ACIT, New Delhi V. Sh. Mukul Rohtagi, New Delhi

ITA 2852/DEL/2011

• Counselvise Citation: 285220114 RSA 2011
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 04-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 01-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: SHEKHON
• Keywords: Depreciation; Revised return
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.D. RANJAN ITA NO. 2852/DEL/2011 ASSESSMENT YEAR: 2005-06 ASSISTANT COMMISSIONER OF IT, VS. MUKUL ROHTAGI, CIRCLE 37(1), N-217, G.K. PART-I, NEW DELHI. NEW DELHI. (PAN: AACPR4789B) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RS NEG I, SR.DR RESPONDENT BY: SHRI MS SHEKHON, CA ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 14.03.2011 PASSED FOR ASSESSMENT YEAR 2005-06. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LEARNED C IT(APPEALS) HAS ERRED IN DELETING THE PENALTY OF RS.5,11,883 IMPOSED BY THE ASSESSING OFFICER UNDER SEC. 271(1)(C) OF THE INCOME-TAX ACT, 1961. 2. THE ADUMBRATED FACTS OF THE CASE ARE THAT ASSESS EE IS A SENIOR ADVOCATE AND FORMER ADDITIONAL SOLICITOR GENERAL OF INDIA. H E HAS FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2004-05 ON 31.10.2005 DE CLARING TOTAL INCOME OF RS.4,01,22,010. THIS RETURN OF INCOME WAS PROCES SED UNDER SEC. 143(1) ON 22.11.2006. IT WAS ACCEPTED AS IT IS. ACCORDING TO THE ASSESSING OFFICER, 2 ASSESSEE ALLEGED TO HAVE GOT DEVELOPED, LAN, PAY RO LL SOFTWARE FOR HIS LAW FIRM FROM BHARAT NET TECHNOLOGY LTD. FOR A CONSIDER ATION OF RS.15,20,750. HE CLAIMED DEPRECIATION ON THIS ASSET. AN INFORMATI ON FROM ITO, WARD 2(4), HAVING TERRITORIAL JURISDICTION OVER M/S. BHARAT NE T TECHNOLOGY LTD. HAD BEEN RECEIVED, EXHIBITING THE FACT THAT M/S. BHARAT NET TECHNOLOGY LTD. IS A BOGUS CONCERN OF SOFTWARE DEVELOPMENT. ON THE BASIS OF THIS INFORMATION, ASSESSING OFFICER HAS REOPENED THE ASSESSMENT OF TH E ASSESSEE BY ISSUANCE OF A NOTICE UNDER SEC. 148 OF THE ACT. IN RESPONSE TO THE NOTICE, ASSESSEE CONTENDED THAT THE RETURN SUBMITTED ORIGINALLY BE T REATED AS SUBMITTED IN RESPONSE TO THIS NOTICE. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, ASSESSING OFFICER DIRECTED THE ASSESSEE TO FILE CON FIRMATION FROM M/S. BHARAT NET TECHNOLOGY LTD. DEMONSTRATING THE FACT THAT SOF TWARE WAS DEVELOPED BY THAT CONCERN. THE ASSESSEE VIDE HIS LETTER BEARING NO.393 DATED 14.11.2008 EXPRESSED HIS INABILITY TO LOCATE THE COMPANY. HE A LSO SUBMITTED THAT HE FEELS THAT IT IS NOT WORTH HIS EFFORTS AND WOULD BE NEEDL ESS OR UNREMUNERATIVE TO SPENT FURTHER TIME, EFFORT, ENERGY AND RESOURCES IN PERUSING THE MATTER. WITHOUT ADMITTING THAT THE TRANSACTION HAD NOT BEEN ENTERED INTO, HE DECIDED TO OFFER THE AMOUNT OF DEPRECIATION AGGREGATING TO RS.14,52,620 FOR TAX. HE FILED A REVISED RETURN AND PAID THE TAX. 3 3. ASSESSING OFFICER HAS ISSUED A SHOW-CAUSE NOTICE UNDER SEC. 274 READ WITH SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961O N THE GROUND THAT ASSESSEE HAS CONCEALED THE INCOME BY FURNISHING INA CCURATE PARTICULARS OF HIS INCOME. IN RESPONSE TO THE QUERY OF ASSESSING OFFIC ER, IT WAS CONTENDED THAT ASSESSEE HAS NEVER ADMITTED THAT THE TRANSACTION WA S NOT CARRIED OUT. THE SOFTWARE WAS DULY DEVELOPED. M/S. BHARAT NET TECHNO LOGY RAISED A BILL NO.135 DATED 30.3.2005, ASSESSEE MADE THE PAYMENT THROUGH CHEQUE NOS. 776494 AND 776496 DATED 25.5.2005 AND 27.5.2005. HE HAS DEDUCTED THE TDS OF RS.31,799 AND ISSUED A TDS CERTIFICATE IN FO RM NO.16A. THE ASSESSEE FURTHER SUBMITTED THAT ITO, WARD 2(4) HAD REQUISITE CERTAIN INFORMATION IN THE CASE OF M/S. BHARAT NET TECHNOLO GY LTD. BY WAY OF A LETTER DATED 15.12.2006. THE ASSESSEE HAS SUBMITTE D BECAUSE OF THIS INFORMATION REQUIRED BY THE ITO, HIS STAFF CONTACTE D MR. HARI KISHAN CHAUDHARY, DIRECTOR OF BHARAT NET TECHNOLOGY LTD. T O ASCERTAIN THE REASON FOR SUCH REQUISITION. THE DIRECTOR HAD STATED THAT IT WAS A NORMAL ROUTINE INQUIRY CONDUCTED BY THE INCOME-TAX AUTHORITIES. TH E ASSESSEE HAS SUBMITTED THE COPY OF THE ASSESSMENT ORDER PASSED I N THE CASE OF BHARAT NET TECHNOLOGY. HE POINTED OUT THAT M/S. BHARAT NET TEC HNOLOGY WAS OPERATING FROM B-24, NAV RACHNA APARTMENTS, EAST ARJUN NAGAR, DELHI-1100 34. THIS PARTY WAS NOT AVAILABLE AT ITS ADDRESS OF MARCH 200 5. IT SEEMS THE PARTY AS 4 EITHER SHIFTED OR DISCONTINUED ITS BUSINESS. INSPIT E OF EFFORTS MADE BY THE ASSESSEE AND HIS STAFF, THEY HAVE NOT BEEN ABLE TO TRACE THE PRESENT WHEREABOUTS OF THE PARTIES AND, THEREFORE, ASSESSEE DEEMED IT FIT TO OFFER THE AMOUNT FOR TAX. HE EMPHASIZED THAT THERE IS NO DOUB T ABOUT THE FACT THAT LAN, PAY ROLL, SOFTWARE WAS GOT DEVELOPED. HE ALSO EMPHA SIZED THAT HE HAS MADE THE PAYMENT THROUGH ACCOUNT PAYEE CHEQUES AND DEDUC TED THE TDS. HE HIGHLIGHTED THAT IN ASSESSMENT YEAR 1999-00, HE FIL ED A RETURN OF INCOME OF RS.73,16,910 AND PAID A TAX OF RS.21,55,070. IN ASS ESSMENT YEAR 2005-06, I.E. YEAR UNDER CONSIDERATION, A TAX OF RS.1,34,75, 893 HAS BEEN PAID. THIS HAS INCREASED TO A TAX OF RS.7,80,40,951 PAID BY HIM IN 2009-10 ON AN INCOME OF RS.22,99,16,410. HE SURRENDERED THE AMOUNT SIMPLY F OR THE REASON THAT TRACING THE WHEREABOUTS OF THE PARTIES IS UN REMUNE RATIVE AND THE WORTH OF HIS EFFORTS WOULD COST HIM MORE THAN THE TAX LIABIL ITY, IF HE AGREED FOR THE ADDITION. HE CONTENDED THAT HE HAS NOT CONCEALED TH E PARTICULARS OF INCOME OR FURNISHED ANY INACCURATE PARTICULARS. THE AMOUNT WAS OFFERED FOR TAX ONLY JUST TO END THE LITIGATION AND FOR PIECE OF MIND. 4. ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXP LANATION OF THE ASSESSEE. HE WAS OF THE OPINION THAT AMOUNT OF DEPR ECIATION WAS OFFERED FOR TAX WHEN ASSESSEE WAS CORNERED BY THE INCOME-TAX DE PARTMENT WITH THE HELP 5 OF ITS INQUIRY. HE IMPOSED A PENALTY OF RS.5,11,883 WHICH IS EQUIVALENT TO THE TAX SOUGHT TO BE EVADED. 5. DISSATISFIED WITH THE PENALTY, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED FIRST APPELLATE AUTHORITY AND RE ITERATED HIS CONTENTIONS. LEARNED FIRST APPELLATE AUTHORITY HAS ACCEPTED THE CONTENTION OF THE ASSESSEE AND DELETED THE PENALTY. ACCORDING TO THE LEARNED FIRST APPELLATE AUTHORITY, THERE IS NO DELIBERATE ATTEMPT AT THE EN D OF ASSESSEE FOR CONCEALMENT OF INCOME BY FURNISHING INACCURATE PART ICULARS. 6. BEFORE US, LEARNED DR RELIED UPON THE ORDER OF T HE ASSESSING OFFICER WHEREAS LEARNED COUNSEL FOR THE ASSESSEE RELIED UPO N THE ORDER OF THE LEARNED CIT(APPEALS). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. 8. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARIN G ON THE CONTROVERSY AND, THEREFORE, IT IS SALUTARY UPON US TO TAKE NOTE OF THE RELEVANT PROVISIONS OF SECTION 271(1)(C) ALONG WITH EXPLANATION 1 WHICH RE AD AS UNDER: 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. 6 (1). IF THE ASSESSING OFFICER OR THE COMMISSIONER ( APPEALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT , IS SATISFIED THAT ANY PERSON (A) AND (B)******** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I) AND (INCOME-TAX OFFICER,)******** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1.- WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER(APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O F SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C ) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHI CH PARTICULARS HAVE BEEN CONCEALED. 7 9 . A BARE PERUSAL OF THIS SECTION WOULD REVEAL THAT FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUA NTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION C AN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERTAIN SITUATION, EVEN WITHOUT THERE BEING ANYTHIN G TO INDICATE SO, STATUTORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INT O PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)( C) POSTULATES TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FAC TS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISION S OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OF FERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARN ED CIT(APPEALS); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPU TATION OF TOTAL INCOME 8 UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NO T ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS TO PROVE THAT SU CH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS R ELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME. UN DER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAYA IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO TH E COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDING TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEE MING FICTION WOULD COME TO PLAY BY THE FAILURE OF THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL IN COME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANA TION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. T HESE TWO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1 )(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN T HE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUT ING THE TOTAL INCOME OF THE ASSESSEE, FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCUR ATE PARTICULARS HAVE BEEN FURNISHED. 9 10. ADVERTING TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE ASSESSING OFFICER IS NOT POSSESSING ANY MATERIAL WHICH CAN SU GGEST THAT EXPLANATION SUBMITTED BY THE ASSESSEE WITH REGARD TO THE ADDITI ON IS FALSE. IN OTHER WORDS, THE ADDITION HAS BEEN MADE SIMPLY ON THE CONCESSION GIVEN BY THE ASSESSEE. ASSESSING OFFICER MIGHT BE HAVING INFORMATION ABOUT THE CREDENTIAL OF M/S. BHARAT NET TECHNOLOGY BUT HE HAS NOWHERE DISCUSSED THE NATURE OF INFORMATION. HE MADE AN OBSERVATION THAT ITO, WARD 2(4) HAS SENT AN INFORMATION INDICATING THE FACT THAT THIS COMPANY E XISTED ONLY ON PAPER. ASSESSEE HAS IDENTIFIED THIS CONCERN AND ALSO PRODU CED THE SCRUTINY ASSESSMENT ORDER PASSED IN THAT CASE. WE DO NOT SEE ANY MALA FIDE AT THE END OF AN ASSESSEE FOR MANIPULATING SUCH A SMALL AMOUNT WHEN HE IS OFFERING TAX OF MORE THAN RS. ONE CRORE AND THIRTY LACS. THE ASS ESSEE HAS POINTED OUT THAT PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES, SOF TWARE WAS FUNCTIONING IN HIS OFFICE. HE DID NOT WANT TO PURSU E THE LITIGATION ABOUT THE ALLOWANCE OR DISALLOWANCE OF DEPRECIATION. THIS LIT IGATION COST MUST BE MORE TO THE ASSESSEE THEN THE TAX LIABILITY, THEREFORE, HE HAS OFFERED THAT AMOUNT ALSO FOR THE TAX. IT IS NOT PROVED ON THE RECORD TH AT HIS CLAIM WAS FACTUALLY INCORRECT. ASSESSING OFFICER ALSO NOT REFERRED ANY EVIDENCE EITHER IN THE ASSESSMENT ORDER OR IN THE PENALTY ORDER WHICH CAN DEMONSTRATE THE CLAIM OF ASSESSEE IS FACTUALLY INCORRECT. CONSIDERING ALL TH ESE FACTS AND CIRCUMSTANCES, 10 WE ARE OF THE VIEW THAT LEARNED CIT(APPEALS) HAS AP PRECIATED THE FACTS AND CIRCUMSTANCES IN RIGHT PERSPECTIVE AND HIS ORDER DO ES NOT CALL FOR ANY INTERFERENCE. - 11. IN VIEW OF THE ABOVE, APPEAL OF THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 12.08.201 1 SD/- SD/- ( K.D. RANJAN ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12/08/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR