Jakson and Co., Delhi V. DCIT, New Delhi

ITA 3777/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73957 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 06-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 23-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHAMEER SHARMA
• Keywords: Bonafide belief
• Section: 153A; 80IB; 6; 132

Judgement Text

ITA NO. 3777/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO.3777/DEL/2012 A.Y. : 2007 - 08 JACKSON AND CO., 47, GB ROAD, DELHI 110 006 (PAN:- AAAFJ5441N) VS. DCIT, CENTRAL CIRCLE - 12, NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. NIR E N GUPTA, CA DEPARTMENT BY : SH. S HAMEER SHARMA, CIT(DR) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXXI, NEW DELHI DATED 14.5.2012 PERTAINING TO ASSESSMENT YEAR 2007- 08. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THAT IN FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS. 20 LACS U/S. 271(1)(C).THAT AS THE ASSESSEE HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED INACCURATE PARTICULARS AND ALL MATERIAL FACTS WERE DISCLOSED A ND OVERALL PROFITABILITY OF THE FIRM WAS NOT CHANGED, THE ITA NO. 3777/DEL/2012 2 PENALTY IMPOSED U/S. 271(1)(C) IS UNWARRANTED AND UNJUSTIFIED AND BE DELETED. 2. THAT SINCE IN THIS CASE SEARCH WAS CONDUCTED U/S . 132 OF THE I.T. ACT ON 10.,2.2010 AND NOTICE U/S. 153A WAS ISSUED BY THE DCIT FOR MAKING FRESH ASSESSMENT, THE IMPOSITION OF PENALTY ON THE BASIS OF OLD ASSESSMENT IS CONTRARY TO LAW AND THE SAME I S DELETED. 3. IN THIS CASE THE ASSESSEE IS ENGAGED IN MANUFACT URE AND TRADING OF GEN SETS. IT HAS TWO MAIN MANUFACTURING UNITS ONE AT MAYAPURI (DELHI) AND OTHER AT SILVASSA. THE SILVAS SA UNIT ENJOYS BENEFITS OF DEDUCTION U/S. 80IB(4) AND ITS 100% PRO FITS ARE EXEMPT FROM TAX. DURING THE ASSESSMENT PROCEEDING, A.O. NOTICED THAT THE ASSESSEE WAS MAINTAINING AN OD FACILITY WITH THE SY NDICATE BANK, NEW DELHI. THE ASSESSEE WAS SHOWING THIS OD ACCOUNT S IN THE BOOKS OF HEAD OFFICE, GB ROAD, NEW DELHI. THE UNSECURED L OANS FROM RELATIVES AND FRIENDS WERE ALSO SHOWN IN THE BOOKS OF HEAD OFFICE. A.O. FURTHER OBSERVED THAT THE ASSESSEE WAS USING HEAD OFFICE FUNDS FOR PAYMENTS MADE TO CREDITORS OF SILVASSA BR ANCH ALSO INCLUDING OTHER BRANCHES. IN FACT, IT WAS OBSERVED THAT THE ASSESSEE MAINTAINED THIS BANKING FACILITY FOR MAKING CENTRA LIZED PAYMENTS FROM THE HEAD OFFICE TO CREDITORS OF ALL OTHER BRAN CHES. THE ASSESSEE DEBITED RS. 1,03,19,091/- IN THE PROFIT AND LOSS AC COUNT OF HEAD OFFICE, GB ROAD, NEW DELHI AS INTEREST EXPENSES ON SECURED AND UNSECURED LOANS TOGETHER WITH PROCESSING FEES. THES E INTEREST EXPENSES WERE NOT APPORTIONED TO DIFFERENT UNITS. 3.1 ASSESSING OFFICER OPINED THAT SINCE FUNDS WERE REQUIRED BY ALL THE BRANCHES FOR MEETING THEIR FUND REQUIREMENT AND IT WAS A GROSS ERROR ON THE PART OF THE ASSESSEE TO BOOK ALL ITS I NTEREST EXPENSES IN ITA NO. 3777/DEL/2012 3 THE HEAD OFFICE ONLY. ASSESSING OFFICER FURTHER OB SERVED THAT ALTHOUGH THE OVERALL PROFITABILITY OF THE FIRM WOUL D NOT CHANGE ON ACCOUNT OF APPORTIONMENT OF EXPENSES, THE PROFITABI LITY ON INDIVIDUAL BRANCHES WOULD BE DIFFERENT FROM WHAT THE ASSESSEE HAD CLAIMED AS PER ITS PRESENTATION OF THE ACCOUNTS. THIS WOULD IN A WAY INCREASE THE TOTAL INCOME OF THE FIRM AS SUCH, FOR THE REAS ON THAT THE PROFIT OF SILVASSA UNIT WILL REDUCE AS A RESULT OF APPORTI ONMENT OF INTEREST EXPENSES. THIS IN TURN WOULD REDUCE THE AMOUNT OF D EDUCTION AVAILABLE U/S. 80IB CLAIMED BY THE ASSESSEE RESULT ING IN INCREASED TOTAL TAXABLE INCOME OF THE FIRM. ASSESSING OFFIC ER PROCEEDED TO MAKE COMPUTATION FOR APPORTIONMENT FOR USE OF LOA N FUND BY FUND FLOW METHOD. HE HELD THAT THE FUND FLOW METHOD IS MORE SPECIFIC AS IT SPECIFICALLY DENOTES THE ACTUAL FUND REQUIREMENT OF THE VARIOUS BRANCHES. HENCE, HE HELD THAT A SUM OF RS. 52,93,6 90/- WAS TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ASSESSI NG OFFICER ALSO INITIATED THE PROCEEDINGS U/S. 271(1)(C) FOR FURNIS HING OF INACCURATE PARTICULARS OF INCOME AND SHOWING EXAGGERATED CLAI M OF DEDUCTION U/S. 80IB. 4. ASSESSEE APPEALED AGAINST THE QUANTUM ORDER BEFO RE THE CIT(A) AND CIT(A) AFFIRMED THE DISALLOWANCE. ACCOR DINGLY, THE PENALTY U/S. 271(1)(C) WAS IMPOSED AT AN AMOUNT OF RS. 20 LACS. 5. UPON ASSESSEES APPEAL CIT(A) AFFIRMED THE LEVY OF PENALTY. 6. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BE FORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT SECTION 271(1)(C) POSTULATES IMPOSITION O F PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALME NT OF INCOME. IN THIS CASE WE FIND THAT PENALTY U/S. 271(1)(C) HAS B EEN LEVIED FOR REDUCTION IN THE AMOUNT ELIGIBLE FOR REBATE U/S. 80 IB. IT HAS BEEN THE CASE OF THE ASSESSING OFFICER THAT ASSESSEE HAS BE EN MAINTAINING ITA NO. 3777/DEL/2012 4 OD FACILITY AND THE SAME IS KEPT RECORDED AT THE HE AD OFFICE. WHILE THE PAYMENTS FOR ALL THE UNITS IS MADE THROUGH THE OD AMOUNT BUT THE ENTIRE INTEREST EXPENDITURE IS BOOKED AT THE HE AD OFFICE. IN THIS MANNER, IT IS THE REVENUE ALLEGATION THAT ASSESSEE HAS BEEN ABLE TO INFLATE THE PROFIT FOR INCREASED CLAIM OF EXEMPTION U/S. 80IB AND THUS EXAGGERATED CLAIM HAS BEEN MADE. 8. NOW WE FIND THAT ASSESSEE HAS BEEN FOLLOWING THE ABOVE SYSTEM OF ACCOUNTANCY IN THE PAST ALSO. IN THE PAST THIS PRACTICE WAS NEVER QUESTIONED. HENCE, IT CANNOT BE SAID THAT TH E ASSESSEES CLAIM UNDER SECTION 80IB WAS EX-FACIE BOGUS. FURTH ER, THE ASSESSEE HAD DISCLOSED ALL THE AMOUNT AND DETAIL IN THE PROF IT AND LOSS ACCOUNT AND BALANCE SHEET AND CLAIMED DEDUCTION UND ER SECTION 80IB. THE CLAIM U/S. 80IB AND THE COMPUTATION WAS D ULY DISCLOSED AND WAS ALSO SUPPORTED BY THE CERTIFICATE OF CHARTE RED ACCOUNTANT IN THIS REGARD. THE AUDITORS HAS ISSUED CERTIFICAT E IN FORM NO. 10CCB AS PRESCRIBED AS PER RULE AND IT DETERMINED THE DED UCTION U/S. 80IB.THE SAME WAS ADOPTED BY THE ASSESSEE IN THE RE TURN. THUS THE ASSESSEE BY ADOPTING THE AMOUNT CANNOT BE SAID TO C ONCEAL ANY INCOME OR FURNISH IN ACCURATE PARTICULARS AS THE AUDITORS IN THIS REGARD HAS MADE THE COMPUTATION ACTING IN STATUTOR Y AND EXPERT POSITION. IT IS SETTLED LAW THAT ASSESSEE IS ENTI TLED TO RELY UPON THE OPINION OF EXPERT UNLESS THE SAME IS EX-FACIE BOGU S. IN THIS CASE THE CLAIM CANNOT BE SAID TO BE EX-FACIE BOGUS. MOREOVER , THE SYSTEM HAD BEEN CONSISTENTLY FOLLOWED IN THE PAST AND NEVER QU ESTIONED BY THE REVENUE. 8.1 FURTHERMORE, WE FIND THAT QUANTUM PROCEEDINGS A ND PENALTY PROCEEDINGS ARE SEPARATE. NOW IN THIS CONNECTION, I T IS THE PLEA OF THE LD. COUNSEL OF THE ASSESSEE THAT ASSESSEE HAS HUGE AMOUNT OF ITA NO. 3777/DEL/2012 5 PARTNERS CAPITAL WHICH CAN BE EVIDENT FROM THE FIGU RES AS UNDER:- S.NO. S.NO. S.NO. S.NO. PARTICULARS SCHEDULE NO. PARTICULARS SCHEDULE NO. PARTICULARS SCHEDULE NO. PARTICULARS SCHEDULE NO. AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT (CURRENT YEAR) (PREVIOUS YE (CURRENT YEAR) (PREVIOUS YE (CURRENT YEAR) (PREVIOUS YE (CURRENT YEAR) (PREVIOUS YEAR AR AR AR 1. PARTNERS CAPITAL A 161,231,330.09 86,6 18,522,97 2. SECURED LOAN B 141,933,766.57 26, 370,631.91 (SYNDICATE BANK) 3. UNSECURED LOANS B 32,262,202.29 30,039,455.44 TOTAL = TOTAL = TOTAL = TOTAL = 335,427,298.95 143, 335,427,298.95 143, 335,427,298.95 143, 335,427,298.95 143,028,610.32 028,610.32 028,610.32 028,610.32 8.2 FROM THE ABOVE LD. COUNSEL OF THE ASSESSEE HAS CONTENDED THAT ASSESSEE HAD SUFFICIENT AMOUNT OF OWN FUND ALS O WHICH CAN BE SAID TO BE USED IN RUNNING THE BUSINESS OF EXEMPTED UNIT I.E. SLIVASSA UNIT. WE FIND THAT ASSESSEE HAS SUFFICIEN T OWN FUNDS AVAILABLE WHICH CAN BE STATED TO HAVE BEEN UTILISED TOWARDS THE CREDIT NEEDS OF SLIVASSA UNIT. WE FIND THAT WHEN THE ASSESSEE HAS BOTH INTEREST FREE AND INTEREST BEARING FUNDS AVAIL ABLE IT IS THE PREROGATIVE OF THE ASSESSEE TO ALLOCATE THE FUNDS T OWARDS SPECIFIC ACTIVITIES WHICH SUITS HIM. IN THIS VIEW OF THE MA TTER ALSO IT CANNOT BE SAID THAT ASSESSEE HAS MADE ANY EX-FACIE BOGUS C LAIM. ASSESSEE CAN ALSO NOT BE STATED TO HAVE FURNISHED INACCURATE PARTICULARS OR MADE ANY CONCEALMENT. IN THESE CIRCUMSTANCES, IN O UR CONSIDERED OPINION, ASSESSEE SHOULD NOT BE VISITED WITH THE RI GORS OF PENALTY U/S. 271(1)(C). 9. IN THIS REGARD, WE DRAW SUPPORT FROM THE FOLLOWI NG CASE LAWS:- I) COMMISSIONER OF INCOME TAX VS. RELIANCE PETROPRO DUCTS PVT. LTD. 322 ITR 158, ( SUPREME COURT) 'A GLANCE AT THE PROVISIONS OF SECTION 271 (1) (C) OF THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT. THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INC OME OF THE ITA NO. 3777/DEL/2012 6 ASSESSEE SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING O F THE WORDS' PARTICULARS' USED IN SECTION 271 (1 ) (C) W OULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEN D UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS T HE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS, OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE I NACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CO RRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RE TURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE I S NO QUESTION OF INVITING THE PENALTY U/S 271(1)(C). A MERE MAKIN G OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AM OUNT TO FURNISHING INACCURATE PARTICULARS.' . (II) CIT VS DHARAMPAL PREM CHAND (DEL) 329 ITR 572 'THE ASSESSEE, ENGAGED IN THE MANUFACTURE OF FLAVOU RED CHEWING TOBACCO AND KIWAN, CLAIMED DEDUCTION UNDER SECTIONS 80-IA AND 80IB OF THE INCOME TAX ACT, 1961. THE AS SESSMENT WAS MADE DENYING THE DEDUCTION CLAIMED UNDER SECTIO NS 80-IA ITA NO. 3777/DEL/2012 7 AND 80-LB. ON THE BASIS OF THE DISALLOWANCE PENALTY WAS LEVIED UNDER SECTION 271 (1)(C) OF THE ACT REJECTING THE A SSESSEE'S CONTENTION THAT THE AMOUNTS DISALLOWED DID QUALIFY FOR DEDUCTION UNDER SECTIONS 80-IA AND 80IB OF THE ACT . THE COMMISSIONER (APPEALS) DELETED THE PENALTY ACCEPTIN G THE ASSESSEE'S CONTENTION THAT IT HAD DISCLOSED ALL MAT ERIAL FACTS PERTAINING TO THE COMPUTATION OF DEDUCTION ADMISSIB LE TO THE ASSESSEE UNDER SEC. 80-IA AND 80-IB, THAT THE DIREC TORS' REMUNERATION HAD BEEN DULY DEBITED IN THE HEAD OFFI CE AND NO AMOUNT WAS ALLOCATED TOWARDS UNITS, THAT THE INTERE ST EARNED ON BANKS AND INTEREST PAID TO OTHERS HAD A DIRECT N EXUS TO THE BUSINESS ACTIVITIES AND, THEREFORE, DEDUCTION OF SA ID AMOUNT WOULD BE ADMISSIBLE TO THE ASSESSEE. THE TRIBUNAL H ELD THAT ALLOCATION OF EXPENSES BETWEEN THE HEAD OFFICE AND THE UNIT WOULD ALWAYS BE A DEBATABLE ISSUE AND AFFIRMED THE ORDER OF THE COMMISSIONER (APPEALS).' THE DELHI HIGH COURT H ELD THAT THE VIEW OF THE TRIBUNAL WAS JUSTIFIED AND DISMISSE D THE DEPARTMENTAL APPEAL. (III) THE APEX 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 STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEE DINGS, 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 CONS CIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENA LTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIG ATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCIS ED JUDICIALLY ITA NO. 3777/DEL/2012 8 AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMST ANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY C OMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FR OM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 10. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS AS ABOVE, WE SET AS IDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE LEVY OF PENALT Y OF RS. 20 LACS. 11. SINCE WE HAVE ALREADY DELETED THE LEVY OF PENAL TY, THE SECOND GROUND BECOMES ACADEMIC AND HENCE WE ARE NOT ADJUDI CATING UPON. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/1/2014. SD/- SD/- [ [[ [BHAVNESH SAINI BHAVNESH SAINI BHAVNESH SAINI BHAVNESH SAINI] ]] ] [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 09/1/2014 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. 3777/DEL/2012 9