS MISCELLANEOUS INCOME AND , HENCE , DID NOT ALLOW DEDUCTION U/S 80HHC. THE AO OBSERVED THAT DURING THE YEAR THE ASSESSEE HAD SOLD SCRAP/CUTTING OF FABRIC TO THE ITA N OS. 1966 & 1967/D/ 2013 7 TUNE OF RS. 18,52,755/ - WHICH WAS CREDITED TO PURCHASES FABRIC WOVEN ACCOUNT. SALE OF SCRAP WAS NEITHER CONSIDERED AS PART OF TURNOVER NOR PART OF EXPORT INCENTIVE WHILE CLAIMING DEDUCTION U/S 80HHC. HE OBSERVED THAT ASSESSEE HAD CONSIDERED THE SAID RECEIPT AS PART OF THE BUSINESS RECEIPT AND INSTEAD OF CREDITING THE SAME IN SALE ACCOUNT, ADJUST ED THE SAME WITH FABRIC ACCOUNT WHICH WAS AGAINST THE PROVISIONS OF ACCOUNTING STANDARD. HE REFERRED TO THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PUNJAB STAINLESS STEEL INDUSTR IES, 162 TAXMAN AS PER WHICH THE INCOME FROM SALE OF SCRAP GENERATED DURING THE MANUFACTURE OF GOODS , WHICH WER E ENTIRELY EXPORTED, WAS NOT INCIDENTAL TO EXPORT ACTIVITY AND COULD NOT BE TREATED AS BUSINESS INCOME. HE, ACCORDINGLY , LEVIED PE4NALTY U/S 271(1)(C). LD. CIT(A) DELETED THE PENALTY. BEING AGGRI EVED THE DEPARTMENT IS IN APPEAL BEFORE US. 14. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DECISION OF HON BLE PUNJAB & HARYANA HIGH COURT , RELIED UPON BY AO , HAS BEEN REVERSED BY HON BLE SUPREME COURT IN 364 ITR 144 IN THE CASE OF CIT VS. PUNJAB STAINLESS STEEL INDUSTRIES LTD. (2014) AND, THEREFORE, THE VERY PREMISE OF WHICH THE ADDITION WAS MADE HAS NO LEGS TO STAND. 15. LD. DR RELIED ON THE ORDER OF AO. 16. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE HON BLE SC IN 364 ITR 144 I N THE CASE OF CIT VS. PUNJAB STAINLESS STEEL INDUSTRIES LTD. HAS HELD AS UNDER: HELD ACCORDINGLY, THAT AS THE ASSESSEE WAS NOT PRIMARILY DEALING IN SCRAP BUT WAS A MANUFACTURER OF STAINLESS STEEL UTENSILS, ONLY THE SALE PROCEEDS FROM SALE ITA N OS. 1966 & 1967/D/ 2013 8 OF UTENSILS WOU LD BE TREATED AS ITS TURNOVER . THE VIEW EXPRESSED BY THE HIGH COURT WAS IN CONFORMITY WITH THE NORMAL ACCOUNTING PRACTICE FOLLOWED BY TRADERS, INCLUDING THE ASSESSEE AND IT WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT THE PROCEEDS GENERATED FROM THE S ALE OF SCRAP WOULD NOT BE INCLUDED IN THE TOTAL TURNOVER . 17 . THUS, SINCE VERY BASIS FOR INITIATION OF PENALTY DOES NOT SURVIVE, T HEREFORE, THERE WAS NO QUESTION OF LEVYING PENALTY. IN VIEW OF ABOVE DISCUSSION, THE DEPARTMENT S APPEAL IS DISMISSED. O RDE R PRONOUNCED IN THE OPEN COURT ON 27/02/2015 SD/ - SD/ - ( H.S. SIDHU ) JUDICIAL MEMBER ( S.V. ME HROTRA ) ACCOUNTANT MEMBER DATED: 27/02/2015 *KAVITA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITA N OS. 1966 & 1967/D/ 2013 9 SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 24.02.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 26 .02.2015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER