DCIT, New Delhi V. M/s. National Cooperative Development Corporation, New Delhi

ITA 3606/DEL/2010

• Counselvise Citation: 360620114 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 24-10-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 27-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Keywords: Bonafide belief; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE PRESIDENT AND SHRI RAJPAL YADAV, JUDICIAL MEMBER I.T.A NO. 3606/DEL/10 ASSTT. YEAR : 2000-01 DCIT, CIRCLE 13(1), NEW DELHI. VS. M/S. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION, 4, SIRI INSTITUTIONAL AREA, HAUZ KHAS, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.S. NEGI, SR. DR RESPONDENT BY: SHRI K.V.S.R. KRISHNA, CA ORDER ORDER ORDER ORDER PER RAJPAL YADAV : JM PER RAJPAL YADAV : JM PER RAJPAL YADAV : JM PER RAJPAL YADAV : JM THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 17 TH MAY, 2010 PASSED FOR ASSTT. YEAR 2000-01. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LD. C IT(A) HAS ERRED IN DELETING THE PENALTY OF `1,39,42,002/- IMP OSED U/S 271(1)(C) OF THE INCOME TAX ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN UNDERTAKING OF GOVT. OF INDIA. IT CAME INTO EXISTEN CE BY WAY OF ITA NO. 3606/DEL/10 ASSTT. YEAR 2000-01 2 NATIONAL COOPERATIVE DEVELOPMENT CORPORATION ACT 19 62 (NO. 26 OF 62). IT IS ENGAGED IN THE BUSINESS OF PROVIDI NG LONG TERM FINANCE TO THE STATE GOVT. AND COOPERATIVE SOCIETI ES IN ALL THESE STATES. FOR ASSTT. YEAR 2000-01, IT HAS FILED ITS RETURN OF INCOME ON 21.11.2000 DECLARING AN INCOME OF ` 28,33 ,52,920/-. IT WAS PROCESSED U/S 143(1) ON 26 TH MARCH, 2001. THE AO HAD FORMED AN OPINION THAT WHILE CLAIMING DEDUCTION U/S 36 (1)(VIII) OF THE ACT, ASSESSEE HAS INCLUDED CERTAIN RECEIPTS WHICH ARE NOT DERIVED FROM THE BUSINESS OF PROVIDING LONG TERM FI NANCE. THUS, SUCH RECEIPTS NAMELY DIVIDEND, INTEREST FROM BANK, MISCELLANEOUS RECEIPTS, ETC. DO NOT QUALIFY FOR THE DEDUCTION TO THE EXTENT OF 40% U/S 36 (1)(VIII). HE RECORDED THE REASONS AND REOPENED THE ASSESSMENT. IN THE REASSESSMENT ORDER, HE OBSERVED THAT SECTION 36(1) (VIII) CONTEMPLATES THA T IF AN ASSESSEE IS ENGAGED IN PROVIDING LONG TERM FINANCE FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT OR DEVELOPME NT OF INFRASTRUCTURE FACILITIES IN INDIA AND CREATED ANY SPECIAL RESERVE, THEN AN AMOUNT NOT EXCEEDING 40% OF THE PROFIT DERI VED FROM SUCH BUSINESS OF PROVIDING LONG TERM FINANCE SPECIF IED IN THIS SECTION WOULD BE ALLOWED AS A DEDUCTION. ACCORDING TO THE AO, THE DIVIDEND INCOME, MISCELLANEOUS RECEIPTS INCOME, INTEREST ITA NO. 3606/DEL/10 ASSTT. YEAR 2000-01 3 FROM BANK AND INTEREST ON ADVANCE / DEPOSITS DO NOT COME FROM THE BUSINESS OF PROVIDING LONG TERM FINANCE AND, TH EREFORE, FOR THE PURPOSE OF GETTING ANY SUCH RESERVE, THESE RECE IPTS OUGHT NOT TO BE INCLUDED WHILE COMPUTING DEDUCTION OF 40% . HE ADDED BACK THE 40% OF SUCH RECEIPTS AS AN INCOME OF THE ASSESSEE. 3. THE APPEAL TO THE LD. CIT(A) DID NOT BRING ANY R ELIEF TO THE ASSESSEE. THE ASSESSEE TOOK THE MATTER BEFORE THE T RIBUNAL IN ITA NO. 1242/D/2009. IN PRINCIPLE, EXCLUSION OF SU CH RECEIPTS FROM THE GROSS RECEIPTS FOR THE PURPOSE OF COMPUTAT ION OF 40% U/S 36(1)(VIII) HAS BEEN UPHELD BUT THE ISSUE HAS B EEN REMITTED BACK TO THE FILE OF AO FOR COMPUTING THE DISALLOWAN CE AFTER CONSIDERING OVERHEAD EXPENSES RELATABLE TO EARNING SUCH RECEIPTS. 4. THE AO HAS INITIATED PROCEEDING U/S 271(1)(C). H E ISSUED A SHOW CAUSE NOTICE U/S 274 READ WITH SECTION 271(1)( C) INVITING ASSESSEES EXPLANATION AS TO WHY PENALTY BE NOT IMP OSED. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS CONTENDED BY THE ASSESSEE THAT IT HAS BEEN CLAIMING A SIMILAR DEDUCT ION RIGHT FROM ASSTT. YEAR 1994-95. IT WAS ALWAYS ALLOWED BY THE AO. FIRST ITA NO. 3606/DEL/10 ASSTT. YEAR 2000-01 4 TIME IT WAS DISALLOWED IN 1999-2000. THE AO HAS VIS ITED THE ASSESSEE WITH THE PENALTY IN ASSTT. YEAR 1999-2000. THE ASSESSEE FURTHER CONTENDED THAT IT HAS DISCLOSED AL L THE FACTS IN THE RETURN OF INCOME AS WELL AS IN THE AUDITED ACCO UNTS. IT HAS NOT FURNISHED ANY INACCURATE PARTICULARS NOR CONCEA LED THE PARTICULARS. IN ITS UNDERSTANDING, SUCH RECEIPTS AL SO QUALIFY FOR DEDUCTION U/S 36(1)(VIII). THERE IS NO DELIBERATE A TTEMPT AT THE END OF ASSESSEE TO EVADE PAYMENT OF TAX. THE LD. AO WAS NOT SATISFIED WITH THE CONTENTION OF ASSESSEE AND HE VI SITED THE ASSESSEE WITH THE PENALTY. 5. DISSATISFIED WITH THE IMPOSITION OF PENALTY, ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A). IT REITERATED ITS CONTENTION. IT ALSO POINTED OUT THAT IN ASSTT. YEA R 1999-2000. LD. FIRST APPELLATE AUTHORITY HAS DELETED THE PENAL TY VIDE ORDER DATED 22 ND OCTOBER, 2009. LD. CIT(A) DELETED THE PENALTY IN T HIS ASSTT. YEAR ALSO AND HE RELIED UPON HIS FINDING REC ORDED IN 1999- 2000. LD. FIRST APPELLATE AUTHORITY DID NOT FIND AN Y DISPARITY IN THIS ASSTT. YEAR. HE HAS REPRODUCED HIS ORDER IN AS STT. YEAR 1999-2000 ON PAGES 4 6 OF THE IMPUGNED ORDER. ITA NO. 3606/DEL/10 ASSTT. YEAR 2000-01 5 6. LD. DR WHILE IMPUGNING THE ORDER OF LD. CIT(A) S UBMITTED THAT ASSESSEE HAS THE BENEFIT OF EXPERTS FOR ITS GU IDANCE AND IT COULD EASILY ANTICIPATE THE DIVIDEND INCOME OR INTE REST INCOME WERE NOT DERIVED FROM THE BUSINESS OF LONG TERM FIN ANCE. IN SUCH SITUATION, IT SHOULD HAVE NOT INCLUDED THESE R ECEIPTS IN THE GROSS RECEIPTS WHILE COMPUTING DEDUCTION ADMISSIBLE U/S 36(1)(VIII) OF THE ACT. HE RELIED UPON THE ORDER OF THE AO. 7. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND DREW OUR ATTENTION TOWARDS PAGE NO. 8 OF THE PAPER BOOK WHEREIN ASSESSEE HAS PLACED ON RECORD THE DETAILS IN TABULA R FORM EXHIBITING THE DETAILS OF DIVIDEND ON INVESTMENT, M ISCELLANEOUS RECEIPTS, SERVICE CHARGES, INTEREST ON ADVANCE DEPO SITS AND INTEREST ON BANK ACCOUNT RIGHT FROM ASSTT. YEAR 199 4-95 UPTO 1999-2000. HE POINTED OUT THAT ALL ALONG IN THE PAS T, DEDUCTION U/S 36(1)(VIII) HAS BEEN ALLOWED TO THE ASSESSEE BY DIFFERENT AOS IN SCRUTINY ASSESSMENT PASSED U/S 143(3). THUS, ASSESSEE IN THE PRESENT YEAR HAS A PRIME FACIE BELIEF THAT D EDUCTION U/S 36(1)(VIII) WOULD BE ADMISSIBLE TO IT ON SUCH INCOM E. IT HAS DISCLOSED ALL THE BASIC FACTS TRULY AND CORRECTLY. IT HAS NOT CONCEALED ANY PARTICULARS OR FURNISHED ANY INACCURA TE PARTICULARS. IT IS THE AO WHO HAS TO ASSESS THE TRU E INCOME OF ITA NO. 3606/DEL/10 ASSTT. YEAR 2000-01 6 ASSESSEE ON THE BASIS OF THESE VERY DETAILS. IT IS A DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE AO ABOUT INCLU SION OR EXCLUSION OF CERTAIN RECEIPTS IN THE GROSS RECEIPTS ELIGIBLE FOR DEDUCTION U/S 36(1)(VIII). THEREFORE, THERE CANNOT BE ANY PENALTY ON SUCH BONAFIDE BELIEF OF THE ASSESSEE. FO R BUTTERACING HIS CONTENTION, HE RELIED UPON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN 322 ITR 158. HE ALSO RELIED UPON THE DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MAH ANAGAR TELEPHONE LIMITED RENDERED IN ITA NO. 626 /2011. HE PLACED ON RECORD COPY OF THE JUDGMENT OF THE HONBLE COURT. L D. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN 1999-200 0 PENALTY HAS BEEN DELETED. LD. CIT(A) HAS PUT HIS RELIANCE O N THAT ORDER. THE COD I.E. COMMITTEE ON DISPUTE, DENIED PERMISSIO N TO THE REVENUE FOR AGITATING THE MATTER IN FURTHER APPEAL BEFORE THE TRIBUNAL. THUS, THE ORDER IN ASSTT. YEAR 1999-2000 PASSED BY THE LD. CIT(A) BECOME FINAL. HE PLACED ON RECORD CO PY OF THE MINUTES OF MEETING HELD ON 23.12.2010 AND POINTED O UT THAT PERMISSION TO CHALLENGE THE ORDER OF THE LD. CIT(A) FOR DELETING PENALTY IN ASSTT. YEAR 1999-2000 HAS BEEN DENIED. T HE ISSUE IS ITA NO. 3606/DEL/10 ASSTT. YEAR 2000-01 7 AVAILABLE AT SL. NO. 19-20 OF THE MINUTES OF THE M EETING. HE PREYED THAT APPEAL OF THE REVENUE BE DISMISSED. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. 9. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARIN G ON THE CONTROVERSY AND, THEREFORE, IT IS SALUTARY UPON US TO TAKE NOTE OF THE RELEVANT PROVISIONS OF SECTION 271(1)(C) ALONG WITH EXPLANATION 1 WHICH READ AS UNDER: 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1). IF THE ASSESSING OFFICER OR THE COMMISSIONER ( APPEALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER T HIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)******** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I) AND (INCOME-TAX OFFICER,)******** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHIC H SHALL ITA NO. 3606/DEL/10 ASSTT. YEAR 2000-01 8 NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICULARS OF SUCH IN COME OR FRINGE BENEFITS: EXPLANATION 1.- WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON U NDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER(APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLAN ATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SA ME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLO WED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESU LT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF TH IS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 10. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICE R OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCE EDINGS BEFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, ITA NO. 3606/DEL/10 ASSTT. YEAR 2000-01 9 THE PENALTY IMPOSED UNDER THIS SECTION CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNIS HING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FE ATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEA LMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INAC CURATE PARTICULARS, IN CERTAIN SITUATION, EVEN WITHOUT THE RE BEING ANYTHING TO INDICATE SO, STATUTORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTUL ATES TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FAC TS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVI SIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEALS); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NO T ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASS ESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MA TERIAL TO THE COMPUTATION OF THE TOTAL INCOME. UNDER FIRST SITUAT ION, THE DEEMING FICTION WOULD COME TO PLAYA IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATER IAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CAT EGORICAL FINDING TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME ITA NO. 3606/DEL/10 ASSTT. YEAR 2000-01 10 TO PLAY BY THE FAILURE OF THE ASSESSEE TO SUBSTANTI ATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSE E IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSE E. THESE TWO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED T O SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN TH E RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INC OME OF THE ASSESSEE, FOR THE PURPOSE OF SECTION 271(1)(C) WOUL D BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 11. THE ASSESSEE HAS DISCLOSED ALL THE FACTS FULLY AND TRULY. IT IS NOT THE CASE OF AO THAT ASSESSEE HAS FURNISHED I NACCURATE PARTICULARS. FROM THE DETAILS SUBMITTED BY THE ASSE SSEE, AO HAS FORMED AN OPINION IN A REASSESSMENT PROCEEDING THAT CERTAIN RECEIPTS DOES NOT QUALIFY FOR INCLUSION FOR THE PUR POSE OF COMPUTATION OF DEDUCTION ADMISSIBLE U/S 36(1)(VIII) . THE AO HIMSELF ALLOWED DEDUCTION TO THE ASSESSEE FROM ASST T. YEAR 1994-95 UPTO 1998-99. IN 1999-2000, ASSESSMENT WAS REOPENED AND THEREAFTER DEDUCTION WAS DISALLOWED TO THE ASSESSEE FOR THE FIRST TIME. BUT THE PENALTY IMPOSE D ON SIMILAR CIRCUMSTANCE WAS DELETED BY THE LD. CIT(A). THE RE VENUE WAS ITA NO. 3606/DEL/10 ASSTT. YEAR 2000-01 11 NOT PERMITTED BY THE COD TO CHALLENGE ORDER OF THE LD. CIT(A) IN ASSTT. YEAR 1999-2000. CONSIDERING THE CUMULATIVE S ETTING OF ALL THESE FACTS, WE ARE OF THE VIEW THAT THERE IS NO DE LIBERATE ATTEMPT AT THE END OF ASSESSEE TO EVADE THE PAYMENT OF TAXES. IT DOES NOT DESERVE TO BE VISITED WITH PENALTY U/S 271(1)(C). LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY DELETED THE P ENALTY. ORDER PRONOUNCED IN THE OPEN COURT ON 2.12.2011 . SD/- SD/- [G.E.VEERABHADRAPPA] [RAJPAL YADAV] PRESIDENT JUDICIAL MEMBER DATED: 2.12.2011 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES