D.C.I.T., CIRCLE 3(1), MUMBAI V. EKANSHA ENTERPRISES PVT.LTD., MUMBAI

ITA 493/MUM/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0794 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: J D MISTRI
• Keywords: Avoidance of tax
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.493/M/2014 ASSESSMENT YEAR: 2007-08 D.C.I.T., CIRCLE 3(1), ROOM NO.607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020 VS. M/S. EKANSHA ENTERPRISE PVT. LTD., 147, 14 TH FLOOR, ATLANTA, NARIMAN POINT, MUMBAI - 21 PAN: AABCE 4798B (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI J.D. MISTRI, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 06.07.2015 DATE OF PRONOUNCEMENT : 06.07.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 08.03.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2007-08. 2. THE SOLE ISSUE RAISED BY THE REVENUE IN THIS APP EAL IS RELATING TO THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TA X ACT. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO), DURING THE ASSESSMENT PROCE EDINGS, MADE A DISALLOWANCE OF RS.31,46,288/- UNDER SECTION 14A RE AD WITH RULE 8D AND FURTHER DISALLOWANCE OF RENT EXPENDITURE OF RS.81,6 0,000/-. IN RELATION TO THE ABOVE STATED DISALLOWANCES, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. ITA NO.493/M/2014 M/S. EKANSHA ENTERPRISE PVT. LTD. 2 CIT(A). IN THE MEANTIME THE AO INITIATED THE PENAL TY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) RESTRI CTED THE DISALLOWANCE UNDER SECTION 14A TO RS.1,73,446/-, HOWEVER, MADE T HE DISALLOWANCE OF THE REMAINING AMOUNT OF RS.30,31,633/- UNDER DIFFERENT HEAD ON ACCOUNT OF MARK TO MARK LOSSES IN RELATION TO O&F TRANSACTIONS. H E ALSO CONFIRMED THE DISALLOWANCE OF RENT EXPENDITURE. THE ASSESSEE WEN T IN APPEAL BEFORE THE ITAT AGAINST THE SAID QUANTUM DISALLOWANCE. THE ITAT CONFIRMED THE DISALLOWANCE UNDER SECTION 1 4A OF RS.1,73,446/-, HOWEVER, DELETED THE DISALLOWANCE OF EXPENDITURE IN RELATION TO MARK TO MARK LOSSES OF RS.30,31,633/-. IN RELATI ON TO RENT DISALLOWANCE, THE ITAT OBSERVED THAT THE ASSESSEE HAD TAKEN THE PREMI SES ON RENT FOR USE OF ITS BUSINESS PURPOSES. HOWEVER, THE ASSESSEE DURING TH E YEAR INTENDED TO ENGAGE IN ANOTHER ACTIVITY OF TRADING AND SOFTWARE DEVELOP MENT WHICH DID NOT COMMENCE DURING THE YEAR. THE TRIBUNAL OBSERVED TH AT POSSIBILITY COULD NOT BE RULED OUT THAT THE BUSINESS PREMISES WAS TAKEN F OR THE INTENDED ACTIVITY OF TRADING AND SOFTWARE DEVELOPMENT ALSO. UNDER THESE CIRCUMSTANCES, THE TRIBUNAL RESTRICTED THE DISALLOWANCE TO A REASONABL E AMOUNT OF RS.10 LAKHS AND THE DISALLOWANCE OF THE REMAINING AMOUNT WAS DELETE D. IN THE MEANWHILE, THE AO LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF TH E ACT. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) AGITATING THE LEVY OF PENALTY. 3. THE LD. CIT(A) CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE FOUND THAT IT WAS NEITHER A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME NOR OF CONCEALMENT OF INCOME. HE, RELYING U PON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIAN CE PETROPRODUCTS (P.) LTD. [2010] 322 ITR 158 (SC), HELD THAT EACH AND E VERY CASE OF DISALLOWANCE CANNOT BE SAID TO BE A CASE OF LEVY OF PENALTY. HE THEREFORE DELETED THE PENALTY ITA NO.493/M/2014 M/S. EKANSHA ENTERPRISE PVT. LTD. 3 SO LEVIED BY THE AO. BEING AGGRIEVED, THE DEPARTME NT HAS COME IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. ADMITTEDLY, IN THIS CASE, THE ASSESSEE NE ITHER HAD FILED ANY INACCURATE PARTICULARS OF INCOME NOR HAD CONCEALED ITS INCOME. THE AO HAD COMPUTED THE DISALLOWANCE UNDER SECTION 14A AT RS.31,46,288/- WH ICH ULTIMATELY HAS BEEN RESTRICTED BY THE TRIBUNAL TO RS.1,73,446/- ONLY. THE TRIBUNAL HAS FURTHER DELETED THE MAJOR PORTION OF THE DISALLOWANCE OUT O F RENT EXPENDITURE. OUT OF THE TOTAL DISALLOWANCE OF RS.71,60,000/- MADE BY TH E AO IN THIS RESPECT, THE TRIBUNAL HAS RETAINED IT ONLY TO THE EXTENT OF RS.1 0 LAKHS. WE FIND THAT IT IS NOT A CASE OF FURNISHING OF WRONG PARTICULAR OF INCOME BY THE ASSESSEE FOR THE PURPOSE OF AVOIDANCE OF TAX. ONLY BECAUSE SOME DIS ALLOWANCE OF EXPENDITURE HAS BEEN MADE THAT ITSELF IS NOT SUFFICIENT TO HOLD THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCE ALED THE INCOME WARRANTING ANY LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) A ND THE SAME IS UPHELD. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 06.07.201 5. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.10.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI ITA NO.493/M/2014 M/S. EKANSHA ENTERPRISE PVT. LTD. 4 THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.