ACIT, New Delhi V. M/s Delhi Automobiles Ltd., New Delhi

ITA 3697/DEL/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69594 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-12-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 02-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Depreciation; Business expenditure; Bonafide belief; Difference of opinion
• Section: 143(3)

Judgement Text

ITA NO. 3697/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3697/DEL/2011 A.Y. : 200 4 - 0 5 DCIT, CIRCLE 10(1), NEW DELHI VS. M/S DELHI AUTOMOBILES LTD., 14-C, SAGAR APARTMENTS, 6, TILAK MARG, NEW DELHI 110 001 (PAN: AABCD7933P) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. ALOKE PERIWAL, CA DEPARTMENT BY : MS. NIDHI SRIVASTAVA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM PER SHAMIM PER SHAMIM PER SHAMIM YAHYA: AM YAHYA: AM YAHYA: AM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XVI, NEW D ELHI DATED 31.3.2011 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. THE ISSUE RAISED IS THAT LD. CIT(A) ERRONEO USLY DELETED THE PENALTY U/S. 271(1)(C) OF THE I.T. ACT AMOUNTING TO RS. 11,92,044/-. 3. THE BRIEF FACTS ARE AS UNDER:- THE ORIGINAL RETURN DECLARING LOSS OF RS. 33,22,770 /- WAS FILED ON 1.11.2004. THE SAID RETURN WAS PROCESSED U/S. 143(1) AND THEREAFTER ASSESSMENT U/S. 143(3) WAS COMPLETED AT NEW INCOME OF RS. NIL VIDE ORDER DATED 27.9.2006. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, ITA NO. 3697/DEL/2011 2 IT WAS OBSERVED BY THE ASSESSING OFFICER THAT NO SIGNIFICANT BUSINESS ACTIVITY WAS CARRIED OUT BY TH E ASSESSEE DURING THE PERIOD RELEVANT TO THE ASSTT. Y EAR 2004-05. IT WAS ALSO OBSERVED THAT NO SIGNIFICANT BUSINESS ACTIVITIES HAVE ACTUALLY BEEN CARRIED OUT BY THE ASSESSEE COMPANY IN EARLIER YEARS. IN THE RETURN OF INCOME, THE ASSESSEE HAD SHOWN RECEIPTS ON ACCOUNT OF SALES AT RS. 3,99,232/- ONLY AS AGAINST STOCK INVEN TORY OF OPENING AND CLOSING STOCK AT RS. 5,68,30,244.75. TH E ASSESSEE ALSO WROTE BACK UNCLAIMED BALANCE AMOUNT ING TO RS. 1,44,32,161.49. THE ASSESSEE ALSO SHOWN SALE OF ITS FIXED ASSETS. THE PROFITS ON SALE OF FIXED ASSETS H AS BEEN SHOWN AT RS. 1,72,50,006.65. IT HAS SHOWN MISCELLA NEOUS INCOME AT RS. 24,24,373/-. FROM THE ABOVE, THE ASSESSING OFFICER INFERRED THAT THE BUSINESS HAD AL READY BEEN WOUNDED UP BY THE ASSESSEE. HE OPINED THAT TH E DETAILS FURNISHED BY THE ASSESSEE COMPANY ALSO REV EALED THAT THE COMPANY HAD NOT UNDERTAKEN ANY EFFORT TO IMPROVE ITS BUSINESS DURING THE YEAR. ASSESSING OFF ICER FURTHER REFERRED TO HONBLE KERALA HIGH COURT DECI SION IN THE CASE OF SPV BANK LTD. VS. CIT (1980) 126 ITR 77 3, WHEREIN THE HONBLE COURT HAS HELD THAT IN ORDER TO SUSTAIN A CLAIM FOR DEDUCTION BY WAY OF BUSINESS EXPENDITURE, THE EXPENDITURE MUST HAVE BEEN LAID OU T OR EXPENDED FOR THE PURPOSE OF A BUSINESS WHICH WAS IN EXISTENCE IN THE YEAR OF ACCOUNT, THE PROFITS OF W HICH ARE UNDER ASSESSMENT. HENCE, IN VIEW OF THE JUDGMENT O F KERALA HIGH COURT (SUPRA), THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE FOR LOSS OF RS . 33,22,770/-. ITA NO. 3697/DEL/2011 3 4. ON THE ABOVE ADDITION, PENALTY U/S. 271(1)(C) O F THE ACT WAS ALSO INITIATED. 5. UPON ASSESSEES APPEAL LD. CIT(A) DELETED THE LE VY OF PENALTY AND HELD AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE ALONG WITH THE SUBMISSIONS MADE BY THE AUTHORIZED REPRESENTATIVE O F THE APPELLANT COMPANY. IT HAS BEEN LAID DOWN BY HONBLE COURTS THAT ASSESSMENT AND PENALTY PROCEEDINGS ARE INDEPENDENT AND SEPARATE AND MEREL Y BECAUSE ADDITION TO INCOME HAS BEEN MADE DURING ASSESSMENT PROCEEDINGS, LEVY OF CONCEALMENT PENALTY DOES NOT FOLLOW AUTOMATICALLY. IN THE INSTANT CASE, THE ASSESSING OFFICER HIMSELF IS ADMITTING IN THE ASSES SMENT AND PENALTY ORDERS ON THE ONE HAND THAT THE APPELL ANT HAD INCOME FROM BUSINESS (ALBEIT NOT VERY SUBSTANT IAL), MISCELLANEOUS RECEIPTS AND PROFIT ON SALE OF FIXED ASSETS DURING THE YEAR AND ON THE OTHER HAND, THE ASSESSIN G OFFICER HAS HELD NO BUSINESS ACTIVITIES WERE CARRI ED OUT DURING THE YEAR AND HENCE THE LOSS WORKED OUT DUE T O EXCESS OF EXPENDITURE OVER INCOME WAS TO BE DISALLO WED. THUS, AS POINTED OUT BY THE APPELLANT, THE ASSESSIN G OFFICER IS ACKNOWLEDGING THE INCOME RECEIVED BY THE APPELLANT DURING THE YEAR BUT NOT ALLOWING THE EXCE SS OF EXPENDITURE OVER INCOME, STATING THAT THE BUSINESS OF THE APPELLANT HAD CLOSED DOWN. HOWEVER, THE AO HAS FAILED TO SPECIFY ANY ITEM OF EXPENDITURE CLAIMED B Y THE APPELLANT WHICH WAS NOT SUPPORTED BY BILLS/ VOUCHER S. ACCORDINGLY, IN MY VIEW, THE AO HAS NOT BEEN ABLE T O ESTABLISH THAT THERE WAS FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. TH E ITA NO. 3697/DEL/2011 4 JUDGEMENT OF THE HONBLE HYDERABAD BENCH OF THE ITA T IN THE CASE OF NAVBHARTAT ENTERPRISE PVT. LTD. RELIED UPON BY THE APPELLANT, IN WHICH THE ITAT HELD THAT MERELY BECAUSE THERE WAS DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE DEPARTMENT REGARDING ALLOWABILITY OF DEPRECIATION/ LOSSES, CONCEALMENT OF INCOME WAS NOT ESTABLISHED, IS SQUARELY APPLICABLE TO THE FACTS OF THIS CASE. THEREFORE, THE AO IS DIRECTED TO DELETE THE PENALTY LEVIED U/S. 271(1)(C). THESE TWO GROUNDS OF APPEAL ARE ALLOWED. 6. AGAINST THE ABOVE, THE REVENUE IS IN APPEAL BEF ORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT IN THE QUANTUM PROCEEDINGS, THE ADDITION WAS SUSTAINED BY THE LD. CIT(A) AS THE ASSESSEE HAS NOT AVAILED THE OPPORTUNITIES OF HEARING. LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT THE SAID ORDER OF THE LD. CIT(A) HAS BEEN SET ASIDE BY THE T RIBUNAL TO THE FILE OF THE LD. CIT(A). IN THIS VIEW OF THE MATTER, LD . COUNSEL OF THE ASSESSEE SUBMITTED THAT THE PENALTY U/S. 271(1)(C) IN THIS CASE IS NOT SUSTAINABLE. FURTHER, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IN THIS CASE THERE IS NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS AND AS SUCH PLEADED THAT THE ORDER OF THE LD. CIT(A) BE AFFIRMED. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D PERUSED THE RECORDS. WE FIND THAT IN THIS CASE THAT THERE IS NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS BY THE ASS ESSEE. WE FIND THAT ASSESSING OFFICER IN THIS CASE HAS HIMSELF ADMITTED THAT ASSESSEE HAS INCOME FROM BUSINESS (THOUGH NOT VERY SUBSTANTI AL), ITA NO. 3697/DEL/2011 5 MISCELLANEOUS RECEIPTS AND PROFIT ON SALE OF FIXED ASSETS. ASSESSING OFFICER HAS THUS CONTRADICTED HIMSELF BY SAYING THA T NO BUSINESS ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE AND HEN CE THE LOSS WORKED OUT DUE TO EXCESS OF EXPENDITURE OVER INCOM E WAS DISALLOWED. THUS, WHILE ASSESSING OFFICER ACKNOWLED GED THE RECEIPT BY THE ASSESSEE DURING THE YEAR, BUT HE DID NOT ALL OW THE EXCESS OF EXPENDITURE OVER INCOME, STATING THAT THE BUSINESS OF THE APPELLANT HAD CLOSED DOWN. WE FURTHER FIND THAT ASSESSING OF FICER HAS FAILED TO SPECIFY ANY AMOUNT OF EXPENDITURE CLAIMED BY THE AS SESSEE WHICH IS NOT SUPPORTED BY BILLS / VOUCHERS. HENCE, NO CA SE OF BOGUS EXPENDITURE HAS BEEN MADE OUT. THUS, WE AGREE WITH THE LD. CIT(A) THAT ASSESSING OFFICER HAS NOT BEEN ABLE TO ESTABL ISH THAT THERE IS FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. 8.1 FURTHERMORE, AS STATED BY THE LD. COUNSEL OF TH E ASSESSEE ON MERITS OF THE CASE THE MATTER HAS BEEN REMITTED BY THE TRIBUNAL TO THE FILE OF THE LD. CIT(A). HENCE, SINCE THE QUANT UM HAS NOT YET BEEN CONFIRMED, THE PENALTY IS ALSO NOT LEVIABLE IN THIS VIEW OF THE MATTER. 9. IN THIS REGARD, WE PLACE RELIANCE FROM THE APE X COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIPS 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 ITA NO. 3697/DEL/2011 6 STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMI NAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE P ARTY 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 TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 9.1 WE FURTHER PLACE RELIANCE UPON THE HONBLE APE X COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PROD UCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER D ATED 17.3.2010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP S HEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUSE WH AT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A E SSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO ITA NO. 3697/DEL/2011 7 OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS A CCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM IS NOT ACCEPT ED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WI LL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INT ENDMENT OF LEGISLATURE. 10. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD . COMMISSIONER OF INCOME TAX (A), HENCE, WE UPHOLD THE SAME. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/12/2013. SD/- SD/- [ [[ [I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 06/12/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 3697/DEL/2011 8