SARANG EXPORTS P.LTD, MUMBAI V. DCIT 8(3),

ITA 4365/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8748 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 17-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 20-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Depreciation
• Section: 273B; 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.4365 /MUM/2014 (ASSESSMENT YEAR: 2010-11) M/S. SARANG EXPORTS P. LTD. VS. DEPUTY COMMISSIONER OF FLAT NO. 6, F - 11/12, WICEL OPP. SEEPZ, MIDC ANDHERI (E), MUMBAI 400093 INCOME TAX - 8(3) MUMBAI PAN AAACS7462H APPELLANT RESPONDENT APPELLANT BY: NONE RESPONDENT BY: SHRI V. JUSTIN DATE OF HEARING: 30.10.2017 DATE OF PRONOUNCEMENT: 31.10.2017 O R D E R PER P.K. BANSAL, VICE PRESIDENT THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-18, MUMBAI DATED 25.04.2014 FOR A.Y. 2010-11 BY WHICH THE CIT(A) CONFIRMED THE LEVY OF PENALTY ON THE ASSESSEE IN RE SPECT OF DISALLOWANCE MADE BY THE AO FOR DEPRECIATION OF ` 12,97,132/- ON LET OUR PROPERTY AND INTEREST OF ` 577 ON ACCOUNT OF DELAYED PAYMENT OF TDS. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE EVEN THOUGH THE CASE WAS FIXED FOR HEARING SEVERAL TIMES. WE, THEREFORE, DEC IDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LEARNED D.R. AND GOING THR OUGH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT IN THIS CASE T HE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) DETERMINING TOTAL LO SS OF ` 46,16481/- AGAINST THE RETURNED LOSS OF ` 64,90,160/-. THE AO MADE THE DISALLOWANCE UNDER SECTION 14A AMOUNTING TO ` 5,75,970/- ON ACCOUNT OF INTEREST ON LATE PAYMENT OF TDS AMOUNTING TO ` 577/- AND DEPRECIATION ON LET OUT PREMISES AMOUNTING TO ` 12,97,132/- AND INITIATED PENALTY BY OBSERVING ITA 4365/MUM/2014 M/S. SARANG EXPORTS P. LTD. 2 THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ARE INITIATED SEPARATELY FOR THE DEFAULT COMMITTED WITHIN THE MEANING OF THAT SECTION AND ULTIMATELY AFTER GIVING SHOW CAUSE NOTICE TO THE ASSESSEE LEVIED PENALTY ON THE ASSESSEE AMOUNTING TO ` 5,78,967/- @100% OF THE TAX SOUGHT TO BE EVADED ON THE ADDITION OF ` 18,73,679/- BY OBSERVING UNDER PARA 5 AS UNDER: - 5. HAD THE CASE NOT BEEN SELECTED FOR SCRUTINY, IN COME TO THE EXTENT OF THESE DISALLOWANCES WOULD HAVE ESCAPED ASSESSMEN T. ALSO, THE SAVING PROVISIONS OF SEC 273B ARE NOT APPLICABLE TO THE PENALTY INITIATED U/S. 271(1)(C). FURTHER, THE HON'BLE HIGH COURT OF DELHI HAS, VIDE JUDGEMENT DATED 22/01/2013, IN THE CASE OF CIT VS. MAK DATA LTD., ALLOWED THE REVENUE APPEAL (AGAINST THE ITAT S ORDER DELETING CONCEALMENT PENALTY) HOLDING THAT THE ABSENCE OF AN Y EXPLANATION IS STATUTORILY CONSIDERED AS AMOUNTING TO CONCEALMENT OF INCOME. IN THAT CASE, THE ADDITION HAD BEEN MADE ON THE BASIS OF IM POUNDED MATERIAL AND THE ASSESSEE HAD SUBSEQUENTLY SURRENDERED THE S AME. IN THE INSTANT CASE, PENALTY HAS BEEN INITIATED ON ALTOGET HER DIFFERENT ISSUES, VIS. DISALLOWANCE U/S. 14A, DISALLOWANCE OF INTERES T ON TDS AND DISALLOWANCE OF DEPRECIATION CLAIMED IN RESPECT OF RENTED PREMISES. HOWEVER, THE PRINCIPLE LAID DOWN BY THE HONBLE HIG H COURT OF DELHI THAT IT IS THE ASSESSEE WHO HAS TO DISCHARGE THE ON US OF OFFERING EXPLANATION AND DISCLOSING THE MATERIAL FACTS BEFOR E THE AO, IS APPLICABLE IN THE INSTANT CASE. AGAIN, DESPITE SUFF ICIENT OPPORTUNITY, THE ASSESSEE HAS NOT PUT FORTH ANY EXPLANATION AS T O WHY PENALTY U/S. 271(1)(C) SHOULD NOT BE IMPOSED IN RESPECT OF THE IMPUGNED DISALLOWANCES. BY FAILING TO ACCOUNT FOR EXPENSES A TTRIBUTABLE TO EXEMPT-INCOME YIELDING INVESTMENTS, CLAIMING INADMI SSIBLE EXPENDITURE OF INTEREST ON TDS AND DEPRECIATION ON RENTED PREMISES, THE ASSESSEE HAS SOUGHT TO REDUCE ITS INCIDENCE OF TAXATION AND HAS THEREBY CONCEALED ITS INCOME AS WELL AS FURNISHED I NACCURATE PARTICULARS THEREOF. HERE, IT MAY BE MENTIONED THAT IN THE ASSESSMENT FOR A.Y. 2008-09 MADE ON 08/10/2010, DEPRECIATION OF RS.7,58,557/- ON LET OUT SHOP PREMISES WAS DISALL OWED. DESPITE THIS, THE ASSESSEE MADE SIMILAR CLAIM OF DEPRECIATI ON IN THE INSTANT YEAR IN THE RETURN FILED ON 15/10/2010. THIS IS IND ICATIVE OF THE INTENTION ON THE PART OF THE ASSESSEE TO EVADE TAX. AGAIN, AS FAR AS INTEREST ON TDS IS CONCERNED, THERE IS NO AMBIGUITY OVER THE FACT THAT THE SAME CANNOT BE CLAIMED AS EXPENDITURE. THIS BEI NG SO, I'AM SATISFIED THAT THIS IS A FIT CASE FOR IMPOSITION OF PENALTY U/S. 271(1)(C) ON THE IMPUGNED DISALLOWANCES AGGREGATING TO RS.18, 73,679/-. A MINIMUM PENALTY OF RS.5,78,967/- U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961, BEING 100% OF THE TAX ON THE CONCEALED I NCOME OF RS.18,73,679/- IS HEREBY IMPOSED ON THE ASSESSEE. THE SAME HAS BEEN WORKED OUT AS UNDER :- ITA 4365/MUM/2014 M/S. SARANG EXPORTS P. LTD. 3 INCOME SOUGHT TO BE EVADED (RS.5,75,970/- + RS.577/-+ RS. 12,97,132/-) RS.18,73,679/- ============ TAX THEREON @ 30% RS.5,62,104/- (+) E. CESS @ 3% RS.16,863/- TOTAL TAX ON THE INCOME SOUGHT TO BE EVADED RS.5,7 8,967/- =========== MINIMUM PENALTY BEING 100% OF TAX RS.5,78,967/- ============ DEMAND NOTICE FOR PENALTY U/S. 271(L)(C) OF RS.5.78 ,967/- IS ISSUED. 3. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DELETED THE PENALTY IN RESPECT OF DISALLOWANCE MADE UNDER SECTI ON 14A BUT CONFIRMED THE PENALTY IN RESPECT OF DISALLOWANCE OF ` 12,97,132/-. 4. AFTER HEARING THE LEARNED D.R. AND GOING THROUGH T HE ORDERS OF THE TAX AUTHORITIES BELOW WE NOTED THAT THE AO HAS LEVI ED THE PENALTY ON THE ASSESSEE FOR CONCEALING INCOME AS WELL AS FURNISHIN G INACCURATE PARTICULARS OF INCOME WHILE THE PENALTY PROCEEDINGS WAS INITIAT ED WITHOUT SPECIFYING ANY PARTICULAR CHARGE. IN OUR VIEW THE ISSUE INVOLV ED IS DULY COVERED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT V. SAMSON PERINCHERY [2017] 392 ITR 4 (BOM.) WHEREIN IT IS HELD AS UNDER : - 3. THE IMPUGNED ORDER OF THE TRIBUNAL DELETED THE PENALTY IMPOSED UPON THE RESPONDENT ASSESSEE. THIS BY HOLDING THAT THE INITIATION OF PENALTY UNDER SECTION 271 (1)(C) OF THE ACT BY ASSE SSING OFFICER WAS FOR FURNISHING INACCURATE PARTICULARS OF INCOME WHI LE THE ORDER IMPOSING PENALTY IS FOR CONCEALMENT OF INCOME. THE IMPUGNED ORDER HOLDS THAT THE CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THEREFORE, THE ASSESSING OFFICER SHOULD BE CLEAR AS TO WHICH OF TH E TWO LIMBS UNDER WHICH PENALTY IS IMPOSABLE, HAS BEEN CONTRAVENED OR INDICATE THAT BOTH HAVE BEEN CONTRAVENED WHILE INITIATING PENALTY PROCEEDINGS. IT CANNOT BE THAT THE INITIATION WOULD BE ONLY ON ONE LIMB I.E. FOR FURNISHING INACCURATE PARTICULARS OF INCOME WHILE I MPOSITION OF PENALTY ON THE OTHER LIMB I.E. CONCEALMENT OF INCOME. FURTH ER, THE TRIBUNAL ALSO NOTED THAT NOTICE ISSUED UNDER SECTION 274 OF THE A CT IS IN A STANDARD PROFORMA, WITHOUT HAVING STRIKED OUT IRRELEVANT CLA USES THEREIN. THIS ITA 4365/MUM/2014 M/S. SARANG EXPORTS P. LTD. 4 INDICATES NON-APPLICATION OF MIND ON THE PART OF TH E ASSESSING OFFICER WHILE ISSUING THE PENALTY NOTICE. 4. THE IMPUGNED ORDER RELIED UPON THE FOLLOWING EXT RACT OF KARNATAKA HIGH COURT'S DECISION IN CIT V/S. MANJUNATH COTTON AND GINNING FACTORY 359 ITR 565 TO DELETE THE PENALTY: THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT T O INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COU RSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF I NCOME ARE DIFFERENT. THUS, THE ASSESSING OFFICER WHILE ISSUIN G NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT AS CASE OF FURNISHIN G OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN [2007] 292 ITR 11 (SC) AT PAGE 19 HAS H ELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PAR TICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HI GH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 30 6 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING P. LTD., REPORTED IN 171 TAXMN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSIT ION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTI CULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF T HE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NONAPPLICAT ION OF MIND. 5. THE GRIEVANCE OF THE REVENUE BEFORE US IS THAT T HERE IS NO DIFFERENCE BETWEEN FURNISHING OF INACCURATE PARTICULARS OF INC OME AND CONCEALMENT OF INCOME. THUS, DISTINCTION DRAWN BY T HE IMPUGNED ORDER IS BETWEEN TWEEDLEDUM AND TWEEDLEDEE. IN THE ABOVE VIEW, THE DELETION OF THE PENALTY, IS UNJUSTIFIED. 6. THE ABOVE SUBMISSION ON THE PART OF THE REVENUE IS IN THE FACE OF THE DECISION OF THE SUPREME COURT IN ASHOK PAI V/S. CIT 292 ITR 11 [RELIED UPON IN MANJUNATH COTTON & GINNING FACTORY (SUPRA)] WHEREIN IT IS OBSERVED THAT CONCEALMENT OF INCOME AND FURNI SHING OF INACCURATE PARTICULARS OF INCOME IN SECTION 271(1)(C) OF THE A CT, CARRY DIFFERENT MEANINGS/ CONNOTATIONS. THEREFORE, THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SECTION 271(1)(C) OF THE ACT, FOR INITIATION OF PEN ALTY PROCEEDINGS WILL NOT WARRANT/ PERMIT PENALTY BEING IMPOSED FOR THE O THER BREACH. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPOND TO THE GRO UND ON WHICH THE PENALTY HAS BEEN INITIATED/NOTICE ISSUED. IT MUST, THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND OF WHICH THE PENALTY PROCEEDINGS HAS BEEN INITIATED, A ND IT CANNOT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAS NO NOTICE. ITA 4365/MUM/2014 M/S. SARANG EXPORTS P. LTD. 5 7. THEREFORE, THE ISSUE HEREIN STANDS CONCLUDED IN FAVOUR OF THE RESPONDENT ASSESSEE BY THE DECISION OF THE KARNATAK A HIGH COURT IN THE CASE OF MANJUNATH COTTON AND GINNING FACTORY (S UPRA). NOTHING HAS BEEN SHOWN TO US IN THE PRESENT FACTS WHICH WOULD W ARRANT OUR TAKING A VIEW DIFFERENT FROM THE KARNATAKA HIGH COURT IN T HE CASE OF MANJUNATH COTTON AND GINNING FACTORY (SUPRA). 5. THE CHARGE OF CONCEALMENT OF INCOME IS DIFFERENT F ROM FURNISHING INACCURATE PARTICULARS OF INCOME. FROM THE ASSESSME NT ORDER AS WELL AS THE PENALTY ORDER IT IS APPARENT THAT THE AO HAS NOT LE VIED PENALTY ON THE ASSESSEE UNDER SECTION 271(1)(C) IN RESPECT OF SPEC IFIC CHARGE. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND D ELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) FOLLOWING THE DECISION OF T HE HON'BLE JURISDICTIONAL HIGH COURT SAMSON PERINCHERY AS PRODUCED HEREIN ABOVE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017. SD/ - SD/ - (PAWAN SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 31 ST OCTOBER, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -18, MUMBAI 4. THE CIT - 8, MUMBAI 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.