Appeal details
Counselvise Citation
[2011] 134 COUNSELVISE.COM (IT) 6385 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-06-2011
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
13-06-2011
Assessment Year
1996-1997
Appeal Filed On
26-06-2009
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI D. K. TYAGI, JUDICIAL MEMBER AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER I.T.A. NO.2046 / AHD/2009 (ASSESSMENT YEAR 1996-97 ) ACIT, CIRCLE 8, AHMEDABAD VS. TORRENT INVESTMENT PVT. LTD., TORRENT HOUSE, NR. DINESH HALL, OFF ASHRAM ROAD, AHMEDABAD C.O. NO.164/AHD/2009 IN I.T.A.NO. 2046/AHD/2009(ASSESSMENT YEAR 1996-97) TORRENT HOUSE, VS. ACIT, CIRCLE 8, TORRENT INVESTMENT PVT. LTD., AHMEDABAD NR. DINESH HALL, OFF ASHRAM ROAD, AHMEDABAD PAN/GIR NO. : 31-116 CU 8308 (APPELLANTS) .. (RESPONDENTS) APPELLANT BY: SHRI G. S. SOURYAWANSHI, SR. DR RESPONDENT BY: SHRI S. N. SOPARKER, SR. ADV. O R D E R PER SHRI D. K. TYAGI, JM: THIS IS REVENUES APPEAL AND CROSS OBJECTION OF THE ASSESSEE AGAINST THE ORDER DATED 17.04.2009 OF CIT(A) XIV, AHMEDABAD FOR THE ASSESSMENT YEAR 1996-97. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS: I.T.A.NO.2046/AHD/2009 C.O. NO.164/AHD/2009 2 1) THE LD. CIT(A) XIV, AHMEDABAD ERRED IN LAW AND ON FACT IN DELETING THE PENALTY OF RS.17,71,360/- LEVIED U/S 2 71(1)(C) OF THE ACT. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LED. CIT(A) XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDE R OF THE A.O. 3) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. C IT(A) XIV, AHMEDABAD MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE A.O. MADE ADDITIONS/DISALLOWANCES OF RS.26,74,2 62/- IN RESPECT OF OPEN OFFER FOR ACQUISITION OF SHARES OF AHMEDABAD ELECTR ICITY COMPANY, DISALLOWANCE OF RS.16,97,697/- IN RESPECT OF KEYMAN INSURANCE PREMIUM; DISALLOWANCE OF INTEREST OF RS.8,08,541/- IN CONNEC TION WITH KEYMAN INSURANCE PREMIUM AND TDS PAYMENT; DISALLOWANCE OF RS.13,350/- IN RESPECT OF SHARE TRANSFER EXPENDITURE AND DISALLOWA NCE OF RS.11,63,162/- IN RESPECT OF TRANSFER STAMP EXPENDITURE. THE ASSESS EE PREFERRED APPEAL BEFORE LD. CIT(A) WHO CONFIRMED THE FOLLOWING ADDITIONS: (I) DISALLOWANCE OF OPEN OFFER FOR ACQUISITION OF S HARE OF AHMEDABAD ELECTRICITY CO., OF RS.26,74,262/-; (II) DISALLOWANCE ON ACCOUNT OF SHARE TRANSFER EXPE NSES OF RS. 13,350/-; (III) DISALLOWANCE ON ACCOUNT OF TRANSFER STAMP EXPENSES OF RS.11,63,162/-. ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST PAI D IN CONNECTION WITH KEYMAN INSURANCE PREMIUM AND TDS WAS DELETED AND DI SALLOWANCE ON ACCOUNT OF KEYMAN INSURANCE PREMIUM OF RS.16,97,697 /- WAS PARTLY ALLOWED. ASSESSEE WENT IN APPEAL BEFORE THE HONBL E TRIBUNAL IN RESPECT OF THE ADDITIONS CONFIRMED BY LD. CIT(A) WHILE THE REV ENUE WENT IN APPEAL AGAINST THE RELIEF GIVEN BY THE LD. CIT(A) TO THE A SSESSEE. THE HONBLE I.T.A.NO.2046/AHD/2009 C.O. NO.164/AHD/2009 3 TRIBUNAL CONFIRMED THE ACTION OF LD. CIT(A) IN RESP ECT OF (I) DISALLOWANCE OF OPEN OFFER FOR ACQUISITION OF SHARE OF AHMEDABAD EL ECTRICITY CO., OF RS.26,74,262/-; (II) DISALLOWANCE ON ACCOUNT OF SHA RE TRANSFER EXPENSES OF RS. 13,350/-; AND (III) DISALLOWANCE ON ACCOUNT OF TRANSFER STAMP EXPENSES OF RS.11,63,162/- AND SET ASIDE THE MATTER BACK TO THE FILE OF THE A.O. IN RESPECT OF GROUNDS ON WHICH LD. CIT(A) DID NOT GIVE RELIEF TO THE ASSESSEE I.E. IN RESPECT OF RS.16,97,697/- IN RESPECT OF KEYMAN INSU RANCE PREMIUM AND INTEREST OF RS.8,08,541/- IN CONNECTION WITH KEYMAN INSURANCE PREMIUM AND TDS PAYMENT. 4. AFTER THIS, ANOTHER NOTICE U/S 271(1)(C) WAS ISS UED TO THE ASSESSEE AS TO WHY PENALTY SHOULD NOT BE LEVIED IN RESPECT OF THE ADDITION WHICH HAVE BEEN CONFIRMED BOTH BY LD. CIT(A) AND HONBLE ITAT. THE ASSESSEES EXPLANATION WAS THAT IT HAD FILED RETURN OF INCOME ALONG WITH THE STATEMENT OF COMPUTATION OF TOTAL INCOME AND A COPY OF ANNUAL AC COUNTS AUDITED AS PER COMPANIES ACT, AUDIT REPORT U/S 44AB OF THE ACT. I T W SUBMITTED THAT DURING THE YEAR ASSESSEE HAD ACQUIRE SHARES IN AHMEDABAD E LECTRICITY COMPANY FOR THE PURPOSE IT HAD INCURRED EXPENSES ON OPEN OFFER FOR SHARES, SHARE TRANSFER EXPENSES AND SHARE TRANSFER STAMP EXPENSES . THE A .O. DISALLOWED THE AFORESAID EXPENDITURE OF RS.26,74,264/- AS CAPITAL EXPENDITURE ON THE GOURD THAT THE ASSESSEES NORMAL BUSINESS WAS OF FINANCI NG AND INVESTMENT IN SHARES AND SECURITY AS WELL AS SALE AND PURCHASE OF SHARES AND SECURITIES IN THE OPEN MARKET AND THEREFORE, IT ACQUIRED THE CONT ROLLING INTEREST IN THE MANAGEMENT OF THESE COMPANIES COULD NOT BE SAID TO BE ITS MAIN OBJECT OF ITS NORMAL BUSINESS. IT WAS FURTHER SUBMITTED BY THE A SSESSEE THAT THE EXPENDITURE WAS CLAIMED U/S 37 OF THE ACT AND HENCE IT WOULD NOT MAKE A DIFFERENCE EVEN IF ITS BUSINESS DIRECTLY BENEFIT OU T OF SUCH ACQUISITION OF THE ASSET I.E. CONTROLLING INTEREST IN THE AHMEDABAD EL ECTRICITY CO. EVEN THEN, THE I.T.A.NO.2046/AHD/2009 C.O. NO.164/AHD/2009 4 ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S 37 OF T HE ACT BECAUSE FOR THE PURPOSE OF DEDUCTION U/S 37 THE EXPENDITURE WOULD B E FOR THE PURPOSE OF BUSINESS AND THE SAME NEED NOT BE CONNECTED TO ANY SPECIFIC INCOME. RELIANCE WAS PLACED BY THE A.O. IN THE CASES OF DAL MIA JAIN & CO. VS CIT 81 ITR 754, DECISION OF HON'BLE HIGH COURT OF CALCU TTA IN THE CASE OF GROUND SUGAR MILLS LTD. VS CIT 117 ITR 747 AND THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF SURABHI AND SONS PVT. LTD . 201 ITR 464, WHICH WERE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS THE FACTS IN THOSE CASES WERE ALTOGETHER DIFFERENT, WAS POINTED OUT DURING T HE PENALTY PROCEEDINGS. THE ASSESSEE IN SUPPORT OF ITS CONTENTION, PLACED R ELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BOMBAY STEAM N AVIGATION CO. PVT. LTD. VS CIT 56 ITR 52 AND CIT VS BOMBAY DYEING & MF G. CO. LTD. 85 TAXMAN 396 AND CONTENDED THAT THE EXPENDITURE IN TH IS CONNECTION WAS ALLOWABLE AS REVENUE EXPENDITURE BECAUSE IT HAD INC URRED SUCH EXPENSES FOR AUGMENTING OF ITS EXISTING BUSINESS. 5. AS REGARDS THE DISALLOWANCE OF RS.11,76,512/- BE ING SHARE TRANSFER EXPENSES AND STAMP PAPER EXPENSES IT WAS SUBMITTED THAT THESE EXPENSES WERE OF ALLOWABLE NATURE AND IN SUPPORT OF ITS CONT ENTION, THE ASSESSEE RELIED ON THE DECISION OF LD. CIT(A) IN THE CASE OF ASSESS EE ITSELF FOR THE ASSESSMENT YEAR 1994-95. IT WAS FURTHER SUBMITTED THAT THOUGH HONBLE ITAT HAS CONFIRMED THE DISALLOWANCE OF SUCH EXPENSE S IN ASSESSMENT YEAR 1994-95, IT HAD HELD THAT THE ASSESSES IS ENTITLED TO CAPITALIZE SUCH EXPENDITURE TOWARDS COST OF ACQUISITION OF SHARES A ND ACCORDINGLY, SUCH EXPENSES OF ACQUISITION OF SHARES OF GLFL WERE DISA LLOWED IN THE YEAR OF ACQUISITION AND THE SAME WERE HELD TO BE ALLOWABLE IN THE YEAR IN WHICH THE SHARES WERE SOLD BY WAS OF COST OF ACQUISITION. TH US, ITAT ALSO ACCEPTED SUCH EXPENSES ARE NOT COMPLETELY DISALLOWABLE BUT T HEY ARE ALLOWABLE IN THE I.T.A.NO.2046/AHD/2009 C.O. NO.164/AHD/2009 5 DIFFERENT YEAR. CONSIDERING THE ABOVE DECISION, GI VING DIFFERENT VIEWS ON BOTH THE ISSUES, IT WAS CLEAR THAT THE ISSUE UNDER CONSIDERATION WAS A DEBATABLE ONE. BY RELYING UPON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS CIT 249 ITR 125 , THE ASSESSEE CONTENDED THAT EVERY ADDITION/DISALLOWANCE DO NOT NECESSARY L EAD TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AND AS PER THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE ABOVE CASE, IT CAN BE SEEN THAT TWO VIEWS AR E POSSIBLE ON THE SAID ISSUE. FURTHER, IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS VEGETABLE PRODUCTS LTD. 88 ITR 192 (S.C.) , IT WAS SUBMITTED THAT THE PENALTY WAS NOT JUSTIFIED WHEN TWO VIEWS ARE PO SSIBLE. THE ASSESSEE ALSO RELIED UPON THE DECISION OF HON'BLE HIGH COURT OF M ADRAS IN THE CASE OF CIT VS INDEN BISLERS 240 ITR 943 AND ARGUED THAT AN ADD ITION TO INCOME DOES NOT MEAN THAT THERE HAS BEEN CONCEALMENT OF INCOME. IN THE LIGHT OF THESE SUBMISSIONS, ASSESSEE SUBMITTED THAT IT HAD NOT FUR NISHED ANY INACCURATE PARTICULARS OF INCOME AND HENCE THERE WAS NO JUSTIF ICATION FOR LEVYING OF ANY PENALTY. THE A.O. DID NOT ACCEPT THIS EXPLANATION OFFERED BY THE ASSESSEE AND OBSERVED THAT THE ASSESSEES NORMAL BUSINESS WA S OF FINANCING AND INVESTMENT IN SHARES AND SECURITIES AS WELL AS SALE AND PURCHASE OF SHARES/SECURITIES AN D ACQUIRING OF SHARES FOR SECU RING CONTROLLING INTEREST IN THE MANAGEMENT OF THE ABOVE COMPANIES WAS THEREFORE , NOT AN OBJECTIVE OF ITS NORMAL BUSINESS AND HENCE, THE EXPENSES OF RS.2 6,74,262/- ON SUCH ACQUISITION OFFER CANNOT BE TREATED AS REVENUE EXPE NDITURE. FURTHER, THE EXPENSE ON ACCOUNT OF SHARE TRANSFER EXPENDITURE OF RS.13,350/- WAS HELD TO BE RELATED TO CAPITAL ASSET AND HENCE THE SAME COUL D NOT BE ALLOWED AS REVENUE EXPENDITURE. SIMILARLY, THE A.O. OBSERVED THAT THE ASSESSEE ITSELF CONSIDERED THE SHARES SHOWN UNDER THE HEAD INVESTME NT PORTFOLIO IN THE BALANCE SHEET AS CAPITAL ASSET AND THEREFORE HELD T HAT EXPENDITURE THEREON WAS I.T.A.NO.2046/AHD/2009 C.O. NO.164/AHD/2009 6 RELATED TO CAPITAL EXPENDITURE. THE A.O. ACCORDING LY LEVIED PENALTY U/S 271(1)(C) AMOUNTING TO RS.17,71,360/- ON THE GROUND THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME. 6. BEFORE CIT(A) ASSESSEE MADE SUBMISSIONS WHICH HA VE BEEN REPRODUCED BY CIT(A) IN PARA 2.2 OF HIS ORDER. TAK ING INTO CONSIDERATION THOSE SUBMISSIONS, LD. CIT(A) DELETED THE PENALTY I MPOSED BY THE A.O. BY OBSERVING AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSIONS PUT FORTH BY THE APPELLANT ALONG WITH VARIOUS CASE LAWS AS RE LIED UPON. THE CONTENTION OF THE A.R. THAT THE PENALTY ORDER IS TI ME BARRED IS REJECTED AS I FIND THAT THE A.O. HAS PASSED THE ORDER IN TIM E. IT IS SEEN THAT THE APPELLANT HAS DISCLOSED FULL FACTS AND DETAILS AT T HE TIME OF ASSESSMENT PROCEEDINGS AND IT IS A MERE REJECTION OF CLAIM .AS THE DISPUTE WAS CONTINUING FROM A.Y. 1994-95, THE FACTS WERE KNOWN TO THE DEPARTMENT. THE APPELLANT HAD BONAFIDE BELIEF THAT NO CONTROLLING INTEREST WAS ACQUIRED BY THE APPELLANT AS ONLY LESS THAN 10% OF VOTING RIGHTS OF AEC LTD. WERE ACQUIRED BY THE APPELLANT A ND SUCH EXPENDITURE WAS INCURRED IN THE COURSE OF BUSINESS OF DEALING IN SHARES AND MAKING INVESTMENTS. FURTHER THE APPELLANT HAS S OLD THE SHARES SO ACQUIRED IN A.Y. 1998-99, SO THE ALLEGATION OF THE A.O. ABOUT ACQUIRING CONTROLLING INTEREST BY THE APPELLANT IS NOT CORRECT. IN THE FACTS OF THE CASE I AM OF THE VIEW THAT THERE IS NO JUSTIFICATION IN HOLDING THAT THERE IS FURNISHING OF INACCURATE PART ICULARS OF INCOME. FURTHER, THE ISSUE IS DISPUTABLE AND DEBATABLE AND MERELY THE FACT THAT THE ADDITIONS STOOD CONFIRMED AT THE FIRST APPELLAT E STAGE WOULD NOT RESULT INTO LEVY OF PENALTY U/S. 271(L)(C), AS THE PENALTY PROCEEDINGS ARE ENTIRELY DIFFERENT FROM THE ASSESSMENT PROCEEDI NGS AND NO PENALTY CAN BE LEVIED, UNLESS IT IS ESTABLISHED THAT THERE IS CLEAR CUT FURNISHING OF INACCURATE PARTICULARS OF INCOME . IN VIEW OF TH E ABOVE FACTS AND CASE LAWS CITED, I HOLD THAT IT IS NOT A FIT CASE F OR LEVY OF PENALTY. THEREFORE, I DELETE THE PENALTY. 7. AT THE TIME OF HEARING LD. D.R. RELIED ON THE OR DER OF A.O. LD. A.R. PLACED RELIANCE ON THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND ORDER I.T.A.NO.2046/AHD/2009 C.O. NO.164/AHD/2009 7 PASSED BY HIM AND FURTHER RELIED ON THE LATEST JUDI CIAL PRONOUNCEMENTS ON THE ISSUE. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORDS, WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FINANCIN G AND INVESTMENT IN SHARES AND SECURITIES AS WELL AS SALE & PURCHASE OF SHARES AND SECURITIES. DURING THE YEAR UNDER APPEAL, ASSESSEE CAME OUT WITH THE OFFER FOR PURCHASE OF SHARES OF AHMEDABAD ELECTRICITY CO. AND FOR THIS PURPOSE INCU RRED AN EXPENDITURE OF RS.26,74,262/- ON SHARE TRANSFER EXPENSES OF RS.13, 350/- AND SHARE TRANSFER STAMP DUTY EXPENSE OF RS.11,63,162/-. THERE IS NO DISPUTE ABOUT THE FACT THAT THIS EXPENDITURE WAS SEPARATELY SHOWN IN THE P & L ACCOUNT WHICH WAS FILED WITH THE RETURN OF INCOME. ASSESSEE CLAIMED THIS EXPENDITURE AS REVENUE EXPENDITURE ALLOWABLE U/S 37 OF THE ACT AS ACCORDING TO HIM, THE ENTIRE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF BUSINESS. THE A.O.S VIEW HOWEVER WAS THAT THIS EX PENDITURE WAS INCURRED FOR THE PURCHASE OF SHARES OF A COMPANY TO ACQUIRE THE CONTROLLING INTEREST IN THE MANAGEMENT OF THAT COMPANY AND HENCE SUCH EXPEN DITURE WAS TREATED AS CAPITAL EXPENDITURE BY HIM. THE DISPUTE WAS CONTIN UING FROM THE ASSESSMENT YEAR 1994-95 AND THE FACTS WERE KNOWN TO THE REVENU E AND THE ASSESSEE ON THE OTHER HAND HAD BONA FIDE BELIEF THAT NO CONTROL LING INTEREST WAS ACQUIRED BY THE ASSESSEE AS ONLY LESS THAN 10% OF VOTING RIG HT ON AEC LTD. WAS ACQUIRED BY THE REVENUE AND SUCH EXPENDITURE WAS IN CURRED IN THE COURSE OF BUSINESS OF DEALING IN SHARES AND MAKING INVESTMENT . SINCE THE FACT THAT THE ASSESSEE IN THE ASSESSMENT YEAR 1998-99 SOLD THESE SHARES IS NOT IN DISPUTE, THE ALLEGATION OF THE A.O. THAT ASSESSEE ACQUIRED T HESE SHARES FOR CONTROLLING INTEREST IN AEC LTD., ALSO PROVED TO BE INCORRECT. IN THE LIGHT OF THESE PECULIAR FACTS OF THIS CASE, WE ARE OF THE CONSIDER ED VIEW THAT THERE WAS NO JUSTIFICATION IN HOLDING THAT THERE WAS FURNISHING OF INACCURATE PARTICULARS OF I.T.A.NO.2046/AHD/2009 C.O. NO.164/AHD/2009 8 INCOME BY THE ASSESSEE. SIMPLY BECAUSE THE ADDITIO N HAS BEEN MADE, PENALTY CANNOT BE IMPOSED AUTOMATICALLY UNLESS IT W AS ESTABLISHED THAT THERE WAS CONCEALMENT OF INCOME OR FURNISHING OF INACCURA TE PARTICULARS OF SUCH INCOME. THIS VIEW FINDS SUPPORT FROM THE VARIOUS J UDICIAL PRONOUNCEMENTS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING. 9. IN VIEW OF ABOVE, ORDER PASSED BY LD. CIT(A) DEL ETING THE PENALTY U/S 271(1)(C) IMPOSED BY THE A.O., IS HEREBY UPHELD. 10. THE CROSS OBJECTION FILED BY THE ASSESSEE WAS N OT PRESSED AT THE TIME OF HEARING AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE 2011. SD./- SD./- (D. C. AGRAWAL) (D.K.TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED :17 TH JUNE, 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE I.T.A.NO.2046/AHD/2009 C.O. NO.164/AHD/2009 9 1. DATE OF DICTATION 15/6/11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16/6/11 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 16/6/11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 17/6/11 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 17/6/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17/ 6/11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..
