DCIT, New Delhi V. M/s Alma Mater Agencies P Ltd., New Delhi

ITA 2225/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3827 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 09-06-2010
• Assessment Year: 1997-1998
• Appeal Filed On: 25-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP KUMAR TANDON
• Assessee Lawyers: G S SAHOTA
• Keywords: Depreciation; Speculation loss; Wrong claim; Difference of opinion; Revised return; Capital Gains
• Section: 271(1)(c); 80P; 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM ITA NO.2225/DEL/2009 ASSESSMENT YEAR : 1997-98 DY.COMMISSIONER OF INCOME TAX, CIRCLE-1(1), NEW DELHI. VS. M/S ALMA MATER AGENCIES P.LTD., 12, SHIVAJI MARG, VILLAGE RANGPURI, NEW DELHI 110 037. PAN NO.AAACA0816F. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANDEEP KUMAR TANDON, CA. RESPONDENT BY : SHRI G.S.SAHOTA, SR.DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 6.3.2009 FOR THE AY 1997-98, IN THE MATTER OF IMPOS ITION OF PENALTY U/S 271(1)(C) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT ASSESSEE FILED A RETURN OF INCOME AT A LOSS OF RS.25.69 LAKHS UNDER THE HEAD PROFIT AND GAINS OF BUSINESS AND PROFESSION. WHI LE ASSESSING THE INCOME U/S 143(3), THE AO DISALLOWED PART OF THE EXPENSES CLAI MED AGAINST SERVICE CHARGES/RENT RECEIVED BY THE ASSESSEE. AS AGAINST ACTUAL CLAIM OF EXPENSES, THE AO HAS ALLOWED EXPENSES ONLY TO THE EXTENT OF RS.4 LAKHS AND ALSO ALLOWED ASSESSEES CLAIM OF DEPRECIATION AT 10%. IN THE QU ANTUM ORDER, ISSUE WITH REGARD TO TAXING OF SERVICE CHARGES UNDER THE HEAD INCOME FROM BUSINESS WAS UPHELD BY THE CIT(A) IN FAVOUR OF THE ASSESSEE. IN A FURTHER APPEAL FILED BEFORE THE TRIBUNAL, THE MATTER WAS RESTORED BACK TO THE FILE OF THE AO TO RE-EXAMINE WHETHER THE DOMINANT USE IS OF LETTING OUT THE BUILDING OR COMM ERCIAL EXPLOITATION OR INSEPARABLE LETTING OF BUILDING AS PLANT AND MACHIN ERY. HOWEVER, WHILE REFRAMING THE ASSESSMENT, THE AO HAS TREATED THE INCOME AS IN COME FROM PROPERTY. THUS, IT IS CLEAR THAT THERE IS A DIFFERENCE OF OPINION WITH REGARD TO TREATMENT OF INCOME ITA-2225/DEL/2009 2 EARNED BY THE ASSESSEE ON ACCOUNT OF SERVICE CHARGE S. IN THE INITIAL ASSESSMENT, THE AO HAS MERELY DISALLOWED SOME OF THE EXPENDITURE CL AIMED AGAINST SUCH INCOME AND HAD NOT CHANGED THE HEAD OF INCOME UNDER WHICH SUCH SERVICE CHARGES WERE ASSESSABLE. THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE FILE O F THE AO. THUS, THERE APPEARS TO BE DEBATABLE ISSUE WITH REGARD TO NATURE OF INCOME EARNED BY THE ASSESSEE, BUT THERE WAS NEITHER ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS WITH REGARD TO INCOME EARNED AND THE EXPENDITURE INCURRE D THEREON. MERE DISALLOWANCE OF PART OF THE EXPENSES AND CHANGE OF HEAD OF INCOM E SUBSEQUENTLY ON REASSESSMENT, WILL NOT ALTER THE BONA-FIDE CLAIM OF THE ASSESSEE WHILE JUDGING THE IMPOSITION OF PENALTY U/S 271(1)(C). HON'BLE SUPRE ME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. 322 ITR 158 WHIL E CONFIRMING THE ORDER OF HONBLE HIGH COURT DELETING THE PENALTY IMPOSED U/S 271(1)(C) FOR DENIAL OF ASSESSEES CLAIM OF DEDUCTION OF INTEREST EXPENDITU RE, HAS CATEGORICALLY OBSERVED THAT BY ANY STRETCH OF IMAGINATION, MAKING AN INCO RRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. ACCORDINGLY, IT WAS HELD THAT DECLINE OF ASSESSEES CLAIM OF INTEREST AGAINST THE LOAN UTILIZED FOR MAKING INVESTMENT IN TAX FREE SECURITIES, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS SO AS TO ATTRACT PENALTY U/S 271(1)(C) OF THE ACT. HON'BLE SUPREME COURT IN THIS CASE AFTER CONSIDERING THE PROPOSITIO N OF LAW LAID DOWN IN THE CASE OF DILIP N.SHROFF 291 ITR 519 (SC) AND DHARMENDER TE XTILE PROCESSORS 306 ITR 277 (SC), HELD AS UNDER:- A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINAB LE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDI TURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENAL TY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVE NUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTE D BY ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PE NALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF T HE LEGISLATURE. ITA-2225/DEL/2009 3 3. RECENTLY, HON'BLE DELHI HIGH COURT IN THE CASE O F ARETIC INVESTMENT PVT.LTD., VIDE ORDER DATED 18.2.2010 IN ITA 264/200 9 OBSERVED THAT WHERE THE LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF TRADING IN SH ARES WAS NOT ACCEPTED BY THE AO AND WAS TREATED AS A SPECULATION LOSS IN TERMS O F EXPLANATION TO SECTION 73 OF THE ACT, DID NOT AUTOMATICALLY RESULT IN THE INFERE NCE OF CONCEALMENT OF INCOME JUSTIFYING IMPOSITION OF PENALTY U/S 271(1)(C) OF T HE ACT. SIMILARLY, IN THE CASE OF AURIC INVESTMENT & SECURITIES LTD. 163 TAXMAN 533 , IT WAS OBSERVED BY THE HON'BLE DELHI HIGH COURT THAT WHERE ASSESSEE HAS DE CLARED HIS INCOME FROM BROKERAGE AND OTHER INCOME AGAINST WHICH IT HAD CLA IMED SHARE TRADING LOSS, THE AO FOUND THAT LOSS WAS SPECULATIVE IN NATURE AND CO ULD NOT BE ADJUSTED AGAINST ASSESSEES NORMAL INCOME, ACCORDINGLY THE AO HELD T HAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF M AKING A WRONG CLAIM OF SHARE TRADING LOSS AGAINST THE NORMAL INCOME AND IMPOSED PENALTY U/S 271(1)(C) OF THE ACT. THE HONBLE HIGH COURT HELD THAT MERE TREATME NT OF BUSINESS LOSS AS A SPECULATION LOSS BY THE AO DID NOT AUTOMATICALLY WA RRANT INFERENCE OF CONCEALMENT OF INCOME, ACCORDINGLY PENALTY WAS NOT LEVIABLE. 4. RECENTLY, HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. THE SHAHABAD COOP.SUGAR MILLS LIMITED (SUPRA) OBSER VED THAT WHERE THE ASSESSEE IS FOUND TO HAVE MADE WRONG CLAIM U/S 80P AND WRONG CLAIM OF DEPRECIATION ON GUEST HOUSE, MAKING A WRONG CLAIM IS NOT AT PAR WIT H CONCEALMENT OR GIVING OF INACCURATE INFORMATION, IT WILL NOT CALL FOR LEVY O F PENALTY U/S 271(1)(C). ACCORDINGLY, ORDER OF THE ITAT CHANDIGARH BENCH DEL ETING PENALTY IMPOSED U/S 271(1)(C) WAS UPHELD BY THE HONBLE COURT. 5. HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. S.P.K.STEELS PVT.LTD. - 270 ITR 156 UPHELD THE ORDER OF THE TRIB UNAL DELETING THE PENALTY U/S 271(1)(C) BY OBSERVING THAT ASSESSEE BEING ENGAGED IN THE BUSINESS OF COMMISSION AGENCY, EXPLANATION TO SECTION 73 WAS APPLICABLE AN D THUS, LOSS ON ACCOUNT OF TRADING IN SHARES WAS DISALLOWED, IT WAS HELD THAT FOR SUCH DISALLOWANCE PENALTY U/S ITA-2225/DEL/2009 4 271(1)(C) IS NOT LEVIABLE AS THE ASSESSEE HAS FILED PRELIMINARY DETAILS ALONGWITH THE RETURN. 6. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SIDDHARTHA ENTERPRISES 322 ITR 80 OBSERVED THAT WHERE THE AS SESSEES CLAIM FOR SET OFF ON ACCOUNT OF CAPITAL GAINS AGAINST PROFIT OF BUSINESS WAS DISALLOWED BY THE AO AND AO IMPOSED PENALTY FOR FURNISHING INACCURATE PARTIC ULARS OF INCOME, THE CIT(A) DELETED THE SAME AND TRIBUNAL UPHELD THE ORDER OF T HE CIT(A) BY OBSERVING THAT ENTIRE FACTS HAVE BEEN DISCLOSED BY THE ASSESSEE IN THE DOCUMENTS FILED ALONGWITH THE RETURN AND THE MISTAKE HAS BEEN COMMITTED BY TH E COUNSEL OF THE ASSESSEE FOR SUCH WRONG CLAIM. THERE WAS NO SCOPE FOR CONCEALIN G ANY INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. WHILE COUNTERING THE DEPARTMENTS CONTENTION THAT EVEN IF CLAIM FOR SET OFF OF CAPITAL LOSS AGAI NST PROFIT OF BUSINESS WAS BY THE NEGLIGENCE OR BY MISTAKE, THE FACT REMAINS THAT THE PARTICULARS OF INCOME FURNISHED WERE NOT CORRECT AND WILLFUL CONCEALMENT NOT BEING AN ESSENTIAL REQUIREMENT FOR LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT, AS HEL D BY THE HON'BLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS (SUPRA ), THE PENALTY COULD NOT BE DELETED, THE HONBLE HIGH COURT OBSERVED AS UNDER:- WE ARE UNABLE TO ACCEPT THE SUBMISSION. THE JUDGM ENT OF THE HON'BLE SUPREME COURT IN DHARMENDRA TEXTILE PROCESS ORS [2008] 306 ITR 277 CANNOT BE READ AS LAYING DOWN THAT IN E VERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. WHAT HAS BEEN LAID DOWN IS THAT QUALITATIVE DIFFERENCE BETWE EN CRIMINAL LIABILITY UNDER SECTION 276C AND PENALTY UNDER SECT ION 271(1)(C) HAD TO BE KEPT IN MIND AND APPROACH ADOPTED TO THE TRIA L OF A CRIMINAL CASE NEED NOT BE ADOPTED WHILE CONSIDERING THE LEVY OF PENALTY. EVEN SO, THE CONCEPT OF PENALTY HAS NOT UNDERGONE C HANGE BY VIRTUE OF THE SAID JUDGMENT. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAK E. THIS BEING THE POSITION, THE FINDING HAVING BEEN RECORDED ON FACTS THAT THE FURNISHING OF INACCURATE PARTICULARS WAS SIMPLY A M ISTAKE AND NOT A DELIBERATE ATTEMPT TO EVADE TAX, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE HELD TO BE PERVERSE. 7. HON'BLE SUPREME COURT IN THE CASE OF SURESH CHAN D MITTAL 251 ITR 9 OBSERVED THAT WHERE ASSESSEE HAS FILED REVISED RETU RN SHOWING HIGHER INCOME AND ITA-2225/DEL/2009 5 THE ASSESSEE HAS SURRENDERED THE INCOME AFTER PERSI STENCE QUERIES BY THE AO AND WHERE REVISED RETURN HAS BEEN REGULARIZED BY THE RE VENUE, EXPLANATION OF THE ASSESSEE THAT HE HAS DECLARED ADDITIONAL INCOME TO BUY PEACE OF MIND AND TO COME OUT OF WAXED LITIGATION COULD BE TREATED AS BONA-FI DE, ACCORDINGLY LEVY OF PENALTY U/S 271(1)(C) WAS HELD TO BE NOT JUSTIFIED. FURTHE RMORE, IN ORDER TO JUSTIFY THE LEVY OF PENALTY, TWO FACTORS MUST CO-EXIST, (I) THERE MU ST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESENT THE ASSESSEES INCOME. IT IS NOT ENOUGH FOR THE PU RPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME, AND (II) THE CIRCUMSTA NCES MUST SHOW THAT THERE WAS ANIMUS, I.E. CONSCIOUS CONCEALMENT OR ACT OF FURNIS HING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE. EXPLANATION 1 TO SECTION 271(1)(C) HAS NO BEARING ON FACTORY NO.I BUT HAS A BEARING ONLY ON FACTORY NO.2 . THE EXPLANATION DOES NOT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOT HESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E., IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POS ITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE, THE EXPLANATION CANNOT HE LP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUES TION WAS THE INCOME OF THE ASSESSEE. 8. IN VIEW OF THE ABOVE, IT IS NOT A FIT CASE FOR L EVY OF PENALTY, ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) DE LETING THE SAME. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 9 TH JUNE, 2010. SD/- SD/- (A.D.JAIN) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09.06.2010. VK. ITA-2225/DEL/2009 6 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR