M/s. Neemrana Hotels Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 4080/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5214 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 19-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion; Valuation report; TDS
• Section: 271(1)(c); 40(a)(ia)

Judgement Text

ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.4080/DEL/2016 ASSESSMENT YEAR: 2008- 09 M/S NEEMRANA HOTELS PRIVATE LIMITED, A-20B LAJPAT NAGAR-2, NEW DELHI. VS DY.COMMISSIONER OF INCOME TAX, CIRCLE 13(1), NEW DELHI. APPELLANT RESPONDENT ASSESSEE BY : SHRI SALIL KAPOOR, A DV. SHRI SHIVESH PANDIYA, ADV. DEPARTMENT BY: MS RINKU SINGH, SR. DR DATE OF HEARING : 28.02.2019 DATE OF PRONOUNCEMENT : 24.05.2019 O R D E R PER SUDHANSHU SRIVASTAVA, JM : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-6, NEW DELHI {CIT (A)} FOR ASSESSMENT YEAR 2008-09 WHE REIN VIDE ORDER DATED 1.2.2016, THE LD. COMMISSIONER OF INCOM E TAX (A) HAS UPHELD THE IMPOSITION OF PENALTY OF RS. 8,95,25 6/- IMPOSED U/S 271(1)( C) OF THE INCOME TAX ACT, 1961 (HEREINA FTER CALLED 'THE ACT'). ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 2 2.0 BRIEF FACTS OF THE CASE ARE THAT DURING THE YE AR UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF RUNNING OF HOTELS IN VARIOUS LOCATIONS SPREAD ALL OVER THE COUNTRY. THE RETURN OF INCOME WAS FILED DECLAR ING AN INCOME OF RS. 4,28,30,390/-. THE ASSESSMENT WAS COMPLETE D AT AN INCOME OF RS. 5,76,72,750/- AFTER MAKING THE FOLLOW ING ADDITIONS/DISALLOWANCES:- I) ADDITION ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) O F THE ACT TO THE TUNE OF RS. 1,24,49,495/- II) ADDITION ON ACCOUNT OF SHORT TERM CAPITAL GAIN TO T HE TUNE OF RS. 23,92,871/-. 2.1 PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITI ATED IN THE ASSESSMENT ORDER ITSELF. THE ASSESSEES APPEAL BE FORE THE LD. COMMISSIONER OF INCOME TAX (A) WAS PARTLY ALLOWED W HEREIN THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT WAS RESTRICTE D TO RS. 21,60,000/- AND THE DISALLOWANCE ON ACCOUNT OF SHOR T TERM CAPITAL GAIN WAS REDUCED FROM RS. 23,92,871/- TO RS .4,73,881/-. SUBSEQUENTLY, ON THE ASSESSEE APPROACHING THE ITAT, THE ITAT DELETED THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT A ND ALSO UPHELD THE ADDITION PERTAINING TO SHORT TERM CAPITAL GAINS AS RESTRICTED BY THE LD. CIT (A). THUS, THE ONLY ADDITION WHICH FINALLY SURVIVED ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 3 WAS OF RS. 4,73,881/- WHICH PERTAINED TO ADDITION O N ACCOUNT OF SHORT TERM CAPITAL GAIN. SUBSEQUENTLY, PENALTY OF RS. 8,95,256/- WAS IMPOSED U/S 271(1)(C) OF THE ACT ON THE TOTAL A DDITION OF RS. 26,33,881/- WHICH INCLUDED THE DISALLOWANCE OF RS. 21,60,000/- PERTAINING TO DISALLOWANCE U/S 40(A)(IA) OF THE ACT . THIS PENALTY OF RS. 8,95,256/- WAS UPHELD BY THE LD. COMMISSIONE R OF INCOME TAX (A) AND NOW THE ASSESSEE IS BEFORE THE ITAT CHA LLENGING THE CONFIRMATION OF PENALTY AND HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL:- 1. THAT THE NOTICE ISSUED U/S 271(1 )(C) AND ORDER PASSED UNDER SAID SECTION IMPOSING PENALTY OF RS. 8,95,256/- ARE ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. 2. THAT NO VALID SATISFACTION WAS RECORDED BEFORE INITIATION OF PENALTY AS SUCH THE NOTICE U/S 271(1 )(C) AND PENALTY ORDER PASSED UNDER SAID SECTION ARE WITHOUT JURISDICTION AND LIABLE TO BE QUASHED. THE CIT (A) HAS GROSSLY ERRED IN UPHOLDING THE SAME. 3. THAT IN THE ABSENCE OF ANY SPECIFIC CHARGE, THE LEVYING OF PENALTY U/S 271(1)(C) IS ILLEGAL, BAD IN LAW AND IS LIABLE TO BE QUASHED. 4. THAT THE AO HAD NO JURISDICTION AND AUTHORITY T O PASS THE IMPUGNED PENALTY ORDER AND HENCE THE PENALTY OR DER IS ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. 5. THAT THE A.O. AND CIT(A) HAVE ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THIS IS A STRAIGHT F ORWARD CASE OF DISALLOWANCE OF EXPENSES AND HENCE PENALTY PROVISIONS ARE NOT ATTRACTED . ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 4 6. THAT THE A.O. AND CIT (A) HAVE ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT ON THE GIVEN FACTS A ND CIRCUMSTANCES THE ISSUES OF NATURE OF SERVICES AND CONTRACT, DEDUCTION OF TDS AND RATE OF DEDUCTION OF TDS ARE HIGHLY CONTENTIOUS AND DEBATABLE ISSUES AND HEN CE AS SUCH NO PENALTY U/S 271 (L)(C) CAN BE LEVIED ON THAT ACCOUNT. 7. THAT THE A.O. AND CIT(A) HAVE ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT NO PENALTY CAN B E LEVIED ON THE AMOUNT OF ADDITION UPHELD ON THE CALCULATION OF SHORT TERM GAIN AS THE STAND OF THE ASSESSEE HAS BEEN ACCEPTED IN PRINCIPLE AND THE DIFFERENCE AROSE ONLY DUE TO DIFFERENCE IN VALUATIO N . 8. THAT THE PENALTY ORDER U/S 271(1)(C) IS AGAINST THE WELL ESTABLISHED NORMS AND JURISPRUDENCE OF PENALTY UNDER THE IT ACT AND AGAINST VARIOUS DECISIONS OF I TAT, HIGH COURT AND SUPREME COURT. 9. THAT THE APPELLANT HAD NEITHER CONCEALED INCOME NOR HAD FILED INACCURATE PARTICULARS OF INCOME AND THE CIT (A) HAS GROSSLY ERRED IN UPHOLDING THE PENALTY ORDER. 10. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE CIT (A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN IN VOKING EXPLANATION 1 AGAINST THE APPELLANT. 11. THAT WITHOUT PREJUDICE TO ABOVE, THE AO HAS LE VIED PENALTY WITHOUT GIVING EFFECT TO THE ITAT ORDER IN QUANTUM APPEAL. 12. THAT THE EXPLANATIONS FILED BEFORE THE A.O AND THE MATERIAL AVAILABLE ON RECORD HAS NOT BEEN PROPERLY CONSIDERED AND LEGALLY INTERPRETED. THE PENALTY IMP OSED CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD. 13. THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE OBSERVATIONS MADE ARE ILLEGAL, BAD IN LAW AND UNWARRANTED AND CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD. 14. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER AND OR MODIFY THE GROUNDS OF APPEAL OF THE SAID APP EAL. ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 5 ALL OF THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJ UDICE AND ARE MUTUALLY EXCLUSIVE TO EACH OTHER. 3.0 AT THE OUTSET, THE LD. AUTHORISED REPRESENTATI VE (AR) SUBMITTED THAT SINCE THE QUANTUM ADDITION PERTAININ G TO THE DISALLOWANCE U/S 40(A)(IA) HAD BEEN DELETED TOTALLY BY THE ITAT, PENALTY COULD NOT SURVIVE ON THIS ADDITION. WITH RESPECT TO THE OTHER ADDITION OF RS. 4,73,881/- PERTAINING TO THE SHORT TERM CAPITAL GAIN, THE LD. AR SUBMITTED THAT THE NOTICE U/S 271 READ WITH SEC 274 SERVED ON THE ASSESSEE WAS VAGUE AS IT DID NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE ON WHICH TH E ASSESSING OFFICER (AO) WANTED TO LEVY THE PENALTY. IT WAS SUB MITTED THAT THE NOTICE ISSUED WAS VAGUE, ILLEGAL AND WITHOUT JURISD ICTION. HENCE, THE SUBSEQUENT PENALTY PROCEEDINGS AND THE PENALTY ORDER PASSED WERE ALSO ILLEGAL AND BAD IN LAW. RELIANCE WAS PLAC ED ON THE JUDGMENTS OF THE HONBLE KARNATAKA HIGH COURT IN TH E CASES OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY REPOR TED IN 359 ITR 565 AND ON CIT VS. SSA EMERALD MEADOWS. 3.1 THE LD. AR FURTHER SUBMITTED THAT THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. IT WAS SUBMITTED THAT THIS IS A SIMPLE CASE WHERE THE ASSESSEE HAD APPORTIONED THE VALUE OF THE LAND AND BUILDING SOLD BY IT ON THE BASIS OF A VALUATION REPORT TAKEN FROM THE ARCHITECT. ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 6 THIS VALUATION REPORT WAS NOT ACCEPTED BY THE AO. H OWEVER, ON APPEAL, THE LD. CIT (A) UPHELD THE VALUATION REPORT SUBMITTED BY THE ASSESSEE AND RETURNED THE FINDINGS IN FAVOUR OF THE ASSESSEE AND ALSO PARTLY UPHELD THE VALUES OF THE LAND AND B UILDING APPORTIONED IN THE VALUATION REPORT. THIS ORDER OF CIT (A) WAS FURTHER UPHELD BY THE ITAT. THE LD. AR SUBMITTED TH AT THIS IS A CASE OF DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE AO AND A CASE WHEREIN A CLAIM WAS MADE BY THE ASSESSEE IN ITS RETURN ON BASIS OF AN ARCHITECTS CERTIFICATE WHICH WAS NOT ACCEPTED INITIALLY BY THE AO BUT IN APPEAL THE LD. CIT (A) HAD ACCEPTED THE REPORT AND PARTLY ALLOWED THE APPEAL O N THE BASIS OF THE VALUES OF LAND AND BUILDING MENTIONED IN THE RE PORT. 3.2 RELIANCE WAS PLACED ON THE JUDGMENT IN THE CAS E OF CIT VS. BACARDI MARTINI INDIA LTD REPORTED IN 288 ITR 5 85 WHEREIN IT WAS HELD THAT DISALLOWANCE OF CLAIM CANNOT BE A GRO UND TO IMPOSE PENALTY UNDER SECTION 271(L)(C). RELIANCE WA S ALSO PLACED ON THE ITATS DECISION IN DCIT VS. JMD ADVISORS PVT LTD REPORTED IN 124 ITD 223 WHEREIN IT WAS HELD BY THE ITAT DELH I BENCHES THAT NO PENALTY CAN BE LEVIED ON THE ADDITION MADE IN THE ASSESSMENT ON THE BASIS OF A VALUATION REPORT OF TH E DVO. ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 7 3.3 IN RESPONSE, THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE (SR. DR) SUBMITTED THAT ON PAGE 40 A ND 42 OF THE ASSESSMENT ORDER, PENALTY U/S 271(1)(C) HAS BEEN SP ECIFICALLY INITIATED FOR FURNISHING INACCURATE PARTICULARS AND FURTHER ON PAGE 24 OF THE PENALTY ORDER, PENALTY U/S 271(1)(C) HAS BEEN SPECIFICALLY INITIATED FOR FURNISHING INACCURATE PA RTICULARS. IT WAS SUBMITTED THAT THUS, THERE WAS APPLICATION OF MIND BY THE ASSESSING OFFICER AND HENCE MERE NON-STRIKING OF CO RRECT LIMB IN THE NOTICE CANNOT BE TAKEN AS FATAL ERROR. RATHER, IT IS A CURABLE DEFECT AND PROTECTION U/S 292 BB IS ALSO AVAILABLE TO THE REVENUE. THE LD. SR. DR ALSO SUBMITTED THAT THIS OB JECTION WAS NEVER RAISED BY THE ASSESSEE DURING PENALTY PROCEED INGS OR BEFORE THE LD. CIT (A) AND THAT THE ASSESSEE IS RAISING SU CH OBJECTION NOW, AFTER ALMOST 6 YEARS OF ASSESSMENT ORDER DATED 28.12.2010, WHEREIN SUCH PENALTY WAS INITIATED AND THE INITIAL PENALTY NOTICE DATED 28.12.2010 WAS ISSUED. IT WAS SUBMITTED THAT, THUS, ON FACTS, IT CAN BE SAFELY CONCLUDED THAT EVEN ASSUMIN G THAT THERE WAS DEFECT IN THE NOTICE, IT HAD CAUSED NO PREJUDIC E TO THE ASSESSEE AND THAT THE ASSESSEE HAD CLEARLY UNDERSTO OD WHAT WAS THE PURPORT AND IMPORT OF NOTICE ISSUED UNDER SECTI ON 274 R/W ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 8 SECTION 271 OF THE ACT. THEREFORE, PRINCIPLES OF NA TURAL JUSTICE WERE FOLLOWED. 4.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS FAR AS THE QUESTION OF PENALTY ON THE ADDITION OF RS. 21,60,000/- U/S 40(A )(IA) OF THE ACT IS CONCERNED, UNDISPUTEDLY AND ADMITTEDLY, THE QUAN TUM ADDITION HAS BEEN DELETED BY THE ITAT. THUS, PENAL TY DOES NOT SURVIVE ON THIS ADDITION. THE AO IS DIRECTED TO GIV E THE APPEAL EFFECT TO THE ASSESSEE IN THIS REGARD. 4.1 AS FAR AS THE ADDITION PERTAINING TO SHORT TER M CAPITAL GAIN IS CONCERNED, IT IS CLEAR THAT IN THE INSTANT CASE IT CANNOT BE SAID THAT THE ASSESSEE HAD WITHHELD ANY RELEVANT IN FORMATION REGARDING THE SHORT TERM CAPITAL GAINS FROM THE AO. THE CLAIM OF THE ASSESSEE WAS BASED ON THE VALUATION REPORT OF A N ARCHITECT WHICH WAS PARTLY ACCEPTED BY THE LD. CIT (A) ALSO. THERE IS NO FACTUAL FINDING BY THE AO THAT THE ASSESSEE HAD FUR NISHED ANY INACCURATE PARTICULARS WHILE BIFURCATING THE VALUE BETWEEN LAND AND BUILDINGS WHILE COMPUTING SHORT TERM CAPITAL GA INS. WITH REGARD TO THE PROVISIONS OF SECTION 271(1)(C ) OF T HE ACT PERTAINING TO PENALTY, THE HONBLE APEX COURT HAS AUTHORITATIV ELY LAID DOWN THAT MAKING OF A CLAIM BY THE ASSESSEE WHICH IS NOT SUSTAINABLE ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 9 WILL NOT TANTAMOUNT TO FURNISHING INACCURATE PARTIC ULARS. IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (S C), THE HONBLE APEX COURT HAS HELD AS FOLLOWS: A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN O RDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY , THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE PRESENT IS NOT A CAS E OF CONCEALMENT OF INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. HOWEVER, THE LD. COUNSEL FOR THE REVENUE SUGGESTED THAT BY MAKING INCORRECT CLAIM FO R THE EXPENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. AS PER LAW LEXICON, THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENSE); THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THEREFO RE, THE WORD 'PARTICULARS' USED IN THE SECTION 271 (1) (C) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLA IM MADE. IT IS AN ADMITTED POSITION IN THE PRESENT CAS E THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND T O BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEM ENT ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 10 MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUAL LY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESS EE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE LEARNED COUNSEL ARGUED THAT 'SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME.' WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENA LTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNO T TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. 4.2 ALTHOUGH, BOTH THE LOWER AUTHORITIES HAVE HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS, ON A CONSIDERATION ON THE FACTS, SUCH A VIEW IS NOT TENA BLE IS THE PRESENT APPEAL. THEREFORE, RESPECTFULLY FOLLOWING T HE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETR OPRODUCTS PVT. LTD. (SUPRA) WE DELETE THE IMPUGNED PENALTY. ITA NO. 4080/DEL/2016 ASSESSMENT YEAR 2008-09 11 5.0 ORDER PRONOUNCED IN THE OPEN COURT ON 24.05.20 19. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTA VA) VICE PRESIDENT JUDICIAL MEMBER DATED: 24 TH MAY, 2019 GS COPY FORWARDED TO: - 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR BY ORDER ASSTT. REGISTRAR DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 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.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 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