SHILPA DILESH MEHTA, MUMBAI V. DCIT CIR 26(2), MUMBAI

ITA 3665/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8141 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 16-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 23-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: MANISH J SHETH
• Keywords: Capital asset; Earning of tax free income; Difference of opinion
• Section: 14A; 56

Judgement Text

, , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH. . . , , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.3665/MUM/2012, ! ! ! ! / ASSESSMENT YEAR-2007-08 SHILPA DILESH MEHTA 283/18, DEVKARAN NIVAS, SAMUEL STREET, MUMBAI. ' ' ' '. .. . . .. . . .. . /PAN:AAZPM1661L VS. DCIT CIRCLE 26 (2) AAYAKAR BHAVAN, MUMBAI-400020 ( '% / APPELLANT) ( &''% / RESPONDENT) () () () () * * * * / ASSESSEE BY : SHRI MANISH J. SHETH + * / REVENUE BY : SHRI NEIL PHILIP + ++ + ), ), ), ), / DATE OF HEARING : 16-09-2014 -.! + ), / DATE OF PRONOUNCEMENT : 26-09-2014 , 1961 + ++ + 254 254 254 254( (( (1 11 1) )) ) )5) )5) )5) )5) 6 6 6 6 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM : CHALLENGING THE ORDER DT.19.03.2012 OF THE CIT(A)-2 8,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT OFFICER HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN LEVYING PENALTY U/S. 271(1)(C) OF RS.1,40,284/- ON THE ADDITION MADE EVE N WHEN ALL THE FACTS OF THE CASE WERE SET BEFORE AND NO WITHHOLDING OF ANY INFORMATION WAS DONE BEFO RE THE DEPARTMENT. THE ASSESSEE HAS REPRESENTED ALL THE PARTICULARS OF INCOME IN THE RE TURN/COMPUTATION AND NO INFORMATION GIVEN IN THE SAME IS EITHER INCORRECT OR INCOMPLETE. ALL THE SPECIFICS OF THE INCOME ARE FURNISHED. 2. THAT THE LD. CIT OFFICER HAS ERRED IN ADOPTING T HAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND HAS RELIED ON THE VIEW THAT IT WAS INTEN TIONAL ON THE PART OF THE ASSESSEE TO CONCEAL INCOME. ALL THE FACTS AND FIGURES ARE KEPT BEFORE A ND DISALLOWANCE MADE IN THE ASSESSMENT IS SOLELY ON ACCOUNT OF DIFFERENT VIEW TAKEN ON THE SAME FACT S AND HENCE THE SAME CAN BE TERMED AS DIFFERENCE OF OPINION AND NOT A CASE OF CONCEALED I NCOME AND THUS PENALTY CANNOT BE IMPOSED ON SUCH DIFFERENCE OF OPINION. 3. THAT THE LD. CIT OFFICER HAS ERRED IN MAKING AN IMPLICATION THAT THE ASSESSEE TREATED THE INVESTMENT IN SHARES AS CAPITAL ASSET AND THUS AMOU NTING TO FURNISHING OF INACCURATE PARTICULARS OF INCOME SINCE ANY STATEMENT MADE OR ANY DETAILS SUPP LIED BY THE ASSESSEE ARE NOT FACTUALLY INCORRECT. THE ASSESSEE BORROWED MONEY FOR MAKING V ARIOUS INVESTMENTS IN SHARES OF COMPANIES, BONDS, BANK FDS, ETC. ON WHICH RETURNS WERE RECEIVE D BY WAY OF DIVIDEND, INTEREST ON BONDS, LOANS GIVEN AND BANK DEPOSITS AND SHORT TERM CAPITAL GAIN . THE ASSESSEE PAID INTEREST ON THE ABOVE SAID BORROW INGS. HENCE, INTEREST EXPENSE ON UNSECURED LOAN WAS LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF EARNING INCOME FROM DIVIDEND AND INTEREST ON BONDS & FIXED DEPOSITS AND SHORT TERM CAPITAL GAINS AND THUS SAME WAS CLAIMED AS DEDUCTIBLE EXPENDITURE U/S.57 (III). 4. THAT THE LD. CIT OFFICER HAS GRIEVOUSLY ERRED IN ADOPTING THAT THE ASSESSEE'S CLAIM WAS NOT BONAFIDE WHEN THE AMOUNT WAS BORROWED TO EARN CAPIT AL GAIN, INCOME FROM OTHER SOURCES AND EXEMPT INCOME BUT ACCORDING TO THE PROVISIONS OF SE CTION 57, THE EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING INCOME CAN BE CLAIMED AS DEDUCTI ON EVEN IF THE CONNECTION BETWEEN THE EXPENDITURE AND EARNING OF INCOME IS NOT DIRECT. 5. THE ASSESSEE RESERVES HER RIGHT TO ADD, DELETE, AMENDS, ALTER, AND MODIFY ANY OTHER GROUNDS OF APPEAL. 2. ASSESSEE,AN INDIVIDUAL,FILED HER RETURN OF INCOME O N 28.07.2007 DECLARING INCOME AT RS.32,32, 2 ITA NO.3665/M/2012 SHILPA DILESH MEHTA 650/-.ASSESSING OFFICER (AO)FINALISED THE ASSESSMEN T ON 27.10.2009 U/S.143(3) OF THE ACT DETERM -INING THE INCOME OF THE ASSESSEE AT RS.36.49 LAKHS .DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT ASSESSEE HAD CLAIMED EXPENSES TO THE EXT ENT OF RS. 4,83,368/- U/S. 57 OF THE ACT.ON PERUSAL OF THE COMPUTATION OF INCOME,HE FURTHER FOU ND THAT THE ASSESSEE HAD OFFERED INTEREST INCOME TO THE TUNE OF RS.1,00,308/- AND AS AGAINST THE SAID AMOUNT SHE HAD DEBITED INTEREST AND OTHER EXPENSES TO THE EXTENT OF RS.4.83 LAKHS RESUL TING IN LOSS UNDER THE HEAD 'INCOME FROM OTHER SOURCES' TO THE TUNE OF RS.3.83 LAKHS.CONSIDERING T HESE FACTS, AO HELD THAT AS PER THE PROVISIONS OF SECTION 57 OF THE ACT, ASSESSEE COULD CLAIM EXPE NSES U/S. 57 TO THE EXPENDITURE IF SAME WERE NECESSARY TO EARN THE INCOME U/S.56,THAT IT WAS IMP OSSIBLE TO INCUR EXPENSES OF RS.4.83 LAKHS TO THE EARN INCOME OF RS.1,00,308/-,THAT THE EXPENSES WERE NOT RELATED TO EARNING OF INCOME U/S. 56 OF THE ACT.FINALLY, AN AMOUNT OF RS. 4.16 LAKHS (PR OPORTIONATE EXPENSES) WERE DISALLOWED BY HIM. THE AO ALSO INITIATED PENALTY PROCEEDINGS U/S.271(1 )(C) OF THE ACT.THE ASSESSEE DID NOT FILE ANY APPEAL AGAINST THE QUANTUM ADDITION.MEANWHILE, THE AO ISSUED A NOTICE,DATED 27.10.2009,ASKING THE ASSESSEE AS TO WHY THE PENALTY U/S.271(1)(C)SHO ULD NOT BE LEVIED.THE ASSESSEE VIDE HER LETTER, DATED 01.12.2009,ADMITTED THAT THERE WAS OMISSION O F HER PART, THAT IT WAS UNINTENTIONAL WHICH LED TO NON-DECLARATION OF INTEREST INCOME TO RS.4.16 LA KHS IN THE RETURN.AO WAS OF THE OPINION THAT ASSESSEE HAD FILED INACCURATE PARTICULARS OF INCOME BY WAY OF INTEREST. HE LEVIED A PENALTY OF RS. 1,40,284/- U/S.271(1)(C) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM IT WAS CLAIMED THAT DEDU CTION WAS AVAILABLE U/S.57 OF THE ACT FOR THE INTEREST EXPENDITURE,THAT THE ASSESSEE HAD OBTAINED UNSECURED LOANS MAINLY FOR INVESTMENT IN SHARES,THAT IT RESULTED IN CAPITAL GAINS,THAT THE A SSESSEE HAD SHOWN CAPITAL GAINS IN HER RETURN, THAT INTEREST PAID AND THE BORROWED FUNDS WERE RELATED T O INVESTMENT AND THE EXPENDITURE CLAIMED FOR MAKING INVESTMENT IN SHARES WAS ALLOWABLE EXPENDITU RE. AFTER CONSIDERING THE ASSESSMENT ORDER,SUBMISSION O F THE ASSESSEE AND PENALTY ORDER, THE FAA HELD THAT THE EXPENDITURE CLAIMED TO HAVE BEEN INCU RRED FOR MAKING INVESTMENT IN SHARES WOULD BE DEDUCTIBLE FOR COMPUTING CAPITAL GAINS,THAT THE EXP ENDITURE CLAIMED UNDER THE HEAD INCOME FROM OTHER SOURCES WOULD AMOUNT TO FURNISHING OF INACCUR ATE PARTICULARS OF INCOME,THAT EXPENDITURE INCURRED FOR EARNING DIVIDEND WAS NOT ALLOWABLE ON ACCOUNT OF PROVISIONS OF SECTION 14A OF THE ACT,THAT CLAIMING DEDUCTION FOR INTEREST EXPENDITUR E FOR EARNING CAPITAL GAINS AND DIVIDEND INCOME WAS NOT JUSTIFIED,THAT THE ASSESSEE HAD ACTED IN A RECKLESS MANNER, THAT THE CLAIM MADE BY THE ASSESSEE FOR DEDUCTION OF INTEREST PAID AGAINST THE INTEREST INCOME (AS REVENUE EXPENSES) WAS NOT BONAFIDE,THAT THE AMOUNT WAS BORROWED TO EARN INCOM E/CAPITAL GAINS, THAT THE CASES RELIED UPON BY THE ASSESSEE WERE OF NO HELP.THE FAA REFERRED TO TH E CASES OF DHARMENDRA TEXTILE DELIVERED BY THE HON'BLE SUPREME COURT HE FURTHER HELD THAT ASSE SSEE COULD NOT SUBSTANTIATE HER CLAIM FOR DEDUCTION OF INTEREST EXPENSES AGAINST THE INCOME F ROM OTHER SOURCES, THAT THE PENALTY LEVIED BY THE AO WAS IN ORDER THAT THE CLAIM OF THE ASSESSEE WAS NOT BONAFIDE.FINALLY, HE CONFIRMED THE ORDER OF THE AO. 4. BEFORE US,AUTHORISED REPRESENTATIVE (AR) STATED THA T ASSESSEE HAD FILED ALL THE NECESSARY DETAILS BEFORE THE AO,THAT SHE HAD NOT CONCEALED ANY FACT.H E RELIED UPON THE CASES OF NALIN P SHAH(IT APPEAL NO.49 OF 2013,DATED 04.03.2013),RELIANCE PET RO CHEMICALS(189TAXMAN322),ADITY BIRLA NOVA LTD.(IT APPEAL 3899 OF 2010 DATED 14.12.2012) AND STINGREY TRADERS P.LTD.(ITA/ 5445/ MUM/2011).DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE BORROWED FUNDS FOR MAKIN G INVESTMENT IN SHARES,THAT SHE PAID INTEREST FOR PURCHASING SHARES,THAT SHE MADE CLAIM OF INTERE ST EXPENDITURE UNDER THE HEAD INCOME FROM OTHER SOURCES,THAT UNDER THAT HEAD THE ASSESSEE HAD SHOWN LOSS,THAT QUANTUM ADDITION WAS NOT CHALLENGED BY HER,THAT AO AND FAA WERE OF THE OPINI ON THAT SHE HAD FILED INACCURATE PARTICULARS.THE ASSESSEE WAS VERY WELL AWARE ABOUT THE BORROWING OF THE FUNDS AND THEIR 3 ITA NO.3665/M/2012 SHILPA DILESH MEHTA UTILISATION.THE CLAIM MADE BY THE ASSESSEE UNDER TH E PROVISIONS OF A PARTICULAR SECTION (SECTION 57)SHOWS THAT SHE KNEW THE IMPLICATION OF SUCH CLAI M.UNDER THE ACT,THE INCOME OF AN ASSESSEE IS ONE AND VARIOUS SECTIONS DIRECT THE MODES IN WHICH THE INCOME IS TO BE LEVIED. NO ONE OF THOSE SECTIONS CAN BE TREATED AS GENERAL OR SPECIFIC FOR THE PURPOSE OF ANY ONE PARTICULAR SOURCE OF INCOME ; THEY ARE ALL SPECIFIC AND DEAL WITH VARIOU S HEADS IN WHICH AN ITEM OF INCOME OF AN ASSESSEE FALLS. THESE SECTIONS ARE MUTUALLY EXCLUSI VE AND WHERE AN ITEM OF INCOME FALLS SPECIFICALLY UNDER ONE HEAD, IT HAS TO BE CHARGED U NDER THAT HEAD AND NO OTHER.SIMILARLY,EXPENDITURE INCURRED BY THE ASSESSE E ARE DIRECTLY RELATED TO THE HEADS UNDER WHICH SAME COULD BE CLAIMED.IF THE ASSESSEE MAKES A CLAIM TO REDUCE HIS OR HER TAX INCIDENCE BY CHANGING THE HEADS OF EXPENDITURE IT HAS TO BE HELD THAT THE PARTICULARS FILED BY HIM OR HER ARE NOT ACCURATE.A RETURN IS NOT ONLY AN ORDINARY DOCUMENTA RY.ASSESSEES HAVE TO VERIFY THE RETURNS AND DECLARE THAT DETAILS FURNISHED ARE TRUE.THEREFORE,W HEN AN TOTALLY UNSUSTAINABLE CLAIM IS MADE IT CANNOT BE CONSIDERED A DEBATABLE CLAIM ABOUT WHICH TWO VIEWS WERE POSSIBLE.IN THE MATTER BEFORE US,THERE IS NO AMBIGUITY ABOUT THE SECTION UNDER WH ICH CLAIM FOR INTEREST EXPENDITURE COULD BE MADE AND THE ASSESSEE KNEW IT.NON FILING OF APPEAL AGAINST THE QUANTUM ORDER PROVE THAT THE ASSESSEE TOOK A CHANCE WHILE FILING THE RETURN AND MADE A CLAIM THAT WAS NOT PERMISSIBLE BY LAW AT ALL.WE ARE OF OPINION THAT THE ASSESSEE WAS GUILTY OF FILING INACCURATE PARTICULAR OF INCOME AND THUS CONCEALING HER INCOME. NOW,WE WOULD LIKE TO TAKE UP THE CASES RELIED UPON BY THE ASSESSEE.IN THAT MATTER TWO ISSUES WERE CONCLUDED AGAINST THE ASSESSEE AND THE AO HAD INITI ATED PENALTY PROCEEDINGS FOR THOSE ITEMS.FAA PARTLY ALLOWED THE APPEAL OF THE ASSESSEE.TRIBUNAL ALLOWED/REJECTED THE APPEAL FILED BY ASSESSEE/AO FOR SUSTAINING /DELETING THE PENALTY BY THE FAA.DEPARTMENT CHALLENGED THE MATTER BEFORE THE HONBLE JURISDICTIONAL HIGH COURT.THE AS SESSEE HAD CONTESTED THE ADDITIONS MADE IN ITS CASE AND WERE BOTH WERE DECIDED AGAINST IT.IN THE M ATTER BEFORE US,THE ASSESSEE CHOOSE NOT TO CHALLENGE THE FINDING OF QUANTUM PROCEEDINGS.NOT ON LY THIS THE ASSESSEE HAD ADMITTED BEFORE THE AO THAT THERE WAS OMISSION ON HER PART. BUT,EXPLANA TION FILED BY HER WAS NOT FOUND BONA FIDE BY BOTH THE AUTHORITIES.ONCE THE ASSESSEE FILED EXPLAN ATION AND IT IS FOUND TO BE NOT GENUINE,PENALTY U/S.271(1)(C)HAS TO LEVIED.IN OUR OPINION THAT FACT S OF THE CASE UNDER APPEAL ARE DISTINGUISHABLE FROM THE FACTS OF ADITYA BIRLA NOVA LTD.(SUPRA). IN THE CASE OF STINGREY TRADERS P.LTD.(SUPRA)THE FAA HAD HELD THAT THE EXPLANATION GIVEN BY THE ASSE SSEE WAS BONA FIDE AND THE ASSESSEE HAD NOT AGREED THAT THERE WAS OMISSION ON ITS PART.IT WAS A LSO FOUND THAT THE LEGAL EXPENDITURE INCURRED BY THE ASSESSEE WAS TO PROTECT ITS BUSINESS INTEREST.W E ARE OF THE OPINION THAT FACTS OF BOTH THE CASES ARE NOT COMPARABLE.IN THE MATTER OF NALIN P SHAH(SU PRA)THE ASSESSEE HAD FILED A NOTE WITH ITS COMPUTATION OF INCOME DISCLOSING ALL THE DETAILS.TH US,IN OUR OPINION,THERE IS NO SIMILARITY BETWEEN THE CASE RELIED UPON BY THE ASSESSEE AND THE MATTER BEFORE US.IN THE CASE OF RELIANCE PETRO PRODUCT THE HONBLE APEX COURT WAS DEALING WITH A CASE WHER E IT WAS FOUND THAT THE NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURA TE.BUT,IN THE CASE UNDER CONSIDERATION AO AND THE FAA BOTH HAVE HELD THAT INACCURATE PARTICULARS WERE FILED.NOT ONLY THIS, THE ASSESSEE HERSELF ADMITS OMISSION ON HER PART.THUS,NONE OF THE CASES RELIED UPON BY HER OF ANY HELP,AS THE FACT AND CIRCUMSTANCES ARE DIFFERENT. AFTER CONSIDERING THE PECULIAR FACTS OF THE PRESENT CASE,WE HOLD THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.THEREFORE,CONFIRMIN G HIS ORDER WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. 7)8 () 9 : + 5 ; + ) <= . ORDER PRONOUNCED IN THE OPEN COURT ON 26TH,SEPTEMBER2014 . 6 + -.! > ? 26 ) , 201 4 . + 5 @ SD/- SD/- ( . . / I.P. BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER 4 ITA NO.3665/M/2012 SHILPA DILESH MEHTA / MUMBAI, ? /DATE: 26.09 . 2014. 6 6 6 6 + ++ + &)A &)A &)A &)A B B B BA!) A!)A!) A!) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '% 2. RESPONDENT / &''% 3. THE CONCERNED CIT(A)/ C D , 4. THE CONCERNED CIT / C D 5. DR E BENCH, ITAT, MUMBAI / AE5 &) , , . . . 6. GUARD FILE/ 5 7 'A) 'A) 'A) 'A) &) &)&) &) //TRUE COPY// 6 / BY ORDER, F / < DY./ASST. REGISTRAR , /ITAT, MUMBAI