ITO, New Delhi V. Sh. Prakash Narain Singh, New Delhi

ITA 2691/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69599 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2004-2005
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T R TALWAR
• Assessee Lawyers: NIDHI SRIVASTAVA
• Keywords: Bonafide belief; Deemed dividend

Judgement Text

ITA NO. 2691/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2691/DEL/2013 A.Y. : 200 4 - 0 5 ITO, WARD-25(3), R.NO. 1709, 17 TH FLOOR, E-2 BLOCK, CIVIC CENTER, MINTO ROAD, J.L.N. MARG, NEW DELHI 110 002 VS. SHRI PRAKASH NARAIN SINGH B-8, MAGNUM HOUSE- I, COMMERCIAL COMPLEX, KARAMPURA, NEW DELHI 110 015 (PAN: ALRPS6193A) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : MS. NIDHI SRIVASTAVA, D.R. DEPARTMENT BY : SH. T.R. TALWAR, ADV. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXIV, NEW DELHI DATED 08.2.2013 PERTAINING TO ASSESSMENT YEAR 2004- 05. 2. THE ISSUE RAISED IS THAT LD. CIT(A) ERRED IN D ELETING THE PENALTY LEVIED U/S. 271(1)(C) AMOUNTING TO RS. 5,84 ,553/-. 3. IN THIS CASE THE ASSESSEE IS A PROPRIETOR OF M/ S SHASHI INTERNATIONAL DEALING IN IMPORT OF PLASTIC, PAPERS, WASTE ETC. IN THE YEAR UNDER CONSIDERATION, HE WAS ALSO DIRECTOR TO M/S SHASHI INTERNATIONAL PVT. LTD. (SIPL), WHICH DEALS IN EXPO RT OF FABRIC AND GARMENTS. THE LD. CIT(A) NOTICED THAT DURING THE YEAR ITA NO. 2691/DEL/2013 2 CONSIDERATION, THE ASSESSEE HAD TAKEN LOANS AND ADV ANCES TO THE TUNE OF RS. 27,90,906/- FROM SIPL, WHICH IS CLOSEL Y HELD COMPANY AND IN WHICH THE ASSESSEE IS HAVING SUBSTANTIAL INT EREST. THE AMOUNT OF LOANS AND ADVANCES TAKEN WAS THEREFORE HIT BY TH E PROVISIONS OF SECTION 2(22)(E) OF THE ACT AS DEEMED DIVIDEND. THIS INFORMATION WAS PASSED BY THE LD. CIT(A) TO THE AO, RESULTING I N REOPENING OF THE ASSESSMENT. THE AO ASSESSED THIS AMOUNT AS THE INC OME OF THE ASSESSEE AS DEEMED DIVIDEND U/S. 2(22)(E) AND INI TIATED PENALTY PROCEEDINGS. THE APPEAL OF THE ASSESSEE AGAINST THE QUANTUM ASSESSMENT WAS DISMISSED BY THE LD. CIT(A)-XXIV, N EW DELHI. THEREAFTER, A SHOW CAUSE NOTICE FOR IMPOSITION OF PENALTY U/S. 271(1)(C) WAS ISSUED BY THE AO. NOBODY ATTENDED DES PITE REPEATED NOTICES. MEANWHILE, THE APPELLANT HAD PREFERRED AN APPEAL AGAINST THE QUANTUM ASSESSMENT BEFORE ITAT, DELHI, WHO VIDE THEIR ORDER DATED 20.10.2010 IN I.T.A. NO. 1458/DEL/2010, DIREC TED THAT THE ADDITION SHOULD BE RESTRICTED TO RS. 17,67,450/- A S AGAINST RS. 27,90,906/-, SINCE, THE MAXIMUM AMOUNT OF THE LOAN OUTSTANDING DURING THE YEAR WAS RS. 17,67,450/-. SINCE THE AS SESSEE DID NOT RESPOND TO THE SHOW CAUSE NOTICE OF THE AO FOR IMPO SITION OF CONCEALMENT PENALTY, THE AO IMPOSED A PENALTY OF RS . 5,84,553/- ON THE ASSESSEE FOR CONCEALMENT OF INCOME AND FOR FILI NG INACCURATE PARTICULARS OF HIS INCOME. 4. AGGRIEVED BY THE ABOVE ORDER ASSESSEE APPEALED BEFORE THE LD. CIT(A). ASSESSEE SUBMITTED THAT THE AMOUNT OF LOAN AND ADVANCES TAKEN BY THE ASSESSEE WERE ATTRIBUTABLE T O NORMAL BUSINESS TRANSACTIONS AND WERE ON ACCOUNT OF TRAVE LLING AND OTHER EXPENSES TO BE INCURRED BY THE ASSESSEE FOR THE PU RPOSE OF THE BUSINESS OF THE COMPANY, THEREFORE, THESE LOANS AND ADVANCES WERE NOT REALLY HIT BY THE PROVISIONS OF SECTION 2(22)(E ). IT WAS FURTHER SUBMITTED THAT ITAT HAD NOTED THAT LOANS AND ADVANC ES HAD BEEN ITA NO. 2691/DEL/2013 3 REGULARLY RETURNED BACK BY THE ASSESSEE, WHO HAD PA ID AN INTEREST OF RS. 63,290/- TO THE COMPANY ON ACCOUNT OF SUCH LOAN S. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD NEITHER CONCEALED A NY TRANSACTION NOR HE FILED ANY INACCURATE PARTICULARS OF INCOME . FURTHERMORE, ASSESSEE RELIED UPON THE CATENA OF CASE LAWS IN TH IS REGARD. IT WAS FURTHER SUBMITTED THAT THERE WAS NO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF S UCH INCOME. THE ASSESSEE HAS MADE PROPER DISCLOSURE OF FACTS, MATER IAL TO COMPUTATION OF HIS INCOME IN HIS RETURN. THE ADDITI ON WAS MADE UNDER THE DEEMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT, WHICH, THE ASSESSEE WAS NOT WELL AWARE OF. 4.1 CONSIDERING THE ABOVE, LD. CIT(A) DELETED THE P ENALTY AND HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE DETAILED SUBMISSIO NS MADE BY THE ASSESSEE. I HAVE ALSO CAREFULLY PERUSED THE AS SESSMENT ORDER AS WELL AS THE JUDGEMENTS OF VARIOUS COURTS C ITED BY THE LD. AR. I AM OF THE CONSIDERED OPINION THAT ALL TH E PARTICULARS OF THE TRANSACTIONS AND MATERIALS FACTS PERTAINING TO THE ISSUE HAD BEEN DISCLOSED FULLY AND COMPLETELY BY THE ASSE SSEE IN HIS RETURN OF INCOME. THERE WAS NO ATTEMPT ON THE PART OF THE ASSESSEE TO WILLFULLY EVADE THE TAX WITH ANY MALA FIDE INTENTION. IN MY OPINION, THE INSTANT CASE IS COVE RED BY THE RULING OF HONBLE SUPREME COURT OF INDIA IN THE CAS E OF C.I.T. VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC), WHEREIN THE HONBLE COURT HAS HELD THAT ...AS THE APPELLANT HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE A S WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO TH E AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BE CAUSE THE ITA NO. 2691/DEL/2013 4 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 U/S. 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THAT IN CASE OF EVER Y RETURN, WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSI NG OFFICER FOR ANY REASON, THE APPELLANT WILL INVITE PENALTY U/S. 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATU RE. THE APPELLANTS RELIANCE IN THE CASE OF BRAHAMPUTRA CONSTRUCTIONS LTD. (SUPRA) HAS ALSO BEEN CONSIDERED , WHEREIN, THE HONBLE COURT HAS HELD THAT THE ASSESSEE HAD DI SCLOSED ALL THE FACTS FULLY AND TRULY, NO MATERIAL FACTS HAD BE EN SUPPRESSED. THERE WAS NO DELIBERATE ATTEMPT OR ANY MALAFIDE INTENTION ON THE PART OF THE ASSESSEE TO EVADE PAYM ENT OF TAX. IT COULD HAVE BEEN, AT BEST, AN INADVERTENT ERROR W HICH WAS GENUINE AND BONA FIDE THAT SUCH LOAN / ADVANCE TAKE N FROM THE COMPANY, WHICH WAS REPAYABLE, COULD NOT CONSTIT UTE ASSESSEES INCOME. BASED ON THE ABOVE DISCUSSION, I AM OF THE OPINIO N THAT PENALTY IS NOT IMPOSABLE U/S. 271(1)9C) IN THIS CAS E AND THEREFORE, THE PENALTY IMPOSED AMOUNTING TO RS. 5,8 4,553/- IS HEREBY DELETED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT ASSESEE IN THIS CASE HAS BEEN DOING BUSIN ESS IN HIS PROPRIETORSHIP CAPACITY. DURING THE YEAR UNDER CON SIDERATION, HE WAS ALSO DIRECTOR OF SHASHI INTERNATIONAL PVT. LTD. (SIPL). DURING THE YEAR ASSESSEE HAS TAKEN LOANS AND ADVANCES TO THE T UNE OF RS. 27,90,906/- FROM SIPL WHICH WAS A CLOSELY HELD COMP ANY AND IN WHICH THE ASSESSEE IS HAVING SUBSTANTIAL INTEREST. THIS ADDITION WAS ITA NO. 2691/DEL/2013 5 RESTRICTED TO RS. 17,67,450/- BY THE ITAT, DELHI. P ENALTY PROCEEDINGS WERE ALSO INITIATED ON THIS AMOUNT AND PENALTY OF R S. 5,84,553/- WAS LEVIED. 6.1 PLEA OF THE ASSESSEE IS THAT LOANS AND ADVANCES TAKEN BY THE ASSESSEE WERE ATTRIBUTABLE TO NORMAL BUSINESS TRANS ACTIONS AND WERE ON ACCOUNT OF TRAVELLING AND OTHER EXPENSES TO BE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF THE BUSINESS OF THE COMPANY. WE FIND THAT ALL THE FACTS IN THIS CONNECTION WERE DUL Y DISCLOSED BY THE ASSESSEE. THERE WAS NO CONCEALMENT. WE FIND THAT THE ASSESSEES EXPLANATION THAT THE ADDITION WAS MADE UNDER THE DE EMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT WHICH THE ASSESSEE WAS NOT WELL AWARE OF HAS SUFFICIENT COGENCY. WHEN THE ASSE SSEE HAS MADE ALL THE NECESSARY DISCLOSURES AND THE RIGORS OF PEN AL PROVISIONS OF SECTION 271(1)(C) HAVE FASTENED ON THE ASSESSEE BY THE DEEMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IN OUR CONSIDERED OPINION, ASSESSEE SHOULD NOT BE VISITED WITH THE RIGORS OF P ENALTY U/S. 271(1)(C) OF THE I.T. ACT, AS THE ASSESSEES CONTEN TION THAT NO MATERIAL WAS SUPPRESSED AND THEREFORE, THERE WAS NO MALAFIDE INTENTION ON THE PART OF THE ASSESSEE TO EVADE TH E TAX HAS SUFFICIENT COGENCY. AT BEST IT WAS AN INADVERTENT ERROR WHIC H WAS GENUINE AND BONAFIDE. ACCORDINGLY, IN OUR CONSIDERED OPIN ION, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) DELETING T HE LEVY OF PENALTY IN THIS REGARD. 6.2 IN THIS REGARD, WE PLACE RELIANCE UPON THE HO NBLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PROD UCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER D ATED 17.3.2010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP S HEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUSE WH AT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILIP ITA NO. 2691/DEL/2013 6 SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A E SSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS A CCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM IS NOT ACCEPT ED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WI LL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INT ENDMENT OF LEGISLATURE. 6.3 WE FURTHER PLACE RELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMI NAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE P ARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MEREL Y BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCR ETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSI DERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNIC AL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE B REACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 7. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS A ND PRECEDENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD . COMMISSIONER OF INCOME TAX (A), HENCE, WE UPHOLD THE SAME. ITA NO. 2691/DEL/2013 7 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/11/2013. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 22/11/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 2691/DEL/2013 8