Anand and Anand, New Delhi V. DCIT, New Delhi

ITA 4391/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3741 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 11-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: B K ANAND
• Keywords: Depreciation; Difference of opinion; Revenue expenditure; Capital expenditure
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI B.P.JAIN, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4391/DEL /2014 ASSTT. YEAR: 2008-09 ANAND AND ANAND, B-41, NIZAMUDDIN EAST, NEW DELHI. (PAN:AAAFA0186F) VS DCIT, CIRCLE-37(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.K. ANAND, ADV. RESPONDENT BY : SHRI SURENDERPAL , SR. DR DATE OF HEARING : 30.10.2017 DATE OF PRONOUNCEMENT: 31.10.201 7 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER PASSED BY THE LD. CIT(A)-XXVIII, NEW DELHI FO R ASSESSMENT YEAR 2008-09 WHEREIN VIDE ORDER DATED 6 TH MAY, 2014, THE LD. COMMISSIONER OF INCOME TAX(A) HAS CONFIRMED THE PEN ALTY OF RS.4,52,648/- IMPOSED U/S 271(1)(C) OF THE INCOME T AX ACT, 1961 (HEREINAFTER CALLED 'THE ACT'). ITA NO. 4391/DEL/2014 ASSESSMENT YEAR 2008-09 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM OF ADVOCATES SPECIALISING IN INTELLECTUAL PROPERTY RIG HTS LAWS AND HAS ITS PRINCIPAL PLACE OF BUSINESS IN THE NCR REGI ON OF DELHI AND NOIDA. IN RESPECT OF THE ASSESSMENT YEAR UNDER CON SIDERATION, THE RETURN OF INCOME WAS FILED AT RS. 5,73,75,030/- WHICH WAS ASSESSED AT RS. 6,19,93,720/- AND SUBSEQUENTLY REVI SED U/S 154 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'TH E ACT') TO RS. 6,22,28,729/-. THE DIFFERENCE BETWEEN THE RETURNED AND ASSESSED INCOME AROSE ON ACCOUNT OF CERTAIN DISALLO WANCES OUT OF EXPENSES AGAINST WHICH THE ASSESSEE FILED APPEAL BE FORE THE LD. COMMISSIONER OF INCOME TAX(A). THEREAFTER, BOTH TH E ASSESSEE AS WELL AS THE DEPARTMENT, FILED SECOND APPEALS BEFORE ITAT WHEREIN THE ITAT PARTLY ALLOWED THE ASSESSEES APPEAL AND D ISMISSED THE DEPARTMENTS APPEAL. AMONGST VARIOUS DISALLOWANCES MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, ONE DISALLOWANCE RELATED TO THE TREATMENT OF EXPENDITURE OF RS. 15,6 6,721/- TOWARDS COST OF INSTALLATION OF A NEW TRANSFORMER R EPLACING THE EXISTING TRANSFORMER AT THE PREMISES IN NOIDA TAKEN ON LEASE BY THE ASSESSEE. IT AROSE ON ACCOUNT OF TREATMENT OF THE SAID AMOUNT WHILE COMPUTING THE PROFIT FOR THE YEAR. TH E ASSESSEE CLAIMED THE ENTIRE EXPENSES OF RS. 15,66,721/- AS A BUSINESS ITA NO. 4391/DEL/2014 ASSESSMENT YEAR 2008-09 3 EXPENDITURE BEING REVENUE IN NATURE WHEREAS THE ASS ESSING OFFICER WAS OF THE OPINION THAT THE EXPENDITURE WAS CAPITAL IN NATURE AND, THEREFORE, AFTER ALLOWING RS. 2,35,008/ - AS DEPRECIATION, THE ASSESSING OFFICER ADDED BACK THE BALANCE OF RS.13,31,713/- TO THE INCOME OF THE ASSESSEE. SUBS EQUENTLY, PENALTY OF RS. 4,52,648 WAS LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE ACT') ON THI S AMOUNT. THIS PENALTY WAS CONFIRMED BY THE LD. COMMISSIONER OF IN COME TAX(A) AND NOW THE ASSESSEE HAS APPROACHED THE ITAT AND HA S CHALLENGED THE CONFIRMATION OF PENALTY BY RAISING T HE FOLLOWING GROUNDS OF APPEAL:- 2.1 THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE A SSESSEE:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEAL) ERRED IN CONFIRMING THE PENALT Y ORDER IN RESPECT OF ADDITION OF RS.13,31,713 MADE T O THE RETURNED INCOME MERELY BECAUSE THE ASSESSEE'S CLAIM THAT THE COST OF THE TRANSFORMER REPLACED BY IT WAS A REVENUE EXPENDITURE WHEREAS THE DEPARTMENT HELD IT TO BE A CAPITAL EXPENSE AND THE SAME WAS UPHELD IN APPEAL. 2. THAT THE LEARNED CIT (APPEAL) ERRED IN NOT HOLD ING THAT MERELY BECAUSE THE CLAIM OF THE ASSESSEE WAS UPHELD AGAINST THE ASSESSEE IN APPEALS CANNOT PRE- SUPPOSE THAT ASSESSEE CONCEALED OR FILED INACCURATE PARTICULARS OF ITS INCOME AND MORE SO WHEN THERE HA VE BEEN INSTANCES IN THE PAST WHERE REPLACEMENT OF ITA NO. 4391/DEL/2014 ASSESSMENT YEAR 2008-09 4 TRANSFORMER AND SIMILAR MACHINERY HAS BEEN HELD TO BE A REVENUE EXPENSE. 3. THAT THE ORDER OF THE LEARNED AUTHORITIES BELOW BEING CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE APPEAL BE ALLOWED. 3. THE LD. AR SUBMITTED THAT NO PENALTY WAS LEVIABL E ON A MERE DISALLOWANCE OUT OF EXPENSES CLAIMED, PARTICULARLY IN VIEW OF THE FACT THAT THE DISALLOWANCE HAD ARISEN ON ACCOUNT OF DIFFERENCE IN OPINION ON THE NATURE OF THE TRANSACTION AS TAKEN B Y THE ASSESSEE AND THAT TAKEN BY THE DEPARTMENT. IT WAS SUBMITTED THAT THE DEPARTMENT HAD ALLOWED DEPRECIATION AFTER TREATING THE EXPENDITURE AS CAPITAL EXPENDITURE AND IT PROVED TH AT THE DEPARTMENT HAD ACCEPTED THE TRANSACTION AS BEING A GENUINE ONE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF PROFESSION. THUS, IT WAS NOT A CASE OF CONCEALMENT OF ANY INCOM E NOR WAS IT A CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME . IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT POINTE D OUT ANYWHERE IN THE ORDER THAT ANY INFORMATION IN RELAT ION TO THE EXPENSE ACCOUNT WAS INACCURATELY STATED. IT WAS AL SO STATED THAT NO PENALTY FOR CONCEALMENT OF INCOME WAS LEVIABLE M ERELY BECAUSE OF DIFFERENCE IN OPINION AS REGARDS TREATMENT OF EX PENSES AS BEING OF CAPITAL OR REVENUE IN NATURE. LD. AR ALSO PLACE D RELIANCE ON NUMEROUS CASE LAWS TO SUPPORT HIS PROPOSITION THAT PENALTY U/S ITA NO. 4391/DEL/2014 ASSESSMENT YEAR 2008-09 5 271(1)(C) OF THE ACT WAS NOT IMPOSABLE FOR MAKING A CLAIM WHICH WAS NOT ACCEPTED BY THE REVENUE, ESPECIALLY WHEN TH E RELEVANT DETAILS WERE BEFORE THE ASSESSING OFFICER AND DULY DISCLOSED IN THE RETURN OF INCOME. 4. LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF COMMISSIONER OF INCOME TAX VS ZOOM COMMUNICATION PV T. LTD. REPORTED IN 327 ITR 510(DEL) AND SUBMITTED THAT WHE RE THE ASSESSEE HAD MADE A CLAIM WHICH WAS NOT ONLY INCORR ECT IN LAW BUT WAS ALSO WHOLLY WITHOUT ANY BASIS AND FURTHER W HERE THE EXPLANATION FURNISHED BY THE ASSESSEE FOR MAKING SU CH A CLAIM WAS NOT BONA FIDE, IT WOULD BE DIFFICULT TO SAY THA T THE ASSESSEE WOULD NOT BE LIABLE TO PENALTY U/S 271(1)(C) OF THE ACT. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE HON' BLE DELHI HIGH COURT HAS HELD IN ZOOM COMMUNICATION PVT. LTD. (SUPRA) THAT WHERE A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, NOT LEVYING PENALTY WOULD GIVE LICENCE TO UNSCRUPULOUS ASSESSEE S TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS. IT WAS SUBMITTED THAT PENALTIES HAVE A DETERRENT EFFECT AND, THEREFO RE, THE IMPOSITION CANNOT BE DONE AWAY WITH ENTIRELY. LD. DEPARTMENTAL ITA NO. 4391/DEL/2014 ASSESSMENT YEAR 2008-09 6 REPRESENTATIVE ALSO READ OUT EXTENSIVELY FROM THE O RDER OF THE LD. COMMISSIONER OF INCOME TAX(A) AND SUBMITTED THAT BO TH THE ASSESSING OFFICER AS WELL AS THE LD. COMMISSIONER O F INCOME TAX(A) HAD REACHED A CONCURRENT FINDING THAT THE PE NALTY WAS IMPOSABLE ON THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS OF THE CASE ARE NOT DISPUTED. IT IS A SETTLED LAW THAT ASSESSMENT AND PENALTY PROCEEDINGS ARE DISTINCT AND ALTHOUGH THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS MAY CONSTITUTE EVIDENCE IN T HE COURSE OF PENALTY PROCEEDINGS, THEY CANNOT BE REGARDED AS CON CLUSIVE. THIS IS THE LAW ENUNCIATED BY THE HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS ANWAR ALI REPORTED IN 76 ITR 696 (S.C.), COMMISSIONER OF INCOME TAX VS KHODAY ESWARS A & SONS (1972) 83 ITR 369 (S.C.), ANANTHARAM VEERASINGHAIAH & CO. VS C.I.T. REPORTED IN 123 ITR 457 (SC). IN THE CASE O F COMMISSIONER OF INCOME TAX VS BACARDI MARTINI INDIA LTD. REPORTE D IN 288 ITR 585 (DEL), THE HON'BLE DELHI HIGH COURT HELD THAT M ERELY BECAUSE THERE WAS A DIFFERENCE OF OPINION BETWEEN THE ASSES SEE AND THE ASSESSING OFFICER, IT CANNOT BE SAID THAT THE ASSES SEE HAD THE INTENTION TO CONCEAL HIS INCOME. ITA NO. 4391/DEL/2014 ASSESSMENT YEAR 2008-09 7 5.1 HERE IN THE PRESENT APPEAL BEFORE US, IT IS NO T A CASE THAT THE ASSESSEE HAD NOT BEEN ABLE TO EXPLAIN ANY EXPEN DITURE OR HAD FAILED TO GIVE ANY DETAILS AND THE ASSESSING OFFICE R HAD ADDED THE SAME TO THE INCOME. IT IS ONLY A CASE WHERE THERE IS A DIFFERENCE OF OPINION AS TO A PARTICULAR EXPENDITURE BEING REV ENUE IN NATURE OR CAPITAL IN NATURE. IT IS EVIDENT FROM THE RECOR DS THAT THE ASSESSEE HAD GIVEN ALL PARTICULARS OF EXPENDITURE A ND INCOME AND HAD DISCLOSED ALL FACTS TO THE ASSESSING OFFICER. I T IS NOT THE CASE WHERE SOME NEW FACTS WERE DISCOVERED DURING THE COU RSE OF ASSESSMENT PROCEEDINGS OR THAT THE ASSESSING OFFICE R HAD DUG OUT SOME INFORMATION WHICH WAS NOT FURNISHED BY THE ASS ESSEE. THE MUMBAI BENCH OF ITAT IN THE CASE OF SADHANA TEXTIL E MILLS P. LTD. IN ITA NO. 7681/MUM/2011 VIDE ORDER DATED 22.1 0.2012 HAD, ON AN IDENTICAL ISSUE, HELD THAT THE ASSESSEE HAS A RIGHT TO CLAIM A PARTICULAR EXPENDITURE AS REVENUE EXPENDITU RE THOUGH THE SAME MAY BE DISALLOWED BY THE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS. THE MUMBAI BENCH OF THE ITAT WENT ON TO HOLD THAT SUCH CLAIM MADE BY THE ASSESSEE SUPPORTED BY THE DO CUMENTARY EVIDENCES DOES NOT INVITE INVOCATION OF PROVISIONS OF SECTION 271(1)(C) OF THE ACT FOR FILING INACCURATE PARTICUL ARS/CONCEALING THE PARTICULARS OF INCOME. THE HONBLE APEX COURT IN T HE CASE OF ITA NO. 4391/DEL/2014 ASSESSMENT YEAR 2008-09 8 COMMISSIONER OF INCOME TAX VS RELIANCE PETROPRODUCT S PVT. LTD. REPORTED IN 322 ITR 158 (SC) HAS ALSO HELD THAT MER E MAKING OF CLAIM WHICH IS UNSUSTAINABLE IN LAW, BY ITSELF, WIL L NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. WE ARE OF THE CONSIDERED OPINION THAT TH E RELIANCE OF THE DEPARTMENT ON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE ZOOM COMMUNICATION (P) LTD. DOES NOT CO ME TO THE AID OF THE DEPARTMENT IN THIS PARTICULAR CASE FOR T HE REASON THAT THE HON'BLE DELHI HIGH COURT HAS ALSO DULY CONSIDER ED THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF R ELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) IN THIS JUDGMENT AN D HAS OPINED THAT MERE SUBMITTING A CLAIM WHICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF INCOME O F THE ASSESSEE BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY TH E ASSESSEE NEEDS TO BE BONA FIDE. THE HON'BLE DELHI HIGH COUR T HAS FURTHER HELD THAT IF THE CLAIM, BESIDES BEING INCORRECT IN LAW, IS MALA FIDE, EXPLANATION (1) TO SECTION 271(1)(C) WOULD COME INT O PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE. HOWEVER, IN THE PRESENT APPEAL BEFORE US, THERE IS NO CHARGE OF ANY MALA FIDE ACT AGAINST THE ASSESSEE AND THE PENALTY HAS BEEN IMPOS ED ONLY ON THE BASIS OF DIFFERENCE IN OPINION ON THE DEDUCTIBI LITY OF A ITA NO. 4391/DEL/2014 ASSESSMENT YEAR 2008-09 9 PARTICULAR ITEM OF EXPENDITURE. THEREFORE, RESPECT FULLY FOLLOWING THE HON'BLE APEX COURT IN THE CASE OF RELIANCE PETR OPRODUCTS PVT. LTD. (SUPRA), WE ARE UNABLE TO CONCUR WITH THE FIND INGS OF BOTH THE LOWER AUTHORITIES. WE ACCORDINGLY SET ASIDE THE OR DER OF THE LD. COMMISSIONER OF INCOME TAX(A) AND DIRECT THE ASSESS ING OFFICER TO DELETE THE PENALTY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017. SD/- SD/- (B.P. JAIN ) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31ST OCTOBER, 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR