EPG WEALTH MANAGEMENT (I) P.LTD, MUMBAI V. DCIT CIR 4(1), MUMBAI

ITA 263/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7998 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 15-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Difference of opinion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.263/MUM/2016 (ASSESSMENT YEAR- 2005-06) M/S EFG WEALTH MANAGEMENT PVT. LTD. (PRESENTLY KNOWN AS STRATCAP SECURITIES PVT. LTD.) 44, STRATEGIC HOUSE, MINT ROAD, FORT, MUMBAI 400 001. PAN: AABCA3906B VS. DCIT CIRCLE-4(1), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIMAL PUNAMIYA WITH SHRI DARSHAN GANDHI (AR) REVENUE BY : SHRI V.JUSTIN (DR) DATE OF HEARING : 31.10.2017 DATE OF PRONOUNCEMENT : 20.12.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-9, [CIT(A)] MUMBAI DATED 06.11.2015 FOR ASSESSMENT YEA R 2005-06. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LD. AO WAS FAILED TO RECODED ANY DIRECTION T O INITIATE THE PENALTY IN TERMS OF LEGAL FICTION UNDER SECTION 271(1B) OF THE INCOME TAX ACT IN ITS ASSESSMENT ORDER UNDER SECTION 143(3) DATED 27.12.2 007 AND HENCE ENTIRE PENALTY PROCEEDING IS REQUIRED TO BE QUASHED IN ABS ENCE OF SATISFACTION TO INITIATE THE PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 2. THE LD. CIT(A) ERRED IN CONFORMING ACTION OF THE LD. AO LEVIED PENALTY OF RS.15,00,483/- UNDER SECTION 271(1)(C). 3. THE LD. CIT(A) PASSED QUANTUM ORDER ON 10.11.200 8 AGAINST WHICH APPEAL WAS ALREADY PREFERRED BY THE ASSESSEE BEFORE THE HO N'BLE ITAT. DURING THE 2 ITA NO.263/M/2016 M/S EFG WEALTH MANAGEMENT PVT. LTD. PENDENCY OF QUANTUM APPEAL BEFORE THE ITAT, THE LD. AO LEVIED THE PENALTY VIDE ORDER DATED 29.03.2010 UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. THE LD. CIT(A) ERRED IN APPRECIATING PROVISIONS OF SECTION 275(1)(A) OF THE INCOME TAX ACT AND ERRED IN APPLYING FIRST PROVISO AFTER SAID SECTION AFTER HOLDING THAT CUT-OFF DATE TO PASS PENALTY ORDER IS 31.03.2010, I.E. 1 YEAR AFTER THE COMPLETION OF YEAR IN WHICH CIT PASSES ORDER, I NSTEAD OF 31.05.2009, I.E. 6 MONTHS FROM THE DATE OF RECEIPTS OF CIT(A)'S ORDER IN CASES WHERE APPEAL IS PREFERRED BEFORE THE ITAT. 4. THE LD. CIT(A) ERRED IN CONFORMING ACTION OF THE LD. AO LEVIED PENALTY OF RS.15,00,483/- UNDER SECTION 271(L)(C) NOT APPRECIA TING THE VIEW THAT ISSUE WAS DEBATABLE IN NATURE AND NO PENALTY CAN BE LEVIED ON SUCH ISSUES. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGE D IN THE BUSINESS OF EQUITY SHARES, BROKER IN NATIONAL STOCK EXCHANGE AND BOMBA Y STOCK EXCHANGE, MUTUAL FUNDS DISTRIBUTION AND HAVING MERCHANT BROKI NG SERVICES LICENSE FROM SEBI, FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 30 TH OCTOBER 2005. SUBSEQUENTLY, THE ASSESSEE FILED REVI SED RETURN OF INCOME ON 31 ST MARCH 2007 DECLARING TOTAL INCOME OF RS.2,39,83,99 3/-. THE ASSESSMENT WAS COMPLETED ON 27 TH DECEMBER 2007. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER BESIDES THE OTHE R ADDITIONS AND DISALLOWANCE MADE THE ADDITION OF RS. 41,00,522/- O N ACCOUNT OF CAPITALISATION OF EXPENDITURE. ON APPEAL BEFORE THE LD. CIT(A), IN QUANTUM ASSESSMENT THE ADDITION ON ACCOUNT OF CAPITALISATIO N OF EXPENDITURE WAS CONFIRMED. THE ASSESSING OFFICER LEVIED PENALTY ON THE ADDITION/ DISALLOWANCE ON ACCOUNT OF CAPITALISATION OF EXPEND ITURE. THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF R S. 15,00,483/- VIDE ORDER DATED 29 TH MARCH 2010. ON APPEAL BEFORE THE LD. CIT(A), THE P ENALTY ORDER WAS UPHELD. ON FURTHER APPEAL BEFORE THE TRIB UNAL, THE MATTER WAS 3 ITA NO.263/M/2016 M/S EFG WEALTH MANAGEMENT PVT. LTD. RESTORED BACK TO THE FILE OF ASSESSING OFFICER VIDE ORDER DATED 06.06.2012 IN ITA NO. 4144/MUM/2011. THE CASE WAS RESTORED TO EXAMINE IF THE PENALTY ORDER WAS PASSED WITHIN STIPULATED PERIOD P RESCRIBED UNDER SECTION 275 AND TO DECIDE THE QUESTION OF PENALTY AFRESH. T HE ASSESSING OFFICER IN THE RESTORATION PROCEEDING AGAIN CONFIRMED THE PENA LTY ORDER VIDE ORDER DATED 26 TH FEBRUARY 2014. ON FURTHER APPEAL BEFORE CIT(A) THE ORDER OF PENALTY WAS FURTHER CONFIRMED VIDE ORDER DATED 6 TH NOVEMBER 2015, IMPUGNED BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASS ESSEE ARGUED THAT THE ASSESSING OFFICER FAILED TO ATTEND THE DIRECTION OF THE TRIBUNAL WHILE PASSING FRESH ORDER DATED 26 TH FEBRUARY 2014 IN CONFIRMING THE PENALTY ORDER PASSED ORIGINALLY ON 29 TH MARCH 2010. IT WAS ARGUED THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDE R HAS NOT RECORDED SATISFACTION FOR INITIATING PENALTY WHETHER THE ASS ESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULAR OF INCO ME. THE SATISFACTION OF THE ASSESSING OFFICER IS MUST AND IT SHOULD BE CLEA R FROM THE ASSESSMENT ORDER ITSELF. SINCE, THE ASSESSING OFFICER FAILED T O RECORD SUCH SATISFACTION IN THE ASSESSMENT ORDER, THE PENALTY ORDER IS LIABL E TO BE QUASHED. IN SUPPORT OF HIS SUBMISSION THE LD. AR OF THE ASSESSE E RELIED UPON THE DECISIONS OF HONBLE ANDHRA PRADESH HIGH COURT IN C IT VS. LOTUS 4 ITA NO.263/M/2016 M/S EFG WEALTH MANAGEMENT PVT. LTD. CONSTRUCTION REPORTED VIDE [2015] 370 ITR 475(A P), V.V. PROJECTS AND INVESTMENT PRIVATE LIMITED VS DCIT [2008] 300 ITR 4 0(AP), CHENNAKESHWAR PHARMACAUTICAL VS CIT [2012] 349 ITR 196 (A P ), HONBLE DELHI HIGH COURT IN CIT VS RAM COMMERCIAL E NTERPRISES LTD. [2000] 246 ITR 568(DELHI), CIT VS. M.K. SHARMA[2008 ] 307 ITR 147(DELHI) AND DECISION OF HONBLE APEX COURT IN D. M. MANASVI VS. CIT[1972] 86 ITR 557(SC). IN ALTERNATIVE SUBMISSION S, IT WAS ARGUED THAT THE ORDER OF PENALTY IS BASED MERELY ON DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE REVENUE ON ACCOUNT OF NATURE OF EX PENSES. ACCORDING TO REVENUE THE EXPENSES INCURRED BY THE ASSESSEE GIVES ENDURING BENEFIT TO THE ASSESSEE AND THE SAME WAS REQUIRED TO BE TREATE D AS CAPITAL IN NATURE. HOWEVER, AS PER THE ASSESSEE, THE EXPENSES ARE REVE NUE IN NATURE AND CLAIMED THE BENEFIT OF SUCH EXPENDITURE IN THE YEAR ONLY. THE EXPENDITURE WAS DISALLOWED, MERE DISALLOWANCE WOULD NOT LEAD TO LEVY OF PENALTY. IN SUPPORT OF HIS SUBMISSION THE LD. AR OF THE ASSESSE E RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CIT VS RELIANC E PETROPRODUCTS PVT. LIMITED 322 ITR 158(SC). IN THIRD ALTERNATIVE SUBMI SSION, THE LD. AR ARGUED THAT ASSESSEE HAS TAKEN THE PREMISES ON LEAS E AND CARRY OUT REPAIR WORK FOR SMOOTH UTILISATION PREMISES FOR THE PURPOS E OF BUSINESS. HOWEVER, THE ASSESSING OFFICER WAS A VIEW THAT CERT AIN REPAIR WORKS HAS GIVEN AND DURING BENEFIT TO THE PREMISES AND THEREF ORE, IT WAS CAPITAL IN NATURE ACCORDINGLY AND ADDITION/ DISALLOWANCE OF RS . 41,00,522/- WAS 5 ITA NO.263/M/2016 M/S EFG WEALTH MANAGEMENT PVT. LTD. MADE. SINCE, MERELY IT WAS DIFFERENCE OF OPINION RE GARDING NATURE OF EXPENDITURE, THE ASSESSEE HAS NOT CONCEALED ANYTHIN G ABOUT THE INCOME NOR FURNISHED INACCURATE PARTICULAR WHILE FILING THE RE TURN OF INCOME. THE ASSESSEE FURNISHED AND DISCLOSED ALL PARTICULARS WH ILE FURNISHING THE RETURN OF INCOME. THE ASSESSING OFFICER WHILE MAKING DISAL LOWANCE NOWHERE RECORDED THAT THE ASSESSEE HAS EITHER CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULAR THEREOF. IN OTHER ALTERNATIVE SUBMISSION THE LD. AR OF THE ASSESSEE RELIED THAT THE ORDER OF PENALTY WAS T IME-BARRED AND THE SAME WAS NOT PASSED WITHIN THE PRESCRIBED PERIOD OF LIMI TATION AS PRESCRIBED UNDER SECTION 275 OF THE ACT. FINALLY THE LD. AR AR GUED THAT ASSESSING OFFICER WAS BOUND TO FOLLOW THE ORDER OF TRIBUNAL A ND ASSESSING OFFICER HAS NOT FOLLOWED THE DIRECTION OF TRIBUNAL. THE LO WER AUTHORITIES HAS NO OPTION EXCEPT EITHER TO TAKE THE MATTER ON FURTHER APPEAL BEFORE HIGH APPELLATE FORUM OR OUGHT TO FOLLOW THE DIRECTION. IN SUPPORT OF HIS SUBMISSION THE LD. AR RELIED UPON THE DECISION OF TRIBUNAL IN INCOME TAX OFFICER VS PUNJ HOSPITALITY PRIVATE LIMITED AND UNI ON OF INDIA VS. KAMALAKSHI FINANCE CORPORATION LTD. AIR (1972) (SC ) 711. 4. ON THE OTHER HAND THE LD. DR FOR THE REVENUE SUPPOR TED THE ORDER OF THE AUTHORITIES BELOW. IT WAS ARGUED THAT IN THE RESTOR ATION PROCEEDINGS THE ASSESSEE FAILED TO SUBSTANTIATE HIS CONTENTION THAT THE ORDER OF THE PENALTY WAS PASSED BEYOND THE PRESCRIBED PERIOD OF LIMITATI ON AS PROVIDED UNDER 6 ITA NO.263/M/2016 M/S EFG WEALTH MANAGEMENT PVT. LTD. SECTION 275 OF THE ACT. ON MERIT IT WAS ARGUED THA T THE DISALLOWANCE MADE IN THE QUANTUM ASSESSMENT HAS BEEN CONFIRMED BY THE APPELLATE AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE AUT HORITIES BELOW. THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT WHILE MAKING THE DISALLOWANCE OR PASSING FINAL THE ASSESSMENT ORDER ON 27.12.2007 THE ASSESSING OFFICER HAS NOT RECORDED HIS SATISFACTION, IF THE ASSESSEE CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULAR OF INCOME. THE ASSE SSING OFFICER AT THE END OF ASSESSMENT ORDER NOTED; NOTICE U/S 271(1)(C) OF THE ACT, 1961 IS ISSUED SEPARATELY . WE HAVE NOTED THAT WHILE FRAMING ASSESSMENT OR DER THE ASSESSING OFFICER MADE FOUR ADDITION BY WAY OF DISALLOWANCES, CONSISTING OF (I) DISALLOWANCE OF COMPUTER SOFTWARE CHARGES, (II) DISALLOWANCE ON ACCOUNT OF PENALTY LEVIED BY SEBI, (III) DISALLOWANCE ON ACCOUNT OF CAPITALIZATION OF EXPENDITURE ON LEASED PREMISES AND (IV) DISALLOWANCE ON ACCOUNT OF NON-DEDUCTION OF TDS ON PAYMENT TO RELATED PARTY. WHILE MAKING DISALLOWANCES THE ASSESSING OFF ICER HAS NOT RECORDED HIS SATISFACTION ABOUT THE INITIATION OF PENALTY ON SUCH DISALLWANCES. AT THE END OF ASSESSMENT ORDER THE ASSESSING OFFICERS JUST MENTIONED NOTICE U/S 271(1)(C) OF THE ACT ISSUED SEPARATELY. ADMITTEDLY THERE IS NO SATISFACTION OF THE ASSESSING OFFICER REGARDING THE INITIATION O F PENALTY IN ASSESSMENT ORDER. COMING BACK TO THE ORDER OF PENALTY, INITIAL LY THE PENALTY ORDER WAS PASSED ON 29.03.2010. THE PENALTY LEVIED VIDE ORDER DATED 29.03.2010 HAS 7 ITA NO.263/M/2016 M/S EFG WEALTH MANAGEMENT PVT. LTD. ALREADY BEEN SET ASIDE BY THE TRIBUNAL IN ITS ORDER 06.06.2012 IN ITA NO. 4144/MUM/2011. 6. THE ASSESSING ORDER WHILE PASSING FRESH PENALTY ORD ER HELD THAT DESPITE GIVING OPPORTUNITY THE ASSESSEE FAILED TO EXPLAIN A S TO HOW THE ORDER DATED 29.03.2010 WAS BEYOND THE STIPULATED TIME AND HELD THAT THE ORDER WAS PASSED WITHIN TIME. THE ASSESSING OFFICER AGAIN CON FIRMED THE PENALTY ORDER WITHOUT SPECIFYING, UNDER WHICH LIMB OF SECTI ON 271(1)(C) THE PENALTY IS LEVIED. THE LD CIT (A) CONFIRMED THE ORD ER OF PENALTY WITHOUT SPECIFYING THE SPECIFIC LIMB OF SECTION 271(1)(C). THE LD CIT(A) CONCLUDED AS UNDER: I HAVE FURTHER GONE THROUGH THE PRESENT AS WELL AS PREVIOUS ASSESSMENT ORDER AND PENALTY ORDER OF THE AO AS WEL L AS CIT(A)S ORDER ON QUANTUM AS WELL AS PENALTY . KEEP ING IN VIEW THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, IT HAS BEEN CLEARLY ESTABLISHED BY THE AO THAT THE CLAIM OF THE ASSESSEE BEING CAPITAL IN NATURE COULD NOT BE ESTABLISHED AN D THE CONTENTION OF THE APPELLANT WAS NOT SUPPORTED BY TH E RELEVANT FACTS. THEREFORE, THE PENALTY IMPOSED BY THE AO IS UPHELD . IN OUR VIEW THE ASSESSING OFFICER AS WELL AS BY LD CIT(A) FAILED IN RECORDING THE SATISFACTION REGARDING INITIATING, IM POSING AND CONFIRMING THE PENALTY ORDER, IF IT WAS FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS. THE ORDER OF PENALTY WAS PA SSED AND CONFIRMED IN MECHANICAL WAY. WE HAVE SEEN THAT IN THIS CASE, THE RE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO 8 ITA NO.263/M/2016 M/S EFG WEALTH MANAGEMENT PVT. LTD. QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1)(C) OF THE ACT. IN OUR VIEW MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAIN ABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANN OT AMOUNT TO THE INACCURATE PARTICULARS . IN OUR VIEW THE ASSESSEE HAD FURNISHED ALL THE DETA ILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, FOR WHICH THERE IS NO FINDING THAT THE DETAILS WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AO TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MEREL Y BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT AC CEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT , IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271(1)(C). THE HONBLE SUPREME COURT IN DILIP N. SHORFF VS CIT (291 ITR 519 SC) HELD THAT WHEN THE ASSESSEE HAS FURNISHED ALL THE P ARTICULARS OF INCOME THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. FURTHER, HO NBLE APEX COURT IN RELIANCE PETROPRODUCTS LTD VS CIT (322 ITR 158 SC ) HELD THAT MERE MAKING A CLAIM WHICH IS NOT SUSTAINABLE IN LAW DOES NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C). THE HONBLE ANDHRA PRADESH HIGH COURT IN CIT VS. LOTUS CONSTRUCTION, V.V. PROJECTS AND INVESTMEN T PRIVATE LIMITED VS DCIT, AND IN CHENNAKESHWAR PHARMACEUTICAL VS CIT (S UPRA) AND HONBLE DELHI HIGH COURT IN CIT VS RAM COMMERCIAL ENTERPRIS ES LTD. (SUPRA) HELD THAT RECORDING OF THE SATISFACTION IN THE ASSE SSMENT ORDER ABOUT THE 9 ITA NO.263/M/2016 M/S EFG WEALTH MANAGEMENT PVT. LTD. INITIATION OF PENALTY IS MUST. IN ABSENCE OF PROPER SATISFACTION ABOUT THE INITIATION OF PENALTY ORDER THE PENALTY IS LIABLE T O BE DELETED. THUS, THE SUBMISSIONS OF THE LD. AR FOR THE ASSESSEE ARE CONV INCIBLE THAT THE PENALTY WAS LEVIED BY ASSESSING OFFICER WITHOUT PROPER SATI SFACTION. IN OUR VIEW THE RATIO OF DECISION IN RELIANCE PETROPRODUCTS LTD (SU PRA) IS DIRECTLY APPLICABLE ON THE FACTS OF THE PRESENT CASE. THUS, THE LD AR OF ASSESSEE IS SUCCEEDED IN CONVINCING US ON HIS FIRST TWO PREPOSI TION THAT NEITHER THE AO RECORDED HIS SATISFACTION ABOUT INITIATING AND IN I MPOSING THE PENALTY ON PARTICULAR LIMB OF SECTION 271(1)(C) AND THERE WAS DIFFERENCE OF OPINION ON THE DISALLOWANCE OF EXPENDITURE. HENCE, THE GROUND S OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. AS WE HAVE ALLOWED THE AP PEAL OF THE ASSESSEE ON FIRST TWO PREPOSITIONS OF SUBMISSIONS OF LD. AR FOR THE ASSESSEE HENCE, THE DISCUSSION ON OTHER SUBMISSION HAS BECOME ACADEMIC. 7. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF DECEMBER, 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED 20/12/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/