DCIT, New Delhi V. M/s. Xylos Arteriors India Pvt. Ltd., New Delhi

ITA 3614/DEL/2015

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8298 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 04-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 3614/DEL/2015 AY: 20 10-11 DCIT, VS XYLOS ARTERIORS INDIA PVT. LTD., CIRCLE 27(2), A-1/292, JANAK PURI, ROOM NO. 193, NEW DELHI-110058 C.R. BUILDING, (PAN: AAACX0732F) NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY : MS ASHIMA NEB, SR. DR ASSESSEE BY : NONE PRESENT DATE OF HEARING: 04.07.2018 DATE OF PRONOUNCEMENT: 03.10.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 26.03.2015 PASSED BY THE LD. CIT (APPEA LS)-22, NEW DELHI FOR ASSESSMENT YEAR 2010-11. 2.0 BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED AT A LOSS OF RS. 65,44,462/-. SUBSEQUENTLY, THE CA SE WAS SELECTED FOR SCRUTINY AND DURING THE COURSE OF SCRUTINY, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THERE WAS AN INCOME OF R S. 82,932/- ONLY WHEREAS THE EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT ITA NO. 3614/DEL/2015 ASSESSMENT YEAR 2010-11 2 AMOUNTED TO RS. 66,29,006/-. THE ASSESSEE WAS ASKE D TO ESTABLISH ITS CLAIM OF ALLOWABILITY OF EXPENSES OF RS. 66,29,006/-. IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE COMPA NY THAT SINCE THIS WAS THE FIRST YEAR FOR INCORPORATION OF THE CO MPANY AND THE COMPANY WAS UNDER THE PROCESS OF SHIFTING ITS BUSIN ESS UNIT AS WELL AS SHOWROOM IN MUMBAI, SUBSTANTIAL SALES HAD N OT TAKEN PLACE AND THAT THE MAJOR EXPENSES WERE TOWARDS SALA RY WHICH WAS AROUND RS. 40 LACS COMPRISING OF AROUND 60% OF THE TOTAL EXPENDITURE. HOWEVER, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE EXPENDITURE OF RS. 66,29,006/-, AS CLAIMED IN THE PROFIT AND LOSS ACCOUNT, WAS IN THE NATURE OF PREOPERATIVE EXPENDITURE AS THE BUSINESS OPERATIONS HAD NOT STARTED AND, THE REFORE, THESE EXPENSES WERE NOT ALLOWABLE U/S 36 AND 37 OF THE AC T. THE ASSESSING OFFICER PROCEEDED TO MAKE AN ADDITION OF RS. 66,29,006/- TO THE INCOME OF THE ASSESSEE. 2.1 THEREAFTER, THE PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT WERE INITIATED AND PENALTY OF RS. 20,47,864/- WAS I MPOSED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 2.2 ON APPEAL BEFORE THE LD. CIT (A), THE LD. CIT ( A) DELETED THE PENALTY. NOW, THE DEPARTMENT IS BEFORE THE ITAT AN D HAS ITA NO. 3614/DEL/2015 ASSESSMENT YEAR 2010-11 3 CHALLENGED THE DELETION OF PENALTY BY THE LD. CIT ( A) AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE PE NALTY U/S 271(1)(C) AMOUNTING TO RS. 20,47,864/- IGNORING THE FACT THAT NO APPEAL WAS FILED BY THE ASSESSEE AGAIN ST THE QUANTUM ADDITION OF RS. 66,29,006/-. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE PE NALTY U/S 271(1)(C) AMOUNTING TO RS. 20,47,864/- IGNORING THE FACT THAT ASSESSEE COMPANY HAD FURNISHED THE INACCURATE PARTICULARS OF THEIR INCOME AND PENALTY IS A CIVIL LIABILITY'. 3. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE/RESPO NDENT WHEN THE APPEAL WAS CALLED OUT FOR HEARING NOR WAS ANY APPLICATION FOR ADJOURNMENT RECEIVED ON BEHALF OF T HE ASSESSEE/ RESPONDENT. HOWEVER, LOOKING INTO THE FACTS OF THE CASE, WE DEEM IT APPROPRIATE TO DECIDE THE APPEAL ON MERITS EX-PARTE QUA THE ASSESSEE/RESPONDENT. 4. THE LD. SR. DR ARGUED THAT THE ASSESSEE HAD NOT FILED ANY APPEAL AGAINST THE QUANTUM ADDITION OF RS. 66,29,00 6/- AND, THEREFORE, IT WAS APPARENT THAT THE ASSESSEE HAD AC CEPTED THAT THE QUANTUM ADDITION WAS JUSTIFIED. IT WAS FURTHER SUB MITTED THAT THE LD. CIT (A) HAD IGNORED THE OBSERVATIONS AND FI NDINGS OF THE ASSESSING OFFICER WHILE DELETING THE PENALTY. IT W AS SUBMITTED ITA NO. 3614/DEL/2015 ASSESSMENT YEAR 2010-11 4 THAT IT WAS A CLEAR CASE OF FURNISHING OF INACCURAT E PARTICULARS OF INCOME AND THE PENALTY HAD BEEN RIGHTLY IMPOSED. I T WAS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE SET ASIDE AND THE PENALTY REINSTATED. 5.0 WE HAVE HEARD THE LD. SR. DR AND HAVE ALSO PERU SED THE IMPUGNED ORDERS. A PERUSAL OF THE ORDERS SHOWS THA T THE CONTENTION OF THE ASSESSING OFFICER IS INCORRECT TH AT THE BUSINESS OF THE ASSESSEE HAD NOT COMMENCED. IT WAS ONLY SUB MITTED BEFORE THE ASSESSING OFFICER THAT IT WAS THE FIRST YEAR OF INCORPORATION OF THE COMPANY AND THE COMPANY HAD ALSO SOLD SAMPLES O F WOODEN FLOORING TO ONE OF THE PARTIES TOWARDS WHICH AN INC OME OF RS. 82,932/- HAD BEEN DECLARED BY THE ASSESSEE. IT IS ALSO SEEN THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENE SS OF THE EXPENSES AND THE ONLY GROUND FOR DISALLOWING THE EX PENDITURE WAS THAT IN VIEW OF THE ASSESSING OFFICER THE EXPENSES WERE IN THE NATURE OF PREOPERATIVE EXPENSES. FURTHER, IT IS SE EN THAT THE ASSESSING OFFICER HAS IMPOSED PENALTY FOR FURNISHIN G INACCURATE PARTICULARS OF INCOME WHEREAS ON FACTS OF THE CASE, IT IS OUR CONSIDERED OPINION THAT ALL THE INFORMATION RELEVAN T TO THE IMPUGNED DISALLOWANCES WAS BEFORE THE ASSESSING OFF ICER AT THE TIME OF ASSESSMENT PROCEEDINGS AND NO CASE COULD HA VE BEEN ITA NO. 3614/DEL/2015 ASSESSMENT YEAR 2010-11 5 MADE OUT BY THE AO FOR FURNISHING INACCURATE PARTIC ULARS OF INCOME. THE HONBLE APEX COURT IN THE CASE OF RELI ANCE PETROPRODUCTS PVT. LTD. REPORTED IN 322 ITR 158 (SC ) (2010) HAD MADE THE FOLLOWING OBSERVATION WITH RESPECT TO THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT:- THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS U/ S. 271(1)(C) MUST EXIST BEFORE THE PE NALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WO ULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ON LY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS AR E FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. IN DILIP N. SHROFF V. JOINT CIT, (2007) 6 SCC 329, THIS COUR T EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND FURNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT THE PENALTY U /S.271 (1)(C), MENS REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD INACCURATE' SIGNIFIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO H OLD THAT CLAUSE (III) OF S. 271 (1) (C) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUTHO RITY, INASMUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASO N OF SUCH CONCEALMENT OF PARTICULARS OF INCOME, BUT IT M AY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM INACCURATE PARTICULARS' WAS NOT DEFINED ANYWH ERE ITA NO. 3614/DEL/2015 ASSESSMENT YEAR 2010-11 6 IN THE ACT AND, THEREFORE, IT WAS HELD THAT FURNISH ING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS. IT WAS FURTHER HELD THAT THE ASSESSING OFFICER MUST BE FOUND TO HA VE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY NO T BONA FIDE BUT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT THE EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER, THE ASSESSEE HAD FURNISHED THE PARTICULARS OF HIS INCOME. THE COURT ULTIMATELY WENT ON TO HOLD THAT T HE ELEMENT OF MEANS REA WAS ESSENTIAL. IT WAS ONLY ON THE POINT OF MEANS REA JHAT THE JUDGMENT IN DILIP N. SH ROFF V JOINT CIT WAS UPSET. 5.1 THE HONBLE APEX COURT FURTHER HELD AS FOLLOWS: A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN O RDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE PRESENT IS NOT A CASE OF CONCEALMENT OF INCOME. THAT IS NOT TH E CASE OF THE REVENUE EITHER. HOWEVER, THE LD. COUNSEL FOR TH E REVENUE SUGGESTED THAT BY MAKING INCORRECT CLAIM FOR THE EX PENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. AS PER LAW LEXICON, THE MEANING OF THE W ORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENS E); THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. TH EREFORE, THE WORD 'PARTICULARS' USED IN THE SECTION 271 (1) (C) WOULD ITA NO. 3614/DEL/2015 ASSESSMENT YEAR 2010-11 7 EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MAD E. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFOR MATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR IN ACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPL IED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, P RIMA FACIE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING IN ACCURATE PARTICULARS. THE LEARNED COUNSEL ARGUED THAT 'SUBMI TTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTER EST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INC OME.' WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN I NCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCU RATE PARTICULARS. 5.2 THEREFORE, IN VIEW OF THE JUDGMENT OF THE HONB LE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SU PRA), WE ARE OF THE OPINION THAT THE LD. CIT (A) WAS JUSTIFIED IN D ELETING THE IMPUGNED PENALTY AND WE FIND NO REASON TO INTERFERE WITH HIS FINDINGS ON THE ISSUE. THE GROUNDS RAISED BY THE DE PARTMENT ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT STAN DS DISMISSED. ITA NO. 3614/DEL/2015 ASSESSMENT YEAR 2010-11 8 ORDER PRONOUNCED IN THE OPEN COURT ON 3RD OCTOBER, 2018. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 3 RD OCTOBER , 2018 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 1 ITA NO. 3614/DEL/2015 ASSESSMENT YEAR 2010-11 9