DCIT CIR 3(1), MUMBAI V. EARNEST CAPITAL MANAGEMENT P. LTD, MUMBAI

ITA 3616/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62199 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 02-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ALOK BARIYAGRA
• Keywords: Wrong claim; Difference of opinion; Revised return
• Section: 27

Judgement Text

M/S EARNEST CAPITAL MANAGEMENT P LTD ITA NO. 3616/MUM/2010 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI T R SOOD,A M & SHRI VIJAY PAL RAO, JM ITA NO. 3616/MUM/2010 (ASST YEAR 2005-06) THE DY COMMR OF INCOME TAX CIRCLE 3(1), MUMBAI VS M/S EARNEST CAPITAL MANAGEMENT P LTD 7/11 TULSIANI CHAMBERS NARIMAN POINT MUMBAI 21 (APPELLANT ) (RESPONDENT) PAN NO. AABCE3157A ASSESSEE BY SH ALOK BARIYAGRA REVENUE BY SH D S SUYNDERSINGH DT.OF HEARING 2 ND APRIL 2012 DT OF PRONOUNCEMENT 4 TH APRIL 2012 ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 2.2.2010 OF THE CIT(A) ARISING FROM THE PENALTY ORDER PASSED U/S 27 1(1) (C) OF THE (I T ACT FOR THE ASSESSMENT YEAR 2005-06. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND IN T HIS APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN DELETING PENALTY OF RS. 4,00,031/- LEVIED U/S 271(1)( C) OF THE I T ACT IN RESPECT OF DISALLOWANCE OF LOSS ON SALE OF FIXED ASS ETS OF RS. 10,93,204/-. 2.1 DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER OBSERVED THAT THE ASSESSEE HAS DEBITED RS.10,93,204/- ON ACCOUNT OF L OSS ON SALE OF FIXED ASSETS; HOWEVER, THE SAME HAS NOT BEEN ADDED IN THE COMPUTA TION OF INCOME FILED ALONG WITH THE RETURN OF INCOME. TO RECTIFY THE MISTAKE, THE ASSESSEE FILED REVISED COMPUTATION WHEREIN THE LOSS ON SALE OF FIXED ASSET S OF RS. 10,93,204/- WAS ADDED TO M/S EARNEST CAPITAL MANAGEMENT P LTD ITA NO. 3616/MUM/2010 2 THE TOTAL INCOME. THE ASSESSING OFFICER DID NOT AC CEPT THE REVISED COMPUTATION OF INCOME FILED BY THE ASSESSEE BY CITING THE DECISION OF THE HONHBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS CIT REPORTED IN 284 ITR 323(SC). 2.2 THE ASSESSMENT WAS COMPLETED BY ADDING THE SAI D AMOUNT OF RS. 10,34,204/- AS INCOME OF THE ASSESSEE AND PENALTY PROCEEDINGS U /S 271(1)( C) WERE ALSO INITIATED BY ISSUING NOTICE U/S 274 R.W.S 271(1) ( C) DATED 17.6.2008. CONSEQUENTLY, THE ASSESSING OFFICER LEVIED PENALTY OF RS. 4,00,031/- U/S 271(1) (C) VIDE ORDER DATE 30.6.2008. 2.3 THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEF ORE THE CIT(A) AND SUBMITTED THAT THE ASSESSEE INCURRED LOSS SINCE IT WAS CLOSI NG DOWN ITS BUSINESS OF LEASE FINANCED/HIRE PURCHASE OF PLANT AND MACHINERY. THE ASSESSEE SOLD THE PLANT AND MACHINERY TO THE PARTIES TO WHOM IT HAD LEASED THE SAME AND SUFFERED LOSS OF RS.10.93 LACS. IT WAS SUBMITTED THAT SINCE THE AS SESSEE WAS INTO THE BUSINESS OF LEASE FINANCE/HIRE PURCHASE OF PLANT & MACHINERY AND FINA LLY SELLING OF THE SAID ASSETS TO THE LESSEE FOR A LOSS, WHICH IN VIEW OF THE ASSESSE E, TO BE A LOSS ON ACCOUNT OF BUSINESS. ACCORDINGLY, THE SAME WAS CLAIMED AS BUS INESS LOSS IN THE P&L ACCOUNT. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE HAD MADE FU LL AND COMPLETE DISCLOSURE OF ALL THE FACTS RELATING TO THE COMPUTATION OF ITS INCOME . THE ONLY POINT ON WHICH THERE WAS A DIFFERENCE BETWEEN THE ASSESSEE AND THE ASSES SING OFFICER WAS THE HEAD OF INCOME UNDER WHICH LOSS INCURRED BY THE ASSESSEE ON SALE OF ASSETS WAS TO BE CLAIMED. THUS, IT WAS A DIFFERENCE OF OPINION, WHE N THE VIEW TAKEN BY THE ASSESSEE, WAS NOT ACCEPTED BY THE ASSESSING OFFICER 2.4 AFTER CONSIDERING THE FACTS AND THE EXPLANATION OF THE ASSESSEE, THE CIT(A) DELETED THE PENALTY. M/S EARNEST CAPITAL MANAGEMENT P LTD ITA NO. 3616/MUM/2010 3 3 BEFORE US, THE LD DR HAS SUBMITTED THAT THE ASSES SEE MADE WRONG CLAIM OF LOSS OF RS. 10,93,204/- WHICH WAS CAPITAL IN NATURE DUE TO TRANSFER OF FIXED ASSETS. THE ASSESSEE SUBSEQUENTLY ACCEPTED THE SAID WRONG CLAIM AND FILED REVISED COMPUTATION OF INCOME, WHICH WAS NOT ACCEPTED BY TH E ASSESSING OFFICER IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF GOETZE (INDIA) LTD (SUPRA). HE HAS RELIED UPON THE PENALTY ORDER PASSED U/S 271 (1) (C ) BY THE ASSESSING OFFICER. 3.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S REITERATED THE CONTENTIONS AS RAISED BEFORE THE CIT(A) AND SUBMITTED THAT THIS IS A CASE OF DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER. TH E ASSESSEE CLAIMED LOSS AS BUSINESS LOSS AS ARISING FROM THE SALE OF LEASED AS SETS TO THE LESSEE ITSELF; HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE SAME. THERE FORE, THE CLAIM, WHICH IS NOT ACCEPTABLE UNDER THE PROVISIONS OF LAW, WOULD NOT A MOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. 4 WE HAVE CONSIDERED THE RIVAL CONTENTION AND RELEV ANT MATERIAL ON RECORD. UNDISPUTEDLY, WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO CLARIFY THE AMOUNT OF RS. 10.93 LACS DEBITED TO THE P&L ACCOUNT, ON ACCOU NT OF LOSS ON SALE OF FIXED ASSETS, THE ASSESSEE FILED REVISED COMPUTATION OF INCOME AN D ADDED THE SAID OF R. 10.93 LACS IN THE COMPUTATION OF INCOME. THE ASSESSING O FFICER DID NOT ACCEPT THE REVISED COMPUTATION OF INCOME BY CITING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD (SUPRA). 4.1 IT IS NOT THE CASE OF RAISING A FRESH CLAIM BY THE ASSESSEE WHILE FILING A REVISED RETURN OF INCOME. IT IS A CASE WHERE THE ASSESSIN G OFFICER QUESTIONED THE ALLOWABILITY OF LOSS WHICH WAS ACCEPTED BY THE ASSESSEE BY FILIN G THE REVISED COMPUTATION OF INCOME AND THE ASSESSING OFFICER ULTIMATELY ASSESSE D THE INCOME BY ADDING THE SAME IN THE INCOME OF THE ASSESSEE. THEREFORE, THE DECISION OF THE HONBLE SUPREME M/S EARNEST CAPITAL MANAGEMENT P LTD ITA NO. 3616/MUM/2010 4 COURT IN THE CASE OF GOETZE (INDIA) LTD (SUPRA) IS NOT RELEVANT ON THE FACTS OF THE PRESENT CASE. 4.2 EVEN IN THE REVISED COMPUTATION OF INCOME, THE ASSESSEE HAS NOT CHANGED THE AMOUNT; BUT THE BUSINESS LOSS CLAIMED BY THE AS SESSEE ACCEPTED AS CAPITAL LOSS. THEREFORE, THERE WAS NO DIFFERENT IN THE PRIMARY FA CTS OF THE LOSS WAS DUE TO SALE OF LEASED ASSETS. THE ONLY POINT ON WHICH THE ASSESSI NG OFFICER HAD OBJECTION AS THE ALLOWABILITY OF THE LOSS, WHICH WAS ACCEPTED BY THE ASSESSEE, AND ADDED BACK TO THE INCOME; THEREFORE, THE CLAIM OF THE ASSESSEE IS NOT A BOGUS CLAIM OR CLAIM OF NON EXISTENCE LOSS. THERE IS NO DISPUTE THAT THERE WAS LOSS OF RS. 10.93 LACS ON SALE OF LEASED ASSETS. THE DISPUTE WAS ONLY ON THE POINT WH ETHER THE LOSS IS ALLOWABLE OR NOT. THEREFORE, WHEN THE ASSESSEE HAS DISCLOSED ALL THE PRIMARY FACTS, THEN EVEN IF THE CLAIM OF THE ASSESSEE IS NOT ALLOWABLE AS PER THE P ROVISIONS OF LAW, THE SAME CANNOT E LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS CONC EALED INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME ATTRACTING THE LE VY OF PENALTY U/S 271(1)( C) OF THE ACT. 4.3 THEREFORE, HAVING REGARD TO THE FACTS AND CIRCU MSTANCES OF THE CASE, THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F COMMISSIONER OF INCOME-TAX V. RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN 322 IT R 158 WILL APPLY TO THE CASE OF THE ASSESSEE. THE HONBLE SUPREME COURT HAS HELD THAT A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOU NT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. IN T HIS VIEW OF THE MATTER, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CI T(A) IN DELETING THE PENALTY. M/S EARNEST CAPITAL MANAGEMENT P LTD ITA NO. 3616/MUM/2010 5 5 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 4 TH , DAY OF APRIL 2012 SD/ SD/- ( T R SOOD ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 4 TH , APRIL 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI