DCIT 2(2)(1), MUMBAI V. ISRANI INVESTMENT P.LTD, MUMBAI

ITA 386/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2204 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 17-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYAN
• Assessee Lawyers: S C TIWARI
• Section: 143(3)

Judgement Text

1 ITA NO.386/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.386/MUM/2017 (ASSESSMENT YEAR: 2012-13) DY.CIT, CIR. 2(2)(1), MUMBAI VS M/S ISRANI INVESTM ENTS PVT LTD 104, SIR VITHALDAS CHAMBERS 16, MUMBAI SAMACHAR MARG FORT, MUMBAI 400 023 PAN : AAACI1459C APPELLANT RESPONDEDNT APPELLANT BY SHRI ABI RAMA KARTIKEYAN RESPONDENT BY SHRI S.C. TIWARI DATE OF HEARING 17-10-2018 DATE OF PRONOUNCEMENT 16-11-2018 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-5, MUMBAI DATED 06-10-2016 AND IT PERTAINS T O AY 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ''WHETHER ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE ID. CIT(A) WAS RIGHT IN DELETING THE PENALTY LEVIED U/S. 271(L)(C) OF THE ACT AMOUNTING TO RS.15,51,146/-WITHOUT APPRECIATING THE FACT THAT ASS ESSEE HAS WILFULLY AVOIDED THE DISALLOWANCE OF STT AND DONATION PAID TO ITS COMPUT ATION OF TOTAL INCOME. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) WAS RIGHT IN DELETING THE PENALTY LEVIED U/S. 271(L)(C) OF THE ACT AMOUNTING TO RS.15,51,146/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION ON ACCOUNT OF DONATION PAID IN THE ABSENCE OF REQUIRED DOCUMEN TARY EVIDENCES LIKE RECEIPT AND VALID EXEMPTION CERTIFICATE OF THE DONE.' 2 ITA NO.386/MUM/2017 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A DOMESTIC COMPANY ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SE CURITIES, FILED ITS RETURN OF INCOME FOR AY 2012-13 ON 26-09-2012 DECLARING TOTAL LOSS OF RS.84,31,405. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE ACT ON 13-02-2015 DETERMINING THE TOTAL LOSS AT RS.1,94,650. THEREAF TER, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF DISALLOWANCE OF DONATION PAID AMOUNTING TO RS.50 LAKHS AND DISALLOWANCE OF SECURITY TRANSACTION TAX AMOUNTING TO RS.19,891. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED AND ASKED AS TO WHY PENALTY SHALL NOT BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. I N RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE, VIDE ITS LETTER DATED 14-08-2 015 SUBMITTED THAT THE QUESTION OF FURNISHING INACCURATE PARTICULARS OF IN COME DOES NOT ARISE IN RESPECT OF DISALLOWANCE OF DONATION PAID AMOUNTING TO RS.50 LAKHS AND DISALLOWANCE OF STT AMOUNTING TO RS.19,891 AS THE S AME HAS BEEN INCLUDED IN REVISED STATEMENT OF TOTAL INCOME FILED BEFORE COM PLETION OF ASSESSMENT IMMEDIATELY AFTER NOTICING INADVERTENT ERROR COMMIT TED IN FILING RETURN OF INCOME. THE ASSESSEE, FURTHER SUBMITTED THAT THE FACTS REGARDING PAYMENT OF DONATION AND STT HAS BEEN DISCLOSED IN THE FINANCIA L STATEMENTS UNDER ADMINISTRATIVE & OTHER EXPENSES BUT BY INADVERTEN T ERROR, THE SAME HAVE NOT BEEN TAKEN INTO STATEMENT OF TOTAL INCOME WHILE FIL ING RETURN OF INCOME; HENCE, 3 ITA NO.386/MUM/2017 THE SAME CANNOT BE CONSIDERED AS FURNISHING OF INAC CURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C). TH E AO, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO BY FOLLOWING T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PRO CESSORS VS UOI (2008) 306 ITR 277 HELD THAT THE ADDITIONS MADE IN THE QUANTUM ASSESSMENT HAVING ATTAINED FINALITY AND SUCH ADDITION HAS BEEN MADE A FTER EXAMINATION OF BOOKS OF ACCOUNT, THEREFORE, THERE IS NO MERIT IN THE ARG UMENTS OF THE ASSESSEE THAT IT IS AN INADVERTENT ERROR WHILE COMPUTING TOTAL INCOM E. THE EVIDENCE AGAINST THE ASSESSEE WOULD NOT HAVE COME TO LIGHT BUT FOR T HE ENQUIRIES CONDUCTED IN THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS. THEREFORE, HE OPINED THAT IT IS A FIT CASE FOR IMPOSITION OF PENALTY FOR FURN ISHING INACCURATE PARTICULARS OF INCOME AND HENCE LEVIED PENALTY OF RS.15,51,146 WHI CH IS 100% OF TAX SOUGHT TO BE EVADED. 3. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE FIL ED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), ASSESSEE REITERATED ITS SUBMISSIONS MADE BEFORE THE AO TO ARGUE THAT THERE IS NO QUESTION OF FURNISHING OF INACCURATE PARTICULARS OF INCOME IN RESPECT OF ADDITION MADE BY THE AO TOWARD S DONATION AND STT PAID AS THE SAME HAS BEEN RECTIFIED BY FILING REVISED ST ATEMENT OF TOTAL INCOME IMMEDIATELY AFTER NOTICING THE INADVERTENT ERROR CO MMITTED IN FILING RETURN OF INCOME. THE ASSESSEE FURTHER SUBMITTED THAT THE DE TAILS OF DONATION PAID AND 4 ITA NO.386/MUM/2017 STT HAVE BEEN DISCLOSED IN THE FINANCIAL STATEMENTS UNDER THE HEAD ADMINISTRATIVE & OTHER EXPENSES IN ITS ACCOUNTS. A LTHOUGH THE ASSESSEE HAS OMITTED TO ADD BACK THE SAID TWO AMOUNTS IN ITS TOT AL INCOME, BUT THE SAME IS ON ACCOUNT OF AN INADVERTENT HUMAN ERROR WHICH CANN OT BE CONSIDERED AS DELIBERATE ATTEMPT MADE TO EVADE PAYMENT OF TAXES. IN THIS REGARD, THE ASSESSEE RELIED UPON THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT LTD VS CIT, KOLKATTA I N CIVIL APPEAL NO.6924 OF 2012. 4. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMIS SIONS OF THE ASSESSEE AND ALSO BY FOLLOWING THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT LTD VS CIT, KOLKATTA (SUPRA) HELD THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE APEX COURT WHERE, UNDER IDENTICAL SET OF FACTS, THE HONBLE COURT HEL D THAT WHEN PRIMARY FACTS HAVE BEEN DISCLOSED IN THE ACCOUNTS, MERELY FOR THE REASON THAT THE DISALLOWANCE NEEDS TO BE ADDED BACK IN TOTAL INCOME , HAVE NOT BEEN ADDED, CANNOT BE CONSIDERED AS FURNISHING OF INACCURATE PA RTICULARS OF INCOME WHICH WARRANTS LEVY OF PENALTY U/S 271(1)(C). THE RELEVA NT OBSERVATIONS OF THE LD.CIT(A) ARE EXTRACTED BELOW:- 3.2 I HAVE CONSIDERED THE APPELLANT'S SUBMISSIONS. IN THIS CASE AO HAD LEVIED PENALTY U7S 271(1)(C) ON THE GROUND THAT APP ELLANT HAD FILED INACCURATE PARTICULARS OF INCOME. AO IN THE ASSESSMENT ORDER DISALLOWED RS. 50,00, 0007- ON DONATION PAID AND RS. 19, 891 7- ON ACCOUN T OF SECURITY TRANSACTION, TAX. IN THE APPELLANT'S SUBMISSION APPELLANT STATES THAT THEY FILED CLAIM OF 5 ITA NO.386/MUM/2017 DONATION AND SECURITY TRANSACTION TAX TO ADMINISTRA TIVE AND OTHER EXPENSES IN ITS ACCOUNTS WHICH IS REFLECTED IN PAPERBOOK PAGE 1 4 OF THE SUBMISSIONS APPELLANT FURTHER STATES THAT AFTER NOTICING THE ERROR THEY HAVE FILED REVISED COMPUTATION BY ADDING THESE TWO ITEMS ON WHICH ASSE SSMENT WAS FINALISED BY THE AQ. APPELLANT CLAIMED THAT IT IS A BONAFIDE AND INADVERTENT ERROR WHICH WAS RECTIFIED AND HENCE PENALTY SHOULD NOT BE LEVIE D. HERE THE ISSUE IS THAT APPELLANT HAD MENTIONED THE TWO ITEMS IN THE ACCOUN TS IN THE ADMINISTRATIVE AND OTHER EXPENSES CLAIMING THE DONATION AND SECURI TY TRANSACTION AS EXPENSES. HOWEVER, IN THE COMPUTATION OF INCOME APP ELLANT FAILED TO DISALLOW THE SAME. FOR THIS APPELLANT STATES THAT THIS IS A BONAFIDE AND INADVERTENT ERROR WHICH THEY HAVE RECTIFIED BY FILING REVISED C OMPUTATION DURING THE ASSESSMENT PROCEEDINGS. APPELLANT RELIES ON HON'BLE SUPREME COURT DECISION IN THE CASE OF PRICE WATERHOUSE COOPERS (P) LTD. V CIT KOLKATTA IN CIVIL APPEAL NO. 6924 2012 WHERE IT IS HELD AS UNDER: 'CONTENTS OF TAX AUDIT REPORT SUGGEST THAT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QU ESTION OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. ALL THAT HAPPENED IN PRESENT CASE IS THAT THROUGH BONAFIDE AND INADVERTE NT ERROR FAILED TO ADD PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CA N ONLY BE DESCRIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CAL IBER AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH TH E INADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT B E DOUBTED, BUT ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING INACCUR ATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. CONSEQUENTLY, GIV EN THE PECULIAR FACTS OF THIS CASE, THE IMPOSITION OF PENALTY ON THE ASSE SSEE IS NOT JUSTIFIED.' IN THE ABOVE SUPREME COURT CASE ALSO APPELLANT HAD CLAIMED PROVISION FOR GRATUITY AS AN EXPENDITURE BUT THEY HAVE NOT DISALL OWED THE SAME BY ADDING TO THE TOTAL INCOME WHILE FILING THE RETURN OF INCO ME. WHEN AO LEVIED PENALTY, SUPREME COURT HELD THAT HERE THE PARTICULARS FILED BY APPELLANT ARE NOT INACCURATE OR THERE IS NO QUESTION OF CONCEALMENT O F INCOME. ACCORDING TO THE SUPREME COURT ALL THAT HAPPENED IN THE ABOVE PRICEW ATER HOUSE COOPERS PVT. LTD. CASE IS BONAFIDE AND INADVERTENT ERROR WH ERE THEY FAILED TO ADD INCOME FROM GRATUITY TO TOTAL INCOME. IF WE APPLY T HE CASE OF PRICEWATER HOUSE COOPERS PVT. LTD., IN THIS CASE ALSO APPELLAN T HAD SHOWN DONATION AND SECURITY TRANSACTION IN ADMINISTRATIVE AND OTHER EX PENSES, BUT FAILED TO ADD IT TO THE TOTAL INCOME IN THE COMPUTATION. THIS IS IDE NTICAL TO THE FACTS OF PRICEWATER HOUSE COOPERS PVT. LTD. CASE OF SUPREME COURT. HENCE APPLYING THE ABOVE CASE, THIS HAS TO BE TREATED AS BONAFIDE AND INADVERTENT ERROR. IN SUCH A CASE SUPREME COURT HELD THAT PENALTY CANNOT LEVIED U/S 271(1)(C) OF THE ACT. IN VIEW OF THE ABOVE DECISION OF SUPREME C OURT, PENALTY LEVIED IS CANCELLED. THIS GROUND OF APPEAL IS ALLOWED. 5. THE LD.DR SUBMITTED THAT THE LD.CIT(A) WAS ERRED IN DELETING PENALTY LEVIED U/S 271(1)(C) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS WILLFULLY AVOIDED DISALLOWANCE OF DONATION PAID & STT IN ITS COMPUTATION OF TOTAL 6 ITA NO.386/MUM/2017 INCOME. THE LD.DR FURTHER SUBMITTED THAT WHEN THOS E TWO EXPENSES ARE CLEARLY NOT ADMISSIBLE UNDER THE ACT, THE ASSESSEE OUGHT TO HAVE DISALLOWED, IN ITS STATEMENT OF TOTAL INCOME WHILE FILING TOTAL IN COME BUT THE ASSESSEE FAILED TO DO SO, THEREFORE, THE AO WAS RIGHT IN LEVYING PE NALTY U/S 271(1)(C). 6. THE LD.AR FOR THE ASSESSEE, ON THE OTHER HAND, S UPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT THE ASSESSEE HAS DISCLOSE D PRIMARY FACTS IN ITS FINANCIAL STATEMENTS, WHILE FILING RETURN OF INCOME , BUT BY INADVERTENT MISTAKE, FAILED TO ADD BACK DONATION PAID AND STT IN THE STA TEMENT OF TOTAL INCOME WHICH HAS BEEN SUBSEQUENTLY RECTIFIED BY FILING REV ISED STATEMENT OF TOTAL INCOME BEFORE COMPLETION OF ASSESSMENT WHICH IS EVI DENT FROM THE FACT THAT THE AO HAS NOT MADE ANY ADDITION IN THE ASSESSMENT ORDER. THE AO HAS ACCEPTED THE REVISED STATEMENT OF TOTAL INCOME FILE D BY ASSESSEE VIDE LETTER DATED 27-01-2015, BUT INITIATED PENALTY PROCEEDINGS ON THOSE TWO ITEMS FOR FURNISHING INACCURATE PARTICULARS OF INCOME. WHEN THE PRIMARY FACTS HAVE BEEN DISCLOSED IN THE RETURN FILED FOR THE RELEVANT YEAR AND THERE IS AN OMISSION TO ADD BACK CERTAIN DISALLOWANCE, THE SAME CANNOT BE C ONSIDERED AS WILLFUL ATTEMPT MADE TO EVADE PAYMENT OF TAX WHICH WARRANTS LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSEE H AS DISCLOSED PRIMARY FACTS IN 7 ITA NO.386/MUM/2017 RESPECT OF DONATION PAID AND STT PAID IN ITS RETURN OF INCOME FILED FOR THE RELEVANT ASSESSMENT YEAR. IT IS ALSO AN ADMITTED F ACT THAT THE ASSESSEE FAILED TO ADD BACK DONATION PAID AMOUNTING TO RS.50 LAKHS AND STT PAID AMOUNTING TO RS.19,891 IN THE STATEMENT OF TOTAL INCOME. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS FILED REVISED STATEMENT OF TOTAL INCOM E RECTIFYING THE SAID MISTAKES BEFORE COMPLETION OF ASSESSMENT PROCEEDING S. THE REASON GIVEN BY THE ASSESSEE FOR NOT DISALLOWING THOSE TWO ITEMS IN THE STATEMENT OF TOTAL INCOME IS THAT THERE IS AN INADVERTENT ERROR WHILE FILING RETURN OF INCOME, WHICH RESULTED IN OMISSION OF THOSE TWO ITEMS IN THE STAT EMENT OF TOTAL INCOME. THE SAID MISTAKES IS ONLY A HUMAN ERROR WHICH CANNOT BE CONSIDERED AS DELIBERATE ATTEMPT MADE TO EVADE PAYMENT OF TAXES. WHEN WE EX AMINE THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE DECISION OF HONBLE AP EX COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT LTD VS CIT, KOLKATTA (SUPRA) , WE FIND THAT THE FACTS OF THE ASSESSEES CASE ARE IDENTICAL TO THE FACTS OF T HE CASE DECIDED BY THE HONBLE APEX COURT WHILE DELETING PENALTY LEVIED U/S 271(1) (C). IN THE SAID CASE, ALTHOUGH THE TAX AUDITOR QUANTIFIED THE DISALLOWANC E OF CERTAIN AMOUNT, THE ASSESSEE FAILED TO ADD BACK IN THE STATEMENT OF TOT AL INCOME. UNDER THOSE FACTS, THE HONBLE APEX COURT HELD THAT THIS CANNOT BE CONSIDERED AS WILFUL ATTEMPT MADE TO EVADE PAYMENT OF TAXES AND AT BEST, IT COULD BE TERMED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. IN THI S CASE, ON PERUSAL OF FACTS, 8 ITA NO.386/MUM/2017 WE FIND THAT ALTHOUGH THE ASSESSEE HAS DISCLOSED AL L FACTS IN RESPECT OF THOSE TWO ITEMS OF EXPENSES, BUT FAILED TO ADD BACK IN TH E STATEMENT OF TOTAL INCOME, WHILE FILING RETURN OF INCOME. THE SAID MISTAKE HA S BEEN RECTIFIED IMMEDIATELY AFTER NOTICING DURING THE COURSE OF ASSESSMENT PROC EEDINGS BY FILING REVISED STATEMENT OF TOTAL INCOME. UNDER THESE FACTS AND C IRCUMSTANCES, THE AO WAS INCORRECT IN COMING TO THE CONCLUSION THAT THE ASSE SSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF DONA TION PAID & STT WHICH WARRANTS LEVY OF PENALTY U/S 271(1)(C). THE LD.CIT (A), AFTER CONSIDERING RELEVANT FACTS HAS RIGHTLY DELETED PENALTY LEVIED B Y THE AO. WE DO NOT FIND ANY ERROR IN THE FINDINGS OF THE LD.CIT(A); HENCE, WE A RE INCLINED TO UPHOLD THE FINDING OF LD.CIT(A) AND DISMISS THE APPEAL FILED B Y THE REVENUE. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER, 2018. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 16 TH NOVEMBER, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI