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ITA 4542/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4798 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 10-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV PUNDIR SENIOR
• Keywords: Principle of natural justice; Capital receipt; TDS; Set aside; FORM 26AS
• Section: 271(1)(c); 143(3); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.4542 /DEL./2017 (ASSESSMENT YEAR : 2012-13) MY GUEST HOUSE ACCOMMODATIONS PVT. LTD., VS. DCIT, CIRCLE 17(1), A 65A, NIZAMUDDIN EAST, NEW DELHI. NEW DELHI 110 013. (PAN : AAGCM5756L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.P. MALL, ADVOCATE SHRI SHYAM SUNDER, ADVOCATE MS. SUMANGLA SAXENA, ADVOCATE REVENUE BY : SHRI GAURAV PUNDIR, SENIOR DR DATE OF HEARING : 22.09.2021 DATE OF ORDER : 30.09.2021 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, MY GUEST HOUSE ACCOMMODATIONS PVT. LIMI TED (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 01.03.2017 PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS )-38, NEW DELHI QUA THE ASSESSMENT YEAR 2012-13 ON THE GROUND S INTER ALIA THAT:- ITA NO.4542/DEL./2017 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) H AS FAILED TO OBSERVE THE PRINCIPAL OF NATURAL JUSTICE AND THE IM PUGNED ORDER OF PENALTY IS BAD IN LAW ON THE GROUNDS THAT PENALT Y BASED ON AN ASSESSMENT ORDER WHERE AO NEVER OFFERED ANY OPPORTU NITY OF BEING HEARD ON THE SUBJECT MATTER OF ADDITION AND C ONCLUSIONS DRAWN WERE ARBITRARY BASED ON CONJECTURES AND ASSUM PTIONS AND CALCULATED ON AD HOC BASIS. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE PE NALTY HAS BEEN LEVIED WITHOUT APPRECIATING THE FACTS AND DOCU MENTS PLEADED ON RECORD DURING ASSESSMENT AS WERE CALLED FOR FROM TIME TO TIME AND WITHOUT MAKING OUT OR ALLEGING ANY CASE OF CONC EALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME AS HAS BEEN HELD BY THE APEX COURT IN THE CASE OF RELIANCE PETROCHEMICAL LTD. 3. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, LD. CIT (A) HAS ERRED AND WAS NOT JUSTIFIED IN UPHOLDIN G THE PENALTY U/S 271(1)(C) ON AN ADDITION MERELY BASED ON HYPOTH ETICAL PRESUMPTION & CONJECTURES WITHOUT ANY COGENT REASON , EVIDENCE OR RECORDS BRINGING ON RECORD JUSTIFYING A CASE OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 4. THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT WITH OUT PREJUDICE TO EACH OTHER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ON THE BASIS OF ASSESSMEN T FRAMED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (FOR SHO RT THE ACT) WHEREBY ASSESSING OFFICER MADE DISALLOWANCE OF EXPE NDITURE OF RS.1,03,03,818/- BEING 50% OF EXPENDITURE CLAIMED O F RS.2,06,07,635/- CONSIDERING THE SAME BEING CAPITAL IN NATURE HAVING ENDURING BENEFITS; MADE ADDITION OF RS.11,77 ,467/- BEING THE ALLEGED DIFFERENCE BETWEEN INCOME SHOWN IN 26 AS AND INCOME SHOWN BY THE ASSESSEE IN PROFIT AND LOSS ACCOUNT ON HIS FAILURE TO FILE RECONCILIATION, AO INITIATE D PENALTY ITA NO.4542/DEL./2017 3 PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. ON FAILURE OF THE ASSESSEE TO FILE ANY EXPLANATION TO THE SHOW-CAUSE NOTICE ISSUED U/S 271(1)(C) READ WITH SECTION 274 OF THE ACT, AO PROC EEDED TO LEVY THE PENALTY FOR FURNISHING INACCURATE PARTICULARS O F INCOME TO THE TUNE OF RS.39,38,820/- @ 100% OF THE TAX SOUGHT TO BE EVADED. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING THE APPEAL WHO HAS GIVEN PART RELIEF BY DELE TING THE PENALTY LEVIED ON THE BASIS OF ADDITION OF RS.6,58,710/- BY PARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT (A), THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL B Y WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNED ORDER CONTENDED INTER ALIA THAT ASSESSEE HAS NOT FURNISHE D ANY INACCURATE PARTICULARS OF INCOME IN CLAIMING DEDUCTIONS AND AL L TRUE AND CORRECT FACTS WERE BROUGHT ON RECORD; THAT MERELY O N THE BASIS OF DISALLOWANCE/ADDITION MADE DURING THE ASSESSMENT, P ROVISIONS CONTAINED U/S 271(1)(C) OF THE ACT ARE NOT ATTRACTE D AND THAT WHETHER THE EXPENSES ARE CAPITAL OR REVENUE IN NATU RE IS A DEBATABLE ITA NO.4542/DEL./2017 4 ISSUE AND NO PENALTY CAN BE LEVIED ON THE SAME AND RELIED UPON THE DECISIONS RENDERED BY HONBLE APEX COURT IN CASES OF CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. 322 ITR 158 & EMPI RE JUTE CO. LTD. VS. CIT (1980) 124 ITR 1 AND DECISIONS RENDERED BY HONBLE HIGH COURTS IN CASES OF CIT VS. KRISHNA MARUTI LTD. 330 ITR 547 (DEL.), CIT VS. GURDASPUR COOPERATIVE S UGAR MILLS LTD. 354 ITR 27 (P&H) & CIT VS. AMTEK AUTO LT D. 352 ITR 354 (P&H). 6. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVEN UE CONTENDED THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS THAT HE HAS NOT FURNISHED ANY INACCURATE PARTICULARS AS HE HAS NOT APPEARED BEFORE THE AO DESPITE NUMEROUS OPPORTUNITIES AND RE LIED UPON THE ORDER PASSED BY THE AO AND LD. CIT (A). 7. UNDISPUTEDLY, PENALTY IN THIS CASE HAS BEEN INIT IATED ON THE BASIS OF AD HOC DISALLOWANCE/ADDITION OF RS.1,03,03 ,818/- BEING 50% OF THE EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT UNDER DIFFERENT HEADS AND FOR MAKING ADDITION OF RS.11,77 ,467/- BEING THE ALLEGED DIFFERENCE BETWEEN THE INCOME SHOWN IN 26AS AND INCOME SHOWN IN THE PROFIT & LOSS ACCOUNT. IT IS ALSO NOT IN DISPUTE THAT INCOME IN THIS CASE WAS ASSESSED AT LOSS AND NO TAX WAS PAYABLE BY THE COMPANY. IT IS ALSO NOT IN DISPUTE THAT DURING THE FIRST APPELLATE PROCEEDINGS, LD CIT (A) HAS GIVEN PART RELIEF BY DE LETING THE ITA NO.4542/DEL./2017 5 PENALTY QUA DISALLOWANCE/ADDITION OF RS.6,58,710/- ON ACCOUNT OF NON-DEDUCTION OF TDS. 8. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, ORDER PASSED BY THE LOWER AUTHORITIES AND ARGUMENTS ADDRESSED BY THE AUTHORIZED REPRESENTATIVES OF BOTH THE PARTIES, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS:- AS TO WHETHER THE ASSESSEE HAS CONCEALED PARTICULA RS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME D URING ASSESSMENT PROCEEDINGS? 9. SO FAR AS PENALTY LEVIED BY THE AO AND CONFIRMED BY THE LD. CIT (A) QUA AD HOC DISALLOWANCE/ADDITION OF RS.1,03 ,03,818/- BEING 50% OF THE EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT BY TREATING THE EXPENDITURE AS CAPITAL IN NATURE IS CONCERNED, IT IS A SETTLED PRINCIPLE OF LAW THAT ON THE BASIS OF MERE DISALLOWANCE OF EXPENDITURE CLAIMED AS PER BOOKS OF ACCOUNT, PENALT Y U/S 271(1)(C) OF THE ACT CANNOT BE LEVIED UNLESS ANY PARTICULARS IN THE RETURN OF INCOME HAS BEEN FOUND TO BE FALSE OR INCORRECT. 10. HONBLE SUPREME COURT IN A CASE CITED AS RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 (SC) WHILE INTERPRETING THE PROVISIONS CONTAINED U/S 271(1)(C) OF THE ACT DECID ED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. OPERATIVE PART OF WHICH IS REPRODUCED FOR READY REFERENCE AS UNDER :- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE I.T. ACT, 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT, TH ERE HAS TO BE ITA NO.4542/DEL./2017 6 CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAIL OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN T HE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE C ANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN OR DER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTL Y COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAM OUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULA RS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO AT TRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT 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 SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. 11. MAKING AD HOC DISALLOWANCE BY THE AO TO THE EXT ENT OF 50% OF THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOU NT OF SALARY & WAGES, COMMUNICATION EXPENSES, MARKETING EXPENSES, PROFESSIONAL & LEGAL EXPENSES AND TOUR & TRAVEL EXPENSES BY HOLD ING THE SAME TO BE CAPITAL IN NATURE ITSELF SHOWS THAT THE AO HI MSELF WAS NOT SATISFIED AS TO IN WHICH OF THE CASE ASSESSEE FURNI SHED INACCURATE PARTICULARS BECAUSE EVERYTHING DECIDED BY THE AO AS WELL AS LD. CIT (A) ON AD HOC BASIS ON THE BASIS OF THEIR GUESS WORK. IDENTICAL ISSUE HAS BEEN DECIDED BY THE HONBLE APEX COURT IN CASE OF EMPIRE JUTE CO. LTD. (SUPRA) BY RETURNING FOLLOWING FINDINGS :- ITA NO.4542/DEL./2017 7 IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING T HE ASSESSEE'S TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND C ONDUCT OF THE ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFIC IENTLY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNTOUCHE D, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUG H THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE. THE TEST OF ENDURING BENEFIT IS, THEREFORE, NOT A CERTAIN OR CO NCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICALLY WITHO UT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF A GIVEN C ASE. 12. EVEN OTHERWISE, WE FAIL TO COMPREHEND AS TO WHA T ENDURING BENEFIT HAS BEEN CREATED IN FAVOUR OF THE ASSESSEE BY INCURRING EXPENSES ON SALARY & WAGES, COMMUNICATION EXPENSES, MARKETING EXPENSES ETC. BECAUSE THESE ARE EXPENSES WHICH ARE NECESSARY TO CARRY OUT DAY-TO-DAY BUSINESS. 13. MOREOVER, IT IS A DEBATABLE ISSUE IF THE EXPEND ITURES ARE CAPITAL OR REVENUE IN NATURE AS HAS BEEN HELD BY HONBLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT VS. GURDASPUR COOPERATIVE SUGAR MILLS LTD. (SUPRA) BY RETURNING FOLLOWING FINDINGS :- ASSESSEE RECEIVED A SUM AS GRANT-IN-AID FROM STATE GOVERNMENT AND SAME WAS DISCLOSED AS CAPITAL RECEIPT ASSESSI NG OFFICER, HOWEVER, TREATED RECEIPT OF GRANT-IN-AID AS REVENUE RECEIPT AND THEREAFTER LEVIED PENALTY UNDER SECTION 271(1)(C) WHETHER SINCE ISSUE WHETHER AMOUNT OF GRANT-IN-AID WAS CAPITAL RE CEIPT OR A REVENUE RECEIPT WAS A DEBATABLE ISSUE, PENALTY UNDE R SECTION 271(1)(C) WAS NOT IMPOSABLE HELD, YES. 14. SO FAR AS QUESTION OF LEVYING THE PENALTY QUA A DDITION OF RS.11,77,467/- BEING THE DIFFERENCE BETWEEN INCOME SHOWN IN 26AS AND INCOME SHOWN IN THE PROFIT & LOSS ACCOUNT IS CONCERNED, LD. AR FOR THE ASSESSEE CONTENDED THAT AS PER FORM 26AS, INCOME ITA NO.4542/DEL./2017 8 CREDITED WAS RS.21,96,701/- WHEREAS INCOME SHOWN IN THE PROFIT & LOSS ACCOUNT WAS RS.10,19,234/- AND THE DIFFERENCE IS ON ACCOUNT OF THE FACT THAT VENDORS HAVE DEDUCTED TDS ON FULL VAL UE OF INVOICE WHICH INCLUDE THIRD PARTY CHARGES LIKE AIRFARE, HOT EL, ROOM CHARGES, ETC. WHEREAS THE INCOME OF THE ASSESSEE IS LIMITED TO THE COMMISSION IT RECEIVED FOR FACILITATING THE SERVICE S AND ACCORDINGLY SHOWN THE REMAINING AMOUNT HAVING BEEN PAID TO THE VENDORS. ALL THESE FACTS HAVE BEEN GIVEN IN THE TABLE AVAILABLE AT PAGES 60 TO 140 OF THE PAPER BOOK. 15. WE HAVE PERUSED THE DOCUMENTS BROUGHT ON RECORD BY THE ASSESSEE, AVAILABLE AT PAGES 60 TO 140 OF THE PAPER BOOK, WHICH GO TO SHOWS THAT HOW MUCH REVENUE WAS BOOKED BY THE AS SESSEE AND HOW MUCH WAS THE REIMBURSEMENT OF THE EXPENSES LEAD ING TO NO DIFFERENCE IN THE INCOME SHOWN IN THE 26AS AND PROF IT & LOSS ACCOUNT. LD. DR FOR THE REVENUE HAS FAILED TO POIN T OUT ANY DIFFERENCE IN THE INCOME SHOWN IN FORM 26AS AND PRO FIT & LOSS ACCOUNT AS EXPLAINED BY THE ASSESSEE. SO, ON THIS SCORE ALSO, THE REVENUE HAS FAILED TO PROVE IF INACCURATE PARTICULA RS HAVE BEEN FURNISHED BY THE ASSESSEE. 16. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT AO HAS FAILED TO MAKE OUT THE CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME BY T HE ASSESSEE SO AS ITA NO.4542/DEL./2017 9 TO LEVY THE PENALTY. CONSEQUENTLY, QUESTION FRAMED IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. RE SULTANTLY, THE PENALTY LEVIED BY THE AO AND SUSTAINED BY THE LD. C IT (A) IS DELETED AND THE APPEAL FILED BY THE ASSESSEE IS HER EBY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2021. SD/- SD/- (PRASHANT MAHARISHI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF SEPTEMBER, 2021 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-38, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.