Nadish Real Estate Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 4444/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86569 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 08-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 23-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SATYAJEET GOEL CAS
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH E EE E : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG, JUDICIAL , JUDICIAL , JUDICIAL , JUDICIAL MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 4444/DEL/2013 4444/DEL/2013 4444/DEL/2013 4444/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2006 2006 2006 2006 - -- - 07 0707 07 M/S NADISH REAL ESTATES M/S NADISH REAL ESTATES M/S NADISH REAL ESTATES M/S NADISH REAL ESTATES PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., 1 11 1- -- -E, NAAZ CINEMA E, NAAZ CINEMA E, NAAZ CINEMA E, NAAZ CINEMA COMPLEX, COMPLEX, COMPLEX, COMPLEX, JHANDEWALAN EXTENSION, JHANDEWALAN EXTENSION, JHANDEWALAN EXTENSION, JHANDEWALAN EXTENSION, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 055. 110 055. 110 055. 110 055. PAN : AACCN2671D. PAN : AACCN2671D. PAN : AACCN2671D. PAN : AACCN2671D. VS. VS. VS. VS. ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -13(1), 13(1), 13(1), 13(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.S. SINGHVI AND SHRI SATYAJEET GOEL, CAS. RESPONDENT BY : SHRI VIVEK KUMAR, SR.DR. ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGINAST TH E ORDER OF LEARNED CIT(A)-XVI, NEW DELHI DATED 30 TH MAY, 2013. 2. THE ONLY GROUND RAISED BY THE ASSESSEE IS AGAINS T THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX A CT, 1961 AMOUNTING TO `13,08,890/-. 3. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED THE RETURN DECLARING LOSS OF `38,86,482/-. THE LOSS OC CURRED DUE TO INCURRING OF EXPENSES BY THE ASSESSEE. THE ASSESSI NG OFFICER DISALLOWED THE ENTIRE LOSS AND ASSESSED THE INCOME AT NIL. HE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE LOSS ON THE GROUND THAT THE ASSESSEE DID NOT COMMENCE THE BUSINESS. I T WAS SUBMITTED BY THE LEARNED COUNSEL THAT THE ASSESSEE WAS IN THE BU SINESS OF REAL ITA-4444/DEL/2013 2 ESTATE. DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAD GIVEN THE ADV ANCE FOR THE PURCHASE OF LAND AND HAD ALSO PURCHASED THE STAMP F OR REGISTRY OF SUCH LAND. HE, THEREFORE, CONTENDED THAT THE ASSESSEE H AD COMMENCED THE BUSINESS AND THE ASSESSING OFFICER WRONGLY HELD THA T THE ASSESSEE DID NOT COMMENCE THE BUSINESS. HE WAS FAIR ENOUGH TO P OINT OUT THAT IN THE QUANTUM APPEAL, THE ITAT DID NOT ACCEPT THE ASS ESSEES CLAIM. HE FURTHER SUBMITTED THAT MERELY BECAUSE THE ASSESSEE S CLAIM FOR DEDUCTION OF EXPENSES IS DISALLOWED, IT DOES NOT AM OUNT TO CONCEALMENT OF INCOME. IN SUPPORT OF THIS CONTENTI ON, HE RELIED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF C IT VS. RELIANCE PETROPRODUCTS PVT.LTD. (2010) 322 ITR 158 (SC). H E SUBMITTED THAT THE GENUINENESS OF THE EXPENSES CLAIMED BY THE ASSE SSEE HAS NOT BEEN DISPUTED. ANY MATERIAL OR EVIDENCE FURNISHED BY THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE OR INACCURATE. THER EFORE, THE DECISION OF HONBLE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT.LTD. (SUPRA) WOULD BE SQUARELY APPLICABLE. 4. LEARNED DR, ON THE OTHER HAND, REFERRED TO THE O RDER OF THE ITAT AND POINTED OUT THAT THE ITAT HAS FOUND THAT THE AS SESSEE HAS NOT EVEN GIVEN THE ADVANCE FOR PURCHASE OF LAND AND THE REFORE, THE BUSINESS CANNOT BE SAID TO HAVE COMMENCED. HE SUBM ITTED THAT THE ITAT CONSIDERED ALL THE FACTS AND THEREAFTER HAS AR RIVED AT THE CONCLUSION THAT THE CONTENTION OF THE ASSESSEE TO H AVE COMMENCED THE BUSINESS IS INCORRECT. HE, THEREFORE, SUBMITTED TH AT THE ASSESSEES CLAIM THAT IT HAS COMMENCED THE BUSINESS WAS A FACT UALLY INCORRECT CLAIM AND THEREFORE, THE PENALTY LEVIED UNDER SECTI ON 271(1)(C) IS QUITE JUSTIFIED. THE SAME SHOULD BE SUSTAINED. 