ITO, New Delhi V. M/s. Franco Leome Shoes Pvt. Ltd., New Delhi

ITA 4532/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86509 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Assessee Lawyers: ASEEM CHAWLA
• Keywords: Principle of natural justice; Initiation of penalty proceedings
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, AM AND SHRI GEORGE GEORGE K , J.M. ITA NO: 4532 /DEL/20 1 3 AY : - 2009 - 10 ITO, WARD 11(3), ROOM NO.374A VS. FRANCO LEOME SHOES P.LTD. CR BLDG., IP ESTATE RZ 142, NEW DELHI NEW VISHNU GARDEN EXTN NEW DELHI PAN: AAACF 2181 Q (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.PARWINDER KAUR, SR.D.R. RESPONDENT BY : SH. ASEEM CHAWLA, C.A. AND SH. PRANSHU GOEL, C.A. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF T HE LD.CIT(A) - XIII, LAXMI NAGAR, NEW DELHI DATED 3.5.2013 FOR THE AY 2009 - 10, WHEREIN THE LD.CIT(A) DELETED THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT . 2. FACTS IN BRIEF : - THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF FOOTWEAR AT THEIR FACTORY AT BADDI AND DE LHI. IT HAD SEPARATE UNITS FOR WHICH IT HAD SEPARATE PROFIT AND LOSS A/C AND BALANC E SHEET. THESE UNITS ARE LOCATED AT BADDI AND DELHI. THE ASSESSEE FILED CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSS A/C. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.9. 2009 DEC LARING NIL INCOME AFTER CLAIMING THE DEDUCTION U/S 80 IC OF RS.1,00,17,292/ - . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 14 3 (3) AFTER REALLOCATING THE EXPENSES AND DETERMINING THE DEDUCTION U/S 80 IC AT RS.1,03,09,617/ - . AS THE ASSESSEE HAS EAR NED BOOK PROFIT OF RS.88,08,966/ - UNDER THE PROVISIONS OF S.115 JB OF THE ACT, ITA NO.4532/DEL/2013 AY: 2009 - 10 M/S FRANCO LEOME SHOES PVT.LTD., NEW DELHI 2 ASSESSMENT WAS COMPLETED ACCORDINGLY. PENALTY WAS LEVIED U/S 271(1)(C) ON THE GROUND THAT THE ASSESSEE COMPANY HAD DIVERTED ITS EXPENSES OF BA DD I UNIT, MOSTLY RELATABLE TO ITS M ANUFACTURING UNIT, WHICH IS EXEMPT FROM TAX, IN ORDER TO REDUCE TAXABLE INCOME OF THE NON EXEMPT UNIT/SALES OUTLETS. 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY , FOR THE VARIOUS REASONS GIVEN IN HIS ORDER, DELETED THE PENALTY BY RELYING ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT.LTD. (2010) REPORTED IN 322 ITR 158 (SC) AS WELL AS THE JUDGEMENT OF HON BLE MUMBAI TRIBUNAL IN BSE L INFRASTRUCTURE REALITY LTD. VS. ACIT REPORTED IN 22 TAXMAN.COM 155 (MUM). 4. WE HAVE HEARD SMT.PARWINDER KAUR, LD.SR.D.R. ON BEHALF OF THE REVENUE AND SHRI ASEEM CHAWLA, THE LD.COUNSEL FOR THE ASSESSEE. 5. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON PERUSAL OF MATERIAL PLACED ON RECORD AS WELL AS ORDERS OF LOWER AUTHORITIES, CASE LAWS CITED, WE HOLD AS FOLLOWS. 6. THE FIRST APPELLATE AUTHORITY HAS GIVEN THE FOLLOWING FACTUAL FINDINGS AT PARA 5.2 OF HIS ORDER. ( 1 ) THE INCOME OF THE ASSESSEE WAS ASSESSE D UNDER MAT PROVISIONS AS THE RETURNED INCOME WAS LESS THAN BOOK PROFITS ASSESSABLE U/S 115 JB OF THE ACT. ( 2 ) EVEN AFTER REALLOCATION OF EXPENSES, THE INCOME OF THE ASSESSEE WAS ASSESSED AT NIL. ( 3 ) THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80 IC WAS RS.1,00,17 ,292/ - AND WHEREAS AFTER REALLOCATION THE AO ARRIVED AT THE DEDUCTION U/S 80 IC WAS RS.1,03,0 9 ,6 1 7/ - . THERE IS NO CHANGE IN THE ASSESSED INCOME OR RETURNED INCOME AND THE ENTIRE PROFIT BY AND LARGE REMAIN THE SAME. ( 4 ) THE REALLOCATION OF THE EXPENSES DID NOT ALT ER THE POSITION OF THE ASSESSEE. ITA NO.4532/DEL/2013 AY: 2009 - 10 M/S FRANCO LEOME SHOES PVT.LTD., NEW DELHI 3 ( 5 ) THE LOSS SUFFERED FROM NOIDA AND DELHI UNIT WAS SET OFF AGAINST THE PROFIT RECEIVED FROM BADDI UNIT AND THEREAFTER DEDUCTION U/S 80 IC IS CLAIMED AND HENCE THERE IS NO BENEFIT THAT THE ASSESSEE WOULD DERIVE BY INFLATING TH E EXPENSES OF OTHER UNITS AND REDUCE THE EXPENSES OF BA DD I UNIT. ( 6 ) THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF INCOME AND NO MOTIVE CAN BE ATTRIBUTED TO THE ASSESSEE. THESE FACTUAL FINDINGS COULD NOT BE CONTROVERTED BY THE LD.D.R. 6.1. UNDER THE CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT THE FIRST APPELLATE AUTHORITY HAS CORRECTLY APPLIED THE JUDGEMENT OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS P.LTD. 322 ITR 158 (SC) AND THE JUDGEMENT OF BOMBAY HIGH COURT IN BSE L INFRASTRUCTURE REALITY LTD. VS. ACIT 22 TAXMAN.COM 155 (MUM). 6.2. THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON GINNING FACTORY CONSIDERED THE ENTIRE CASE LAW ON THE SUBJECT OF LEVY OF PENALTY U/S 271(1)(C ) OF THE ACT A ND SUMMARIZED THE LAW AS FOLLOWS. THE HIGH COURT HAD TO CONSIDER WHETHER PENALTY U/S 271(1)(C ) CAN BE LEVIED IN A CASE WHERE THE ASSESSEE AGREES TO AN ADDITION MADE BY THE AO SO AS TO BUY PEACE OF MIND. HELD BY THE HIGH COURT: MERELY BECAUSE THE ASSESS EE AGREED FOR ADDITION DOES NOT LEAD TO THE INFERENCE THAT THE SAID ADDITION IS ON ACCOUNT OF CONCEALMENT IF THE ASSESSEE HAS OFFERED AN EXPLANATION WHICH IS NOT FOUND TO BE FALSE. THE MERE FACT THAT THE ASSESSEE A GREED TO PAY TAX AND DID NOT CHALLENGE THE ASSESSMENT ORDER DOES NOT MEAN T HAT HIS CONDUCT IS MALA FIDE. THE FOLLOWING PRINCIPLES APPLY: (A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILITY. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS O R LIABILITIES. (C) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1) (C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. (E) THE EXISTENC E OF SUCH CONDITIONS SHOULD BE DISCERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 27 1(1) (C), AT LEAST THE FACTS SET OUT IN EXPLANATION L 1(A) AND (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. ITA NO.4532/DEL/2013 AY: 2009 - 10 M/S FRANCO LEOME SHOES PVT.LTD., NEW DELHI 4 (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271(1)( C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1 ( B ). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMISSIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND I NTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON A CCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. (L ) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT 'BON A FIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUG H NOT SUBSTANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. ( O ) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECT ION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING TH E ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT OF T HE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS INSOFAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SA ID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ITA NO.4532/DEL/2013 AY: 2009 - 10 M/S FRANCO LEOME SHOES PVT.LTD., NEW DELHI 5 A SSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PRO CEEDINGS. 6.3 . APPLYING THE PROPOSITIONS LAID DOWN THEREIN TO THE FACTS OF THE CASE , WE UPHOLD THE FINDING OF THE FIRST APPELLATE AUTHORITY AND DISMISS THE APPEAL FILED BY THE REVENUE. 7 . IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH JANUARY, 2015. SD/ - SD/ - ( GEORGE GEORGE K ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 07 TH JANUARY, 2015. *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR