M/s. B.S. Shah, Ahmedabad V. The Dy.CIT, Circle-11, Ahmedabad

ITA 481/AHD/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9375 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-09-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 05-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: TDS; Capital Gains
• Section: 271(1)(c); 40(b); 27

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 481/AHD/2015 ( ASSESSMENT YEAR : 2008-09) M/S. B.S. SHAH GF-2-3-4, SILVER OAK BUILDING, MAHALAXMI CHAR RASTA, PALDI, AHMEDABAD - 380007 / VS. DY.CIT CIRCLE 11, 1 ST FLOOR, NARAYAN CHAMBERS, AHMEDABAD ./ ./ PAN/GIR NO. : AACFB1266F ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. DIVATIA, A.R. / RESPONDENT BY : SHRI SATISH SOLANKI, SR.D.R. DATE OF HEARING 18/09/2019 !'# / DATE OF PRONOUNCEMENT 19/09/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-5, AHMEDABAD (CIT(A) IN SHORT), DATED 3 0.12.2014 ARISING IN THE PENALTY ORDER DATED 28.03.2013 PASSED BY THE ASSESSING OFFICER ITA NO. 481/AHD/15 [M/S. B. S. SHAH VS. DCIT] A.Y. 2008-09 - 2 - (AO) UNDER S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT); CONCERNING A.Y. 2008-09. 2. THE ASSESSEE BY WAY OF ITS GROUNDS OF APPEAL HAS CHALLENGED THE IMPOSITION OF PENALTY ON ADDITIONS/DISALLOWANCES AS UNDER: 1.1 THE ORDER PASSED U/S.250 ON 30-12-2014 FOR A.Y .2008-09 BY CIT(A)-5, ABAD UPHOLDING THE PENALTY LEVIED U/S. 27 1(1)(C) IN RESPECT OF ADDITIONS TOWARDS PARTNERS REMUNERATION, INTEREST INCOME AND CAPITAL GAIN ON REDEMPTION OF MUTUAL FUN D IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NAT URAL JUSTICE. 1.2 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND O R ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO T HE IMPUGNED ADDITIONS. 2.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY LEVIED U/S.271(1)(C) IN RESP ECT OF THE ADDITIONS TOWARDS PARTNERS REMUNERATION, INTEREST I NCOME AND CAPITAL GAIN ON REDEMPTION OF MUTUAL FUND. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE PENALTY LEVIED U/S.271(1)(C) IN RESPECT OF THE ADDITIONS TOWARDS P ARTNERS REMUNERATION, INTEREST INCOME AND CAPITAL GAIN ON R EDEMPTION OF MUTUAL FUND. 3.1 THE LD.CIT(A) HAS ERRED IN UPHOLDING THAT TH E AO HAD LEVIED PENALTY FOR THE ACT CONCEALING INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THERE WAS NO DEFAULT OF FURNISHING INACCURATE PARTICULARS OF INCOME AND CASE LAW RELIED UPON BY HIM WERE DISTING UISHABLE ON FACTS. 3. BRIEFLY STATED, THE ASSESSEE IS A PARTNERSHIP FI RM ENGAGED IN PUBLICATION AND SALE OF EDUCATIONAL BOOKS. THE RET URN OF INCOME FOR AY 2008-09 WAS FILED DECLARING TOTAL INCOME OF RS.4 7,35,940/-. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO NOTICE D THAT THE ASSESSEE HAS CLAIMED PARTNERS REMUNERATION OF RS.32,37,616/- UNDER S.40(B) OF THE ACT ALTHOUGH THE PARTNERS WERE HUF AND NO SERVI CE COULD BE RENDERED BY THEM. THE ASSESSEE OBJECTED TO THE SAM E BY ITS WRITTEN ITA NO. 481/AHD/15 [M/S. B. S. SHAH VS. DCIT] A.Y. 2008-09 - 3 - REPLY IN THE ASSESSMENT PROCEEDINGS. HOWEVER, THE AO REJECTED THE EXPLANATION AND MADE THE DISALLOWANCE OF ENTIRE REM UNERATION OF RS.32,37,616/-. THE AO FURTHER OBSERVED THAT THE AS SESSEE HAD PAID MANUSCRIPT EXPENSES OF RS.76,700/- WITHOUT MAKING T DS AND CONSEQUENTLY, DISALLOWANCE WAS CARRIED UNDER S.40(A )(IA) OF THE ACT. THE AO MADE OTHER DISALLOWANCES AND COMPLETED THE A SSESSMENT ASSESSING THE TOTAL INCOME AT RS.81,35,210/-. 4. THE CIT(A) IN FIRST APPEAL GRANTED PARTIAL RELIE F. MEANWHILE, THE AO PASSED ORDER OF RECTIFICATION UNDER S.154 OF THE ACT WHEREBY THE DISALLOWANCE OF REMUNERATION WAS SCALED DOWN TO RS. 7,84,088/. PENALTY PROCEEDINGS WERE INITIATED ON THE ADDITIONS /DISALLOWANCES AND THE AO IMPOSED PENALTY OF RS.2,84,090/- ON THE GROU ND OF CONCEALMENT OF PARTICULARS OF INCOME TO THE EXTENT OF RS.9,19,372/- COMPRISING OF PARTNERS REMUNERATION OF RS.7,84,088/ - AND DISALLOWANCE OF MANUSCRIPT EXPENSES OF RS.76,700/-, UNDISCLOSED CAPITAL GAINS OF RS.42,131/- AND INTEREST INCOME OF RS.16,453/-. 5. AGGRIEVED BY THE IMPOSITION OF PENALTY, THE ASSE SSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE PENALTY LEVIED IN RESPECT OF AFORESAID ITEMS OF ADDITIONS/DISALLOWANC ES EXCEPT FOR MANUSCRIPT EXPENSES OF RS.76,700/-. 6. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ON THE IMPOSITION OF PENALTY UNDER S. 271(1)(C) OF THE ACT . IT IS NOTICED THAT DISALLOWANCE OF PARTNERS REMUNERATION WAS MADE ONLY FOR THE REASON THAT INTEREST INCOME OF RS.20,61,351/- WAS CONSIDER ED AS INCOME FROM OTHER SOURCES WHICH IN THE OPINION OF AO DID NOT Q UALIFY FOR BOOK ITA NO. 481/AHD/15 [M/S. B. S. SHAH VS. DCIT] A.Y. 2008-09 - 4 - PROFIT SO AS TO COMPUTE PARTNERS REMUNERATION UNDE R S. 40(B) OF THE ACT. WE NOTICE THAT CO-ORDINATE BENCH OF TRIBUNAL IN SOME CASES, NAMELY, AKSHAR ASSOCIATES ITA NO. 2583/AHD/2011 DATED 15.09 .2015 AND HORIZAN MOTORS ITA NO. 555-556/AHD/2012 DATED 30.11.2015 HAVE TAKEN A VIEW THAT INCOME UNDER ALL THE HEADS OF INC OME ARE ELIGIBLE FOR COMPUTING PARTNERS REMUNERATION. WITHOUT GOING TO THE CORRECTNESS OF THE ELIGIBILITY OF REMUNERATION FROM INCOME GENERAT ED UNDER THE HEAD INCOME FROM OTHER SOURCES, WE FIRMLY THINK THAT T HE ACTION OF THE ASSESSEE CANNOT BE DISCARDED SUMMARILY ON THE FACE OF DIVERGENT VIEWS PREVAILING ON THE SUBJECT. THUS, AS CLAIMED, THE I SSUE THUS NOT FREE OF DEBATE AT THE TIME OF FILING OF RETURN BY THE ASSES SEE. THE ACTION OF THE ASSESSEE THUS FALLS WITHIN THE BRACKET OF BONAF IDE BELIEF. IN SUCH CIRCUMSTANCES, FURNISHING INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE CANNOT BE ALLEGED AS CONTEMPLATED UNDER S. 271(1)(C) OF THE ACT. 8. IN SO FAR AS INCLUSION OF CAPITAL GAINS OF MATUR ITY OF MUTUAL FUNDS IS CONCERNED, IT IS NOTICED THAT THE ASSESSEE HAS EXPLAINED THE SOURCES OF SUCH INVESTMENT BUT THE EFFECT OF REDEMP TION WAS LEFT OUT TO BE GIVEN IN THE BOOKS OF ACCOUNTS. THE ASSESSEE HA S PLEADED OVERSIGHT AND MISTAKE. IT WAS POINTED OUT THAT MISTAKE WAS C OMMITTED AS IT WAS ASSUMED THAT LONG TERM CAPITAL GAINS FROM UNITS OF MUTUAL FUNDS IS EXEMPT FROM TAXATION. THE OTHER ADDITIONS TOWARDS I NTEREST INCOME OF RS.16,453/- WAS ON ACCOUNT OF MISTAKE IN SHOWING CO RRECT INCOME DUE TO NON-AVAILABILITY OF INTEREST INCOME ARISING FROM IDBI LTD. THE ACTION OF THE ASSESSEE WAS HOWEVER IN CONFORMITY WI TH THE TDS CERTIFICATE. THE ASSESSEE HAS THUS DISCHARGED THE BURDEN OF EXPLAINING THE CIRCUMSTANCES OF OMISSION OR MISTAKES. HENCE, IN TOTALITY, WE OBSERVE THAT THE ASSESSEE HAS ACTED BONAFIDE AND TH ERE APPEARS TO BE NO FALSITY IN THE EXPLANATION OFFERED BY THE ASSESSEE. ITA NO. 481/AHD/15 [M/S. B. S. SHAH VS. DCIT] A.Y. 2008-09 - 5 - 9. NEEDLESS TO SAY, THE IMPOSITION OF PENALTY ON FA STENING OF TAX LIABILITY IS NOT AUTOMATIC. THE FULFILLMENT OF CON DITIONS STIPULATED IN SECTION 271(1)(C) OF THE ACT IS A SIN QUA NON FOR IMPOSITION OF PENALTY UNDER S. 271(1)(C) OF THE ACT. THE EXISTENCE OF CO NDITIONS IS NOT DISCERNABLE FROM THE CASE RECORDS. WE THUS SET ASI DE THE ORER OF THE CIT(A) AND DIRECT THE AO TO CANCEL THE PENALTY IMPO SED UNDER S. 271(1)(C) OF THE ACT. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. SD/- SD/- (KUL BHARAT) ( PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCO UNTANT MEMBER AHMEDABAD: DATED 19/09/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 19/09/2019