5. IN THE REJOINDER, IT WAS POINTED OUT BY THE LEAR NED COUNSEL THAT THE ASSESSEE HAD GIVEN THE ADVANCE FOR PURCHASE OF LAND AND HAD ALSO PURCHASED THE STAMPS FOR GETTING THE SALE DEED EXEC UTED. HOWEVER, ITA-4444/DEL/2013 3 BEFORE THE SALE DEED COULD HAVE BEEN EXECUTED, THE ASSESSEES ADVOCATES NOTED CERTAIN DEFECT IN THE TITLE OF THE SELLER OF THE LAND AND THEREFORE, SALE DEED COULD NOT BE EXECUTED. HOWEVE R, THESE FACTS CLEARLY SHOW THAT THE ASSESSEE HAD ALREADY STARTED THE BUSINESS ACTIVITY THOUGH THE TRANSACTION OF PURCHASE OF LAND IS NOT MATERIALIZED BUT THE ASSESSEE HAS STARTED THE PROCESS OF SEARCHI NG THE LAND AND NEGOTIATING FOR PURCHASE OF LAND. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA), THEIR LORD SHIPS OF HONBLE APEX COURT HELD AS UNDER:- WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIE D BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE R ETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 7. FROM THE ABOVE, IT IS EVIDENT THAT MERE MAKING O F A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, IS NOT LIABLE FOR PENALTY UNDER SECTION 271(1)(C). IN THE CASE OF THE ASSESSEE, IT CLAIMED THE DEDUCTION FOR EXPENSES ON THE GROUND THAT IT COMMEN CED THE BUSINESS. THERE CAN BE DEBATE WHETHER THE ASSESSEE COMMENCED THE BUSINESS OR NOT. BUT, MERELY BECAUSE A VIEW IS TAKEN THAT T HE BUSINESS HAS NOT BEEN COMMENCED AND CONSEQUENTIALLY EXPENSES CLAIMED BY THE ASSESSEE ARE TO BE DISALLOWED, BY ITSELF, IS NOT SU FFICIENT FOR LEVY OF PENALTY UNDER SECTION 271(1)(C). IT IS NOT THE CAS E OF THE REVENUE THAT ANY DETAILS FURNISHED BY THE ASSESSEE ARE FOUND TO BE FALSE, INCORRECT OR ERRONEOUS. THE GENUINENESS OF THE EXPENDITURE I NCURRED BY THE ASSESSEE HAS NOT BEEN DOUBTED. THE EXPENSES HAVE B EEN DISALLOWED ON THE TECHNICAL GROUND THAT THE BUSINESS HAS NOT B EEN COMMENCED BY ITA-4444/DEL/2013 4 THE ASSESSEE. HONBLE APEX COURT HAS CLEARLY STATE D THAT A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. THESE OBSERVATIONS OF THEIR LORDSHIPS WOULD BE SQUARELY APPLICABLE IN THE CASE OF THE ASSESSEE. W E HAVE ALSO NOTICED THAT THE CIT(A) WHILE SUSTAINING THE PENALTY HAS RE LIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION P.LTD. [2010] 191 TAXMAN 179. IN TH E SAID DECISION, THEIR LORDSHIPS HELD AS UNDER:- IN THE CASE OF RELIANCE PETROPRODUCTS P.LTD. [2010 ] 322 ITR 158 (SC), THE ADDITION MADE BY THE ASSESSING OF FICER IN RESPECT OF THE INTEREST CLAIMED AS A DEDUCTION UNDE R SECTION 36(1)(III) OF THE ACT WAS DELETED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THOUGH IT WAS LATER RESTORED, BY THE TRIBUNAL, TO THE ASSESSING OFFICER . THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF T HE TRIBUNAL WAS ADMITTED BY THE HIGH COURT. IT WAS, I N THESE CIRCUMSTANCES, THAT THE TRIBUNAL CAME TO THE CONCLU SION THAT THE ASSESSEE HAD NEITHER CONCEALED THE INCOME NOR FILED INACCURATE PARTICULARS THEREOF. IN RECORDING THIS FINDING, THE TRIBUNAL FELT THAT IF TWO VIEWS OF THE CLAIM OF THE ASSESSEE WERE POSSIBLE, THE EXPLANATION OFFERED BY IT COULD NOT BE SAID TO BE FALSE. THIS, HOWEVER, IS N OT THE FACTUAL POSITION IN THE CASE BEFORE US. THE FACTS OF THE PRESENT CASE THUS ARE CLEARLY DISTINGUISHABLE. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCUR ATE PARTICULARS OF THE INCOME OF THE ASSESSEE, BUT IT C ANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALA FIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSES SEE. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMAL L PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS N OT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BAS IS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAI M IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTI ON 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW THAT A C LAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FO UNDATION ITA-4444/DEL/2013 5 ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT B E LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO MAKE WH OLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BE ING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR R ETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF-ASSESSMENT UNDER SECT ION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTE D FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TA X, WHICH IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAI MS OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION T O EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOU T PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CA SES ARE NOT PICKED UP FOR SCRUTINY. THIS WOULD TAKE AWAY T HE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. WE FIND THAT THE ASSESSEE BEFORE US DID NOT EXPLAI N EITHER TO THE INCOME-TAX AUTHORITIES OR TO THE INCO ME-TAX APPELLATE TRIBUNAL AS TO IN WHAT CIRCUMSTANCES AND ON ACCOUNT OF WHOSE MISTAKE, THE AMOUNTS CLAIMED AS DEDUCTIONS IN THIS CASE WERE NOT ADDED, WHILE COMPU TING THE INCOME OF THE ASSESSEE-COMPANY. WE CANNOT LOSE SIGHT OF THE FACT THAT THE ASSESSEE IS A COMPANY WH ICH MUST BE HAVING PROFESSIONAL ASSISTANCE IN COMPUTATI ON OF ITS INCOME, AND ITS ACCOUNTS ARE COMPULSORILY SUBJE CTED TO AUDIT. IN THE ABSENCE OF ANY DETAILS FROM THE ASSE SSEE, WE FAIL TO APPRECIATE HOW SUCH DEDUCTIONS COULD HAVE B EEN LEFT OUT WHILE COMPUTING THE INCOME OF THE ASSESSEE-COMP ANY AND HOW IT COULD ALSO HAVE ESCAPED THE ATTENTION OF THE AUDITORS OF THE COMPANY. 8. THUS, AFTER CONSIDERING THE DECISION IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA), IT WAS STATED BY TH E HONBLE JURISDICTIONAL HIGH COURT THAT MERE SUBMITTING A CL AIM WHICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCUR ATE PARTICULARS OF THE INCOME OF THE ASSESSEE BUT IF THE CLAIM, BESIDE S BEING INCORRECT IN LAW IS MALA FIDE , EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INT O PLAY. IF THE ASSESSEES CLAIM IS BONA FIDE, THEN H E WILL NOT BE LIABLE FOR PENALTY. THEREFORE, THE PRECISE QUESTION TO BE ADJ UDICATED BY US IS WHETHER THE ASSESSEES CLAIM WAS BONA FIDE OR MALA FIDE . ITA-4444/DEL/2013 6 9. IN THE CASE OF THE ASSESSEE, WE FIND THAT THE RE TURNED INCOME OF THE ASSESSEE WAS LOSS OF `38,86,482/- AND, AFTER DI SALLOWANCE OF EXPENSES, INCOME ASSESSED IS NIL. THUS, THERE WAS NO TAX LIABILITY ON THE ASSESSEE WHICH MAY MOTIVATE IT TO MAKE A BOGUS CLAIM OF THE EXPENDITURE. EVEN OTHERWISE, THE GENUINENESS OF TH E EXPENSES HAS NOT BEEN DOUBTED BY THE REVENUE. THE FACT THAT THE ASS ESSEE STARTED NEGOTIATION FOR THE PURCHASE OF LAND IS ALSO NOT DI SPUTED. CONSIDERING THE TOTALITY OF THESE FACTS, WE FIND NO MATERIAL TO HOLD THAT THE CLAIM FOR THE DEDUCTION OF THE EXPENSES WAS MALA-FIDE. THERE FORE, ON THESE FACTS, IN OUR OPINION, THE DECISION OF HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF ZOOM COMMUNICATION P.LTD. (SUPRA) WOULD NOT BE APPLICABLE, BUT, THE DECISION OF HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA) WOULD BE AP PLICABLE. RESPECTFULLY FOLLOWING THE SAME, WE CANCEL THE PENA LTY. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 9 TH JANUARY, 2015. SD/- SD/- ( (( ( CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG ) )) ) (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 09.01.2015 VK. COPY FORWARDED TO: - 1. APPELLANT : M/S NADISH REAL E M/S NADISH REAL E M/S NADISH REAL E M/S NADISH REAL ESTATES PVT.LTD., STATES PVT.LTD., STATES PVT.LTD., STATES PVT.LTD., 1 11 1- -- -E, NAAZ CINEMA COMPLEX, E, NAAZ CINEMA COMPLEX, E, NAAZ CINEMA COMPLEX, E, NAAZ CINEMA COMPLEX, JHANDEWALAN EXTENSION, NEW DELHI JHANDEWALAN EXTENSION, NEW DELHI JHANDEWALAN EXTENSION, NEW DELHI JHANDEWALAN EXTENSION, NEW DELHI 110 055. 110 055. 110 055. 110 055. 2. RESPONDENT : ASSISTANT COMMISSIONER OF INCOME TA X, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -13(1), NEW DELHI. 13(1), NEW DELHI. 13(1), NEW DELHI. 13(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR