DCIT, New Delhi V. M/s. Dusk Valley Technologies Ltd., New Delhi

ITA 4432/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91011 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 23-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Business income; Business expenditure; Bonafide belief; Wrong claim; Difference of opinion
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO. 4432 /DEL/2013 ASSESSMENT YEAR: 2007 - 08 DCIT, VS. DUSK VALLEY TECHNOLOGIES LTD., CIRCLE 10(1), OFFICE NO. 202, F - 46, NEW DELHI. BHAGAT SINGH MARKET, NEW DELHI. AABCD5471A (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. PARWINDER KAUR, SR. DR RESPONDENT BY : SH. MANU GIRI, ADV. DATE OF HEARING: 23.03 .2015 DATE OF PRONOUNCEMENT: 0 8 . 0 5 . 2 0 1 5 ORDER PER SHRI C.M. GARG, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - XIII, DATED 17.05.2013 IN APPEAL NO. 08/2012 - 13 BY WHICH PENALTY ORDER DATED 20.03.2012 PASSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 FOR SHORT (THE ACT) HAS BEEN SET ASIDE BY DELETING THE PENALTY IMPOSED BY THE AO. 2. THE SOLE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER: 2 WHETHER THE CIT(A) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW WAS JUSTIFIED IN DELETING THE PENALTY AMOUNTING TO RS. 33,81,821/ - IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE I.T. ACT, 1961? 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APPEAL ARE THAT THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 13.11.2009 DETERMINING THE TOTAL INCOME AT RS. 1,22,55,437/ - . THE AO NOTED THAT IN THE RETURN OF INCOME AN AMOUNT OF INTEREST RS. 72,08,432/ - WAS RECEIVED FROM FIXED DEPOSITS WH ICH WAS SHOWN BY THE ASSESSEE AS BUSINESS INCOME AND THE AO TREATED THE SAME AS INCOME FROM OTHER SOURCES. THE AO ALSO OBSERVED THAT THE ASSESSEE HAS PAID RS. 25 LAKHS AS CONSULTANCY FEE AND THE SAME WAS CLAIMED AS BUSINESS EXPENDITURE. BUT THE AO TREATE D THE SAME AS HAVING BEEN PAID AGAINST THE CAPITAL GAINS INCOME OF RS. 75,47,005/ - AND, THEREFORE, THE AO DISALLOWED THE SAME AS BUSINESS EXPENDITURE AND THE SAID EXPENDITURE OF CONSULTANCY FEE WAS ALLOWED AGAINST THE CAPITAL GAIN INCOME AND, THUS, THE CAP ITAL GAIN WAS ASSESSED AND REDUCED TO RS. 50,47,005/ - . THE AFORESAID BOTH THE ADDITIONS WERE UPHELD BY THE CIT(A) AND ASSESSEE DID NOT PREFER ANY APPEAL BEFORE ITAT AND THE SAID ADDITIONS ATTAINED FINALITY. 4. SUBSEQUENTLY THE AO INITIATED PENALTY PROC EEDINGS U/S 271(1)(C) OF THE ACT AND AFTER PROVIDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE AND CONSIDERING THE EXPLANATION OFFERED BY THE ASSESSEE HELD 3 THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM AT THE TIME OF ASSESSMENT AND ALSO SUBSEQUE NTLY DURING PENALTY PROCEEDINGS. THEREFORE, THE AO HELD THAT THE ASSESSEE HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS OF ITS INCOME WITH THE INTENTION TO EVADE DUE TAXES AND THE AO LEVIED PENALTY OF RS. 33,81,821/ - U/S 271(1)(C) OF THE ACT VIDE ORDE R DATED 20.03.2012. 5. BEING AGGRIEVED BY THE ABOVE PENALTY ORDER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALLOWED BY PASSING THE IMPUGNED ORDER AND THE AO WAS DIRECTED TO DELETE THE PENALTY. NOW THE REVENUE DEPARTMENT IS BEFORE THI S TRIBUNAL IN THE SECOND APPEAL WITH THE SOLE GROUND AS REPRODUCED HEREINABOVE. 6. WE HAVE HEARD ARGUMENT OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. 7. THE LD. DEPARTMENTAL REPRESENTATIVE, SUPPORTING THE PENALTY ORDER, SUBMITTED THAT THE ASSESSEE MADE A WRONG CLAIM BY FURNISHING INACCURATE PARTICULARS OF ITS INCOME AND THE INCOME WHICH WAS RECEIVED AS INTEREST FROM FIXED DEPOSITS WAS WRONGLY SHOWN AS BUSI NESS INCOME. THE LD. DR FURTHER CONTENDED THAT THE ASSESSEE ALSO CLAIMED CONSULTANCY FEE AS BUSINESS EXPENDITURE WHICH WAS PAID AGAINST CAPITAL 4 GAINS INCOME. THEREFORE, THE AO WAS RIGHT IN HOLDING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME WITH AN INTENTION TO EVADE TAXES AND THE PENALTY U/S 271(1)(C) OF THE ACT WAS RIGHTLY LEVIED ON THE ASSESSEE. THE LD. DR VEHEMENTLY CONTENDED THAT THE CIT WAS NOT JUSTIFIED IN DELETING THE PENALTY WITHOUT ANY JUSTIFIED AND COGENT REASON AND WR ONGLY PLACED RELIANCE ON THE VARIOUS JUDGMENTS OF HON BLE SUPREME COURT AND HIGH COURT INCLUDING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD., 189 TAXMAN 322 (SC). THE LD. DR FINALLY PRAYED THAT IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE PENALTY ORDER. 8. THE LD. COUNSEL OF THE ASSESSEE SUPPORTED THE IMPUGNED ORDER AND SUBMITTED THAT MERELY BECAUSE THE AO TREATED THE INCOME UNDER A DIFFERENT HEAD OF INCOME SUBSTITUTING THE HEAD OF INCOME WHI CH WAS ADOPTED BY THE ASSESSEE CANNOT BE A BASIS FOR IMPOSING PENALTY. THE LD. AR ALSO CONTENDED THAT THE AO HAVE NOT RAISED ANY DOUBT OR ALLEGATION ABOUT THE QUANTUM AND GENUINENESS AS DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME AND, THEREFORE, NEIT HER THE ASSESSEE FURNISHED ANY INACCURATE PARTICULARS OF INCOME NOR THE ASSESSEE HAS CONCEALED ANY PARTICULARS OF ITS INCOME AND, THEREFORE, PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE IMPOSED MERELY BECAUSE THE ASSESSEE MADE A CLAIM WHICH WAS ALLOWED IN SO ME ANOTHER HEAD OF INCOME 5 INSTEAD OF THE HEAD OF THE INCOME CHOSEN BY THE ASSESSEE. THE LD. COUNSEL LASTLY PRAYED THAT THE APPEAL OF THE REVENUE DESERVES TO BE DISMISSED BEING DEVOID OF MERITS. 9. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS AT THE VERY OUTSET, WE NOTE THAT THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND CONCLUSION BY RELYING ON THE DECISION OF HON BLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (SUPRA), THE RELEVANT OPERATIVE PART READS AS UNDER: 5.2 DECISION I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE ASSESSING OFFICER. IT IS SEEN THAT ASSESSING OFFICER HAS LEVIED PENALTY ON ACCOUNT OF SHOWING INTEREST INCOME AS BUSINESS INCOME AND CLAIMING CONSULTANCY EXPENSES PAID TO THE CONSULTANT FOR SALE OF SHARED TO THE FOREIGN PARTY AS BUSINESS EXPENDITURE. THE ASSESSING OFFICER HELD THAT THE INTEREST INCOME RECEIVED FROM FIXED DEPOSITS IS ASSESSABLE AS INCOME FROM OTHER SOURCES AND THE CONSULTANCY PAYMENT OF RS. 25,00,00 0/ - WAS PAID FOR SALE OF SHARES TO THE FOREIGN PARTY THEREFORE, SUCH EXPENSES CANNOT BE ALLOWED AS BUSINESS EXPENDITURE AS THE INCOME FROM SALE OF SHARES WAS ASSESSABLE UNDER THE HEAD LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER HELD THAT SINCE APPELLANT HAS FURNISHED INAPPROPRIATE PARTICULARS OF INCOME, THEREFORE, IT IS LIABLE FOR PENALTY U/S 271(1)(C) OF THE I.T. ACT. IT IS SUBMITTED BY THE APPELLANT THAT IT HAD SHOWN INTEREST INCOME AS BUSINESS INCOME IN THE AY 2004 - 05 AND 05 - 06 AND SAME WAS ASSESSED AS BUSINESS INCOME. HOWEVER, IN THE AY 2006 - 07 THE ASSESSING OFFICER CHANGED HIS VIEW AND ASSESSED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES. IN AY 2007 - 08 ALSO THE ASSESSING OFFICER FOLLOWED HIS PREDECESSORS ORDER AND ASSESSED THE INTEREST INCOME OF RS. 72,08,432/ - AS INCOME FROM OTHER SOURCES. THE APPELLANT HAD STATED THAT IT HAD A BONAFIDE BELIEF THAT INTEREST INCOME IS ASSESSABLE AS BUSINESS INCOME, THEREFORE, SAME WAS SHOWN AS 6 BUSINESS INCOME DURING THE YEAR. IT HAS STATED THAT NOTHING HAS B EEN CONCEALED AND EVERYTHING WAS DISCLOSED IN THE RETURN OF INCOME. FOR THE ADDITION OF RS. 25,00,000/ - MADE ON ACCOUNT OF DISALLOWANCE OF CONSULTANCY FEE AS BUSINESS EXPENDITURE, IT IS SUBMITTED BY THE APPELLANT THAT IT HAS ENGAGED A CONSULTANT TO ADVISE IT IN BUSINESS MATTERS AND ALSO TO ADVISE ABOUT THE SALE OF SHARES TO A FOREIGN PARTY. THIS AMOUNT WAS DEBITED UNDER THE HEAD LEGAL AND PROFESSIONAL EXPENSES. THE APPELLANT CLAIMED THAT NO INACCURATE PARTICULARS OF ITS INCOME WAS SUBMITTED IN THE RETURN OF INCOME AND IT HAS A BONAFIDE BELIEF THAT EXPENDITURE WAS BUSINESS EXPENDITURE AND SAME WAS ALLOWABLE AGAINST THE BUSINESS INCOME. THE APPELLANT HAS CLAIMED THAT IT HAS DISCLOSED ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IT NEVER TRIED TO CONCE AL OR FILE INACCURATE PARTICULARS OF INCOME, THEREFORE, PENALTY FOR CONCEALMENT COULD NOT BE IMPOSED ON THE APPELLANT. A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) SUGGESTS THAT IN ORDER TO BE COVERED U/S 271(1)(C) THERE HAS TO BE CONCEALMENT OF INCOME OF THE APPELLANT. SECONDLY THE APPELLANT MUST HAVE FURNISHED INACCURATE PARTICULARS OF ITS INCOME IN THE RETURN OF INCOME. HOWEVER IN THE INSTANT CASE, THE APPELLANT HAS GIVEN ALL PARTICULARS OF ITS INCOME SHOWN IN THE RETURN OF INCOME. THE APPELLANT D ID NOT CONCEAL OR SUPPRESS ANY FACTS RELATING TO THE INCOME OF THE INSTANT YEAR. THE INFORMATION GIVEN IN THE RETURN OF INCOME WAS NOT FOUND TO BE BOGUS OR INCORRECT. THE INTEREST RECEIVED FROM FIXED DEPOSITS WAS SHOWN AS BUSINESS INCOME ON THE BASIS OF EARLIER YEARS ASSESSMENT ORDER AND THE APPELLANT HAD BONAFIDE BELIEF THAT SUCH INCOME IS ASSESSABLE AS BUSINESS INCOME. SIMILARLY, THE EXPENDITURE INCURRED ON CONSULTANT FEE WAS CLAIMED AS BUSINESS EXPENDITURE UNDER THE BONAFIDE BELIEF THAT SUCH EXPENDITU RE IS ALLOWABLE AS BUSINESS EXPENDITURE. THE EXPLANATION FURNISHED BY THE APPELLANT IS BONAFIDE AND WAS BASED ON THE RELEVANT INFORMATION AVAILABLE IN THE RETURN OF INCOME. THEREFORE, THE APPELLANT CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULA RS OF INCOME OR CONCEALMENT OF INCOME. THE ADDITION WAS BASED ON DIFFERENCE OF OPINION AND ON SUCH ADDITIONS TWO VIEWS ARE POSSIBLE, WHEREVER TWO VIEWS ARE POSSIBLE ON A ISSUE PENALTY U/S 271(1)(C) CANNOT BE LEVIED. THE ASSESSMENT OF INTEREST INCOME AS I NCOME FROM OTHER SOURCES AS AGAINST BUSINESS INCOME DECLARED BY THE APPELLANT AND DISALLOWANCE OF CLAIM OF CONSULTANT FEE AS BUSINESS EXPENDITURE IS A DEBATABLE ISSUE AND ALWAYS TWO VIEWS ARE POSSIBLE. WHERE 7 TWO OPINIONS ARE POSSIBLE ON AN ISSUE IT CANNOT BE SAID THAT APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND ON SUCH ISSUE PENALTY CANNOT BE LEVIED. SINCE THE APPELLANT HAS NOT CONCEALED ANY INCOME AND DID NOT MAKE ANY CLAIM WHICH WAS EX - FACIE BOGUS, THEREFORE, THE CASE OF THE APPELLANT C ANNOT BE COVERED UNDER THE PROVISIONS OF SECTION 271(1)(C) EXPLANATION - 1(A). HENCE, THE PENALTY LEVIED BY THE ASSESSING OFFICER WAS NOT JUSTIFIED AND SAME IS DELELTED. 10. IN VIEW OF ABOVE, WE ARE IN AGREEMENT WITH THE CONCLUSION OF CIT(A) THAT THE APPE LLANT ASSESSEE HAD GIVEN ALL PARTICULARS OF ITS INCOME IN THE RETURN OF INCOME AND ASSESSEE DID NOT CONCEAL OR SUPPRESS ANY FACT RELATING TO THE INCOME EARNED DURING THE RELEVANT FINANCIAL YEAR. THE AO HAVE NOT BROUGHT OUT ANY FACT OR ALLEGATION ON RECO RD THAT THE INFORMATION GIVEN BY THE ASSESSEE IN ITS RETURN OF INCOME WAS EITHER BOGUS OR INCORRECT AND HENCE THE SAME IS PRESCRIBED AS CORRECT WHICH WAS NOT DISPUTED BY THE AO. THE CIT(A) ALSO OBSERVED THAT THE INTEREST INCOME RECEIVED FROM FIXED DEPOSIT S WAS SHOWN AS BUSINESS INCOME ON THE BASIS OF EARLIER YEARS ASSESSMENT ORDERS UNDER THE BONAFIDE BELIEF THAT SUCH INCOME IS ASSESSABLE AS BUSINESS INCOME WHICH WAS TREATED BY THE AO AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME DURING THE QUANTU M PROCEEDINGS. IN THIS SITUATION, THE ADDITION WAS BASED ON DIFFERENCE OF OPINION AND WHEN TWO VIEWS ARE POSSIBLE THE PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE LEVIED. 8 11. IN SO FAR AS THE CONSULTANCY FEE PAYMENT IS CONCERNED. THE CIT(A) RIGHTLY ACCEPT ED THE EXPLANATION OF THE ASSESSEE THAT IT HAS ENGAGED A CONSULTANT TO ADVISE THE ASSESSEE IN BUSINESS MATTERS AND ALSO TO ADVISE ABOUT THE SALE OF SHARES TO A FOREIGN ENTITY OR PARTY. THEREFORE, THE IMPUGNED AMOUNT OF CONSULTANCY FEE WAS DEBITED UNDER TH E HEAD OF LEGAL AND PROFESSIONAL EXPENSES WHICH WAS CLAIMED AS BUSINESS EXPENDITURE UNDER A BONAFIDE BELIEF THAT THE EXPENDITURE WAS INCURRED FOR BUSINESS AND THE SAME WAS ALLOWABLE AGAINST THE BUSINESS INCOME. HOWEVER, DURING THE QUANTUM PROCEEDINGS, THE CLAIM OF CONSULTANCY FEE WAS ALLOWED AGAINST THE INCOME OF CAPITAL GAINS INSTEAD OF INCOME FROM BUSINESS. IN THIS SITUATION, WE SAFELY OBSERVED THAT THE CLAIM OF THE ASSESSEE WAS NOT DISALLOWED AND THE SAME WAS ALLOWED AGAINST THE INCOME OF CAPITAL GAINS INSTEAD OF BUSINESS INCOME AND THUS, IT CANNOT BE HELD THAT EITHER ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR HAD CONCEALED PARTICULARS OF ITS TAXABLE INCOME WITH AN INTENTION TO EVADE TAX. AT THIS JUNCTURE WE RESPECTFULLY FOLLOW THE DECI SION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (SUPRA), WHEREIN THEIR LORDSHIPS SPEAKING FOR THE APEX COURT OF INDIA EXPRESSLY HELD THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE WHICH CLAIM WAS NOT ACCEPTED OR W AS NOT ACCEPTABLE TO THE REVENUE, THAT, BY ITSELF, WOULD NOT ATTRACT PENALTY U/S 271(1)(C) OF THE ACT. HOWEVER, IN THE PRESENT CASE, THE CLAIM OF THE ASSESSEE ON BOTH 9 THE COUNTS WAS NOT DISMISSED AT THE THRESHOLD BUT BOTH THE CLAIMS OF THE ASSESSEE WAS AL LOWED IN A DIFFERENT HEAD OF INCOME INSTEAD OF THE HEAD OF INCOME ADOPTED BY THE ASSESSEE IN ITS RETURN OF INCOME. 12. UNDER THE ABOVE NOTED FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO HOLD THAT THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHI NG OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF ITS INCOME AT ANY STRETCH OF IMAGINATION AND THE AO LEVIED PENALTY ON WRONG PREMISE WITHOUT ANY JUSTIFIED REASON WHICH WAS RIGHTLY DELETED BY THE CIT(A) BY PASSING THE IMPUGNED ORDER A ND WE HAVE NO REASON TO INTERFERE WITH THE CONCLUSION AND DECISION OF THE CIT(A) AND WE UPHELD THE SAME. 13. ACCORDINGLY SOLE GROUND OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 0 8 . 0 5 . 2 0 1 5 S D / - S D / - ( S.V. MEHROTRA ) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 0 8 / 0 5 / 2 0 1 5 *KAVITA, P.S. 10 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR 11 SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 01.05.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 08.05.2015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 0 8 . 0 5 . 2 0 1 5 4. DRAFT APPROVED BY THE SECOND MEMBER 0 8 . 0 5 . 2 0 1 5 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 0 8 . 0 5 . 2 0 1 5 6. DATE OF PRONOUNCEMENT OF ORDER 0 8 . 0 5 . 2 0 1 5 7. DATE OF FILE SENT TO THE BENCH CLERK 1 1 . 0 5 . 2 0 1 5 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER