DCIT, New Delhi V. M/s. Housing & Urban Development Corp. Ltd., New Delhi

ITA 499/DEL/2010

• Counselvise Citation: 49920114 RSA 2010
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 03-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: KRISHAN MALHOTRA
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.499/DEL/2010 ASSESSMENT YEAR : 2006-07 DCIT, CIRCLE 12 (1), NEW DELHI. VS. HOUSING & URBAN DEVELOPMENT CORPN. LTD., CORE 7A, INDIA HABITAT CENTRE, LODHI ROAD, NEW DELHI. PAN : AAACH0632A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KRISHAN MALHOTRA, ADVOCATE REVENUE BY : SHRI SATPAL SINGH, SR.DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE DEPARTMENT FOR ASSESSMENT YEAR 1997-98 AGAINST THE ORDER DATED 30.11.2009 PASSED BY T HE CIT (A)-XV, NEW DELHI. THE FOLLOWING GROUNDS OF APPEAL HAVE BEE N TAKEN:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE ORDER OF THE CIT (A) IS WRONG, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE PENALTY IMPOSED U/S 271 (1)(C) OF RS.1,86,62,000/- STATING THAT THE ASSESSEE CO ULD NOT BE SAID TO HAVE CONCEALED THE PARTICULARS OF INCOME WHERE AS THE FACTS OF THE CASE STATE OTHERWISE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE PENALTY AS AFTER INSERTION OF EXPLANATION 1 TO THE PROVISIONS OF SECTION 271 (1)(C), THE ONUS IS ON THE ASSESSEE TO SHOW THAT THERE WAS NO INTENTION OF ITA NO.499/DEL/2010 2 CONCEALMENT OF INCOME WHEREAS THE LD. CIT (A) HAS WRO NGLY INTERPRETED THE SAME IN THE FAVOUR OF THE ASSESSEE. 2. GROUND NO.1 IS GENERAL. 3. APROPOS GROUND NOS.2 AND 3, THE FACTS ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 28.11.97 DECLARING INCOME OF RS.64,53,59,920/-. ASSESSMENT U/S 143 (3) OF THE IT ACT WAS COMPLETED ON 28.03.00 ON INCOME OF 90,09,66,496/-. ONE OF TH E DISALLOWANCES WAS RELATING TO INTEREST ACCRUED ON KFW GRANT OF RS.4 .34 CRORES PERTAINING TO THE PREVIOUS YEAR. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE FOR IMPOSITION OF PENALTY U/S 271 (1)(C) OF THE ACT ON 08.12.08. THE ASSESSEE MADE SUBMISSION BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 17.12.08. THE ASSESSING OFFICER, AFT ER CONSIDERING THE FACTS ON RECORD AND THE APPELLATE ORDER OF CIT (A) A ND THE ITAT, DELHI, LEVIED PENALTY ON ACCOUNT OF ADDITION MADE IN THE A SSESSMENT ORDER. THE ASSESSING OFFICER, WHILE IMPOSING PENALTY, OBSERVED T HAT THE EXPLANATION SUBMITTED BY THE ASSESSEE WAS NOT ACCEPTABLE . THE ASSESSING OFFICER FURTHER GAVE A FINDING THAT MERELY FI LING APPEAL BEFORE THE HIGH COURT DID NOT NEGATE THE FACT THAT AT ALL APPELLATE LEVELS IT HAD BEEN FOUND THAT THE ASSESSEE HAD INCORRECT LY UNDERSTATED ITS INCOME BY REDUCING ITS PROFIT. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE MALA FIDE INTENTION OF THE ASSESSEE WA S CLEAR FROM THE FACT THAT THE ASSESSEE HAD, OF ITS OWN, ADDED BACK A SUM OF RS.29.62 CRORES ON ACCOUNT OF CHANGE OF ACCOUNTING PO LICY IN A.Y. 96- 97 ON THE BASIS OF THE OPINION OF ITS AUDITOR, WHEREAS , UNDER SIMILAR CIRCUMSTANCES DURING THE RELEVANT ASSESSMENT YEAR, IT HAD NOT CONSIDERED THE INTEREST EARNED ON KFW FUNDS AS ITS INCO ME. 4. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT (A ) DELETED THE PENALTY IMPOSED BY THE ASSESSING OFFICER. GRIEVANCED TH ERE AGAINST, THE DEPARTMENT IS IN APPEAL BEFORE US. ITA NO.499/DEL/2010 3 5. CHALLENGING THE IMPUGNED ORDER, THE LD. DR CONTE NDED THAT THE LD. CIT (A) HAS ERRED IN DELETING THE PENALTY OF ` 1,86,62,000/- RIGHTLY LEVIED ON THE ASSESSEE BY THE ASSESSING OFFICER; THAT WHILE DOING SO, THE LD. CIT (A) HAS ERRED IN OBSERVING THAT THE ASSESSEE COULD NOT BE SAID TO HAVE CONCEALED THE PARTICULARS OF ITS INCOME; THAT THE LD. CIT (A) HAS ERRED IN IGNORING THAT AS PER EXPLANATION 1 T O SECTION 271 (1)(C) OF THE ACT, IT IS THE ASSESSEES ONUS TO SHOW THAT IT WAS NOT THE ASSESSEES INTENTION TO CONCEAL ITS INCOME; THAT THE LD. CIT (A) HAS FAILED TO CONSIDER THAT THE ASSESSEE HAD INCORRECTLY UND ERSTATED ITS INCOME BY REDUCING ITS PROFIT WITH A MALA FIDE INTEN TION; AND THAT THE LD. CIT (A) HAS ALSO FAILED TO APPRECIATE THAT THE SAI D MALA FIDE INTENTION OF THE ASSESSEE WAS CLEAR FROM THE FACT THAT THE ASSESSEE HAD, OF ITS OWN, ADDED BACK A SUM OF ` 29.62 CRORES ON ACCOUNT OF CHANGE OF ACCOUNTING POLICY IN A.Y. 1996-97 ON THE BASIS OF ITS AUDITORS OPINION, WHEREAS UNDER SIMILAR CIRCUMSTANCES, DURING TH E YEAR, THE ASSESSEE HAD NOT CONSIDERED THE INTEREST EARNED ON KFW FU NDS AS ITS INCOME. 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN C ONTENDED THAT THERE IS NO ERROR WHATSOEVER IN THE ORDER OF THE LD. CIT (A); THAT THE ORDER DELETING THE PENALTY IS A PERFECTLY LEGAL WELL -REASONED ELABORATE ORDER, CONSIDERING APPROPRIATELY THE FACTS AS WELL AS T HE LEGAL POSITION APPLICABLE; THAT THE ASSESSEE HAD DULY DISCLOSED THE TREA TMENT OF THE INTEREST ON KFW GRANTS TO IT IN ITS NOTES ON ACCOUNTS; THAT THE CHANGE IN ACCOUNTING POLICY WAS SUGGESTED BY THE ASSESSEES AUDITO RS IN TERMS OF AS-I ISSUED BY THE ICAI; THAT IN THESE FACTS, THERE WAS NO WARRANT TO HOLD THAT THE ASSESSEE HAD REMAINED UNABLE TO OFFER AN Y EXPLANATION TO JUSTIFY ITS CLAIM; THAT THIS APART, AN APPEAL STOOD FILED BEFORE THE HONBLE HIGH COURT AGAINST THE TRIBUNAL ORDER WHEREB Y THE ADDITION MADE IN THE ASSESSMENT ORDER HAD BEEN CONFIRMED; THAT THE ITA NO.499/DEL/2010 4 ASSESSEES AUDITOR HAD NOT QUALIFIED HIS AUDIT REPORT ON ACCOUNT OF CHANGE IN ACCOUNTING POLICY AND HE HAD SIMPLY DISCLOSE D THE IMPACT ON THE CHANGE IN THE ACCOUNTING POLICY AS PER AS-I; THA T HE ASSESSEE COMPANY HAD NOT ADDED BACK ` 29.62 CRORES OF ITS OWN ON ACCOUNT OF CHANGE IN ACCOUNTING POLICY, REGARDING WHICH, THE A SSESSING OFFICER HAD WRONGLY OBSERVED IN THE ASSESSMENT ORDER; THAT IT HA D BEEN INCORRECT TO STATE THAT IT WAS UNDER SIMILAR CIRCUMSTA NCES THAT THE INTEREST WHICH ACCRUED ON KFW FUNDS HAD NOT BEEN CONSI DERED BY THE ASSESSEE AS ITS INCOME; THAT THE ACCOUNTING TREATMENT ADO PTED BY THE ASSESSEE COMPANY WAS DULY DISCLOSED IN ITS FINANCIAL STATEM ENTS AND ALSO IN THE ASSESSMENT PROCEEDINGS; THAT THE ASSESSEE NURTURE D A BONA FIDE BELIEF IN THE CORRECTNESS OF THE ACCOUNTING TREA TMENT ACCORDED; AND THAT THEREFORE, THE APPEAL FILED BY THE DEPARTM ENT, CARRYING NO MERIT, BE DISMISSED. 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MAT ERIAL ON RECORD. THE PENALTY WAS LEVIED BY THE ASSESSING OFFICER , OBSERVING, INTER ALIA, THAT THE ASSESSEE HAD, OF ITS OWN, ADDED BAC K A SUM OF ` 29.62 CRORES ON ACCOUNT OF CHANGE OF ACCOUNTING POLI CY IN A.Y. 1996- 97, ON THE BASIS OF THE OPINION OF ITS AUDITOR, WHEREA S UNDER SIMILAR CIRCUMSTANCES, DURING THE YEAR, THE ASSESSEE HAD NOT CON SIDERED THE INTEREST EARNED ON KFW FUNDS AS ITS INCOME. 8. IN THIS REGARD, IT IS SEEN THAT AS RIGHTLY CONSIDERED BY THE LD. CIT (A) IN THE ORDER UNDER APPEAL, IN PARA 3 OF SCHEDUL E U (SIGNIFICANT ACCOUNTING POLICIES), THE ASSESSEE HAD DULY DISCLOSED THAT THE BASIS OF THE ACCOUNTING WAS CASH BASIS AND WAS AS PER THE INSTRU CTIONS AND GUIDELINES CONTAINED IN THE LETTER DATED 28.04.95 OF THE NATIONAL HOUSING BANK, AS PER WHICH, THE ASSESSEE WAS ADVISED ON THE ACCOUNTING TREATMENT IN NPA CASES AND THE PROVISIONING REQUIREMENTS THEREUNDER. IN THE SCHEDULE V NOTES FORMING PART OF ITS ACCOUNTS, THE ASSESSEE COMPANY HAD DISCLOSED THAT DUE TO CHANGE IN ACCO UNTING ITA NO.499/DEL/2010 5 POLICY REGARDING TREATMENT OF KFW GRANT, THE PROFIT DURING THE YEAR WAS LOWER BY ` 13.01 CRORES (INCLUDING ` 4.34 CRORES PERTAINING TO THE PREVIOUS YEAR). THERE WAS A REVIEW OF ACCOUNTS BY THE CAG U/S 619 (4) OF THE COMPANIES ACT. THIS REVIEW FORMED PART OF THE ASSESSEES ANNUAL REPORT. THEREIN THE PRINCIPAL DIRECTOR OF C OMMERCIAL AUDIT STATED AS FOLLOWS:- ATTENTION IS INVITED TO NOTE 3(A) OF NOTES FORMING PART OF ACCOUNTS STATING THAT DUE TO CHANGE IN ACCOUNTING POLICY OF INTEREST ACCRUED ON KFW GRANT THE PROFIT IS LOWER BY 13. 01 CRORES (INCLUDING ` 4.34 CRORE PERTAINING TO THE PREVIOUS YEAR.) 9. IN PARA 3 OF SCHEDULE U (SUPRA), IT STOOD MENTIONE D AS FOLLOWS:- GRANT/SUBSIDY THE GRANT/SUBSIDY RECEIVED IS BEING ACCOUNTED FOR ON CASH BASIS. THE BALANCE OF UNUTILIZED GRANT AT THE END OF THE YEAR I S SHOWN AS CURRENT LIABILITIES AND OVER SPENT AMOUNT IS SHOWN A S RECOVERABLE UNDER THE HEAD LOANS AND ADVANCES. GRANT RECEIVED AS REIMBURSEMENT AGAINST EWS/LIG SCHEM ES, APPROVED BY KFW IS BEING ACCOUNTED FOR ON CASH BASI S. THE INTEREST ACCRUED ON SUCH SCHEMES IS BEING CREDITED TO KFW R & D FUND ACCOUNT WHICH IS TO BE UTILIZED AS PER TERMS OF THE AGREEMENT WITH KFW. 10. IT WAS NEVER THE CASE OF THE ASSESSING OFFICER, IT IS SEEN, EITHER THAT THE ASSESSEE HAD FAILED TO OFFER AN EXPLANATION, O R THAT ITS EXPLANATION HAD BEEN FOUND TO BE FALSE. THE ASSESSING OFFICERS STAND WAS THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULAR S OF ITS INCOME BY MAKING A WRONG CLAIM AND THAT THE ASSESSEE HA D NOT BEEN ABLE TO DISCHARGE BY ONUS OF PROOF, THAT THERE WAS NO CONCEALMENT. HOWEVER, WE FIND THIS STAND OF THE A.O. TO BE BASELESS, AS ALSO RIGHTLY CONSIDERED BY THE LD. CIT (A). IN VIEW OF PARA 3 OF THE SCHEDULE U (SUPRA), ALL THE NECESSARY FACTS MATERIAL TO THE COMPUT ATION OF TOTAL INCOME STOOD DULY DISCLOSED BY THE ASSESSEE BEFORE THE ASSESSI NG OFFICER. THE ASSESSING OFFICER DID NOT DELINEATE ANY DEFICIENCY IN SUCH FURNISHING OF FACTS BY THE ASSESSEE AND THAT BEING SO, WE HOLD THAT ITA NO.499/DEL/2010 6 THERE WAS NO OCCASION FOR THE ASSESSEE TO BE VISITED WITH THE PENALTY WRONGLY IMPOSED. THE LEGAL REQUIREMENT FOR THE ASSESSEE TO GO BEYOND THE RIGOUR OF SECTION 271 (1)(C) OF THE ACT IS TO OFFER AN EXPLANATION, WHICH EXPLANATION IS BONA FIDE. IN THE PRESENT CASE, AS CORRECTLY FOUND BY THE LD. CIT (A), AS DISCUSSED IN THE PRECEDING PARAGRAPHS, THE ASSESSEE AMPLY DEMONSTRATED ITS EXPLANATI ON TO BE A BONA FIDE EXPLANATION. ALL THE FACTS NECESSARY FOR THE COMPUTATION OF THE TOTAL INCOME OF THE ASSESSEE STOOD DULY DISCLOSED IN T HE ASSESSEES INCOME-TAX RETURN ITSELF. THAT BEING SO, THE ASSESSEE CA NNOT, BY ANY STRETCH OF IMAGINATION, BE SAID TO HAVE EITHER CONCEA LED ITS INCOME, OR FURNISHED INACCURATE PARTICULARS THEREOF. 11. IN VIEW OF THE ABOVE, WE HOLD THAT THE LD. CIT (A) HAS CORRECTLY CONCLUDED THAT THE ASSESSEE HAD OFFERED AN EXPLANATION WHICH WAS DULY SUBSTANTIATED AND IT HAD NOT BEEN ESTABLISHED BY T HE ASSESSING OFFICER THAT THE ASSESSEES EXPLANATION WAS NOT BONA FID E, OR THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE CO MPUTATION OF ITS TOTAL INCOME HAD NOT BEEN DISCLOSED BY THE ASSESSEE. 12. FOR THE AFORE-GOING DISCUSSION, FINDING NO ERROR W HATSOEVER IN THE WELL REASONED ELABORATE ORDER PASSED BY THE LD. CIT (A ), WE HEREBY CONFIRM THE SAME, REJECTING THE GRIEVANCE SOUGHT TO B E RAISED BY THE DEPARTMENT BY WAY OF THE GROUNDS OF APPEAL TAKEN. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 27.09.20 12. SD/- SD/- [S.V. MEHROTRA] [A.D. JAIN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 27.09.2012. ITA NO.499/DEL/2010 7 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES