M/s. The Bank of Tokyo-Mitsubishi, UFJ Ltd., New Delhi V. DDIT, New Delhi

ITA 3705/DEL/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0845 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-07-2017
• Assessment Year: 1995-1996
• Appeal Filed On: 23-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G K DHALL CIT DR INTL
• Keywords: Permanent establishment; Question of law; Set aside
• Section: 271(1)(c); 143(3); 27

Judgement Text

1 ITA NOS. 3705 & 3757/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 3705/DEL/2014 ( A .Y 1995-96) THE BANK OF TOKYO MITSUBISHI, UFJ LTD. (EARLIER KNOWN AS THE BANK OF TOKYO MITSUBISHI LTD.) JEEVAN VIHAR BUILDING, 3, PARLIAMENT STREET, NEW DELHI AABCT3880D (APPELLANT) VS DDIT CIRCLE-1(1), INTERNATIONAL TAXATION NEW DELHI (RESPONDENT) ITA NO. 3757/DEL/2014 ( A.Y 1995-96) DDIT CIRCLE-1(1), INTERNATIONAL TAXATION NEW DELHI (APPELLANT) VS THE BANK OF TOKYO MITSUBISHI, UFJ LTD. (EARLIER KNOWN AS THE BANK OF TOKYO MITSUBISHI LTD.) JEEVAN VIHAR BUILDING, 3, PARLIAMENT STREET, NEW DELHI AABCT3880D (RESPONDENT) APPELLANT BY MR. PERCY PARDIWALA, ADV RESPONDENT BY MR. G. K. DHALL, CIT DR (INTL) ORDER PER SUCHITRA KAMBLE, JM THESE TWO APPEALS ARE FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE ORDER DATED 18/03/2014 PASSED BY CIT(A) -XXV, NEW DELHI FOR ASSESSMENT YEAR 1995-96. DATE OF HEARING 18.03.2019 DATE OF PRONOUNCEMENT 27.03.2019 2 ITA NOS. 3705 & 3757/DEL/2014 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO. 3705/DEL/2014 ADDITIONAL GROUNDS 1A. THAT THE NOTICE ISSUED U/S 274 RED WITH U/S 27 1(1)(C) OF THE ACT DATED SEPTEMBER, 11, 1998 DOES NOT MENTION THE SPEC IFIC CHARGE FOR WHICH PENALTY PROCEEDINGS ARE INITIATED HENCE THE SAID NO TICE AND THE ORDER PASSED U/S 271(1)(C) OF THE ACT ARE ILLEGAL, BAD IN LAW AN D WITHOUT JURISDICTION. GROUNDS OF APPEAL THE APPELLANT RESPECTFULLY SUBMITS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE HONBLE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER (LD. AO) IN LEVYING PENALTIES UNDER SECTION 271(1)(C) OF THE AC T FOR THE ALLEGED CONCEALMENT OF PARTICULARS OF INCOME ON THE PART OF THE APPELLA NT WITH RESPECT TO EACH OF THE ISSUES REFERRED TO HEREUNDER, WHERE THE PENALTIES H AD BEEN CALCULATED WITH REFERENCE TO 100% OF THE AMOUNTS OF TAXES ALLEGEDLY SOUGHT TO BE EVADED WITH RESPECT TO EACH OF THE SAID ISSUES - (A) DISALLOWANCE MADE ON ACCOUNT OF EXPENDITURES INCUR RED IN RESPECT OF PREMISES PROVIDED TO THE GENERAL MANAGERS OF THE APPELLANT (B) DISALLOWANCE MADE WITH RESPECT TO THE EXPENDITURES ALLEGEDLY INCURRED BY THE APPELLANT ON PREMISES PROVIDED TO I TS SENIOR EXECUTIVES. (C) DISALLOWANCE OF THE INTEREST PAID TO HEAD OFFICE A ND FOREIGN BRANCHES OF THE BANK SITUATED OUTSIDE INDIA. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE HONBLE CIT(A) FAILED TO APPRECIATE THAT THE APPELL ANT IS NEITHER GUILTY OF CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITH RESPECT TO ANY OF THE THREE ISSUES REFERRED TO IN G ROUND NO. (1) ABOVE AND ACCORDINGLY THE HONBLE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN LEVYING PENALTY UNDER SECTION 271 (1)(C) OF THE ACT WITH RESPECT TO EACH OF THE 3 ITA NOS. 3705 & 3757/DEL/2014 SAID ISSUES. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN LEVYING PENALTY AND THE HONBLE CIT (A) ER RED IN CONFIRMING THE SAME, COMPLETELY IGNORING THAT NO SATISFACTION HAS BEEN R ECORDED IN THE ASSESSMENT ORDER THAT THE APPELLANT HAD CONCEALED ITS INCOME O R FURNISHED INACCURATE PARTICULARS OF ITS INCOME. 4. GENERAL (A) EACH OF THE ABOVE GROUND IS INDEPENDENT AND WITHOU T PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE APPELLANT. ITA NO. 3757/DEL/2014 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND LAW, LD.CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED BY THE A.O U/ S 271(1)(C) TO THE EXTENT OF RS.1,60,47,526/-. 3. THE ASSESSEE IS A FOREIGN BANKING COMPANY AND NO N-RESIDENT HAVING ITS HEAD OFFICE AT TOKYO, JAPAN. THE ASSESSEE COMPANY H AS ITS BRANCHES IN INDIA AT DELHI, BOMBAY, CALCUTTA ETC. THESE BRANCHES OF THE ASSESSEE CONSTITUTE A PERMANENT ESTABLISHMENT (PE) OF THE ASSESSEE IN IND IA WITHIN THE MEANING OF ARTICLE 5 OF THE INDO-JAPAN DOUBLE TAXATION AVOIDAN CE AGREEMENT (DTAA). TOTAL INCOME OF THE ASSESSEE IS TAXABLE IN INDIA AT THE INCOME TAX RATE PRESCRIBED BY THE ANNUAL FINANCE ACT FOR A COMPANY OTHER THAN A DOMESTIC COMPANY WHICH IS 55% FOR THE ASSESSMENT YEAR 1995-9 6 AND NO SURCHARGE. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1995-9 6 WAS FILED ON 28/11/1995 DECLARING TOTAL INCOME OF RS.64,58,42,38 0/-. ORDER U/S 143(3) OF THE ACT WAS PASSED ON 11/9/1998 WHEREIN TOTAL INCOM E WAS DETERMINED AT 4 ITA NOS. 3705 & 3757/DEL/2014 RS.72,70,60,080/-. THE APPEAL OF THE ASSESSEE AGAI NST THE ASSESSMENT ORDER WAS DISPOSED OFF BY THE CIT(A) VIDE ORDER DATED 17/ 12/1999. THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL AND TRIBUNAL VIDE ORDER DATED 3/4/2003 AND 13/1/2003 PASSED THE RELEVANT ORDERS. IN THE MEANT IME, THE PENALTY PROCEEDINGS U/S 271(1)(C) WAS INITIATED. THE ASSES SMENT ORDER UNDER WHICH LIMB OF SECTION 271(1)(C) THE PENALTY IS INITIATED WAS NOT SPECIFIED. THIS OBJECTION WAS RAISED DURING THE PENALTY PROCEEDINGS BY THE ASSESSEE. THE ASSESSING OFFICER PASSED PENALTY ORDER THEREBY IMP OSING PENALTY OF RS. 2,03,45,865/- U/S 271(1)(C) OF THE ACT. 4. BEING AGGRIEVED BY THE PENALTY ORDER, THE ASSESS EE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASS ESSEE. 5. THE LD. AR SUBMITTED THAT THE INAPPROPRIATE WORD S IN THE NOTICE ISSUED U/S 274 READ WITH SECTION 271 HAVE NOT BEEN STRUCK OFF, THEREFORE, IT WAS NOT UNDERSTOOD AS TO UNDER WHICH LIMB OF PROVISIONS OF SECTION 271(1)(C) OF THE ACT, THE ASSESSING OFFICER LEVIED PENALTY. THE SHOW CA USE NOTICE ISSUED U/S 274 DID NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT WAS FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. THEREFORE, THE PENALTY ORDER PASSED U/S 271(1)(C) IN PURSUANCE TO THE SAID NOTICE WAS SUBMITTED TO BE SET ASIDE BY TH E LD. AR. THE LD. AR ALSO RELIED UPON THE DECISION OF THE ASSESSEES OWN CASE BY THE TRIBUNAL IN ITA NO. 6093 & 6614/MUM/ 2003 ORDER DATED 6/12/2018 AND SUB MITTED THAT THE 5 ITA NOS. 3705 & 3757/DEL/2014 APPEAL OF THE ASSESSEE WAS ALLOWED AND THE APPEAL O F THE REVENUE WAS DISMISSED. 6. THE LD. DR RELIED UPON THE PENALTY ORDER AND THE ORDER OF THE CIT(A). THE LD. AR DURING THE COURSE OF HEARING RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN CASE OF M/S SUNDARAM FINANCE L TD. VS. ACIT 2018- TIOL-813-H.C-MAD IT. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IN THE SHOW CAUSE NOTICE THERE WAS NO SPE CIFIC CHARGES AS RELATES TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME AS RELATES TO DISALLOWANCE MADE ON ACCOUNT OF EXPENDIT URE INCURRED IN RESPECT OF PREMISES PROVIDED TO THE GENERAL MANAGERS OF THE AS SESSEE, DISALLOWANCE MADE WITH THE EXPENDITURES ALLEGEDLY INCURRED BY THE ASS ESSEE ON PREMISES PROVIDED TO ITS SENIOR EXECUTIVES AND DISALLOWANCE OF THE IN TEREST PAID TO HEAD OFFICE AND FOREIGN BRANCHES OF BANK SITUATED OUTSIDE INDIA. D URING THE REGULAR ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS GIVEN ALL THE DETAILS TO THE ASSESSING OFFICER. THEREFORE, THERE WAS NO CONCEALMENT ON THE PART OF THE ASSESSEE. THUS, THE AUTHORITIES CITED BY THE LD. AR ARE APPLICABLE IN THE PRESENT CASE. THUS, SECTION 271(1)(C) OF THE ACT WAS NOT CORRECTLY INVO KED BY THE ASSESSING OFFICER. THE CIT(A) ALSO OVERLOOKED THE ACTUAL INTENTION OF THE PENALTY PROCEEDINGS WHICH CLEARLY SET OUT THAT WHEN THERE IS INACCURATE PARTICULARS OR CONCEALMENT ON PART OF THE ASSESSEE, THEN THE SAME SHOULD BE PR OCEEDED. BUT IN THE PRESENT CASE, THE ASSESSEE HAS DISCLOSED ALL THE FACTUAL AS PECTS BEFORE THE ASSESSING OFFICER WHICH CANNOT BE STATED THAT THERE WAS CONCE ALMENT OF PARTICULARS OF INCOME OR THE ASSESSEE FURNISHED INACCURATE PARTICU LARS OF INCOME. WE FIND THE ONLY ISSUE TO BE DECIDED IN THE GROUNDS OF APPEAL I S REGARDING THE SUSTAINABLE OF PENALTY LEVIED U/S 271(1)(C) WHEN THE INAPPROPRI ATE WORDS IN THE NOTICE ISSUED U/S 274 R.W.S. 271 OF THE ACT HAVE NOT BEEN STRUCK OFF. A PERUSAL OF THE NOTICE ISSUED U/S 274 R.W.S. 271 DATED 28.11.2011 S HOWS THAT THE 6 ITA NOS. 3705 & 3757/DEL/2014 INAPPROPRIATE WORDS IN THE SAID NOTICE HAVE NOT BEE N STRUCK OFF AND IT IS A PRINTED NOTICE. EVEN THE LAST LINE OF THE SAID NOT ICE ONLY SPEAKS OF SECTION 271 AND DOES NOT EVEN MENTION OF SECTION 271(1)(C) OF T HE I.T. ACT. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SAHIWAL INVESTMENT & TRADING CO. VS. IT O VIDE ITA NO.4913/DEL/2015 FOR ASSESSMENT YEAR 2006-07 ORDER DATED 18.07.2018 TO WHICH BOTH OF US PARTIES. WE FIND THE TRIBUNAL IN THE SAID DECISION WHILE ALLOWING THE ADDITIONAL GROUND FILED BY THE ASSESSE E HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER :- 12. ADDITIONAL GROUND NO. (II) IS RELATING TO ABSE NCE OF SPECIFIC CHARGE POINTING OUT IN THE NOTICE. IT IS PERTINENT TO NOTE HERE THAT THE PENALTY ORDER IS BASED ON FURNISHING OF INACCURATE PARTICULARS BUT T HE NOTICE IS NOT SPECIFYING EXACTLY ON WHICH LIMB THE PENALTY U/S 271(1)(C) HAS BEEN INITIATED. FROM THE NOTICE DATED 30.06.2013 PRODUCED BY THE LD. AR DURI NG THE HEARING, IT CAN BE SEEN THAT THE ASSESSING OFFICER WAS NOT SURE UNDER WHICH LIMB OF PROVISIONS OF SECTION 271 OF THE INCOME TAX ACT, 1961, THE ASS ESSEE IS LIABLE FOR PENALTY. THE ISSUE IS SQUARELY COVERED BY THE DECIS ION OF THE HON'BLE SUPREME COURT IN CASE OF M/S SSA' EMERALD MEADOWS. THE EXTR ACT OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN M/S. SSA' EMERA LD MEADOWS ARE AS UNDER WHICH WAS CONFIRMED BY THE HON'BLE APEX COURT : '3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY TH E ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTIO N 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'T HE ACT') TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE ITA NO. 4913/DEL/2015 DECISION OF THE DIVISION BENCH OF THI S COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. 4. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDG MENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIA L QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE AP PEAL IS ACCORDINGLY DISMISSED.' 7 ITA NOS. 3705 & 3757/DEL/2014 THUS, ADDITIONAL GROUND NO. (II) OF THE ASSESSEE'S APPEAL IS ALLOWED. SINCE THE INCEPTION OF THE NOTICE ISSUED U/S 271(1)(C) HAS BE COME NULL AND VOID, THERE IS NO NEED TO COMMENT ON MERIT OF THE CASE. THE PENALT Y U/S 271(1)(C) OF THE ACT IS QUASHED. SINCE IN THE INSTANT CASE ALSO THE INAPPROPRIATE W ORDS IN THE PENALTY NOTICE HAS NOT BEEN STRUCK OFF AND THE NOTICE DOES NOT SPECIFY AS TO UNDER WHICH LIMB OF THE PROVISIONS, THE PENALTY U/S 271(1 )(C) HAS BEEN INITIATED, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH E PENALTY LEVIED U/S 271(1)(C) IS NOT SUSTAINABLE AND HAS TO BE DELETED. ALTHOUGH THE LD. DR HAS RELIED ON VARIOUS DECISIONS TO THE PROPOSITION THAT MERE NON- STRIKING OFF OF THE INAPPROPRIATE WORDS WILL NOT INVALIDATE THE PENALTY PROCEEDINGS, HOWEVER, ALL THESE DECISIONS ARE OF NON-JURISDICTIONAL HIGH COUR T DECISIONS. THE DECISION OF THE HONBLE MADRAS HIGH COURT RELIED ON BY THE LD. DR IS NOT APPLICABLE IN THE PRESENT CASE AS THE DECISION OF THE HONBLE KARNATA KA HIGH COURT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA) WHERE THE SLP FILED B Y THE REVENUE HAS BEEN DISMISSED. SINCE THERE IS NO DECISION OF THE JURIS DICTIONAL HIGH COURT ON THIS ISSUE, THEREFORE, WE FIND MERIT IN THE ARGUMENT OF THE LD. AR THAT IF TWO VIEWS ARE AVAILABLE ON A PARTICULAR ISSUE, THE VIEW WHICH IS FAVOURABLE TO THE ASSESSEE HAS TO BE FOLLOWED IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LIMITED (SUPRA). WE , THEREFORE, SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICE R TO CANCEL THE PENALTY SO LEVIED. 8. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH MARCH, 2019 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27/03/2019 8 ITA NOS. 3705 & 3757/DEL/2014 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 18.03.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 19.03.2019 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. PS/PS 27 .03.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 27.03.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27.03.2019 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 9 ITA NOS. 3705 & 3757/DEL/2014