Sri. KETAN V. PAREKH, MUMBAI V. DCIT CENT. CIR. - 40, MUMBAI

ITA 2540/MUM/2007

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100965 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 03-03-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 02-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 2540/MUM/2007 (ASSESSMENT YEAR 2000-01) MR. KETAN V. PAREKH, BHUPEN CHAMBERS, GROUND FLOOR, 9, DALAL STREET, FORT, MUMBAI 400023. PAN: AADPP1505A ... APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 40, MUMBAI. .... RESPONDENT ASSESSEE BY BY : SHRI RAJIV KHANDELWAL REVENUE BY : DR.P.DA NIEL, SPECIAL COUNSEL DATE OF HEARING : 09/06/2015 DATE OF PRONOUNCEMENT : 31/08/2015 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL PREFERRED BY THE ASSESSEE I S DIRECTED AGAINST THE IMPUGNED ORDER DATED 28/02/2007 PASSED BY THE CIT(A)-VII, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2000-01, WHICH IN-TURN HAS 2 MR. KETAN V. PAREKH ARISEN FROM THE ORDER PASSED BY THE ACIT DATED 24/ 12/2010 UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). 2. IN THIS APPEAL THE SOLE GRIEVANCE OF THE ASSESS EE IS AGAINST THE IMPOSITION OF PENALTY OF RS.2,31,000/- UNDER SECTIO N 271(1)(C) OF THE ACT. 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE APP ELLANT IS AN INDIVIDUAL, WHO DERIVED INCOME FROM TRADING IN SHAR ES, SALARY AND OTHER SOURCES DURING THE PREVIOUS YEAR RELEVANT TO THE AS SESSMENT YEAR UNDER CONSIDERATION. THE DIFFERENCE BETWEEN THE RETURNED AND THE ASSESSED INCOME, WHICH HAS PROMPTED THE ASSESSING OFFICER TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS A SUM OF RS.7 .00 LACS, WHICH HAS BEEN ASSESSED TO TAX AS DEEMED DIVIDEND UNDER SEC TION 2(22)(E) OF THE ACT. IN THIS CONTEXT, BRIEF FACTS ARE THAT THE ASS ESSEE WAS FOUND TO HAVE RECEIVED A SUM OF RS.7.00 LACS FROM M/S. CLASSIC CR EDIT LTD., WHICH WAS TREATED BY THE ASSESSING OFFICER AS A DEEMED DIVID END WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. THE SAID A DDITION MADE BY THE ASSESSING OFFICER HAS BECOME FINAL, AS STATED BY TH E LD. REPRESENTATIVE FOR THE ASSESSEE BEFORE US. 3 MR. KETAN V. PAREKH 3.1 SUBSEQUENTLY, VIDE ORDER DATED 28/03/2005, THE ASSESSING OFFICER TREATED THE ASSESSEE GUILTY OF CONCEALING THE PARTI CULARS OF INCOME BY FILING INACCURATE PARTICULARS QUA THE AFORESAID AMO UNT OF RS.7.00 LACS AND ACCORDINGLY, HE LEVIED THE PENALTY OF RS.2,31,0 00/- UNDER SECTION 271(1)(C) OF THE ACT WHICH WAS EQUIVALENT TO THE 10 0% OF THE TAX SOUGHT TO BE EVADED WITH RESPECT TO THE AMOUNT OF RS.7.00 LACS ASSESSED AS INCOME UNDER SECTION 2(22)(E) OF THE ACT. 4. THE AFORESAID STAND OF THE ASSESSING OFFICER HAS SINCE BEEN AFFIRMED BY THE CIT(A) ALSO. BEFORE US, LD. REPRES ENTATIVE FOR THE ASSESSEE HAS ASSAILED THE STAND OF THE INCOME-TAX A UTHORITIES BY POINTING OUT THAT THERE WAS NO INACCURATE PARTICULA R FILED BY THE ASSESSEE IN AS MUCH AS THE ASSESSEE CLAIMED THAT TH E AMOUNT OF RS.7.00 LACS IN QUESTION WAS RECEIVED FROM M/S. CLASSIC CRE DIT LTD., IN THE REGULAR COURSE OF BUSINESS. AS PER HIM, THE ASSE SSEE AS WELL AS M/S. CLASSIC CREDIT LTD. WERE IN THE BUSINESS OF DEALING IN SHARES AND THAT THE TRANSACTION OF RS.7.00 LACS WAS PART OF THE OVERALL BUSINESS TRANSACTIONS AND, THEREFORE, IT COULD NOT BE CONSIDERED AS LOAN OR ADVANCE FOR THE PURPOSE OF SECTION 2(22)(E) OF THE ACT. LD. REPRES ENTATIVE FOR THE ASSESSEE CONTENDED THAT THOUGH THE AFORESAID EXPL ANATION RENDERED BY THE ASSESSEE HAS NOT BEEN ACCEPTED IN THE QUANTU M PROCEEDINGS AND 4 MR. KETAN V. PAREKH THE IMPUGNED SUM HAS BEEN HELD TO BE ASSESSABLE AS A DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT, HOWEVE R, A MERE NON- ACCEPTANCE OF THE CLAIM DOES NOT GIVE RISE TO PENAL TY UNDER SECTION 271(1)(C) OF THE ACT. 4.1 EMPHASIZING THAT THERE WAS NO DELIBERATE INTENT ION TO CONCEAL THE IMPUGNED INCOME, THE LD. REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE AND THE GROUP COMPANIES HAVE DECLARED INCOMES FOR ASSESSMENT YEAR UNDER CONSIDERATION OF SUBSTANTIAL AMOUNTS AND IN COMPARISON THE IMPUGNED SUM OF RS.7. 00 LACS WAS AN INSIGNIFICANT FIGURE. THEREFORE, IT COULD NOT BE SA ID THAT ASSESSEE HAD HAD DELIBERATELY NOT TREATED THE IMPUGNED SUM AS AN ASSESSABLE INCOME IN THE RETURN OF INCOME FILED. IN THIS CONT EXT HE HAS ALSO REFERRED TO THE INCOMES RETURNED BY THE ASSESSEE IN THE PRECEDING TWO ASSESSMENT YEARS TO DEMONSTRATE THAT THE TAXABLE IN COMES HAVE BEEN RETURNED IN EXCESS OF RS.1.00 CRORE EACH AND, THERE FORE, IT COULD NOT BE ALLEGED THAT ASSESSEE HAD CONSCIOUSLY CONCEALED THE INCOME QUA THE IMPUGNED AMOUNT OF RS.7.00 LACS. IT HAS ALSO BEEN CONTENDED THAT THERE WAS NO FURNISHING OF INACCURATE PARTICULARS O F INCOME AND THUS, IN THE LIGHT OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT 5 MR. KETAN V. PAREKH VS. RELIANCE PETROPRODUCTS PVT. LTD., 322 ITR 158(S C), PENALTY UNDER SECTION 271(1)(C) WAS NOT LEVIABLE. 5. ON THE OTHER HAND, LD. SPECIAL COUNSEL APPEARING FOR THE REVENUE HAS DEFENDED THE ORDERS OF AUTHORITIES BELOW FOR IM POSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. LD. SPECIAL CO UNSEL APPEARING FOR THE REVENUE POINTED OUT THAT IN THE PRESENT CASE TH E PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE RIGHTLY INVOKED BE CAUSE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN ITS POSITION THAT THE IM PUGNED TRANSACTION WITH M/S. CLASSIC CREDITS LTD. WAS IN THE ORDINARY COURS E OF BUSINESS AND OUTSIDE THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. IT WAS, THEREFORE, CONTENDED THAT THE NON-RETURNING OF SUCH INCOME BY THE ASSESSEE CONSTITUTED A DEFAULT IN TERMS OF SECTION 271(1)(C) OF THE ACT AND, THEREFORE, PENALTY HAS BEEN APPROPRIATELY LEVIED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. FACTUALLY SPEAKING, THE ADDITION OF RS.7.00 LACS, WHICH IS TH E CONTROVERSY BEFORE US HAS BEEN HELD TO BE AN AMOUNT ASSESSABLE AS DEE MED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. PERTINENTLY, TH E SAID AMOUNT WAS FOUND TO HAVE BEEN RECEIVED BY THE ASSESSEE ON 27/0 3/2000 FROM M/S. CLASSIC CREDIT LTD., AND IN SO FAR AS THE APPLICABI LITY OF SECTION 2(22)(E) QUA THE SAID TRANSACTION IS CONCERNED THERE IS NO D ISPUTE. NO DOUBT, 6 MR. KETAN V. PAREKH ASSESSEE CONTENDED BEFORE THE INCOME-TAX AUTHORITIE S THAT THE OTHER CONCERN I.E. M/S. CLASSIC CREDIT LTD. WAS ALSO ENGA GED IN THE BUSINESS OF DEALING IN SHARES AND THAT THE SAID SUM WAS A PART OF THE OVERALL BUSINESS TRANSACTIONS BETWEEN THE ASSESSEE AND THE SAID COMPANY, AND THEREFORE, IT WAS CLAIMED THAT THE PROVISIONS OF SECTION 2(22)(E) WERE NOT ATTRACTED. NOTABLY, SHORN OF OTHER DETAILS, F OR THE PRESENT, IT WOULD SUFFICE TO OBSERVE THAT SECTION 2(22)(E) OF THE AC T PRESCRIBES THAT ANY PAYMENT RECEIVED BY WAY OF AN ADVANCE OR LOAN BY A SHARE HOLDER, FROM A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIAL LY INTERESTED SHALL BE CONSTRUED AS DEEMED DIVIDEND, SUBJECT TO THE CON DITIONS PRESCRIBED THEREIN. THE CLAIM OF THE ASSESSEE HAS BEEN THAT THE IMPUGNED SUM OF RS.7.00 LACS RECEIVED FROM M/S. CLASSIC CREDIT LTD. IS NOT IN THE NATURE OF LOAN OR ADVANCE AND RATHER IT WAS A BUSINESS TR ANSACTION. THE ASSESSING OFFICER HOWEVER, DIFFERED WITH THE ASSESS EE AND ACCORDING TO HIM ASSESSEE COULD NOT SUBSTANTIATE THAT THE TRANSA CTION WAS FALLING OUTSIDE THE DEEMING SCOPE OF SECTION 2(22)(E) OF T HE ACT. 6.1 QUITE CLEARLY, IT IS A CASE WHERE THE ASSESSEE FAILED TO SUBSTANTIATE ITS STAND ABOUT THE PERCEPTION OF VIEWING A PARTICU LAR TRANSACTION. A DIFFERENCE IN PERCEPTION ABOUT A TRANSACTION, IN OU R VIEW, WOULD NOT CONSTITUTE FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE 7 MR. KETAN V. PAREKH MEANING OF SECTION 271(1)(C) OF THE ACT. NOTABLY, A PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UN DER SECTION 143(3) OF THE ACT ON 5/11/2003 CLEARLY SUGGESTS THAT THE A SSESSING OFFICER HAS PERCEIVED THE SAID TRANSACTION TO BE FALLING WITHIN THE SCOPE OF THE DEEMING PROVISIONS OF SECTION 2(22)(E) BASED ON THE PARTICULARS FURNISHED BY THE ASSESSEE. IT IS NOT A CASE WHERE ASSESSEE CAN BE SAID TO HAVE CONCEALED OR FURNISHED ANY WRONG OR FALSE PARTICULARS ABOUT THE TRANSACTION. HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD.(SUPRA) HAS HELD THAT UNLES S THERE IS A FINDING THAT ANY OF THE DETAILS OR PARTICULARS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FA LSE, IT WOULD NOT INVITE THE PENALTY UNDER SECTION 271(1)(C) OF THE A CT MERELY BECAUSE THE CLAIM MADE IN THE RETURN OF INCOME HAS BEEN FOUND T O BE UNSUSTAINABLE. IN THE PRESENT CASE, FACTUALLY SPEAKING, THE SITUAT ION IS OF A VARYING PERCEPTION OF THE NATURE OF TRANSACTION WHICH HAS RESULTED IN APPLICATION OF SECTION 2(22)(E) OF THE ACT, THEREBY RESULTING IN A DIFFERENCE BETWEEN RETURNED AND THE ASSESSED INCOME . HAVING REGARD TO THE ENTIRE CONSPECTUS OF FACTS AND CIRCUMSTAN CES OF THE CASE, IN OUR VIEW IT IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CI T(A) AND DIRECT THE 8 MR. KETAN V. PAREKH ASSESSING OFFICER TO DELETE THE PENALTY OF RS.2,31, 000/- IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2015 SD/- SD/- (SANJAY GARG) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI,DATED :../08/2015 VM. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBA I VM , SR. PS