M/s. Global Capital Ltd., New Delhi V. DCIT, New Delhi

ITA 4817/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2967 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 23-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Keywords: Earning of tax free income; Difference of opinion
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NOS.4816 & 4817/DEL/2015 ASSESSMENT YEARS : 2007-08 & 2008-09 GLOBAL CAPITAL LTD., 414/1, 4 TH FLOOR, DDA COMMERCIAL COMPLEX, DISTRICT CENTRE, JANAK PURI, NEW DELHI. VS. DCIT, CIRCLE- 12(1), NEW DELHI. PAN : AAACG3130E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MANU GIRI, ADV. DEPARTMENT BY : SHRI S. R. SENAPATI, SR.DR DATE OF HEARING : 21-02-2018 DATE OF PRONOUNCEMENT : 14-03-2018 O R D E R PER R. K. PANDA, AM : THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE SEPARATE ORDERS DATED 29.05.2015 OF THE CIT(A)- 4, NEW DELHI RELATING TO ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY. FOR THE SAKE OF CONVENIENCE, BOTH THE APPEALS WERE HEARD TOGETHER A ND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE ASSESSEE IN BOTH THE APPEALS HAS CHALLENGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE PENALTY OF RS.7,09,967/- F OR ASSESSMENT YEAR 2007-08 2 ITA NOS.4816 & 4817/DEL/2015 AND RS.4,46,278/- FOR ASSESSMENT YEAR 2008-09 LEVIE D BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE I.T. ACT, 1961. ITA NO.4816/DEL/2015 (A.Y. 2007-08) : 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE FILED ITS RETURN OF INCOME DECLARING LOSS OF RS.85,28,382/-. THE ASSESSING OF FICER COMPLETED THE ASSESSMENT DETERMINING THE LOSS AT RS.64,19,151/-. IN THE SAID ORDER, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.21,09, 231/- U/S 14A OF THE I.T. ACT, 1961 R.W. RULE 8D OF THE I.T. RULES, 1962. TH E APPEAL FILED BY THE ASSESSEE WAS DISMISSED BY THE LD. CIT(A). THEREAFTER, THE A SSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND OBSERVING TH AT THE DISALLOWANCE U/S 14A R.W. RULE 8D WAS MADE, THE ASSESSING OFFICER LEVIED PENALTY OF RS.7,09,967/- U/S 271(1)(C) OF THE I.T. ACT, WHICH WAS ENHANCED B Y THE LD. CIT(A) ON DISALLOWANCE OF RS.82,62,666/- AS AGAINST DISALLOWA NCE OF RS21,09,231/-. 4. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE LD. CIT(A) ENHANCING THE PENALTY U/S 271(1)(C) LEVIED B Y THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSEE COMPANY HAS DISCLOSED A ND FURNISHED EVERY PARTICULAR AND INFORMATION IN THE RETURN OF INCOME. REFERRING TO THE DECISION OF 3 ITA NOS.4816 & 4817/DEL/2015 THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RE LIANCE PETROPRODUCTS PVT. LTD. REPORTED IN 322 ITR 158, HE SUBMITTED THAT MER E MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF DOES NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. RELYING ON VARIOUS DECISIONS, HE SUBMITTED THAT RULE 8D IS NOT RETROSPECTIVE AND IS APPLICABLE TO ASSESSMENT YEAR 2008-09 AND ONWARDS. FURTHER, HE SUBMITTED TH AT THERE ARE VARIOUS DISPUTES AND LITIGATIONS GOING ON THE ISSUE OF PROVISIONS OF SECTION 14A. THEREFORE, THE SAME IS A DEBATABLE ONE AND LEVY OF PENALTY U/S 271 (1)(C) IS NOT APPLICABLE. HE FURTHER SUBMITTED THAT WHEN THE ASSESSMENT ORDER IN QUANTUM HAS BEEN MERGED WITH THE ORDER OF THE LD. CIT(A) IN QUANTUM AND HAS BEEN ACCEPTED BY THE PARTIES (NOT CHALLENGED BY EITHER PARTY BEFORE THE TRIBUNAL), THEREFORE, IT IS NOT POSSIBLE ON THE PART OF THE LD. CIT(A) IN PENALTY P ROCEEDINGS TO TAKE A DIFFERENT VIEW ON THE RULE 8D CALCULATION AND UNDO THE SETTLE D ISSUE. FURTHER, THERE CANNOT BE TWO ORDERS OF THE LD. CIT(A) ON THE SAME ISSUE I.E. ONE FOR QUANTUM AND ANOTHER FOR PENALTY IN RESPECT OF RULE 8D CALCU LATION. SINCE THERE IS DIFFERENCE OF OPINION AMONG ASSESSING OFFICER, LD. CIT(A) IN QUANTUM AND LD. CIT(A) IN PENALTY PROCEEDINGS, THEREFORE, IT IS A D EBATABLE ISSUE. RELYING ON VARIOUS DECISIONS, HE SUBMITTED THAT THE PENALTY LE VIED BY THE ASSESSING OFFICER AND ENHANCED BY THE LD. CIT(A) IS NOT SUSTAINABLE. 4 ITA NOS.4816 & 4817/DEL/2015 6. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE O RDER OF THE LD. CIT(A) AND SUBMITTED THAT THE LD. CIT(A) HAS RIGHTLY ENHAN CED THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE I.T. ACT. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. WE FIND THE ASSESSING OFFICER IN THE INSTANT CASE, APP LYING THE PROVISIONS OF SECTION 14A R.W. RULE 8D DISALLOWED AN AMOUNT OF RS.21,09,2 31/- AND THE APPEAL FILED BY THE ASSESSEE WAS DISMISSED BY THE LD. CIT(A). T HE ASSESSING OFFICER, THEREAFTER, INITIATED PENALTY PROCEEDINGS U/S 271(1 )(C) AND LEVIED PENALTY OF RS.7,09,967/- BEING 100% OF TAX SOUGHT TO BE EVADED . WE FIND IN THE INSTANT CASE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO L EVY PENALTY ON AN AMOUNT OF RS.82,62,666/- WHICH IS THE AMOUNT CALCULATED BY HI M U/S 14A R.W. RULE 8D MEANING THEREBY ENHANCING THE PENALTY SO LEVIED BY THE ASSESSING OFFICER. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE QUANTUM ORDER HAS BEEN ACCEPTED BY BOTH THE PARTIES AFTER THE APP EAL WAS DISMISSED BY THE LD. CIT(A), THE LD. CIT(A) CANNOT ENHANCE THE SAME IN T HE PENALTY PROCEEDINGS FOR ENHANCING THE PENALTY. IT IS ALSO HIS SUBMISSION T HAT RULE 8D IS NOT APPLICABLE FOR THE ASSESSMENT YEAR 2007-08. IT IS ALSO HIS AR GUMENT THAT THERE WAS NO CONCEALMENT OF ANY PARTICULARS OR FURNISHING OF INA CCURATE PARTICULARS OF INCOME. 5 ITA NOS.4816 & 4817/DEL/2015 WE FIND MERIT IN THE ARGUMENT OF THE LD. COUNSEL FO R THE ASSESSEE THAT THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE TO THE FAC TS OF THE PRESENT CASE THE ASSESSMENT YEAR BEING 2007-08. THEREFORE, DISALLOW ANCE ON ACCOUNT OF EXEMPT INCOME CANNOT BE MADE U/S 14A R.W. RULE 8D FOR THE IMPUGNED ASSESSMENT YEAR. WE ALSO FIND MERIT IN THE ARGUMENT OF THE LD . COUNSEL FOR THE ASSESSEE THAT THE ISSUE REGARDING DISALLOWANCE U/S 14A DURING THE RELEVANT PERIOD WAS A HIGHLY DEBATABLE ISSUE. THEREFORE, FOLLOWING THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) WHEREIN IT HAS HELD THAT MERE MAKING OF A CLAIM WHICH IS NO T SUSTAINABLE IN LAW BY ITSELF DOES NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S REGARDING THE INCOME OF THE ASSESSEE, WE HOLD THAT IT IS NOT A FIT CASE FOR LEV Y OF PENALTY FOR THE IMPUGNED ASSESSMENT YEAR. WE, THEREFORE, SET-ASIDE THE ORDE R OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY SO LEVI ED. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. ITA NO.4817/DEL/2015 (A.Y. 2008-09) : 8. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSESS EE FILED HIS RETURN OF INCOME DECLARING LOSS OF RS.83,77,259/- ON 23.09.20 08 AND THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON A LOSS OF RS.70 ,64,290/- WHEREIN DISALLOWANCE U/S 14A R.W. RULE 8D AMOUNTING TO RS.1 3,12,968/- WAS MADE. THE APPEAL FILED BY THE ASSESSEE WAS DISMISSED BY T HE LD. CIT(A). THEREAFTER, 6 ITA NOS.4816 & 4817/DEL/2015 THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C). REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND RELY ING ON VARIOUS DECISIONS, THE ASSESSING OFFICER LEVIED PENALTY OF RS.4,46,278/- U /S 271(1)(C) OF THE I.T. ACT. 9. IN APPEAL, THE LD. CIT(A) ENHANCED THE PENALTY B Y DIRECTING THE ASSESSING OFFICER TO COMPUTE THE PENALTY AT THE RATE OF 100% OF TAX SOUGHT TO BE EVADED ON AN AMOUNT OF RS.78,86,541/- BEING THE DISALLOWANCE U/S 14A R.W. RULE 8D. 10. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 11. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBM ITTED THAT THE TOTAL AMOUNT OF DIVIDEND THAT HAS BEEN RECEIVED BY THE ASSESSEE DURING THE IMPUGNED YEAR IS ONLY RS.250/- A FACT BROUGHT ON RECORD BY THE ASSES SING OFFICER IN THE BODY OF THE ASSESSMENT ORDER AND NOT DISPUTED BY THE REVENU E. RELYING ON VARIOUS DECISIONS, HE SUBMITTED THAT IT HAS NOW BEEN HELD T HAT THE DISALLOWANCE U/S 14A CANNOT EXCEED THE ACTUAL DIVIDEND INCOME THAT HAS B EEN RECEIVED BY THE ASSESSEE WHICH IN THE INSTANT CASE IS RS.250/-. RELYING ON VARIOUS DECISIONS HE SUBMITTED THAT THE ASSESSEE CAN MAKE A NEW PLEA DURING PENALT Y PROCEEDINGS. HE ACCORDINGLY SUBMITTED THAT MERELY BECAUSE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE ORDER OF THE LD. CIT(A), IT DOES NOT ME AN THAT THE PENALTY IN THE INSTANT CASE CAN BE SUSTAINED WHEN THE ACTUAL DIVID END INCOME IS RS.250/-. HE 7 ITA NOS.4816 & 4817/DEL/2015 REITERATED HIS ARGUMENTS AS ARGUED IN ITA NO.4816/D EL/2015 FOR ASSESSMENT YEAR 2007-08. 12. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). 13. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSE SSEE, IN THE INSTANT CASE, HAS EARNED EXEMPT DIVIDEND INCOME OF RS.250/- ONLY. IT HAS BEEN HELD BY VARIOUS DECISIONS IN THE RECENT PAST THAT DISALLOWANCE U/S 14A R.W. RULE 8D CANNOT EXCEED THE ACTUAL DIVIDEND INCOME RECEIVED. SINCE THE ASSESSEE IN THE INSTANT CASE HAS RECEIVED DIVIDEND INCOME OF RS.250/- ONLY, THEREFORE, THE DISALLOWANCE U/S 14A R.W. RULE 8D COULD NOT HAVE EXCEEDED RS.250 /- HAD THE ASSESSEE CHALLENGED THE ORDER OF THE LD. CIT(A). IT HAS BEE N HELD IN VARIOUS DECISIONS THAT THE ASSESSEE CAN MAKE NEW PLEA DURING THE PENALTY P ROCEEDINGS WHICH WAS NOT TAKEN DURING THE ASSESSMENT PROCEEDINGS. SINCE IN THE INSTANT CASE THE ASSESSEE HAS RECEIVED EXEMPT DIVIDEND INCOME OF RS.250/- ONL Y, THEREFORE, SUCH DISALLOWANCE COULD NOT HAVE EXCEEDED TO RS.250/- HA D THE ASSESSEE CONTESTED THE ORDER OF THE LD. CIT(A). WE, THEREFORE, FIND S OME FORCE IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT AT LEAST PENA LTY SHOULD NOT BE LEVIED IN THE INSTANT CASE. WE, THEREFORE, SET-ASIDE THE ORDER O F THE LD. CIT(A) AND DIRECT THE 8 ITA NOS.4816 & 4817/DEL/2015 ASSESSING OFFICER TO CANCEL THE PENALTY SO LEVIED. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 14. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH MARCH, 2018. SD/- SD/- (BEENA A. PILLAI) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14-03-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI