M/s. Royal Exports, New Delhi V. ACIT, New Delhi

ITA 1972/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7463 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 03-08-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 03-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA SENIOR
• Assessee Lawyers: ABHISHEK ANAND
• Keywords: Business income; Revised return
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1972/DEL./2014 (ASSESSMENT YEAR : 2004-05) M/S. ROYAL EXPORTS, VS. ACIT, 2719, BANK STREET, CENTRAL CIRCLE 33 (1), KAROL BAGH, NEW DELHI. NEW DELHI. (PAN : AADFR6282M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ABHISHEK ANAND, ADVOCATE REVENUE BY : SHRI F.R. MEENA, SENIOR DR DATE OF HEARING : 03.08.2016 DATE OF ORDER : 08.08.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. ROYAL EXPORTS (HEREINAFTER REFERRE D TO AS THE ASSESSEE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 05.02.2014 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS)-XIX, NEW DELHI, AFFIRMING THE PENALTY ORDER DATED 29.09.2010 PASSED U/S 271(1)(C) OF THE INCOME -TAX ACT, 1961 (FOR SHORT THE ACT), FOR THE ASSESSMENT YEAR 2004 -05 ON THE GROUNDS INTER ALIA THAT :- ITA NO.1972/DEL./2014 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT (A) WAS INCORRECT AND UNJUSTIFIED IN 1) DISMISSING THE APPEAL OF THE ASSESSEE. 2) NOT AGREEING TO KEEP THE PENALTY PROCEEDINGS PENDING TILL THE DECISION OF QUANTUM APPEAL PENDING BEFORE THE HON'BLE ITAT. 3) IN CONFIRMING THE PENALTY LEVIED ON THE GROUND T HAT THE QUANTUM APPEAL HAS BEEN DECIDED WHEREAS THE SAM E IS PENDING BEFORE THE HON'BLE ITAT. 4) HOLDING THAT THE ASSESSEE HAD FILED INACCURATE PARTICULARS OF INCOME OR HAS CONCEALED INCOME. 5) HOLDING THAT THE ASSESSEE WAS LIABLE TO PENALTY US/271(1)(C) EVEN WHEN THERE IS NEITHER ANY FILING OF INACCURATE PARTICULARS OF INCOME OR ANY CONCEALMENT OF INCOME. 6) HOLDING THAT THE ASSESSEE WAS LIABLE FOR 271(1)( C) PENALTY EVEN WHEN THE CONDITIONS NECESSARY FOR SUCH LEVY ARE NOT SATISFIED. 7) HOLDING THAT PENALTY WAS LIABLE SINCE IT WAS A C IVIL LIABILITY AND NO MEANS-REA ETC. WAS REQUIRED. 8) HOLDING THAT THE ASSESSEE WAS LIABLE FOR PENALTY SINCE THE ASSESSEE DID NOT FILE AN EXPLICIT NOTE AL ONGWITH THE COMPUTATION OF INCOME. 9) HOLDING THAT CHANGE OF HEAD OF INCOME BY THE AO WAS LIABLE FOR PENALTY. 2. BRIEFLY STATED THE FACTS OF THIS CASE ARE : ON T HE BASIS OF ASSESSMENT ORDER DATED 15.12.2006 PASSED U/S 143(3) OF THE ACT AT RS.11,41,714/-, PENALTY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE WHO IS A 100% EXPORT ORIENTED UNIT INTO TH E MANUFACTURING ITA NO.1972/DEL./2014 3 AND EXPORT OF PLAIN GOLD JEWELLERY AND HAS BEEN CLA IMING DEDUCTION U/S 10A / 10B OF THE ACT. ASSESSMENT ORDER HAS BEE N AFFIRMED BY THE LD. CIT (A) VIDE ORDER DATED 25.04.2008. AO, A FTER HAVING SATISFIED HIMSELF, CAME TO THE CONCLUSION THAT ASSE SSEE, BY MAKING DELIBERATE ATTEMPT, CONCEALED HIS TAXABLE INCOME BY FURNISHING INACCURATE PARTICULARS AND INFLATING THE CLAIM OF D EDUCTION U/S 10A / 10B TO THE EXTENT OF RS.3,06,207/- BY CLAIMING MORE THAN LAWFUL DEDUCTION AND FURTHER CLAIMING INTEREST TO THE TUNE OF RS.8,35,507/- ON THE BUSINESS INCOME WHEREAS IT WAS NOT BUSINESS INCOME AND PASSED THE FOLLOWING ORDER :- ACCORDINGLY, THE UNDERSIGNED IS SATISFIED THAT IT IS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) READ WIT H EXPLANATION 1(A) THERETO. THE COMPUTATION OF PENAL TY IS AS FOLLOWS :- INCOME SOUGHT TO BE EVADED 11,41,714 TAX ON ABOVE INCOME (INCLUDING SURCHARGE) 4,09,590 MINIMUM PENALTY LEVIABLE @ 100% TAX SOUGHT TO BE EVADED 4,09,590 MAXIMUM PENALTY LEVIABLE @ 300% TO BE EVADED 12,28,770 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THEREBY LEVY A PENALTY OF RS.4,09,590/- @ 100% OF T HE TAX SOUGHT TO BE EVADED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 READ WITH EXPLANATION 1(A) THERETO FOR CONCEALING AND FURNISHING INACCURATE PARTICULARS OF INCOME. ITA NO.1972/DEL./2014 4 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) WHO HAS AFFIRMED THE PENALTY ORDER BY DISMISSING THE APPEAL . FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIB UNAL BY CHALLENGING THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE LD. AR FOR THE ASSESSEE CHALLENGING THE IMPU GNED ORDER CONTENDED THAT SINCE THE ADDITION OF RS.11,41,714/- MADE BY THE AO VIDE ORDER DATED 15.12.2006 QUA AY 2004-05 STAND S ALREADY DELETED BY THE TRIBUNAL IN CASE CITED AS M/S. ROYAL EXPORTS VS. ACIT IN ITA NO.2402/DEL/2008 VIDE ORDER DATED 22.02 .2016, THE PENALTY ORDER IS NOT SUSTAINABLE IN THE EYES OF LAW . HOWEVER, ON THE OTHER HAND, LD. DR TO REPEL THE ARGUMENT ADDRES SED BY LD. AR CONTENDED THAT THE PENALTY PROCEEDINGS ARE NOT TO B E INFLUENCED BY THE QUANTUM PROCEEDINGS AND RELIED UPON THE ORDER P ASSED BY THE LD. CIT (A). 6. IN THE BACKDROP OF THE UNDISPUTED FACT THAT ADDI TION OF RS.11,41,714/- MADE VIDE ASSESSMENT ORDER DATED 15. 12.2006 QUA AY 2004-05 AGAINST THE ASSESSEE HAS ALREADY BEEN DE LETED VIDE ITA NO.1972/DEL./2014 5 ORDER DATED 22.02.2016 BY THE TRIBUNAL IN ITA NO.24 02/DEL/2008 (SUPRA), THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS:- AS TO WHETHER PENALTY IMPOSED UNDER SECTION 271(1) (C) OF THE ACT ON THE BASIS OF ADDITION MADE BY THE AO IS SUSTAINABLE WHEN ADDITION HAS ALREADY BEEN DELETED BY THE APPELLATE TRIBUNAL? 7. HONBLE SUPREME COURT IN THE JUDGMENT CITED AS K .C. BUILDERS V. ASSISTANT COMMISSIONER OF INCOME-TAX 26 5 ITR 562 (SC) ANSWERED THE AFORESAID QUESTION IN FAVOUR OF T HE ASSESSEE BY RECORDING FOLLOWING FINDINGS :- WHERE THE ADDITIONS MADE IN THE ASSESSMENT ORDER ON THE BASIS OF WHICH PENALTY FOR CONCEALMENT WAS LEVIED, THERE REMAINS NO BASIS AT ALL FOR LEVYI NG THE PENALTY FOR CONCEALMENT AND, THEREFORE, IN SUCH A C ASE NO SUCH PENALTY CAN SURVIVE AND THE SAME IS LIABLE TO BE CANCELLED. ORDINARILY, PENALTY CANNOT STAND IF THE ASSESSMENT ITSELF IS SET ASIDE. ONCE PENALTIES IMPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, ARE CANCELLED ON THE BASIS OF THE CONCLUSIVE FINDING OF THE APPELLATE TRIBUNAL THAT THERE IS NO CONCEALMENT OF INCOME, PROSECUTION OF THE ASSESSEE FOR AN OFFENCE UNDER SECTION 276C FOR WILLFUL EVASION OF TAX CANNO T BE PROCEEDED WITH THEREAFTER : QUASHING OF THE PROSECU TION IS AUTOMATIC. THE APPELLANTS, WHO WERE ENGAGED IN THE BUSINESS OF CONSTRUCTION, HAD RETURNED THEIR INCOME FOR THE ASSESSMENT YEARS 1983-84 TO 1986-87 AT CERTAIN FIGU RES OF CONST OF CONSTRUCTION. THEREAFTER WHEN ENQUIRIE S WERE MADE THEY FILED REVISED RETURNS DISCLOSING HIG HER COST OF CONSTRUCTION IN THE BASIS OF AN APPROVED VA LUERS REPORT. THE REVISED RETURNS WERE ACCEPTED BY THE DEPARTMENT AND ASSESSMENTS WERE COMPLETED. THE DIFFERENCE BETWEEN THE INCOMES ORIGINALLY RETURNED AND ITA NO.1972/DEL./2014 6 THOSE IN THE REVISED RETURNS WERE TREATED AS CONCEA LED INCOME AND PENALTIES WERE LEVIED UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961. THE APPELLA NTS WERE ALSO PROSECUTED FOR THE OFFENCE UNDER SECTION 276C AND CERTAIN SECTIONS OF THE INDIAN PENAL CODE, 1860 . THE APPELLATE TRIBUNAL HELD THAT THERE WAS NO CONCEALMENT OF INCOME. AND GIVING EFFECT TO THE TR IAL ON THE BASIS OF THE DEPARTMENTS COMPLAINT HAD PROCEEDED AFTER CHARGES HAD BEEN FRAMED. THE APPELLANTS APPLIED TO THE MAGISTRATE FOR ADJOURNMEN T. THE MAGISTRATE DID NOT ADJOURN THE TRIAL BUT PERMIT TED THE FIRM TO MARK THE APPELLATE ORDERS OF THE TRIBUN AL IN EVIDENCE AT THE APPROPRIATE STAGE OF THE TRIAL, AS THE MATTER WAS IN THE STAGE OF FURTHER CROSS EXAMINATIO N. THE APPELLANTS PREFERRED REVISION PETITIONS BUT THE HIGH COURT DISMISSED THE REVISION PETITIONS TAKING THE V IEW THAT SINCE THE CHARGES HAD BEEN FRAMED AND THE MATT ER WAS IN THE STAGE OF FURTHER CROSS EXAMINATION THE PROSECUTION COULD PROCEED WITH THE TRIAL. ON APPEA L TO THE SUPREME COURT : HELD, REVERSING THE DECISION OF THE HIGH COURT, THAT THE FINDING OF THE APPELLATE TRIBUNAL WAS CONCLUSIVE AND THE PROSECUTION COULD NOT BE SUSTAIN ED SINCE THE PENALTY WAS CANCELLED FOLLOWING THE TRIBU NALS ORDER AND NO OFFENCE SURVIVED UNDER THE INCOME-TAX ACT THEREAFTER. QUASHING OF THE PROSECUTION WAS AUTOMATIC. ALLOWING THE TRIAL TO PROCEED FURTHER W OULD BE AN IDLE AND EMPTY FORMALITY. 8. FOLLOWING THE JUDGMENT IN THE CASE OF K.C. BUILD ERS V. ASSISTANT COMMISSIONER OF INCOME-TAX (SUPRA) DELIVE RED BY HONBLE APEX COURT AND IN VIEW OF THE FACT THAT ADD ITIONS MADE BY THE AO QUA AY 2004-05 HAVE ALREADY BEEN DELETED AND THE ORDER OF THE TRIBUNAL HAS SINCE ATTAINED FINALITY, THE PE NALTY ORDER DATED 29.09.2010 AFFIRMED BY THE CIT (A) IS NOT SUSTAINAB LE IN THE EYES OF LAW. SO, WHEN HE APPELLATE TRIBUNAL CAME TO THE CONCLUSION THAT ITA NO.1972/DEL./2014 7 THERE IS NO MATERIAL ON RECORD TO SUSTAIN THE ADDIT ION, THERE IS NO QUESTION OF CONCEALMENT OF INCOME BY THE ASSESSEE T O ATTRACT THE PROVISIONS CONTAINED U/S 271(1)(C) OF THE ACT. SO, WE HEREBY ALLOW THE PRESENT APPEAL AND QUASH THE PENALTY ORDER. ORDER PRONOUNCED IN OPEN COURT ON THIS 8 TH DAY OF AUGUST, 2016. SD/- SD/- (J.S. REDDY) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 8 TH DAY OF AUGUST, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XIX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.