Som Nath Virmani, V. ACIT, Cir-37(1),

ITA 4523/DEL/2005

• Counselvise Citation: 452320114 RSA 2005
• Duration Of Justice: 6 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 22-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 01-12-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Assessee Lawyers: S R WADHWA
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G NEW DELHI BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SMT. DIVA SINGH, JUDICIAL MEMBER ITA NO: 4523/DEL/2005 A.Y. : 2001-02 SH. SOM NATH VIRMANI VS. ACIT, CIRCLE 37(1) A 39, NARAINA INDL. AREA, PHASE II NEW DELHI NEW DELHI 28 ITA NO: 1909/DEL/2009 A.Y. : 2001-02 ACIT, CIRCLE 33(1) VS. SH. SOM NATH VIRMANI NEW DELHI NEW DELHI (APPELLANT) (RESPONDE NT) APPELLANT BY : SHRI S.R.WADHWA, ADV. RESPONDENT BY : SHRI S.MOHANTY, D.R. O R D E R PER DIVA SINGH, JUDICIAL MEMBER THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AND T HE REVENUE, WHEREAS THE ASSESSEE IS IN APPEAL AGAINST THE ACTIO N OF THE CIT(A)-XXVI, NEW DELHI IN SUSTAINING THE QUANTUM ADDITION VIDE HIS ORDER DT.25.8.2009. THE REVENUE IS IN APPEAL AGAINST THE ACTION OF CIT(A) IN QUASHING THE PENALTY PROCEEDINGS VIDE HIS ORDER DT. 19.2.2009. SINCE BOTH THE APPEALS PERTAIN TO A.Y. 2001-02 AND WERE A RGUED TOGETHER AS SUCH FOR THE SAKE OF CONVENIENCE A COMMON ORDER IS BEING PASSED. ITA 4523/DEL/05 & PAGE 2 OF 6 ITA 1909/DEL/09 SHRI SOM NATH VIRMANI A.Y. 2001-02 2. THE ASSESSEE IN THE QUANTUM PROCEEDINGS IS BEFOR E US ON THE FOLLOWING GROUNDS. 1. THAT THE TREATMENT OF INCOME OF INTEREST PAID U/S 14A OF THE ACT, ON FACTS AND CIRCUMSTANCES, IS WRONG AND ERRONEOUS. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE OF INTEREST PAID TO OTHERS AND FIRMS IS AGAINST THE PR INCIPLES OF NATURAL JUSTICE, WRONG AND BAD AT LAW. 3. THAT THE ASSESSEE OBJECTS TO THE COMPUTATION OF TOTAL INCOME AND TAX THEREON. 4. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDI CE TO ONE ANOTHER. 5. YOUR PETITIONER MAY ADD, AMEND, MODIFY AND WITH DRAW ANY OF THE AFORESAID GROUNDS OF APPEAL. 3. THE LD.A.R. ADDRESSING GROUND NO.1 SOUGHT TO ARG UE THAT THERE WAS SUFFICIENT INTEREST FREE ADVANCES WITH THE ASSESSEE AS COMPARED TO THE LOANS ADVANCED AS SUCH THE INTEREST PAID U/S 14A O N FACTS COULD NOT BE DISALLOWED. HOWEVER BEFORE THE LD.A.R. COULD ADVAN CE FURTHER ARGUMENTS IN REGARD THERETO HE WAS REQUIRED TO ADDRESS WHETHE R GROUND NO.2 RAISED IN THE PRESENT APPEAL IS BEING PRESSED. ON SEEKING THE INSTRUCTIONS FROM THE ASSESSEE PRESENT IN COURT LD.A.R. SUBMITTED THA T THE ASSESSEE WOULD WANT TO PRESS THE SAID GROUND. ADVERTING TO THE FA CTS IT WAS HIS SUBMISSION THAT THE ASSESSEE WAS CONSISTENTLY PRESE NT BEFORE THE A.O. AND EVEN BEFORE THE CIT(A). HOWEVER ON THE LAST DA TE THE CIT(A) HAD GIVEN ADJOURNMENT AND THERE WAS SOME GAP OF COMMUNI CATION IN REGARD TO THE DATE AS SUCH ON ACCOUNT OF THIS FACT THE ASS ESSEE COULD NOT BE REPRESENTED BEFORE THE CIT(A) AND THE IMPUGNED ORDE R WAS PASSED. IN THE CIRCUMSTANCES IT WAS HIS PRAYER THAT THE ISSUE MAY BE RESTORED TO THE ITA 4523/DEL/05 & PAGE 3 OF 6 ITA 1909/DEL/09 SHRI SOM NATH VIRMANI A.Y. 2001-02 CIT(A) AS RELEVANT FACTS AND SUBMISSIONS HAVE NOT B EEN TAKEN INTO CONSIDERATION BY THE CIT(A) BEFORE PASSING THE ORDE R. THE LD.D.R. HAD NO OBJECTION TO THE SAID REQUEST OF THE ASSESSEE AS A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT NONE WAS PRESENT ON BEHAL F OF THE ASSESSEE. 4. IN THE LIGHT OF SUBMISSIONS ADVANCED BEFORE THE AUTHORITIES SUPPORTED BY FACTS AVAILABLE ON RECORD IT IS SEEN THE IMPUGNED ORDER WAS PASSED EX PARTE THE ISSUES AS SUCH ARE RESTORED BAC K TO THE FILE OF CIT(A) WITH THE DIRECTION TO DECIDE THE SAME AFRESH AFTER AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. 6. THE SAID ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE PARTIES. ITA 1909/DEL/09 : 7. THE DEPARTMENT IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN QUASHING THE PENALTY IMPOSED U/S 271(1)(C) OF RS.20,28,841/- . 8. THE LD.A.R. ADDRESSING THE BACKGROUND SUBMITTED THAT THIS WAS THE FIRST YEAR WHEN THE ISSUE OF DISALLOWANCE CAME UP ON THE STATUTE AND THERE WAS NO MALAFIDE ON THE PART OF THE ASSESSEE. ALL NECESSARY FACTS WERE FULLY AVAILABLE ON THE RECORD AS SUCH RELYING UPON CIT VS. PETRO PRODUCTS LTD., 322 ITR 158 (SC) IT WAS URGED THAT T HE IMPUGNED ORDER ITA 4523/DEL/05 & PAGE 4 OF 6 ITA 1909/DEL/09 SHRI SOM NATH VIRMANI A.Y. 2001-02 DESERVES TO BE UPHELD. IT WAS ALSO SUBMITTED THAT IT WAS A BONAFIDE CLAIM OF THE ASSESSEE AS SUCH THERE WAS NO MALAFIDE. RE LIANCE WAS PLACED UPON THE ADVISE OF AR OF THE ASSESSEE MR.HC GAMBHIR WHICH FACT HAS BEEN TAKEN INTO CONSIDERATION BY THE CIT(A). RELIA NCE WAS ALSO PLACED UPON THE ORDER OF THE COORDINATE BENCH IN THE CASE OF NIRAJ KUMAR SAHU VS DCIT, 13 SOT (LUCK) WHICH HAD BEEN AUTHORED BY T HE LD.A.M. RELIANCE WAS ALSO PLACED UPON THE FOLLOWING JUDGEME NTS FOR THE PROPOSITION THAT NO PENALTY IN THE CONTEXT OF SEC. 14A CAN BE LEVIED. SUNSHINE INVESTMENTS VS ACIT (2006) 106 TTJ (MUM) 8 55 P.8 CIT(A)S ORDER; EVER PLUS SECURITIES & FINANCE LTD. (2006) 1 01 TTJ 151 (BOM.) P.9 CIT(A)S ORDER; NEERAJ KUMAR SAHU VS. DCIT (2007) 1 3 SOT 1 (LUCK); IN THE ALTERNATIVE RELIANCE WAS ALSO PLACED UPON SUDH IR DATTARAM PATIL VS DCIT (2005) 2 SOT 678 (MUM); AH BALDOTA VS ACIT (20 06) 1203 TTJ (MUM) 517 FOR THE PROPOSITION THAT FIRM AND ITS PAR TNERS ARE INTERLINKED AND THERE IS NO LOSS OF REVENUE. ARGUMENTS WERE AL SO ADVANCED THAT NO SATISFACTION WAS RECORDED BY THE A.O. 9. THE LD.DR VEHEMENTLY OPPOSED THE STAND IN REGARD TO THE SATISFACTION ARGUING THE ISSUE IS NO LONGER RES INT EGRA. RELIANCE WAS PLACED UPON NAINU MAL HET CHAND VS CIT, 294 ITR 185 (ALL) IN SUPPORT OF THE PENALTY ORDER. IT WAS ALSO HER STAND THAT THE PLEA OF THE ASSESSEE THAT WRONG ADVISE WAS GIVEN BY THE COUNSEL CANNOT B E ACCEPTED AS THE ASSESSEE IS REPRESENTED BY ONE OF THE BEST COUNSELS IN INDIA AND IN FACT THIS IS AN APPEAL OF THE DEPARTMENT AND SHE SHOULD HAVE BEEN ALLOWED TO ADDRESS THE ARGUMENTS AND IT WAS HER VEHEMENT PRAYE R THAT THE ISSUE SHOULD BE DECIDED AFTER THE FINDING IN THE QUANTUM APPEAL HAS BEEN ITA 4523/DEL/05 & PAGE 5 OF 6 ITA 1909/DEL/09 SHRI SOM NATH VIRMANI A.Y. 2001-02 ARRIVED AT BY THE CIT(A) AS THE SAID ISSUE STANDS R ESTORED. IT WAS URGED THAT THE PENALTY CAN BE DECIDED ONLY AFTER CONCLUSI ON HAS BEEN ARRIVED AT IN THE QUANTUM PROCEEDINGS. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME WE ARE OF THE VIEW THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE IT WOULD BE APPROPRIATE TO RESTORE THIS ISSUE ALSO BACK TO THE CIT(A) AS FINDINGS ARRIVED AT IN THE QUANTUM PROCEEDINGS HAVE A BEARIN G ON THE PENALTY PROCEEDINGS. THUS SINCE THE SAID ISSUE HAS BEEN RE STORED FOR WANT OF OPPORTUNITY IT WOULD BE IN THE FITNESS OF THINGS T O RESTORE THE ISSUE IN THE PENALTY PROCEEDINGS ALSO AS THE VERY MAINTAINABILIT Y OF THE ADDITION NECESSARILY HAS TO BE DECIDED FIRST. ACCORDINGLY T HE LD.CIT(A) SHALL PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW, AFTER DECIDI NG THE QUANTUM APPEAL. NEEDLESS TO SAY THAT A REASONABLE OPPORTUN ITY OF BEING HEARD SHALL BE AFFORDED TO THE ASSESSEE. 11. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS A LLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT ITA 4523/DEL/2005 OF ASSESSEE AND ITA 1909/DEL/09 OF DEPARTMENT ARE BOTH ALLOWED FOR STATISTICAL PURP OSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH,2012. SD/- SD/- (S.V.MEHROTRA) (DIVA SINGH) ACCOUNTNAT MEMBER JUDICIAL MEMBE R DATED: THE 28 TH MARCH, 2012 *MANGA ITA 4523/DEL/05 & PAGE 6 OF 6 ITA 1909/DEL/09 SHRI SOM NATH VIRMANI A.Y. 2001-02 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT( A); 5.DR 6.GUARD FILE BY ORDER DY. REGISTRAR // C O P Y //