M/s. Magnum Steels Ltd., New Delhi V. DCIT, New Delhi

ITA 4847/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3755 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2004-2005
• Appeal Filed On: 24-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Wrong claim; Ignorance of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4847/DEL /2015 ASSESSMENT YEAR: 2004-05 M/S MAGNUM STEELS LIMITED, 10, ESSEL HOUSE, ASAF ALI ROAD, NEW DELHI-110002 (PAN: AADCM6400E) VS DCIT, CENTRAL CIRCLE-16, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJIV SAXENA, ADVOCATE RESPONDENT BY: SHRI ATIQ AHMAD, SR. DR DATE OF HEARING : 13.09.2017 DATE OF PRONOUNCEMENT: 31.10.2017 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 25, NEW DELHI WHEREIN VIDE ORDER DATED 28/05/2015, PENALTY OF RS. 15,45,387/- IMPOSED UNDER SECTION 271 (1) (C) OF THE INCOME TAX ACT, 1961 AND PERTAINING TO ASSESSMENT YEAR 200 4 05 HAS BEEN CONFIRMED. ITA NO. 4847/DEL/2015 ASSESSMENT YEAR 2004-05 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY HAD FILED ITS RETURN INCOME AT RS. 76,93,966/- AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 153A/143 (3) OF THE INCOME TAX ACT, 1961 AT RS. 2,41,80,260/-. THE ASSE SSEE HAD CLAIMED SHORT-TERM CAPITAL LOSS OF 1,64,55,925/- ON SALE OF UNITS/MUTUAL FUNDS WHICH WAS DISALLOWED BY THE AO U NDER SECTION 94 (7) OF THE INCOME TAX ACT, 1961 WHILE MA KING THE ASSESSMENT. ON APPEAL BEFORE THE LD. CIT (APPEALS), THE LD. CIT (APPEALS) RESTRICTED THE ADDITION TO THE EXTENT OF DIVIDEND EARNED BY THE ASSESSEE ON UNITS/MUTUAL FUNDS AMOUNTING TO RS. 43,07,699/-. THE AO PROCEEDED TO IMPOSE PENALTY OF RS. 15,45,387/- UNDER SECTION 271(1)(C) OF THE INCOME T AX ACT, 1961 ON THE GROUND THAT THE ASSESSEE HAD FURNISHED INACC URATE PARTICULARS OF INCOME OF RS. 43,07,699/-. THE PENAL TY IMPOSED WAS UPHELD BY THE LD. CIT (APPEALS) AND NOW THE ASS ESSEE HAS APPROACHED THE ITAT AND HAS CHALLENGED THE ORDER OF THE LD. CIT (APPEALS). THE GROUNDS PREFERRED BY THE ASSESSEE AR E AS UNDER 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) IS ARBITRARY, BIASED AND BAD IN LAW AND F ACTS OF THE CASE IN SO FAR AS IT CONFIRMS THE PENALTY ORDER PAS SED BY THE ASSESSING OFFICER. 2. THAT THE LEARNED CIT (APPEALS) HAS GROSSLY ERRE D IN LAW AND ON FACTS IN CONFIRMING THE PENALTY U/S 271(1) ( C) ITA NO. 4847/DEL/2015 ASSESSMENT YEAR 2004-05 3 AMOUNTING TO RS 15,45,387/-. 3. THAT THE LEARNED CIT (APPEALS) HAS GROSSLY ERRE D IN COMING TO THE CONCLUSION THAT THE APPELLANT FURNISH ED INACCURATE PARTICULARS OF ITS INCOME FAILING TO APP RECIATE THAT THE ASSESSEE HAD ACTED BONAFIDE WHILE CLAIMING LOSS ON REDEMPTION OF UNITS OF MUTUAL FUND. 3.1 THAT THE LEARNED CIT (APPEALS) HAS GROSSLY ERR ED IN HOLDING THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME IGNORING THE FACT THAT TH E LOSS ON REDEMPTION OF UNITS WAS ADMISSIBLE TO THE APPELLANT EXCEPT FOR THE DEEMING PROVISION UNDER SECTION 97 (4) OF T HE ACT. 4 THAT THE APPELLANT CRAVES TO LEAVE, ADD, ALTER OR DELETE THE ABOVE GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME BY CLAIMING SETOFF OF CAPITAL GAINS AGAINST SHORT-TERM CAPITAL LOSS ARISI NG ON REDEMPTION OF VARIOUS MUTUAL FUNDS/UNITS. IT WAS SU BMITTED THAT THE CLAIM FOR THE ADJUSTMENT OF LOSS ARISING ON RED EMPTION OF UNITS AGAINST THE CAPITAL GAIN WAS MADE AS THE ASSE SSEE WAS UNAWARE OF THE PROVISIONS OF SECTION 94 (7) OF THE INCOME TAX ACT, 1961 AND, THEREFORE, IT WAS A BONA FIDE INADVERTENT ERROR COMMITTED BY THE ASSESSEE AND NO PENALTY WAS LEVIAB LE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IT WAS FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 94 (7) ARE DEEMING P ROVISIONS AND IN THE NORMAL COURSE THE LOSS ARISING ON REDEMPTION OF UNITS IS ADMISSIBLE. IT WAS SUBMITTED THAT THE ASSESSEE HAD FURNISHED FULL ITA NO. 4847/DEL/2015 ASSESSMENT YEAR 2004-05 4 DETAILS AND PARTICULARS OF ITS INCOME WHILE FILING THE RETURN OF INCOME AND IT WAS UNDER A BONA FIDE BELIEF REGARDING THE ALLOW- ABILITY OF THE CLAIM THAT THE SET OFF WAS CLAIMED A ND, THEREFORE, THE PENALTY COULD NOT HAVE BEEN LEVIED UPON THE ASSESSE E. RELIANCE WAS PLACED IN THE CASE OF CIT VERSUS DCM LTD IN ITA NO. 98/2013 WHEREIN THE HONBLE DELHI HIGH COURT HAS HE LD THAT MERELY BECAUSE A CLAIM IS MADE WHICH IS NOT FOUND S USTAINABLE, THE LEVY OF PENALTY UNDER SECTION 271 (1) (C) OF TH E INCOME TAX ACT, 1961 WAS UNSUSTAINABLE . IT WAS SUBMITTED THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LA W, BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICU LARS REGARDING THE INCOME OF THE ASSESSEE AND SUCH CLAIM MADE IN T HE RETURN CANNOT AMOUNT TO INACCURATE PARTICULARS. IT WAS SUB MITTED THAT ALTHOUGH THE CLAIM WAS NOT ACCEPTED, THE DETAILS TH EREOF WERE VERY MUCH AVAILABLE IN THE RETURN AND THAT THE ASSE SSEE HAD DISCLOSED ALL THE MATERIAL FACTS IN THE RETURN OF I NCOME AND, THEREFORE, IT COULD NOT BE SAID THAT THE ASSESSEE H AD FURNISHED INACCURATE PARTICULARS OF INCOME. IT WAS SUBMITTED THAT IN VIEW OF THE LEGAL AS WELL AS THE FACTUAL POSITION, THE PENA LTY SHOULD BE DELETED. ITA NO. 4847/DEL/2015 ASSESSMENT YEAR 2004-05 5 4. THE LD. DEPARTMENTAL REPRESENTATIVE READ OUT EXT ENSIVELY FROM THE ORDER OF THE LD. CIT (APPEALS) AND SUBMITT ED THAT THE PENALTY HAD BEEN RIGHTLY LEVIED AS IGNORANCE OF LAW COULD NOT BE AN EXCUSE. IT WAS SUBMITTED THAT THE ASSESSEE HAD M ADE A WRONG CLAIM ON ACCOUNT OF CAPITAL LOSS AND, THEREFORE, TH E PENALTY WAS RIGHTLY IMPOSED. THE LD. DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT THE PENALTY IMPOSED AND AS CONFIRMED BY THE LD . CIT (APPEALS) SHOULD BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. WE WOULD LIKE TO REFER TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT V. RELIANCE PETROPRODUCTS (P.) LTD . REPORTED IN 322 ITR 158, WHEREIN THE HONBLE COURT, WHILE INTERPRETING THE P ROVISIONS OF SECTION 271(1)(C) OF THE ACT, HELD THAT A GLANCE AT THE SAID PROVISION WOULD SUGGEST THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INC OME OF THE ASSESSEE. SECONDLY, AS PER THE HONBLE APEX COURT, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS I NCOME. IN THE FACTS OF THAT CASE, THE HONBLE COURT FOUND THAT IT WAS NOT A CASE OF CONCEALMENT OF THE PARTICULARS OF THE INCOME. HO WEVER, THE COUNSEL FOR THE REVENUE SUGGESTED THAT BY MAKING AN INCORRECT ITA NO. 4847/DEL/2015 ASSESSMENT YEAR 2004-05 6 CLAIM FOR THE EXPENDITURE ON INTEREST, THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. THE HON BLE COURT FURTHER OBSERVED THAT IT HAD TO ONLY SEE AS TO WHET HER IN THAT CASE, AS A MATTER OF FACT, THE ASSESSEE HAD GIVEN I NACCURATE PARTICULARS. THE HONBLE APEX COURT NOTED THAT AS P ER LAW LEXICON, THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN THE PLURAL SENSE); THE DETAILS OF A CLAIM, OR T HE SEPARATE ITEMS OF AN ACCOUNT. THEREFORE, THE WORD 'PARTICULAR' USE D IN SECTION 271(1)(C) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MADE. THE HONBLE SUPREME COURT FURTHER OBSERVED TH AT IN WEBSTER'S DICTIONARY , THE WORD 'INACCURATE' HAS BEEN DEFINED AS: 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORD ING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRAN SCRIPT.' THE HONBLE COURT OBSERVED THAT BY READING THE WORDS 'I NACCURATE' AND 'PARTICULARS' IN CONJUNCTION, THEY MUST MEAN TH E DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. THE H ONBLE COURT FURTHER NOTED THAT IT WAS AN ADMITTED POSITION THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR IN ACCURATE. THE HONBLE COURT OBSERVED THAT IT WAS NOT AS IF ANY ST ATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY IN CORRECT AND, ITA NO. 4847/DEL/2015 ASSESSMENT YEAR 2004-05 7 ACCORDINGLY, HELD THAT, PRIMA FACIE , THE ASSESSEE COULD NOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE HO NBLE COURT DISMISSED THE CONTENTION RAISED BY THE COUNSEL FOR THE REVENUE THAT 'SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICUL ARS OF SUCH INCOME'. THE HONBLE APEX COURT HELD THAT IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY, UNLESS THE CASE IS STRICTL Y COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. IT WAS THE HONBLE COURTS DICTA THAT BY ANY STRETCH OF IMAGIN ATION, MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271 (1)(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. 5.1 AS FAR AS THE PRESENT APPEAL BEFORE US IS CONC ERNED, IT IS SEEN THAT THE ASSESSING OFFICER, IN THE PENALTY ORD ER, HAS OBSERVED THAT THE ASSESSEEE HAS FURNISHED INACCURAT E PARTICULARS. THE AO HAS HELD THAT THE ACT OF CLAIMING SET OFF OF LOSS AGAINST CAPITAL GAINS WAS AN ACT OF FURNISHING OF INACCURAT E PARTICULARS OF INCOME. THE LD. CIT (A) HAS NOTED THAT IGNORANCE OF LAW WAS NO EXCUSE. HOWEVER, W ITH REGARD TO THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT, PERTAINING TO PENALTY, THE HO NBLE APEX COURT ITA NO. 4847/DEL/2015 ASSESSMENT YEAR 2004-05 8 HAS AUTHORITATIVELY LAID DOWN THAT MAKING OF A CLAI M BY THE ASSESSEE WHICH IS NOT SUSTAINABLE WILL NOT TANTAMOU NT TO FURNISHING INACCURATE PARTICULARS. IN CIT VS. RELIA NCE PETROPRODUCTS PVT. LTD. (SUPRA), THE HONBLE APEX C OURT HAS HELD AS FOLLOWS: A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN O RDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE PRESENT IS NOT A CASE OF CONCEALMENT OF INCOME. THAT IS NOT TH E CASE OF THE REVENUE EITHER. HOWEVER, THE LD. COUNSEL FOR TH E REVENUE SUGGESTED THAT BY MAKING INCORRECT CLAIM FOR THE EX PENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. AS PER LAW LEXICON, THE MEANING OF THE W ORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENS E); THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. TH EREFORE, THE WORD 'PARTICULARS' USED IN THE SECTION 271 (1) (C) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MAD E. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFOR MATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR IN ACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPL IED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, P RIMA FACIE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING IN ACCURATE PARTICULARS. THE LEARNED COUNSEL ARGUED THAT 'SUBMI TTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTER EST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INC OME.' WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN I NCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCU RATE PARTICULARS. 5.2 ALTHOUGH, BOTH THE LOWER AUTHORITIES HAVE HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME, ON AN ITA NO. 4847/DEL/2015 ASSESSMENT YEAR 2004-05 9 OVERALL CONSIDERATION ON THE FACTS, SUCH A VIEW IS NOT TENABLE IS THE PRESENT APPEAL THEREFORE, RESPECTFULLY FOLLOWIN G THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF RELIANCE P ETROPRODUCTS PVT. LTD. (SUPRA) WE SET ASIDE THE IMPUGNED ORDER A ND DIRECT THE AO TO DELETE THE PENALTY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31ST O CTOBER, 2017. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 31ST OCTOBER, 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR