M/s. Cosmos Fiber Glass Ltd., New Delhi V. DCIT, New Delhi

ITA 3486/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6753 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 27-12-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 13-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Assessee Lawyers: DR RAKESH KUMAR GUPTA
• Keywords: Business expenditure; Bonafide belief
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-1 NEW DELHI BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 3486/DEL/2016 ASSESSMENT YEAR: 2002-03 M/S COSMOS FIBRE GLASS LTD., VS. DCIT, CIRCLE 3(1 ), C/O M/S RRA TAXINDIA NEW DELHI D-28, SOUTH EXTENSION, PART-I, NEW DELHI 49 (PAN: AAACC0289Q) (ASSESSEE) (RESPONDENT) ASSESSEE BY : DR. RAKESH KUMAR GUPTA, ADV. & SH. SOMIL AGGARWAL, ADV. REVENUE BY :SH. F.R. MEENA, SR. DR. ORDER THIS APPEAL IS FILED BY ASSESSEE AGAINST THE ORDE R DATED 29.12.2015 PASSED BY THE LD. CIT(A)-2, NEW DELHI RE LATING TO ASSESSMENT YEAR 2002-03. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN LEVYING PENALTY OF R S. 1,78,500/- AND THAT TOO WITHOUT ASSUMING JURISDICTI ON AS PER LAW AND WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 2. THAT IN ANY CASE IN ANY VIEW THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN LEVYING PE NALTY U/S. 271(1)(C) IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT THE ASSESSEE CRAVES THE LEAVE TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL AT ANY STAGE AND ALL T HE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 3. AT THE THRESHOLD, I NOTE THAT REGISTRY HAS RAISE D THE OBJECTION OF SHORTAGE OF TRIBUNAL FEE BY RS. 6007/- AT THE TIME OF FILING THE APPEAL. HOWEVER, IN THIS CONNECTION, LD. COUNSEL OF THE ASS ESSEE HAS STATED THAT IN VIEW OF THE HONBLE HIGH COURT OF PATNA DE CISION DATED 6.5.2008 REPORTED IN (2009) 310 ITR 0195, IN THE C ASE OF DR. AJITH KUMAR PANDEY VS. INCOME TAX APPELLATE TRIBUNAL, THE OBJECTION OF THE REGISTRY IS NOT VALID AND THE FEE FILED BY THE A SSESSEE I.E. RS. 500/- IS SUFFICIENT AND THEREFORE, THE APPEAL OF THE ASSE SSEE IS MAINTAINABLE AND MAY BE HEARD ON MERIT. 3.1 LD. DR DID NOT RAISE ANY SERIOUS OBJECTION TO T HIS PROPOSITION. 4. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS ESPECIALLY THE HONBLE HIGH COURT OF PATNA DECISION DATED 6. 5.2008 REPORTED IN (2009) 310 ITR 0195, IN THE CASE OF DR. AJITH KUMA R PANDEY VS. INCOME TAX APPELLATE TRIBUNAL, WHEREIN THE HONBLE HIGH COURT HAS HELD THAT A PERSON AGGRIEVED BY AN ORDER IMPOSING P ENALTY, IF 3 APPROACHES THE TRIBUNAL BY PREFERRING AN APPEAL, IM POSITION OF PENALTY, HAVING NO NEXUS WITH THE TOTAL INCOME OF T HE ASSESSEE, IT WOULD NOT BE DISCERNIBLE WHAT IS THE TOTAL INCOME O F ASSESSEE AND ACCORDINGLY, SUCH AN APPEAL WILL BE COVERED BY CL. (D) OF S. 253(6) AND FEE PAYABLE BEFORE THE TRI BUNAL IS RS. 500/- ONLY. THEREFORE, IN VIEW OF THE AFORESAID JUDGMENT THE OBJECTION RAISED BY THE REGISTRY IS NOT TENABLE, HENCE, THE SAME IS DISMISSED AND ACCORDINGLY, THE PRESENT APPEAL IS TREATED AS MAINT AINABLE AND IS BEING HEARD ON MERITS. 5. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT WAS COMPLETED VIDE ORDER U/S 143(3) DATED 04.03.2005 AT AN INCOME OF RS. 1,50,720/-. LATER ON, THE CASE WAS OPENED WITHI N THE MEANING OF SECTION 147 AND WAS ASSESSMENT U/S 147 R.W.S. 14 3(3) OF THE ACT WAS COMPLETED ON 14.12.2009 AT AN INCOME OF RS.6,50 ,720/-. AGGRIEVED WITH THIS ORDER, THE ASSESSEE PREFERRED A N APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) VIDE HIS ORDER DATED 22.06.2010 DISMISSED THE APPEAL OF THE ASSESSEE. 5.1 FURTHER, THE ASSESSEE FILED AN APPEAL AGAINST T HE ORDER OF LD. CIT(A) BEFORE THE ITAT. THE ITAT VIDE ITS ORDER PAS SED IN ITA NO. 4246/DE1L2010 DATED 31.12.2010 RESTORED BACK THE CA SE TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THE REASSESSMENT WAS COMPLETED U/S 147 R.W.S. 254 ON 15.12.2011 AT AN INCOME OF RS .6,50,720/- 4 AFTER MAKING ADDITION ON ACCOUNT OF UNEXPLAINED CAS H CREDIT. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT (A) VIDE HIS ORDER DATED 25.02.2013 IN APPEAL NO. 255/1 1-12 CONFIRMED ADDITION ON THE GROUND. 5.2. IN THE ABSENCE OF ANY REPLY TO THE PENALTY NO TICES, THE AO OBSERVED THAT HE HAS NO OTHER ALTERNATIVE EXCEPT TO IMPOSE PENALTY U/S 271 (L)(C) OF THE ACT ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. SINCE, THE ABOVE ADDITION WAS TREATED AS CONCEALED INCOME AND INACCURATE PARTICULARS OF INCOME OF THE ASSESSEE. T HEREFORE PENALTY PROCEEDINGS U/S 271(1) (C) OF THE I.T. ACT, 1961 W ERE INITIATED BY ISSUE OF NOTICE U/S 274 READ WITH SECTION 271 OF TH E I.T. ACT, 1961 DATED 15.12.2011. ANOTHER NOTICE WAS ISSUED TO THE ASSESSEE ON 22.11.2013 FIXING THE HEARING ON 20.12.2013 PROVIDI NG AN OPPORTUNITY TO SHOW CAUSE WHY PENALTY U/S 271(1)(C) SHOULD NOT BE LEVIED. NO REPLY WAS RECEIVED BY THE AO. AFTER INTR ODUCTION OF EXPLANATION TO SECTION 271(1)(C) THE REVENUE IS NOT REQUIRED TO PROVE MENS REA ON THE PART OF THE ASSESSEE. AO OBSE RVED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF RS. 5,00,000 BECAUSE THE ASSESSEE COMPANY MADE CERTAIN CLAIMS BY WAY OF BUSINESS EXPENDITURE IN THE RETURN OF INCOME BUT WAS NOT ABLE TO SUBSTANTIATE THESE CLAIMS. HENCE, T HE AO HELD THAT THE ASSESSEE COMPANY IN DEFAULT IN FURNISHING INACC URATE PARTICULARS 5 OF ITS INCOME AND IMPOSE A PENALTY OF RS. 1,78,500/ - @100% OF THE TAX SOUGHT TO BE EVADED VIDE HIS ORDER DATED 31.3.2 1014 PASSED U/S. 271(1)(C) OF THE I.T. ACT, 1961. 6. AGGRIEVED WITH THE PENALTY ORDER, ASSESSEE APPEA LED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 29/12/201 5 HAS UPHELD THE PENALTY AND ACCORDINGLY, DISMISSED THE APPEAL O F THE ASSESSEE. 7. AGAINST THE ABOVE ORDER OF THE LD. CIT(A) DATED 29.12.2015, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. DURING THE HEARING, LD. COUNSEL OF THE ASSESSE E HAS FILED A PAPER BOOK CONTAINING PAGES 1 TO 60 HAVING THE COPY OF ASSESSEES REPLY DATED 21.12.2004 FILED BEFORE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS; COPY OF ASSESSMENT ORDER DA TED 4.3.2005; COPY OF ASSESSEES REPLY DATED 7.8.2009 FILED BEFOR E AO RAIING OBJECTIONS TO THE PROCEEDINGS U/S. 148; COPY OF ASS ESSEES REPLY DATED 9.11.2009 FILED BEFORE THE AO DURING THE PROC EEDINGS U/S. 147; COPY OF ASSESSMENT ORDER DATED 14.12.2009 PASS ED U/S. 147/143(3) OF THE ACT; COPY OF ORDER DATED 22.6.201 0 PASSED BY LD. CIT(A); COPY OF ITAT ORDER DATED 31.12.2010 IN ITA NO. 4246/DEL/2010 FOR AY 2002-03; COPY OF ASSESSEES RE PLY DATED 16.8.2011 FILED BEFORE AO TOGETHER WITH ANNEXURES; COPY OF ASSESSEES REPLY DATED 14.9.2011 FILED BEFORE THE A O; COPY OF 6 ASSESSEES REPLY DATED 17.10.2011 FILED BEFORE THE AO TOGETHER ANNEXURES; COPY OF ASSESSEES REPLY DATED 1.12.2011 FILED BEFORE THE AO; COPY OF ASSESSMENT ORDER DATED 15.12.2011 P ASSED BY THE AO U/S. 143(3) OF THE ACT READ WITH SECTION 254 OF THE I.T. ACT, 1961 FOR AY 2002-03 AND COPY OF ASSESSEES LETTER DATED 25.2.2013 FILED BEFORE THE AO REGARDING THE SURRENDER OF DISPUTED A MOUNT; COPY OF ORDER DATED 25.2.2013 PASSED BY THE LD. CIT(A); COP Y OF REPLY DATED 20.12.2013 FILED BEFORE THE AO DURING THE COU RSE OF PENALTY PROCEEDINGS FOR AY 2002-03 AND COPY OF WRITTEN SUBM ISSIONS DATED 11.8.2015 FILED BEFORE THE LD. CIT(A) HE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FULL Y DISCLOSED ALL THE INFORMATION ASKED FOR AND HAS NOWHERE FURNISHED ANY INACCURATE PARTICULARS. IT WAS THE FURTHER CONTENTION THAT NO WHERE IN THE ASSESSMENT ORDER, IT HAS BEEN RECORDED THAT THE ASS ESSEE FURNISHED INACCURATE PARTICULARS OF INCOME. THEREFORE, HE STA TED THAT NO PENALTY CAN BE LEVIED IN THIS CASE AS IT CANNOT BE SAID THAT THERE WAS ANY ATTEMPT BY THE ASSESSEE TO CONCEAL PARTICULARS OF INCOME. IN THIS BEHALF, HE FILED A COPY OF THE DECISION RENDER ED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN (2010) 322 ITR 158 (SC) AND STATED THAT THE PRESENT CASE IS FULLY COVERE D BY SAID DECISION 7 AND ACCORDINGLY, REQUESTED THAT THE PENALTY IN DISP UTE MAY BE DELETED. 9. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND STATED THAT THE LD. CIT(A) HA S PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE , HENCE, THE SAME MAY BE AFFIRMED. 10. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONGWITH DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE IN THE SHAPE OF PAPER BOOK AND THE CASE LAW CITED BY HIM. FROM THE RECORDS, IT REVEALS THAT THE AO L EVIED PENALTY OF RS. 1,78,500/- PASSED U/S. 271(1)(C) OF THE I.T. AC T, 1961 VIDE ORDER DATED 31.3.2014. THE AO OBSERVED THAT COMPAN Y MADE CERTAIN CLAIMS BY WAY OF BUSINESS EXPENDITURE IN TH E RETURN OF INCOME BUT WAS NOT ABLE TO SUBSTANTIATE THESE CLAIM S. HOWEVER, THE ASSESSEES COUNSEL CONTENTION WAS THAT THE ASSE SSEE DID NOT CLAIM ANY EXPENDITURE IN ITS RETURN OF INCOME AND T HERE IS NO CONCEALMENT OF INCOME AND FACTS ON THE PART OF TH E ASSESSEE. I FIND THAT THERE IS NO CONCLUSIVE PROOF THAT THE ASSESSEE CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE AO HAS NOT BROUGHT ENOUGH INCRIMINATING MATERIAL FOR CONCEALME NT AND THERE IS NO MATERIAL FOR ESTABLISHING THE CONCEALMENT INDEPE NDENTLY IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE PENALTY IS NOT LEVIABLE, BECAUSE 8 ALL THE DOCUMENTS SUBMITTED BY THE ASSESSEE WERE NE ITHER REJECTED BY THE AO AS FALSE OR INCORRECT FACTS NOR AO HAD CL INCHING ANY FURTHER EVIDENCE OF CONCEALMENT OF FACTS. I FURTHER FIND THAT THE ASSESSEE HAS ADMITTED THE ADDITION ONLY TO AVOID HA ZARDS OF LITIGATION AND TO BUY THE PEACE BUT THE SAME DO NOT CONSTITUTE ADMISSION FOR THE PURPOSE OF LEVYING PENALTY. 10.1 I ALSO FIND THAT SECTION 271(1)(C) POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AN D CONCEALMENT OF INCOME. ON THE FACTS AND CIRCUMSTANCES OF THIS CAS E THE ASSESSEES CONDUCT CANNOT BE SAID TO BE CONTUMACIOUS SO AS TO WARRANT LEVY OF PENALTY. 10.2 IN THIS REGARD, I FIND THAT ASSESSEES COUNS EL RELIANCE FROM THE HONBLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010 IS SQUARELY APPLICABLE IN THE PRESENT CASE OF THE ASSE SSEE. IN THIS CASE VIDE ORDER DATED 17.3.2010 IT HAS BEEN HELD THAT TH E LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO TH E MEANING OF WORD CONCEALMENT AND INACCURATE CONTINUES TO B E A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDER TEXTI LE CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS H ELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C ). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS 9 ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLA IM IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 10.3 I FURTHER PLACE RELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LOR DSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMI NAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS T HE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MEREL Y BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCR ETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSI DERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNIC AL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE B REACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE T O ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 10 11. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, I FIND THAT THE LEVY OF PENALTY IN THIS CASE IS NOT JUSTIFIED. ACCORDINGLY, I SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE LEVY OF PENALTY IN DISPUTE. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/02/2017 . SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 02/02/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES