DCIT CIR 3(1), MUMBAI V. BUDHRANI FINANCE LTD, MUMBAI

ITA 4210/MUM/2008

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88081 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2015
• Appeal Filed By: Department
• Bench Allotted: I
• Next Hearing Date: 27-01-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 13-06-2008
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Keywords: Depreciation; Capital receipt
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO. 4210/M/2008 ( AY: 1997 - 1998 ) ./I.T.A. NO. 4224/M/2008 ( AY: 2000 - 2001 ) DCIT, CIRCLE 3(1), ROOM NO.607,6 TH FLOOR, AAYAKAR BHANVAN, MUMBAI 400 020. / VS. M/S. BUDHRANI FINANCE LTD., 94, MAKER CHAMBERS - VI, NIRMAN POINT, MUMBAI - 21. ./ PAN : AAACB 2504R ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SACHCHIDANAND DUBE, DR / RESPONDENT BY : SHRI KIRTISHAH / RAJIV THAKKAR, HITES H A SURANA / DATE OF HEARING : 29 .1.2015 / DATE OF PRONOUNCEMENT :29 .1.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AGAINST THE ORDER OF THE CIT (A) - XXVII, MUMBAI DATED 31.3.2008 IN CONNECTION WITH THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT INVOLVING THE ASSESSMENT YEARS 1997 - 98 AND 2000 - 01. 2. FIRSTLY, WE SHALL TAKE UP THE APPEAL ITA NO.4210/M/2008 (AY 1997 - 1998). IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUND WHICH READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE PENALTY OF RS. 48,54,162/ - LEVIED U/S 271(1)(C) BY THE ASSESSING OFFICER IN RESPECT OF DISALLOWANCE OF DEPRECIATION ON LEASED ASSETS AND MEMBERSHIP FEES PAID TO CCI WITHOUT APPRECIATING THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF ITS INCOME AND HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ORDER OF THE TRIBUNAL FOR THE AY 1997 - 1998 IN ASSESSEES OWN CASE (ITA NO.2395/M/2 001, DATED 1.5.2014). BRINGING OUR ATTENTION TO THE GROUNDS RAISED AT PAGES 4 TO 7 OF THE SAID ORDER (SUPRA), LD COUNSEL MENTIONED THAT THE ONLY ISSUE IN THE SAID GROUNDS 2 RAISED BY THE REVENUE REVOLVES AROUND THE CLAIM OF DEPRECIATION OF VARIOUS ASSETS. ASSESSING OFFICER LEVIED THE PENALTY ON THE ADDITION RELATING TO DISALLOWANCE OF MEMBERSHIP FEES PAID TO THE CCI CLUB. REFERRING TO PAGE 9 (PARA 7) OF THE SAID TRIBUNALS ORDER, LD COUNSEL MENTIONED THAT IN CONNECTION WITH THE SAID CLAIM OF DEPRECIATION, IT IS THE PRAYER OF THE ASSESSEE TO REMAND THE MATTER TO THE FILE OF ASSESSING OFFICER FOR DE NOVO DECISION AND THE SAID PRAYER WAS ALLOWED AS EVIDENT FROM PARA 5 ON PAGE 11 OF THE SAID ORDER AND THE SAME READS AS UNDER: 5..WE CONSIDER IT JUST AND PROPER TO RESTORE ALL THE ISSUES RAISED IN THE PRESENT APPEALS TO THE FILE OF ASSESSING OFFICER FOR DENOVO CONSIDERATION AS PER LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING.. 4. THUS, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THA T THE SOLITARY ISSUE RELATING TO THE DEPRECIATION WITH ITS PENALTY U/S 271(1)(C) OF THE ACT RESTORED TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION THEREFORE, THE PRESENT APPEAL DOES NOT HAVE LEGS TO STAND. LD COUNSEL PRAYED FOR DELETING THE ADDI TIONS AS THE ASSESSING OFFICER MAY RESTART THE PENALTY PROCEEDINGS DURING THE SET ASIDE PROCEEDINGS ON QUANTUM ISSUES. 5. AFTER HEARING BOTH THE PARTIES W E FIND MERIT IN THE ASSESSEES ARGUMENT. ACCORDINGLY, WE REMAND THE ISSUE TO THE FILE OF THE ASSESS ING OFFICER AND THIS PART OF THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. THERE IS ANOTHER ISSUE WHICH IS THE SUBJECT MATTER OF PENALTY RELATES TO THE DISALLOWANCE OF MEMBERSHIP FEES PAID TO CCI. THE SAID FEES IS INTERACT FEES AND THE SAME WAS PAID AT THE TIME OF ACQUIRING THE MEMBERSHIP IN THE CLUB. DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTED THAT THE SAID DISALLOWANCE OF RS. 20,03,550/ - CONSTITUTES A CAPITAL RECEIPT. ASSESSEE ADMITTED THE SAME DESPITE THE DEB ATABLE NATURE OF THE ISSUE TO AVOID THE ALLEGATIONS. ASSESSING OFFICER LEVIED THE PENALTY ON THE SAID DISALLOWANCE. THE MATTER WAS AGITATED BY THE ASSESSEE BEFORE THE CIT (A) AND THE TRIBUNAL. HOWEVER, THE ASSESSING OFFICER LEVIED ON THE SAID DISALLOWAN CE IN ADDITION TO THE CLAIM OF DEPRECIATION NARRATED ABOVE. DURING THE FIRST APPELLATE PROCEEDINGS IT WAS SUBMITTED THAT THE PENALTY SHOULD NOT BE INVOKED IN RESPECT OF THE DISALLOWANCE OF RS. 20,03,550/ - AS SUCH ADDITIONS ARE NOT SUSTAINABLE IN LAW. ALTE RNATIVELY, THIS MAY BE A CASE FOR ADDITION THAT THE PENALTY IS 3 NOT EXCISABLE ON SUCH ADDITIONS. HE RELIED ON VARIOUS DECISIONS OF JURISDICTIONAL HIGH COURT AND SUBMITTED THAT THE ASSESSEE IS ENTITLED TO RELIEF ON SUCH ISSUES. CONTENTS OF PARA 4 OF THE CI T (A)S ORDER ARE RELEVANT IN THIS REGARD. IN PARA 4.5, CIT (A) CONCLUDED BY SAYING THAT THE PENALTY U/S 271(1)(C) IS NOT TO BE LEVIED ON SUCH ADDITIONS. 7. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 8. AFTER HEARING BOTH THE P ARTIES, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) ON THIS ISSUE THAT NO PENALTY IS REQUIRED TO BE LEVIED IS FAIR AND REASONABLE . THEREFORE, IN OUR OPINION THE ORDER OF THE CIT (A) DOES NOT CALL FOR ANY INTERFERENCE ON THIS ISSUE. THUS, THE PENA LTY STANDS DISMISSED CONSIDERING THE DECISION OF THE TRIBUNAL ON THE DEPRECIATION ISSUE AND THE PENALTY IS NOT SUSTAINABLE IN LAW IN RESPECT OF THE ADDITION OF RS. 2,03,550/ - . ACCORDINGLY, GROUND RAISED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES. 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.4224/M/2008 (AY 2000 - 2001) (BY REVENUE) 10. THIS APPEAL FILED BY THE REVENUE ON 13.6.2008 AGAINST THE ORDER OF THE CIT (A) - XXVII, MUMBAI DATED 31.3.2008 FOR THE AY 2000 - 01 IN MATTER OF PENALTY U/S 271(1)(C) OF THE ACT. ASSESSING OFFICER MADE DISALLOWANCE ON ACCOUNT OF DEPRECIATION ON LEASED ASSETS, DISALLOWANCE U/S 14A AND DISALLOWANCE OF LOSS IN TRADING OF SECURITIES. 11. BEFORE US, REFERRING TO THE FIRST ISSUE, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT AS DISCUSSED IN THE ABOVE APPEAL FOR THE AY 1997 - 98 THE ISSUE RELATING TO THE DEPRECIATION ON THE LEASED ASSETS WAS REMANDED BY THE TRIBUNAL AND THEREFORE, THE PENALTY HAS TO BE DELETED. CONSIDERING THE DISCUSSION WE HAVE GIVEN IN DETAIL IN THE ABOVE PARAGRAPHS OF THIS ORDER, WE AGREE WITH THE ARGUMENT OF THE LD COUNSEL. ACCORDINGLY, THE PENALTY STANDS DELETED AND THE ISSUE IS REMANDED TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. 12. REGARDING THE DISALLOWANCE U/S 14A OF THE ACT, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PARA 16 OF THE ORDER OF THE TRIBUNAL FOR THE AY 2000 - 02 VIDE 4 ITA NO.4076 & 4077/M/2004, DATED 12.12.2014 AND MENTIONED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS LESSER THAN 2% OF THE DIVIDEND INCOME WHICH WAS MOSTLY BEING APPLIED BY THE TRIBUNAL IN CERTAIN CASES FOR THE AYS PRIOR TO 2008 - 2009. GRANTING THE RELIEF TO THE ASSESSEE ON THIS ISSUE WAS ALSO HIGHLIGHTED BY THE LD COUNSEL AND RELIED ON THE CONTENTS OF PARA 16 OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) DATED 12.12.2014. ON PERUSAL, WE FIND THE SAME IS RELEVANT AND THE RELEVANT LINES ARE REPRODUCED AS UNDER: 16.THE DISALLOWANCE U/S 14A MADE BY THE ASSESSING OFFICER IS EVEN LESS THAN 2% OF THE DIVIDEND INCOME, WHICH IS MOSTLY BEING APPLIED BY THE TRIBUNAL IN SOME OF THE CASE FOR THE AYS PRIOR TO 2008 - 09, I.E., PRIOR TO APPLICABILITY OF RULE 8D. ACCORDINGLY, SUCH A DISALLOWANCE MADE BY THE ASSESSING OFFICER IS REASONABLE AND THE SAME IS CONFIRMED. THUS, GROUND NO.3 IS DISMISSED. 13. ON PERUSAL OF THE FACTS OF THE PRESENT CASE AND THE ABOVE DECISION OF THE TRIBUNAL, WE FIND THE ADDITION CONFIRMED BY THE TRIBUNAL IS BASED ON THE ESTIMATIONS I.E., 2% OF THE DIVIDEND INCOME. OTHERWISE, THERE IS NO FINDING OF THE FACT WITH REGARD TO THE CONCEALMENT OF INCOME OF FURNISHING OF THE INACCURATE PARTICULARS IN THIS REGARD. THEREFORE, WE ARE OF T HE OPINION THAT IT IS NOT FIT CASE FOR LEVY OF PENALTY. WE ACCORDINGLY, DISMISS THIS PART OF THE GROUND RAISED BY THE REVENUE. 14. REGARDING THE LAST ISSUE RELATING TO THE DISALLOWANCE OF LOSS IN TRADE SECURITIES, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR A TTENTION TO THE ORDER OF THE TRIBUNAL ON QUANTUM APPEAL AND MENTIONED THAT VIDE PARA 20, THE TRIBUNAL GRANTED RELIEF IN THE MATTER AND FOR THIS THE TRIBUNAL RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. WALFORT SHARES STOCK BRO KERS PVTG LTD [2010] 326 ITR 1. 15. WE HAVE PERUSED THE SAID PARA 20 OF THE TRIBUNALS ORDER DATED 12.12.2014 AND THE RELEVANT LINES READ AS UNDER: 20.THUS, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT WE HOLD THAT SUCH A LOSS OVER AND ABOVE AMOUNT OF DIVIDEND CANNOT BE DISALLOWED IN THIS YEAR. ACCORDINGLY, FOLLOWING THE HONBLE SUPREME COURT DECISION, WE ALLOW THE GROUND NO.4 AS RAISED BY THE ASSESSEE. 16. THE IMPUGNED PENALTY (RELATING TO THE DISALLOWANCE OF LOSS IN TRADING OF SECURITIES) IS CONNECTED TO THE SAID GROUND NO.4 OF THE ASSESSEES APPEAL WHICH WAS IN FAVOUR OF THE ASSESSEE. WE ACCORDINGLY CONSIDERING THE FACT OF ADDITION, THE PENALTY IS NOT EXCISABLE ON THIS ISSUE. THUS, WE AGREE WITH THE DECISION OF THE CIT (A) AND IT DOES NO T CALL FOR ANY INTERFERENCE. 5 17. THUS, THE PENALTY RELATING TO THE DEPRECIATION IS DELETED AND PENALTY ON THE DISALLOWANCE U/S 14A IS ALSO DELETED ON THE GROUND OF ESTIMATIONS. FINALLY, THE ISSUE RELATING TO THE DISALLOWANCE OF LOSS IN TRADING OF SECURI TIES STANDS DELETED CONSIDERING THE RELIEF GRANTED BY THE TRIBUNAL IN QUANTUM ADDITIONS. 18 IN THE RESULT, APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER P RONOUNCED IN THE OPEN COURT ON 29 TH JANUARY, 2015. S D / - S D / - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 29 .1 .2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI