Mohair Investment and Trading Company (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 4677/DEL/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97974 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-09-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 10-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA SENIOR
• Assessee Lawyers: BHAVITA KUMAR
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Earning of tax free income; Period of limitation; Question of law; Initiation of penalty proceedings; Difference of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 260A; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI A.T. VARKEY, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.4677/DEL./2009 (ASSESSMENT YEAR : 2001-02) M/S. MOHAIR INVESTMENT AND TRADING VS. DCIT, CIRC LE 5 (1), COMPANY (P) LIMITED, NEW DELHI. 15, AURANGZEB ROAD, NEW DELHI 110 011. (PAN : AAACM0345D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GAURAV JAIN, ADVOCATE AND BHAVITA KUMAR, ADVOCATE REVENUE BY : SHRI P. DAM KANUNJNA, SENIOR DR DATE OF HEARING : 02.09.2015 DATE OF PRONOUNCEMENT : 27.11.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I , DEHRADUN DATED 12.10.2009 FOR THE ASSESSMENT YEAR 2001-02. 2. THE SOLITARY GROUND INVOLVED IN THIS APPEAL IS A GAINST CONFIRMATION OF THE PENALTY OF RS.1,49,38,148/- LEVIED UNDER SECTIO N 271(1)(C) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) BY THE AO. ITA NO4677 /DEL./2009 2 3. THIS IS THE SECOND ROUND OF APPEAL BEFORE US AFT ER THE HONBLE JURISDICTIONAL HIGH COURT SET-ASIDE THE ORDER OF TH E TRIBUNAL WHICH WAS ALLOWED IN FAVOUR OF THE ASSESSEE ON THE GROUND THA T PENALTY PROCEEDINGS ARE HIT BY LIMITATION. THE HONBLE HIGH COURT HAS DIREC TED THE TRIBUNAL TO DECIDE THE ISSUE ON MERITS VIDE ORDER DATED 30.09.2 011. THE FACTS AND CIRCUMSTANCES WHICH LED TO THE PENALTY IS AS FOLLOW S :- (I) THE ASSESSEE, WHICH IS A COMPANY, OPERATES IN T HE BUSINESS OF SHARES AND SECURITIES. (II) THE ASSESSEE FILED ITS RETURN OF INCOME ON 29. 10.2001 DECLARING INCOME OF RS.3,84,75,860/- FOR THE YEAR UNDER CONSI DERATION I.E. 2001-02 AND THE SAME WAS ASSESSED UNDER SECTION 143 (3) OF THE ACT. (III) DURING THE RELEVANT ASSESSMENT YEAR, THE ASSE SSEE HAD RECEIVED DIVIDEND INCOME OF RS.3,11,85,522/- FROM VARIOUS OT HER COMPANIES. (IV) WHILE DEALING WITH THE TAX ASSESSMENT OF THE A SSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLA IMED EXEMPTION OF AN EXPENDITURE OF RS.4,15,86,591/- BEI NG INTEREST ON LOANS RAISED FOR ACQUIRING SHARES OF VARIOUS COM PANIES. (V) THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DAT ED 28.02.2003 CAME TO THE CONCLUSION THAT AS PER SECTION 14A AND SECTION 115-O(5), NO DEDUCTION WAS ALLOWABLE WITH RESPECT T O THE ITA NO4677 /DEL./2009 3 EXPENDITURE INCURRED IN RELATION TO DIVIDEND INCOME WHICH WAS EXEMPTED FROM TAX. (VI) ON THE BASIS OF THE RELEVANT CALCULATIONS, THE ASSESSING OFFICER MADE A DISALLOWANCE OF RS.3,07,77,285/- AND AS A CO NSEQUENCE, PENALTY PROCEEDINGS WERE INITIATED AGAINST THE ASSE SSEE UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE WAS DULY INFORMED ABOUT THE INITIATION OF PENALTY PROCEEDINGS. (VII) AGGRIEVED BY THE ASSESSMENT ORDER DATED 28.02 .2003 THE ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE STAND OF THE ASSESSING OFF ICER VIDE ORDER DATED 23.12.2005. (VIII) THEREAFTER, THE ASSESSEE FILED AN APPEAL BEF ORE THE TRIBUNAL AND THE TRIBUNAL ALSO DISMISSED THE QUANTUM APPEAL OF T HE ASSESSEE VIDE ORDER DATED 11.08.2008. (IX) VIDE ORDER DATED 26.02.2009, THE ASSESSING OFF ICER LEVIED PENALTY OF RS.1,49,38,148/- UNDER SECTION 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD FURNISHED INCOR RECT PARTICULARS OF HIS INCOME. THE PENALTY ORDER WAS CO NFIRMED BY THE CIT (A) VIDE ORDER DATED 12.10.2009. CONSEQUENT LY, THE ASSESSEE APPROACHED THE TRIBUNAL AND THE TRIBUNAL A LLOWED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 30.04.2010. THE TRIBUNAL QUASHED THE PENALTY ORDER ON THE GROUND TH AT IT WAS ITA NO4677 /DEL./2009 4 IMPOSED BEYOND THE PERIOD OF LIMITATION AS PRESCRIB ED UNDER SECTION 275(1)(A) OF THE ACT. (X) AGAINST THE AFORESAID ORDER DATED 30.04.2010 OF THE TRIBUNAL, THE REVENUE WENT IN APPEAL BEFORE THE HONBLE JURIS DICTIONAL HIGH COURT AND THE HONBLE HIGH COURT ALLOWED THE A PPEAL OF THE REVENUE AND DIRECTED THE TRIBUNAL TO DECIDE THE APPEAL ON MERITS BY OBSERVING AS UNDER :- THE SUBSTANTIAL QUESTION OF LAW AS FRAMED IS THEREFORE DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. IN THE CIRCUMSTANCES THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS REMITTED BACK TO THE ITAT FOR A DECISION ON THE MERITS OF THE APPEAL IN ACCORDANCE WITH LAW. (XI) NOW, THE APPEAL IS BEFORE US TO BE DECIDED ON MERITS. 4. LD. AR SUBMITTED THAT THE ASSESSING OFFICER LEVI ED PENALTY UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF THE AFOR ESAID ADDITION WITHOUT JUDICIALLY APPRECIATING THE FACTS OF THE CASE AND T HE POSITION OF LAW AND CONTENTED THAT IF THE ASSESSING OFFICER OR THE COMM ISSIONER (APPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT ANY PERSON, HAS CONCEALED THE PARTICULARS OF H IS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, THEN ONLY AO MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. ACCORDING TO T HE LD. AR, THEN ONLY IN ITA NO4677 /DEL./2009 5 THE CASES REFERRED TO IN CLAUSE (C), IN ADDITION TO ANY TAX PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL N OT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR THE FURNISHING OF INAC CURATE PARTICULARS OF SUCH INCOME. THE LD. AR BROUGHT TO OUR ATTENTION THE EXPLANATION I. - WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT - SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AN D FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' THE LD. AR FURTHER CONTENDED THAT ON PERUSAL OF THE AFORESAID, SECTION 271 (1) OF THE ACT PROVIDES THAT THE ASSESSING OFFICER MAY , IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, DI RECT THE IMPOSITION OF PENALTY UNDER THAT SECTION. ACCORDING TO HIM, THE L AWMAKERS HAVE DELIBERATELY USED THE WORD 'MAY' IN SECTION 271 (I) OF THE ACT, WHICH SHOWS THAT DISCRETION IN THIS REGARD HAS BEEN CONFERRED O N THE ASSESSING OFFICER. MERELY BECAUSE CERTAIN ADDITIONS ARE MADE IN THE AS SESSMENT, IT DOES NOT ITA NO4677 /DEL./2009 6 NECESSARILY FOLLOW THAT PENALTY IS TO BE LEVIED. THE LD. AR CONTENDED THAT WHILE DECIDING THE PENALTY PROCEEDINGS, THE AO HAS TO DECIDE WHETHER THE APPELLANT HAD, ON THE FACTS OF THE CASE AND IN VIEW OF THE POSITION IN LAW, BY MAKING A CLAIM OR NOT DISCLOSING AN AMOUNT, SOUGHT TO CONCEAL/FILE INACCURATE PARTICULARS OF INCOME. LD AR WANTS US TO APPRECIATED THAT THERE MAY BE ITEMS IN RESPECT WHEREOF THERE MAY BE BONA F IDE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFI CER OR DIVERGENCE OF JUDICIAL OPINION, IN WHICH CASE THERE CANNOT BE ANY CHARGE OF CONCEALMENT OR FILING OF INACCURATE PARTICULARS OF INCOME. FURTHER , THERE MAY BE ITEMS IN RESPECT WHEREOF PARTICULARS OF INCOME MAY BE CONSID ERED TO HAVE BEEN CONCEALED AND SOME OTHER ITEMS IN RESPECT WHEREOF I NACCURATE PARTICULARS OF INCOME MAY HAVE BEEN FILED; AND THE SAME IS REQUIRE D TO BE SO STATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, AS THE T WO CONCEPTS 'CONCEALMENT OF INCOME' AND 'FILING OF INACCURATE PARTICULARS OF INCOME' ARE NOT OVERLAPPING OR INTERCHANGEABLE AND HAVE DISTINCT CO NNOTATION AND MEANING. ACCORDING TO LD. AR, THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF ITS INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF ITS INCOME WHICH MAY BE SUBJECTED TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A PERUSAL OF THE RETURN OF INCOME AND THE DOCUMENTS FILED BY THE APP ELLANT COMPANY AND THE ORDER PASSED U/S. 143(3) ON 28.02.2003 REVEAL THAT THE ABOVE DISALLOWANCES ARE IN THE NATURE OF DIFFERENCE OF OPINION AS TO TH E TAXABILITY OF INCOME / ALLOW ABILITY OF EXPENDITURE AND NO FACTS WERE CONC EALED. THE ADDITIONS OF ITA NO4677 /DEL./2009 7 RS.3,77,70,285 ARE ON ACCOUNT OF DEBATABLE CLAIMS. THESE DISALLOWANCES, IT IS SUBMITTED, SHOULD NOT LEAD TO THE CONCLUSION THA T THE ASSESSEE HAS, IN ANY WAY, CONCEALED THE PARTICULARS OF ITS INCOME OR FUR NISHED INACCURATE PARTICULARS OF SUCH INCOME. THE LD. AR SUBMITTED TH AT THERE WAS NO WARRANT TO LEVY / IMPOSE PENALTY UNDER SECTION 271(1)(C) OF THE ACT PRIMARILY ON THE GROUND THAT THE CLAIM OF THE APPELLANT WAS A LEGAL AND BONA FIDE CLAIM BACKED BY ADEQUATE/ NECESSARY DISCLOSURE IN THE RET URN OF INCOME/ ACCOMPANYING DOCUMENTS. THE LD. AR SUBMITTED A WRI TTEN SYNOPSIS, RELEVANT SUBMISSIONS OF WHICH ARE AS FOLLOWS :- ON PERUSAL OF EXPLANATION I TO SECTION 271(1)(C) OF THE ACT IT WILL BE KINDLY NOTICED THAT THE SAID EXPLANATION HAS TWO LIMBS (A) AND (B) AS UNDER: (A) FAILS TO OFFER ANY EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER TO BE FALSE; OR (B) OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED. CLAUSE (A) CANNOT BE APPLIED IN THE PRESENT CASE SI NCE THE APPELLANT HAS OFFERED EXPLANATION AND THE SAME CANN OT BE REGARDED AS FALSE. FURTHER, ON DISSECTING THE PROVISIONS OF CLAUSE (8) , IT WILL BE KINDLY NOTED THAT THE FOLLOWING THREE CONDITIONS MUST CUMULATIVELY EXIST IN ORDER TO LEVY PENALTY UNDER T HAT CLAUSE: APPELLANT OFFERS AN EXPLANATION WHICH HE IS NOT A BLE TO SUBSTANTIATE; AND ITA NO4677 /DEL./2009 8 APPELLANT FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE; AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL T O COMPUTATION OF HIS TOTAL INCOME HAVE NOT BEEN DISCL OSED IN THE CASE OF CIT V. RAHULJEE & CO.: 250 ITR 225 T HE DELHI HIGH COURT UPHELD THE DELETION OF PENALTY BY THE TRIBUNAL HOLDING THAT EXPLANATION 1(B) TO S. 271(1)(C) PRESC RIBED THAT PENALTY COULD BE IMPOSED ONLY IF (A) APPELLANT HAD NOT BEEN ABLE TO SUBSTANTIATE THE EXPLANATION, (B) SUCH EXPLANATI ON WAS NOT BONA FIDE, AND (C) ALL THE FACTS RELATING TO THE SA ME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAD NOT BEEN DI SCLOSED BY HIM. THE COURT HELD THAT SINCE THE AFORESAID PARAME TERS WERE NOT APPLICABLE IN THE CASE OF THE APPELLANT, THE PENALT Y LEVIED HAD BEEN RIGHTLY DELETED BY THE CIT(A). IT IS RESPECTFULLY SUBMITTED THAT THE AFORESAID PRE -REQUISITE CONDITIONS FOR LEVYING PENALTY UNDER SECTION 271(1) (C) OF THE ACT ARE NOT SATISFIED IN THE PRESENT CASE. THE CLAIM OF THE APPELLANT WAS A LEGAL AND BONA FIDE CLAIM. THEREFORE, IN OUR RESPECTFUL SUBMISSION, NEITHER OF THE TWO SITUATIONS NAMELY 'F URNISHING OF INACCURATE PARTICULARS OF INCOME' OR 'CONCEALMENT O F INCOME' EXISTED SO AS TO WARRANT THE IMPOSITION OF PENALTY UNDER SECTION 271(1 )(C) OF THE ACT. THE ALLEGATION OF THE ASSESSING OFFICER THAT THE AP PELLANT FURNISHED INACCURATE PARTICULARS OF INCOME IS, IN O UR RESPECTFUL SUBMISSION, NOT CORRECT. THE ALLEGATION OF THE ASSE SSING OFFICER IS MERELY BASED ON THE GROUND THAT ACCORDING TO THE AS SESSING OFFICER THE APPELLANT CLAIMED DEDUCTION OF VARIOUS EXPENDITURE, WHICH IT WAS NOT ENTITLED TO. THE SAID BASIS OF THE ASSESSING OFFICER, AS WILL BE KINDLY APPRECIATED FROM THE ELA BORATE SUBMISSIONS OF THE APPELLANT ON MERITS (BELOW), IS MISPLACED. REFERENCE IN THIS REGARD MAY ALSO BE MADE TO THE FOLLOWING JUDICIAL PRECEDENTS WHEREIN IT HAS BEEN HELD THAT W HERE DISALLOWANCE / ADDITION IS MADE IN RESPECT OF A BON A FIDE CLAIM, NO PENALTY COULD BE IMPOSED UNDER SECTION 271 (1)( C) OF THE ACT: IN THE CASE OF BUNNAH SHELL OIL STORAGE AND DISTRIB UTING CO. OF INDIA LTD. V. ITO: 112 ITR 592 (CAL.) THE AP PELLANT AFTER FILING FULL AND DETAILED PARTICULARS WITH ALL MATER IAL RELEVANT TO ITA NO4677 /DEL./2009 9 ASSESSMENT BEFORE THE ITO RAISED THE LEGAL CONTENTI ON BEFORE THE [TO THAT THE APPELLANT WAS ENTITLED TO THE BENEFIT OF DEVALUED LOSS, INCREASED DEPRECIATION AND DEVELOPMENT REBATE . THE ABOVE CLAIM WAS NOT ACCEPTED BY THE [TO AND PENALTY PROCE EDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED. THE COURT NOTICED IN THE AFORESAID CASE THAT THE APPELLANT HA D MADE THE CLAIM AFTER PURSUING THE EXPERT LEGAL ADVICE AND TH E SAME WAS CLEARLY BASED ON COGENT, LEGAL GROUND AND THERE WAS NO AUTHORITATIVE JUDICIAL PRONOUNCEMENT COVERING THE S AID QUESTION RAISED BY THE APPELLANT. IT WAS OBSERVED BY THE COU RT THAT THE CLAIM OF THE APPELLANT FOR NECESSARY DEDUCTION BASE D ON LEGAL CONTENTIONS PUT FORWARD BY IT COULD NEVER AMOUNT TO CONCEALMENT OF ANY INCOME OF THE COMPANY AND IT COULD NEVER BE SAID THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS OF I TS INCOME BY SEEKING TO RAISE THE LEGAL PLEAS. IT WAS HELD IN THE ABOVE CASE THAT THE CONTENTION R AISED BY THE APPELLANT DID NOT IN ANY WAY INDICATE THAT THER E HAD BEEN ANY CONCEALMENT OF PARTICULARS OF INCOME OR FILING OF I NACCURATE PARTICULARS OF INCOME BY THE APPELLANT AND THAT WHE THER THE SAID CONTENTIONS ARE ULTIMATELY UPHELD OR TURNED DOWN, I T COULD NOT BE SAID THAT THEY WERE FRIVOLOUS, DISHONEST OR MALAFID E. THE REJECTION OF THE CONTENTION RAISED BY THE APPELLANT, THE COUR T HELD COULD NOT LEAD TO THE CONCLUSION THAT THERE HAD BEEN ANY CONC EALMENT OF THE PARTICULARS OF INCOME OR FILING OF ANY INACCURATE P ARTICULARS OF INCOME BY THE APPELLANT SO AS TO RESULT IN LEVY OF PENALTY U/S 27I(I)(C) OF THE ACT. LEGAL CONTENTIONS BONA FIDELY RAISED, WHETHER THEY ARE ULTIMATELY ACCEPTED OR REJECTED BY THE APPROPRIATE AUTHORITY WILL NOT BE GENERALLY AN ACT OF FRAUD OR GROSS OR WILLFUL NEGLIGENCE, THE COURT FURTHER HELD . THE AFORESAID DECISION OF THE SINGLE JUDGE OF THE C ALCUTTA HIGH COURT WAS AFFIRMED BY THE DIVISION BENCH OF TH E SAME COURT IN [TO V. BUNNAH SHELL OIL STORAGE AND DISTRI BUTION CO. OF INDIA LTD. 163 ITR496. MERE DISALLOWANCE OF EXPENDITURE NOT LIABLE TO PENALTY THE ASSESSEE MOST RESPECTFULLY SUBMITS THAT THE MER E DISALLOWANCE OF AN EXPENDITURE CLAIMED IN THE TAX R ETURN DOES NOT AMOUNT TO CONCEALMENT OF INCOME. AN ANALYSIS OF THE AFORESAID PROVISIONS OF SECTION 271 (1)(C) READ WITH EXPLANAT ION 1 BRING ITA NO4677 /DEL./2009 10 OUT THE LEGAL POSITION THAT PENALTY FOR CONCEALMENT CAN BE LEVIED IF THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND TO BE FALSE BY THE INCOM E TAX AUTHORITIES. IN OTHER WORDS, PENALTY PROVISIONS UND ER SECTION 271(1)(C) OF THE ACT ARE TRIGGERED IF THERE ARE DEL IBERATE ATTEMPTS ON THE PART OF THE ASSESSEE TO WITHHOLD TRUE FACTS AND SUPPRESS TRUE FACTS WITH A MALA FIDE INTENTION TO EVADE TAXE S. AS A COROLLARY, PENALTY UNDER SECTION 27I(1)(C) CANNOT B E LEVIED IF: THE ASSESSEE ACTED ON A BONA FIDE BELIEF AND FURN ISHED THE FULL FACTS RELEVANT TO THE CASE OR THE ADDITIONS HAVE BEEN MADE ON A GROUND ON WHICH THERE IS DIFFERENCE OF OPINION. IN OTHER WORDS, BEFORE PENALTY CAN BE LEVIED UNDER THE PROVISIONS OF SECTION 271 (1)(C) OF THE ACT, IT IS TO BE PROVED BEYOND DOUBT THAT ADDITIONS MADE BY THE ASSESSING O FFICER WERE PART OF THE CONSCIOUS ATTEMPT ON THE PART OF THE AS SESSEE TO CONCEAL HIS INCOME. IN THIS CONTEXT, WE WOULD LIKE TO DRAW YOUR KIND AT TENTION TO THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN COMMISSIONER OF INCOME TAX VS AJAIB SINGH & CO. (17 0 CTR 489). IN THIS CASE, THE HON'BLE HIGH COURT HAS HELD THAT MERE DISALLOWANCE OF AN EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INCORRECT PARTICULARS OF ITS INCOME. CONCEALMENT INVOKES PENAL ACTION AND HENCE IT HAS TO BE PROVED AS A CONSCIOUS ACT ON THE PART OF THE ASSESSEE TO HIDE OR CONCEAL AN ELEMENT OF INCOME. THE ESSENTIAL PRE-CONDITION FOR INVOKING EX PLANATION I TO SECTION 27I(1)(C) IS THAT THE ASSESSEE FAILS TO OFF ER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND TO BE INCOR RECT BY THE TAX AUTHORITIES WHICH IS NOT THE CASE IN THE MATTER UND ER CONSIDERATION. WE WOULD ALSO LIKE TO DRAW YOUR KIND ATTENTION TO T HE DECISION OF THE MADHYA PRADESH HIGH COURT IN THE CA SE OF CIT VS S.T.I. BIPLUS TUBING (INDIA) LTD. (247 ITR 426) WHE REIN THE HON'BLE COURT AFFIRMED THE TRIBUNAL'S VIEW THAT: QUOTE .... SIMPLY BECAUSE A CLAIM NOT TENABLE IN LAW HAS BEEN MADE, ONE CANNOT BE PERMITTED TO JUMP TO THE POSITI VE CONCLUSION THAT ALL WAS DELIBERATE. ACCORDINGLY, IT HELD THAT WHERE THERE IS NO ITA NO4677 /DEL./2009 11 POSITIVE EVIDENCE OF WILFUL CONCEALMENT, NO PENALTY CAN BE LEVIED. UNQUOTE IN DELHI CLOTH AND GENERAL MILLS COMPANY LIMITED VS . CIT (157 [TR 822), THE DELHI HIGH COURT HELD AS UND ER: QUOTE .... THE MERE FACT THAT A CLAIM FOR EXPENDITURE STA NDS DISALLOWED DOES NOT BY ITSELF LEAD TO THE INFERENCE THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS TO TH AT ITEM. THE FACT THAT THE PLEA OF THE ASSESSEE THAT THE EXPENDI TURE IN QUESTION WAS OF REVENUE NATURE WAS NOT ACCEPTED, BY ITSELF D ID NOT MEAN THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICUL ARS OF ITS INCOME BY NOT ADDING THAT BACK TO ITS TOTAL INCOME. THE QUESTION FOR CONSIDERATION WAS AS TO WHETHER, ON THE FACTS A ND CIRCUMSTANCES OF THE CASE, THE ASSESSEE COULD REASO NABLY BE UNDER A BONA FIDE BELIEF THAT THE EXPENDITURE IN QUESTION WAS OF A REVENUE NATURE AND HAVING REGARD TO THE MANNER IN W HICH THE ACCOUNTS WERE MAINTAINED BY THE ASSESSEE, THE EXPEN DITURE WAS NOT ADDED BACK TO ITS TOTAL INCOME OR WAS IT SO DON E TO CONCEAL THE TRUE NATURE OF THE EXPENDITURE. UNQUOTE ON THE SAME LINES, THE HON'BLE MADHYA PRADESH HIGH COURT IN J.K. JAJOO VS. CIT (181 ITR 410) HAS OBSER VED AS UNDER: QUOTE .... MERELY BECAUSE A CLAIM FOR CERTAIN EXPENDITURE IS REJECTED, IT CANNOT BE HELD THAT THE CLAIM FOR EXPE NDITURE MADE BY THE ASSESSEE WAS FALSE OR INACCURATE TO HIS KNOWLED GE OR WAS AS A RESULT OF GROSS NEGLIGENCE. UNQUOTE THE DELHI TRIBUNAL IN ITO V R B G M MODI & ORS (P) LTD. (31 ITJ 550) HAS HELD AS UNDER: QUOTE .... THE MERE HOLDING OF AN ADDITION MADE IN THE AS SESSMENT PROCEEDINGS WOULD NOT IPSO FACTO LEAD TO THE CONCLU SION THAT THERE WAS CONCEALMENT OF INCOME AND FOR THE PURPOSE OF LE VY ON PENALTY THE ENTIRE MATERIAL IS AGAIN TO BE APPRISED THE EXPLANATION OFFERED THOUGH REJECTED MUST BE BONA FIDE AND ALL T HE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF TOTAL INCOME ARE DISCLOSED. UNQUOTE ITA NO4677 /DEL./2009 12 IN NUCHEM LIMITED VS. DC[T (47 [TO 487) THE JURISDICTIONAL DELHI TRIBUNAL HAS HELD THAT DIFFERE NCE OF OPINION WILL NOT JUSTIFY THE CONCLUSION THAT THE EXPLANATIO N GIVEN BY THE ASSESSEE WAS EITHER UNSUBSTANTIATED OR MALA FIDE. T HE TRIBUNAL WAS CATEGORICAL IN HOLDING THAT IF THE ASSESSEE HAS TAKEN A STAND THAT EXPENDITURE INCURRED IS A REVENUE EXPENDITURE AND IF IT IS HELD OTHERWISE AS A CAPITAL EXPENDITURE, IT CANNOT BE SA ID THAT THE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT BONA FIDE . THE TRIBUNAL OBSERVED AS UNDER: QUOTE .... NO PENALTY WAS LEVIABLE IF AFTER FURNISHING AL L THE NECESSARY PARTICULARS OF INCOME THE ASSESSEE CLAIME D BENEFIT OF CERTAIN PROVISIONS OF THE ACT AND RAISED CONTENTION BUT DID NOT FIND FAVOUR WITH THE AUTHORITIES. IT MIGHT BE ON DI FFERENCE OF OPINION ON PARTICULAR SET OF FACTS BUT IT DID NOT I MPLY THAT THERE HAD BEEN A CONCEALMENT OF PARTICULARS OF INCOME. IF THE ASSESSEE HAD TAKEN A STAND THAT THE EXPENDITURE INCURRED WAS A REVENUE EXPENDITURE AND IF IT WAS HELD OTHERWISE AS A CAPIT AL EXPENDITURE, IT COULD NOT BE SAID THAT THE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT BONA FIDE. UNQUOTE IN THIS CONTEXT, THE ASSESSEE WOULD ALSO LIKE TO DR AW YOUR ATTENTION TO THE DECISION OF THE HON'BLE GUWAHATI H IGH COURT IN CIT VS GURUDAYALRAM MUKHLAL (190 ITR 39) WHEREIN TH E HON'BLE HIGH COURT HAS OBSERVED AS UNDER (EMPHASIS SUPPLIED ): QUOTE EVEN IN CASE OF STIPULATED DIFFERENCE BETWEEN THE A SSESSED INCOME AND THE RETURNED INCOME, THE PENALTY UNDER S ECTION 271 (I) (C) IS NOT AUTOMATIC . THE FACT THAT CERTAIN INCOME HAS BEEN ASSESSED BY T HE INCOME-TAX OFFICER IN THE ASSESSMENT ORDER BY ITSEL F IS NOT CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS TH E INCOME OF THE ASSESSEE. IN FACT, IN VERY MANY CASES, THE ASSE SSING OFFICER CAN INCLUDE CERTAIN AMOUNTS IN THE INCOME OF THE AS SESSEE IF THE EXPLANATION GIVEN BY THE ASSESSEE IN REGARD TO THE SOURCE THEREOF IS NOT FOUND TO BE SATISFACTORY. THAT MAY BE ALL RI GHT SO FAR AS THE ASSESSMENT IS CONCERNED BUT WHEN THE QUESTION OF PE NALTY COMES, DIFFERENT CONSIDERATIONS WILL APPLY AND THE INCOME- TAX OFFICER WILL BE REQUIRED TO PUT ON RECORD SOME FURTHER MATE RIAL OTHER THAN THE REJECTION OF THE EXPLANATION OF THE ASSESSEE IN REGARD TO ITS ITA NO4677 /DEL./2009 13 SOURCE TO HOLD THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE TO JUSTIFY IMPOSITION OF PENALTY. UNQUOTE RECENTLY, IN MAXOPP INVESTMENTS LIMITED VS, DCIT CI RCLE 6(1) (3672LDEI/2007) THE JURISDICTIONAL DELHI TRIBU NAL, HAS HELD THAT THE ISSUE OF DISALLOWANCE UNDER SECTION 14A OF THE ACT HAS BEEN A SUBJECT MATTER OF A SUBSTANTIATED CONTROVERS Y AND IS HIGHLY DEBATABLE ISSUE. IT IS FURTHER OBSERVED THAT ON A D EBATABLE ISSUE, IT CAN NOT BE SAID THAT THE ASSESSEE HAS CONCEALED ITS PARTICULARS OF INCOME AND THEREFORE, PENALTY UNDER SECTION 271(1)( C) OF THE ACT CAN NOT BE LEVIED. A COPY OF THE JUDGEMENT IS ENCLO SED FOR YOUR HONOUR'S READY REFERENCE (ANNEXURE - 6). IN VIEW OF THE ABOVE SUBMISSION, IT IS ABUNDANTLY C LEAR THAT MERELY BECAUSE THE CLAIM OF EXPENDITURE STANDS DISA LLOWED, IT DOES NOT BY ITSELF LEAD TO THE INFERENCE THAT THE A SSESSEE HAD FURNISHED INACCURATE PARTICULARS OR CONCEALED INCOM E IN REGARD TO THAT ITEM. WHERE THERE IS NO FINDING THAT THE ASSES SEE HAD EITHER CONCEALED THE PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF INCOME OR SUPPRESSED THE MATERIAL FA CTS RELATING TO THE COMPUTATION OF INCOME, PENALTY UNDER SECTION 27 1 (1) (C) OF THE ACT CANNOT BE IMPOSED. IN THE PRESENT CASE, NONE OF THE CONDITIONS PRECEDE NT TO THE LEVY OF PENALTY UNDER SECTION 27I(1)(C) OF THE ACT WERE SATISFIED WHICH COULD JUSTIFY THE LEVY OF PENALTY. IN THE PRE SENT CASE: THE ASSESSEE OFFERED FULL EXPLANATIONS FOR THE EX PENDITURE CLAIMED IN THE TAX RETURN DURING ASSESSMENT PROCEED INGS. THE EXPLANATIONS WERE NOT FOUND TO BE FALSE. THE STATEMENTS/EXPLANATIONS MADE BY THE ASSESSEE WITH REGARD TO THE BASIS OF THE DEDUCTIONS (IN DISPUTE) WERE BONA FIDE AND WERE FULLY DISCLOSED DURING THE ASSESSMENT PROC EEDINGS. THE ADDITIONS MADE DURING THE ASSESSMENT PROCEEDI NGS WERE ON ACCOUNT OF DIFFERENCE IN OPINION. FURTHER, WE ALSO INVITE YOUR HONOUR'S KIND ATTENTIO N TOWARDS VARIOUS JUDICIAL RULINGS WHICH HAVE LAID DOWN THE F OLLOWING RATIOS WHILE DECIDING ON WHETHER THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS LEVIABLE: LEGAL CONTENTION BONA FIDE RAISED, WHETHER IT AS UL TIMATELY ACCEPTED OR REJECTED, WILL NOT GENERALLY BE AN ACT OF FRAUD OR ITA NO4677 /DEL./2009 14 WILLFUL NEGLIGENCE ATTRACTING THE PENAL PROVISION U NDER SECTION 271(1)(C) OF THE ACT. NO QUESTION OF ANY LIABILITY WILL ARISE WHERE THE ASSESSEE IS MERELY CONTENDING FOR A PARTICULAR POSITION CONTRAR Y TO THE VIEW TAKEN BY THE ASSESSING OFFICER. THE ASSESSEE HAS A RIGHT TO MAKE ANY CLAIM WHICH MAY OR MAY NOT BE ALLOWED. MERE DISALLOWANCE OF A CLAIM CANNOT BY ITSELF FORM THE BASIS FOR INITIATING PENALTY PROCEEDINGS IN THE ABS ENCE OF ANY MATERIAL TO SHOW THAT THE CLAIM WAS MADE MALA FIDE OR DELIBERATELY UNDER FALSE PREMISES WITH THE ULTERIOR INTENT TO EVADE FISCAL LIABILITY. THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT HAS NOT RECORDED ANY SATISFACTION REGARDING CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE APPELLANT I N RESPECT OF THE ADDITIONS/ DISALLOWANCES MADE BY THE ASSESSING OFFI CER. A MERE MENTION AT THE END OF THE ASSESSMENT ORDER AS A MATTER OF ROUTINE THAT PENALTY PROCEEDINGS HAVE BEE N INITIATED SEPARATELY FOR FILING INACCURATE PARTICULARS OF INC OME CANNOT, IT IS RESPECTFULLY SUBMITTED, TANTAMOUNT TO RECORDING OF SATISFACTION REGARDING CONCEALMENT OF INCOME/SUBMITTING OF INACC URATE PARTICULARS OF INCOME OR INDICATING THAT THE ASSESS ING OFFICER HAS APPLIED HIS MIND AND FORMED AN OPINION IN RESPECT T HEREOF, PRIOR TO INITIATING PENALTY PROCEEDINGS. THE ASSESSING OFFICER HAS TO BE CATEGORICAL AND SH OULD BE APPARENT ON A BARE READING OF THE ASSESSMENT ORDER AND IS NOT SOMETHING WHICH CAN BE READ. THE SATISFACTION ASSUM ES IMPORTANCE BECAUSE IT FORMS THE VERY BASIS FOR LEVY OF PENALTY UNDER SECTION 271 (1)( C) OF THE ACT. IN ABSENCE OF SUCH A FINDING, IN VIEW OF THE DECISIONS OF THE DELHI HIGH COURT (S UPRA) INITIATION OF THE PROCEEDINGS ITSELF IS VITIATED. FURTHER, THE ASSESSING OFFICER, WITHOUT FINDING OR RECORDING THAT THE APPELLANT HAS CONCEALED PARTICULARS OF INC OME OR HAS FILED INACCURATE PARTICULARS OR INCOME, HAS LEVIED PENALT Y JUST BECAUSE SOME OF THE ADDITIONS MADE IN THE ASSESSMENT ORDER HAVE BEEN CONFIRMED BY THE CIT(A). ITA NO4677 /DEL./2009 15 IN OUR RESPECTFUL SUBMISSION, MERE CONFIRMATION OR SUSTAINMENT OF THE ADDITIONS/DISALLOWANCE BY THE CI T(A) DOES NOT ATTRACT LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER IS REQUIRED TO ESTABLISH THAT THE ASSESSEE HAS CONCEALED OR FILED INACCURATE PARTICULARS OF INCOME . THE MUMBAI BENCH OF TRIBUNAL IN THE CASE OF SHIRISH R. SHAH V. ACIT: 114 TAXMAN 33 (MUM) (MAG) HAS HELD LIKEWISE. IT WAS OBSERVED BY THE BENCH AS UNDER: 'IT IS WELL-SETTLED THAT THE PENALTY PROCEEDINGS AR E DIFFERENT FROM THE QUANTUM PROCEEDINGS AND MERELY BECAUSE AN ADDITION MADE BY THE ASSESSING OFFICER IS SUSTAINED BY THE A PPELLATE TRIBUNAL, PENALTY CANNOT BE AUTOMATICALLY LEVIED UN LESS IT IS INDEPENDENTLY PROVED THAT THE ASSESSEE CONCEALED IN COME OR FURNISHED INACCURATE PARTICULARS OF INCOME .....' IN VIEW OF THE AFORESAID, IT IS THE RESPECTFUL SUBM ISSION OF THE APPELLANT THAT THE IMPUGNED PENALTY ORDER, BEIN G WITHOUT JURISDICTION, BAD IN LAW AND VOID-AB-INITO, SHOULD BE QUASHED. WITHOUT PREJUDICE, IT IS THE RESPECTFUL SUBMISSION OF THE APPELLANT THAT ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW, PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS NOT LEVIABLE FOR THE REASONS STATED HEREUNDER: SECTION 271 (1) OF THE ACT, AS REPRODUCED ABOVE, PR OVIDES THAT THE ASSESSING OFFICER MAY, IN THE COURSE OF AN Y PROCEEDINGS UNDER THIS ACT, DIRECT THE IMPOSITION OF PENALTY UN DER THAT SECTION. IN OUR RESPECTFUL SUBMISSION THE LAWMAKERS HAVE DELIBERATELY USED THE WORD 'MAY' IN SECTION 271(1) OF THE ACT WHICH SHOWS THAT DISCRETION IN THIS REGARD HAS BEEN CONFERRED ON THE ASSESSING OFFICER. MERELY BECAUSE CERTAIN ADDIT IONS / ADJUSTMENTS ARE MADE IN THE ASSESSMENT, IT DOES NOT NECESSARILY FOLLOW THAT PENALTY IS TO BE LEVIED. BASED ON THE ABOVE, THE ASSESSEE MOST RESPECTFULLY SUBMITS THAT THE MERE DISALLOWANCE OF A CLAIM OF EXPENDITUR E DURING THE ASSESSMENT PROCEEDINGS BASED ON DIFFERENCE OF OPINI ON DOES NOT TANTAMOUNT TO CONCEALMENT OF INCOME TO JUSTIFY LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, NO PENALTY SHOULD BE LEVIED ON THE ASSESSEE IN THE PRESENT CAS E. ITA NO4677 /DEL./2009 16 CONCLUSION IT IS MOST HUMBLY SUBMITTED THAT THE ASSESSEE WAS U NDER THE BONA FIDE BELIEF THAT THE REVENUE EXPENDITURE O N INTEREST BEING IN THE NATURE OF NORMAL BUSINESS EXPENDITURE, WAS D EDUCTIBLE UNDER THE PROVISIONS OF LAW FOR DETERMINING THE TOT AL TAXABLE INCOME OF THE ASSESSEE. NOTWITHSTANDING THE FACT THAT THE QUANTUM APPEAL FI LED IN YOUR OFFICE HAS BEEN DECIDED AGAINST THE APPELLANT AND WHICH IS PENDING BEFORE HON'BLE ITA T, FOR PENALTY PURPOSES YOUR HONOUR WOULD BE ENTITLED TO CONSIDER THE MATTER AFRESH AND DECIDE IF PENALTY OUGHT TO HAVE BEEN LEVIED. IN THE LIGHT OF THE AFORESAID SUBMISSIONS, IT IS RESPECTFULLY SUBMITTED THAT ON T HE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW NO PENALTY UND ER SECTION 271(1)(C) OF THE ACT WAS LEVIABLE. THE PENALTY LEVI ED, THEREFORE, CALLS FOR BEING DELETED IN ITS ENTIRETY. 5. LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES B ELOW. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. WE FIND THAT THE APPELLANT IS A PRIVATE LIMITED COMPAN Y, WAS, INTER ALIA, ENGAGED IN THE BUSINESS OF DEALING IN SHARES/SECURITIES AND GIVING LOANS. AS PART OF THE AFORESAID ACTIVITY THE APPELLANT HELD SHARE/SEC URITIES BOTH AS TRADING ASSETS(STOCK-IN-TRADE) AND INVESTMENTS(CAPITAL A SSETS). THE BREAK-UP OF SHARES HELD AS CAPITAL ASSETS AND TRADING ASSETS HAS BEEN PERUSED AT (PAGE 4 OF PB-1). 7. IT HAS TO BE KEPT IN MIND THAT THE SHARES HELD A S TRADING ASSETS AND CAPITAL ASSETS IS THAT IN THE FORMER CASE INCOME ARISING FROM SALE AND PURCHASE OF SHARES IS TAXABLE AS BUSINESS INCOME WH EREAS IN THE LATTER CASE INCOME ARISING FROM SALE OF SHARES IS TAXABLE AS CA PITAL GAINS. ITA NO4677 /DEL./2009 17 8. WE TAKE NOTE OF THE FACT THAT DURING THE RELEVAN T ASSESSMENT YEAR, THE APPELLANT DID NOT SELL ANY SHARES HELD AS CAPITAL A SSETS AND, THEREFORE, NO INCOME WAS DISCLOSED UNDER THE HEAD CAPITAL GAINS . HOWEVER, CERTAIN SHARES HELD AS TRADING ASSETS WERE SOLD DURING THE YEAR AND INCOME/PROFIT ARISING THEREFROM WAS OFFERED TO TAX AS BUSINESS IN COME. (PAGE 4 OF PB-1) PERUSAL OF THE SAME GIVES THE DETAILS OF SHARES HEL D AS CAPITAL ASSET AND TRADING ASSET AS ALSO DETAILS OF SHARES HELD AS TRA DING ASSET AND SOLD DURING THE YEAR; AND PERUSAL OF (PAGE 31OF PB-1) DISCLOSES PROFIT ON SALE OF SHARES AGGREGATING TO RS. 1.29 CRORES AS BUSINESS INCOME A S ALSO (PAGE 2 OF PB-1) DISCLOSING INCOME UNDER THE HEAD BUSINESS. 9. FROM THE AFORESAID FACTS DISCLOSED BY THE ASSESS EE SHOWS THAT SHARES CLASSIFIED UNDER THE CATEGORY OF TRADING ASSET WE RE HELD AS STOCK-IN-TRADE WITH A VIEW TO DEAL THEREIN, INCOME WHEREFROM WAS T AXABLE AS BUSINESS INCOME. SO ACCORDING TO THE ASSESSEE, DIVIDEND INCO ME EARNED FROM SUCH SHARES, IF ANY, WAS INCIDENTAL AND DID NOT CONSTITU TE THE DOMINANT MOTIVE OF THE APPELLANT WHEN IT FILED THE RETURN OF INCOME AN D PARTICIPATED IN THE ASSESSMENT PROCEEDINGS BEFORE TO AO AND OTHER AUTHO RITIES. WE FIND THAT DURING THE RELEVANT ASSESSMENT YEAR, THE APPELLANT RECEIVED DIVIDEND INCOME OF RS. 3,11,25,522/- FROM THE SHARES OF 15 COMPANIE S WHICH WERE HELD AS TRADING ASSETS. IN OTHER WORDS, THE APPELLANT DID NOT RECEIVE ANY DIVIDEND FROM SHARES HELD AS CAPITAL ASSET AND RECEIVED DIVI DEND ONLY FROM SHARE HELD AS TRADING ASSETS WHICH FACT HAS BEEN TAKEN NOTE A T PAGE 2 OF THE ASSESSMENT ITA NO4677 /DEL./2009 18 ORDER PASSED UNDER SECTION 143(3), WHEREIN THE AFOR ESAID UNDISPUTED FACTS WERE NOTED IN THE FOLLOWING WORDS: THE ASSESSEE HAS SHOWN SHARES IN THE ABOVE-MENTIO NED 15 COMPANIES FROM WHERE DIVIDEND WAS RECEIVED AS TRAD ING ASSET.. THEREFORE, THE PORTION OF INTEREST PAID R ELATING TO 15 COMPANIES (FROM WHERE DIVIDENDS HAVE BEEN RECEIVED) IS DISALLOWED) IS DISALLOWED. 10. WE TAKE NOTE THAT THE AO TAKING TO CONSIDERATIO N THE FACT THAT THE APPELLANT HAD RECEIVED DIVIDEND ONLY FROM SHARES HE LD AS TRADING ASSETS, IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT THE ASSESSING OFFICER INVOKED PROVISIONS OF SECTION 14A AND DISAL LOWED INTEREST EXPENDITURE INCURRED ON BORROWED FUNDS UTILIZED FOR ACQUIRING SUCH SHARES UNDER THAT SECTION. 11. THEREAFTER WE FIND THAT THE AFORESAID DISALLOWA NCE WAS SUSTAINED IN THE QUANTUM APPEALS. THE ASSESSING OFFICER IMPOSED PENALTY UNDER SECTION 271(1) (C) ALLEGING FURNISHING OF INACCURATE PARTIC ULARS OF INCOME WITH RESPECT TO THE CLAIM OF INTEREST EXPENDITURE, WHICH HAS BEEN CHALLENGED IN THE PRESENT APPEAL BEFORE THE HONBLE TRIBUNAL. 12. THE LD. AR GAURAW JAIN SUBMITTED THAT IT IS WEL L SETTLED THAT PENALTY CANNOT BE IMPOSED ON DEBATABLE ISSUES AND RELIED ON THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN CIT VS. ELECTROLUX K ELVENATRO LTD. 357 ITR 665 (DEL) AND CIT VS. JASWINDER SINGH AHUJA 351ITR2 62(DEL.) ITA NO4677 /DEL./2009 19 13. ACCORDING TO HIM, THE ISSUE WHETHER THE PROVISI ONS OF SECTION 14A ARE APPLICABLE IN A CASE WHERE SHARES ARE HELD AS TRADI NG ASSETS IS CLEARLY A DEBATABLE ISSUE, MORESO AT THE TIME WHEN THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR WAS FILED FOR VARIOUS REAS ONS. FIRSTLY THE IMPUGNED ASSESSMENT YEAR, VIZ., AY 2001-02 WHICH WERE UNDISP UTEDLY THE FIRST YEAR OF APPLICATION OF SECTION 14A OF THE ACT. THE LD. AR P OINTED OUT THAT SECTION 14A WAS INSERTED IN THE STATUTE FOR THE FIRST TIME BY THE FINANCE ACT, 2001, WHICH RECEIVED THE ASSENT OF THE PRESIDENT ON 11.05 .2001 (REFER CIRCULAR NO. 14 OF 2001 REPORT IN 252 ITR(ST.) 65). THEREFO RE, ACCORDING TO LD. AR, SINCE IT WAS THE FIRST YEAR, IT WOULD BE APPRECIATE D THAT THE ISSUE REGARDING APPLICABILITY OF SECTION 14A IN VARIOUS SITUATIONS LIKE SHARES HELD FOR CONTROLLING INTEREST, SHARES HELD AS TRADING ASSETS , ETC. AND THE METHOD OF COMPUTATION OF DISALLOWANCE, ETC. LACKED CLARITY AN D SO THE ACTION OF THE ASSESSEE WAS A BONAFIDE ACTION WHICH CANNOT INVITE PENALTY. 14. HE POINTED OUT THAT DUE TO THE AFORESAID UNCERT AIN POSITION OF LAW THERE WERE SUBSTANTIAL LITIGATION ON THE AFORESAID ISSUE OF APPLICATION OF SECTION 14A AND SEVERAL CONFLICTING DECISIONS WERE EVEN RENDERED BY THE VARIOUS BENCHES OF TRIBUNAL. AND IN ORDER TO RECON CILE CONFLICTING DECISIONS FROM VARIOUS BENCHES OF THE TRIBUNAL, A SPECIAL BEN CH WAS ALSO CONSTITUTED IN THE CASE OF IRO S. DAGA CAPITAL MANAGEMENT PVT. LTD.: 117 ITAT169 (SB). OUR ATTENTION WAS BROUGHT IN THIS REGARD TO PARAGRAPH 6 OF THE ORDER ITA NO4677 /DEL./2009 20 WRITTEN BY THE MINORITY VIEW IN THE AFORESAID DECIS ION, WHICH HAS BEEN REPRODUCED HEREUNDER FOR READY REFERENCE: 6. WHEN THE APPEAL CAME UP BEFORE THE DIVISION BE NCH, IT WAS NOTICE THAT THERE WAS DIFFERENCE OF OPINION BET WEEN THE BENCHES ON THE ISSUE INVOLVED IN THE APPEAL. THE RE VENUE HAD RELIED ON THE DECISION OF THE TRIBUNAL DATED 5/09/2 006 IN THE CASE OF RIDGE INVESTMENT CO. LTD. V. JT. CIT [ IT APPEAL NOS. 4260-61 (MUM.) OF 2003] AS WELL AS THE DECISION OF DELHI BE NCH OF THE TRIBUNAL IN THE CASE OF EVER PLUS SECURITIES & FINA NCE LTD. V. DY. CIT [2006] 101ITD 151 WHEREIN IT WAS HELD THAT EVEN IF THE MAIN ACTIVITY OF THE COMPANY WAS TO MAKE INVESTMENT S IN HOLDING COMPANY FOR RETAINING CONTROL OVER THE GROU P COMPANIES, THE DISALLOWANCE UNDER SECTION 14A CAN BE MADE IRRE SPECTIVE OF THE FACT THAT DIVIDEND EARNINGS WERE ONLY INCIDENTA L IN NATURE. ON THE OTHER HAND, THE ASSESSEE HAD RELIED ON THE DECI SION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF VIDYUT INVESTM ENTS V. ITO [2006] 10 SOT 284 WHEREIN IT WAS HELD THAT WHEN SHA RES ARE HELD AS STOCK-IN-TRADE WITH THE OBJECT OF TRADING IN SHA RES, AND DIVIDEND INCOME EARNING WAS ONLY INCIDENTAL IN NATU RE NO PART OF THE EXPENSES COULD BE DISALLOWED UNDER SECTION 14A OF THE ACT. IN VIEW OF SUCH DIFFERENCE OF OPINION, THE BENCH RE COMMENDED THE CONSTITUTION OF A SPECIAL BENCH TO DECIDE THE Q UESTION MENTIONED IN PARA I ABOVE. IT IS IN THE ABOVE CIRCU MSTANCES THAT HON'BLE PRESIDENT HAS CONSTITUTED THE SPECIAL BENCH TO DECIDE THE SAID QUESTION AS WELL AS TO DISPOSE OF THE APPEAL.' (EMPHASIS SUPPLIED) IN VIEW OF THE ABOVE, ACCORDING TO THE LD. AR, THE ISSUE OF APPLICATION OF SECTION 14A WAS UNCLEAR, ESPECIALLY AT THE TIME OF FILING THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR, BEING THE FIRST Y EAR OF APPLICATION OF THE SAID SECTION AFTER INSERTION THEREOF IN THE STATUTE . 15. THE LD, AR POINTED OUT THAT THE SPECIAL BENCH IN THE CASE OF DAGA CAPITAL CONSTITUTED PRECISELY IN THE ISSUE INVOLVED IN THE PRESENT CASE AND ITA NO4677 /DEL./2009 21 TOOK US TO THE ISSUE FRAMED WHICH ACCORDING TO THE LD. AR IS PRECISELY THE ISSUE WHICH IS IN HAND AND THE ISSUE IS REPRODUCED BELOW :- 'WHETHER, IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE PROVISIONS OF SECTION 14A OF THE IN COME-TAX ACT, 1961, ARE APPLICABLE WITH RESPECT TO DIVIDEND INCOM E EARNED BY THE ASSESSEE ENGAGED IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES, ON THE SHARES HELD AS STOCK-IN-TRADE AN D WHEN EARNING OF SUCH DIVIDEND INCOME IS, THEREFORE, INCIDENTAL T O TRADING IN SHARES?' 16. IN THE AFORESAID FACTS AND QUESTION OF LAW FRAM ED BY THE SPECIAL BENCH AS POINTED OUT BY THE LD. AR, WE FIND FORCE I N THE CONTENTION THAT THIS ISSUE WAS A DEBATABLE ISSUE AND THAT THE ISSUE WHET HER THE PROVISIONS OF SECTION 14A ARE APPLICABLE WHERE SHARES WERE HELD A S STOCK-IN-TRADE WAS CLEARLY A DEBATABLE ISSUE. 17. WE FURTHER TAKE NOTE THAT IN THE AFORESAID DECI SION OF THE SPECIAL BENCH, THERE WAS A DISSENT BETWEEN THE MINORITY AND MAJORITY VIEW. THE MINORITY VIEW IN THE AFORESAID DECISION AT PARA 25 DECIDED THE AFORESAID ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTI ON OF THE AFORESAID ORDER IS REPRODUCED HEREUNDER FOR READY REFERENCE: 25. IN VIEW OF THE ABOVE LEGAL POSITION, THE NEXT QUESTION WHICH ARISES FOR OUR CONSIDERATION IS WHETHER ANY D ISALLOWANCE UNDER SECTION 14A CAN BE MADE IN THE CASE OF A DEAL ER IN SHARES. GENERALLY, IN OUR OPINION, A DEALER IN SHARES DOES NOT ACQUIRE SHARES AND SECURITIES TO EARN DIVIDEND INCOME. THE DOMINANT AND IMMEDIATE OBJECT BEHIND ACQUISITION OF SHARES I S TO EARN PROFIT ON THE SALE OF SHARES AT THE EARLIEST POINT OF TIME WHICH IS CHARGEABLE TO TAX UNDER THE ACT. SOMETIMES, SUCH PE RSON BY CHANCE MAY ALSO GET THE DIVIDEND ON THE SHARES HELD BY HIM AS 'STOCK-IN-TRADE'. SINCE SUCH DIVIDEND INCOME IS NEV ER INTENDED AT THE TIME OF PURCHASE OF SHARES, IN OUR OPINION, THE CONNECTION ITA NO4677 /DEL./2009 22 BETWEEN THE EXPENDITURE INCURRED AND THE DIVIDEND I NCOME CAN BE SAID TO BE INCIDENTAL ONLY SINCE THE DOMINANT AN D IMMEDIATE CONNECTION EXISTS ONLY BETWEEN THE EXPENDITURE INCU RRED AND PROFIT ON SALE OF SHARES. SINCE THE EXISTENCE OF DO MINANT AND IMMEDIATE CONNECTION IS THE CONDITION PRECEDENT FOR INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT, IN OUR OP INION, THE MERE RECEIPT OF DIVIDEND INCOME INCIDENTALLY IN THE CASE OF DEALER IN SHARES WOULD NOT BE SUFFICIENT FOR INVOKI NG THE PROVISIONS OF SECTION 14 A OF THE ACT. WE TAKE NOTE THAT THE MAJORITY DECISION EXPRESSED I N PARAS 23.8 AND 23.9 OF SPECIAL BENCH ORDER DECIDED THE AFORESAID ISSUE AGA INST THE ASSESSEE. THE RELEVANT PORTION OF THE AFORESAID ORDER IS REPRODUC ED HEREUNDER FOR READY REFERENCE :- ' .... A GREAT DEAL OF EMPHASIS HAS BEEN LAID ON TH E ESTABLISHING OF DOMINANT AND IMMEDIATE CONNECTION BETWEEN THE EX PENDITURE INCURRED AND THE EXEMPT INCOME. ACCORDING TO THE LD . AR THE EXPENDITURE OF INTEREST ON INVESTMENT IN SHARES HAS DIRECT AND PROXIMATE LINK WITH THE PROFIT OR LOSS FROM TRADING OF SHARES AND INDIRECT LINK WITH THE DIVIDEND INCOME WHICH WAS EA RNED INCIDENTALLY AND HENCE NO DISALLOWANCE IS WARRANTED . IN OUR OPINION THERE IS A BASIS FALLACY IN THIS ARGUMENT. DOMINANT AND IMMEDIATE CONNECTION REFERS TO FIRST DEGREE OF RELA TION BETWEEN THE TWO THINGS. HOWEVER, IT WOULD CEASE TO BE DOMIN ANT IF THE DEGREE OF RELATIONSHIP SLIPS FROM FIRST TO SECOND. IT IS NOTICED THAT THERE IS A DOMINANT AND IMMEDIATE CONNECTION B ETWEEN THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE SHAPE O F INTEREST ON BORROWINGS FOR PURCHASE OF SHARES AND THE DIVIDEND INCOME. IT IS ONLY DUE TO THE INVESTMENT IN THE SHARES THAT THE D IVIDEND INCOME HAS RESULTED. SUCH INVESTMENT RESULTS INTO T WO INCOMES, VIZ., THE PROFIT ON ITS SALE AND THE DIVIDEND. BOTH THESE INCOMES FALL ON THE SAME PLATFORM AND ARE THE DIRECT RESULT OF INVESTMENT. IF A PERSON INVESTS IN THE SHARES FROM WHICH DIVIDE ND INCOME IS EARNED AND THEREAFTER SUCH DIVIDEND IS DEPOSITED IN THE BANK FROM WHERE THE INTEREST INCOME RESULTS, IN SUCH A S ITUATION THE RELATION BETWEEN THE INTEREST PAID BY THE ASSESSEE ON THE BORROWED FUNDS FOR THE PURCHASE OF SHARES WITH THE DIVIDEND INCOME IS DOMINANT AND IMMEDIATE, BEING THAT OF THE FIRST DEGREE BUT THE RELATION OF SUCH INTEREST PAID WITH THE INTEREST ITA NO4677 /DEL./2009 23 INCOME EARNED ON THE AMOUNT INVESTED IN THE BANK, W OULD BE OF SECOND DEGREE, BEING INDIRECT AND NON-IMMEDIATE. WE THEREFORE, DO NOT FIND ANY FORCE IN THIS SUBMISSION. 23.9 THE LEARNED COUNSEL FOR THE ASSESSEE WHILE INV ITING OUR ATTENTION TO RULE 8D(2)(II) CONTENDED THAT IT REFER S TO THE 'VALUE OF INVESTMENT'. ON THIS ANALOGY IT WAS URGED THAT S ECTION 14A ALONG WITH THIS RULE CANNOT HAVE ANY APPLICATION WH ERE THE SHARES ARE HELD. AS STOCK-IN-TRADE. THE SUM AND SUB STANCE OF HIS SUBMISSIONS WAS THAT THIS SECTION WOULD APPLY ONLY WHEN THE SHARES ARE HELD AS 'INVESTMENT'. WE ARE NOT IMPRESS ED WITH THIS SUBMISSION RAISED ON BEHALF OF THE ASSESSEE FOR THE OUT-AND-OUT REASON THAT THE REFERENCE IN THIS RULE IS TO THE 'V ALUE OF INVESTMENT' AND NOT THE ASSETS 'HELD AS INVESTMENT' . A PERSON MAY MAKE INVESTMENT IN SHARES AND THE SHARES SO PUR CHASED MAY BE HELD EITHER AS 'STOCK-IN-TRADE' OR 'INVESTME NT'. THE WORD 'INVESTMENT' IN THIS RULE REFERS TO THE MAKING OF P URCHASE OF SHARES AND NOT HOLDING IT AS INVESTMENT.' 18. WE ALSO TAKE NOTE OF THE FACT THAT THE AFORESA ID ISSUE WAS ADMITTED BY THE HIGH COURT AS INVOLVING SUBSTANTIAL QUESTION OF LAW. 19. WE ALSO TAKE NOTE OF THE FACT THAT THE APPEAL B EARING ITA NO.263 OF 2010 IN THE APPELLANT'S OWN CASE FOR THE ASSESSMENT YEAR 2002-03, I.E., THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR, WAS ADMITTE D BY THE HIGH COURT ON THE GROUND OF INVOLVING SUBSTANTIAL QUESTION OF LAW WAS ADMITTED AND WAS ADJUDICATED VIDE THE COMMON ORDER IN THE AFORESAID DECISION, REPORTED AS MAXOPP INVESTMENT (SUPRA) AND IN THIS REGARD, IT CA N BE SEEN AT PAGE 296 OF THE AFORESAID DECISION OF THE DELHI HIGH COURT REPO RTED AT 347 ITR 272 THOUGH AGAINST THE ASSESSEE. FURTHER WE FIND THAT T HE SLP FILED AGAINST THE AFORESAID DECISION OF THE DELHI HIGH COURT IN THE A PPELLANT'S OWN CASE FOR THE ASSESSMENT YEAR 2002-03 HAS ALSO BEEN ADMITTED BY THE HON'BLE SUPREME ITA NO4677 /DEL./2009 24 COURT IN CC NO. 17279/2012. THE HONBLE JURISDICTI ON HIGH COURT HAS HELD THAT WHEN AN ISSUE IS ADMITTED BY THE HIGH COURT ON THE GROUND THAT THE SAME INVOLVES SUBSTANTIAL QUESTION OF LAW, THE SAME CANNOT BE VISITED WITH PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE HON 'BLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF BASTI SUGAR V. CIT RENDER ED IN ITA 232/2005, OBSERVED AS UNDER: 'THE FOLLOWING QUESTIONS WERE FRAMED ON 18 TH OCTOBER, 2005: '(A) WHETHER THE 1TAT WAS CORRECT IN LAW 'IN HOLDIN G THAT THE ISSUE REGARDING ALLOWABILITY OF INTEREST PAYABLE ON LATE DEPOSIT OF PROVIDENT FUND WAS A DEBATABLE ISSUE AND, THEREF ORE, COULD NOT BE DISALLOWED IN THE INTIMATION ISSUED ORDER SE CTION 143(1)(A) OF THE INCOME TAX ACT? (B) WHETHER THE ITAT WAS CORRECT IN LAW IN HOLDING THAT DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF AN AMOUNT OF RS 18,02,0261- BEING INTEREST PAYABLE ON LATE DEPOSIT OF PROVIDENT FUND UNDER SECTION 43-8 OF THE INCOME TAX ACT AS THE SAME WAS NOT PAID DURING THE YEAR?' INSOFAR AS QUESTION (A) ABOVE IS CONCERNED, WE FIND THAT THE ISSUE REGARDING ALLOWABILITY OF INTEREST PAYABLE ON LATE DEPOSIT OF PROVIDENT FUND IS A DEBATABLE ISSUE. THIS CONCLU SION OF OURS IS FORTIFIED BY THE FACT THAT THE VERY ISSUE IS BEFORE US IN ITA NO.958/2007 IN RESPECT OF THE VERY YEAR IN QUESTION NAMELY ASSESSMENT YEAR 1998-99. ITA NO. 958/2007 ARISES OU T OF THE REGULAR ASSESSMENT COMPLETED UNDER SECTION 143(3) O F THE INCOME TAX ACT, 1961 (IN SHORT .. THE SAID ACT). TH E SAID QUESTION HAS TRAVELLED ALL THE WAY UPTO THE TRIBUNA L AND IS NOW BEFORE US IN THE SAID ITA NO.958/2007 AS WELL AS OT HER CONNECTED APPEALS BEING ITA NOS.965/2007. 1248/2007 . 646/2009 AND 652/2009. IT IS THEREFORE CLEAR THAT T HE ISSUE WAS DEBATABLE AND, THEREFORE, COULD NOT BE DISALLOWED W HILE CONSIDERING THE INTIMATION UNDER SECTION 143(1)(A) OF THE SAID ACT. CONSEQUENTLY, QUESTION (A) IS DECIDED IN FAVOU R OF THE APPELLANT AND AGAINST THE REVENUE ... (EMPHASIS SUP PLIED) . ITA NO4677 /DEL./2009 25 20. SIMILARLY IN THE CASE OF LIQUID INVESTMENT: ITA 240 OF 2009, THE HON'BLE JURISDICTIONAL DELHI HIGH COURT [REFER PAGE 81 OF CASE LAWS PB] DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER ON THE GROUND THAT THE SUBSTANTIVE APPEAL (BEING APPEAL UNDER SECTION 260A OF THE ACT AGAINST THE DISALLOWANCE MADE IN QUANTUM PROCEEDINGS) HAD BEEN ADMITTED BY THE HIGH COURT. 'BOTH THE CIT(A) AS WELL AS THE ITAT HAVE SET ASIDE THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271( 1)(C) OF THE INCOME TAX ACT. 1961 ON THE GROUND THAT THE ISS UE OF DEDUCTION UNDER SECTION 14A OF THE ACT WAS A DEBATA BLE ISSUE. WE MAY ALSO NOTE THAT AGAINST THE QUANTUM ASSESSMEN T WHEREUNDER DEDUCTION UNDER SECTION 14A OF THE ACT W AS PRESCRIBED TO THE APPELLANT. THE APPELLANT HAS PREF ERRED AN APPEAL IN THIS COURT UNDER SECTION 260A OF THE ACT WHICH HAS ALSO BEEN ADMITTED AND SUBSTANTIAL QUESTION OF LAW FRAMED. THIS ITSELF SHOWS THAT THE ISSUE IS DEBATABLE. FOR THESE REASONS. WE ARE O(THE OPINION THAT NO QUESTION OF LAW ARISES IN THE PRESENT CASE. THIS APPEAL IS ACCORDINGLY DISMISSED... (EMPHASIS SUPPLIED) 21. A USEFUL REFERENCE MAY ALSO BE MADE TO THE DECI SION OF APEX COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS PRIVATE LIMITED: 322 ITR 158, WHERE THE DECISION OF BOMBAY HIGH COURT DELETING TH E PENALTY IMPOSED BY THE ASSESSING OFFICER ON THE GROUND THAT QUANTUM AP PEAL WAS ADMITTED BY THE HIGH COURT ON THE GROUND OF INVOLVING QUESTION OF L AW, WAS AFFIRMED BY THE APEX COURT. AND WE TAKE NOTE THAT VARIOUS OTHER HO NBLE HIGH COURTS AND TRIBUNALS HAVE DECIDED THE AFORESAID ISSUE IN FAVOR OF THE ASSESSEE. WE TAKE NOTE OF THE FACT THAT OTHER HIGH COURTS AND VARIOUS BENCHES OF TRIBUNAL IN THE FOLLOWING CASES HAVE DECIDED THE AFORESAID ISSU E IN FAVOUR OF THE ITA NO4677 /DEL./2009 26 ASSESSEE AND HELD THAT SECTION 14A CANNOT BE INVOKE D WHERE SHARES ARE HELD AS STOCK-IN-TRADE: CCI LTD. V. JCIT: 250 CTR (KAR.) [REFER PG. 90 TO 9 2 OF CASE LAWS PBL CIT VS. SMT. LEENA RAMACHANDRAN: 339 ITR 296 (KER.) [REFER PG 94-96 OF CASE LAWS PBL DCIT V. M/S. INDIA ADVANTAGE: ITA NO. 6711LMUML 201 1 (MUM. TRIB.)- SUBSEQUENTLY AFFIRMED BY THE BOMBAY HIGH COURT IN I TA NO. 1131 OF2013 [COPY OF THE DECISIONS ATTACHED HEREWITH) PRESCIENT SECURITIES PVT. LTD. VS. ACIT: ITA NO. 83 61/MUM/2011 (MUM TRIB.) [REFER PAGE 97-LOL OF CASE LAWS PBL YATISH TRADING V. ACIT: 129 LID 237 (MUM. TRIB.) DCIT VS. GULSHAN INVESTMENT CO LTD.: ITA NO. 666/KO 1L2012 (KOL.) [REFER PGS 102- 108 OF CASE LAWS PBL APOORVA PATNI V. ACIT: 54 SOT 9 (PUNE TRIB.) MSA SECURITIES SERVICES P. LTD. V. ACIT: 22 ITR (T) 400 (MAD. TRIB.) ETHIO PLASTICS PVT. LTD. V. DCIT: ITA NO. 8481 AHDL 2012 (AHD. TRIB.) FROM THE AFORESAID DECISIONS CITED, IT IS CLEAR THA T THE PRESENT ISSUE, VIZ., APPLICATION OF SECTION 14A, ESPECIALLY IN RELATION TO SHARES HELD AS TRADING ASSETS, WAS CLEARLY DEBATABLE AND SO IT CANNOT BE V ISITED WITH PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 22. FURTHER, WE RELY ON THE FOLLOWING DECISIONS WHE RE PENALTY UNDER SECTION 271(1)(C) HAS BEEN DELETED ON THE ISSUE OF DISALLOWANCE U/S 14A ON THE GROUND THAT THE SAID ISSUE IS CLEARLY DEBATABLE , WHICH CANNOT BE VISITED WITH PENALTY UNDER THE FORMER SECTION :- ITA NO4677 /DEL./2009 27 CIT V. JINDAL EQUIPMENT LEASING AND CONSULTANCY SER VICES LTD. ITA NO. 68/2012 (DEL) (HC) (REFER PAGES 43-46 OF CASE LAWS PB) CIT V. LIQUID INVESTMENTS LTD. ITA NO. 2401/2009 (D EL) (HC) (REFER PAGES 47 OF CASE LAWS PB) DCIT V. NALWA INVESTMENT LTD. ITA NO. 3805/2010(DEL ) (ITAT) (REFER PAGES 48-59 OF CASE LAWS PB) ACIT V. A.T. INVOFIN INDIA (P) LTD. ITA NO. 4479/20 13 23. FURTHER WE FIND THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS RELATING TO THE EARNING OF DIVIDEND INCOME. SO IT CANNOT BE SAID THAT THE ASSESSEE HAD CONCEALED INCOME OR FURNISHED INACCURATE PARTICULAR S OF INCOME. THE ONLY BASIS OF LEVYING THE PENALTY U/S 271(1) (C) OF THE ACT WAS THAT THE CLAIM OF THE ASSESSEE FOR THE DISALLOWANCE U/S 14A OF THE AC T WAS NOT ACCEPTED BY THE AO, SO IT CAN AT THE MOST BE A GROUND FOR MAKING TH E ADDITION BUT WAS NOT SUFFICIENT TO LEVY THE PENALTY U/S 271(1)(C) OF THE ACT. SO WE FIND MERIT IN THE APPEAL OF THE ASSESSEE AND DIRECT DELETION OF P ENALTY LEVIED AGAINST THE ASSESSEE. WE ORDER ACCORDINGLY. 24. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF NOVEMBER, 2015. SD/- SD/- (O.P. KANT) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 TH DAY OF NOVEMBER, 2015 TS ITA NO4677 /DEL./2009 28 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-I, DEHRADUN. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.