ACIT 12(3), MUMBAI V. LEMUIR AIR EXPRESS, MUMBAI

ITA 3055/MUM/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3411 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 09-05-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 19-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BEPARIDR
• Assessee Lawyers: AARTI VISSANJIAR
• Keywords: Business income; Question of law; Difference of opinion

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL G BENC H MUMBAI , , BEFORE S/SHJOGINDER SINGH,JUDICIAL MEMBER & RAJE NDRA,ACCOUNTANT MEMBER ./I.T.A./3055/MUM/2010, /ASSESSMENT YEAR: 2004-05 ACIT-12(3), ROOM NO.121 AAYAKAR BHAVAN, MUMBAI-400020. VS. M/S. LEMUIR AIR EXPRESS ORICON HOUSE, 2 ND FLOOR 12 K, DUBHASH MARG, FORT,MUMBAI-400 023. PAN:AAAFL 2518 C ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI S.K. BEPARI-DR ASSESSEE BY: MS. AARTI VISSANJI-AR / DATE OF HEARING: 09.05.2016 / DATE OF PRONOUNCEMENT: 18.05.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 18.01.2010 OF CIT(A)-23,M UMBAI THE ASSESSING OFFICER (AO.)HAS FILED THE PRESENT APPEAL.ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF FREIGHT FORWARDING,LOGISTICS AND RELATE D SERVICES.IT IS ALSO AN APPROVED AIR CARGO AND CUSTOMS HOUSE AGENT. IT FILE D ITS RETURN OF INCOME 01.11. 2004,DECLARING TOTAL INCOME AT RS.1.12 CRORES.THE A SSESSMENT U/S.143(3) OF THE ACT,WAS COMPLETED ON 28.12.2006 DETERMINING THE TOT AL INCOME OF THE ASSESSEE AT RS.56.19 CRORES.EFFECTIVE GROUND OF APPEAL IS AB OUT DELETION OF PENALTY,LEVIED BY THE AO,U/S.271(1)(C)OF THE ACT. BRIEF FACTS: DURING THE YEAR UNDER APPEAL,THE ASSESSEE HAD TRANS FERRED THE INTERNATIONAL AIR CARGO BUSINESS TO A COMPANY,NAMELY DHL BANZAR LUMIE R PVT. LTD.WHEREIN 51% SHARES WERE HELD BY THE PARTNERS OF THE ASSESSE E FIRM.THE REMAINING FACTS ARE THAT IT RECEIVED A SUM OF RS.57.73 CRORES FOR T HE SAID SALE, THAT IT OFFERED THE CONSIDERATION RECEIVED UNDER THE HEAD CAPITAL GAIN S, THAT THE SALE PROCEEDS WERE INVESTED IN NABARD BONDS AND NHB BONDS,THAT IT CLAIMED EXEMPTION U/S.54EC OF THE ACT.THE AO,REFERRING TO CLAUSE 3.4 OF THE DEED OF TRANSFER OF BUSINESS(DTD.29.5.2003),HELD THAT THE AMOUNT RECEIV ED BY THE ASSESSEE WAS FOR NON-COMPETE AND WAS COVERED BY SECTION 28(VA) OF TH E ACT.HE FURTHER HELD THAT 3055/M/10-LEMUIR 2 INCOME WAS TAXABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS/PROFESSION.AN ADDITION OF RS.5473 CRORES WAS MADE AS COMPENSATION FOR NON-COMPETE FEE AND CLOSURE OF THE BUSINESS UNDER THE HEAD BUSINESS INC OME.HE ALSO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C)OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN THE MEANWHILE THE QUANTUM PROCEEDINGS WERE CONTE STED BEFORE THE FIRST APPELLATE AUTHORITY(FAA),WHO RESTRICTED THE NON COM PETE FEE TO RS.4.5CR. THE MATTER TRAVELLED UP TO THE TRIBUNAL.VIDE ITS ORDER DT9.10.15(ITAS NO.3245 & 2430/MUM/2008),THE TRIBUNAL DISMISSED APPEALS FILED BY THE AA AS WELL AS THE AO. 4. DURING THE PENALTY PROCEEDINGS THE ASSESSEE MADE E LABORATE SUBMISSION BEFORE THE AO, HOWEVER, HE LEVIED A PENALTY, VIDE I TS ORDER DT.31.3.09, OF RS.1,61,43,750/-.HE HELD THAT BY SHOWING THE BUSINE SS RECEIPT AS LONG TERM CAPITAL GAIN FURNISHED INACCURATE PARTICULARS OF IN COME, THAT THERE WAS AN ELEMENT OF NON COMPETE FEE IN THE AMT RECD BY THE A SSESSEE. 5. AGGRIEVED BY THE PENALTY ORDER OF THE AO, THE ASSES SEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HI M,THE ASSESSEE ARGUED THAT IT HAS NEITHER CONCEALED ANY PARTICULARS OF INCOME NOT FURNISHED ANY INACCURATE PARTICULARS, THAT FULL AND TRUE DISCLOSURE WAS MADE ABOUT SALE PROCEEDS OF RS.54.37 CRORES UNDER THE HEAD CAPITAL GAINS, THA T THERE WAS DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE AO, THAT IN SU CH A CASE PENALTY COULD NOT BE LEVIED, THAT INVESTMENT MADE IN NABARD AND NHB B ONDS PROVE THAT ASSESSEE WAS OF THE OPINION THAT IT WAS ENTITLED TO CLAIM EXEMPTION U/S. 54EC OF THE ACT, THAT THE PENALTY PROCEEDINGS AND ASSESSMEN T PROCEEDINGS WERE DIFFERENT AND INDEPENDENT OF EACH OTHER, THAT MERE NON-ACCEPT ANCE OF THE CLAIM OF THE ASSESSEE DID NOT IPSO FACT LEAD TO THE CONCLUSION I T HAD FILED INACCURATE PARTICULARS OF INCOME,THAT THE FAA HAD RESTRICTED T HE NON-COMPETE FEE TO RS.4.5 CRORES,THAT HE HAD ACCEPTED THE CONTENTION OF THE A SSESSEE THAT THE AMOUNT 3055/M/10-LEMUIR 3 RECEIVED BY IT WAS FOR TRANSFER OF GOODWILL, THAT T HE CALCULATION OF NON-COMPETE FEE WAS BASED ON AN ESTIMATE,THAT THE ISSUE WAS A D EBATABLE ISSUE,THAT PENALTY COULD NOT BE LEVIED IN RESPECT OF A LEGAL CLAIM IRR ESPECTIVE OF THE FACT THAT THE SAME WAS DECIDED AGAINST THE ASSESSEE. 6. IN OUR OPINION,WHETHER A RECEIPT/EXPENSE IS CAPITAL OR REVENUE IS A LEGAL ISSUE. NON ACCEPTANCE OF SUCH A LEGAL CLAIM CANNOT BE CONS IDERED AS CONCEALMENT OF INCOME FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME THAT WOULD WARRANT IMPOSITION OF PENALTY U/S.271(1)(C) OF THE ACT. AFT ER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE PENALTY ORDER,THE FAA HELD THAT AO HAD RELIED ON THE FINDINGS GIVEN IN THE ASSESSMENT ORDER WHILE PASSIN G THE PENALTY ORDER,THAT HE HAD NOT BROUGHT ANY AMOUNT TO JUSTIFY THAT THERE WA S CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS,THAT THE QUANTUM A DDITION DID NOT AUTOMATICALLY LEAD TO CONCEALMENT, THAT ADDITION COULD BE DUE TO DIFFERENCE IN OPINION AND DIFFERENCE IN PERCEPTION TO THE SAME ISSUE,THAT ON MERITS THE ASSESSEE HAD SUBMITTED A BONA FIDE EXPLANATION AS TO THE DEDUCTI ON CLAIMED BY IT THOUGH NOT ACCEPTED BY THE AO,THAT PENALTY COULD NOT BE LEVIED ON ADDITIONS MADE ON ACCOUNT OF DIFFERENCE OF OPINION, THAT MERE REJECTI ON OF AN EXPLANATION OF AN ASSESSEE WOULD NOT LEAD TO A CONCLUSION THAT EXPLAN ATION WAS FALSE, THAT THE AO HAD NOT BEEN ABLE TO ESTABLISH THAT EXPLANATION OF THE ASSESSEE WAS NOT BONA FIDE. FINALLY,THE FAA DELETED THE PENALTY. 7. DURING THE COURSE OF HEARING BEFORE US,THE DR SUPPO RTED THE ORDER OF THE AO AND STATED THAT ASSESSEE HAD NOT DISCLOSED THE INCO ME UNDER PROPER HEAD, THAT THE TRIBUNAL HAD DISMISSED THE APPEAL FILED BY THE ASSE SSEE WITH REGARD TO QUANTUM ADDITIONS.THE AR RELIED UPON THE CASES OF ANANT OVE RSEAS(P) LTD. (54TAXMANN 211),M/S.SM CONSTRUCTION(APPEAL NO.412/2013)FORTUNE HOTELS AND ESTATES (P.) LTD.(52TAXMANN330). 3055/M/10-LEMUIR 4 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT DURING THE YEAR UNDER CONSIDERATION THE A SSESSEE HAD SOLD ITS BUSINESS AND HAD RECEIVED A SUM OF RS.54.73 CRORES, THAT THE SALE PROCEEDS WERE INVESTED IN BONDS AND IT CLAIMED AN EXEMPTION U/S.54EC OF TH E ACT, THAT THE AO HELD THAT THE TRANSACTION FELL UNDER THE HEAD BUSINESS INCOME , THAT HE MADE THE ADDITION OF RS.54.73 TO THE INCOME OF THE ASSESSEE TREATING THE SAME AS NON-COMPETE FEE, THAT IN THE APPELLATE PROCEEDINGS THE FAA REDUCED I T TO RS.4.5 CRORES,THAT HIS ORDER WAS CHALLENGED BEFORE THE TRIBUNAL,THAT THE T RIBUNAL DISMISSED BOTH THE APPEALS,THAT THE AO INITIATED PENALTY PROCEEDINGS O F RS.4.5 CRORES AND LEVIED A PENALTY OF RS.1.61 CRORES. CONSIDERING THESE FACTS WE ARE OF THE OPINION THAT THERE WAS NEITHER FURNISHING OF INACCURATE PARTICUL ARS OF INCOME NOR CONCEALING THE PARTICULARS OF INCOME. THE ASSESSEE HAD FILED ALL THE DETAILS OF TRANSACTION IN THE RETURN OF INCOME ITSELF. THERE WAS DIFFERENCE O F OPINION BETWEEN THE AO AND THE ASSESSEE AS TO UNDER WHICH HEAD THE SALE PROCEE DS OF TRANSACTION SHOULD BE TAXED.THE ASSESSEE HAD OFFERED INCOME UNDER THE HEA D CAPITAL GAIN WHEREAS THE AO TAXED THE SAME AS BUSINESS INCOME.IN OUR O PINION,IN SUCH CASES, NO PENALTY SHOULD BE LEVIED U/S. 271(1)(C ) OF THE ACT . WE WOULD LIKE TO REFER TO THE CASE OF ANANT OVERSEAS(P) LTD. (SUPRA) OF THE DELHI HIGH COURT. IN THAT CASE THE ASSESSEE HAD DECLARED STCG ON SALE OF SHARES HOWEV ER, THE AO HELD THAT SAME WAS TO BE TAXED UNDER THE HEAD BUSINESS INCOME.HE A LSO LEVIED PENALTY U/S. 271(1)(C ) FOR CONCEALING THE PARTICULARS OF INCOME .THE FAA DELETED THE PENALTY LEVIED BY THE AO.MATTER TRAVELLED UPTO THE HON'BLE HIGH COURT . VIDE ITS ORDER DATED 4.9.2014 THE COURT HELD AS UNDER : 8. .. A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN OR DER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INC OME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS I NCOME. PRESENT IS NOT THE CASE OF CONCEALMENT OF THE INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. HOWEVER, THE LEARNED COUNSEL FOR THE REVENUE SUGGESTED THAT BY MAKING IN CORRECT CLAIM FOR THE EXPENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED INACCURATE PAR TICULARS OF THE INCOME. AS PER LAW LEXICON, THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENSE); THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THEREFO RE, THE WORD 'PARTICULARS' USED IN SECTION 271(1)(C) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFORMATION GI VEN IN THE RETURN WAS FOUND TO BE INCORRECT 3055/M/10-LEMUIR 5 OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE O R ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. 11. THE LEARNED COUNSEL ARGUED THAT 'SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTI CULARS OF SUCH INCOME'. WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE WORDS CO NCERNED. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLE SS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS. IN CIT V. ATUL MOHAN BINDAL [(2009) 9 SCC 589] WHERE THIS COURT WA S CONSIDERING THE SAME PROVISION, THE COURT OBSERVED THAT THE ASSESSING OFFICER HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THIS COURT REFERRED TO ANOTHER DECISION OF THIS COURT IN UNION OF INDIA V. DHARAMENDRA TEXTILE PROCESSORS [(2008) 13 SCC 369] AS ALSO THE DECISION IN UNION OF INDIA V. RAJASTHAN SPG. & WVG. MILLS [(2009) 13 SCC 448] AND REITERATED IN PA RA 13 THAT: (ATUL MOHAN BINDAL CASE [(2009) 9 SCC 589] , SCC P. 597, PARA 13) '13. IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271(1)(C), CONDITIONS STATED THEREIN MUST EXIST.' 12. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271(1)(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ON LY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PA RTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. 13. IN DILIP N. SHROFF V. CIT [(2007) 6 SCC 329] TH IS COURT EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND 'FURNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT THE PENALTY UNDER SECTION 271(1)(C ), MENS REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD 'INACCURATE' SIGNIFIED A DELIBE RATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CLAUSE (III) OF S ECTION 271(1) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUTHORITY, INASMUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASO N OF SUCH CONCEALMENT OF PARTICULARS OF INCOME, BUT IT MAY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM 'INACCURATE PARTICULARS' WAS NOT DEFINED ANYWHERE IN THE ACT AN D, THEREFORE, IT WAS HELD THAT FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS. 14. IT WAS FURTHER HELD IN DILIP N. SHROFF [(2007) 6 SCC 329] THAT THE ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT THE EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER, THE ASSESSEE HAD FURNISHED THE PARTICULARS OF HIS I NCOME. THE COURT ULTIMATELY WENT ON TO HOLD THAT THE ELEMENT OF MENS REA WAS ESSENTIAL. 9. IN VIEW OF THE AFORESAID POSITION, WE DO NOT THINK ANY SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION BEFORE US IN THIS APPEAL. THE APPEAL IS DISMISSED. NO COSTS. WE ARE ALSO OF THE OPINION THAT CONFIRMATION OF AN ADDITION BY APPELLATE AUTHORITY DO NOT JUSTIFY LEVY OF PENALTY U/S. 271(1 )(C),AS THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE DIFFERENT SO DECISION TAKEN DURING THE 3055/M/10-LEMUIR 6 ASSESSMENT STAGE WOULD NOT AND SHOULD NOT LEAD TO A UTOMATIC LEVY OF CONCEALMENT PENALTY.IT HAS TO BE SEEN THAT WHAT EXP LANATION WAS OFFERED BY THE ASSESSEE WHILE FILING REPLY TO THE PENALTY NOTICE.A FTER GOING THROUGH THE EXPLANATION FILED BY THE ASSESSEE,WE ARE OF THE OPI NION THAT IT WAS ONE OF THE PLAUSIBLE EXPLANATION.THE ISSUE OF TAXING A PARTICU LAR INCOME UNDER THE HEAD BUSINESS INCOME OR INCOME ARISING OF CAPITAL GAINS IS A DEBATABLE ISSUE.IN OUR OPINION NO PENALTY SHOULD BE LEVIED IN SUCH CIRCUMS TANCES.THEREFORE,UPHOLDING THE ORDER OF THE FAA,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. . ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY,2016. ! 18 , 2016 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 18.05.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.