GUJARAT CAPITAL VENTURE LTD., V. THE DY.CIT.,CIRCLE-1,

ITA 3213/AHD/2003

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6376 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-06-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 05-08-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAVANSHI
• Assessee Lawyers: J P SHAH
• Keywords: Revenue expenditure
• Section: 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.3213/AHD/2003 A. Y.: 1996-97 GUJARAT CAPITAL VENTURE LTD., 3 RD FLOOR, PANORAMA COMPLEX, R. C. DUTT ROAD, BARODA VS THE D. C. I. T., CIRCLE-1, BARODA PA NO. 31-619-CZ-3899 (APPELLANT) (RESPONDENT) APPELLANT BY SHRI J.P. SHAH, AR RESPONDENT BY SHRI G. S. SOURYAVANSHI, SR. DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II I, BARODA DATED 21 ST MARCH, 2003, FOR ASSESSMENT YEAR 1996-97, CHALLENGI NG THE CONFIRMATION OF PENALTY LEVIED U/S 271 (1) (C) OF THE IT ACT ON AN AMOUNT OF RS.4,50,000/-. 2. THIS APPEAL WAS EARLIER DISMISSED VIDE ORDER DAT ED 14-03-2007 FOR DEFAULT OF THE ASSESSEE IN PROSECUTING THE APPE AL. THE SAME ORDER WAS RECALLED WHILE ALLOWING MISC. APPLICATION OF TH E ASSESSEE VIDE ORDER DATED 10-12-2010 AND THE APPEAL WAS RE-FIXED FOR HEARING ON MERIT. 2. BRIEFLY, THE FACTS IF THE CASE ARE THAT THE ASSE SSEE CHALLENGED LEVY OF PENALTY FOR ADDITION OF RS.4,50,000/- BEING DEFERRED REVENUE ITA NO.3213AHD/2003 GUJARAT CAPITAL VENTURE LTD. VS DCIT, CIRCLE-1, BAR ODA 2 EXPENDITURE. IT IS STATED THAT THE LEARNED CIT(A) F OUND THAT THERE WAS NO JUSTIFICATION FOR CLAIMING THE DEFERRED REVENUE EXPENDITURE OF RS.4,50,000/- IN ADDITION TO THE CLAIM OF RS.26,613 /- MADE U/S 35D OF THE IT ACT IN COMPUTATION OF INCOME. THE AO INITIAT ED PENALTY PROCEEDINGS ON THE ABOVE AMOUNT. IT WAS SUBMITTED B EFORE THE AO THAT THE ORDER OF THE LEARNED CIT(A) IS RECEIVED ON QUANTUM AND THE ASSESSEE WOULD BE FILING APPEAL BEFORE THE TRIBUNAL . THE AO HOWEVER, PROCEEDED TO LEVY PENALTY VIDE SEPARATE OR DER. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESS EE HAS DEBITED THE AMOUNT OF RS.4,03,392/- TO THE PROFIT & LOSS AC COUNT AS WRITE OFF OF THE DEFERRED REVENUE EXPENDITURE WHEREAS IN THE RET URN IT HAS CLAIMED DEDUCTION OF RS.4,50,000/-. HOWEVER, IN THE STATEME NT, IT IS CLARIFIED THAT ELIGIBLE DEDUCTION U/S 35 D OF THE IT ACT IS R S.26,613/- AND THAT OF RS.4,50,000/- WAS CLAIMED IN THE COMPUTATION OF INC OME AGAINST THE AMOUNT DEBITED TO THE PROFIT & LOSS ACCOUNT OF RS.4 ,03,392/-. IT WAS SUBMITTED THAT THE AO WHILE MAKING THE ADDITION NOT ED THAT THE AMOUNT OF RS.4,50,000/- WAS NOT DEBITED TO THE PROF IT & LOSS ACCOUNT AND THE ASSESSEE CLARIFIED THAT THE ASSESSEE IS ENT ITLED ONLY FOR DEDUCTION OF RS.26,613/- U/S 35D OF THE IT ACT, THE REFORE CLAIM WAS ADDED OF RS.4,50,000/-. IT WAS ALSO NOTED THAT THE ABOVE DEFERRED REVENUE EXPENDITURE IS CLAIMED AFRESH ONLY IN THE S TATEMENT OF INCOME WHICH IS NEITHER REFLECTED IN THE PROFIT & L OSS ACCOUNT NOR IN THE BALANCE SHEET. IT WAS, THEREFORE, SUBMITTED THA T SINCE NO AMOUNT OF RS.4,50,000/- WAS CLAIMED AND IN THE PROFIT & LO SS ACCOUNT CLAIM IS MADE OF RS.4,03,392/- ON WHICH THE AO AGREED THAT T HERE WAS BASIS TO MAKE SUCH CLAIM. IT WAS ADDED THAT THE ADDITION, IF ANY, COULD HAVE BEEN CONSIDERED FOR RS.46,608/- FOR THE PURPOSE OF PENALTY. IT WAS, ITA NO.3213AHD/2003 GUJARAT CAPITAL VENTURE LTD. VS DCIT, CIRCLE-1, BAR ODA 3 THEREFORE, SUBMITTED THAT THE ASSESSEE HAS NOT FURN ISHED ANY INACCURATE PARTICULARS AND NO INCOME IS CONCEALED, THEREFORE, PENALTY SHOULD NOT BE LEVIED. THE LEARNED CIT(A) HOWEVER, D ID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE PENALT Y. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND REFE RRED TO THE ASSESSMENT ORDER TO SHOW THAT NO SEPARATE ADDITION OF RS.4,50,000/- WAS MADE IN THE ASSESSMENT ORDER. HE HAS SUBMITTED THAT THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL ON QU ANTUM IN ITA NO.2023/AHD/2002 AND THE APPEAL OF THE ASSESSEE HAS BEEN DISMISSED BEING TIME BARRED VIDE ORDER DATED 17-11- 2006. COPY OF THE ORDER IS PLACED ON RECORD. HE HAS ALSO REFERRED TO PB-25 WHICH IS THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSID ERATION TO SHOW THAT THE PRELIMINARY EXPENSES WRITTEN OFF WERE CLAIMED I N THE EARLIER YEAR ALSO AND ON THE SAME BASIS SAME CLAIM IS MADE IN TH E ASSESSMENT YEAR UNDER APPEAL WHICH WAS 10% OF THE PRELIMINARY EXPENSES. COPY OF THE COMPUTATION IS ALSO FILED ON RECORD. HE HAS SUBMITTED THAT SINCE COMPLETE PARTICULARS WERE DISCLOSED IN THE ACCOUNTS AS WELL AS THE PARTICULARS WERE DISCLOSED BEFORE THE AO, THEREFORE , THE ASSESSEE HAS NOT CONCEALED PARTICULARS OF INCOME AND HAS ALS O NOT FURNISHED INACCURATE PARTICULARS OF INCOME. 5. ON THE OTHER HAND, THE LEARNED RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT SINCE QUANTUM ADDITION IS CONFIRMED BY THE LEARNED CIT(A) AND THE APPEAL OF T HE ASSESSEE IS ITA NO.3213AHD/2003 GUJARAT CAPITAL VENTURE LTD. VS DCIT, CIRCLE-1, BAR ODA 4 DISMISSED BY THE TRIBUNAL BEING TIME BARRED, THEREF ORE, PENALTY WAS RIGHTLY IMPOSED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. THE FACTS NOTED ABOVE ARE NOT IN DISPUTE. WE FIND FROM THE ASSESSMENT ORDER THAT THE AO NOTED IN THE ASSESSMENT ORDER THAT THE ASSESSEE DEBITED IN THE PROFIT & LOS S ACCOUNT AN AMOUNT OF RS.4,03,392/- AS PRELIMINARY EXPENSES WR ITTEN OFF U/S 35D OF THE IT ACT. HOWEVER, IN THE STATEMENT OF INCOME IT WAS CLARIFIED THAT ELIGIBLE DEDUCTION U/S 35 D OF THE IT ACT IS ONLY R S.26,613/-. THEREFORE, EXCESS CLAIM WAS ADDED BACK BY THE ASSES SEE ITSELF IN THE STATEMENT OF INCOME. THESE FACTS NOTED BY THE AO IN THE ASSESSMENT ORDER SHOW THAT THE ASSESSEE DECLARED ALL TRUE AND CORRECT FACTS BEFORE THE AO AND SUO MOTO DISALLOWED THE CLAIM U/S 35D OF THE IT ACT. FURTHER, THE ASSESSEE FILED BREAK UP OF PRELIM INARY EXPENSES AND DIFFERED REVENUE EXPENDITURE IN A SUM OF RS.40,33,9 24/- AND REDUCED 10% BEING WRITTEN OFF AT RS.4,03,392/- AND MADE A C LAIM OF RS.36,30,532/-. IT WOULD, THEREFORE, SHOW THAT THE ASSESSEE MADE A LESSER CLAIM OF PRELIMINARY EXPENSES AND DEFERRED R EVENUE EXPENDITURE IN THE ACCOUNTS. THE PROFIT & LOSS ACCO UNTS OF THIS YEAR AND THE FIGURE SHOWN IN THE EARLIER YEARS (PB 25) S HOWS THAT SIMILAR CLAIM IS MADE IN THE PRECEDING ASSESSMENT YEAR. THE REFORE, THE ASSESSEE DECLARED COMPLETE FACTS BEFORE THE AO AS W ELL AS DECLARED TRUE FACTS IN THE PROFIT & LOSS ACCOUNTS. IT WAS AL SO CLARIFIED BEFORE THE AO THAT ULTIMATELY THE ASSESSEE WAS ELIGIBLE FOR DE DUCTION U/S 35D OF THE IT ACT IN A SUM OF RS.26,613/- AND BALANCE WAS ADDED BACK. THE ORDER OF THE AO FURTHER STATES THAT THE ASSESSEE MA DE FRESH CLAIM OF ITA NO.3213AHD/2003 GUJARAT CAPITAL VENTURE LTD. VS DCIT, CIRCLE-1, BAR ODA 5 DEFERRED REVENUE EXPENDITURE IN A SUM OF RS.4,50,00 0/- WHICH WAS NOT CONSIDERED FAVOURABLY BY THE AO. IT APPEARS FRO M THE FINDING OF THE AO IN THE ASSESSMENT YEAR THAT NO SEPARATE ADDI TION HAS BEEN MADE OF RS.4,50,000/- BECAUSE SUCH CLAIM WAS MADE A FRESH AT THE ASSESSMENT STAGE AND NEITHER THE FIGURES HAVE BEEN SHOWN IN THE PROFIT & LOSS ACCOUNT NOT IN THE BALANCE SHEET. THE AO, THEREFORE, DID NOT MAKE SEPARATE ADDITION OF RS.4,50,000/-. IT WOU LD, THEREFORE, SHOW THAT IN THE ACCOUNTS, THE ASSESSEE DID NOT MAK E ANY CLAIM OF DEDUCTION OF RS.4,50,000/-. ONLY CLAIM OF DEDUCTION WAS MADE IN THE PROFIT & LOSS ACCOUNT OF RS.4,03,392/- ON WHICH ALS O THE ASSESSEE EXPLAINED BEFORE THE AO THAT THE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION ONLY IN A SUM OF RS.26,613/- AND BALANCE IS ADDED BACK IN THE STATEMENT OF INCOME. THE LEARNED CIT(A) ALSO NO TED THE SAME FACTS IN THE APPELLATE ORDER DATED 23-02-2001 ON QU ANTUM. ON QUANTUM IT WAS EXPLAINED BEFORE THE LEARNED CIT(A) THAT SUCH CLAIM WAS MADE AS PER THE GUIDELINES ISSUED BY THE INSTIT UTE OF CHARTERED ACCOUNTANTS OF INDIA AND SUCH CLAIM IS ALLOWABLE. T HUS, THE ASSESSEE DISCLOSED COMPLETE FACTS BEFORE THE AO AT THE ASSES SMENT STATE AS WELL AS BEFORE THE LEARNED CIT(A) AT THE STAGE OF Q UANTUM. THE ASSESSEE ALSO OFFERED EXPLANATION WHICH WAS THOUGH NOT FOUND SATISFACTORY BUT THE EXPLANATION OF THE ASSESSEE WA S BONA FIDE TO MAKE A CLAIM AFRESH FOR DEDUCTION U/S 35D OF THE IT ACT ON WHICH NO CLAIM WAS MADE IN THE PROFIT & LOSS ACCOUNT. IT, TH EREFORE, APPEARS THAT THE ASSESSEE MADE A FRESH CLAIM AT THE ASSESSM ENT STAGE ON THE BASIS OF THE DETAILS AVAILABLE WITH HIM BUT NO SEPA RATE CLAIM IS MADE IN THE PROFIT & LOSS ACCOUNT AND THE BALANCE SHEET. THEREFORE, THE ASSESSEE HAS NEITHER FILED ANY INACCURATE PARTICULA RS BEFORE THE AO ITA NO.3213AHD/2003 GUJARAT CAPITAL VENTURE LTD. VS DCIT, CIRCLE-1, BAR ODA 6 NOR CONCEALED PARTICULARS OF INCOME IN THE RETURN O F INCOME FILED FOR THE ASSESSMENT YEAR UNDER APPEAL. SINCE, FRESH CLAI M WAS MADE FOR DEDUCTION BEFORE THE AO AT THE ASSESSMENT STAGE WHI CH DOES NOT FIND FAVOUR FROM THE AO; THEREFORE, NO SEPARATE ADDITION HAS BEEN MADE IN THE COMPUTATION OF INCOME. CONSIDERING THE FACTS AN D CIRCUMSTANCES NOTED ABOVE IT IS CLEAR THAT MERE REJECTING THE CLA IM OF THE ASSESSEE FOR WHICH NO SEPARATE ADDITION IS ALSO MADE, THE AS SESSEE DID NOT CONCEAL THE PARTICULARS OF INCOME AND ALSO DID NOT FILE ANY INACCURATE PARTICULARS OF INCOME. THE FRESH CLAIM OF THE ASSES SEE WAS NOT FOUND FALSE. 7. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) HELD THAT A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C ) OF THE INCOME-TAX ACT, 1961, SUGGEST THAT IN ORDER TO BE COVERED BY IT, THERE HA S TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASS ESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1) ( C ) WOULD EMBRACE THE DETA ILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETUR N IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPO SE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAI M TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ITA NO.3213AHD/2003 GUJARAT CAPITAL VENTURE LTD. VS DCIT, CIRCLE-1, BAR ODA 7 ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE T HE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RET URN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TH E TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAI LS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORREC T OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENAL TY UNDER SECTION 271(1) ( C ). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. S UCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFF IRMED. 8. THE HONBLE SUPREME COURT IN THE CASE OF M/S. RA JASTHAN SPINNING & WEAVING MILLS 2009 PIOL 63 SC HELD THAT ON EVERY DEMAND PENALTY IS NOT AUTOMATIC. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SAHABAD CO -OP. SUGAR MILLS LTD. 322 ITR 73 (P&H) HELD THAT MAKING OF WRO NG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING OF INACCURATE INFORM ATION, WHICH MAY CALL FOR LEVY OF PENALTY U/S 271 (1) ( C ) OF THE A CT. THE HONBLE PUNJAB & HARYANA HIGH COURT AGAIN IN THE CASE OF CIT VS SI DHARTHA ENTERPRISES 322 ITR 80 (P & H) HELD THAT LOSS SUFFE RED ON SALE OF MACHINERY WRONGLY TAKEN AGAINST PROFIT OF BUSINESS. ASSESSEE ON REALIZATION MISTAKE COMMITTED BY THE COUNSEL ACCEPT ED THE DECISION OF THE AO. NO DELIBERATE DEFAULT. APPELLATE AUTHORI TIES JUSTIFIED IN DELETING THE PENALTY U/S 271 (1) ( C ) OF THE IT AC T. ITA NO.3213AHD/2003 GUJARAT CAPITAL VENTURE LTD. VS DCIT, CIRCLE-1, BAR ODA 8 9. CONSIDERING THE FACTS OF THE CASE AS NOTED ABOVE , IN THE LIGHT OF THE ABOVE DECISIONS, WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY. THE AUTHORITIES BELOW WERE N OT JUSTIFIED IN LEVYING THE PENALTY. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17-06-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 17-06-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD