DCIT, New Delhi V. M/s. SRF Ltd., Gurgaon

ITA 3848/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6978 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 09-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 17-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BERNWAL
• Assessee Lawyers: SATYEN SETHI A DV SHRI TARUN
• Keywords: Business income
• Section: 143(3); 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI G.D. AGR A WAL , VICE PRESIDENT , AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO. 3 848/ DEL /20 13 ASSESSMENT YEAR : 2006 - 07 THE D .C.I.T VS. M/S SRF LIMITED CENTRAL CIRCLE 9(1) BLOCK C, SECTOR - 45 NE W DELHI GURGAON PAN : A AACS 0206 P [APPELLANT] [RESPONDENT] DATE OF HEARING : 09 . 0 2 . 201 6 DATE OF PRONOUNCEMENT : 19 . 0 2 .2016 APPELLANT BY : MS. ANIMA BERNWAL , SR. DR RESPONDENT BY : SHRI SATYEN SETHI , A DV. SHRI TARUN PANDEY, ADV ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - X II, NEW DELHI DATED 2 8 /0 3 /20 13 FOR A.Y 2006 - 07 DELETING THE PENALTY AMOUNTING TO RS. 26,53,420/ - LEVIED U/S 271(1)(C) OF THE INCOME - TAX ACT, 1961 ['THE ACT' FOR SHORT]. 2 ITA NO. 3848 /DEL/20 13 2 2. BRIEFLY STATED, THE FACTS AS EMANATING FROM THE ORDERS OF THE AUTHORITIES BELOW ARE THAT THE ASSESSEE FILED HIS ORIGINAL RETURN OF INCOME ON 30 TH NOVEMBER 2006 DECLARING TOTAL BUSINESS INCOME OF RS. 1,27,93,49,010/ - . SUBSEQUENTLY, THE ASSESSEE REVISED THE RETURN OF INCOME ON 31.3.2008 REDUCING THE TOTAL BUSINESS INCOME TO RS. 12,60,91,510/ - . HOWEVER, ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATED 30 TH DECEMBER 2009 AT A TOTAL INCOME OF RS. 1,30,43,90,275/ - ON THE ALLEGATION THAT THE ASSESSEE HAD FUR NISHED INACCURATE PARTICULARS OF INCOME. BUT THERE WAS NO ALLEGATION REGARDING ANY CONCEALMENT OF INCOME. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A) ON ALL GROUNDS EXCEPT THE ADDITION ON ACCOUNT OF EXCESS CLAIM OF DEDUCTION U/S 35(2) AN D ADDITION FOR PEN A LTY OF RS. 2000/ - . SATISFIED WITH THE CONTENTIONS OF THE LD. AR, THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE ON ALL THE GROUNDS. 3. AFTER GIVING APPEAL EFFECT, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE FOR IMPOSING PENALTY U/S 271(1)(C) OF THE ACT OF RS. 26,53,420/ - ON THE ADDITION MADE U/S 35(2) OF THE AT ALLEGING THAT ASSESSING KNOWINGLY AND CONSCIOUSLY HAS MADE AN EXCESS CLAIM OF DEDUCTION U/S 35(2) OF THE ACT IN SPITE OF THE FACT THAT THE R & D UNIT AT CHENNAI WAS NOT APPROV E BY DSIR AND THEREFOR E THE SAME WERE NOT 3 ITA NO. 3848 /DEL/20 13 3 ALLOWABLE AND THEREBY FILED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. 3. THE LD. DR RELIED ON THE ORDERS OF THE ASSESSING AUTHORITY AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN GIVING RELIEF TO THE ASSESSEE. HE FURTHER SUBMITTED THAT THE LD. CIT(A) ERRED IN NOT APPRECIATING THE NATURE AND EXTENT OF CONCEALMENT AND THAT THE AO HAD IMPOSED PENALTY U/S 271(1)(C) OF THE ACT OF THE TAX SOUGHT TO BE EVADED WELL WITHIN THE PRESCRIBED LIMITS. 4. BEFORE US ALSO, THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND CONTENDED THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 35(2AB) @ 150% OF EXPENDITURE ON ITS IN HOUSE R & D AND HAS MADE A BONAFIDE CLAIM OF ALLOWANCE U/S 35(2AB) OF THE ACT WHICH WAS UNDER CONSIDERATION BEFORE DSIR FOR APPROVAL AT THE TIME OF CLAIM. AFTER APPROVAL ON 19.9.2008, THE ASSESSEE WAS HAVING NO OPTION TO RE D UCE THE CLAIM BY REVISING THE TAX RETURN BECAUSE THE LAST DATE FOR FILING RE VISED RETURN U/S 139(5) LAPSED ON 31.3.2008. THE LD. AR FURTHER CONTENDED THAT FROM THE CERTIFICATE OF DSIR IT IS AMPLY CLEAR TAHT IT WAS INFORMED TO TAX DEPARTMENT. ASSESSEE OFFERED ADDITION IN INCOME 4 ITA NO. 3848 /DEL/20 13 4 DURING THE ASSESSMENT PROCEEDINGS BASED ON APPROVAL OF EXPENSES BY DSIR WHICH WAS ACCEPTED BY THE AO WITHOUT ANY MODIFICATION. IN VIEW OF THE ABOVE, THE LD. AR SUBMITTED THAT THE ALLEGATION OF THE AO IS BASELESS. THE LD. AR RELIED ON A CATENA OF DECISIONS INCLUDING THE DECISION OF THE HON BLE DELHI HIGH CO URT IN THE CASE OF HCIL VS. ARRPL TRIVENI [JV] VS. ACIT [2011] 16 T AXMANN 384 [DEL] , CIT VS. VAMCHAMPIGONS AND AGRO PRODUCT 284 ITR 408, CIT VS. DHARAMPAL PREMCHAND LTD [2011] 329 ITR 572 AND CIT VS. RELIANCE PETROPRODUCTS P. LTD [2010] 189 TAXMANN 322 [SC]. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE L D. CIT(A) HAS DELETED THE PENALTY AND ARRIVED AT HIS CONCLUSION BY RELYING ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS [P] LTD [SUPRA], DILLIP N. SHROFF, UOI VS. DHARMENDRA TEXTILE PROCE SSORS [2008] 306 ITR 277/174 TAXMAN 571 [SC] AND CIT VS. BACARDI MARTINI INDIA LTD [2007] 288 ITR 585/158 TAXMAN 348 [DELHI] HELD THAT MERE ERRONEOUS CLAIM IN THE ABSENCE OF ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS IS NO GROUND FOR LEVYING P ENALTY ESPECIALLY WHEN THERE IS NOTHING ON RECORD TO SHOW THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT BONA FIDE OR ANY MATERIAL 5 ITA NO. 3848 /DEL/20 13 5 PARTICULARS WERE CONCEALED OR FURNISHED INACCURATE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE RELEVANT MATERIAL ON RECORD. BEFORE WE CONSIDER THE FACTUAL MATRIX OF THIS CASE TO ASCERTAIN AS TO WHETHER IN THE EYES OF THE PROVISIONS OF THE ACT AS EXPLAINED BY NUMEROUS JUDICIAL PRONOUNCEMENTS, PENALTY CAN BE LEVIED IN THIS CASE OR NOT, WE WOULD LIKE TO DISCUSS IN NUT SHELL THE RELEVANT LEGAL POSITION REGARDING LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AND AS TO HOW AND WHEN SUCH PENALTY CAN BE LEVIED UNDER THIS SECTION. THERE ARE NO TWO OPINION S ABOUT THE SETTLED POSITION OF LAW THAT REGULAR ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO ENTIRELY DIFFERENT SUBJECTS WHICH OPERATE IN DISTINCT AND SEPARATE SPHERES SO MUCH SO THAT ENTIRELY DIFFERENT PARAMETERS ARE APPLICABLE FOR MAKING QU ANTUM ADDITION AND FOR LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THERE CAN BE NO DISPUTE WITH REGARD TO THE POSITION OF LAW THAT UNDER SECTION 271(1)(C) PENALTY CAN BE LEVIED ONLY IF EITHER THE ACT OF 'CONCEALMENT OF PARTICULARS OF INCOME' OR ' FURNISHING OF INACCURATE PARTICULARS OF INCOME' IS FOUND TO HAVE BEEN COMMITTED BY THE ASSESSEE. THESE ARE TWO DIFFERENT OMISSIONS OR DEFAULTS ALBEIT THEY REFER TO DELIBERATE ACT ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITU TE A DELIBERATE ACT OF 6 ITA NO. 3848 /DEL/20 13 6 EITHER SUPPRESSIO VERI OR SUGGESTIO FALSY. BY THE MERE REASON OF SUCH CONCEALMENT OR OF FURNISHING OF INACCURATE PARTICULARS ALONE, THE ASSESSEE DOES NOT, IPSO FACTO, BECOME LIABLE TO A PENALTY. IMPOSITION OF PENALTY IS NOT AT ALL AUTOMATIC. MEANING THEREBY, ANY ADDITION IN QUANTUM WOULD NOT LEAD TO AUTOMATIC LEVY OF PENALTY AND THIS IS ALSO TRUE IN RESPECT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. NOT ONLY IS THE LEVY OF PENALTY DISCRETIONARY IN NATURE BUT THE DISCRETION HAS TO BE EXERCISED KEEPING THE RELEVANT FACTORS IN MIND AND THE APPROACH OF THE TAXMAN MUST BE FAIR AND OBJECTIVE. THIS SUBJECT HAS BEEN A MATTER OF GREAT CONTROVERSY. FINALLY, AFTER REFERRING TO THE DECISIONS IN THE CASE OF DILIP N. SHROFF VS JCIT & A NOTHER, 291 ITR 519, UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS [2008] 13 SCC 369, AS WELL AS UNION OF INDIA VS RAJASTHAN SPG. & WVG. MILLS [2009] 13 SCC 448, THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD, 322 ITR 1 58, HAS HELD AS UNDER: 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 INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HA VE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CA NNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTI - 7 ITA NO. 3848 /DEL/20 13 7 CULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAI M TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCU MENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271 (1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 7. ADVER TING TO THE FACTS OF THIS CASE, WE FIND THAT THE ASSESSEE HAS NEITHER CONCEALED THE PARTICULARS OF INCOME NOR HAS FURNISHED INACCURATE PARTICULARS OF INCOME WARRANTING LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF THIS AMOUNT OF RS.26,53,420/ . PE NALTY PROCEEDINGS OPERATE IN A DIFFERENT SPHERE BECAUSE DIFFERENT PARAMETERS APPLY FOR LEVY OR NON - LEVY OF PENALTY IN CONTRAST TO THE QUANTUM ADDITIONS WHICH OPERATE IN AN ENTIRELY 8 ITA NO. 3848 /DEL/20 13 8 DIFFERENT SPHERE. IN CASE ANY LEGAL OR VALID CLAIM IS MADE, WHICH IS NOT F OUND TO BE CORRECT BY THE AUTHORITIES, IT WOULD NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY AS DISCUSSED ABOVE. IT IS NOT A CASE WHERE THE ASSESSEE HAS NOT DISCLOSED FULL AND FINAL FACTS RATHER ASSESSEE HAS CLAIMED DEDUCTION U/S 35(2) OF THE ACT. THE LD.AR HAS RELIED ON NUMEROUS DECISIONS IN SUPPORT OF HIS CONTENTION. THE CASE OF THE REVENUE IS THAT THIS IS A CLEAR CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME WHICH THE ASSESSEE HAS DONE WITH THE AIM TO EVADE PAYMENT OF TAX. BEFORE WE DISCUSS THE CA SES RELIED ON BY THE PARTIES, WE WOULD LIKE TO MENTION THAT THE ASSESSEE HAS MADE A FULL AND TRUE DISCLOSURE OF INCOME AND HAS MADE A CLAIM FOR DEDUCTION. HENCE, THE ASSESSEE HAS MADE A BONAFIDE LEGAL CLAIM WHICH CANNOT BE SAID TO BE FALLACIOUS OR FLIPPANT AND MALAFIDE. THIS FACT HAS NOT BEEN DISPUTED BY THE REVENUE. BE THAT AS IT MAY, WE ARE OF THE CONSIDERED OPINION THAT IN CASE A VALID CLAIM BASED ON LAW IS MADE BY THE ASSESSEE AFTER DISCLOSING FULL AND TRUE FACTS, AND THE SAME IS REJECTED AND ADDIT ION IS MADE QUA THAT AMOUNT, IT WOULD NOT TANTAMOUNT TO EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AUTOMATICALLY. THE REVENUE IS BOUND TO ESTABLISH ITS CASE WHICH FALLS UNDER EITHER OF THE TWO 9 ITA NO. 3848 /DEL/20 13 9 CONDITIONS LAID IN SECTION 271(1)(C) OF THE ACT. THE REVENUE HAS RELIED ON VARIOUS DECISIONS 8. THE FIRST DECISION OF THE HON'BLE SUPREME COURT RELIED ON BY THE LD. DR IN THE CASE OF CIT V S RELIANCE PETROPRODUCTS, HAS ALREADY BEEN DISCUSSED BY US WHICH, IN OUR OPINION, SUPPORTS TH E CASE OF THE ASSESSEE BECAUSE IT HAS BEEN HELD THEREIN THAT MAKING AN INCORRECT CLAIM CANNOT BY ANY STRETCH OF IMAGINATION TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. THERE IS NO FINDING BY THE REVENUE THAT THE DETAILS SUPPLIED BY THE ASSE SSEE IN ITS RETURN ARE INCORRECT OR ERRONEOUS OR FALSE. THE ASSESSEE HAS MADE A CLAIM WHICH WAS NOT FOUND TO BE SUSTAINABLE IN LAW AND QUANTUM ADDITION HAS BEEN MADE. SO, IT WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE COURT SPECIFICALLY REJECTED THE REVENUE S CONTENTION THAT SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME . IN THIS CASE, THE FACTS ARE SIMPLE. T HE ASSESSING OFFICER HAS SUMMARILY REJECTED THE SUBMISSIONS MADE BY THE ASSESSEE IN REPLY TO THE PENALTY NOTICE AND PROCEEDED TO LEVY PENALTY THE ASSESSEE HAS NEITHER CONCEALED THE INCOME NOR HAS FURNISHED ANY INACCURATE/FALSE PARTICULARS FOR THE PURPOS E OF CLAIMING THE DEDUCTION. THERE WAS NO FALSE STATEMENT OF FACTS. THE CLAIM WAS NOT EVEN DISGUISED SUCH AS WITH A WRONG 10 ITA NO. 3848 /DEL/20 13 10 DESCRIPTION OR A MISLEADING OR FALSE LABEL WHICH THE ASSESSING OFFICER HAD TO UNRAVEL FOR MAKING DISALLOWANCE. AS HELD BY THE HON' BLE ORISSA HIGH COURT IN THE CASE OF CIT VS INDIAN METALS & FERRO ALLOYS LTD, 211 ITR 35, THE WORD CONCEAL IS DERIVED FROM THE LATIN CONCELARE WHICH IMPLIES TO HIDE. WEBSTER IN HIS NEW INTERNATIONAL DICTIONARY EQUATES ITS MEANING TO HIDE OR WITHDRAW FROM OBSERVATION, TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF. THE OFFENCE OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME - TAX AUTHORITIES. IN FURNISHING I TS RETURN OF INCOME, AN ASSESSEE IS REQUIRED TO FURNISH PARTICULARS AND ACCOUNTS ON WHICH SUCH RETURN INCOME HAS BEEN ARRIVED AT. THESE MAY BE PARTICULARS AS PER ITS BOOKS OF ACCOUNT, IF IT HAS MAINTAINED THEM, OR ANY OTHER BASIS UPON WHICH IT HAD ARRIVED AT THE RETURNED FIGURE OF INCOME. ANY INACCURACY MADE IN SUCH BOOKS OF ACCOUNT OR OTHERWISE WHICH RESULTED IN KEEPING OFF OR HIDING A PORTION OF ITS INCOME IS PUNISHABLE AS FURNISHING INACCURATE PARTICULARS OF ITS INCOME. IN THIS CASE, THE ASSESSEE H AS DISCLOSED ALL THE FACTS AND THEY ARE NEITHER FALSE NOR INACCURATE. AFTER COGITATING THE ENTIRE FACTS OF THE CASE AND BASING THEM ON THE TEXT OF THE PENALTY PROVISIONS WITH REFERENCE TO THE RELEVANT PRECEDENTS RELIED ON BY BOTH THE PARTIES, WE CANNOT AL LOW REV ENUE S APPEAL. FOR THE FOREGOING 11 ITA NO. 3848 /DEL/20 13 11 REASONS, WE DISMISS THE APPEAL OF THE REVENUE AND CONFIRM THE CANCELLATION OF THE IMPUGNED PENALTY LEVIED U/S 271(1)(C) OF THE ACT . 9 . IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. THE ORDER IS PRONO UNCED IN THE OPEN COURT ON 1 9 .02.2016. S D / - S D / - ( G.D. AGARWAL ) (C.M. GARG) VICE PRESIDENT JUDICIAL MEMBER DATED: 1 9 T H FEBRUARY , 2016. VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI