DCIT 6(1), KALYAN V. BLUE NILES HOLDINGS LTD, MUMBAI

ITA 2904/MUM/2010

• Counselvise Citation: 290419914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 21-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 13-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DILIP S DAMLE
• Keywords: Bonafide belief
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI J. SUDHAKA R REDDY (AM) I.T.A.NO.2904/MUM/2010 ASSESSMENT YEAR: 2004-05 DY. COMMISSIONER OF INCOME-TAX, CIR.6(1), R.NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. M/S. BLUE NILES HOLDINGS LTD., NO.463, CEAT MAHAL, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400 025. PAN: AAACB 1881 B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.K. GUPTA RESPONDENT BY : SHRI DILIP S. DAMLE DATE OF HEARING 21.07.2011 DATE OF PRONOUNCEMENT 29.07.2011 O R D E R PER D.K. AGARWAL, JM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 29.01.2010 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS) FOR THE ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY IS AN INVESTMENT COMPANY/NON-BANKING FINANCIAL COMPANY. THE RETURN WAS FILED DECLARING TOTAL LOSS AT ` 1,89,49,159/-. DURING THE COURSE OF ASSESSMENT, TH E ASSESSING OFFICER, ON EXAMINATION OF THE BALANCE SH EET, NOTED THAT THE ASSESSEE COMPANY HAS MADE INVESTMENT IN SHARES AND SECURITIE S OF ` 97,38,70,273/. ON THIS INVESTMENT, DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE COMPANY HAS EARNED DIVIDEND OF ` 5,72,349/- WHICH IS NOT FORMING PART OF THE TOTAL I NCOME. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY PROVISION O F SECTION 14A SHOULD NOT BE INVOKED IN RESPECT OF EXEMPTED INCOME BEING DIVIDEN D. IN RESPONSE, IT WAS, INTER ALIA, SUBMITTED BY THE ASSESSEE THAT THE INVESTMENT S ARE OUT OF OWN FUNDS AND NON-INTEREST BEARING LOANS AND HENCE PROVISIONS OF SECTION 14A ARE NOT ATTRACTED. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE A SSESSEES EXPLANATION. THE ITA NO.2904/MUM/2010 M/S. BLUE NILES HOLDINGS LTD. 2 ASSESSING OFFICER AFTER INVOKING THE PROVISIONS OF SECTION 14A MADE A DISALLOWANCE OF ` 1,38,05,732/- AS PER THE WORKING GIVEN AT PAGE 2-4 OF THE ASSESSMENT ORDER. BESIDES THIS, THE ASSESSING OFFICER ALSO DISALLOWED THE DEDUCTION UNDER SECTION 57(III) OF THE ACT AND ACCORDINGLY WORKED OUT THE D ISALLOWANCE AT ` 1,84,09,525/-. THE ASSESSING OFFICER AFTER ALLOWING THE DEDUCTION OF WRITE BACK PROVISION AND DIVIDEND COMPUTED THE GROSS INCOME OF THE ASSESSEE AT ` 1,97,10,119/- AND AFTER ALLOWING DEDUCTION OF BROUGHT FORWARD BUSINESS LOSS UPTO ` 1,97,10,119/- DETERMINED THE ASSESSEES TAXABLE INCOME AT ` 1,89,49,159/- VIDE ORDER DATED 18.12.2006 PASSED UNDER SECTION 143(3) OF THE INCOM E-TAX ACT, 1961 (THE ACT). 3. ON APPEAL THE LEARNED CIT(A) DISMISSED THE APPEA L. ON FURTHER APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL ALSO DISMISSED TH E APPEAL. 4. WHILE COMPLETING THE ASSESSMENT THE ASSESSING OF FICER ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND ACCORDINGLY THE ASSESSING OFFICER ISSUED NOTICE TO SHOW CAUSE AS TO WHY PENALTY UNDER SECTION (1)(C) OF THE ACT SHOULD NOT BE IMPOSED. IN RESPONS E, IT WAS, INTER ALIA, SUBMITTED BY THE ASSESSEE THAT THE ENTIRE INVESTMENT PORTFOLI O IS OUT OF TAX FREE FUNDS WHICH ARE HIGHER THAN THE INVESTMENT PORTFOLIO ITSELF AND , THEREFORE, NO INTEREST EXPENDITURE ARE TO BE DISALLOWED IN VIEW OF THE DEC ISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. RELIANCE UTIL ITIES & POWER LTD.,(313 ITR 340). IT WAS FURTHER SUBMITTED THAT THE ISSUES ARE DEBATA BLE ISSUES AND THERE IS NO FURNISHING OF INACCURATE PARTICULARS AND HENCE THE PENALTY INITIATED BE DROPPED. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE LEARNED CIT(A) IN THE QUANTUM APPEAL HAS HELD THAT THE WORKING GIVEN BY T HE ASSESSING OFFICER IS THE CORRECT METHOD OF WORKING FOR THE DISALLOWANCE AS P ER LAW AND, THEREFORE, IT IS A FIT CASE FOR IMPOSITION OF PENALTY AND ACCORDINGLY THE ASSESSING OFFICER IMPOSED PENALTY OF ` 49,50,750/- VIDE ORDER DATED 25.3.2009 PASSED U/S. 271(1)(C) OF THE ACT. ITA NO.2904/MUM/2010 M/S. BLUE NILES HOLDINGS LTD. 3 5. ON APPEAL, THE LEARNED CIT(A) OBSERVED THAT THE APPELLANT HAD FURNISHED ITS EXPLANATION WHICH IS SUBSTANTIATED WITH THE FA CTS AND FIGURES FROM ITS AUDITED ACCOUNTS, THEREFORE, THE ASSESSEE HAS SATISFIED CLA USE (B) OF EXPLANATION (1) TO SECTION 271(1)(C) OF THE ACT AND HENCE, THE APPELLA NT CANNOT BE HELD TO BE GUILTY OF FURNISHING INACCURATE PARTICULARS OF INCOME AND ACCORDINGLY, HE DELETED THE PENALTY IMPOSED BY THE ASSESSING OFFICER. 6. BEING AGGRIEVED THE ORDER OF THE LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS, THE DELET ION OF PENALTY OF ` 50 LAKHS IMPOSED BY THE ASSESSING OFFICER U/S.271(1)(C) OF T HE ACT. 7. AT THE TIME OF HEARING, THE LEARNED DEPARTMENTA L REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER. 8. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE WHILE RELYING ON THE ORDER OF THE LEARNED CIT(A) FURTHER SUBMITS THA T SINCE THE PENALTY WAS IMPOSED ON THE DISALLOWANCE U/S.14A OF THE ACT, THE PARTICU LARS OF WHICH HAVE BEEN DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME, THEREFORE, THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE AND FOR THI S PROPOSITION RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS: (1) CIT VS. RELIANCE PETRO PRODUCTS LTD. (2010) 322 ITR 158 (SC) (2) DCIT V. NALWA INVESTMENTS LTD. (ITA NO. 380 5/DEL/2010 FOR A.Y. 2005-06 ORDER DTD.29.10.2010) (3) ACIT V. JINDAL EQUIPMENT LEASING & CONSULTA NCY SERVICES LTD. (ITA NO. 3808-09/DEL/2010 FOR A.YS. 1999-2000 & 2001-02, ORD ER DTD.21.04.2011) THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FILED COP IES OF THE ABOVE DECISIONS. HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE PENALTY BE UPHELD. 9. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH ITA NO.2904/MUM/2010 M/S. BLUE NILES HOLDINGS LTD. 4 AS, IT IS ALSO NOT IN DISPUTE THAT THE DISALLOWANCE OF INTEREST WAS MADE BY THE AO UNDER SECTION 14A OF THE ACT ON THE BASIS OF COMPL ETE PARTICULARS FILED BY THE ASSESSEE. IT WAS CLAIMED BY THE ASSESSEE THAT THE ENTIRE INVESTMENT MADE IN SHARES AND SECURITIES WAS MADE OUT OF OWN FUNDS AND NON-INTEREST BEARING LOANS AND HENCE THE PROVISIONS OF SECTION 14A ARE NOT APP LICABLE. HOWEVER, THE AO IN VIEW OF THE PROVISIONS OF SECTION 14A MADE THE DISA LLOWANCE U/S.14A READ WITH SECTION 57(III) AMOUNTING TO ` 1,84,09,525/-. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT DISCLOSED THE COMPLETE PA RTICULARS OF ITS INCOME OR THE SAME WERE FOUND TO BE FALSE OR UNTRUE OR BASED ON N O MATERIAL OR BONAFIDE BELIEF. 10. IN ORDER TO APPLY THE PROVISIONS OF SECTION 271 (1)(C) THERE HAS TO BE CONCEALMENT OF PARTICULARS OF INCOME, SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. 11. IN A RECENT JUDGMENT OF THE HONBLE APEX COURT IN CIT VS. RELIANCE PETR- PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) THEIR LO RDSHIPS, AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DILIP N. SHROFF VS. JCI T (2007) 291 ITR 519(SC), UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS (2008) 3 06 ITR 277 (SC) AND SREE KRISHNA ELECTRICALS V. STATE OF TAMIL NADU (2009) 2 3 VST 249 (SC) HAVE OBSERVED AND HELD (PAGE 158 HEAD-NOTES) AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS O THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS U SED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MA DE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCO RRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF F URNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASS ESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAG INATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHI NG WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INAC CURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETA ILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO ITA NO.2904/MUM/2010 M/S. BLUE NILES HOLDINGS LTD. 5 THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING T HAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO F URNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. S UCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURAT E PARTICULARS. RESPECTFULLY FOLLOWING THE ABOVE DECISION AND IN TH E ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE, WE ARE OF THE VIEW THAT THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE WHICH MAY C ALL FOR LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. ACCORDINGLY, WE ARE INCL INED TO UPHOLD THE ORDER OF THE LEARNED CIT(A) IN DELETING THE PENALTY IMPOSED BY T HE A.O. UNDER SECTION 271(1)(C) OF THE ACT. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 12. IN THE RESULT, THE REVENUES APPEAL STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF JULY, 2011. SD SD (J. SUDHAKAR REDDY) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED THE 29TH JULY, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT-6, MUMBAI. 4. THE CIT(A)-14, MUMBAI 5. THE DR F BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI