SAI SHIPPING CO. P.LTD, MUMBAI V. DCIT 5(3), MUMBAI

ITA 3197/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2188 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 05-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHWAS JADHAVDR
• Keywords: Search and seizure; Earning of tax free income; Difference of opinion
• Section: 143(3); 14A

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.3197 /MUM/2013 ( / ASSESSMENT YEAR : 2009-10) SAI SHIPPING COMPANY PRIVATE LIMITED 1109,EMBASSY CENTRE NARIMAN POINT MUMBAI-400 021 / V. THE ASSISTANT COMMISSIONER OF INCOME TAX 5(3), ROOM NO. 573, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. ./ PAN : AABCS1298J ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY NONE REVENUE BY : SHRI VISHWAS JADHAV,DR / DATE OF HEARING : 02-08-2016 / DATE OF PRONOUNCEMENT : 18-10-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE COMPANY, BEING ITA NO. 3197/MUM/2013, IS DIRECTED AGAINST THE APPELLATE OR DER DATED 07 TH FEBRUARY, 2013 PASSED BY LEARNED COMMISSIONER OF INCOME TAX ( APPEALS)- 9, MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSME NT YEAR 2009-10, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARI SING FROM THE PENALTY ORDER DATED 28 TH JUNE 2012 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 271(1)(C) OF THE INCOME TAX AC T,1961 (HEREINAFTER CALLED THE ACT). ITA 3197/MUM/2013 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE APPELLAN TS CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE PENAL TY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME TAX A CT,1961 AMOUNTING TO RS.1,59,130/- ON THE DISALLOWANCE ON ACCOUNT OF RU LE 8D R.W.S. 14A. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN BUSINESS OF SHIPPING AGENT, DERIVATIVE TRADING & TRANSPORT A ND LOGISTICS ACTIVITIES. DURING QUANTUM ASSESSMENT PROCEEDINGS U/S 143(3) R EAD WITH SECTION 143(2) OF THE ACT, THE AO OBSERVED THAT THE ASSESSE E HAS EARNED INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME , WHILE THE ASSE SSEE HAS NOT DISALLOWED EXPENDITURE INCURRED IN RELATION TO EARNING OF INCO ME WHICH DOES NOT FORM PART OF TOTAL INCOME. THE ASSESSEE WAS ASKED TO EXP LAIN THE SAME AND THE ASSESSEE IN REPLY SUBMITTED AS UNDER: IN RESPECT OF SUCH DISALLOWANCE U/S 14A OF INCOME -TAX ACT,1961 , WE HEREBY VOLUNTARILY DISALLOW EXPENDITURE INCURRED TO EARN EX EMPT INCOME AGGREGATING TO RS.4,68,166/- IN ACCORDANCE WITH SECTION 14A OF IN COME-TAX ACT READ WITH RULE-8D. PLEASE FIND ATTACHED HEREWITH WORKING OF DISA LLOWANCE AND REQUEST YOU TO ADD BACK THE SAME TO OUR TOTAL INCOME. THE AO KEEPING IN VIEW FACTS AND CIRCUMSTANCES OF T HE CASE AND ACCOUNTS OF THE ASSESSEE, RECORDED SATISFACTION THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RELATION TO EXEMPT INCOME IS NOT COR RECT AND THEREAFTER THE AO KEEPING IN VIEW MANDATE OF SECTION 14A(2) OF THE AC T , APPLIED RULE 8D OF INCOME TAX RULES, 1962 TO DISALLOW THE EXPENDITURE INCURRED IN RELATION TO THE EARNING OF EXEMPT INCOME . THE DISALLOWANCE WOR KED OUT BY THE AO UNDER RULE 8D(2)(I)AND 8D(2)(II) WAS NIL WHILE DISALLOWAN CE WORKED OUT UNDER RULE 8D(2)(III) OF INCOME TAX RULES, 1962 WAS RS.4,68,16 6/- BEING 0.5% OF THE ITA 3197/MUM/2013 3 AVERAGE INVESTMENTS HELD BY THE ASSESSEE, VIDE ASSE SSMENT ORDER DATED 15.2.2011 PASSED BY THE AO U/S 143(3) OF THE ACT. THE ASSESSEE DID NOT FILE APPEAL AGAINST THE ASSESS MENT ORDER DATED 15.2.2011 PASSED BY THE AO U/S 143(3) OF THE ACT IN QUANTUM ASSESSMENT PROCEEDINGS WHICH ATTAINED FINALITY. THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WA S INITIATED AGAINST THE ASSESSEE BY THE AO FOR FURNISHING OF INACCURATE PAR TICULARS OF INCOME WHICH CULMINATED IN LEVYING OF PENALTY OF RS.1,59,130/- A GAINST THE ASSESSEE U/S 271(1)(C) OF THE ACT BY THE AO VIDE PENALTY ORDERS DATED 28.06.2012 PASSED BY THE AO FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN THE RETURN OF INCOME FILED BY THE ASSESSEE WITH THE REVENUE. DURING THE PENALTY PROCEEDINGS , THE ASSESSEE SUBMI TTED BEFORE THE AO THAT THREE IS NO CONCEALMENT OF PARTICULARS OF INCOME NO R THE ASSESSEE FILED INACCURATE PARTICULARS OF INCOME IN THE RETURN OF I NCOME FILED WITH THE REVENUE .THE ASSESSEE SUBMITTED THAT NO EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE TO EARN EXEMPT INCOME BUT THE ASSESSEE DURING ASSESSMENT PROCEEDINGS ACCEPTED VOLUNTARILY DISALLOWANCE OF EX PENDITURE INCURRED TO EARN EXEMPT INCOME IN ACCORDANCE WITH SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES, 1962 FOR WHICH WORKING CHART O F DISALLOWANCE WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE AO. IT WAS SUB MITTED THAT THERE WAS NO CONCEALMENT OF PARTICULARS OF INCOME NOR THERE IS F URNISHING OF INACCURATE PARTICULARS OF INCOME TO BE BROUGHT WITHIN MANDATE OF PENALTY PROVISIONS AS STIPULATED U/S 271(1)(C) OF THE ACT. IT WAS SUBMITT ED THAT THE ADDITIONS WERE MADE BY THE AO IN THE ASSESSMENT PROCEEDINGS U/S 14 3(3) OF THE ACT MAINLY ON ACCOUNT OF DIFFERENT VIEW TAKEN ON SAME SET OF F ACTS AND THUS IT COULD BE SAID TO BE DIFFERENCE OF OPINION BUT NOT THE CONCEA LMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME .IT WAS SUBMITTED THAT MERE ITA 3197/MUM/2013 4 DISALLOWANCE OF THE CLAIM IN ASSESSMENT PROCEEDINGS COULD NOT BE THE SOLE BASIS OF LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. THE ASSESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T V. RELIANCE PETROPRODUCTS PRIVATE LIMITED (2010) 322 ITR 158(S C). THE ASSESSEE ALSO RELIED UPON FOLLOWING DECISIONS:- (A) CIT V. SURESH CHANDRA MITTAL (2001) 251 ITR 9(SC) (B) T.ASHOK PAI V. CIT (2007) 292 ITR 11(SC) (C) DILIP & SHROFF V. JCIT (2007)291 ITR 519(SC) THUS, THE ASSESSEE PRAYED THAT NO PENALTY BE LEVIE D AGAINST THE ASSESSEE U/S 271(1)(C) OF THE ACT AS IN THE OPINION OF THE ASSES SEE THERE IS NO CONCEALMENT OF PARTICULARS OF INCOME NOR THERE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE IN THE RETURN OF INCOME FILE D WITH THE REVENUE TO BE BROUGHT WITHIN THE FOUR CORNERS OF PENALTY PROVISIO NS AS STIPULATED U/S 271(1)(C) OF THE ACT. THE ABOVE CONTENTIONS WERE REJECTED BY THE AO AND I T WAS HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME AND PENALTY OF RS.1,59,130/- WAS LEVIED BY THE AO ON THE ASSESSEE U/S 271(1)(C) OF THE ACT AND MORE SO THE AO OBSERVED THAT THE ASSESSEE DID N OT FILE ANY APPEAL AGAINST QUANTUM ASSESSMENT ORDER U/S 143(3) OF THE ACT WHER EIN THE ADDITIONS MADE BY THE AO U/S 14A OF THE ACT READ WITH RULE 8D(2)(I II) OF INCOME TAX RULES, 1962 WERE ACCEPTED BY THE ASSESSEE WHICH ATTAINED F INALITY. THE AO ALSO RELIED ON SEVERAL CASE LAWS AS MENTIONED IN THE PEN ALTY ORDER U/S 271(1)(C) OF THE ACT, WHILE LEVYING PENALTY U/S 271(1)(C) OF THE ACT VIDE ORDERS DATED 28-06- 2012 AND ALSO MADE AN ATTEMPT TO DISTINGUISH CASE L AWS RELIED UPON BY THE ASSESSEE IN HIS AFORE-STATED PENALTY ORDERS. ITA 3197/MUM/2013 5 4. AGGRIEVED BY THE PENALTY ORDER DATED 28-06-2012 PASSED BY THE AO U/S. 271(1)(C) OF THE ACT , THE ASSESSEE FILED FIRST APP EAL WITH LEARNED CIT(A) WHICH WAS DISMISSED BY THE LEARNED CIT(A) VIDE ORDERS DAT ED 07-02-2013. THE ASSESSEE MAINLY REITERATED ITS SUBMISSIONS BEFORE T HE LEARNED CIT(A) AS WERE MADE BEFORE THE AO WHICH ARE NOT REPEATED AGAIN. TH E LEARNED CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE A SSESSEE DID FURNISHED INACCURATE PARTICULARS OF THE INCOME IN THE RETURN OF INCOME FILED WITH THE REVENUE W.R.T. STATUTORY DISALLOWANCE U/S 14A OF TH E ACT R.W.R. 8D OF INCOME TAX RULES, 1962. THE SAID DISALLOWANCE AS WAS MADE BY THE AO WAS ACCEPTED BY THE ASSESSEE AND NO APPEAL IS FILED AGAINST THE ASSESSMENT ORDER OF THE AO WHICH HAS ATTAINED FINALITY. IT WAS OBSERVED BY THE LEARNED CIT(A) THAT THE LEARNED AO DISTINGUISHED THE CASE LAWS RELIED UPON BY THE ASSESSEE. THE LEARNED CIT(A) HELD THAT THESE IS AN ELEMENT OF STR ICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT FOR GIVING INACCURATE PARTICULARS O F INCOME WHILE FILING THE RETURN OF INCOME WITH THE REVENUE. THUS, THE LEARNE D CIT(A) CONFIRMED THE PENALTY AS LEVIED BY THE AO VIDE APPELLATE ORDER DA TED 07-02-2013. 5. AGGRIEVED BY THE APPELLATE ORDER DATED 07-02-201 3 PASSED BY LEARNED CIT(A) , THE ASSESSEE PREFERRED SECOND APPEAL WITH THE TRIBUNAL. 6. NONE APPEARED BEFORE US ON BEHALF OF THE ASSESSE E WHEN THE APPEAL WAS CALLED FOR HEARING. THE LEARNED DR RELIED ON THE OR DERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE LEARNED DR AND GONE THROUGH TH E ORDERS OF THE AUTHORITIES BELOW INCLUDING CASE LAWS REFERRED TO I N THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE EARNED EXEMPT INCOM E WHILE DID NOT DISALLOW THE EXPENDITURE INCURRED IN RELATION TO THE EARNING OF THE EXEMPT INCOME AS MANDATED U/S 14A OF THE ACT. THE ASSESSEE CLAIMED T HAT NO EXPENDITURE WAS INCURRED IN RELATION TO THE EARNING OF EXEMPT INCOM E . THE ASSESSEE ON BEING ITA 3197/MUM/2013 6 ASKED TO SHOW CAUSE AS TO WHY NO EXPENDITURE WAS DI SALLOWED WHICH WAS INCURRED IN RELATION TO THE EARNING OF INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, CAME FORWARD WITH VOLUNTARY DISALLOWANCE OF 0.5% OF AVERAGE INVESTMENT WHICH COMES TO RS.4,68,166/- AS PER SECT ION 14A OF THE ACT READ WITH RULE 8D(2)(III) OF INCOME TAX RULES, 1962. THE AO HELD THAT HE IS NOT SATISFIED WITH THE WORKING OF DISALLOWANCE OF EXPEN DITURE INCURRED BY THE ASSESSEE IN RELATION TO THE EARNING OF EXEMPT INCOM E AS SUBMITTED BY THE ASSESSEE AND RECORDED SATISFACTION TO THAT EFFECT A ND THEREAFTER THEN PROCEEDED TO APPLY SECTION 14A(2) OF THE ACT READ W ITH RULE 8D OF INCOME TAX RULES, 1962 HAVING REGARDS TO THE ACCOUNTS OF THE A SSESSEE WHEREBY DISALLOWANCE OF RS.4,68,166/- WAS MADE BY THE AO OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF EXEMPT INCOME IN TERMS OF SECTION 14A OF THE ACT BY APPLYING RULE 8D(2)(III) OF INCOME TAX RULES, 1962 BY ADOPTING 0.5% OF AVERAGE INVESTMENT HELD BY THE ASSESSEE IN A STEREO TYPED MANNER WITHOUT LOOKING INTO AND ANALYZING THE ACCOU NTS OF THE ASSESSEE AND THEREAFTER WORKING OUT OF EXPENDITURE INCURRED BY T HE ASSESSEE IN RELATION TO EARNING OF EXEMPT INCOME WHICH IS THE MANDATE OF SE CTION 14A OF THE ACT OR COMING TO A CONCLUSION THAT IT IS NOT POSSIBLE FROM THE ACCOUNTS MAINTAINED BY THE ASSESSEE TO WORK OUT DISALLOWANCE OF EXPENDI TURE AS ARE INCURRED FOR EARNING EXEMPT INCOME BEFORE PROCEEDING TO APPLY RU LE 8D OF INCOME TAX RULES, 1962. NO SUCH FINDING IS RECORDED BY THE AO THAT HE MADE AN ATTEMPT/EFFORT TO SCRUTINIZE THE BOOKS OF ACCOUNTS AND RECORDS OF THE ASSESSEE TO IDENTIFY THE ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO THE EARNING OF EXEMPT INCOME BEFORE INVOKING RULE 8D OF INCOME TAX RULES, 1962 READ WITH SECTION 14A OF THE ACT. THE ASSESSEE ACCE PTED THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT WHEREBY NO A PPEAL WAS FILED BY THE ASSESSEE AGAINST THE ADDITION OF RS.4,68,166/- MADE BY THE AO U/S 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES, 1962 BUT THAT ITSELF IS NOT SUFFICIENT TO FASTEN ASSESSEE WITH LIABILITY UNDER PENALTY PROVISIONS AS CONTAINED U/S 271(1)(C) OF THE ACT WITHOUT SATISFYI NG THE MANDATE OF SECTION ITA 3197/MUM/2013 7 271(1)(C) OF THE ACT. UNDER THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AS DETAILED ABOVE, IN OUR CONSIDERED VIEW, THE ACTION OF THE AO IN MAKING DISALLOWANCE OF EXPENDITURE INCURRED BY THE ASSESSE E IN RELATION TO EARNING OF EXEMPT INCOME IN THE AFORE-STATED MANNER WITHOUT C OMPLYING WITH THE PROVISIONS OF SECTION 14A OF THE ACT TO IDENTIFY TH E EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF EXEMPT INCOM E HAVING REGARDS TO THE ACCOUNTS OF THE ASSESSEE OR COMING TO THE CONCLUSIO NS THAT IT IS NOT POSSIBLE TO IDENTIFY THE AMOUNT OF EXPENDITURE INCURRED BY T HE ASSESSEE IN RELATION TO EARNING OF EXEMPT INCOME KEEPING IN VIEW THE MANNER IN WHICH THE ACCOUNTS ARE MAINTAINED BY THE ASSESSEE , THE MANDATE FOR LE VYING OF PENALTY U/S 271(1)(C) OF THE ACT IS NOT FULFILLED MORE-SO IT WA S THE CONTENTION OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED BY T HE ASSESSEE IN RELATION TO EARNING OF EXEMPT INCOME WHICH DOES NOT FORM PART O F THE TOTAL INCOME . THE CONTENTION OF THE ASSESSEE WAS THAT NO EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR EARNING OF EXEMPT INCOME AND IT WAS AL L THE MORE INCUMBENT ON THE AUTHORITIES BELOW TO HAVE IDENTIFY AND ASCERTAI NED THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF EXEMPT INCOME HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, WHICH EXERC ISE TO ASCERTAIN DISALLOWANCE HAVING REGARD TO THE ACCOUNTS OF THE A SSESSEE WAS UNFORTUNATELY HAD NOT BEEN UNDERTAKEN BY THE AUTHORITIES BELOW AN D IN THE ABSENCE THEREOF, WE ARE AFRAID PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE NOT SUSTAINABLE DESPITE THE FACT THAT THE ASSESSEE VOLUNTARILY CAME FORWARD WITH THE AMOUNT OF DISALLOWANCE AS PER SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES, 1962 AND DID NOT FILE APPEAL AGAINST THE ADD ITIONS SO MADE BY THE AO IN ASSESSMENT PROCEEDINGS. THUS, IN OUR CONSIDERED VIEW THE PENALTY OF RS.1,59,130/- AS LEVIED BY THE AO U/S 271(1)(C) OF THE ACT AND AS CONFIRMED BY THE LEARNED CIT(A) IS NOT SUSTAINABLE IN THE EYE S OF LAW AND IS HEREBY ORDERED TO BE DELETED. WE ORDER ACCORDINGLY. ITA 3197/MUM/2013 8 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 3197/MUM/2013 FOR THE ASSESSMENT YEAR 2009-10 IS ALLOWED .. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH OCTOBER, 2016. # $% &' 18-10-2016 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 18-10-2016 [ !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. 9 / CIT- CONCERNED, MUMBAI 5. <=( >>?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, < > //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI