ACIT, New Delhi V. M/s DCM Shriram Consolidated Ltd., New Delhi

ITA 2441/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3505 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Keywords: Retrospective amendment; Wrong claim; Bad and doubtful debts; Difference of opinion
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA 2441(DEL)2011 ASSESSMENT YEAR: 2006-07 ASSTT.COMMISSIONER OF INCOME TAX, M/S. DCM SH RIRAM CONSOLIDATED CIRCLE 10(1), NEW DELHI. V. LTD ., 4, VIKRANT TOWER, RAJENDRA PLACE, NEW DELHI. (APPELLANT) (RESPONDENT ) APPELLANT BY: SHRI SALIL MISHRA, SR. DR RESPONDENT BY: S/SHRI PR ADEEP DINODIA, V.P.GUPTA& BASANT KUMAR, ADV. ORDER PER A.D. JAIN, J.M. THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2006-07 AGAINST THE ORDER DATED 10.02.2011 PASSED BY THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS)XVII, NEW DELHI CANCELLING THE PENALTY OF ` 44,67,496/-, LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT. 2. THE ASSESSEE COMPANY FILED RETURN OF INCOME DECL ARING LOSS AS PER THE NORMAL PROVISIONS OF THE I.T. ACT. HOWEVER, THE TA X WAS PAYABLE ON BOOK PROFIT, AS PER THE PROVISIONS OF SECTION 115 JB OF THE ACT. THE AO MADE THE FOLLOWING DISALLOWANCES:- ITA 2441(DEL)2011 2 I) CLAIM FOR DEDUCTION U/S 80 IA OF THE ACT UNDER THE NORMAL COMPUTATIONS WAS REJECTED; II) EXPENSES U/S 14A OF THE ACT MADE UNDER THE NORMAL COMPUTATIONS WAS DISALLOWED; III) PROVISION FOR BAD AND DOUBTFUL DEBTS WAS ADDED IN T HE BOOK PROFIT; IV) PROVISION FOR GRATUITY WAS ADDED IN THE BOOK PROFIT . 3. IN THE FIRST APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80 IA OF THE ACT UNDER THE NORMAL PRO VISIONS AND PROVISION FOR GRATUITY U/S 115 JB OF THE ACT. THE ADDITION ON A CCOUNT OF DISALLOWANCE U/S 14A OF THE ACT AND PROVISION FOR BAD AND DOUBTFUL DEBTS ADDED IN THE BOOK PROFIT WERE, HOWEVER, CONFIRMED. 4. THE PENALTY IN QUESTION WAS LEVIED ON THE BASIS THAT THE TWO ADDITIONS MADE BY THE ASSESSEE WERE UPHELD BY THE CIT(A). IT WAS HELD THAT THE ASSESSEE COMPANY HAD FURNISHED INACCURATE PARTICULA RS OF INCOME. IT WAS IN THIS MANNER THAT PENALTY OF ` 44,67,496/- WAS LEVIED. 5. BY VIRTUE OF THE IMPUGNED ORDER, THE LEARNED CIT (A) CANCELLED THE LEVY OF PENALTY. 6. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS C ONTENDED THAT THE LD. CIT(A) HAS ERRED IN CANCELING THE PENALTY CORRECTLY LEVIED; THAT THE TWO ITA 2441(DEL)2011 3 MAJOR ADDITIONS MADE BY THE AO WERE CONFIRMED BY TH E LD. CIT(A) IN THE QUANTUM APPEAL; THAT THE PROVISIONS OF SECTION 271( 1)(C) OF THE ACT WERE CLEARLY ATTRACTED; THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND WAS, THEREFORE, CORRECTLY HELD LIABLE FO R PENALTY UNDER THE SAID SECTION; AND THAT THE CIT(A) HAS FAILED TO TAKE INT O CONSIDERATION THESE FACTORS WHICH PROMPTED THE AO TO LEVY THE PENALTY I N QUESTION. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT THE DISALLOWANCES HAD BEEN MADE ON ACCOUNT OF LEGAL CON TROVERSIES AND DIFFERENCE OF OPINION AND NOT BECAUSE THE ASSESSEE HAD MADE ANY CONCEALMENT OF ITS INCOME OR HAD FURNISHED ANY INAC CURATE PARTICULARS OF ITS INCOME; THAT THE LD. CIT(A) HAD UPHELD THE DISALLOW ANCE U/S 14A OF THE ACT IN VIEW OF THE DECISION OF SPECIAL BENCH OF THE TRI BUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT (P)LTD., WHEREIN IT HAD BEEN HE LD THAT RULE 8 D OF THE I.T. RULES, BEING PROCEDURAL, IS APPLICABLE WITH RE TROSPECTIVE EFFECT; THAT, HOWEVER, IN GODREJ BOYCE & MANUFACTURING CO. LTD. V. CIT, 234 CTR 1 (BOM), IT HAS BEEN HELD THAT RULE 8D IS APPLICABLE PROSPECTIVELY ONLY FROM ASSESSMENT YEAR 2008-09; THAT THEREFORE, THERE WAS EVIDENTLY A CONTROVERSY REGARDING THE APPLICABILITY OF RULE 8D OF THE RULES AT THE RELEVANT TIME AND HENCE, PENALTY COULD NOT BE LEVIED WITH REGARD THER ETO; THAT APROPOS BAD AND ITA 2441(DEL)2011 4 DOUBTFUL DEBTS, THE COMPANY HAD DULY ADDED BACK THE PROVISIONS OF NORMAL TAXABLE INCOME; THAT THE SAME HAD NOT BEEN ADDED BA CK IN THE COMPUTATION OF BOOK PROFIT, AS IT WAS A CHARGE ON THE PROFIT OF TH E YEAR AS PER PROVISIONS OF COMPANIES ACT; THAT IN EARLIER YEARS, THE ADDITION HAD BEEN DELETED BY THE LD. CIT(A); THAT HOWEVER, DURING THE PENDENCY OF THE AP PEAL BEFORE THE CIT(A), AGAINST THE ORDER OF ASSESSMENT FOR THE YEAR UNDER CONSIDERATION, CLAUSE (I) WAS INSERTED IN SECTION 115 JB OF THE ACT VIDE FINA NCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2001; THAT IT WA S IN VIEW OF THIS RETROSPECTIVE AMENDMENT, THAT THE LD. CIT(A) UPHELD THE ADJUSTMENT MADE BY THE AO; THAT THE ASSESSEE HAD NEITHER CONCEALED THE PARTICULARS OF ITS INCOME, NOR HAD IT FURNISHED ANY INACCURATE PARTICULARS OF ITS INCOME; AND THAT THEREFORE, THE CIT(A) WAS WELL JUSTIFIED IN CANCELI NG THE PENALTY WRONGLY LEVIED ON BOTH THE COUNTS. 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. APROPOS ADDITION U/S 14A, IT CANNOT BE DISPUTED THA T THE MATTER HAS ONLY RECENTLY BEEN SETTLED BY THE DECISION OF THE HONBL E BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE & MANUFACTURING CO. LTD. (SUPRA). AT THE RELEVANT TIME, THE MATTER WAS, OBVIOUSLY, FLUID, GI VEN THE STATE OF AFFAIRS CONCERNING DAGA CAPITAL MANAGEMENT (P)LTD.(SUPRA ), RENDERED BY THE ITA 2441(DEL)2011 5 TRIBUNAL, WHICH WAS LATER OVER-TURNED BY THE HONBL E BOMBAY HIGH COURT IN GODREJ BOYCE & MANUFACTURING CO. LTD.(SUPRA). 9. SOFAR AS REGARDS THE PROVISION FOR GRATUITY U/S 115JB OF THE ACT, AGAIN, THERE WAS A RETROSPECTIVE AMENDMENT BY WAY OF INSER TION OF CLAUSE (I) IN SECTION 115JB OF THE ACT. THIS AMENDMENT WAS BROUG HT IN BY FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4 .2001. THAT BEING SO, THIS MATTER ALSO CANNOT BE SAID TO BE FREE OF CONTR OVERSY SO AS TO ENABLE PENALTY TO BE LEVIED WITH REGARD THERETO. 10. IN CIT V. RELIANCE PETRO PRODUCTS PVT. LTD., 322 ITR 158(SC), IT HAS BEEN HELD BY THE HONBLE SUPREME COURT THAT MER ELY BECAUSE THE ASSESSEE HAS CLAIMED EXPENDITURE WHICH WAS NOT ACCE PTED OR WAS NOT ACCEPTABLE TO THE REVENUE, IT WOULD NOT ATTRACT THE LEVY OF CONCEALMENT PENALTY U/S 271(1)(C) OF THE ACT; THAT EVERYTHING W OULD DEPEND ON THE RETURN FILED, BECAUSE THAT IS THE DOCUMENT WHERE THE ASSES SEE CAN FURNISH INACCURATE PARTICULARS OF ITS INCOME; THAT WHERE THE ASSESSEE FURNISHES ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN OF INCOME , WHICH DETAILS, IN THEMSELVES, ARE NOT FOUND TO BE INACCURATE, IT COU LD NOT BE VIEWED CONCEALMENT ON THE PART OF THE ASSESSEE; THAT IT WA S UPTO THE AUTHORITIES TO ACCEPT THE ASSESSEES CLAIM THE RETURN OR NOT; THAT MERELY BECAUSE THE ITA 2441(DEL)2011 6 ASSESSEE HAD CLAIMED THE EXPENDITURE NOT ACCEPTABLE TO THE REVENUE, WOULD NOT ATTRACT LEVY OF PENALTY U/S 271(1)(C) OF THE AC T. 11. THE LD. CIT(A), WHILE CORRECTLY CANCELLING THE PENALTY LEVIED, HAS TAKEN INTO CONSIDERATION THE ABOVE POSITION. MOREO VER, THE HONBLE DELHI HIGH COURT IN CIT V. IFCI LTD.(2010) TIOL-405-HC- DEL- HAD HELD THAT WHERE THE ASSESSEE HAS DISCLOSED THE ENTIRE FACTS W HILE FILING THE RETURN OF INCOME, IT CANNOT BE SADDLED WITH THE CHARGE OF FUR NISHING INACCURATE PARTICULARS AND A MERE WRONG CLAIM DOES NOT WARRANT PENALTY. THIS DECISION HAS ALSO BEEN RIGHTLY CONSIDERED BY THE LD. CIT(A) WHILE CANCELLING THE PENALTY. 12. IN VIEW OF THE ABOVE, WE FIND THE ORDER OF THE LD. CIT(A) TO BE UNASSAILABLE, THE SAME IS CONFIRMED, REJECTING THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.07.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14.07.2011 ITA 2441(DEL)2011 7 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR