DDIT (IT) 2(1), MUMBAI V. SHINHAN BANK, MUMBAI

ITA 4549/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83874 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 07-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: VIKAS SHAH; P J PARDIWALA NITESH JOSHI
• Keywords: Tax effect

Judgement Text

, , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH. . . , , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.4549/MUM/2013, ! ! ! ! / ASSESSMENT YEAR-2006-07 DDIT (IT), 2(1), ROOM NO. 120, SCINDIA HOUSE, 1ST FLOOR, BALLARD ESTATE, N.M.ROAD, MUMBAI-400038 VS. M/S SHINHAN BANK, 5TH FLOOR, WOCKHARDT TOWER (WEST WING), BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI-400051 # # # #. .. . . .. . . .. . /PAN:AAACC2144A ( #% / APPELLANT) ( &'#% / RESPONDENT) ( ) / REVENUE BY : SHRI NEIL PHILIP *+ *+ *+ *+ ) ) ) ) / ASSESSEE BY : SHRI P.J.PARDIWALA, NITESH JOSHI & VIKAS SHAH ( (( ( +, +, +, +, / DATE OF HEARING : 23-09-2014 -.! ( +, / DATE OF PRONOUNCEMENT : 23-09-2014 , 1961 ( (( ( 254 254 254 254( (( (1 11 1) )) ) +5+ +5+ +5+ +5+ 6 6 6 6 ORDER U/S..254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM : CHALLENGING THE ORDER DT.30.03.2013 OF THE CIT(A)-1 1,MUMBAI,ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DELETING THE PENALTY BY HOLDING THAT THE TAXABILITY OF GUARANTEE COMMISSION EITHER ON UP-FRONT BASIS OR ON SPREAD OVER A PERIOD BASIS ARE TWO POSSIBLE VIEWS W ITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS DELIBERATELY NOT OFFERED THE UPFRONT GUARANTEE COMMISSION INCOME TO TAX IN THE YEAR OF ACCRUAL AS THE GUARANTEE COMMISSION INCOME ACCRUES TO ASSES SEE WHEN THE RIGHT TO RECEIVE HAS ARISEN. FURTHER, THE GUARANTEE COMMISSION RECEIVED BY THE A SSESSEE PERTAINS TO THE TRANSACTION OF GUARANTEE PROVIDED BY THE ASSESSEE BANK AS GUARANTO R AND IS NOT RETURNABLE AT THE END OF THE GUARANTEE PERIOD AND THUS THE CLAIM OF THE ASSESSEE WAS NOT BONAFIDE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DELETING THE PENALTY BY HOLDING THAT NO FACT OF THE ASSESSEE HAS BEEN FOUND TO BE FALSE OR INACCURATE WITHOUT APPRECIATING THAT THE GUARANTEE COMMISSION RECEIVED HAS BEEN FALSELY/INACCURATELY SHOWN BY THE ASSESSEE AS A CONTINGENT LIABILITY IN THE BOOKS EVE N THOUGH THE SAME WAS IN THE NATURE OF INCOME. FURTHER, AND AS THE GUARANTEE COMMISSION HAD ALREAD Y ACCRUED TO THE ASSESSEE, THE 'ASSESSEE OUGHT TO HAVE OFFERED THE SAME AS INCOME. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY NECESSARY.' 2. IN THIS CASE,RETURN OF INCOME WAS FILED ON 30.11.20 06,DECLARING TOTAL INCOME OF RS.9,19,55, 408/-.THE AO COMPLETED THE ASSESSMENT ON 30.09.2009 ,DETERMINING THE TOTAL INCOME OF RS. 13.34 CRORES.WHILE FINALISING THE ASSESSMENT,THE AO MADE ADDITIONS TO THE INCOME OF THE ASSESSEE UNDER THE HEADS DISALLOWANCE OF INTEREST PAYMENT MADE BY THE BRANCH OFFICE TO HEAD OFFICE(RS.2.14 CRORES)AND UPFRONT GUARANTEE COMMISSION(RS.7.32LAKH S).HE ALSO INITIATED PENALTY PROCEEDINGS,AS PER THE PROVISIONS OF SECTION 271(1)(C)OF THE ACT A GAINST THE ASSESSEE FOR FURNISHING INACCURATE PARTICULARS OF INCOME LEADING TO CONCEALMENT OF INC OME.AFTER CONSIDERING THE REPLY OF THE ASSESSEE,FILED IN RESPONSE TO THE NOTICE ISSUED,HE LEVIED PENALTY AMOUNTING TO RS.25,51,762/-. 3. AGGRIEVED BY THE PENALTY ORDER OF THE AO,THE ASSESS EE FILED AN APPEAL BEFORE THE FIRST APPELLATE 2 ITA NO.4549/MUM/2013 M/S SHINHAN BANK AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER AND PENALTY ORDER,HE HELD THAT THE ADDITION ON ACCOUNT OF INTEREST PAID TO HEAD OFFICE HAD BEEN DELETED BY THE TRIBUNAL VIDE ORDER DATED 27.06.2012(ITA/457 6/4191/MUM/2010).ACCORDINGLY,THE FAA DIRECTED THE AO TO DELETE THE PENALTY, LEVIED U/S. 271(1)(C) OF THE ACT, IN RESPECT OF DISALLOWANCE OF INTEREST PAID TO HEAD OFFICE.REGARDING THE ISSUE ON ADDITION OF RS. 7.32 LAKHS, ON ACCOUNT OF GUARANTEE COMMISSION HE HELD THAT THE ASSESSEE HAD OFFERED THE INCOME FOR TAXATION SPREAD OVER THE PERIOD OF GUARANTEE, IT COULD NOT BE SAID THAT THERE WAS ANY DELIBERATE CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THA T TAXABILITY OF GUARANTEE COMMISSION EITHER ON UPFRONT BASIS OR ON THE SPREAD OVER THE PERIOD GUAR ANTEE WERE TWO POSSIBLE VIEWS, THAT THE FACTS SUBMITTED BY THE ASSESSEE WERE NOT FOUND TO FALSE O R INACCURATE.FINALLY, HE DIRECTED THE AO TO DELETE THE PENALTY LEVIED BY HIM WITH REGARD TO GUA RANTEE COMMISSION. 4. DURING THE COURSE OF HEARING BEFORE US,DEPARTMENTAL REPRES ENTATIVE(DR)SUPPORTED THE ORDER OF THE AO.AUTHORISED REPRESENTATIVE(AR) STATED THAT TH E TAX EFFECT IN THE CASE UNDER CONSIDERATION WAS LESS THAN 4 LAKHS, THAT AS PER THE LATEST CIRCU LAR ISSUED BY THE BOARD, THE TAX LIMIT FOR FILING O F APPEALS HAS BEEN ENHANCED TO RS. 4 LAKHS WHEREAS TH AT THE TAX EFFECT IN THE CASE UNDER APPEAL WAS RS.3.06 LAKHS ONLY. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT AFTER THE ORDER OF THE TRIBUNAL DATED 27.06.2012,THE ONLY AMO UNT FOR WHICH PENALTY WAS LEVIABLE WAS THE GUARANTEE COMMISSION OF RS.7.32 LAKHS.AS PER THE CA LCULATION FURNISHED BY THE ASSESSEE AND VERIFIED BY THE DR,THE TAX EFFECT [@ 41.82]IS 3.06 LAKHS.WE FIND THAT AS PER THE INSTRUCTION NO.5,DATED 10.07. 2014,ISSUED BY THE CBDT,NO APPEAL SHOULD BE FILED WHERE TAX EFFECT OF THE DISPUTED ISSUE WAS LESS THAN RS.4LAKHS. WE FIND THAT IN THE CASES OF MADHUKAR INAMDAR(185 T AXMAN 101) AND SURESHCHANDRA D KHATOD (31TAXMANN.COM74)RESPECTIVELY,HONBLE BOMBAY HIGH C OURT AND HONBLE GUJARAT HIGH COURT HAVE HELD THAT CIRCULAR OF THE CBDT WERE APPLICABLE TO THE CASES WHERE APPEALS WERE PENDING AND NOT ONLY TO THE APPEALS TO BE FILED AFTER THE CIRCU LAR WAS ISSUED.AS THE TAX EFFECT,IN THE CASE UNDER CONSIDERATION,IS RS.3.06 LAKHS I.E.LESS THAN THE MO NETARY-LIMIT PRESCRIBED BY THE BOARD,SO,WE DECIDE THE EFFECTIVE GROUNDS OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL F ILED BY THE AO STANDS DISMISSED. 7+8 *+ , 9 : ( 5 ; ( + <= . ORDER PRONOUNCED IN THE OPEN COURT ON 23RD SEPTEMBER2014 . 6 ( -.! > ? 23 + , 201 4 . ( 5 @ SD/- SD/- ( . . / I.P. BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, ? /DATE: 23.09 . 2014. 6 6 6 6 ( (( ( &+A &+A &+A &+A BA!+ BA!+ BA!+ BA!+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #% 2. RESPONDENT / &'#% 3. THE CONCERNED CIT(A)/ C D , 4. THE CONCERNED CIT / C D 5. DR E BENCH, ITAT, MUMBAI / AE5 &+ , , . . . 6. GUARD FILE/ 5 7 'A+ 'A+ 'A+ 'A+ &+ &+&+ &+ //TRUE COPY// 6 / BY ORDER, F / < DY./ASST. REGISTRAR , /ITAT, MUMBAI