DCIT, New Delhi V. M/s. Flex Securities Ltd. (Now merged with M/s. Uflex Ltd.), New Delhi

ITA 4078/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3504 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-07-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 03-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURESH ANANTARAMAN
• Assessee Lawyers: Y KAKKAR
• Keywords: Earning of tax free income; Wrong claim
• Section: 14A

Judgement Text

ITA NO. 4078/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: 'B' NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO: 4078/DEL/2010 A.Y. : 1998-99 DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-18, ROOM NO. 327, ARA CENTRE, E-2, JHANDEWALAN EXTN., NEW DELHI 110 055 VS. M/S FLEX SECURITIES LTD. (NOW MERGED WITH M/S UFLEX LTD.), 305, 3 RD FLOOR, BHANOT CORNER, PAMPOSH ENCLAVE, GREATER KAILASH-II, NEW DELHI - 110048 (PAN : AAACF1201B) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) APPELLANT BY : MS.Y.KAKKAR, SR.D.R. DEPARTMENT BY : SH. SURESH ANANTARAMAN, C.A. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER PER SHAMIM YAHYA, ACCOUNTANT MEMBER PER SHAMIM YAHYA, ACCOUNTANT MEMBER PER SHAMIM YAHYA, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD.CIT(A)-III, NEW DELHI DATED 2.6.2010 AND PERTAIN S TO A.Y. 1998-99. 2. THE ISSUE RAISED IS THAT THE CIT(A) ERRED IN DELET ING THE PENALTY OF ` 75,00,000/- IMPOSED BY THE A.O. U/S 271(I)(C) OF TH E INCOME TAX ACT, 1961. 3. THE ASSESSEE IN THIS CASE IS AN INVESTMENT AND FINANCE COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT AND DEALING IN SHA RES AND SECURITIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. DIRE CTED THE ASSESSEE TO SUBMIT COMPLETE DETAILS OF INVESTMENT ALONG WITH TH E DETAILS OF FINANCIAL EXPENSES INCURRED. CONSIDERING THE ABOVE ASSESSING OFFICER DISALLOWED INTEREST U/ S 36(1)(III) OF THE ACT BEING INCURRED BY ASSESSEE FOR MAKING ITA NO. 4078/DEL/2010 2 INVESTMENTS IN EXEMPT INCOME. THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. ITAT HOWEVER SET ASIDE THE ORDER OF CIT(A) AND CONFIRMED THE ORDER OF AO. IN THE PENALTY ORDER PENALTY WAS IMPOSED ON AC COUNT OF ADDITIONS TOTALING TO ` 2,01,22,248/-. THE A.O. HELD THAT THE ASSESSEE HAD MADE WRONG CLAIMS WITHOUT ANY SOUND LEGAL BASIS AND HAS THUS CONCEAL ED PARTICULARS OF INCOME / FURNISHED INACCURATE PARTICULARS OF INCOME. 4. UPON ASSESSEE'S APPEAL CIT(A) CONSIDERED THE ISSUE AND HELD AS UNDER. 'I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. FROM THE FACTS OF THE CASE, IT EMER GES THAT THE ASSESSEE HAS BORROWED ` 10,89,87,367/- FROM DIFFERENT PA RTIES AND PAID INTEREST OF ` 2,41,02,166/-. THE PAYMENT OF INTEREST WAS CLAIMED AS EXPENDITURE U/S 36(1)(III) OF THE ACT. THE A.O. WHIL E SCRUTINIZING THE CASE DISALLOWED INTEREST OF ` 2,01,22,248/- U/S 36(1)( III) OF THE ACT HAVING BEEN UTILIZED FOR THE PURPOSE OF MAKING THE I NVESTMENTS IN THE EXEMPT INCOME. THE AO OBSERVED THAT THE APPELLANT HA S CONCEALED THE PARTICULARS OF ITS INCOME/FURNISHED INACCURATE PARTICU LARS OF ITS INCOME TO THE EXTENT OF ` 2,01,22,248/- BEING THE INTEREST CLAIMED AS DEDUCTION U/S 36(1)(III) OF THE ACT AND LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT, TREATING THE SAME AS FURNISHING OF INACCURATE PARTICUL ARS. IT EMERGES FROM THE DECISION OF HONBLE SUPREME COURT IN THE C ASE OF M/S RELIANCE PETRO PRODUCTS P. LTD. THAT THE READING OF THE WORDS 'INACCURATE' AND 'PARTICULARS' IN CONJUNCTION, THEY MUST MEAN THE DETA ILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORREC T, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH BEING NOT THE CASE, THERE WOU LD BE NO QUESTION OF INVITING THE PENALTY U/S 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSE LF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT T O INACCURATE ITA NO. 4078/DEL/2010 3 PARTICULARS. THE ASSESSEE HAD FURNISHED ALL THE DETAILS O F ITS EXPENDITURE AS WELL AS INCOME IN THE RETURN OF INCOME AND THEY WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS TH E CONCEALMENT OF INCOME ON ITS PART. MERELY BECAUSE THE ASSESSEE HAD CLAIM ED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE DEPARTMENT, THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY U/S 271(1)(C) OF THE ACT. MERE MAKING OF THE CLAIM, WHI CH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF I NACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IN VIEW OF THE TO TALITY OF THE FACTS AND CIRCUMSTANCES AND THE JUDICIAL PRECEDENT AS D ISCUSSED ABOVE, THE PENALTY LEVIED BY THE AO U/ S 271(1)(C) O F THE ACT, IS CANCELLED.' 5. WE HAVE HEARD THE RIVAL CONTENTIONS IN THE LIGHT OF MATERIAL PRODUCED ON RECORD AND PRECEDENTS RELIED UPON. IN THIS CASE THE ASSESSEE HAS BORROWED ` 10,89,87,367/- AND PAID INTEREST ` 2,41,0 2,166/-. INTEREST WAS CLAIMED AS EXEMPT EXPENDITURE U/S 36(1)(III) OF THE A CT. AO WHILE SCRUTINIZING THE CASE DISALLOWED INTEREST OF ` 2,01,22,248/- U/S 36( 1)(II) OF THE ACT HAVING UTILIZED FOR THE PURPOSE OF MAKING INVESTMENT IN EXEM PT INCOME. AO OBSERVED THAT ASSESSEE HAS CONCEALED THE PARTICULARS OF I NCOME / FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF ` 2,01,22,248/-. LD.CIT(A) HOWEVER REFERRED TO THE DECISION OF HON'BLE APEX COU RT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. HE HELD THAT THERE I S NO FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT. IN SUCH A SITUA TION HE HELD THAT THERE WOULD NO QUESTION OF IMPOSING PENALTY U/S 271(1)(C) OF THE ACT. A MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSE LF CAN NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING INCOME OF THE ASSESSEE. CIT(A) FURTHER NOTED THAT ASSESSEE HAD FURNISHED ALL DETAILS OF EXPENDITURE AND INCOME. ACCORDINGLY MERELY BECAUSE ASSESSEE HAS CLAIMED E XPENDITURE WHICH IS NOT EXEMPT CAN NOT LEAD TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 6. FURTHER IT IS OBSERVED THAT SECTION 14A WHICH MAND ATES DISALLOWANCE OF ITA NO. 4078/DEL/2010 4 EXPENDITURE IN RELATION TO INCOME NOT INCLUDED IN T OTAL INCOME WAS INTRODUCED BY THE FINANCE ACT, 2001 WITH RETROSPECTI VE EFFECT FROM 1.4.1962. THUS IT IS CLEAR THAT S.14A WAS NOT IN STATUTE BOOKS W HEN THE ASSESSEE HAS FILED HIS RETURN OF INCOME. ITAT WHILE SUSTAINING THE DISALLOWANCE ON MERITS IN THIS CASE HAS ALSO REFERRED TO S.14A IN THIS CASE. THIS F URTHER FORTIFIES ASSESSEE'S CLAIM THAT THERE WAS NO CONCEALMENT OR FURNISH ING OF INACCURATE PARTICULARS OF INCOME IN THIS CASE. 7. IN OUR CONSIDERED OPINION LD.CIT(A) HAS PASSED REASO NABLE ORDER WHICH DOES NOT CALL FOR ANY INTERFERENCE FROM OUR PART. 8. IN THIS REGARD, WE WOULD LIKE TO REFER TO THE HONBLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCT S LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3 .2010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE CONT INUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS HELD THAT MEN SREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HONBLE A PEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED T HEN IN CASE OF EVERY RETURN WHERE THE CLAIM IS NOT ACCEPTED BY THE AO FOR ANY RE ASON, THE ASSESSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NO T THE INTENDMENT OF LEGISLATURE. 9. WE WOULD ALSO LIKE TO REFER THE DECISION OF THE H ONBLE APEX COURT RENDERED BY A LARGER BENCH COMPRISING OF THREE OF T HEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 2 6 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS, AND PENA LTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIB ERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST , OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NO T ALSO BE IMPOSED MERELY ITA NO. 4078/DEL/2010 5 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 CONSIDERATION OF AL L 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 TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIE F THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE . 10. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND P RECEDENTS, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER O F THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND HENCE, WE UPHOLD THE SAME. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.7.2011, UPON CONCLUSION OF HEARING. SD/- SD/- [A.D. JAIN] [A.D. JAIN] [A.D. JAIN] [A.D. JAIN] [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 12/7/2011 MANGA/SRB 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