DCIT Rg. - 3(3), MUMBAI V. M/s. RELIANCE CAPITAL LTD., MUMBAI

ITA 4331/MUM/2006

• Counselvise Citation: 433119914 RSA 2006
• Duration Of Justice: 5 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 01-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 25-07-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: JITENDRA S SANGHAVI
• Section: 271(1)(c); 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER. I.T.A. NO. 4331/MUM/2006 ASSESSMENT YEAR : 2001-02. DY. COMMISSIONER OF INCOME-TAX, M/ S RELIANCE CAPITAL LTD. RANGE-3(3), MUMBAI. VS. GROUND FLOOR, 228, MITTAL CHAMBERS, NARIMAN POINT, MUMBAI 400 021. PAN AAACR5054J. APPELLANT. RESPONDENT. APPELLANT BY : SHRI D.S. SUNDER SINGH. RESPONDENT BY : SHRI JITENDRA S. SANGHAVI. DATE OF HEARING : 01-03-2012 DATE OF PRONOUNCEMENT : 16-03-2012 O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT(APPEALS)-III, MUMBAI DATED 30 TH MAY, 2006 WHEREBY HE CANCELLED THE PENALTY OF RS.1,50,00,000/- IMPOSED BY THE AO U/S 271(1)(C) . 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF LEASING, FINANCING, INVESTMENT AT MERCH ANT BANKING, BILL DISCOUNTING ETC. THE RETURN OF INCOME FOR THE YEAR UNDER CONSID ERATION WAS FILED BY IT ON 31-10- 2001 DECLARING TOTAL INCOME OF RS.18,76,16,530/- IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 12-02-2004, THE TOTAL IN COME OF THE ASSESSEE WAS 2 ITA NO. 4331/MUM/2006 COMPUTED BY THE AO AT RS.46,59,31,610/- AFTER MAKIN G ADDITION, INTER ALIA, ON ACCOUNT OF DISALLOWANCE U/S 14A AMOUNTING TO RS.18, 16,00,000/- AND DISALLOWANCE OF DEDUCTION U/S 35D AMOUNTING TO RS.2,19,86,670/-. ON APPEAL, THE LEARNED CIT(APPEALS) SUSTAINED THE DISALLOWANCE MADE BY THE AO U/S 14A TO THE EXTENT OF RS.69,25,000/- AND CONFIRMED THE ENTIRE DISALLOWANC E MADE ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S 35D AMOUNTING TO RS.2,19,86,670/-. AS A RESULT OF SUSTENANCE OF THE SAID ADDITIONS MADE TO THE TOT AL INCOME OF THE ASSESSEE BY THE LEARNED CIT(APPEALS) IN THE QUANTUM PROCEEDINGS, PE NALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED BY THE AO. THE EXPLANATION OFFERED BY THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED DURING THE COURSE OF THE SAID PROCEEDINGS WAS NOT FOUND ACCEPTABLE BY THE AO AND HE IMPOSED A PENALTY OF RS.1,50,00,000/- U/S 271(1)(C) IN RESPECT OF ADDITIONS OF RS.69,25,0 00/- AND RS.2,19,86,670/- MADE TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF D ISALLOWANCE U/S 14A AND DISALLOWANCE OF DEDUCTION U/S 35D RESPECTIVELY HOLD ING THAT THE ASSESSEE HAD FILED INACCURATE PARTICULARS OF ITS INCOME TO THAT EXTENT . 3. THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT( APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS W ELL AS MATERIAL AVAILABLE ON RECORD, THE LEARNED CIT(APPEALS) CANCELLED THE SAID PENALTY. HE HELD THAT THE DISALLOWANCE MADE BY THE AO U/S 14A WAS MARGINALLY SUSTAINED IN THE QUANTUM PROCEEDINGS PURELY ON ESTIMATED BASIS AND THERE BEI NG NO FINDING OF FACT RECORDED DURING THE COURSE OF QUANTUM PROCEEDINGS THAT INTER EST BEARING BORROWED FUNDS HAD ACTUALLY BEEN UTILIZED BY THE ASSESSEE FOR MAKING I NVESTMENT IN SHARES, THE DISALLOWANCE MADE PURELY ON THE STRENGTH OF PRESUMP TION WAS NOT A GROUND TO IMPOSE PENALTY U/S 271(1)(C). AS REGARDS THE ADDITI ON MADE BY WAY OF DISALLOWANCE U/S 35D, THE LEARNED CIT(APPEALS) FOUN D THAT SIMILAR DISALLOWANCE 3 ITA NO. 4331/MUM/2006 WAS MADE IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR I.E. 2000-01 AND ALTHOUGH THE SAME WAS CONFIRMED BY THE LEARNED CIT(APPEALS) IN THE QUANTUM PROCEEDINGS, THE PENALTY IMPOSED IN RESPECT OF THE SAID DISALLOWANCE WAS CANCELLED BY HIS LEARNED PREDECESSOR. FOLLOWING THE APPELLATE ORDER OF HIS LEARNED PREDECESSOR FOR ASSESSMENT YEAR 2000-01, THE LEARNE D CIT(APPEALS) HELD THAT PENALTY IMPOSED U/S 271(1)(C) IN RESPECT OF ADDITIO N MADE BY WAY OF DISALLOWANCE OF DEDUCTION U/S 35D WAS NOT SUSTAINABLE. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY THE LEARNED COU NSEL FOR THE ASSESSEE, THE DISALLOWANCE MADE BY THE AO U/S 14A AND SUSTAINED B Y THE LEARNED CIT(APPEALS) TO THE EXTENT OF RS.69,25,000/- HAS ALREADY BEEN DE LETED BY THE TRIBUNAL VIDE ITS ORDER DATED 11 TH NOVEMBER, 2011 PASSED IN ITA NO.5413/MUM/2004. CONSEQUENTLY, THE VERY BASIS OF IMPOSITION OF PENAL TY U/S 271(1)(C) IN RESPECT OF THE SAID DISALLOWANCE NO MORE SURVIVES AND THE PENA LTY TO THAT EXTENT IS LIABLE TO BE CANCELLED HAVING NO LEGS TO STAND. AS REGARDS THE R EMAINING AMOUNT OF PENALTY IMPOSED U/S 271(1)(C) IN RESPECT OF ADDITION MADE B Y WAY OF DISALLOWANCE OF DEDUCTION U/S 35D, IT IS OBSERVED THAT A SIMILAR PE NALTY IMPOSED IN RESPECT OF SIMILAR DISALLOWANCE MADE IN ASSESSMENT YEAR 2000-0 1 WAS CANCELLED BY THE LEARNED CIT(APPEALS) AND FOLLOWING THE SAME, THE PE NALTY IMPOSED U/S 271(1)(C) IN RESPECT OF ADDITION MADE FOR DISALLOWANCE OF DEDUCT ION U/S 35D WAS CANCELLED BY THE LEARNED CIT(APPEALS) BY HIS IMPUGNED ORDER PASS ED FOR THE YEAR UNDER CONSIDERATION. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE ORDER OF THE LEARNED CIT(APPEALS) CANCELLING THE PENALTY IMP OSED U/S 271(1)(C) IN RESPECT OF DISALLOWANCE OF DEDUCTION U/S 35D FOR AY 2000-01 HAS BEEN UPHELD BY THE TRIBUNAL VIDE ITS ORDER DATED 18 TH NOV., 2011 PASSED IN ITA NO. 2319/MUM/2006. 4 ITA NO. 4331/MUM/2006 A COPY OF THE SAID ORDER IS PLACED ON RECORD BEFORE US AND A PERUSAL OF THE SAME SHOWS THAT THE PENALTY IMPOSED U/S 271(1)(C) IN RES PECT OF DISALLOWANCE U/S 35D IS HELD TO BE UNSUSTAINABLE BY THE TRIBUNAL ON THE GRO UND THAT THE ISSUE INVOLVED WAS DEBATABLE AND CLAIM FOR DEDUCTION U/S 35D WAS MADE BY THE ASSESSEE ON THE BASIS OF A POSSIBLE VIEW OF THE MATTER. THE TRIBUNAL HELD THAT ALTHOUGH THE SAID CLAIM WAS REJECTED IN THE QUANTUM PROCEEDINGS ON THE INTE RPRETATION OF THE PROVISIONS OF SECTION 35D, IT WAS NOT A FIT CASE TO IMPOSE PENALT Y U/S 271(1)(C) MERELY ON THE BASIS OF SUCH DISALLOWANCE MADE IN THE QUANTUM PROC EEDINGS ESPECIALLY WHEN THE ASSESSEE HAD NOT FURNISHED ANY INACCURATE PARTICULA RS OF ITS INCOME. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES O WN CASE FOR ASSESSMENT YEAR 2000-01 (SUPRA), WE HOLD THAT PENALTY IMPOSED BY TH E AO U/S 271(1)(C) IN RESPECT OF ADDITION MADE BY WAY OF DISALLOWANCE U/S 35D WAS NOT SUSTAINABLE AS RIGHTLY HELD BY THE LEARNED CIT(APPEALS). WE, THEREFORE, UP HOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CANCELLING THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) AND DISMISS THIS APPEAL FILED BY THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THIS 16 TH MARCH, 2012. SD/- SD/- (S.S. GODARA) (P.M. JA GTAP) JUDICIAL MEMBER. ACCO UNTANT MEMBER MUMBAI, DATED: 16 TH MARCH, 2012. 5 ITA NO. 4331/MUM/2006 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, J-BENCH. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI BENCHES , MUMBAI. WAKODE