Global Emerging Markets India Ltd., New Delhi V. ITO Ward 10(2), New Delhi

ITA 3099/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9887 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2000-2001
• Appeal Filed On: 10-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Keywords: Principle of natural justice; Set aside
• Section: 271(1)(c); 143(3); 43(5); 274; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.3099/DEL/2019 (ASSESSMENT YEAR-2000-01) { M/S GLOBAL EMERGING MARKETS INDIA LTD. B-226A, GREATER KAILASH-II, NEW DELHI-110 048 PAN AAACG 3233C VS. ITO, WARD-10(2), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. GAUTAM JAIN, ADV. RESPONDENT BY SH. JAGDISH SINGH, SR. DR DATE OF HEARING 10.06.2020 DATE OF PRONOUNCEMENT 30.06.2020 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST OR DER DATED 27.02.2019 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-22, NEW DELHI {CIT(A)} FOR ASSESSMENT YEAR 2000-01 WHEREIN THE LD. FIRST APPELLATE AUTHORITY HAS UPHELD THE IMPOSITION OF PENALTY OF RS.18,79,644/-IMPOSED U/S 271(1)(C) O F THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT). 2 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SMENT OF THIS CASE WAS COMPLETED U/S 143(3) OF THE ACT AT AN INCO ME OF RS.69,27,614/- AFTER ADJUSTING BROUGHT FORWARD LOSSE S. AT THE TIME OF COMPLETING THE ASSESSMENT, THE FOLLOWING ADDITION S WERE MADE:- (I) RS.1,80,000/- ON ACCOUNT OF DONATIONS. (II) RS.6,96,000/- BEING ALLEGED DIFFERENCE IN INVESTMENT. (III) RS.47,36,485/- BEING ALLEGED DIFFERENCE IN FI NANCIAL TRANSACTIONS. (IV) RS.48,82,192/- ON ACCOUNT OF DISALLOWANCE OF INTEREST. (V) RS.25,80,748/- BEING DISALLOWANCE U/S 43(5) O F THE INCOME TAX ACT. 2.1 ON APPEAL BY THE ASSESSEE, THE LD. CIT (A) DELETED ALL THE ADDITIONS EXCEPT THAT OF RS.48,82,192/- ON ACCO UNT OF INTEREST DISALLOWANCE. THE REASON FOR ADDITION OF THIS AMOUNT WAS THAT THE ASSESSEE COMPANY HAD SHOWN INTEREST INCOME OF RS.1,5 4,16,856/- ON ICD AMOUNT OF RS. 22,25,00,000/- GIVEN TO M/S ME RLIN RESOURCES PVT. LTD. IT WAS SEEN THAT THE ASSESSEE H AD CHARGED 7% 3 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO INTEREST ON THE OPENING BALANCE AND 6% ON THE AMOUN T GIVEN DURING THE YEAR. HOWEVER, THE ASSESSEE HAD TAKEN ADVANCES FROM M/S SILVER LINE TECHNOLOGIES LTD. @ 15% PER ANNUM. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN WHY THE ADV ANCE TAKEN @ 15% WAS GIVEN TO ANOTHER COMPANY @ 6%. THE ASSESSIN G OFFICER PROCEEDED TO RESTRICT THE INTEREST EXPENDITURE CLAI MED TO 5% FROM 15% AS CLAIMED BY THE ASSESSEE. THE ASSESSEES QUAN TUM APPEAL BEFORE THE ITAT WAS ALSO DISMISSED VIDE ORDER DATED 06.12.2016 IN ITA NO.2746/DEL/2014. 2.2 SUBSEQUENTLY PENALTY OF RS.18,79,644/- WAS IMPO SED U/S 271(1)(C) ON THIS INTEREST DISALLOWANCE. THE ASS ESSEES APPEAL AGAINST THE IMPOSITION OF PENALTY BEFORE THE LD. CI T (A) WAS ALSO DISMISSED. NOW THE ASSESSEE IS BEFORE THIS TRIBUNAL CHALLENGING THE CONFIRMATION OF PENALTY BY RAISING THE GROUNDS OF A PPEAL: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-22, NEW DELHI HAS ERRED BOTH IN LAW AND O N FACTS IN UPHOLDING PENALTY OF RS. 18,79,644/- IN AN ORDER DATED 27.2.2019 UNDER SECTION 271(L)(C) OF THE ACT. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT IN ABSENCE OF ANY 4 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO SPECIFIC SHOW CAUSE NOTICE HAVING BEEN ISSUED, THE LEVY OF PENALTY IS OTHERWISE WHOLLY MISCONCEIVED. 3. THAT FURTHERMORE THAT SINCE NO SATISFACTION WAS RECORDED IN THE ORDER OF ASSESSMENT, PENALTY LEVIED IS OTHERWISE WAS WITHOUT JURISDICTION. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS SUSTAINED THE PENALTY BY FAILING TO A PPRECIATE THAT ASSESSMENT PROCEEDINGS ARE NOT CONCLUSIVE AND AN ALLEGED INCORRECT CLAIM DOES NOT TANTAMOUNT TO FURN ISHING OF INACCURATE PARTICULARS, WHEN THE DETAILS SUPPLIED B Y THE ASSESSEE IN RETURN ARE NOT FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. 5. THAT VARIOUS ADVERSE FINDINGS RECORDED BY THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) OVERLOOK THE W RITTEN SUBMISSIONS AND JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED BOTH IN LAW AND ON FACTS IN PE NALTY IMPOSED AND SUSTAINED IS ILLEGAL AND INVALID AS THE SAME HAS BEEN LEVIED AND UPHELD BY RECORDING VAGUE AND, INCONCLUSIVE FINDING THAT ASSESSEE HAS CONCEALED/FU RNISHED INACCURATE PARTICULARS OF ITS INCOME TO THE TUNE OF RS. 48,83,192/-. 7. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THE FACTUAL MATR IX OF THE CASE OF THE APPELLANT AND EVIDENCE ON RECORD AND CONCLUSIONS THUS DRAWN MECHANICALLY ARE WHOLLY UNJUSTIFIED. 8. IT IS THEREFORE PRAYED THAT THE PENALTY LEVIED OF RS.18,79,640/- U/S 271(1)(C) OF THE ACT AND SUSTAIN ED BY 5 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) MA Y KINDLY BE DELETED. 3.0 AT THE OUTSET, THE LD. AUTHORIZED REPR ESENTATIVE (AR) DREW OUR ATTENTION TO THE NOTICE ISSUED U/S 274 R.W.S 271(1)(C) OF THE ACT AND SUBMITTED THAT THE NOTICES PLACED AT PAGES 85-86 OF THE PAPER BOOK WERE HIGHLY VAGUE IN AS MUCH AS THE Y DID NOT STATE TO WHETHER THE ASSESEE HAD CONCEALED THE PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME. IT WAS ALSO SUBMITTED THAT THE PENALTY ORDER WAS VAGUE AND NON S PECIFIC AS THERE WAS NO SPECIFIC CHARGE IN THE PENALTY ORDER S PECIFYING THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR HAD FURNIS HED INACCURATE PARTICULARS OF INCOME. THE LD. AR SUBMITTED THAT NO W IT IS SETTLED LAW THAT IF THE NOTICE INITIATING THE PENALTY PROCEE DINGS DOES NOT SPECIFY AS TO UNDER WHAT LIMB IS THE PENALTY BEING P ROPOSED TO BE IMPOSED, THE PENALTY IMPOSED WILL NOT BE SUSTAINABLE IN EYES OF LAW AS THE ASSESSEE WOULD NOT HAVE BEEN MADE AWARE OF THE CHARGE FOR WHICH THE PENALTY HAD BEEN INITIATED. THE LD. AR PLA CED RELIANCE ON NUMBER OF JUDICIAL PRECEDENT IN THIS REGARD AND SUB MITTED THAT IN 6 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO VIEW OF THIS INHERENT DEFECT IN THE NOTICE ISSUED U/ S 274, THE IMPUGNED PENALTY WAS LIABLE TO BE DELETED. 4.0 IN RESPONSE, THE LD. SR. DR VEHEMENTLY ARGUED THAT THE QUANTUM ADDITION HAD BEEN UPHELD BY THE ITAT AL SO AND, THEREFORE, IT WAS A FIT CASE FOR LEVY OF PENALTY. IT WAS FURTHER SUBMITTED THAT A MERE TECHNICALITY LIKE THE ALLEGED DEFECT IN NOTICE SHOULD NOT BE A GROUND FOR DELETION OF PENALTY WHEN IT WAS OBVIOUS FROM THE CONDUCT OF THE ASSESSEE THAT HE HAD MADE A INCORRECT CLAIM OF INTEREST IN AS MUCH AS 10% OF INTEREST WAS CONFIRMED TO BE HAVE BEEN CLAIMED IN EXCESS. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHO RITIES BELOW. THE LD. AR FOR THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER CONTENDING THAT SHOW-CAUSE NOTICE ISSUED BY THE AO IS NOT A VALID NOTICE TO INITIATE THE PENALTY PROCEEDINGS AS THE A SSESSEE HAS NOT BEEN MADE AWARE IF HE HAS CONCEALED THE PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME . IT IS SETTLED PRINCIPLE OF LAW THAT PENALTY CANNOT BE IMPOSED MER ELY ON THE 7 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO GROUND THAT ADDITIONS MADE IN THE INCOME OF THE ASS ESSEE HAVE BEEN CONFIRMED. RATHER TO PROCEED WITH THE IMPOSITIO N OF PENALTY U/S 271(1)(C), THE AO HAS TO PROVE THAT THERE WAS C ONCEALMENT OF PARTICULARS OF INCOME OR THAT THE ASSESSEE HAS FUR NISHED INACCURATE PARTICULARS OF SUCH INCOME. 5.1 A BARE PERUSAL OF THE NOTICES ISSUED TO THE A SSESSEE U/S 274 READ WITH SECTION 271(1)(C) OF THE ACT GOES TO PROVE THAT ASSESSEE HAS NOT BEEN CALLED UPON TO EXPLAIN IF IT HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF SUCH INCOME. THE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY & ORS DEALT WITH THE IDENTICAL ISSUE THREADBARE AND CAME TO THE FOLLOWING CONCLUSION :- 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABI LITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILIT IES. C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDI ENT FOR ATTRACTING CIVIL LIABILITY. 8 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDING S UNDER SECTION 271. E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. F) EVER IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 27 1(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BEC AUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PRO CEEDINGS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE A SSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AN D THE COMMISSIONER. I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSME NT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIR Y CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH T AX OR SUCH 9 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOU LD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE F AILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE B ONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBI GUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INI TIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE AS SESSING AUTHORITY. P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I .E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURN ISHING OF INCORRECT PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO 10 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO PENALTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSIT ION OF PENALTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSME NT, IT IS INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDIN GS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING O F INCORRECT PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN T HE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PE NALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. 5.2 THEREFORE, FOLLOWING THE LAW LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA, AS STATED ABOVE, W E ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSEE HAS NOT BEEN S PECIFICALLY MADE AWARE OF THE CHARGES LEVELED AGAINST IT AS TO WHETHER THERE IS A CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME ON HIS PART, THE PENALTY U/S 271(1)(C) OF TH E ACT IS NOT SUSTAINABLE. WE ALSO NOTE THAT RECENTLY, THE HONB LE DELHI HIGH COURT HAS APPROVED THE ORDER OF THE HONBLE KARNATA KA HIGH COURT IN THE CASE OF SAHARA INDIA LIFE INSURANCE. ACCORDI NGLY, RESPECTFULLY 11 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO FOLLOWING THE JUDICIAL PRECEDENTS AS AFOREMENTIONED, WE SET ASIDE THE ORDER OF THE LD. FIRST APPELLATE AUTHORITY AND DIRECT THE AO TO DELETE THE PENALTY. 6.0 IN THE FINAL RESULT, THE APPEAL OF THE ASS ESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 30/06/2020. SD/- SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30/06/2020 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 12 ITA NO.3099/DEL/2019 GLOBAL EMERGING MAR KETS (P) LTD. VS. ITO DRAFT DICTATED .2020 DRAFT PLACED BEFORE AUTHOR .2020 APPROVED DRAFT COMES TO THE SR.PS/PS .20 20 ORDER SIGNED AND PRONOUNCED ON .20 20 FILE SENT TO THE BENCH CLERK . 2020 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER. DATE OF UPLOADING ON THE WEBSITE .20 20