ACIT, New Delhi V. M/s A T Invofin India (P) Ltd, New Delhi

ITA 4479/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77759 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Earning of tax free income; Difference of opinion
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. A. T VARKEY, JM ITA NO. 4479/DEL/2013 : ASS TT. YEAR : 2009-10 ACIT, CENTRAL CIRCLE-2 NEW DELHI VS M/S A. T. INVOFIN INDIA PVT. LTD., A-60, NARAINA INDL. AREA, PHASE-I, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACA8248B ASSESSEE BY : SHRI AJAY VOHRA & UPVAN GUPTA REVENUE BY : MS. Y. KAKKAR DATE OF HEARING : 23.6.2014 DATE OF PRONOUNCEMENT : 25.6.2014 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORD ER DATED 10.5.2013 OF CIT(A)-II, NEW DELHI. 2. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN CANCELLING THE PENALTY OF RS. 1 3,97,175/- LEVIED BY THE A.O UNDER SECTION 271(1)(C) OF THE IN COME TAX ACT, 1961. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE FILED RETURN OF INCOME DECLARING AN INCOME OF RS.64,98,665/-. HOWEV ER, THE ASSESSMENT WAS FRAMED ON 30.12.2011 AT AN INCOME OF RS. 1,06,09,211/- U/S 143(3) OF THE IT ACT, 1961 (HERE IN AFTER REFERRED TO THE ACT). DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE A.O ITA NO. 4479/DEL/ 2013 A. T. INVOFI N INDIA PVT. LTD. 2 NOTICED THAT THE ASSESSEE HAD EARNED DIVIDEND INCOM E OF RS. 81,09,932/- WHICH DID NOT FORM PART OF TOTAL INCOME AND THAT AS PER THE ASSESSEE, THE DISALLOWANCE U/S 14A OF THE ACT C AME TO RS. 16,020/-. THE A.O ASKED THE ASSESSEE TO FURNISH DET AILS OF EXPENSES ATTRIBUTABLE TO THE EARNING OF EXEMPT INCOME AND AS TO WHY SAME SHOULD NOT BE ALLOWED AS PER THE PROVISIONS OF SEC. 14A OF THE ACT R.W RULE 8D OF THE INCOME TAX RULES. THE ASSESSEE FILED THE COMPUTATION OF DISALLOWANCE U/S 14A BUT THE A.O DID NOT FIND ME RIT IN THE SUBMISSIONS OF THE ASSESSEE HAD CALCULATED THE DISA LLOWANCE U/S 14A OF THE ACT AT RS. 41,26,566/-. HENCE, THE ADDITION OF RS. 41,10,546/- (RS. 41,26,566/- - RS. 16,020/-) WAS MADE ON ACCOUN T OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME U/S 14A OF TH E ACT. THE A.O ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND LEVIED THE PENALTY OF RS. 13,97,175/-. THE A.O REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA AND OTHERS VS DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM HAD BEEN INCORPORATED IN PARA 3 OF THE IMPUGNED ORDER, AT THE COST OF REP ETITION THE SAME ARE NOT REPRODUCED HEREIN. 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT AND FOR IMPOSING PENALTY U/S 271(1)(C ), THE A.O HAVE TO ITA NO. 4479/DEL/ 2013 A. T. INVOFI N INDIA PVT. LTD. 3 BE SATISFIED THAT A) ASSESSEE HAS CONCEALED THE PAR TICULARS OF INCOME OR B) ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE FURTHER OBSERVED THAT THE LEGISLATURE DID NOT INTEN D TO IMPOSE PENALTY ON EVERY ASSESSEE WHOSE CLAIM WAS REJECTED BY THE A SSESSING OFFICER. HE ALSO OBSERVED THAT WHAT IS SOUGHT TO BE COVERED U/S 271(1)(C) IS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND NOT MAKING UNTENABLE CLAI M. A REFERENCE WAS MADE TO THE FOLLOWING CASES: CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) CIT VS ATUL MOHAN BINDAL (2009) 317 ITR 1 (SC) UOI VS RAJASTHAN SPINNING & WEAVING MILLS (2010) 1G STR66 (SC) AND DECISION IN THE CASE OF CIT (LTU) VS MTNL, ITA NO. 626/2011, DATED 10.10.2011 BY THE JURISDICTIONAL DELHI HIGH C OURT 6. THE LD. CIT(A) ALSO OBSERVED THAT THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO DIFFERENT PROCEEDINGS, AND THAT AN ISSUE MAY CALL FOR AN ADDITION TO INCOME U/S 143(3) ORDER, BU T IN ORDER TO INVOKE A PENALTY, THE A.O HAS TO WALK LITTLE EXTRA MILE TO P ROVE THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO CONCEAL THE PARTICUL ARS OF INCOME OR FURNISHING OF INACCURATE PARTICULRS AND THE MERE NO N-ACCEPTANCE OF ASSESSEES SUBMISSIONS AND WITHOUT ANY POSITIVE EVI DENCE FROM THE A.O THAT ASSESSEE HAS CONCEALED THE INCOME OR FURNISHE D INACCURATE PARTICULARS OF INCOME, DID NOT IPSO FACTO WARRANT P ENALTY U/S 271(1)(C) OF THE ACT. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE EARNED DIVIDEND ITA NO. 4479/DEL/ 2013 A. T. INVOFI N INDIA PVT. LTD. 4 INCOME OF RS. 81,09,932/- AND DEBITED TOTAL EXPENDI TURE IN THE PROFIT AND LOSS ACCOUNT TO THE TUNE OF RS. 32,06,595/- WHICH I NCLUDED THE EXPENDITURE INCURRED ON STATUTORY EXPENSES VIZ. AUD ITORS FEES, LEGAL EXPENSES ETC. BUT A DISALLOWANCE OF RS. 41,10,546/- HAD BEEN MADE AGAINST THE TOTAL EXPENDITURE OF RS. 32,06,595/-. H E ALSO OBSERVED THAT THE ASSESSEE ON ITS OWN DISALLOWED A SUM OF RS. 16, 020/- U/S 14A OF THE ACT, THUS, THERE WAS A DIFFERENCE OF OPINION. THE L D. CIT(A) OBSERVED THAT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA) THE HONBLE SUPREME COURT HAS HELD THAT WHEN ASSESSEE FURNISHED ALL THE MATERIAL IN THE RETURN WHICH WAS NOT FOUND TO BE INCORRECT, IT WAS UPTO TH E AUTHORITIES TO ACCEPT THE CLAIM IN THE RETURN OR NOT, BUT THE SAME COULD NOT BE CONSIDERED AS CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. ACCORDINGLY THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT BY THE A.O WAS DELETED. 7. NOW THE DEPARTMENT IS AN APPEAL. THE LD. DR STRO NGLY SUPPORTED THE ORDER OF THE A.O AND REITERATED THE OBSERVATION S MADE IN THE PENALTY ORDER DATED 27.6.2012 AND THE ASSESSMENT OR DER DATED 30.12.2011 PASSED BY THE A.O. RELIANCE WAS ALSO PLA CED ON THE FOLLOWING CASES: CIT V. ZOOM COMMUNICATION (P.) LTD. [2010] 327 ITR 510 (DELHI) U.O.I VS DHARAMENDRA TEXTILE PROCESSOR 306 ITR 277 (SUPREME COURT) ITA NO. 4479/DEL/ 2013 A. T. INVOFI N INDIA PVT. LTD. 5 8. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND FURTHER SUBMITTED THAT THE ASSESSEE SUO-MOTO DISALLOWED A SUM OF RS. 16,020/- U/S 14A OF THE ACT WHILE THE A.O COMPUTED THE DISALLOWANCE OF RS. 41,10,546/- WHICH WAS MORE THAN THE TOTAL EXPENSES CLAIMED BY T HE ASSESSEE AT RS. 32,06,595/- WHICH INCLUDED THE EXPENDITURE INCURRED ON STATUTORY EXPENSES. THEREFORE, THERE WAS A DIFFERENCE OF OPIN ION AS REGARDS THE DISALLOWANCE U/S 14A OF THE ACT IN THE WORKING OF T HE ASSESSEE AND THE A.O, BUT IT CANNOT BE SAID THAT THE ASSESSEE EITHER FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE INCOME. THER EFORE, ONLY ON THIS BASIS THAT THE CLAIM OF THE ASSESSEE WAS NOT ACCEPT ED BY THE A.O, PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE LEVIED. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE ASSESS EE EARNED DIVIDEND INCOME OF RS. 81,09,932/- WHICH WAS CLAIMED AS EXEM PT. THE ASSESSEE ON ITS OWN DISALLOWED A SUM OF RS. 16,020/- U/S 14A OF THE ACT. HOWEVER, THE A.O WAS NOT SATISFIED WITH THE QUANTUM OF DISALLOWANCE MADE BY THE ASSESSEE AND APPLIED RULE 8D OF THE INC OME TAX RULES TO WORK OUT THE DISALLOWANCE AT RS. 41,10,546/- AS AGA INST THE TOTAL EXPENDITURE OF RS. 32,06,595/-. THUS, THERE WAS A D IFFERENCE OF OPINION ITA NO. 4479/DEL/ 2013 A. T. INVOFI N INDIA PVT. LTD. 6 AS REGARDS TO THE CLAIM OF DISALLOWANCE U/S 14A OF THE ACT R.W RULE 8D OF THE IT RULES. HOWEVER, THE ASSESSEE FURNISHED AL L THE DETAILS RELATING TO THE EARNING OF DIVIDEND INCOME AND THE CALCULATI ON FOR THE DISALLOWANCE TO BE MADE U/S 14A OF THE ACT. SO IT C ANNOT BE SAID THAT THE ASSESSEE HAD CONCEALED INCOME OR FURNISHED INACCURA TE PARTICULARS OF INCOME. THE ONLY BASIS FOR LEVYING THE PENALTY U/S 271(1)(C) OF THE ACT WAS THAT THE CLAIM OF THE ASSESSEE FOR THE DISALLOW ANCE U/S 14A OF THE ACT WAS NOT ACCEPTED BY THE A.O, SO IT CAN AT THE M OST BE A GROUND FOR MAKING THE ADDITION BUT WAS NOT SUFFICIENT TO LEVY THE PENALTY U/S 271(1)(C) OF THE ACT. 10. ON A SIMILAR ISSUE THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 HAS HELD AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INC OME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHE D INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIV EN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS . IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE I NVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAI M TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ITA NO. 4479/DEL/ 2013 A. T. INVOFI N INDIA PVT. LTD. 7 ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE T HE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUC H PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARI SE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NO T BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. 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 S USTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. S UCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. 11. IN THE PRESENT CASE ALSO, AS WE HAVE ALREADY PO INTED OUT AS THERE WAS A DIFFERENCE OF OPINION AS REGARDS TO THE WORKI NG OF DISALLOWANCE U/S 14A OF THE ACT. THE ASSESSEE DISALLOWED SUO-MOT O A SUM OF RS. 16,020/- WHILE THE A.O WORKED OUT THE DISALLOWANCE AT RS. 41,10,546/- WHICH WAS MORE THE TOTAL CLAIM OF THE EXPENSES AT R S. 32,06,595/-. THEREFORE, MERELY ON THIS BASIS THAT THE CLAIM OF T HE ASSESSEE WAS NOT ACCEPTED BY THE A.O IT CANNOT BE SAID THAT THE ASSE SSEE EITHER CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF I NCOME. THEREFORE, BY KEEPING IN VIEW THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. (S UPRA), WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN DEL ETING THE PENALTY LEVIED BY THE A.O U/S 271(1)(C) OF THE ACT. WE DO NOT SEE ANY INFIRMITY IN THE ITA NO. 4479/DEL/ 2013 A. T. INVOFI N INDIA PVT. LTD. 8 IMPUGNED ORDER OF THE LD. CIT(A) AND ACCORDINGLY DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 12. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 25/6/2014). SD/- SD/- (A. T. VARKEY) (N. K . SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: 25/6/2014 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 23.6.2014 PS 2. DRAFT PLACED BEFORE AUTHOR 24.6.2014 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.