ACIT 8(1), MUMBAI V. BUSINESS PRESS P.LTD, MUMBAI

ITA 2132/MUM/2012

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6534 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-08-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 30-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISHCHANDRA R RAJORE
• Keywords: Notional interest; Onus to prove
• Section: 271(1)(c); 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE JUSTICE SHRI P.P. BHATT, PRESIDENT AND SHRI G.S. PANNU, VICE PRESIDENT ITA NO. 2132/MUM/2012 : A.Y : 2004 - 05 DY. COMMISSIONER OF INCOME TAX - 8(1), MUMBAI (APPELLANT) VS. M/S. BUSINESS PRESS PVT. LTD., ROOM NO. D - 46, PLOT NO. 443, NACHIKET HSG. SOC. LTD., SECTOR - 4, CHARKOP, KANDIVALI (W), MUMBAI 400 067. (RESPONDENT) PAN : AAACB1734B APPELLANT BY : SHRI SATISHCHANDRA R. RAJORE RESPONDENT BY : SHRI MADHUR AGRAWAL DATE OF HEARING : 24/10/2018 DATE OF PRONOUNCEMENT : 18 /01/2019 O R D E R PER G.S. PANNU , VICE PRESIDENT : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 16 , MUMBAI DATED 10.01.2012 , PERTAINING TO THE ASSESSMENT YEAR 2004 - 05 , WHICH IN TURN HAS ARISEN FROM THE ORDER DATED 25.03.2009 PASSED BY THE ASSESSING OFFICER, MUMBAI UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL, ALTHOUGH REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE SOLITARY GRIEVANCE IS WITH REGARD TO THE ACTION OF THE CIT(A) IN 2 ITA NO. 2132/MUM/2012 M/S. BUSINESS PRESS PVT. LTD. DELETING THE PENALTY OF ` 96,55,576/ - IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT. 3. I N BRIEF, THE RELEVANT FACTS ARE THAT THE RESPONDENT - ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER - ALIA , ENGAGED IN THE BUSINESS OF PUBLISHING AND SELLING OF MAGAZINES AND BOOKS. FOR THE ASSESSMENT YEAR UN DER CONSIDERATION, IT FILED A RETURN OF INCOME DECLARING A LOSS OF ` 1,06,81,081 / - , WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT DATED 30.11.2006 WHEREBY THE TOTAL INCOME WAS ASSESSED AT ` 24,55,760/ - . THE DIFFERENCE BETWEEN TH E RETURNED AND ASSESSED INCOME WAS ON ACCOUNT OF THREE ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFICER, NAMELY, DISALLOWANCE OF INTEREST PAID ON HDFC LOAN OF ` 63,80,278/ - UNDER SECTION 43B OF THE ACT ; ADDITION ON ACCOUNT OF NOTIONAL INTEREST OF ` 67,1 8,884 / - ON INTEREST - FREE ADVANCES; AND, ` 37,68 0 / - ON ACCOUNT OF SALES TAX LIABILITY. SUBSEQUENT TO THE ASSESSMENT, THE ASSESSING OFFICER HELD THE ASSESSEE GUILTY FOR DEFAULT UNDER SECTION 271(1)(C) OF THE ACT INASMUCH, ACCORDING TO HIM, QUA THE AFORESAI D THREE ADDITIONS, ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SEC. 271(1)(C) OF THE ACT. ACCORDINGLY, VIDE ORDER DATED 25.03.2009, THE ASSESSING OFFICER LEVIED PENALTY EQUIVALENT TO 200% OF THE TAX SOUGHT TO BE EVADED QU A THE AFORESAID ADDITIONS, WHICH CAME TO ` 96,5 5 ,576 / - . THE PENALTY IMPOSED BY THE ASSESSING OFFICER HAS SINCE BEEN DELETED BY THE CIT(A), AGAINST WHICH REVENUE IS IN APPEAL BEFORE US. 4. IN THIS BACKGROUND, THE RIVAL COUNSELS HAVE BEEN HEARD AND THE RELEVANT RECORD PERUSED. 3 ITA NO. 2132/MUM/2012 M/S. BUSINESS PRESS PVT. LTD. 5. THE LD. DR APPEARING FOR THE REVENUE CONTENDED THAT THE CIT(A) ERRED IN DELETING THE PENALTY BY NOT APPRECIATING THAT THE IMPUGNED DISALLOWANCE S/ADDITIONS WERE CORRECTLY MADE, WHICH HA S RESULTED IN A DIFFERENCE BETWEEN THE RETURNED AND THE ASSESSED INCOME. THE LD. DR EMPHASISED THAT EVEN IN THE QUANTUM PROCEEDINGS, THE SAID ADDITIONS/DISALLOWANCES HAD BECOME FINAL, WHICH GOES TO SHOW THAT THE PENALTY FOR CONCEALMENT AND/OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ENVISAGED UNDER SECTION 271(1)(C) OF THE ACT IS JUSTIFIED. 6. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE CIT(A) MADE NO MISTAKE IN DELETING THE PENALTY FOR THE REASONS ASSIGN ED BY HIM. THE LEARNED REPRESENTATIVE POINTED OUT THAT QUA THE THREE ADDITIONS/DISALLOWANCES, NO CHARGE CAN BE MADE AGAINST THE ASSESSEE FOR HAVING MADE A NON - BONA FIDE CLAIM OR A CLAIM FOR WHICH ANY OF THE PARTICULARS FURNISHED WERE FOUND TO BE FALSE O R INACCURATE. IT HAS BEEN ARGUED THAT MERELY BECAUSE THERE IS A DIFFERENCE BETWEEN THE RETURNED AND ASSESSED INCOME, IT DOES NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THIS CONNECTION, HE HAS RELIED ON THE JUDGMENT O F THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. , 322 ITR 158 (SC) TO POINT OUT THAT MERELY BECAUSE A CLAIM HAS BEEN DISALLOWED , IT DOES NOT JUSTIFY THAT THERE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME UNLESS THE ASSESSING OFFICER IS ABLE TO POINT OUT ANY FALSITY OR UNTRUTH IN THE PARTICULARS FILED. APART FROM REITERATING THE REASONS TAKEN BY THE CIT(A) IN THE IMPUGNED ORDER, THE LEARNED REPRESENTATIVE TOOK US THROUGH THE FACTUAL MATRIX RELEVANT TO EACH OF THE THR EE ADDITIONS/DISALLOWANCES IN QUESTION AND POINTED OUT THAT EVEN ON 4 ITA NO. 2132/MUM/2012 M/S. BUSINESS PRESS PVT. LTD. MERIT, THE SAME ARE UNSUSTAINABLE AND, IN ANY CASE, NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME CAN BE MADE OUT UNDER THE GIVEN CIRCUMSTANCES. 7. WE HAVE CAREFULLY CO NSIDERED THE RIVAL SUBMISSIONS. SEC. 271(1)(C) OF THE ACT POSTULATES AND EMPOWERS THE ASSESSING OFFICER TO LEVY PENALTY IF HE IS SATISFIED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME . THE PHRASEOLOGY OF SEC. 271(1)(C) OF THE ACT REVEALS THAT THE JURISDICTION TO LEVY PENALTY IS SUBJECT TO THE SATISFACTION TO BE ARRIVED AT BY THE ASSESSING OFFICER TO THE EFFECT THAT ASSESSEE HAS EITHER CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FUR NISHED INACCURATE PARTICULARS OF SUCH INCOME. AT THIS POINT, WE MAY ALSO REFER TO A TRITE LAW, AND WHICH HAS BEEN UPHELD BY THE HON'BLE SUPREME COURT IN THE CASE OF ANANTHARAM VEERASINGAIAH & CO . VS COMMISSIONER OF INCOME TAX , 123 ITR 457 (SC) , WHICH IS TO THE EFFECT THAT THE PENALTY PROCEEDINGS AND THE ASSESSMENT ARE SEPARATE AND IND EPENDENT PROCEEDINGS. ACCORDING TO THE HON'BLE SUPREME COURT, THE BURDEN OF PROOF IN PENALTY PROCEEDINGS VARIES FROM THAT INVOLVED IN ASSESSMENT PROCEEDINGS, AND THAT A FIN DING IN ASSESSMENT PROCEEDINGS THAT A PARTICULAR RECEIPT IS INCOME CANNOT AUTOMATICALLY BE ADOPTED AS A CONCLUSIVE FINDING TO IMPOSE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN OTHER WORDS, THE QUANTUM ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS BEING INDEPENDENT, THE FINDING S OF THE ASSESSING AUTHORITY IN THE ASSESSMENT PROCEEDINGS CANNOT BE AUTOMATICALLY TAKEN AS CONCLUSIVE TO ESTABLISH CONCEALMENT OR FURNISHING OF I NACCURATE PARTICULARS OF INCOME FOR THE PURPOSES OF SEC. 271(1)(C) OF THE ACT , THOUGH SUCH FINDINGS MAY BE RELEVANT. IT IS ALSO A SETTLED POSITION OF LAW THAT IN PENALTY PROCEEDINGS, THE ASSESSING OFFICER IS BOUND TO CONSIDER THE MATTER 5 ITA NO. 2132/MUM/2012 M/S. BUSINESS PRESS PVT. LTD. AFRESH ON THE BASI S OF THE MATERIAL BEFORE IT AND THEREAFTER MAKE OUT A CASE AS TO WHETHER THE INGREDIENTS OF SEC. 271(1)(C) OF THE ACT ARE SATISFIED OR NOT. 8. IF WE WERE TO EXAMINE THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER IN THE PRESENT CASE, IT CLEARLY SHOWS TH AT THE PRIMARY REASON PREVAILING WITH THE ASSESSING OFFICER TO BE SATISFIED VIS - A - VIS THE INGREDIENTS OF SEC. 271(1)(C) OF THE ACT IS TO THE EFFECT THAT THE AFORESAID ADDITIONS/DISALLOWANCES HAVE BEEN SUSTAINED IN THE QUANTUM PROCEEDINGS. THE AFORESAID RE ASONING, IN OUR CONSIDERED OPINION, IS NOT ENOUGH TO JUSTIFY LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THEREFORE, ON THIS PRELIMINARY ASPECT ITSELF, WE FIND THAT THE ACTION OF ASSESSING OFFICER IS QUITE SUSPECT IN THE EYES OF LAW , AND THE CIT(A) MADE NO MISTAKE IN DELETING THE PENALTY. IN ANY CASE, WE HAVE ALSO EXAMINED THE DISCUSSION MADE BY THE CIT(A) QUA THE MANNER IN WHICH EACH OF THE THREE ADDITIONS/DISALLOWANCES HAVE BEEN MADE BY THE ASSESSING AUTHORITY IN ORDER TO JUSTIFY HIS ULTIMATE DE CISION TO DELETE THE PENALTY . 9. INSOFAR AS THE DISALLOWANCE OF INTEREST OF ` 63,80,278/ - IS CONCERNED, THE SAME RELATES TO A LOAN RAISED BY THE ASSESSEE FROM HDFC LTD. AT THE TIME OF HEARING, THE LEARNED REPRESENTATIVE EXPLAINED THAT THERE IS NO DISPUT E TO THE FACT THAT LOAN OF ` 12,72,50,872/ - WAS RAISED FROM HDFC LTD. FOR WHICH NECESSARY VERIFICATION EXERCISE WAS CARRIED OUT BY THE ASSESSING OFFICER. THE ORDER OF THE ASSESSING OFFICER IN THE QUANTUM PROCEEDINGS REVEAL S THAT THE ONLY REASON TO DISALL OW THE INTEREST EXPENDITURE OF ` 6 3 ,80,27 8 / - WAS INVOKING OF SEC. 43B OF THE ACT. PERTINENTLY, SO FAR AS IT IS RELEVANT FOR THE PRESENT CASE, SEC. 43B OF THE ACT POSTULATES THAT CERTAIN EXPENSES ARE ALLOWED ONLY ON PAYMENT BASIS. NOTICING THAT THE INTERES T EXPENDITURE IN 6 ITA NO. 2132/MUM/2012 M/S. BUSINESS PRESS PVT. LTD. QUESTION WAS NOT ACTUALLY PAID OUT, THE PROVISIONS OF SEC. 43B OF THE ACT HAVE BEEN INVOKED TO DISALLOW THE SAME. ON THIS ASPECT, THE ASSESSEE BROUGHT TO THE NOTICE OF THE CIT(A) THAT THE SAID AMOUNT WAS ACTUALLY PAID IN THE SUBSEQUENT YE AR AND ALLOWED, THEREFORE, THE ONLY DISPUTE WAS AS TO THE YEAR OF ALLOWABILITY OF EXPENDITURE. IN THIS FACT - SITUATION, WHICH IS UNDISPUTED, WE FIND THAT THERE IS NO REASON TO SAY THAT THERE IS ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INC OME. NONE OF THE PARTICULARS OF CLAIM HAVE BEEN FOUND TO BE FALSE OR UNTRUE. THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) HELD THAT MAKING OF A CLAIM, WHICH MAY BE FOUND TO BE INCORRECT IN LAW, CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SEC. 271(1)(C) OF THE ACT. APART FROM THE FACT THAT NO INFORMATION GIVEN IN THE RETURN HAS BEEN FOUND TO BE INCORRECT IN THE PRESENT C ASE, WE ALSO NOTICE THAT THE CONTOUR OF THE DISPUTE BETWEEN THE ASSESSEE AND THE REVENUE IS MERELY ON ACCOUNT OF THE YEAR OF ALLOWABILITY OF CLAIM AND NOT ITS ADMISSIBILITY PER SE IN LAW . THEREFORE, UNDER THESE CIRCUMSTANCES, WE FIND THAT THE CIT(A) MADE NO MISTAKE IN DELETING THE PENALTY ON THIS ASPECT OF THE MATTER. 10. THE SECOND ASPECT OF THE MATTER IS ON ACCOUNT OF NOTIONAL INCOME ADDED BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST ON CERTAIN ADVANCES MADE BY THE ASSESSEE TO SISTER CONCERNS. IN TH IS CONTEXT, IT IS NOTED THAT THE ASSESSEE HAD ADVANCED CERTAIN MONIES TO ITS SISTER CONCERNS ON WHICH NO INTEREST WAS CHARGED. THE ASSESSING OFFICER CALCULATED INTEREST @ 12% ON SUCH ADVANCES AND TREATED SUCH SUM, I.E. ` 67,18,884 / - AS NOTIONAL INCOME EARN ED BY THE ASSESSEE. ON THIS ASPECT OF THE MATTER, THE LEARNED REPRESENTATIVE EXPLAINED THAT THE SAID ADDITION HAS BECOME FINAL AS ASSESSEE 7 ITA NO. 2132/MUM/2012 M/S. BUSINESS PRESS PVT. LTD. HAS CHOSEN NOT TO AGITATE THE SAME BEYOND THE LEVEL OF THE CIT(A). THE LEARNED REPRESENTATIVE EXPLAINED THAT THOUGH THE ADDITION IS PATENTLY ILLEGAL, ASSESSEE DID NOT PURSUE THE SAME IN THE QUANTUM PROCEEDINGS MERELY FOR THE REASON THAT IT HAD SUBSTANTIAL BROUGHT FORWARD LOSSES AND INSPITE OF THE IMPUGNED ADDITION, THE FINAL TAX LIABILITY WAS NIL IN THE HANDS OF TH E ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE SAID FACTUAL ASPECT HAS BEEN ACCEPT ED BY THE CIT(A), AND THERE HAS BEEN NO NEGATION BY THE REVENUE TO THE AFORESAID FACT - POSITION EVEN BEFORE US. THE LEARNED REPRESENTATIVE ASSERTED BEFORE US THAT THE SAID DISALLOWANCE IS, IN ANY CASE, NOT MAINTAINABLE AND FOR THAT REASON, RELIED ON THE JUDGMENT S OF THE HON'BLE GAUHATI HIGH COURT IN THE CASE OF B AND A PLANTATIONS AND INDUSTRIES LTD . VS CIT, 242 ITR 22 AND KESHRICHAND JAISUKHLAL VS CIT, 248 ITR 47 . ON THIS ASPECT OF THE MATTER, WE FIND THAT EVEN IN THE QUANTUM PROCEEDINGS, THERE IS NO FINDING RECORDED BY THE ASSESSING AUTHORITY THAT ANY SUCH INCOME HAS INDEED BEEN EITHER ACCOUNTED FOR OR RECEIVED BY THE ASSESSEE. THEREFORE, IT IS A CASE WHERE A PURELY NOTI ONAL INCOME HAS BEEN ADDED ON MERE GUESS WORK. SUCH AN ADDITION IS LEGALLY UNSUSTAINABLE , AS HAS BEEN HELD BY THE HON'BLE GAUHATI HIGH COURT IN THE CASE S OF B AND A PLANTATIONS AND INDUSTRIES LTD. (SUPRA) AS WELL AS KESHRICHAND JAISUKHLAL (SUPRA) . WE ARE CONSCIOUS THAT PRESENTLY, WE ARE NOT DEALING WITH THE QUANTUM PROCEEDINGS, BUT EVEN WHILE DEALING WITH THE PENALTY PROCEEDINGS , IT IS PERMISSIBLE, IN LAW, TO EXAMINE THE MAINTAINABILITY OR OTHERWISE OF THE ADDITION SO AS TO TEST THE EFFICACY OF INVOKING OF SEC. 271(1)(C) OF THE ACT BY THE ASSESSING OFFICER. THEREFORE, CONSIDERING THE FACT THAT THE ADDITION ITSELF IS ON A POINT OF LAW, WHICH IS UNSUSTAINABLE, WE DO NOT FIND ANY ERROR ON THE PART OF THE CIT(A) IN DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER ON THIS ASPECT. THE ORDER OF THE CIT(A) ON THIS ASPECT IS HEREBY AFFIRMED. 8 ITA NO. 2132/MUM/2012 M/S. BUSINESS PRESS PVT. LTD. 11. THE ONLY OTHER ASPECT REMAINING IS THE PENALTY IMPOSED ON AN ADDITION OF ` 37,680/ - . THE ORDER S OF THE AUTHORITIES BELOW REVEAL THAT THE SAID ADDITION WAS MA DE IN THE QUANTUM PROCEEDINGS BY NOTICING THAT SALES TAX LIABILITY OF ` 37,6 8 0 / - WAS FOUND TO BE OUTSTANDING AS PER THE N OTES TO A CCOUNTS ATTACHED WITH THE PROFIT & LOSS ACCOUNT. THE LEARNED REPRESENTATIVE EXPLAINED THAT THOUGH SAID LIABILITY WAS SHOWN AS OUTSTANDING IN THE N OTES TO A CCOUNTS, IT DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION AND WAS OUTSTANDING SINCE EARLIER YEARS. THE LEARNED REPRESENTATIVE EXPLAINED THAT BEFORE THE CIT(A), ASSESSEE DEMONSTRATED THAT THE SAID AMOUNT OF ` 37,6 8 0/ - WAS NOT DEBITED IN THE PROFIT & LOSS ACCOUNT OF THE CURRENT YEAR AND, THEREFORE, THERE WAS NO CLAIM MADE IN THE INSTANT YEAR. THUS, THE DISALLOWANCE WAS PATENTLY NOT MAINTAINABLE AND, IN ANY CASE, THE SAME CANNOT INVITE PENALTY UNDER SECTION 271(1)(C) OF THE ACT . THE AFORESAID FACT - SITUATION HAS BEEN APTLY NOTED BY THE CIT(A) AND, EVEN BEFORE US, THERE IS NO NEGATION OF THE SAME. THEREFORE, CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, WE HOLD THAT THE CIT(A) MADE NO MISTAKE IN DELETING THE PENALTY QUA THE AFORESA ID DISALLOWANCE ALSO. THE ORDER OF THE CIT(A) ON THIS ASPECT IS HEREBY AFFIRMED. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 T H JANUARY , 201 9 . SD/ - SD/ - ( JUSTICE P.P. BHATT ) PRESIDENT ( G.S. PANNU ) VICE PRESIDENT MUMBAI, DATE : 1 8 T H JANUARY , 201 9 *SSL* 9 ITA NO. 2132/MUM/2012 M/S. BUSINESS PRESS PVT. LTD. C OPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, B BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI