M/s. Rubber Udyog Vikas (P) Ltd, Faridabad V. ACIT, Faridabad

ITA 4435/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5799 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 25-03-2010
• Assessment Year: 1994-1995
• Appeal Filed On: 20-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK MITTAL
• Assessee Lawyers: ASHWANI TANEJA; RANI KIYALA S
• Keywords: Depreciation; Speculation loss; Wrong claim; Unabsorbed depreciation
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI VIMAL GANDHI, HONBLE PRESIDENT AND SHRI R.C.SHARMA, HONBLE ACCOUNTANT MEMBER ITA NO.4435/DEL/2009 ASSESSMENT YEAR : 1994-95 M/S RUBBER UDYOG VIKAS (P) LTD., PLOT NO.2 & 3, DHARM KANTA, MUJESSAR, FARIDABAD. VS. ASSTT.COMMISSIONER OF INCOME TAX, RANGE-1, FARIDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI TANEJA AND MS.RANI KIYA LA, ADVOCATES. RESPONDENT BY : SHRI ASHOK MITTAL, CIT-DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 29.10.2009 FOR THE AY 1994-95, IN THE MATTER OF IMP OSITION OF PENALTY U/S 271(1)(C) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT IN THE RETURN OF INCOME, ASSESSEE CLAIMED SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST THE INCOME UNDER THE HEAD CAPITAL GAIN S. THE AO DECLINED THE CLAIM OF SET OFF AS NOT PERMISSIBLE U/S 71/72 OF THE IT A CT. THE AO ALSO LEVIED PENALTY U/S 271(1)(C) WITH RESPECT TO THE CLAIM OF SET OFF DECLINED BY HIM. AGAINST THE ORDER OF AO LEVYING PENALTY, THE ASSESSEE APPROACH TO THE CIT(A) WHO DELETED THE SAME BY OBSERVING THAT NO SATISFACTION HAS BEEN REC ORDED FOR LEVY OF PENALTY. THE ORDER OF CIT(A) FOR CANCELING THE PENALTY WAS UPHEL D BY THE ITAT. THE REVENUE CARRIED THE MATTER TO THE HIGH COURT WHICH SET ASID E THE ORDER OF THE TRIBUNAL AND THEREAFTER TRIBUNAL PASSED THE ORDER DATED 25.9.200 9 REMANDING THE MATTER BACK TO THE CIT(A) FOR DECIDING THE IMPOSITION OF PENALTY O N MERITS. PRESENT ORDER OF CIT(A) WAS PASSED AS A RESULT OF ORDER OF THE TRIBU NAL DATED 25.9.2009 AND THAT IS ITA-4435/DEL/2009 2 HOW WE ARE SEIZED OF THE MATTER. THE BRIEF QUESTIO N BEFORE US IS AS TO WHETHER LEVY OF PENALTY U/S 271(1)(C) IN RESPECT OF DENIAL OF AS SESSEES CLAIM FOR SET OFF BROUGHT FORWARD BUSINESS LOSS AGAINST THE INCOME ASSESSED U NDER THE HEAD CAPITAL GAINS, IS JUSTIFIED. 3. IT WAS CONTENDED BY THE LEARNED AR THAT ASSESSEE HAS DISCLOSED ALL THE PARTICULARS RELATING TO HIS INCOME AND CLAIM OF SET OFF OF BUSINESS LOSS AGAINST THE CAPITAL GAIN AROSE ON SALE OF BUSINESS ASSETS. IN THE RETURN OF INCOME, THERE WAS ALSO DIRECTORS REPORT DISCLOSING THE FACT OF SALE OF BUILDING AND UTILIZATION OF AMOUNT FOR THE PURPOSE OF BUSINESS. ACCORDING TO L EARNED AR, THERE WAS A BONA- FIDE DISCLOSURE OF ALL THE PARTICULARS AND MERE DEN IAL OF ASSESSEES CLAIM OF SET OFF WILL NOT ATTRACT THE PENAL PROVISIONS AS CONTAINED U/S 271(1)(C). HE PLACED RELIANCE ON THE RECENT DECISION OF HON'BLE SUPREME COURT DAT ED 17 TH MARCH, 2010 IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. 322 ITR 158, WHEREIN IT WAS OBSERVED THAT MAKING AN INCORRECT CLAIM IN LAW CANN OT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS, NO PENALTY IS LEVIABLE U/S 271(1)(C) OF THE IT ACT. LEARNED AR ALSO PLACED ON RECORD ORDER OF THE ITAT VISAKHAP ATNAM BENCH REPORTED AT 29 DTR 1, WHEREIN IT WAS HELD THAT SHORT TERM CAPITAL GAIN U/S 50 IS ELIGIBLE FOR SET OFF AGAINST THE UNABSORBED DEPRECIATION AND ELIGIBLE BU SINESS LOSS. ACCORDINGLY, IT WAS PLEADED THAT ASSESSEES CLAIM WAS ALLOWABLE EVE N ON MERITS AND THAT NO PENALTY SHOULD HAVE BEEN IMPOSED U/S 271(1)(C) MERE LY BY DECLINING SUCH CLAIM. DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF THE SHAHABAD COOP.SUGAR MILLS LIMITED, ORDER DATED 12.10.2009 WA S ALSO PLACED ON RECORD, WHEREIN IT WAS HELD THAT MAKING OF WRONG CLAIM IS N OT AT PAR WITH CONCEALMENT OR GIVING INACCURATE PARTICULARS, WHICH MAY CALL FOR L EVY OF PENALTY U/S 271(1)(C) OF THE IT ACT. RELIANCE WAS ALSO PLACED ON THE DECISI ON OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MEHTA ENGINEERS 8 DTR 1 36 WHEREIN IT WAS HELD THAT MERELY BECAUSE ASSESSEE CLAIMED DEDUCTION OF EXPEND ITURE INCURRED ON EDUCATION OF SON OF A DIRECTOR, ON THE BASIS OF WRITTEN AGREE MENT WHEREBY HE HAS AGREED TO SERVE THE COMPANY AT LEAST FOR THREE YEARS AFTER FI NISHING HIS STUDIES ABROAD, AND THE SAME STANDS DISALLOWED, IT CANNOT BE SAID THAT ASSESSEE CLAIMED THE DEDUCTION ITA-4435/DEL/2009 3 OF EXPENDITURE IN ORDER TO EVADE TAX LIABILITY AND, THEREFORE, PENALTY U/S 271(1)(C) IS NOT LEVIABLE. IT WAS ALSO OBSERVED BY THE HONB LE HIGH COURT THAT SINCE FACTS RELATING TO CLAIM WAS DULY DISCLOSED IN THE RETURN, THERE IS NO CONCEALMENT OF PARTICULARS OF INCOME, THEREFORE MERE REJECTION OF CLAIM OF EXPENDITURE WILL NOT ATTRACT LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT . 4. ON THE OTHER HAND, LEARNED DR CONTENDED THAT ASS ESSEE HAS FILED A WRONG CLAIM WHICH IS NOT PERMISSIBLE UNDER PROVISIONS OF SECTION 71 NOR SECTION 72 OF THE ACT, THEREFORE AO WAS JUSTIFIED IN LEVYING THE PENALTY FOR SUCH WRONG CLAIM. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED UPON THE VARIOUS CASE LAWS CITED BY THE LEARNED AR AND DISCUSSED BY LOWER AUTHORITIES I N THEIR RESPECTIVE ORDERS. FROM THE RECORD, WE FOUND THAT ASSESSEE HAS CLAIMED SET OFF OF UNABSORBED BUSINESS LOSS AGAINST THE CAPITAL GAINS EARNED DURING THE YEAR. AS A RESULT OF AOS ACTION FOR DECLINE OF SUCH SET OFF, PENALTY WAS IMPOSED U/S 27 1(1)(C). CONTENTION OF THE ASSESSEE WAS THAT CLAIM WAS MADE IN BONA-FIDE WAY F OR SETTING OF CARRY FORWARD BUSINESS LOSS AGAINST THE INCOME ARISING ON SALE OF BUSINESS ASSETS. ALONGWITH THE RETURN OF INCOME, THE ASSESSEE HAS ALSO SUBMITTED D IRECTORS REPORT DULY DISCLOSING THE FACT OF SALE OF BUILDING AND UTILIZATION OF THE AMOUNT FOR THE PURPOSE OF BUSINESS. THUS, WE FOUND THAT ASSESSEE HAS FURNISH ED ALL THE PARTICULARS OF INCOME WHICH IS EVIDENT FROM THE COMPUTATION OF INCOME, DI RECTORS REPORT ETC. FILED ALONGWITH RETURN OF INCOME. IN THE QUANTUM ORDER, THE AO DECLINED ASSESSEES CLAIM OF SET OFF. NOWHERE AO HAS ALLEGED THAT ASSE SSEES CLAIM IS MALA-FIDE. THUS, IT WAS A SIMPLE CASE OF DENIAL OF ASSESSEES CLAIM OF SET OFF OF BUSINESS LOSS AGAINST THE CAPITAL GAIN. IN THIS REGARD, HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. (SUPRA) WHILE CONF IRMING THE ORDER OF HONBLE HIGH COURT DELETING THE PENALTY IMPOSED U/S 271(1)( C) FOR DENIAL OF ASSESSEES CLAIM OF DEDUCTION OF INTEREST EXPENDITURE, HAS CAT EGORICALLY OBSERVED THAT BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM I N LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. ACCORDINGLY, I T WAS HELD THAT DECLINE OF ITA-4435/DEL/2009 4 ASSESSEES CLAIM OF INTEREST AGAINST THE LOAN UTILI ZED FOR MAKING INVESTMENT IN TAX FREE SECURITIES, WILL NOT AMOUNT TO FURNISHING OF I NACCURATE PARTICULARS SO AS TO ATTRACT PENALTY U/S 271(1)(C) OF THE ACT. HON'BLE SUPREME COURT IN THIS CASE AFTER CONSIDERING THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF DILIP N.SHROFF 291 ITR 519 (SC) AND DHARMENDER TEXTILE PROCESSORS 30 6 ITR 277 (SC), HELD AS UNDER:- A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINAB LE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDI TURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENAL TY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVE NUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTE D BY ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PE NALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF T HE LEGISLATURE. 6. RECENTLY, HON'BLE DELHI HIGH COURT IN THE CASE O F ARETIC INVESTMENT PVT.LTD., VIDE ORDER DATED 18.2.2010 IN ITA 264/200 9 OBSERVED THAT WHERE THE LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF TRADING IN SH ARES WAS NOT ACCEPTED BY THE AO AND WAS TREATED AS A SPECULATION LOSS IN TERMS O F EXPLANATION TO SECTION 73 OF THE ACT, DID NOT AUTOMATICALLY RESULT IN THE INFERE NCE OF CONCEALMENT OF INCOME JUSTIFYING IMPOSITION OF PENALTY U/S 271(1)(C) OF T HE ACT. SIMILARLY, IN THE CASE OF AURIC INVESTMENT & SECURITIES LTD. 163 TAXMAN 533 , IT WAS OBSERVED BY THE HON'BLE DELHI HIGH COURT THAT WHERE ASSESSEE HAS DE CLARED HIS INCOME FROM BROKERAGE AND OTHER INCOME AGAINST WHICH IT HAD CLA IMED SHARE TRADING LOSS, THE AO FOUND THAT LOSS WAS SPECULATIVE IN NATURE AND CO ULD NOT BE ADJUSTED AGAINST ASSESSEES NORMAL INCOME, ACCORDINGLY THE AO HELD T HAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF M AKING A WRONG CLAIM OF SHARE TRADING LOSS AGAINST THE NORMAL INCOME AND IMPOSED PENALTY U/S 271(1)(C) OF THE ACT. THE HONBLE HIGH COURT HELD THAT MERE TREATME NT OF BUSINESS LOSS AS A SPECULATION LOSS BY THE AO DID NOT AUTOMATICALLY WA RRANT INFERENCE OF CONCEALMENT OF INCOME, ACCORDINGLY PENALTY WAS NOT LEVIABLE. ITA-4435/DEL/2009 5 7. RECENTLY, HON'BLE JURISDICTIONAL HIGH COURT IN T HE CASE OF CIT VS. THE SHAHABAD COOP.SUGAR MILLS LIMITED (SUPRA) OBSERVED THAT WHERE THE ASSESSEE IS FOUND TO HAVE MADE WRONG CLAIM U/S 80P AND WRONG CL AIM OF DEPRECIATION ON GUEST HOUSE, MAKING A WRONG CLAIM IS NOT AT PAR WIT H CONCEALMENT OR GIVING OF INACCURATE INFORMATION, IT WILL NOT CALL FOR LEVY O F PENALTY U/S 271(1)(C). ACCORDINGLY, ORDER OF THE ITAT CHANDIGARH BENCH DEL ETING PENALTY IMPOSED U/S 271(1)(C) WAS UPHELD BY THE HONBLE COURT. 8. HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. S.P.K.STEELS PVT.LTD. - 270 ITR 156 UPHELD THE ORDER OF THE TRIB UNAL DELETING THE PENALTY U/S 271(1)(C) BY OBSERVING THAT ASSESSEE BEING ENGAGED IN THE BUSINESS OF COMMISSION AGENCY, EXPLANATION TO SECTION 73 WAS APPLICABLE AN D THUS, LOSS ON ACCOUNT OF TRADING IN SHARES WAS DISALLOWED, IT WAS HELD THAT FOR SUCH DISALLOWANCE PENALTY U/S 271(1)(C) IS NOT LEVIABLE AS THE ASSESSEE HAS FILED PRELIMINARY DETAILS ALONGWITH THE RETURN. 9. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIDDHARTHA ENTERPRISES 322 ITR 80 OBSERVED THAT WHERE THE ASSESSEES CLAIM FOR SET OFF ON ACCOUNT OF CAPITAL GAINS AGAINST PROFIT OF BUSINESS WAS DISALL OWED BY THE AO AND AO IMPOSED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME, THE CIT(A) DELETED THE SAME AND TRIBUNAL UPHELD THE ORDER OF THE CIT(A) BY OBSERVING THAT ENTIRE FACTS HAVE BEEN DISCLOSED BY THE ASSESSEE IN THE DOCUMENT S FILED ALONGWITH THE RETURN AND THE MISTAKE HAS BEEN COMMITTED BY THE COUNSEL O F THE ASSESSEE FOR SUCH WRONG CLAIM. THERE WAS NO SCOPE FOR CONCEALING ANY INCOM E OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. WHILE COUNTERING THE DEPART MENTS CONTENTION THAT EVEN IF CLAIM FOR SET OFF OF CAPITAL LOSS AGAINST PROFIT OF BUSINESS WAS BY THE NEGLIGENCE OR BY MISTAKE, THE FACT REMAINS THAT THE PARTICULARS O F INCOME FURNISHED WERE NOT CORRECT AND WILLFUL CONCEALMENT NOT BEING AN ESSENT IAL REQUIREMENT FOR LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT, AS HELD BY THE HON'BLE SUPREME COURT IN THE ITA-4435/DEL/2009 6 CASE OF DHARMENDRA TEXTILE PROCESSORS (SUPRA), THE PENALTY COULD NOT BE DELETED, THE HONBLE HIGH COURT OBSERVED AS UNDER:- WE ARE UNABLE TO ACCEPT THE SUBMISSION. THE JUDGM ENT OF THE HON'BLE SUPREME COURT IN DHARMENDRA TEXTILE PROCESS ORS [2008] 306 ITR 277 CANNOT BE READ AS LAYING DOWN THAT IN E VERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. WHAT HAS BEEN LAID DOWN IS THAT QUALITATIVE DIFFERENCE BETWE EN CRIMINAL LIABILITY UNDER SECTION 276C AND PENALTY UNDER SECT ION 271(1)(C) HAD TO BE KEPT IN MIND AND APPROACH ADOPTED TO THE TRIA L OF A CRIMINAL CASE NEED NOT BE ADOPTED WHILE CONSIDERING THE LEVY OF PENALTY. EVEN SO, THE CONCEPT OF PENALTY HAS NOT UNDERGONE C HANGE BY VIRTUE OF THE SAID JUDGMENT. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAK E. THIS BEING THE POSITION, THE FINDING HAVING BEEN RECORDED ON FACTS THAT THE FURNISHING OF INACCURATE PARTICULARS WAS SIMPLY A M ISTAKE AND NOT A DELIBERATE ATTEMPT TO EVADE TAX, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE HELD TO BE PERVERSE. 10. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, W E CAN REASONABLY CONCLUDE THAT ASSESSEE HAS DISCLOSED ALL THE PARTICULARS ALO NGWITH THE RETURN OF INCOME, THEREFORE IT WAS NOT A FIT CASE FOR LEVY OF PENALTY MERELY BY DECLINING ASSESSEES CLAIM FOR SET OFF OF BUSINESS LOSS AGAINST OTHER HE ADS OF INCOME. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2010. SD/- SD/- (VIMAL GANDHI) (R.C.SHARMA) PRESIDENT ACCOUNTANT MEMBER DATED : 31.03.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-4435/DEL/2009 7