Mituto South Asia Private Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 4284/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53127 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Assessee Lawyers: N O N E
• Keywords: Earning of tax free income; Wrong claim; Difference of opinion; Rule 8D
• Section: 271(1)(c); 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH E DELHI ] BEFORE SHRI I. P. BANSAL, JM AND SHRI K. D . RANJAN, AM I. T. APPEAL NO. 4284 (DEL) OF 2011 ASSESSMENT YEAR : 2005-06. MITUTOYO SOUTH ASIA PRIVATE LIMITED, ADDL. COMMISSIONER OF INCOME-TAX, C122, OKHLA INDL. AREA, PHASEI, VS. R A N G E : 6, N E W D E L H I 110 020. N E W D E L H I. P A N / G I R NO. AAA CM 6682 R. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : N O N E; DEPARTMENT BY : SHRI SALIL MISHRA, SR. D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 05-06 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-IX, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS FOLLOWS :- 1. THAT THE ORDER IS AGAINST FACTS AND LAW; 2. THE LD. CIT (APPEALS) HAS ERRED IN NOT CONSIDER ING THE FACTS THAT ADDITION WAS BASED ON DIFFERENCE OF OPINION; 3. THE LD. CIT (APPEALS) HAS ERRED IN CONCLUDING T HAT THE ADDITION WAS AT ASSESSEES OWN ACCORD & ASSESSEE HAD FULLY CO-OP ERATED IN THE ASSESSMENT; 2 I. T. APPEAL NO. 4284 (DEL) OF 2011 4. THE LD. CIT (APPEALS) HAD ERRED IN CONCLUDING T HAT THE ADDITION WAS AT THE WORST ON ACCOUNT OF ASSESSEES GENUINE UNINT ENTIONAL MISTAKE & OMISSION & THERE WAS NOT CONCEALMENT; 5. THE LD. CIT (APPEALS) HAD ERRED IN CONCLUDING T HAT THE OFFER OF DISALLOWANCE MADE BEFORE THE ASSESSING OFFICER AMOU NTS TO REVISION OF INCOME TAX RETURN; 6. THAT JURISDICTIONAL COURTS DECISIONS RELIED UP ON ARE NOT APPLICABLE IN CASE OF ASSESSEE. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO CON FIRMING THE ORDER OF THE ASSESSING OFFICER IMPOSING PENALTY UNDER SECTION 271(1)(C) OF THE ACT . THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT U NDER SECTION 143(3) MADE TWO ADDITIONS. THE FIRST ADDITION RELATES TO DISALLOWANCE OF 20 PER CE NT OF EXPENSES INCURRED ON MAINTENANCE OF VEHICLES AND ANOTHER ADDITION OF RS.1,53,628/- MADE UNDER SECTION 14-A OF THE ACT. THE ASSESSING OFFICER DISALLOWED AMOUNT OF RS.1,53,628/ - AS PER RULE 8-D OF INCOME TAX RULES, 1962. THE ASSESSING OFFICER INITIATED PENALTY PROC EEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER IMPOSED PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF DISALLOWANCE OF RS.1,53,628/- MADE UNDER SECTION 14-A OF THE ACT. 4. ON APPEAL IT WAS SUBMITTED THAT THE ASSESSING OF FICER MADE DISALLOWANCE UNDER RULE 8-D READ WITH SUB-SECTIONS (2) AND (3) OF SECTION 14-A OF THE ACT. SUB SECTIONS (2) AND (3) WERE INTRODUCED BY THE FINANCE ACT, 2006 WITH EFFECT FRO M 1/04/2007 I.E. APPLICABLE FROM ASSESSMENT YEAR 2007-08 TO EMPOWER THE ASSESSING OFFICER TO MA KE ADDITIONS BY APPLYING THE PRESCRIBED METHOD, WHICH WAS NOTIFIED VIDE NOTIFICATION NO.45/ 2008 DATED 24 TH MARCH, 2008 IN THE FORM OF RULE 8-D. THE ASSESSEE, THEREFORE, CONTENDED THAT THE ASSESSING OFFICER HAD WRONGLY APPLIED THE PROVISIONS OF RULE 8-D FOR ASSESSMENT YEAR 2005-06 . IT WAS ALSO SUBMITTED THAT THE ASSESSEE DID NOT FURNISH ANY INACCURATE PARTICULARS OF HIS INCOM E IN THE RETURN OF INCOME OR INFORMATION / DOCUMENTS, EXPLANATIONS ETC. DURING THE COURSE OF A SSESSMENT PROCEEDINGS AND THERE WAS NOT EVEN A SINGLE ADVERSE REMARK BY THE AO IN THIS REGA RD. IT WAS, THEREFORE, SUBMITTED THAT PENALTY UNDER SECTION 271(1)(C) OF THE ACT COULD NOT BE LEV IED. THE LD. CIT (APPEALS), HOWEVER, REJECTED THE CONTENTION OF THE ASSESSEE RELYING ON THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF 3 I. T. APPEAL NO. 4284 (DEL) OF 2011 CIT VS. ZOOM COMMUNICATIONS PVT. LTD. 327 ITR 510 ( DEL.) FOR THE PROPOSITION THAT IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND EXPLANATION FURNISHED BY THE ASSESSEE FOR MAKIN G SUCH A CLAIM IS NOT FOUND TO BE BONAFIDE, THEN IT WOULD BE DIFFICULT TO SAY THAT HE COULD STI LL NOT BE LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE LD. CIT (A) ALSO RELIED ON THE DEC ISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ESCORTS FINANCE LTD. 328 ITR 44 (DEL). HE WAS OF THE OPINION THAT THE ASSESSEE MADE CLAIM KNOWINGLY WHICH WERE INADMISSIBLE IN THE EYES OF LAW. THE ASSESSEE APPARENTLY MADE UNTENABLE CLAIMS AND DELIBERATELY ENGAGED ITSELF IN TAKING A CHANCE KNOWING WELL THAT THE REVENUE PICKS UP ONLY A VERY SMALL PERCENTAGE OF CA SES FOR SCRUTINY. THEREFORE, IT MAY GET AWAY EVEN BY MAKING A WRONG CLAIM. THE LD. CIT (A), THE REFORE, UPHELD THE LEVY OF PENALTY ON DISALLOWANCE OF RS.1,53,628/- MADE UNDER RULE 8D OF IT RULES 1962. 5. BEFORE US WHEN THE CASE CAME UP FOR HEARING, NON E ATTENDED ON BEHALF OF THE ASSESSEE. HAVING REGARD TO THE ISSUE INVOLVED IN THE APPEAL F ILED BY THE ASSESSEE, WE DECIDE THE APPEAL AFTER HEARING THE LD. SR. DR. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT UNDER SECTION 143(3) MADE DISALLOWANCE UNDER SECTION 14A DISALLOWING EXPENSES RELATABLE TO EXEMP T INCOME EARNED BY WAY OF DIVIDENDS AT RS.18,83,532/-. THE AO WORKED OUT DISALLOWANCE AS PER RULE 8-D. THE ASSESSEE HAS NOT PREFERRED ANY APPEAL AGAINST DISALLOWANCE MADE UNDE R SECTION 14-A READ WITH RULE 8-D OF I. T. RULES, 1962. HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT 328 ITR 81 (BOM) HAS HELD THAT PROVISIONS OF R ULE 8-D ARE PROSPECTIVE IN NATURE AND WILL BE APPLICABLE FROM ASSESSMENT YEAR 2008-09. HONBL E BOMBAY HIGH COURT HAS ALSO HELD THAT FOR THE PERIOD PRIOR TO ASSESSMENT YEAR 2008-09 DISALLO WANCE IN RESPECT OF EXPENDITURE HAVING NEXUS WITH THE EXEMPT INCOME CAN BE MADE. IN THIS APPEAL THE ASSESSMENT YEAR INVOLVED IS 2005-06. THEREFORE, THE PROVISIONS OF RULE 8-D WILL NOT BE A PPLICABLE FOR THIS ASSESSMENT YEAR. MERELY BECAUSE THE ASSESSEE HAS NOT CHALLENGED THE ADDITIO N, COULD NOT BE THE BASIS FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER HAD NOT POINTED OUT ANY EXPENDITURE 4 I. T. APPEAL NO. 4284 (DEL) OF 2011 WHICH WAS OTHERWISE DISALLOWABLE BUT FOR THE APPLIC ATION OF RULE 8-D. THEREFORE, IN OUR CONSIDERED OPINION, IT IS NOT A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. ACCORDINGLY, IN OUR CONSIDE RED OPINION, PENALTY CANNOT BE IMPOSED IN RESPECT OF DISALLOWANCE MADE IN ACCORDANCE WITH RUL E 8D WHEN SAME IS NOT APPLICABLE FOR ASSESSMENT YEAR 2005-06. WE, THEREFORE, DELETE THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON: 28 TH NOVEMBER, 2011 . SD/- SD/- [ I. P. BANSAL ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH NOVEMBER, 2011 . *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 5 I. T. APPEAL NO. 4284 (DEL) OF 2011