ACIT 16(1), MUMBAI V. SUMIT P. BHATTACHARYA, MUMBAI

ITA 2442/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1749 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 09-06-2010
• Assessment Year: 1998-1999
• Appeal Filed On: 16-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR SRIVASTAVA
• Keywords: Salary income; Cost of acquisition; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI D.K. AGARWAL, J.M AND SHRI A.L. GEHLOT , A.M. ITA NO. 2442/M/2009 ASSESSMENT YEAR: 1998-99 ASSTT. COMMISSIONER OF INCOME-TAX, APPELLANT 16(1), MATRU MANDIR MUMBAI 9. VS. SHRI SUMIT P. BHATTACHARYA, RESPONDENT 3E RAMALAYAN, 44C, PEDDAR ROAD, MUMBAI 26 (PAN AAGPB6968G) APPELLANT BY : MR. AJAY KUMAR SRIVASTAVA RESPONDENT BY : MS. HIRAL SEJPAL ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-XVI, MUMBAI, PASSED ON 22.12.2008 FOR T HE ASSESSMENT YEAR 1998-99. 2. THE GROUND RAISED BY THE REVENUE IN THIS APPEAL IS IN RESPECT OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IT IS STATED IN THE GROUND THAT THE CIT(A) ERRED IN APPRECIATING THAT W ILFUL ATTEMPT OR CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTR ACTING THE PENALTY WHICH HAS BEEN DULY SUPPORTED BY THE DECISI ON IN THE CASE OF UNION OF INDIA VS. DHARMENDER TEXTILE PROCESSOR REPORTED IN 306 ITR 277. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE WAS AN EMPLOYEE OF M/S PROCTER AND GAMBLE INDIA LTD., WHIC H IS A GROUP COMPANY OF PROCTER AND GAMBLE OF USA. THE COMPANY H AD GIVEN APPRECIATION RIGHTS TO THE ASSESSEE, WHICH ARE AS U NDER:- ITA NO. 2442/M/09 SUMIT P. BHATTACHARYA 2 DATE OF GRANT NUMBER OF SHARES GRANT VALUE EXPIRATION OF RIGHT 26.2.1991 1400 US$ 117250 26.2.2001 24.2.1992 1300 US$ 132763 24.2.2002 26.2.1993 2200 US$ 113438 26.2.2003 25.2.1994 2300 US$ 130669 25.2.2004 28.2.1995 2400 US$ 159000 28.2.2005 4. IN THE QUANTUM MATTER, THE ASSESSEE DID NOT SHOW THIS INCOME IN THE RETURN OF INCOME, HOWEVER, A NOTE IS GIVEN CONTENDING THAT IN THE ABSENCE OF ANY EMPLOYER-EMPLOYEE RELATI ONSHIP BETWEEN THE PARENT COMPANY AND THE ASSESSEE, THE AMOUNT REC EIVED WAS NOT LIABLE FOR TAXATION UNDER THE HEAD INCOME FROM SAL ARIES. IT WAS A CAPITAL RECEIPT IN WHOSE ACQUISITION THE ASSESSEE D ID NOT INCUR ANY COST AND THEREFORE THE AMOUNT WOULD NOT BE TAXABLE UNDER THE HEAD CAPITAL GAINS ON THE BASIS OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. B.C. SRINIVAS SHETTY, 128 ITR 294. THE AO ASSESSED THE SAID AMOUNT AS INCOME FROM SALARY. THE CIT(A) CONFIRMED THE ORDER OF AO. THE SPECIAL BENCH OF ITA T HAD ALSO CONFIRMED THE ORDER OF AO. ON RECEIPT OF THE ORDER OF ITAT, THE AO LEVIED PENALTY, WHICH WAS CANCELLED BY THE CIT(A) B Y OBSERVING AS UNDER:- 8. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF T HE APPELLANT. THE OCCASION FOR THE LEVY OF PENALTY IS THE NON- ADMITTANCE AS INCOME BY THE APPELLANT OF THE AMOUNT OF RS. 4,79,13,851/- RECEIVED FROM PROCTER AND GAMBLE USA. THE APPELLANT HAD DISCLOSED THIS FACT IN THE COMPUTATIO N STATEMENT FILED ALONG WITH THE RETURN OF INCOME FOR THE AY 19 98-99. THE REASON FOR THE NON-ADMITTANCE OF THE AMOUNT RECEIVE D AS INCOME WAS THAT THERE WAS NO EMPLOYER-EMPLOYEE RELA TIONSHIP BETWEEN PROCTER AND GAMBLE USA AND THE APPELLANT. T HEREFORE, THE RECEIPT WOULD NOT PARTAKE THE NATURE OF SALARY. THE APPELLANT WAS OF THE VIEW THAT WHAT HE RECEIVED WAS CAPITAL IN NATURE AND SINCE THERE WAS NO COST OF ACQUISITION, NO CAPITAL GAINS WAS ASSESSABLE ON THE BASIS OF THE SUPREME CO URT DECISION IN CIT VS. B.C. SRINIVASA SHETTY (128 ITR 294). THE AO DID NOT AGREE WITH THE STAND TAKEN BY THE APPELL ANT. THE AO OBSERVED THAT THERE WAS AN EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE APPELLANT AND THE PROCTOR AND GAMBLE GROUP. IF NOT FOR THE EMPLOYMENT OF THE APPELLANT W ITH PROCTOR AND GAMBLE, HE WOULD NOT HAVE RECEIVED THE BENEFIT WHICH HE HAD RECEIVED AND THEREFORE THE RIGHTS WERE RIGHTLY ASSESSABLE AS A PERQUISITE U/S 17 OF THE INCOME TAX ACT. THIS CONCLUSION WAS ALSO CONFIRMED BY THE HONBLE ITAT IN ITS ORDER DATED 3 RD OF JANUARY, 2008 IN ITA NO. 238/MUM/05. THE REASON FOR ITA NO. 2442/M/09 SUMIT P. BHATTACHARYA 3 IMPOSITION OF PENALTY BY THE AO IS THAT THE APPELLA NT DELIBERATELY TRIED TO CONFUSE THE ISSUE BY STATING THAT HE HAS HAD NO EMPLOYER-EMPLOYEE RELATIONSHIP WITH THE GRAN TOR OF THE RIGHTS, PROCTOR AND GAMBLE USA AND THAT THIS WAS AT TEMPT TO OFFER AN EXPLANATION WHICH IS FOUND BY THE AO TO BE FALSE. THEREFORE, THE PROVISIONS OF EXPLANATION 1 TO SECTI ON 271 WOULD APPLY TO THE CASE. THE FACTS OF THE MATTER IS THAT THE APPELLANT HAD DISCLOSED THE INFORMATION IN THE COMPUTATION OF STATEMENT FILED WITH THE RETURN OF INCOME FOR THE AY 1998-99. AT THE SAME TIME, HE DID NOT ADMIT THE AMOUNT RECEIVED AS AN IN COME FOR THE YEAR. THIS IS ON THE BASIS THAT THE AMOUNT WAS RECEIVED FROM THE PARENT COMPANY IN USA WITH WHICH HE HAD HA D NO EMPLOYER-EMPLOYEE RELATIONSHIP AND NOT FROM HIS IMM EDIATE EMPLOYER, PROCTOR AND GAMBLE INDIA LTD. HE WAS ALSO OF THE VIEW THAT THIS WAS A CAPITAL RECEIPT. THE ISSUE, IN SHORT WAS DEBATABLE IN NATURE AND THIS IS BORNE OUT BY THE FA CT THAT THE MATTER WAS BROUGHT BEFORE THE ITAT ON TWO OCCASIONS AND ULTIMATELY THE SPECIAL BENCH HAD TO DELIBERATE ON THE MATTER AND REACH A CONCLUSION. SO IT BECOMES CLEAR THAT TH ERE WAS NO DELIBERATE ATTEMPT TO CONCEAL THE FACTS AND THE NON -ADMITTANCE OF THE INCOME WAS THE BELIEF ON THE PART OF APPELLA NT THAT THE RECEIPT WAS NOT TAXABLE. I ALSO DO NOT THINK THAT T HE APPELLANT HAD DELIBERATELY TRIED TO MISLEAD THE REVENUE BY GI VING FALSE EXPLANATIONS. THE APPELLANT EXPRESSED HIS VIEWS ON THE MATTER AND THESE EXPLANATIONS WERE NOT FOUND ACCEPTABLE TO THE REVENUE. THIS CANNOT BE CONSIDERED AS AN EXPLANATIO N WHICH WAS FOUND TO BE FALSE BY THE AO. THEREFORE, I AM OF THE VIEW THAT PROVISIONS OF SECTION 271(1)(C) OR EVEN THE PR OVISIONS OF EXPLANATION (1) TO SECTION 271 ARE NOT APPLICABLE I N THIS CASE. AS POINTED OUT BY THE APPELLANT, THE HONBLE BOMBAY HIGH COURT IN CIT VS. SHIVLAL DESAI & SONS (114 ITR 317) HAS HELD THAT ADDITIONS/DISALLOWANCES IN THE ASSESSMENT PROC EEDINGS WOULD NOT BRING IN ITS WAKE LEVY OF PENALTY. I AM O F THE VIEW THAT PENALTY IS LEVIABLE ONLY WHEN THERE IS CONCEAL MENT OF THE PARTICULARS OF INCOME WHICH WOULD POINT TO A DELIBE RATE ATTEMPT TO SUPPRESS FACTS OR TO MISLEAD REVENUE. IN THIS CASE, IT DOES NOT APPEAR THAT SUCH A SITUATION HAD PREVAILED . THEREFORE LEVY OF PENALTY IS NOT JUSTIFIABLE. 9. IN VIEW OF THIS DISCUSSION, I COME TO THE CONCLU SION THAT LEVY OF PENALTY U/S 271(1)(C) IS NOT WARRANTED IN T HIS CASE AND AS A RESULT THE PENALTY LEVIED U/S 271(1)(C) IS DEL ETED. 5. THE LEARNED AR AT THE OUTSET SUBMITTED THAT SIMI LAR ADDITIONS CONFIRMED IN THE CASE OF ANIL KUMAR NEHRU FOLLOWING THE DECISION OF SPECIAL BENCH IN THE CASE OF THE ASSESSEE REPORTED IN 112 ITD SB 1. THE LEARNED AR FURTHER SUBMITTED THAT WHEN THE PENA LTY MATTER U/S 271(1)(C) CAME BEFORE THE ITAT IN THE CASE OF ANIL KUMAR NEHRU IN ITA NOS. 3398 TO 3340/MUM/08 VIDE ORDER DATED 31.03 .2010, THE ITAT CANCELLED THE PENALTY OBSERVING AS UNDER:- ITA NO. 2442/M/09 SUMIT P. BHATTACHARYA 4 6. IT IS THUS CLEAR THAT AS HELD BY THE COORDINATE BENCH WITH WHICH WE ARE IN CONSIDERED AGREEMENT, MERELY BECAUS E A LEGAL CLAIM HAS BEEN MADE, AND EVEN THOUGH THE SAID CLAIM HAS BEEN FOUND TO BE INADMISSIBLE, PENALTY UNDER SECTIO N 271(1)(C) CANNOT BE IMPOSED. THAT IS PRECISELY WHAT HAS NOW B EEN HELD BY THE HONBLE SUPREME COURT IN ITS JUDGMENT DATED 17 TH MARCH, 2010 IN THE CASE OF CIT VS. RELIANCE PETROPR ODUCTS PVT. LTD. (REPORTED AT WWW.ITATONLINE.ORG ). IT HAS BEEN OBSERVED BY THE HONBLE SUPREME COURT THAT BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNO T TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. T HEIR LORDSHIPS HAVE FURTHER OBSERVED THAT IT IS UP TO T HE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BE CAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM W AS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY U/S 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CAS E OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY AO F OR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECT ION 271(1)(C). IN THE CASE BEFORE US, THERE IS NOTHING MORE THAN INADMISSIBILITY OF CLAIM WHICH HAS RESULTED IN THE IMPUGNED PENALTY. IT IS NOT EVEN REVENUES CASE THAT ANY FAC TUAL PARTICULARS HAVE BEEN CONCEALED AND GIVEN WRONGLY. IN THESE CIRCUMSTANCES, AND BEARING IN MIND THE ABOVE DISCUS SIONS, WE ARE OF THE CONSIDERED VIEW THAT IT WAS INDEED NOT A FIT CASE FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C). WE, THEREFORE, DELETE THE IMPUGNED PENALTIES. THE ASSESSEE GETS RE LIEF ACCORDINGLY. 6. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER AND SUBMITTED THAT IT IS NOT A COVERED MATTER. THE PENA LTY MATTER U/S 271(1)(C) IS REQUIRED TO BE DECIDED AFTER CONSIDERI NG THE FACTS OF EACH CASE. THE LEARNED DR FURTHER SUBMITTED THAT ME RE ENCLOSING A NOTE ALONG WITH RETURN OF INCOME IS NOT SUFFICIENT UNLESS THE SAME IS SUBSTANTIATED BY THE ASSESSEE. THE LEARNED DR SU BMITTED THAT IT IS NOT A CASE OF BONAFIDE REASON OF THE ASSESSEE TO TREAT THAT THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP. THE ASSESSEE HAS TAKEN FACTUALLY WRONG STAND, THEREFORE, THERE ARE INACCUR ATE PARTICULARS AND CONCEALMENT OF PARTICULARS OF INCOME BY WRONG P RESUMPTION OF THE ASSESSEE. THE LEARNED DR FURTHER SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY CLAUSES (A) AND (B) OF EXPLANATION 1 TO SECTION 271(1). HE FURTHER SUBMITTED THAT JUDGME NT OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158(SC) IS ALSO NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ITA NO. 2442/M/09 SUMIT P. BHATTACHARYA 5 ASSESSEE. THE LEARNED DR IN SUPPORT OF HIS CONTENTI ON RELIED UPON THE FOLLOWING DECISIONS:- 1. ADDL. CIT V. JEEVAN LAL SAH (SC), 205 ITR 244 2. CIT VS. GURBACHAN LAL,250 ITR 157 (DEL.) 3. CIT VS. VIDYAGAURI NATVERLAL & ORS., 238 ITR 91 (GUJ.) 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND THAT ON IDENTICAL SET O F FACTS, THE ITAT IN CASE OF ANIL KUMAR NEHRU CITED SUPRA WHEREIN THE ADDITION IN THE QUANTUM MATTER HAS BEEN CONFIRMED, FOLLOWING TH E DECISION OF ITAT SPECIAL BENCH IN THE CASE OF THE PRESENT ASSES SEE. BUT THE PENALTY U/S 271(1) HAS BEEN CANCELLED BY THE ITAT AS PER FINDING OF ITAT REPRODUCED IN PARA 5 OF THIS IRDER. WHEN FA CTS ARE IDENTICAL TO MAINTAIN CONSISTENCY IN THE LIGHT OF FOLLOWING D ECISIONS WE BOUND TO FOLLOW THE ORDER OF COORDINATE BENCH:- I) CIT VS. GOODLASS NEROLAC PAINTS LTD., 188 ITR 1 (BOM.): PAGE 5 THIS, HOWEVER, DOES NOT MEAN THAT SUBSEQUENT BENCH OF THE TRIBUNAL SHOULD COME TO A CONCLUSION TOTALLY CONTRADICTORY T O THE CONCLUSION REACHED BY THE EARLIER BENCHOF THE TRIBUNAL IN THE SAME CASE FOR AN EARLIER YEAR ON A SIMILAR SET OF FACTS. SUCH A THIN G MAY NOT BE IN THE LARGER PUBLIC INTEREST AS IT IS LIKELY TO SHAKE THE CONFIDENCE OF THE PUBLIC IN THE SYSTEM. II) SAYAJI IRON & ENGG. CO. VS. CIT [2002] 253 ITR 749 (GUJ.):[PAGE 753] 9.4: IN RELATION TO THE AFORESAID APPROACH OF THE CIT(A) AND THE TRIBUNAL WE CANNOT DO BETTER THAN REITERATE WHAT MADRAS HIGH COURT HAS STATED IN THE CASE OF CIT VS. L.G. RAMAMURTHI & ORS. 1977 CTR (MAD) 416: (1977) 110 ITR 453 (MAD): : NO TRIBUNAL OF FACT HAS ANY R IGHT OR JURISDICTION TO COME TO A CONCLUSION ENTIRELY CONTRARY TO THE ONE R EACHED BY ANOTHER BENCH OF THE SAME TRIBUNAL ON THE SAME FACTS. IF A BENCH OF A TRIBUNAL ON THE IDENTICAL FACTS IS ALLOWED TO COME TO A CONC LUSION DIRECTLY OPPOSED TO THE CONCLUSION REACHED BY ANOTHER BENCH OF THE T RIBUNAL ON AN EARLIER OCCASION, THAT WILL BE DESTRUCTIVE OF THE INSTITUTI ONAL INTEGRITY ITSELF. III) RADHASOAMI SATSAND VS. CIT [1992] 193 ITR 321 (SC): [1992] 60 TAXMAN 248 ASSESSMENTS ARE CERTAINLY QUASI-JUDICI AL AND THESE OBSERVATIONS EQUALLY APPLY. 9. WE ARE AWARE OF THE FACT THAT, STRICTLY SPEAKING , RES JUDICATA DOES NOT APPLY TO IT PROCEEDINGS. AGAIN, EACH ASSESSMENT YEA R BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWI NG YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING TH E ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHAN GED IN A SUBSEQUENT YEAR. ITA NO. 2442/M/09 SUMIT P. BHATTACHARYA 6 8. IN THE LIGHT OF ABOVE DISCUSSION, WE RESPECTFULL Y FOLLOW THE ORDER OF ITAT IN THE CASE OF MR. ANIL KUMAR NEHRU C ITED SUPRA AND IN THE LIGHT OF THAT PENALTY LEVIED U/S 271(1)(C) I S LIABLE TO BE CANCELLED. 9. AS REGARDS THE DECISIONS RELIED UPON BY THE LEAR NED DR, WE FIND THAT THOSE CASES ARE DISTINGUISHABLE ON FACTS, WHICH ARE NOT SIMILAR TO THE FACTS OF THE CASE UNDER CONSIDERATIO N. AS REGARDS THE JUDGMENT OF THE APEX COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDER TEXTILES, 306 ITR 307, WE FIND THAT CIT( A) AS WELL AS ITAT HAVE NOT CANCELLED PENALTY ON THE GROUND OF ME NS REA, THEREFORE, THE JUDGMENT OF THE APEX COURT IN THIS C ASE IS NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERA TION. CONTRARY TO THAT, THE CASE UNDER CONSIDERATION IS COVERED BY TH E JUDGMENT OF THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCT S P. LTD. CITED SUPRA. IN THE LIGHT OF ABOVE DISCUSSION, WE HEREBY CANCEL THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. PRONOUNCED IN OPEN COURT ON THIS 11 TH DAY OF JUNE, 2010. SD/- SD/- (D.K. AGARWAL) (A.L. GEHLO T) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 11 TH JUNE, 2010. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, I BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV ITA NO. 2442/M/09 SUMIT P. BHATTACHARYA 7 S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 9.6.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 10.6.10 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER