M. PALLONJI & CO. P.LTD, MUMBAI V. ADDL CIT RG 2(2), MUMBAI

ITA 2367/MUM/2014

• Counselvise Citation: 236719914 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 09-04-2014
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Assessee Lawyers: K K VED
• Keywords: Earning of tax free income
• Section: 43B; 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI RAJENDRA , ACCOUNTAN T MEMBER AND SHRI SAKTIJIT DEY , JUDICIAL MEMBER . / ITA NO . 2367 / MUM./ 2014 ( / ASSESSMENT YEAR : 20 0 7 08 ) M. PALLONJI & CO. PVT. LTD. C/O TAJ PRINTING WORKS 46/A, CAWASJI PATEL STREET FORT, MUMBAI 400 001 PAN AAACM6525B .. / APPELLANT V/S ASSTT . COMMISSIONER OF INCOME TAX RANGE 2(2), AAYAKAR BHAWAN 101, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT / ASSE SSEE BY : SHRI K.K. VED / REVENUE BY : SHRI M. RAJAN / DATE OF HEARING 01 . 10 .2015 / DATE OF ORDER 09.10.2015 / ORDER , / PER SAKTIJIT DEY, J.M. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ORDER DATED 5 TH FEBRUARY 2014, PASSED B Y THE LEARNED COMMISSIONER (APPEALS) 5, MUMBAI, UPHOLDING THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) M. PALLONJI & CO. PVT. LTD. 2 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ), FOR THE ASSESSMENT YEAR 2007 08. 2. BRIEFLY THE FACTS ARE, THE ASSESSEE A COMPANY FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 31ST OCTOBER 2007, DECLARING TOTAL INCOME OF ` 51,54,75,956. DURING THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DECLARED DIVIDEND INCOME OF ` 12,70,858, WHICH IS CLA IMED TO BE EXEMPT UNDER SECTION 10(34) OF THE ACT. BESIDES, THE ASSESSEE ALSO CLAIMED EXEMPTION U NDER SECTION 10(35) OF THE ACT OF INCOME EARNED FROM MUTUAL FUNDS AMOUNTING TO ` 34,09,10,346. HE ALSO FOUND THAT THE ASSESSEE HAS MADE INVESTMENT IN TAX FREE BOND FROM WHICH INCOME OF ` 1,08,67,131, WAS GENERATED DURING THE RELEVANT PREVIOUS YEAR WHICH HAS BEEN CLAIMED EXEMPT UNDER SECTION 10(15) OF THE ACT. HE FURTHER NOTICED THAT THE ASSESSEE HIMSELF DISALLOWED EXPENDITURE OF ` 2,11,525, UNDER SECTIO N 14A OF THE ACT FOR EARNING THE EXEMPT INCOME. ON THE BASIS OF THE ABOVE FACTS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN WHY DISALLOWANCE UNDER SECTION 14A SHOULD NOT BE WORKED OUT IN TERMS WITH RULE 8D. IN REPLY TO THE QUERY RAISED BY TH E ASSESSING OFFICER, IT WAS SUBMITTED BY THE ASSESSEE THAT AS THE ASSESSEE ITSELF HAS MADE DISALLOWANCE UNDER SECTION 14A OF THE ACT, NO FURTHER DISALLOWANCE UNDER RULE 8D SHOULD BE MADE. HOWEVER, NOT BEING SATISFIED WITH THE EXPLANATION OF THE M. PALLONJI & CO. PVT. LTD. 3 ASSESSEE, T HE ASSESSING OFFICER MADE FURTHER DISALLOWANCE OF ` 1,00,10,231, UNDER SECTION 14A. FURTHER, THE ASSESSING OFFICER DISALLOWED OUTSTANDING SERVICE TAX LIABILITIES OF ` 86,71,763, INVOKING THE PROVISIONS OF SECTION 43B O F THE ACT. APART FROM THE AFORESAID AD DITIONS, THE ASSESSING OFFICER ALSO ADDED AN AMOUNT OF ` 17,18,960, TOWARDS VAT REFUND ACCRUED. ON THE BASIS OF AFORESAID ADDITIONS, THE ASSESSING OFFICER INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 3. DURING THE PENA LTY PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT, AS WELL AS ACCRUAL OF VAT REFUND HAVE BEEN DELETED BY THE FIRST APPELLATE AUTHORITY AND THE ONLY ADDITIO N WHICH SURVIVE D WAS AN AMOUNT OF ` 86,71,763 ON ACCOUNT OF OUTSTANDING LIABILITY OF SERVICE TAX. HE, THEREFORE, PROCEEDED TO IMPOSE PENALTY UNDER SECTION 271(1)(C) BY TREATING THE SAID ADDITION AS CONCEALED INCOME OF THE ASSESSEE. BEING AGGRIEVED OF THE S AID PENALTY ORDER , THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. HOWEVER, THE FIRST APPELLATE AUTHORITY ALSO UPH E LD THE IMPOSITION OF PENALTY. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. THE LEARNED COUNSEL FOR THE ASSESSEE M. PALLONJI & CO. PVT. LTD. 4 HAS SUBMITTED BEFORE US THAT IN THE MEAN WHILE, THE ADDITION OF ` 86,71,763, ON ACCOUNT OF SERVICE TAX LIABILITY HAS BEEN DELETED BY THE TRIBUNAL WHILE DECIDING THE QUANTUM OF APPEAL OF THE ASSESSEE FOR THE IMPUGN ED ASSESSMENT YEAR. IN SUPPORT OF SUCH CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED BEFORE US A COPY OF ORDER DATED 30 TH JUNE 2014, PASSED BY THE TRIBUNAL IN ITA NO.1893/MUM./20011. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT DISPUTED TH E AFORESAID FACTUAL POSITION. CONSIDERING THE FACT, ADDITION ON THE BASIS OF WHICH PENALTY WAS IMPOSED UNDER SECTION 271(1)(C) OF THE ACT, HAS BEEN DELETED BY THE TRIBUNAL WHILE DECIDING ASSESSEES QUANTUM APPEAL , THE VERY BASIS FOR IMPOSITION OF PENALTY NO MORE SURVIVES. THEREFORE, WE HAVE NO HESITATION IN DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 5. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT O N 09.10.2015 SD/ - RAJENDRA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED : 09.10.2015 M. PALLONJI & CO. PVT. LTD. 5 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE; (2) / THE REVENUE; (3) ( ) / THE CIT(A); (4) / THE CIT, MUMBAI CITY CONCERNED; (5) , , / THE DR, ITAT, MUMBAI; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI