ACIT, New Delhi V. M/s. Jay Metal Industries Pvt. Ltd., New Delhi

ITA 4848/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74155 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 03-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Assessee Lawyers: P K CHADHA
• Keywords: Business income; Cost of acquisition; Wrong claim; Difference of opinion
• Section: 143(3)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI G. D. AGARWAL, HONBLE VICE PRESIDENT AND SHRI A. T. VARKEY, JUDICIAL MEMBER I TA NO. 4848 /DEL/ 2011 (ASSESSMENT YEAR: 2006 - 07 ) ACIT, CIRCLE - 4(1), ROOM NO. 407, CR BUILDING IP ESTATE, NEW DELHI VS. JAY METAL INDUSTRIES PVT. LTD, E - 48/4, OKHLA INDUSTRIAL AREA, PHASE - II, NEW DELHI AAACJ1748B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. N. BHATIA, SR. DR RESPONDENT BY: P. K. CHADHA, CA O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE DELETION OF THE PENALTY BY THE LD CIT(A), - VII, NEW DELHI DATED 16.08.2011 , FOR THE ASSESSMENT YEAR 2006 - 07. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS FOLLOWS: - 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS ERRONEOUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE PENALTY U/S 271(1 )(C) OF THE ACT AMOUNTING TO RS. 11,15,000/ - LEVIED BY THE ASSESSING OFFICER. 3. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT PENALTY U/S 271(1)(C) CAN BE LEVIED ON ACCOUNT OF CIVIL INFRACTION OF LAW. IN THIS CASE, THE ASSESSEE PURPOSEFULLY COMPUTED COST OF ACQUISITION INCORRECTLY, BY NOT REDUCING THE ADVANCE OF RS.1 CRORE RECEIVED TOWARDS SALE OF ASSETS FROM COST OF ACQUISITION BUT INSTEAD IT WAS REDUCED FROM INDEXED COST OF ACQUISITION. 4. THE LD CIT(A) ERRED IN NOT APPRECIATING THAT THE LIGHT OF C LEAR PROVISIONS IN THIS REGARD, TWO OPINIONS WERE NOT POSSIBLE ON THIS ISSUE. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF HEARING. 3. APROPOS DELETION OF PENALTY OF RS. 11 , 15,000 / - . 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE APPELLANT/ ASSESSEE FILED ITS INCOME TAX RETURN FOR THE YEAR UNDER CONSIDERATION ON 30.11.2006 , DECLARING TOTAL INCOME OF RS. 41,13,680/ - . THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME - TAX ACT 1961 (HEREINAFTER THE ACT) VIDE ORDER DATED 10.11.2008 DETERMINING THE TOTAL INCOME AT RS. 1,07,33,680/ - BY MAKING AN ADDITION OF RS. 66,20,000/ - ON ACCOUNT OF LONG TERM CAPITAL GAIN. PAGE NO. 2 AGAINST THE ABOVE MENTIONED ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE LD CIT(A) - VII, NEW DELHI WHO VIDE ORDER DATED 16.11.2009 PARTLY ALLOWED THE APPEAL, CONFIRMING THE ADDITION TO THE EXTENT OF RS. 44,20,000/ - . THEREAFTER, THE ASSESSING OFFICER LEVIED PENALTY OF RS. 11,15,000/ - UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF THE ADDITION OF RS. 49,67,567/ - (ADDITION OF RS. 44,20,000/ - WHICH WAS CONFIRMED BY THE CIT(A) AND THE CLAIM OF LONG TERM CAPITAL LOSS OF RS. 5,47,567/ - WHICH WAS REJECTED BY THE ASSESSING OFFICER AND THE LD CIT(A) AS WELL) . 5. AGGRIEVED BY T HE SAID PENALTY IMPOSED ON IT BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A) WHO DELETED THE SAID PENALTY. THE REVENUE IS AGGRIEVED BY THE SAID DELETION OF PENALTY BY THE LD CIT(A) AND IS BEFORE US. 6. THE LD DR RELIED UPO N THE ORDER OF THE ASSESSING OFFICER AND THE AR RELIED UPON THE ORDER OF THE LD CIT(A). THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER, HAS OBSERVED THAT THE ASSESSEE HAS SOLD 1,30,000 SHARES OF MARK AUTO INDUSTRIES FOR A SUM OF RS. 44,20,000/ - . THESE SHARE S WERE PURCHASED IN THE YEAR 1994 - 95 FOR A CONSIDERATION OF RS. 78 LAKH. IN THE SAME YEAR OF ACQUISITION OF SHARE I.E 1994 - 95, ITSELF , THE ASSESSEE ALSO RECEIVED AN ADVANCE AMOUNT OF RS. 1 CRORE FOR SALE OF THE SHARES FROM M/S APPLE FINANCIAL SERVICES LTD, BUT THAT SALE DID NOT MATERIALIZE; SO ASSESSEE FORFEITED THE SAID AMOUNT OF RS. 1 CRORES. THE ASSESSEE HAD CLAIMED LONG TERM CAPITAL LOSS COMPUTED U/S 48 & 51 OF THE ACT AT RS. 5, 47,567/ - FROM THE ABOVE TRANSACTION. THE ASSESSING OFFICER AFTER VERIFYING THE MATERIALS ON RECORD INVOKED THE PROVISION OF SECTION 51 OF THE ACT AND CALC ULATED LONG TERM CAPITAL GAIN AT RS. 66,20,000/ - . THE DIFFERENCE IN CALCULATION WAS THAT THE ASSESSEE DEDUCTED THE AMOUNT OF ADVANCE OF RS. 1,00,00,000/ - FROM THE INDEXED COST OF ACQUISITION , WHEREAS , THE ASSESSING OFFICER WAS OF THE VIEW THAT THE AMOUNT ADVANCED SHOULD BE DEDUCTED FROM THE COST OF ACQUISITION. ACCORDINGLY , MADE AN ADDITION OF RS. 66,20,00 0/ - AS COMPUTED BELOW TO THE INCOME RETURNED BY THE ASSESSEE : - SALE PRICE RS. 44,20,000/ - LESS: 1. COST OF ACQUISITION RS. 78 LAKH 2. ADVANCE RECEIVED AS PER SECTION 51 OF THE ACT I CRORE RS. 22,00,000/ - LTCG RS. 66,20,000/ - 7 . AND THE ASSESSING OFFICER ADDED INCOME OF THE ASSESSEE BY RS. 41,13,680/ - . THUS A TOTAL INCOME OF RS. 1,07,33,680 / - COMPUTED BY ASSESSING OFFICER I.E. (RS. 66,20,000 + RS. 41,13,680/ - ) . AGGRIEVED BY THE SAID ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE APPEALED BEFORE THE LD CIT(A), WHO RELIED UPON THE DECISION OF ITAT , MUMBAI BENCH IN THE CASE OF SMT. SAMITA N SHAH VS. JCIT 94 ITD 492 AND GAVE A PARTIAL RELIEF BY DIRECT ING THE ASSESSING OFFICER, TO TAKE THE COST OF ACQUISITION AS NIL ; AND THUS THE VALUE OF LONG TERM PAGE NO. 3 CAPITAL GAIN WAS COMPUTED AS RS. 44,20,000/ - . THIS WAY THE LD CIT(A) ALLOWED RELIEF OF RS. 22,00,000/ - AND THE INDIRECT ADDITION OF RS. 49,67,567/ - WAS CONFIRMED. THEREAFTER, THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS AND SERVED NOTICE TO THE ASSESSEE UNDER SECTION 271(1)(C) ; THE ASSESSEE REPLIED THAT THERE IS NO CAUSE TO INITIATE THE PENALTY PROCEEDING S SINCE THE COMPANY HAS DISCLOSED ALL THE PARTICULARS OF ITS INCOME , IN ITS RETURN OF INCOME . HOWEVER, THE ASSESSING OFFICER, IGNORED THE REPLY OF THE ASSESSEE ; AND IN HIS IMPUGNED PENALTY ORDER HAS MENTIONED ABOUT CERTAIN SALE OF SHARES OF ONE M/S. PASHUPA TI HARYANA & WOOLLEN MILLS LTD. BY THE ASSESSEE WHOSE COST OF ACQUISITION WAS FOR RS. 44,26,250/ - AND WHICH WAS SOLD IN THE RELEVANT ASSESSMENT YEAR FOR A LUMP SUM PRICE OF RS. 6,000/ - AND THAT THE ASSESSEE ACCORDINGLY HAS CLAIMED A LOSS OF RS. 44,26,250/ - . THE ASSESSING OFFICER FURTHER OBSERVES IN HIS PENALTY ORDER THAT THIS CLAIM OF LOSS ON THE SALE OF THE SAID SHARES WAS FOUND TO BE NOT GENUINE BY THE ASSESSING OFFICER AS WELL AS THE LD CIT(A) ; AND WITHOUT TAKING ANY NOTICE TO THE CLAIM OF THE ASSESSEE THAT ITS QUANTUM APPEAL IS PENDING BEFORE THE ITAT, THE ASSESSING OFFICER PROCEEDED ON THE SAID FACTUAL BACKGROUND AND IMPOSED A PENALTY OF RS. 11,15,000 /. 8 . AGGRIEVED BY THE SAID PENALTY IMPOSED BY THE ASSESSING OFFICER THE ASSESSEE PREFERRED AN APPEAL BEFORE LD CIT(A) WHO HELD AS FOLLOW S: - 4.2 IN THE INSTANT CASE, THE ASSESSEE HAD NOT FURNISHED THE INACCURATE PARTICULARS OF HIS INCOME WHEN IT FURNISHED THE RETURN AS THE APPELLANT HAS DISCLOSED ALL THE TRANSACTIONS IN ITS PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE RETURN OF INCOME. TH ERE IS ONLY DIFFERENCE OF OPINION ON THE RELEVANT ISSUE. IF AN ASSESSEE GIVEN AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E , IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FAL SE. IN COMMISSIONER OF INCOME - TAX VS. VAMCHAMPIGONS AND AGRO PRODUCTS (2006) 284 ITR 408 THE ISSUE BEFORE THE DELHI HIGH COURT WAS LEVY OF PENALTY ON CONCEALMENT OF INCOME ON THE PROFIT FROM SALE OF DEBENTURES TREATED AS CAPITAL GAINS IN PRIOR YEARS, WHICH THE ASSESSEE DID NOT SHOW AS BUSINESS INCOME BUT AS CAPITAL GAINS IN RELEVANT ASSESSMENT YEAR. THE COURT HELD THAT THERE WAS NO CONCEALMENT OF INCOME AND PENALTY COULD NOT IMPOSED. IT IS REPEATEDLY HELD BY THE COURTS THAT THE PENALTY ON THE GROUND OF CONC EALMENT OF PARTICULARS OR NON - DISCLOSURE OF FULL PARTICULARS CAN BE LEVIED ONLY WHEN IN THE ACCOUNT/S RETURN AN ITEM HAS BEEN SUPPRESSED DISHONESTLY OR THE ITEM HAS BEEN CLAIMED FRAUDULENTLY OR A BOGUS CLAIM HAS BEEN MADE. WHEN THE FACTS ARE CLEARLY DISCLO SED IN THE RETURN OF INCOME, PENALTY CANNOT BE LEVIED AND MERELY BECAUSE AN AMOUNT IS NOT ALLOWED OR TAXED TO INCOME, IT CANNOT BE SAID THAT THAT THE ASSESSEE HAD FILED INACCURATE PARTICULARS OR CONCEALED ANY INCOME CHARGEABLE TO TAX. FURTHER, CONSCIOUS CO NCEALMENT IS NECESSARY. EVEN IF SOME DEDUCTION OR BENEFIT IS CLAIMED BY THE ASSESSEE WRONGLY BUT BONA FIDE AND NO MALA FIDE CAN BE ATTRIBUTED, THE PENALTY WOULD NOT BE LEVIED. RELIANCE IS ALSO PLACED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158. 4.3 FROM THE DECISIONS CITED ABOVE AND THE CASE LAWS RELIED UPON THE APPELLANT, IT CAN BE CONCLUDED THAT MERE DISALLOWANCE OR ADDITION WILL NOT BE SUFFICIENT FOR LEVY OF PENALTY U/S 271(1)(C). IN VI EW OF THE ABOVE AND TAKING INTO CONSIDERATION THE FACTS (A) THAT THE APPELLANT HAD DISCLOSED ALL MATERIAL FACTS AND (B) ON THE CLAIM OF APPELLANT TWO OPINIONS ARE POSSIBLE, IT IS HELD THAT THERE IS NO CASE OF CONCEALMENT OR PAGE NO. 4 FURNISHING OR INACCURATE PARTICU LARS OF ITS INCOME IN RESPECT OF COST OF ACQUISITION FOR THE PURPOSE OF ARRIVING AT LONG TERM CAPITAL GAIN. THEREFORE, IT IS HELD THAT A.O. WAS NOT JUSTIFIED IN LEVYING PENALTY U/S 271(1)(C) AMOUNT TO RS. 11,15,000/ - . ACCORDINGLY, THE SAME IS CANCELLED. 9 . IT HAS BEEN BROUGHT TO OUR NOTICE THAT ITAT DELHI BENCH HAS ADJUDICATED THE QUANTUM APPEAL PREFERRED BY THE ASSESSEE AS WELL BY THE REVENUE IN THE ASSESSEES OWN CASE FOR THE RELEVANT ASSESSMENT YEAR 2006 - 07 . IN THE SAID ORDER THE TRIBUNAL HELD AS FOLLOWS: - .THE CORRECT APPLICATION OF LAWS ON THE BASIS OF EQUITY ALSO SUGGESTS THAT FIRST OF ALL COST OF ACQUISITION HAS TO BE CALCULATED IN VIEW OF PROVISIONS OF SECTION 51 AND THEN IT IS TO BE INDEXED AS PER PROVISIONS OF SECTION 48. THEREFORE, IN O UR CONSIDERED OPINION, THE LD CIT(A) HAS RIGHTLY REDUCED THE AMOUNT OF ADVANCE RECEIVED FROM THE COST INCURRED BY THE ASSESSEE AND WHEN THE RESULT BECAME NEGATIVE HE APPLIED ZERO VALUE AS THE COST OF ACQUISITION WHICH IN OUR OPINION IS A CORRECT VIEW AND I S IN ACCORDANCE WITH THE HONBLE BOMBAY TRIBUNAL CASE (SUPRA) AS RELIED UPON BY THE LD CIT(A). THE ASSESSING OFFICER WAS ALSO NOT CORRECT IN ADDING THE NEGATIVE FIGURE ARRIVED AT AFTER REDUCING THE ADVANCE RECEIVED FROM COST INCURRED BY THE ASSESSEE AS THE RE CANNOT BE ANY NEGATIVE COST FOR THE COST OF AN ASSET. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A). 10 . WE FIND THAT THE ASSESSING OFFICER IN HIS PENALTY ORDER HAS ERRONEOUSLY BROUGHT IN A SALE OF SHARES OF M/ S PASHUPATI HARYANA WOLLEN MILLS LTD, WHICH HAS NOTHING TO DO WITH THE ASSESSEES CASE. THUS ON A WRONG FACTUAL MATRIX THE ASSESSING OFFICER HAS PROCEEDED TO PENALIZE THE ASSESSEE. WE FIND THAT THERE IS NO WHISPER ABOUT SUCH A TRANSACTION IN THE ASSESSMENT ORDER, OR IN THE CIT(A) S ORDER OR ITATS ORDER IN THE ASSESSEES QUANTUM ASSESSMENT CASE FOR THE RELEVANT ASSESSMENT YEAR. 11 . FROM THE FACTS AND THE CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAD NOT FURNISHED ANY INACCURATE PARTICULARS OF ITS INCOME , WHEREAS IN THE INSTANT CASE, THE ASSESSEE HAD DISCLOSED ALL THE TRANSACTIONS IN ITS PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE RETURN OF INCOME. WE FIND THAT THERE WAS ONLY A DIFFERENCE OF OPINION ON THE RELEVANT ISSUE. THE DIFFERENCE OF OPIN ION CANNOT BE TERMED PER - SE, AS CONCEALMENT U/S 271( C ) OF THE ACT. 12 . IN THIS CASE THE ADDITION WAS SOLELY MADE BY THE ASSESSING OFFICER, DUE TO THE DIFFERENCE IN THE INTERPRETATION OF COMPUTATION OF CAPITAL GAINS UNDER SECTION 48 & 51 OF THE ACT . THE WORDS IN SECTION 271 (1) (C) OF THE ACT ARE PLAIN AND SIMPLE. THER EFORE IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING A N INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. IT IS A WELL SETTLED LAW THAT THE PENALTY ON THE GROUND OF CONCEALMENT OF PARTICULARS OR NON - DISCLOSURE OF FULL PARTICULARS CAN BE LEVIED ONLY WHEN IN THE ACCOUNTS/ RETURN OF AN ITEM HAS BEEN SUPPRESSED DISHONESTLY OR THE ITEM HAS BEEN CLAIMED FRAUDULENTLY OR A BOGUS CLAIM HAS BEEN MADE. THE LD CIT(A) HAS RIGHTLY POINTED OUT THAT WHEN THE FACTS WERE CLEARLY DISCLOSED IN THE RETURN OF PAGE NO. 5 INCOME, IT CANNOT BE SAID THAT THE ASSESSEE HAD FILED INACCURATE PARTICULARS OR CONCEALED ANY INCOME CHARGEABLE TO TAX. THERE WAS NO CONCEALMENT AND EVEN IF SOME DEDUCTION OR BENEFIT WAS WRONGLY CLAIMED BY THE ASSESSEE WHICH WAS BONAFIDE; THEN NO MALA FIDE CAN BE ATTRIBUTED ON THE ASSESSEE AND THEREFORE PENALTY CANNOT BE LEVIED. WE AGREE WITH THE REASONING OF THE LD CIT(A) THAT THE PENALTY U/S 271(1)(C) CANNOT LEVIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE . AS STATED ABOVE, THE ASSESSEE HAD DISCLOSED AL L THE FACTS ; AND MERELY ON THE BASIS OF DIFFERENCE OF OPINION , IT CANNOT BE HELD THAT THERE WAS CONCEALMENT OF INCOME BY FURNISHING INACCURATE PARTICULARS ON THESE FACTS THE LD CIT(A) RIGHTLY FOLLOWED THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF R ELIANCE PETROCHEM 322 ITR 158. THEREFORE WE CONFIRM THE ORDER OF THE LD CIT(A) . 13 . IN THE RESULT WE FIND NO INFIRMITY IN THE ORDER OF THE LD CIT(A) AND THEREFORE WE DISMISS THE APPEAL PREFERRED BY THE REVENUE AND CONFIRM THE ORDER OF THE LD CIT(A) ORDER. 14 . IN THE RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 1 . 01 . 2014 . - S D / - - S D / - ( G. D. AGARWAL) (A. T. VARKEY) HONBLE VICE PRESIDENT JUDICIAL MEMBER DATED 3 1 / 01 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI