The DCITS.K.Circle, Himatnagar V. Liquidator of Sardar Vallabhai Patel Regional Oilseeds Grower So.Ltd., Himatnagar

ITA 3118/AHD/2009

• Counselvise Citation: 311820514 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 23-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Keywords: Capital receipt
• Section: 143(3)

Judgement Text

, , . .. . . .. . , , , , . .. . . .. .!'#$ !'#$ !'#$ !'#$ , % % % % & & & & IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SHRI A.K.GARODIA, A.M.) . ITA NO. 3118/AHD./2009 : ' ()- 2006-07 D.C.I.T., SABARKANTHA CIRCLE, HIMATNAG AR (,- /APPELLANT) -VS- LIQUIDATOR OF SARDAR VALLABHBHAI PATEL REGIONAL OILSEEDS GROWER SOCIETY LTD., HIMATNAG AR ( ./,- /RESPONDENT ) (PAN : AAAJS 3178F) ,- 0 1 / APPELLANT BY : SHRI S.P.TALATI, SR.D.R. ./,- 0 1 / RESPONDENT BY : NONE 2'3 0 4% / DATE OF HEARING : 27/09/2011 5'( 0 4% / DATE OF PRONOUNCEMENT : 30/09/2011 / ORDER PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 03-08-2009 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-X, AHME DABAD DELETING THE PENALTY OF RS.2,19,000/- LEVIED BY THE AO UNDER SECTION 271 (1)(C) OF THE I.T. ACT, 1961 FOR THE ASSESSMENT YEAR 2006-2007. 2. AT THE TIME OF HEARING BEFORE US, NONE WAS PRESE NT FROM THE SIDE OF THE ASSESSEE, DESPITE THE SERVICE OF NOTICE THROUGH RPA D. WE, THEREFORE PROCEED TO DECIDE THIS APPEAL AFTER HEARING THE LD. D.R. AND THE MATE RIALS AVAILABLE ON RECORD. 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY. IT CLOSED ITS BUSINESS SINCE 1998-99, AS THE COOPERATIVE SOCI ETY WAS UNDER LIQUIDATION. AS PER THE HONBLE GUJARAT HIGH COURTS ORDER, THE ASSESSE E HAD SOLD ITS PROPERTIES FOR RS.9,15,00,000/-. THE SAID AMOUNT WAS DEPOSITED IN SBI HIMATNAGAR ON WHICH THE ASSESSEE EARNED INTEREST INCOME OF RS.17,85,146/- F OR THE ASSESSMENT YEAR UNDER ITA NO. 3118-AHD-09 2 APPEAL. APART FROM THIS, THE ASSESSEE RECEIVED GODO WN RENT INCOME AMOUNTING TO RS.70,002/- AND DIVIDEND INCOME OF RS.1,190/-. FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE FILED THE RETURN OF INCOME ON 31.03.20 07 DECLARING TOTAL INCOME AT RS.11,69,546/-. THE AO FRAMED THE ASSESSMENT UNDER SECTION 143(3) WHEREIN HE MADE AN ADDITION OF RS.7,15,742/- AND ALSO INITIATED PEN ALTY PROCEEDINGS UNDER SECTION 271(1)(C). SUBSEQUENTLY, VIDE ORDER DATED 20.06.200 8, THE AO LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF RS.2,19,000/- ON ADDITION OF R S.7,15,742/- MADE IN THE ASSESSMENT ORDER. 4. ON APPEAL AGAINST THE PENALTY ORDER UNDER SECTIO N 271(1)(C), THE ASSESSEE PREFERRED AN APPEAL. BEFORE THE LD. CIT(A), THE ASS ESSEE OBJECTED TO THE LEVY OF PENALTY UNDER SECTION 271(1)(C) ON THE FOLLOWING GROUNDS: 'THE LEARNED AUTHORITY LEVIED PENALTY OF RS. 219000 WHICH HAS NO RELATIONSHIP WITH THE INCREASE IN TAX AFTER ASSESSMENT, MENTIONI NG 100% PENALTY OF TAX SOUGHT TO BE AVOIDED. WHILE CONSIDERING THE PENALTY QUANTUM, THE LEARNED AUTHORITY SHOULD NOT HAVE ASSESSED RS. 70002 AS INC OME FROM HOUSE PROPERTY BECAUSE AS EXPLAINED IN THE ASSESSMENT AND SUBMISSI ON MADE IT WAS NOT CONSIDERED AS CAPITAL RECEIPT AND NOT REVENUE RECEI PT. THE LEARNED AUTHORITY HAS NOT ALLOWED DIVIDEND INCO ME RS. 1190/- FROM COOPERATIVE SOCIETIES WHICH IS ELIGIBLE FOR DEDUCTI ON U/S 80P. THE LEARNED AUTHORITY HAS NOT CONSIDERED EXPENSES A MOUNTING TO RS 686742/- ALLOWABLE UNDER THE HEAD OTHER SOURCES U/S 57. SALARY EXPENSES ARE INCURRED TO REALIZE INCOME FROM INTEREST AND OTHER LEGAL FORMALITIES IN VIEW OF LEGAL STATUS OF THE APPELLANTS. SECURITY EXPENSES ARE INCURRED TO PROTECT PROPE RTY OF APPELLANTS PROPERTY TAX EXPENSES ARE INCURRED BEING STATUT ORY OBLIGATION. LEGAL EXPENSES ARE INCURRED FOR LIQUIDATION, PR OCEEDINGS ELECTRICITY EXPENSES ARE INCURRED IN COMPROMISE FORMULA WITH GEB. THE LEARNED AUTHORITY HAS NOT CONSIDERED ABOVE ASPE CTS IN ASSESSMENT FOR ALLOWING EXPENSES WHICH SHOULD HAVE BEEN CONSIDERED AS PER CASE LAW CIT V/S ARCHANA R DHAWATAY (1982) 36 ITR 355(BOM). THE EXPE NSES ARE ELIGIBLE FOR DEDUCTION U/S 57(III) OF THE INCOME-TAX ACT. ITA NO. 3118-AHD-09 3 DISALLOWANCE OF EXPENSES WILL NOT PER SE AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME - MERELY BECAUSE CERTAIN EXPE NSES CLAIMED BY THE ASSESSES ARE DISALLOWED BY AN AUTHORITY IT CANNOT M EAN THAT THE PARTICULAR FURNISHED BY THE ASSESSEE ARE WRONG. DISALLOWANCE O F AN EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INCORRECT PART ICULARS OF ITS INCOME. CONCEALMENT INVOLVES PENAL ACTION. IT HAS TO BE PRO VED AS A CONSCIOUS ACT. IT IS TRUE THAT DIRECT EVIDENCE MAY NOT BE AVAILABLE IN E VERY CASE. YET, IT MUST BE PROVED AS A NECESSARY COROLLARY FROM THE FACTS AND CIRCUMSTANCES ESTABLISHED ON THE RECORD - CIT V._AJAIB SINGH & CO. [2002] 253 ITR 630 (PUNI. & HAR.) 'CONCEALMENT' V. 'FURNISHING INACCURATE PARTICULARS ' - THE EXPRESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURN ISHED INACCURATE PARTICULARS OF INCOME' .CERTAIN THAT THESE TWO CIRCUMSTANCES AR E NOT IDENTICAL IN DETAILS ALTHOUGH THEY MAY LEAD TO THE SAME EFFECT, NAMELY, KEEPING OFF A CERTAIN PORTION OF INCOME. THE FORMER IS DIRECT AND THE LATTER MAY BE INDIRECT IN ITS EXECUTION. THE WORD 'CONCEAL' IS DERIVED FROM THE LATIN WORD ' CONCOLARE' WHICH IMPLIES 'TO HIDE'. WEBSTER'S NEW INTERNATIONAL DICTIONARY EQUAT ES ITS MEANING TO 'HIDE OR WITHDRAW FROM OBSERVATION; TO COVER OR KEEP FROM SI GHT; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OR. THE OFFENCE OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTI ON THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES. IN FURNISH ING ITS IT RETURN OF INCOME, AS ASSESSEE IS REQUIRED TO FURNISH PARTICULARS AND ACCOUNT ON WHICH SUCH RETURNED INCOME HAS BEEN ARRIVED AT. THESE MAY BE P ARTICULARS AS PER ITS BOOKS OF ACCOUNT IF IT HAS MAINTAINED THEM, OR ANY OTHER BASIS UPON WHICH IT HAS ARRIVED AT THE RETURNED FIGURE OF INCOME. ANY INACC URACY MADE IN SUCH BOOKS OF ACCOUNT OR OTHERWISE WHICH RESULTS IN KEEPING OFF O R HIDING A PORTION OF ITS INCOME IS PUNISHABLE AS FURNISHING INACCURATE PARTI CULARS. THE APPELANT RELIES UPON THE FOLLOWING DECISIONS: GEM GRANITES (2009) 120 TTJ (CHENNAI) 992 OF CHENNAI IT AT AND A.C.LT. VIS. V.LP. INDUSTRIES LTD. IN ITA NO. 4524/MUM/2006. PENALTY WILL ALSO NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCIS ED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EV EN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE P ENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY WHEN THERE IS A TECHNICA L OR VENIAL BREACH OF THE PROVISION OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE - HINDUSTAN STEEL LTD. V. STATE OF ORISSA [19721 83 ITR 26 (SC )' IN VIEW OF THE ABOVE THE LD. A.R PLEADED THAT THE I MPUGNED PENALTY MAY BE DELETED. ITA NO. 3118-AHD-09 4 4.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LD. CIT(A) CANCELLED THE PENALTY ON THE GROUND THAT EXP LANATION FURNISHED BY THE ASSESSEE WAS NEITHER FOUND TO BE FALSE NOR IS THERE ANY FIND ING BY THE AO EITHER IN THE ORDER OF ASSESSMENT OR EVEN DURING THE PENALTY PROCEEDINGS T HAT THE ASSESSEE DID NOT OFFER COMPLETE PARTICULARS OR DETAILS OF THE EXPENDITURE WHENEVER CONSIDERED NECESSARY BY THE AO. FOR CANCELLING THE PENALTY, THE LD. CIT(A) ALSO RELIED ON THE JUDGEMENT OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SHIV LA L TAK VS- CIT REPORTED IN 251 ITR 373 WHEREIN IT WAS HELD THAT ' THE STATUTE HAS CLEARLY DRAWN A DISTINCTION BETWEEN A DELIBERATE FALSE EXPLANATION FURNISHED BY THE ASS ESSES AND AN EXPLANATION, WHICH MAY NOT BE FALSE BUT IS NOT ACCEPTED BECAUSE THE ASSESS ES WAS NOT ABLE TO SUBSTANTIATE IT. WHILE THERE IS NO RELAXATION IN THE RIGOUR OF THE E XPLANATION IN RAISING A PRESUMPTION AGAINST THE ASSESSES IN THE FORMER CASE, IN THE LAT TER CLASS OF CASES, THE STATUTE ITSELF RELAXES ITS RIGOUR BY DIRECTING THAT WHERE IN RESPE CT OF ANY AMOUNT, ADDED OR DISALLOWED AND ANY EXPLANATION IS OFFERED BY SUCH P ERSON WHICH IS NOT ACCEPTED BECAUSE THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SAME, BUT SUCH EXPLANATION IS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE EXPLANATION SHALL NOT APPLY' . THE LD. CIT(A) ALSO RELIED ON THE DECISION OF THE HONBLE DELHI HI GH COURT IN THE CASE OF CIT-VS- BACARDI MARTINI INDIA REPORTED IN 288 ITR 585. AGGR IEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNA L. 5. AT THE TIME OF HEARING, ON BEHALF OF THE REVENUE , SHRI S.P.TALATI, SR.D.R. APPEARED AND POINTED OUT THAT THE LD. CIT(A) ERRED IN LAW IN NOT TAKING COGNIZANCE OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF DHARMENDRA TEXTILE PROCESSORS REPORTED IN 306 ITR 277. IN THIS CASE, T HE HONBLE APEX COURT HAS HELD THAT THE LEVY OF PENALTY IS A CIVIL LEVY AND ONCE T HE DEFAULT IS ESTABLISHED, LEVY OF PENALTY IS MANDATORY. HE ACCORDINGLY POINTED OUT TH AT PENALTY LEVIED BY THE AO UNDER SECTION 271(1)(C) BE RESTORED. 6. HAVING HEARD THE LD. D.R., WE HAVE CAREFULLY GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY AND IT ITA NO. 3118-AHD-09 5 CLOSED ITS BUSINESS DURING THE YEAR 1998-99. SUBSEQ UENTLY, THE SOCIETY WAS UNDER THE CONTROL OF LIQUIDATOR. AS PER THE DIRECTION OF THE HONBLE GUJARAT HIGH COURT, THE ASSESSEE SOLD ITS PROPERTIES FOR RS.9,15,00,000/-. THE SAID AMOUNT WAS DEPOSITED IN SBI, HIMATNAGAR ON WHICH THE ASSESSEE EARNED INTERE ST TO THE TUNE OF RS.17,85,146/- DURING THE RELEVANT PERIOD. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAD CLAIMED EXPENSES TO THE TUNE OF RS.9,68,827/- AGAINST THE INTEREST INCOME OF RS.17,85,146/-. THE AO DISALLOWE D THE EXPENSES CLAIMED AND ASSESSED THE INCOME AT RS.18,56,338/-. IT IS PERTIN ENT TO NOTE THAT THE ASSESSEE WAS OF THE BONA FIDE BELIEF THAT IT CAN CLAIM THE INTEREST EXPENSES UND ER THE HEAD OTHER SOURCES UNDER SECTION 57 OF THE I.T. ACT. THOUGH T HIS BELIEF OF THE ASSESSEE WAS NOT CORRECT, BUT THE ISSUE, BEFORE US, IS THAT, WHETHER THE CLAIM MADE BY THE ASSESSEE WAS BONA FIDE, OR NOT. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT-VS- AJAIB SINGH & CO. ( SUPRA ), HELD THAT DISALLOWANCE OF EXPENSES WILL NOT PER SE AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. IN THE IMPUGNED ORDER, THE LD. CIT(A), AFTER CONSIDERING THE INGREDIENTS OF EXPLANATION 1 TO SECTION 271(1)(C), HELD THAT DISALLOWANCE OF EXPENSES MADE BY THE AO DOES NOT HI T BY ANY ONE OF THEM. THE ASSESSEE HAS FURNISHED THE EXPLANATION, WHICH IS NE ITHER FOUND TO BE FALSE NOR THERE IS ANY FINDING OF THE AO, EITHER IN THE ORDER OF ASSES SMENT OR EVEN DURING PENALTY PROCEEDINGS THAT THE ASSESSEE DID NOT OFFER COMPLET E PARTICULARS OR ANY DETAILS OF THE EXPENSES WHENEVER CONSIDERED NECESSARY BY THE AO. W E, THEREFORE, INCLINE TO UPHOLD THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 6 0 5'( #' ) 30/09 /2011 ' 7 0 !3 8 THIS ORDER PRONOUNCED IN COURT ON 30/09/2011. SD/- SD/- (A.K.GARODIA) (T.K. 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