ACIT CC-13, MUMBAI V. ANU PROJECTS CONSULATANTS & ENGG. P. LTD, MUMBAI

ITA 4722/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0893 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 12-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Assessee Lawyers: S J PARMAR
• Keywords: Speculation loss; Wrong claim
• Section: 271(1)(c); 143(3); 80HHC; 153A; 14A; 250; 37

Judgement Text

ITA NO.4722/MUM/2009 ASSESSMENT YEAR : 2004-05 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI G BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) AND SMT. ASHA VIJAY RAGHAVAN, (JUDICIAL MEMBER) ITA NO. 4722/MUM./2009 ASSESSMENT YEAR : 2004-05 DATE OF HEARING : 21.7.2010 ASSISTANT COMMISSIONER OF INCOME TAX .. .... APPELLANT CENTRAL CIRCLE-13, OLD CGO ANNEXE BUILDING 101, M.K. ROAD, MUMBAI 400 020 VS. M/S. ANU PROJECTS CONSULTANTS & .. RESPONDENT ENGINEERING PVT. LTD. JEWEL CROWN, DADABHAI ROAD ANDHERI (W), MUMBAI 400 058 PAN AAACA3865E APPELLANT BY : SHRI SHRAVAN KUMAR RESPONDENT BY : SHRI S.J. PARMAR O R D E R PER PRAMOD KUMAR: 1. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICATE IN THIS APPEAL IS WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME T AX ACT, 1961 (FOR SHORT ITA NO.4722/MUM/2009 ASSESSMENT YEAR : 2004-05 PAGE 2 OF 7 THE ACT ). THE ASSESSMENT YEAR INVOLVED IS 2004-05 AND THE IMPUGNED CIT(A)S ORDER WAS PASSED ON 2 ND JUNE 2009. 2. THE FACTS LEADING TO THE DISPUTE PREVAILING ARE LIK E THIS. PURSUANT TO THE SEARCH ACTION CARRIED OUT AT THE BUSINESS PREMI SES OF THE ASSESSEE AND ITS OTHER GROUP ENTITIES, NOTICE U/S 153A OF THE A CT WAS ISSUED AND IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED IT S RETURN OF INCOME U/S 153A DECLARING TOTAL INCOME OF RS.24,59,483/-. THE ASSESSMENT WAS FINALISED U/S 153A R/W SECTION 143(3) OF THE ACT ON A TOTAL INCOME AT RS.71,34,483/-. THIS INCOME WAS ARRIVED AT ON ACCO UNT OF DISALLOWANCE OF AN AMOUNT OF RS.46,75,000/- WHICH WAS CLAIMED AS EX PENDITURE BEING THE PAYMENT OF RENT IN RESPECT OF FLAT NO.102, 1 ST FLOOR, B-WING, AMEYA HOUSE, J.P. ROAD, ANDHERI (W), MUMBAI. THE DISALLOWANCE OF RENT WAS MADE BY THE ASSESSING OFFICER MAINLY ON THE GROUND THAT THE SAI D PREMISE WAS NOT USED FOR THE PURPOSES OF BUSINESS. AGGRIEVED, THE ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A), WHO, CONFIRMING THE O RDER OF THE ASSESSING OFFICER, DISMISSED THE APPEAL OF THE ASSESSEE. CONS EQUENTLY, THE ASSESSING OFFICER, DURING THE COURSE OF PENALTY PROCEEDINGS, HELD THAT IT WAS A CASE OF INTENTIONAL SUPPRESSION OF TRUTH OR FACT AN DELIBER ATE FURNISHING OF INACCURATE PARTICULARS SUPPORTED BY THE CIRCUMSTANC ES FOUND FROM WHICH IT COULD BE GATHERED THAT THE ASSESSEE HAD DELIBERATEL Y AND CONSCIOUSLY ATTEMPTED TO CLAIM EXPENDITURE EITHER U/S 30 OR U/S 37 WITH THE SOLE INTENTION OR DESIRE TO AVOID IMPOSITION OF TAX THER EON. BEING AGGRIEVED BY THE IMPOSITION OF PENALTY U/S 271(1)(C) BY THE ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD . CIT(A), WHO, IN TURN, DELETED THE PENALTY SO IMPOSED BY THE ASSESSING OFF ICER BY OBSERVING AS FOLLOWS:- 4. I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS AND FIND SUFFICIENT MERIT IN THE CONTENTIONS OF THE APPELLAN T. ON THE FACTS ITA NO.4722/MUM/2009 ASSESSMENT YEAR : 2004-05 PAGE 3 OF 7 OF HE CASE, IT IS EVIDENT THAT THE PENALTY HAS BEEN IMPOSED BY INVOKING THE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT THOUGH WITHOUT APPRECIATING THE FACTS OF TH E CASE AND THE PROVISIONS OF LAW IN THIS REGARD. IT IS NOT DIS PUTED THAT THE APPELLANT HAS FURNISHED ALL THE RELEVANT DETAILS IN THE ASSESSMENT PROCEEDINGS AND PROPER EXPLANATION HAS A LSO BEEN FURNISHED IN SUPPORT OF THE CLAIM. THUS, ALL PRIMAR Y DETAILS HAVE BEEN DULY SUBMITTED. IT IS ALSO NOT THE CASE OF THE A.O. THAT THE DEDUCTION WAS CLAIMED IN RESPECT OF RENT WHICH WAS A BOGUS CLAIM NOR THERE WAS ANY ELEMENT OF MALAFIDE INTENTI ON. THE CLAIM WAS BONAFIDE AND PROPER EXPLANATION WAS OFFER ED WHICH WAS NOT ACCEPTED IN THE ASSESSMENT ORDER. IT IS MER ELY A CASE INVOLVING DIVERGENCE OF OPINION ABOUT A PARTICULAR CLAIM BETWEEN THE APPELLANT AND THE A.O. WHICH LED TO THE DISALLOWANCE. HOWEVER, THE CONCLUSION DRAWN BY THE A.O. OR THAT UPHELD BY THE APPELLATE AUTHORITY WOULD NOT LEAD TO AN INEVITABLE CONCLUSION THAT THE APPELLANT HAD CONCEA LED THE PARTICULARS OF INCOME HAD FURNISHED INACCURATE PART ICULARS OF INCOME AS IT IS A SETTLED LAW THAT PENALTY AND ASSE SSMENT PROCEEDINGS ARE SEPARATE. 4.1 APART FROM THE DECISIONS RELIED UPON BY THE APP ELLANT IN SUPPORT OF THE CLAIM THAT IT WAS NOT LIABLE TO ANY PENALTY, I WOULD LIKE TO MENTION HERE A PLETHORA OF DECISIONS OF VARIOUS COURTS OF LAW SUPPORTING THE VERSION OF THE APPELLA NT. IN A RECENT CASE OF CIT VS MEHTA ENGINEERS LTD., (2008) 219 CTR 285 (P&H), WHERE THE CLAIM OF CERTAIN EXPENDITURE ON FOREIGN E DUCATION OF OWNERS SON MADE ON THE BASIS OF CERTAIN AGREEMENT, WAS DISALLOWED. IT WAS HELD THAT NEITHER A CASE OF THE REVENUE NOR THERE WAS MATERIAL ON RECORD TO THE EFFECT THAT THE SAID AGREEMENT WAS FALSE AND FABRICATED DOCUMENT AND THE RE WAS NO CASE THAT THE ASSESSEE CLAIMED DEDUCTION OF SUCH EX PENDITURE TO EVADE THE TAX LIABILITY. SIMILARLY, IN ANOTHER CASE OF CIT VS ORIENT POWER CABLE LTD., (2008) 303 ITR 49 (RAJ.), IT WAS HELD THAT MERE DISALLOWANCE OF CERTAIN ITEMS AND CONFIRMATION OF THE SAME WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSE SSEE MADE A DELIBERATE FALSE CLAIM OF DEDUCTION. IN YET ANOTHER CASE OF CIT VS CAPLIN POINT LABORATORIES LTD. (2007) 293 ITR 524 ( MAD.) WHERE DEDUCTION U/S 80HHC AND 80I WERE DISALLOWED, IT WAS OBSERVED THAT IT WAS RIGHTLY HELD BY THE TRIBUNAL THAT WHEN THE DEDUCTION WAS DISALLOWED ON ACCOUNT OF DIFFERENT INTERPRETATI ON, IT COULD NOT BE SAID THAT PARTICULARS OF INCOME HAD BEEN CON CEALED. IN THIS CASE, THE ASSESSEE HAD ADOPTED A PARTICULAR PO INT OF VIEW ON ITA NO.4722/MUM/2009 ASSESSMENT YEAR : 2004-05 PAGE 4 OF 7 THE BASIS OF CERTAIN CASE LAW OR SOME BONAFIDE BELI EF AND A MERE REJECTION OF THE CLAIM OF THE ASSESSEE BY RELYING O N DIFFERENT INTERPRETATION DID NOT AMOUNT TO CONCEALMENT. SIMIL AR VIEW WAS TAKEN IN CIT VS AURIC INVESTMENT AND SECURITIES LTD , (2007) 310 ITR 121/163 TAXMAN 533 (DEL.), IN WHICH BUSINESS LO SS WAS TREATED AS SPECULATION LOSS FOR WHICH PENALTY WAS I MPOSED. IT WAS HELD THAT IT DOES NOT AUTOMATICALLY JUSTIFY INF ERENCE OF CONCEALMENT OF INCOME. REFERENCE COULD ALSO BE MADE TO THE DECISION IN THE CASE OF MIMOSA INVESTMENT CO. LTD. VS ITO, (2009) 28 SOT 470 (MUM.) IN WHICH THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER OF THE INVESTMENT COMPANY MADE DIS ALLOWANCE IN TERMS OF SECTION 14A AS NO SUO MOTTO DISALLOWANC E WAS MADE BY THE ASSESSEE ON THE GROUND THAT THE INTEREST EXP ENSES WERE NOT RELATABLE TO DIVIDEND INCOME BUT TO BUSINESS. I T WAS HELD THAT THE ASSESSEE HAD DISCLOSED ALL RELEVANT MATERI AL FACTS FOR THE PURPOSE OF DETERMINING THE TOTAL INCOME AND HAD ALSO OFFERED EXPLANATION WHICH WAS NOT FOUND FALSE BY TH E A.O. THE CLAIM WAS BONAFIDE. AS SUCH DEEMING PROVISIONS OF E XPLANATION 1 WERE NOT ATTRACTED. RELIANCE COULD ALSO BE PLACED O N GLORIOUS REALITY P. LTD. VS ITO (2009) 29 SOT 292 (MUM.) IN WHICH THE ASSESSEE HAD CLAIMED DEDUCTION OF INTEREST EXPENSES ON LOAN TAKEN FOR THE PURPOSES OF CONSTRUCTION BUSINESS AND THE SAME WAS DISALLOWED ON THE GROUND THAT THE BUSINESS HAD NOT COMMENCED. IT WAS HELD THAT MERE NON-ACCEPTANCE OF EXPLANATION WOULD NOT LEAD TO THE CONCLUSION THAT T HE ASSESSEE WAS LIABLE FOR PENALTY. ALL FACTS RELATING TO INCOM E AND EXPENDITURE WERE DULY DISCLOSED IN THE RETURN AND T HE ASSESSING OFFICER MUST HAVE SOME DEFINITE EVIDENCE OF CONCEAL MENT OF PARTICULARS OF INCOME. IN ANOTHER CASE OF GUJARAT C REDIT CORPORATION LTD. VS ACIT (2008) 302 ITR (AT) 250 (A HM.) (SPECIAL BENCH), IT WAS HELD THAT PENALTY PROCEEDIN GS COULD NOT BE INITIATED FOR DISALLOWANCE OF LOSS. THE ASSESSEE HAD NOT CONCEALED THE PARTICULARS OF INCOME NOR FURNISHED I NACCURATE PARTICULARS OF ITS INCOME. SIMILAR DECISION WAS REN DERED IN STAR INTERNATIONAL P. LTD. VS ACIT, (2008) 23 SOT 88 (LU K.) IN WHICH IT WAS HELD THAT FOR THE PURPOSE OF LEVYING OF PENA LTY THERE HAS TO BE SOME POSITIVE MATERIALS TO SHOW CONCEALMENT O F INCOME OR FURNISHING OF INACCURATE PARTICULARS. IT CANNOT BE LEVIED MERELY BY DISBELIEVING THE CONTENTION OF THE ASSESSEE. 4.2 IN VIEW OF THE ABOVE DISCUSSION ON THE FACTS AN D THE CIRCUMSTANCES OF THE CASE, AND THE LEGAL POSITION E MERGING FROM THE CITED DECISIONS OF VARIOUS COURTS OF LAW, IT IS HELD THAT THERE ITA NO.4722/MUM/2009 ASSESSMENT YEAR : 2004-05 PAGE 5 OF 7 WAS NO JUSTIFICATION FOR TREATING THE APPELLANT AS A DEFAULTER IN TERMS OF SECTION 271(1)(C) AND IN IMPOSING PENALTY. THE PENALTY ORDER IS, THEREFORE, CANCELLED. 3. THE REVENUE, BEING AGGRIEVED BY THE ORDER SO PASSED BY THE LD. CIT(A), IS IN APPEAL BEFORE US. 4. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE A SSESSING OFFICERS ORDER IMPOSING PENALTY, WHEREAS, LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, PLACED BEFORE US A COP Y OF ORDER DATED 14 TH JULY 2009, PASSED BY A CO-ORDINATE BENCH OF THIS TR IBUNAL, IN ASSESSEES OWN CASE, FOR ASSESSMENT YEAR 2004-05, AND POINTED OUT THAT THE TRIBUNAL HAS DELETED THE QUANTUM ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) AGAINST WHICH THE PRESENT PENALTY ORDER IS UNDER CHALLENGE BY THE REVENUE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MA TERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS A LSO THE APPLICABLE LEGAL POSITION. 6. ACCORDING TO THE CIT(A), THE IMPOSITION OF PENALTY U/S 271(1)(C) LEVIED BY THE ASSESSING OFFICER IS NOT SUSTAINABLE IN THE E YES OF LAW AND FOR COMING TO SUCH CONCLUSION, CIT(A)S CONCLUSION IN DETAIL IS Q UOTED HEREIN ABOVE, WHICH WE ARE IN AGREEMENT. WE ARE ALSO OF THE CONSIDERED VIEW THAT WHEN THE QUANTUM ADDITION IN RESPECT OF EXPENDITURE INCURRED FOR PAYMENT OF RENT OF FLAT SITUATED AT ANDHERI (W), MUMBAI, OF RS.46,75,00 0/- ITSELF IS DELETED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL VIDE ORDER DAT ED 14 TH JULY 2009, THE VERY FOUNDATION FOR IMPUGNED PENALTY CEASES TO EXIS T. FOR THE REASONS SET ITA NO.4722/MUM/2009 ASSESSMENT YEAR : 2004-05 PAGE 6 OF 7 OUT ABOVE, WE APPROVE THE CONCLUSION ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATTER AS SUCH. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. PRONO UNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF JULY, 2010. SD/XX SD/XX (ASHA VIJAY RAGHAVAN) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 30 TH DAY OF JULY, 2010. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION), MUMBAI 4. COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, G BENCH, ITAT, MU MBAI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR PRADEEP J. CHWODHURY INCOME TAX APPELLATE TRIBUNAL SR. PRIVATE SECRETARY MUMBAI BENCHES, M UMBAI ITA NO.4722/MUM/2009 ASSESSMENT YEAR : 2004-05 PAGE 7 OF 7 DATE INITIAL 1. DRAFT DICTATED ON 26.7.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 26.7.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 26.7.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 26.7.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 26.7.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 30.7.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 30.7.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER