Deputy Commissioner Of Income Tax, Circle- 3(1)(2), Bangalore V. M/s. G Corp Private Limited, Bangalore

ITA 2288/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9772 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 30-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Keywords: Business expenditure; Rule 8D
• Section: 271(1)(c); 143(3); 14A; 274; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI. B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2288/BANG/2019 ASSESSMENT YEAR : 2014 15 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), BENGALURU. VS. M/S G CORP PVT. LTD., NO.21/19, CRAIG PARK LAYOUT, OFF M.G ROAD, BENGALURE-560 001. PAN AABCG 4084A APPELLANT RESPONDENT IN CO NO.3/BANG/2020 ASSESSMENT YEAR : 2014 15 M/S G CORP PVT. LTD., NO.21/19, CRAIG PARK LAYOUT, OFF M.G ROAD, BENGALURE-560 001. VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI MANJEET SINGH, ADDL. CIT RESPONDENT BY : SHRI YOGESH KUMAR, C.A DATE OF HEARING : 25-06-2020 DATE OF PRONOUNCEMENT : 03-07-2020 PAGE 2 OF 7 ITA NOS.2288/BANG/2019 CO NO.3/BANG/2020 A. Y : 2014 15 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY REVENUE AGA INST ORDER DATED 16/08/2019 PASSED BY LD.CIT(A)-3, FOR ASSESSMENT YE AR 2014- 15. ASSESSEE HAS FILED CROSS OBJECTION WHICH IS IN SUPPORT OF THE ORDER PASSED BY LD.CIT(A) ON FOLLOWING GROUNDS OF A PPEAL: 1. THE CROSS OBJECTOR SUBMITS THAT THE ASSESSING OF FICER FAILED TO APPRECIATE THAT THE APPELLANTS CLAIM FOR BUSINESS E XPENSES WAS PURELY A LEGAL CLAIM, AND NO PENALTY SHOULD LIE EVEN IF THE CLAIM IS FOUND UNSUSTAINABLE IN LAW. 2. THE ASSESSING OFFICER ERRED IN LAW IN DISREGARDI NG THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (322 ITR 158). 3. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER HAS ERRED IN LEVYING PENALTY UNDE R SECTION 271(1)(C) OF RS.98,71,468/- IN RESPECT OF A BONAFIDE CLAIM OF EX PENSES. 4. THE ASSESSING OFFICER ERRED IN LEVYING PENALTY F OR CONCEALMENT OF PARTICULARS OF INCOME/ FURNISHING INACCURATE PARTIC ULARS OF INCOME IN A CASE WHERE TWO VIEWS WERE POSSIBLE. 5. THE ASSESSING OFFICER ERRED IN LEVYING PENALTY U /S.271(1)(C) OF RS.98,71,468/- AS THE CROSS OBJECTOR HAD NEITHER CO NCEALED PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF I NCOME. 6. WITHOUT PREJUDICE TO CROSS OBJECTIONS NOS 1 TO 5 , THE CROSS OBJECTOR SUBMITS THAT THE PENALTY LEVIED IS HIGHLY EXCESSIVE AND ARBITRARY, AND NEEDS TO BE REDUCED SUBSTANTIALLY. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTA TE DEVELOPMENT HAS PROJECT MANAGEMENT, DEVELOPMENT OF RETAILS RESIDENTIAL AND COMMERCIAL PROJECTS AND LETTING T HE PROPERTIES MORALS ON HIRE FOR RENTALS ETC. ASSESSMENT ORDER WA S PASSED UNDER SECTION 143 (3) OF THE ACT DATED 06/12/2016 W HEREIN FOLLOWING DISALLOWANCES WERE MADE: PAGE 3 OF 7 ITA NOS.2288/BANG/2019 CO NO.3/BANG/2020 A. Y : 2014 15 EMPLOYEE BENEFIT EXPENSES RS.2,68 ,84,765/- TRAVELLING AND CONVEYANCE EXPENSES RS. 26,37, 207/- LEGAL AND PROFESSIONAL EXPENSES RS. 9 ,03,270/- DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D, A MOUNTING TO RS.79,29,427/- WAS ALSO MADE UNDER RULE8D(2)(II) AN D SUM OF RS.64,52,787/- UNDER RULE 8D(2)(III) WAS ALSO MADE. LD.AO INITIATED PENALTY PROCEEDINGS UNDER SECTION 2 71(1)(C) OF THE ACT IN ASSESSMENT ORDER. 3. SUBSEQUENTLY, NOTICE UNDER SECTION 274, READ WIT H SECTION 271 WAS ISSUED TO ASSESSEE DATED 06/12/2000, WITHOU T SPECIFICALLY STATING, WHETHER PENALTY IS INITIATED FOR CONCEALMENT OF INCOME, OR FURNISHING OF INACCURATE PARTICULARS. IT HAS BEEN SUBMITTED BY ASSESSEE THAT, NEITHER ASSESSMENT ORDE R NOR NOTICE UNDER SECTION 274 SPECIFIES THE LIMB FOR WHICH PENA LTY HAS BEEN INITIATED. 4. SUBSEQUENTLY, LD.CIT(A)-3 PASSED ORDER DATED 20/ 02/2018 IN APPEAL FILED BY ASSESSEE CHALLENGING ADDITIONS M ADE BY LD.AO IN ORDER PASSED UNDER SECTION 143(3) OF THE ACT, BU SINESS EXPENSES DISALLOWED AMOUNTING TO RS.3,04,25,242/- W AS CONFIRMED, INTEREST EXPENDITURE ADDED UNDER SECTION 14A READ WITH RULE 8D(2)(II) OF RULES WAS DELETED AND DISAL LOWANCE UNDER SECTION 14A READ WITH RULE 8D(2)(III) OF THE ACT WA S PARTLY ALLOWED. LD.AO IN PENALTY PROCEEDINGS LEVIED PENALTY AMOUNTI NG TO RS.98,71,468/- UNDER SECTION 271(1)(C) OF THE ACT, ON DISALLOWANCES OF BUSINESS EXPENSES FOR CONCEALING P ARTICULARS OF INCOME BY WAY OF FILING INACCURATE PARTICULARS OF I NCOME. PAGE 4 OF 7 ITA NOS.2288/BANG/2019 CO NO.3/BANG/2020 A. Y : 2014 15 5. AGGRIEVED BY PENALTY LEVIED, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A). LD.CIT(A) RELYING UPON DECISION OF (HONBLE KARNATAKA HIGH COURT) IN CASE OF (MANJUNATHA COTTON AND GINNING FACTORY ) REPORTED IN (359 ITR 555) AND (CIT VS. SSAS EMERALD MEADOWS) REPORTED IN (2016) 73 TAXMANN.COM 241 ), DELETED PENALTY. LD. CIT (A) NOTED THAT, NOTICE IS DEFECTIV E, AS IT DID NOT INDICATE, WHETHER PENALTY IS INITIATED ON ACCOUNT O F CONCEALMENT OF INCOME OR FURNISHING OF INNER RATE PARTICULARS. LD. CIT(A) ALSO NOTED THAT, THE SAME IS NOT DISCERNIBLE FROM ASSESS MENT ORDER PASSED UNDER SECTION 143 (3) OF THE ACT. 6. AGGRIEVED BY ORDER OF LD. CIT(A), REVENUE IS IN APPEAL BEFORE US NOW. 7. WE HAVE ANALYSED THE ISSUE HAVING REGARDS TO GRO UNDS OF APPEAL FILED AND ADDITIONAL GROUND RAISED, WHICH HA S BEEN ADMITTED HEREINABOVE. 8. ON PERUSAL OF ASSESSMENT ORDER, IT IS OBSERVED T HAT LD. AO INITIATED PENALTY UNDER SECTION 271(1)(C) OF THE AC T, WITHOUT SPECIFYING, WHETHER THERE IS CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS. PENALTY WAS INITIATED ON B OTH LIMBS. IMPUGNED NOTICE INITIATING PENALTY PROCEEDINGS UNDE R SECTION 274 READ WITH 271 IS ALSO ON BOTH LIMBS, AS THERE IS NO STRIKE OFF OF IRRELEVANT LIMBS. LD. AO WHILE DISCUSSING INDEPEN DENT ADDITIONS IN ASSESSMENT ORDER, DID NOT SPECIFY ANY OF THE LIM BS FOR WHICH PENALTY IS INITIATED. 9. HOWEVER, ORDER PASSED BY LD.AO UNDER SECTION 271 (1)(C) IS FOR CONCEALMENT OF INCOME BY FILING INACCURATE PART ICULARS OF INCOME. IN ASSESSMENT ORDER, WE NOTE THAT, LD.AO DI D NOT INITIATE PAGE 5 OF 7 ITA NOS.2288/BANG/2019 CO NO.3/BANG/2020 A. Y : 2014 15 PENALTY UNDER ANY PARTICULAR LIMB, VIS-A-VIS DISALL OWANCES MADE. THUS, ON TOTALITY OF THESE INCIDENTS, IT IS CLEAR T HAT ASSESSING OFFICER INTENDED TO LEVY PENALTY FOR CONCEALMENT, W HICH EITHER SPECIFIED IN NOTICE NOR IN ASSESSMENT ORDER. WE ARE THEREFORE OF OPINION THAT, ENTIRE PENALTY PROCEEDINGS IS WITHOUT APPLICATION OF MIND. THUS LD.AO IS NOT CLEAR AS ON WHAT LIMB PENAL TY IS TO BE LEVIED, WHILE PASSING PENALTY ORDER UNDER SECTION 2 71 (1) (C) OF THE ACT. 10. THIS, IN OUR OPINION, LD.CIT(A) FAILED TO ANALY SE THESE FACTS AND THEREFORE DESERVES TO BE SET-ASIDE. WE THUS, QU ASH PENALTY ORDER PASSED BY LD.AO. AS PENALTY ORDER PASSED HAS BEEN QUASHED, THE GROUND RAISED STANDS ALLOWED. 11. CROSS OBJECTION FILED BY ASSESSEE IS IN SUPPORT OF THE ORDER PASSED BY LD.CIT(A). AS WE HAVE DISMISSED THE APPEA L FILED BY REVENUE CROSS OBJECTION BECOMES INFRUCTUOUS. IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMIS SED AND CROSS OBJECTION FILED BY ASSESSEE STANDS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JULY, 2020 SD/- SD/- (B. R. BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 3 RD JULY, 2020. /VMS/ PAGE 6 OF 7 ITA NOS.2288/BANG/2019 CO NO.3/BANG/2020 A. Y : 2014 15 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 7 OF 7 ITA NOS.2288/BANG/2019 CO NO.3/BANG/2020 A. Y : 2014 15 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -06-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -06-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -06-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -07-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -07-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -07-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -07-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS