SATINDERPALSINGH RESHAMSINGH, MUMBAI V. ACIT CIR. 2(1), MUMBAI

ITA 2532/MUM/2010

• Counselvise Citation: 253219914 RSA 2010
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-04-2011
• Assessment Year: 1994-1995
• Appeal Filed On: 01-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARI S RAHJA
• Keywords: Business expenditure; Principle of natural justice; Bonafide belief

Judgement Text

1 ITA NO.2532/MUM/2010 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI E EE E BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI P M JAGTAP, AM P M JAGTAP, AM P M JAGTAP, AM P M JAGTAP, AM & & & & VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 2532/MUM/2010 2532/MUM/2010 2532/MUM/2010 2532/MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 1994 1994 1994 1994- -- -95 9595 95) )) ) SATINDERPAL SINGH RESHAMSINGH KASHIRAM JAMNADAS BLDG 5 P D MELLO ROAD, MUMBAI 400 009 VS THE ASST COMMR OF INCOME TA CIR 2(1), MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.APNP15317F APNP15317F APNP15317F APNP15317F A SSESSEE BY SHRI HARI S RAHJA REVENUE BY SHRI D SONGATE-DR PER PER PER PER VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 3.2.2010 OF THE CIT(A)-4, MUMBAI ARISING FROM THE PENALTY ORDER U/S 271(1)(C) OF THE I T ACT, 1961 FOR THE AY 1994-95. 2 THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS IN ITS APPEAL: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN CONFIRMING LEVY OF PENALTY OF RS. 4 ,23,788/- U/S 271(1)( C) ON THE APPELLANT. II) WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELLANT SUBMITS THAT LEVY OF PENALTY AT 200% OF TAX IS VERY HARSH ON THE APPELLANT. 3 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E IS A DIRECTOR IN M/S HILLSON & DINSHAW CO LTD. DURING THE COURSE OF SURVEY U/S 1 33A IN THE CASE OF THE COMPANY, IT WAS FOUND THAT THE COMPANY HAD INCURRED EXPENSES TO THE TUNE OF 2 ITA NO.2532/MUM/2010 RS. 4,70,876/- ON THE OCCASION OF THE MARRIAGE OF T HE ASSESSEE HELD ON 21.11.1993. THE ASSESSING OFFICER, WHILE FRAMING T HE ORIGINAL ASSESSMENT, TREATED THESE EXPENSES AS PERQUISITES IN THE HANDS OF THE ASSESSEE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE MATTER WAS CARRIED TO THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 30.7.20 04 SET ASIDE THE SAME TO THE RECORDS TO THE ASSESSING OFFICER TO EXAMINE THE I SSUE DE-NOVO, SPECIFICALLY FOLLOWING PRINCIPLES OF NATURAL JUSTICE AND PARTICU LARLY REFERRING TO THE BOARD RESOLUTION, IF ANY, WHILE TAKING THE ASSESSEE AS A DIRECTOR OF THE COMPANY. IN THE REMAND PROCEEDINGS, THE ASSESSING OFFICER MAINT AINS THE SAID ADDITION IN THE HANDS OF THE ASSESSEE AS PERQUISITES. 3.1 ON APPEAL, THE CIT(A) HELD THAT THE SAID AMOUNT IS THE INCOME OF THE ASSESSEE U/S 2(24)(IV) OF THE I T ACT. ON FURTHER APPEAL BY THE ASSESSEE, THE TRIBUNAL VIDE ORDER DATED 26.8.2009 CONFIRMED THE A DDITION AND HELD THAT IT IS A TAXABLE INCOME OF THE ASSESSEE U/S 2(24)(IV) OF THE I T ACT. 3.2 PENALTY PROCEEDINGS WERE INITIATED BY THE ASSES SING OFFICER AND THE PENALTY OF RS. 4,23,788/- BEING THE 200% OF THE TAX SOUGHT TO BE EVADED WAS LEVIED U/S 271(1)( C)OF THE ACT VIDE ORDER DATED 16 .3.2009. 4 THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEFOR E THE CIT (A), WHO CONFIRMED THE LEVY OF PENALTY VIDE THE IMPUGNED ORD ER. 3 ITA NO.2532/MUM/2010 5 BEFORE US, THE LD AR OF THE ASSESSEE SUBMITTED TH AT THE ADDITION WAS MADE BY THE ASSESSING OFFICER U/S 17(2)(IV) AS PERQUISIT E IN THE HANDS OF THE ASSESSEE WHEREAS THE TRIBUNAL HAS HELD THAT WHEN THE SAID EX PENDITURE HAS BEEN DISALLOWED IN THE HANDS OF THE COMPANY, THE SAME CA NNOT BE TREATED AS PERQUISITE IN THE HANDS OF THE ASSESSEE; THOUGH TH E SAME WAS HELD AS INCOME U/S 24(IV) OF THE ACT. THE LD AR OF THE ASSESSEE T HUS SUBMITTED THAT SINCE THE ASSESSEE HAS NOT RECEIVED ANY INCOME DIRECTLY BUT T HE EXPENDITURE ON THE OCCASION OF THE MARRIAGE OF THE ASSESSEE WAS VOLUNT ARILY INCURRED BY THE COMPANY; THEREFORE, THERE IS NO QUESTION OF CONCEAL MENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. HE FURTHER CONTE NDED THAT DURING THE SURVEY U/S 133(A) ON THE COMPANY, IT WAS FOUND THAT THE EX PENDITURE CLAIMED BY THE COMPANY FOR THE BUSINESS OF THE COMPANY WAS ACTUALL Y INCURRED FOR THE MARRIAGE OF THE ASSESSEE AND THEREFORE, WAS DISALLOWED. SIM ILARLY, THE SAME WAS TAXED IN THE HANDS OF THE ASSESSEE BEING PERQUISITE. WHEN TH E ASSESSEE HAD NO RIGHT TO CLAIM THE SAID BENEFIT, IT CANNOT BE TREATED AS INC OME OF THE ASSESSEE RATHER THE PAYMENT MADE BY THE COMPANY IS VOLUNTARILY AND CONT INGENT IN NATURE. THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE EXPENDI TURE INCURRED BY THE COMPANY ON THE OCCASION OF THE MARRIAGE OF THE ASSE SSEE WAS NOT THE INCOME OF THE ASSESSEE. THUS, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT BY TREATING THE SAID EXPENDITURE AS INCOME IN THE HANDS OF THE ASSESSEE DOES NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING INACCURATE PAR TICULARS OF INCOME RESULTING LEVY OF PENALTY U/S 271(1)( C) OF THE ACT. IN SUPP ORT OF HIS CONTENTION, HE RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS A G ABRAHAM REPORTED IN 239 ITR 835. 4 ITA NO.2532/MUM/2010 5.1 THE LD DR, ON THE OTHER HAND, WHILE SUPPORTING THE ORDERS OF THE AUTHORITIES BELOW, SUBMITTED THAT THE EXPENDITURE O N THE OCCASION OF THE MARRIAGE OF THE ASSESSEE AS INCURRED BY THE COMPANY CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICER ONLY AFTER THE SURVEY U/S 133 (A) WAS CONDUCTED IN THE CASE OF THE COMPANY. HE FURTHER SUBMITTED THAT THE ASSE SSEE DID NOT DISCLOSE THE FACTUM OF THE EXPENDITURE ON THE MARRIAGE WAS BORN E BY THE COMPANY; THEREFORE, IT IS CLEAR CASE OF CONCEALMENT OF INCO ME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME WARRANTED PENALTY U/S 271(1) (C ) OF THE ACT. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. UNDISPUTE DLY, THE SAID AMOUNT OF RS. 4,70,876/- WAS CLAIMED AS BUSINESS EXPENDITURE BY M/S HILLSON & DINSHAW P LTD., WHICH WAS DISALLOWED AND SUBJECTED TO TAX IN THE HANDS OF THE SAID COMPANY. AT THE SAME TIME THE SAID AMOUNT WAS ALSO BEEN TAXED IN THE HANDS OF THE ASSESSEE AS PERQUISITE. THE TRIBUNAL WHILE DECIDING THE APPEAL OF THE ASSESSEE HAS HELD THAT SINCE THE SAID AMOUNT HAS BE EN DISALLOWED BEING THE EXPENDITURE NOT FOR THE PURPOSE OF THE BUSINESS OF THE COMPANY; THE SAME CANNOT BE TREATED AS INCOME BEING PERQUISITE IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, THE SAID AMOUNT HAS BEEN HELD AS INCOM E OF THE ASSESSEE U/S 2(24)(IV) OF THE I T ACT. IT IS EVIDENT THAT THE S AME AMOUNT HAS BEEN ALREADY TAXED TWICE ONCE IN THE HANDS OF THE COMPANY AND TH EN IN THE HANDS OF THE ASSESSEE. WHEN THE SAID AMOUNT WAS CLAIMED BY THE C OMPANY IN WHICH THE ASSESSEE IS A DIRECTOR AS BUSINESS EXPENDITURE AND WAS DISALLOWED THEN KEEPING IN VIEW OF THE NATURE OF THE EXPENDITURE AND THE OC CASION OF THE EXPENDITURE, IT CANNOT BE SAID THAT THE ASSESSEE HAS RECEIVED ANY D IRECT BENEFIT OR INCOME BUT THE SAID BENEFIT IS IN THE SHAPE OF THE EXPENSES SP ONSORED BY THE COMPANY ON 5 ITA NO.2532/MUM/2010 THE OCCASION OF THE MARRIAGE OF THE ASSESSEE. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IT DOES NOT APPEAR THAT THE ASSESSEE HAS CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS OF I NCOME, WHICH OTHERWISE OUGHT TO HAVE BEEN DECLARED IN THE NORMAL COURSE AND CIRC UMSTANCES. THEREFORE, WHEN THE AMOUNT OF RS. 4,70,876/- HAS ALREADY BEEN SUBJECTED TO TAX TWICE, IN OUR CONSIDERED OPINION, THE PENALTY LEVIED U/S 271( 1)( C), IS NOT JUSTIFIED; ACCORDINGLY, THE SAME IS CANCELLED. 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON THE 29 TH DAY OF APRIL 2011. SD/- SD/- ( (( ( P M JAGTAP P M JAGTAP P M JAGTAP P M JAGTAP ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 29 TH , APRIL 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI