Sh. Vikram Kapur, New Delhi V. DCIT, New Delhi

ITA 2047/DEL/2013

• Counselvise Citation: 204720114 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 29-07-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 08-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDREKAR
• Keywords: Principle of natural justice; Initiation of penalty proceedings; Wrong claim; Difference of opinion
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMB ER ITA NO: 2047/DEL/2013 AY : - 2001-02 SHRI VIKRAM KAPUR VS. DCIT E-31, SAINIK FARM CIRCLE 24(1), KHANPUR NEW DELHI NEW DELHI (PAN AAFPK6128G) (APPELLANT) (RESPONDENT) APPELLANT BY : MS. RUCHIKA JAIN, CA RESPONDENT BY :SHRI J.P. CHANDREKAR, SR. DR DATE OF HEARING :29.7.2015 DATE OF PRONOUNCEMENT : .8.2015 O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DI RECTED AGAINST THE ORDER OF LD. CIT(A)XXIII, NEW DELHI DATED 4.1.2013 FOR THE ASSES SMENT YEAR 2001-02. THE ASSESSEE HAS TWO PROPRIETORSHIP CONCERNS. THESE ARE M/S. HIGHLIGHT FASHIONS AND M/S. GLOBAL INVESTMENT. IN THE PROFIT AND LOSS ACCO UNT OF M/S. GLOBAL INVESTMENT, THE ASSESSEE DISCLOSED THE FOLLOWING INCOMES :- 1. FDR INTEREST RS. 1562732.48 2. COMMISSION RECEIVED RS. 39026.73 3. DIVIDEND RECEIVED RS. 983902.70 _____________ __ TOTAL RS. 2585661.91 ITA NO.2047DEL/2013 SHRI VIKRAM KA POOR VS. DCIT 2 2. AGAINST THIS INCOME, TOTAL EXPENDITURE OF RS. . 15,16,558.15 WAS CLAIMED AND NET PROFIT OF RS. 10,69,103.76 WAS DECLARED. THE EXPEN DITURE CLAIMED INCLUDED AN AMOUNT OF RS, 4,08,119.85 AS LOSS ON SHARE TRADIN G. THE AO FOR THE VARIOUS REASONS GIVEN IN THE ORDER, HELD THAT THE LOSS INCU RRED ON PURCHASE AND SALE OF SHARES, IS ASSESSABLE UNDER THE HEAD SHORT-TERM CA PITAL LOSS. THE CLAIM OF THE ASSESSEE OF BUSINESS EXPENSE WAS DISALLOWED. ON APP EAL THE FIRST APPELLATE AUTHORITY CONFIRMED THE ORDER OF THE AO. 3. THE SECOND ISSUE IS WHETHER THE FDR INTERES T AND DIVIDEND RECEIVED BY THE ASSESSEE, BE ASSESSED UNDER THE HEAD INCOME FROM O THER SOURCES OR UNDER THE HEAD INCOME FROM BUSINESS. THE AO CAME TO THE CON CLUSION THAT THESE INCOMES FROM FDR INTERESTS AND DIVIDEND ARE TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND CONSEQUENTLY THE EXPENSES CLAIME D U/S 37 ARE TO BE DISALLOWED. ON APPEAL THE FIRST APPELLATE AUTHORITY AS WELL AS THE ITAT CONFIRMED THE SAME. THEREAFTER, THE AO LEVIED PENALTY U/S 271(1)(C) VID E HIS ORDER DATED 27.2.2009, ON THE GROUND THAT THE ASSESSEE HAS DELIBERATELY CONC EALED INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME. AGGRIEVED THE ASS ESSEE CARRIED THE MATTER IN APPEAL WITHOUT SUCCESS. FURTHER AGGRIEVED THE ASSES SEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXIII CONFIRMI NG THE PENALTY U/S 271(1)(C) AMOUNTING TO RS. 3,81,670/- LEVIED BY THE LD. ASSES SING OFFICER I GROSSLY INJUDICIOUS, UNWARRANTED AND BAD IN LAW. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PENALTY OF RS. 3,81,670/- LEVIED BY THE LD. ASSESSING AUTHORITY UNDER THE PRO VISIONS OF SECTION 271(1)(C) OF THE ACT IS GROSSLY INJUDICIOUS, UNWARRANTED AND BAD IN LAW AS THE APPELLANT HAS NEITHER CONCEALED THE PARTICULARS OF ITS INCOME NOR FURNISH ED ANY INACCURATE PARTICULARS THEREOF. ITA NO.2047DEL/2013 SHRI VIKRAM KA POOR VS. DCIT 3 4. LD. COUNSEL FOR THE ASSESSEE MS. RUCHIKA JA IN CONTENDED THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS AND INFORMATION IN IT S RETURN OF INCOME AND HENCE THERE WAS NO CONCEALMENT OR FURNISHING OF INACCURATE PART ICULARS OF INCOME. SHE SUBMITTED THAT THERE WAS A DIFFERENCE OF OPINION BE TWEEN THE ASSESSEE AND THE AO, AS TO THE HEAD UNDER WHICH THE LOSS ON PURCHASE AND SALE OF SHARES HAS TO BE ASSESSED AND AS TO UNDER WHICH HEAD OF INCOME, INTE REST ON FDR AND DIVIDEND HAVE TO BE ASSESSED. SHE VEHEMENTLY CONTENDED THAT THE A SSESSEE HAS GIVEN CORRECT AND COMPLETE INFORMATION WITH THE RETURN OF INCOME AND MERELY BECAUSE THE AO SHIFTED THE HEAD OF INCOME UNDER WHICH ASSESSMENT HAS TO BE MADE, PENALTY U/S 271(1)(C) CANNOT BE LEVIED. ON THE ISSUE OF ASSESSABILITY O F LOSS ON PURCHASE AND SALE OF SHARES UNDER THE HEAD BUSINESS, SHE RELIED THE SU BMISSIONS MADE BEFORE THE LOWER AUTHORITIES. SIMILARLY ON THE ASSESSABILITY OF FDR INTERESTS AND DIVIDEND UNDER THE HEAD INCOME FROM BUSINESS SHE REITERATED THE CONT ENTIONS RAISED BEFORE THE LOWER AUTHORITIES AND FURTHER SUBMITTED THAT EVEN OTHERWI SE, IF THE INCOME IS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, THE ASS ESSEE WOULD BE ENTITLED TO DEDUCTION U/S 57(III) OF THE ACT. SHE RELIED ON A N UMBER OF CASE LAWS IN SUPPORT OF THE ARGUMENTS AND PRAYED THAT THE PENALTY IN QUESTI ON BE DELETED AS THE ISSUES ON WHICH ADDITIONS WERE MADE ARE HIGHLY DEBATABLE. 5. LD. SR. DR SHRI J.P. CHANDREKAR ON THE OTHE R HAND RELIED ON THE ORDER OF THE AO AS WELL AS THE FIRST APPELLATE AUTHORITY AND SUB MITTED THAT THE ASSESSEE HAS DELIBERATELY CLAIMED SHORT TERM CAPITAL LOSS AS A B USINESS LOSS AND HAS DELIBERATELY DISCLOSED INCOME WHICH IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AS INCOME FROM BUSINESS AND MADE A WRONG CLAIM OF EXPE NDITURE. HE SUBMITTED THAT THE ITAT, IN THE QUANTUM PROCEEDINGS, HAS CONFIRMED THE DISALLOWANCE AMOUNTING TO ITA NO.2047DEL/2013 SHRI VIKRAM KA POOR VS. DCIT 4 RS. 11,35,925/- AND DELETED THE DISALLOWANCE OF RS. 4,22,797/-. THE DISALLOWANCE OF CLAIM OF LOSS OF RS. 4,08,119/- ON ACCOUNT OF PURCH ASE AND SALE OF SHARES WAS CONFIRMED BY THE ITAT. HE SUBMITTED THAT THE ASSESS EE HAD ONLY COMMISSION INCOME OF RS. 39,029/- BY WRONGLY INCLUDED INTEREST AND D IVIDEND INCOME, UNDER THE HEAD INCOME FROM BUSINESS, AND CLAIMED DEDUCTION OF EX PENDITURE OF RS. 11,08,438/-. HE ARGUED THAT THE AO HAS HELD THAT THE PROPRIETORS HIP CONCERN, M/S. GLOBAL INVESTMENT, IS A COLOURABLE DEVICE AND ASSESSEE HAS CREDITED INCOME FROM INTEREST AND DIVIDEND ONLY, TO CLAIM SET OFF OF LOSS ON SALE OF SHARES AND HUGE EXPENSES WHICH WERE NOT OTHERWISE ALLOWABLE AS A DEDUCTION F ROM INCOME FROM OTHER SOURCES. HE SUBMITTED THAT THE PENALTY SHOULD BE C ONFIRMED. 6. RELIABLE CONTENTIONS HAVE BEEN HEARD. 7. ON A CAREFUL CONSIDERATION OF THE FACTS AND CI RCUMSTANCES OF THE CASE AND PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF T HE AUTHORITIES BELOW, WE HOLD AS FOLLOWS. 8. THE ASSESSEE IN THIS CASE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS ALONGWITH THE RETURN OF INCOME. THE ISSUE WHETHER I NCOME FROM PURCHASE AND SALE OF SHARES IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR UNDER THE HEAD INCOME FROM CAPITAL GAINS IS A HIGHLY DEBATABLE I SSUE. THE CONCLUSION DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. SIMILARLY THE ASSESSEES CASE IS THAT INTEREST ON FDRS AND DIVIDENDS ARE ASSESSABLE U NDER THE HEAD INCOME FROM BUSINESS FOR THE REASON THAT THE INCOME IS EARNED AS A CONSEQUENCES OF BUSINESS ACTIVITY. IT WAS SUBMITTED THAT THE ASSESSEE MAINTA INS SEPARATE OFFICE TO LOOK AFTER THE INVESTMENT PORTFOLIOS FOR THE TWO DIFFERENT UNI TS AND ACTIVITIES ARE ON A LARGE ITA NO.2047DEL/2013 SHRI VIKRAM KA POOR VS. DCIT 5 SCALE AND REQUIRE FULL TIME INVOLVEMENT. IT WAS SUB MITTED THAT EXPERIENCED PEOPLE WITH EXPERT KNOWLEDGE WERE EMPLOYED TO MAKE INVESTM ENT DECISIONS, SO THAT THE INCOME OF THE ASSESSEE COULD BE MAXIMISED . 9. WHEN THESE SUBMISSIONS ARE CONSIDERED AND TH E DECISION OF THE AO AS CONFIRMED BY THE APPELLATE AUTHORITIES ARE LOOKED I NTO, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUES IN QUESTION ARE DEBATABLE. IT IS NOT THE CASE OF THE REVENUE THAT THE EXPENDITURE CLAIMED IS FALSE OR FABRICATED . UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS BONAFIDE. THE PENALTY CAN BE LEVIED ON ADDITIONS WHICH ARE DE BATABLE. IN THE CASE OF CIT VS. MANJUNATHA COTTON AN D GINNING FACTORY (2013) 359 ITR 565 THE HONBLE HIGH COURT HAS EXAMINED A CATENA OF JUDGMENTS ON THE ISSUE OF LEVY OF PENALTY U/S 271(1)(C) AND CULLED OUT THE FOLLOWI NG PROPOSITIONS:- THE HIGH COURT HAD TO CONSIDER WHETHER PENALTY U/ S 271(1)(C ) CAN BE LEVIED IN A CASE WHERE THE ASSESSEE AGREES TO AN ADDITION MADE BY THE AO SO AS TO BUY PEACE OF MIND. HELD BY THE HIGH COURT: MERELY BECAUSE THE ASSESSEE AGREED FOR ADDITION DO ES NOT LEAD TO THE INFERENCE THAT THE SAID ADDITION IS ON ACCOUNT OF CONCEALMENT IF T HE ASSESSEE HAS OFFERED AN EXPLANATION WHICH IS NOT FOUND TO BE FALSE. THE MER E FACT THAT THE ASSESSEE AGREED TO PAY TAX AND DID NOT CHALLENGE THE ASSESSMENT ORDER DOES NOT MEAN THAT HIS CONDUCT IS MALA FIDE. THE FOLLOWING PRINCIPLES APPLY: (A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIAB ILITY. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIE NT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 . (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISI ONAL AUTHORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION L1(A) AND (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. ITA NO.2047DEL/2013 SHRI VIKRAM KA POOR VS. DCIT 6 (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271 (1)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECA USE OF THE DEEMING PROVISION CONTAINED IN SECTION 1 (B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMISSIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSE LF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS O N ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD H AVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXP LANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLAN ATION OFFERED IS NOT 'BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEA L, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDE D. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANAT E FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT O F THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS INSOFAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS' W OULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATT ER OF PENALTY PROCEEDINGS. THE ITA NO.2047DEL/2013 SHRI VIKRAM KA POOR VS. DCIT 7 AS7ESSMEN OR REASSESSMENT CANNOT BE DECLARED AS INV ALID IN THE PENALTY PROCEEDINGS. 10. APPLYING THE PROPOSITIONS STATED ABOVE TO THE FACTS OF THE CASE, WE CANCEL THE PENALTY LEVIED BY THE AO AS CONFIRMED BY THE FIRST APPELLATE AUTHORITY. IN THE RESULT THE APPEAL OF THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST, 2015. SD/- SD/- (G.C. GUPTA) (J. SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER DATED: THE 7 .8. 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 4.8.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 5.8.20 15 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 ITA NO.2047DEL/2013 SHRI VIKRAM KA POOR VS. DCIT 8 9. DATE OF DISPATCH OF ORDER