M/S. MARS ENTERPRISES, MUMBAI V. DCIT CENT CIR-36, MUMBAI

ITA 2129/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1402 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA; B K SINGH
• Keywords: Depreciation; Bonafide mistake

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI. BEFORE SHRI R.V. EASWAR, HONBLE PRESIDENT AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A. NO.2129/MUM/2009 ASSESSMENT YEAR : 2006-07. M/S MARS ENTERPRISES, D Y. COMMISSIONER OF OFF INTERNATIONAL AIRPORT VS. INCOME TAX-36, APPROACH ROAD, MAROL, MUMB AI. ANDHERI (EAST), MUMBAI 400 059. PAN AAGEM1530K. APPELLANT RESPONDENT APPELLANT BY : SHRI VIJAY MEHTA. RESPONDENT BY : SH RI S.S. RANA AND SHRI B.K. SINGH. O R D E R PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-VIII, MUMBAI DATED 06-2-2 009 FOR THE ASSESSMENT YEAR 2006-07 WHEREIN A PENALTY LEVIED U/ S 271(1)(C) OF THE ACT WAS CONFIRMED. 2. FACT IN BRIEF: THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF HOTEL AND RESTAURANTS. THE PENALTY IN Q UESTION IS LEVIED ON THE FOLLOWING TWO ADDITIONS : A) DISALLOWANCE OF CLAIM OF HIGHER DEPRECIATION ON PUR CHASE OF MOTOR CAR DURING THE YEAR. 2 B) ADDITION ON ACCOUNT OF SHORT TERM CAPITAL GAINS ON REDEMPTION OF UNIT OF MUTUAL FUND. 3. MR. VIJAY MEHTA, LEARNED COUNSEL FOR THE ASSESS EE, SUBMITTED THAT THE ASSESSEE HAD GIVEN ALL ITS EQUIPMENTS, FUR NITURE AND FIXTURES AS WELL AS VEHICLES TO ITS SISTER CONCERN M/S MARS RES TAURANTS PVT. LTD. FOR CONDUCTING HOTEL BUSINESS ON REVENUE SHARING BASIS WITH EFFECT FROM 01- 10-2005. HE SUBMITTED THAT THE ASSESSEE HAD ALREADY PAID SUBSTANTIAL AMOUNTS FOR THE PURCHASE OF IMPORTED MOTOR CAR (BMW ) BEFORE SEPTEMBER, 2005. IT WAS SUBMITTED THAT SINCE THE MO TOR CAR WAS USED FOR TRANSPORTATION OF PASSENGERS FOR THE HOTEL BUSINESS , THE ASSESSEE WAS OF THE BONAFIDE OPINION THAT IT IS IN THE NATURE OF HIRING OF VEHICLES, ELIGIBLE FOR HIGHER DEPRECIATION AS PER INCOME TAX RULES. THE AS SESSING OFFICER DISALLOWED THE SAME AND THE ASSESSEE HAS NOT DISPUT ED. MR. VIJAY MEHTA FURTHER SUBMITTED THAT THE ASSESSEE HAD ONE MORE CA R AND THIS ALSO HAD BEEN GIVEN TO THE SISTER CONCERN IN PURSUANCE OF TH E CONDUCTING AGREEMENT ENTERED INTO WITH IT AND IN THAT CASE ALSO THE ASSE SSEE HAD CLAIMED HIGHER RATE OF DEPRECIATION AND THE AO HAS NOT DISALLOWED THE SAME. HE TOOK THIS BENCH TO PAGE 12 OF THE PAPER BOOK WHICH IS A FIXED ASSET SCHEDULE TO DEMONSTRATE THAT THE NEW CAR IN QUESTION COST RS.53 ,26,301/- WHEREAS THE OLD VEHICLES WERE OF A VALUE OF RS.70,69,620/-. HE FURTHER TOOK THIS BENCH THROUGH THE VARIOUS PAYMENTS MADE FOR THE NEW CAR, IN SUPPORT OF HIS CONTENTION THAT THE MAJOR PAYMENTS WERE MADE PRIOR TO, THE EXECUTION OF THE CONDUCTING AGREEMENT. HE SUBMITTED THAT THE AO WHILE PASSING AN ORDER U/S 271(1)(C) HAS FASHIONED THE CHARGE OF FUR NISHING OF INACCURATE PARTICULARS ON THE ASSESSEE. HE REFERRED SPECIFICA LLY TO PARA 3.5 AT PAGE 3 OF THE PENALTY ORDER. THEREAFTER HE RELIED UPON THE RECENT JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIA NCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) AND POINTED OUT THAT THE MEANING OF THE WORDS PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE 3 CLAIM MADE AND WHEN NO INFORMATION GIVEN IN THE RET URN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HEL D TO BE GUILTY OF FURNISHING INACCURATE PARTICULARS. ON EXPLANATION 1 , HE SUBMITTED THAT THE SAME WOULD COME INTO PLAY ONLY WHEN THERE IS CONCEA LMENT OF INCOME AND NOT IN CASE WHERE INACCURATE PARTICULARS OF INC OME ARE FURNISHED. IN ANY EVENT HE SUBMITS THAT THE EXPLANATION OF THE AS SESSEE WAS NOT HELD TO BE FALSE. 4. COMING TO THE SECOND ISSUE ON WHICH THE PENALTY IS LEVIED, THE LEARNED COUNSEL TOOK THIS BENCH THROUGH THE VAR IOUS PAPERS IN THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE HAD INVE STED IN MUTUAL FUNDS AND THE DIVIDEND WAS REINVESTED ON A DAILY BASIS. H E POINTED OUT THAT THE ACCOUNTANT OF THE ASSESSEE HAS COMMITTED A BONAFIDE ERROR IN TREATING SOME OF THE SHORT TERM CAPITAL GAINS AS DIVIDEND IN COME AND CONSEQUENTLY CLAIMING EXEMPTION. HE TOOK THIS BENCH THROUGH SOME OF THE MATERIAL PAPERS TO DEMONSTRATE THAT THE ACCOUNTANT HAS ALSO COMMITTED A MISTAKE IN TREATING SOME OF THE DIVIDEND INCOME AS SHORT TE RM CAPITAL GAINS. THUS HE SUBMITS THAT THIS WAS A BONAFIDE MISTAKE. HE REL IED ON JUDGMENT OF PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS . SIDHARTHA ENTERPRISES REPORTED IN 322 ITR 80. 5. THE LEARNED DR, MR. S.S. RANA, ON THE OTHER HAN D CONTROVERTED THE SUBMISSIONS OF THE ASSESSEE AND SU BMITTED THAT THE ONUS THAT A PARTICULAR ASSET WAS GIVEN ON HIRE, SO AS TO ENTITLE THE ASSESSEE TO CLAIM A HIGHER DEPRECIATION IS ON THE ASSESSEE. HE POINTED OUT THAT THE AO AT PARA 3.1 OF HIS PENALTY ORDER CLEARLY BROUGHT OU T THAT THE ASSESSEE WAS NOT FOUND TO HAVE USED THE VEHICLE FOR TRANSPORTING PASSENGERS AND THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM WITH ANY MATERIAL EVIDENCE 4 LIKE LOGBOOK, HIRING BILLS ETC. HE RELIED ON THE OR DER OF THE AO AS WELL AS THE CIT(APPEALS). 6. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL O F THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED, WE HOLD AS FOLLOWS. 7. THE AO LEVIED PENALTY ON THE ASSESSEE ON THE GR OUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME, AS FAR AS THE DISALLOWANCE OF PART OF THE CLAIM OF DEPRECIATION I S CONCERNED. ON THE ISSUE OF DISCLOSURE OF SHORT TERM CAPITAL GAINS AS DIVIDENDS, THE AO FOUND IT FIT TO IMPOSE PENALTY U/S 271(1)(C) FOR CONCEALI NG MATERIAL PARTICULARS OF INCOME. 8. WE FIRST TAKE UP THE ISSUE OF CLAIM OF HIGHER D EPRECIATION ON BMW CAR. THE ASSESSEE HAD MADE ADVANCE PAYMENT FOR PURCHASE OF THE CAR PRIOR TO SEPTEMBER, 2005. A CONDUCTING AGREEMEN T ON REVENUE SHARING BASIS WAS ENTERED INTO WITH EFFECT FROM 01-10-2005. THE EXISTING CAR OF THE ASSESSEE WAS USED IN THE HOTEL BUSINESS BY M/S MASS RESTAURANTS PVT. LTD. AND THE ASSESSEE HAD CLAIMED DEPRECIATION AT 3 0% AND THE AO HAS ALLOWED THE SAME. ADMITTEDLY THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE WHATSOEVER ON THE MAINTENANCE AND RUNNI NG OF NEW BMW CAR. ALL THE FACTS WERE ON RECORD. UNDER THESE CIRC UMSTANCES, THE ISSUE IS WHETHER PENALTY CAN BE LEVIED U/S 271(1)(C) ON THE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME. THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS P. LTD. (SUPRA) HELD AS FOLLOWS : 5 A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) O F THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND T O BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY O F FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSE SSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGI NATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACC URATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETA ILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOU S OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 2 71(1). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RE TURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFFIRMED. 9. APPLYING THE PROPOSITIONS LAID DOWN IN THIS CAS E TO THE FACTS OF THE CASE ON HAND, WE FIND THAT THE ASSESSEE HAS FURNISHED THE REQUIRED INFORMATION IN THE RETURN OF INCOME AND THIS INFORM ATION IS NOT FOUND TO BE INCORRECT OR INACCURATE. THUS IN OUR HUMBLE OPI NION, THE PENALTY HAS BEEN WRONGLY LEVIED ON THIS PARTICULAR DISALLOWANCE . HENCE WE DELETE THE SAME. 10. COMING TO THE SECOND ISSUE I.E. DISCLOSING SHO RT TERM CAPITAL GAINS AS DIVIDENDS, THE AO AT PARA 5.2 PAGE 5 OF TH E ASSESSMENT ORDER 6 BROUGHT OUT THE FACTS. A PERUSAL OF THESE FACTS SH OW THAT IN CERTAIN CASES THE ACCOUNTANT HAS TREATED THE DIVIDEND AS SHORT TE RM CAPITAL GAINS. APPARENTLY THIS IS A BONAFIDE MISTAKE COMMITTED BY THE ACCOUNTANT. THE EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT FOUND TO BE FALSE. UNDER THESE CIRCUMSTANCES, WE DELETE THE PENALTY LEVIED O N THIS COUNT ALSO. 11. IN THE RESULT, THE PENALTY LEVIED U/S 271(1)(C ) IS DELETED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF JUNE, 2010. SD/- SD/- (R.V. EASWAR) (J. SUDHAKAR REDDY) PRESIDENT. ACCOUNTANT MEMBER. MUMBAI, DATED : 30 TH JUNE, 2010. WAKODE COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, B-BENCH (TRUE COPY) BY ORDER AS STT.REGISTRAR, ITAT, MUMBAI BENCHES, MUMBAI.