M/s. Riffleberg Capital (P) Ltd., New Delhi V. ACIT, New Delhi

ITA 4990/DEL/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8830 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 20-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 21-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Bonafide belief; Question of law; Bonafide mistake
• Section: 14A; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F: NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER ITA NO. 4990/DEL/2012 ASSESSMENT YEAR: 2008- 2009 M/S. RIFFLEBERG CAPITAL (P) LTD. VS. ADDL . CIT, F-217A, SAINIK FARMS, CIRCLE-15(1) NEW DELHI. NEW DELHI. (APPELLANT) (RES PONDENT) APPELLANT BY : DR. RAKESH GUPTA, ADVOCATE, R ISHABH KAPOOR, ADVOCATE RESPONDENT BY : SHRI VIKRAM SAHAY, SR. DR ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE ASSESEE HAS QUESTIONED FIRST APPELLATE ORDER WHEREBY THE LD. CIT(A) HAS UPHELD THE LEVY OF PENALTY OF RS. 19,87, 283/- U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 MADE BY THE AO. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS A DVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIA L AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT ASSESSEE COMPANY HAD INCLUDED S ECURITY TRANSACTIONS TAX (STT) OF RS. 49,90,683/- IN THE VALUE OF CREDIT SHARES DURING THE YEAR. ITA NO.4990/DEL/2012 2 SALE AND PURCHASE VALUE OF SHARES WERE SHOWN UNDER VALUED AND OVER VALUED BY THE SAME AMOUNT OF RS. 49,90,683/- ON ACC OUNT OF STT. THE AO WAS OF THE VIEW THAT AS PER SECTION 40(A)(IB) OF TH E INCOME TAX ACT, 1961 THE STT IS NOT AN ALLOWABLE EXPENSES UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. THE AO ACCORDINGLY MADE A DDITION OF RS. 49,90,683/- TO THE INCOME OF THE ASSESSEE. THE AO M ADE FURTHER ADDITION OF RS. 54,000/- U/S 94(7), SIT DISALLOWANCE OF RS. 85, 179/- AGGREGATING TO RS. 1,39,719/- AND DISALLOWANCE U/S 14A AMOUNTING TO RS . 8,15,040/-. THE PENALTY IN QUESTION HAS BEEN LEVIED ON THESE ADDITI ONS. REGARDING THE PENALTY LEVIED ON THE GROUND THAT THE ASSESSEE HAD CLAIMED STT IN ITS PROFIT AND LOSS ACCOUNT AND HAS THEREBY REDUCED ITS INCOME BY CONCEALING THE PARTICULARS OF INCOME, LD. AR SUBMITTED THAT ASSESS ES HAD NOT CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME WHEN IT CLAIMED SIT IN ITS PROFIT AND LOSS ACCOUNT AS ACCOR DING TO THE ASSESSEE, IT WAS A CASE OF BONAFIDE ERROR. WITHOUT PREJUDICE TO THIS ARGUMENT THE LD. AR SUBMITTED FURTHER THAT THERE IS NO TAX SOUGHT TO BE EVADED IN THE PRESENT CASE EVEN IF THE ALLEGATION OF AO IS TAKEN AS CORRE CT. HE SUBMITTED THAT THERE WERE TWO POSSIBILITIES IN THE QUESTION OF LAW REGARDING STT. THE FIRST POSSIBILITY WAS THAT UPTO ASSESSMENT YEAR 2008-09 N O DEDUCTION FROM INCOME (DUE TO SECTION 40(A)(IB)) WAS ALLOWABLE BUT THE REDUCTION FROM TAX U/S 88E WAS ALLOWABLE. THE SECOND POSSIBILITY WAS THAT DEDUCTION FROM INCOME U/S 36(I)(XV) WAS ALLOWABLE BUT NO REDUCTION FROM TAX (DUE TO ITA NO.4990/DEL/2012 3 SPECIFIC MENTION IN SECTION 88E(III) WAS ALLOWABLE. THIS POSSIBILITY WAS AVAILABLE FROM ASSTT. YEAR 2009-10. THE ASSESEE UND ER ITS BONAFIDE BELIEF AVAILED THE POSSIBILITY DISCUSSED ABOVE IN THE ASST T. YEAR UNDER CONSIDERATION WHICH WAS MADE AVAILABLE BY FINANCE A CT 2008 W.E.F. ASSTT. YEAR 2009-10. 4. LD. AR SUBMITTED THAT THERE WAS NO WRONG INF ORMATION GIVEN, NO WRONG PARTICULARS OF TAX PAYABLE, NO WRONG AMOUNT O F STT WAS FURNISHED. HE POINTED OUT FURTHER THAT THERE WAS NO REVENUE IM PLICATIONS AS IT IS EVIDENT FROM ITNS-150 IN WHICH AFTER MAKING THE COR RECT ASSESSMENT , THERE WAS NO TAX PAYABLE DUE TO AVAILABILITY OF REDUCTION /REBATE OF TAX U/S 88E THUS IT WAS A CASE WHERE INSTEAD OF DEDUCTION OF S TT FROM THE INCOME, REDUCTION OF STT FROM THE TAX WAS TO BE ALLOWED. 5. LD. AR SUBMITTED THAT ASSESSEE IS IN THE PU RCHASE AND SALE OF SHARES AS ITS BUSINESS AND HAD MADE AN AGGREGATE AMOUNT OF RS. 318.61 CRORES AS PURCHASE AND RS. 319.22 CRORES AS SALES OF SHARES. STT WHICH IS PAID AT THE TIME OF PURCHASES REMAINED PART OF PURCHASE PRICE A ND WAS ACTUALLY CLAIMED IN PROFIT AND LOSS ACCOUNT PURCHASES. THERE WAS NO MALAFIDE OR IN OTHER WORDS IT WAS A CASE OF BONAFIDE ERROR WHICH IS PROV ED BY THE FACT THAT IN ITS RETURN OF INCOME, ITS TAX LIABILITY WAS NIL AND TH E ENTIRE REBATE ON ACCOUNT OF STT U/S 88 E REMAINED TO BE SET OFF AGAINST ANY TAX LIABILITY. EVEN IF STT IS DISALLOWED AND ADDITIONAL TAX IS WORKED OUT YET THE RE IS NO TAX PAYABLE AS REBATE ON ACCOUNT OF STT U/S 88E WAS STILL AVAILABL E TO THE ASSESSEE. ITA NO.4990/DEL/2012 4 THEREFORE, BY CLAIMING STT AS AN EXPENSE, THERE WAS NO ADVANTAGE TO THE ASSESSEE WHICH IN TURN PROVES THAT IT WAS A CASE OF BONAFIDE ERROR AND IT WAS NOT A CASE OF CONCEALMENT OF PARTICULAR OF INCO ME OR FURNISHING INACCURATE PARTICULARS OF INCOME. IN SUPPORT HE PLA CED RELIANCE ON THE FOLLOWING DECISIONS :- 1. DCIT VS. SHREE LAXMI INVESTMENT ITA 895/AHM/2010 ORDER DATED 23.7.2010 2. PRICEWATER HOUSE VS. CIT 348 ITR 306 (SC) 3. CIT VS. BRAHMPUTRA CONSORTIUM LTD. 348 ITR 339 (DELHI) 6. WITH ASSISTANCE OF CHARTS MADE AVAILABLE AT PAGE NO. 4 OF THE WRITTEN SUBMISSIONS, THE LD. AR SUBMITTED THAT THERE IS NO TAX SOUGHT TO BE EVADED AND THUS THERE WAS NO QUESTION OF LEVY OF PENALTY U /S 271(1) OF THE ACT. IN SUPPORT HE PLACED RELIANCE ON THE DECISION OF C IT VS. M/S. NALWA SONS INVESTMENTS LTD. 327 ITR 543 (DELHI), AFFIRMED BY HONBLE SUPREME COURT. 7. LD. AR ALSO REFERRED PAGE NOS. 1 TO 54 OF T HE PAPER BOOK WHICH ARE COPIES OF AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT SHOWING THE AMOUNT OF BOOK PROFIT IN THE PURCHASE OF SHARES WHI CH WAS EXCLUSIVE OF STT, COMPUTATION OF INCOME AND RETURN SHOWN THAT TA X AFTER MAT CREDIT WAS NIL AND THAT REBATE U/S 88 E REMAINED UNUTILIZE D ; REVISED COMPUTATION OF INCOME SHOWING THAT AFTER MAT RECEIPT U/S 88E, T HERE WAS NIL TAX LIABILITY ; DETAILS OF PURCHASE AND SALE OF SHARES FURNISHED DURING ASSESSMENT PROCEEDINGS, SUBMISSIONS MADE DURING THE PENALTY PR OCEEDINGS THAT STT WAS INADVERTENTLY CLAIMED AND THERE WAS NO GAIN TO THE ASSESSEE AND STT ITA NO.4990/DEL/2012 5 COULD NOT UTILIZED AS REBATE AND SUBMISSIONS MADE B EFORE THE LD. CIT(A) EXPLAINING THE ERROR BECAUSE OF AMENDMENT IN SECTI ON 40 OF THE ACT. 8. REGARDING THE PENALTY LEVIED ON THE ADDITI ON OF RS. 54,000/- MADE U/S 94(7) OF THE ACT, STT DISALLOWANCE OF RS. 85,71 9/- AND DISALLOWANCE U/S 14A AMOUNTING TO RS. 815040/-, THE LD. AR SUBMITTED THAT PENALTY CANNOT BE IMPOSED IN RESPECT OF TWO AMOUNTS IN AS MUCH AS THE ADDITION U/S 94(7) ITSELF WAS NOT MAINTAINABLE AS THE SHARES OF SURAJ DIAMOND WERE PURCHASED ON 6 TH AND 7 TH FEBRUARY, 2007 AS MENTIONED IN THE ASSTT. ORDER AN D ALSO IN GROUNDS BEFORE THE LD. CIT(A). THUS THESE SHARES WE RE PURCHASED MUCH BEFORE THREE MONTHS PRIOR TO THE RECORD DATE AND TH US SECTION 94(7) IS NOT APPLICABLE. HE SUBMITTED FURTHER THAT CLAIM OF STT IS TO BE ALLOWED AS EXPENDITURE INCURRED IN CONNECTION WITH THE TRANSFE R U/S 48 AND HENCE THERE WAS NOTHING WRONG ON THE PART OF THE ASSESSEE ABOUT THIS CLAIM. THE LD. AR REFERRED PAGE 17 OF THE PAPER BOOK WHERE THE DETAIL S OF DIVIDEND SHOWING THAT DIVIDEND OF RS. 54,000/- RECEIVED ON 10.9.2007 HAS BEEN MADE AVAILABLE. 9. REGARDING DISALLOWANCE MADE US/14A OF THE A CT, THE LD. AR SUBMITTED THAT THE DISALLOWANCE WAS MADE NOT ON ACC OUNT OF INDIRECT EXPENSES ATTRIBUTABLE TO EARNING SUCH TAX EXEMPT IN COME BUT INDIRECT EXPENSE WHICH IS ALWAYS A MATTER OF SUBJECTIVE OPIN ION. IN SUPPORT HE PLACED RELIANCE ON SEVERAL DECISIONS WITH EMPHASIS ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO 322 ITR 158 (SC). ITA NO.4990/DEL/2012 6 10. LD. DR ON THE OTHER HAND TRIED TO JUSTIFY T HE PENALTY LEVIED AND UPHELD BY THE AUTHORITIES BELOW WITH THE SUBMISSION THAT THERE WAS NO BONAFIDE MISTAKE ON THE PART OF THE ASSESSEE IN CLA IMING THE BENEFIT FOR WHICH IT WAS NOT ENTITLED TO RESULTING IN MAKING OF DISALLOWANCE / ADDITION BY THE AO. HE SUBMITTED FURTHER THAT THE ASSESEE HAS ALSO LOST IN QUANTUM. 11. CONSIDERING THE ABOVE SUBMISSIONS WE FIND THAT THERE IS NO REASON TO DOUBT THE BONAFIDE OF THE ASSESSEE IN MAKING THE CLAIM AS THERE WAS NO GAIN TO THE ASSESEE AS STT COULD NOT BE UTILIZED AS REBATE AND SECONDLY THERE WAS NO TAX SOUGHT TO BE EVADED. IN BOTH THE S ITUATION I.E TAX PAYABLE ON RETURN INCOME AND TAX POSITION IN THE ASSESSED I NCOME, THE TAX LIABILITY WAS NIL. SO FAR AS OTHER ADDITION / DISALLOWANCE MA DE ON ACCOUNT OF SECTION 94(7) AND U/S 14A OF THE ACT ARE CONCERNED THERE IS NO REASON TO DOUBT THE ABOVE EXPLANATION OF THE ASSESSEE. BESIDES, THE ADD ITIONS/DISALLOWANCES ON WHICH PENALTY IN QUESTION HAS BEEN LEVIED, HAVE BEE N MADE UNDISPUTEDLY ON THE BASIS OF DISCLOSURE MADE BY THE ASSESSEE AVAILA BLE ON RECORD. HENCE IT CAN NOT BE SAID BEYOND DOUBT IN THE PRESENT CASE TH AT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF ON THE PART OF THE ASSESEE TO ATTRACT PENAL ACTION U/S 271(1)(C) OF THE ACT ON THE DISALLOWANCES / ADDITIONS AS DISCUSS ED ABOVE. NOR IS IT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS RELATING TO PARTICULARS OF I NCOME, THE ONLY MISTAKE COMMITTED BY THE ASSESSEE WAS THAT WHILE COMPUTING THE PAYABLE INCOME ITA NO.4990/DEL/2012 7 AND AN AMOUNT WHICH SHOULD HAVE BEEN DISALLOWED DUE TO PROVISIONS OF SECTION 40(A) (IB) OF THE ACT WAS NOT DISALLOWED OR ADDED BACK BY THE ASSESSEE. THE REASONS BEHIND THE OTHER ADDITIONS / DISALLOWANCES HAS ALSO BEEN EXPLAINED BY THE ASSESEE ON WHICH THERE IS NO REASON TO DOUBT ITS BONAFIDE. HAVING REGARD TO THE ABOVE STATED FACTS I N ITS TOTALITY WE FIND THAT THE AO WAS NOT JUSTIFIED IN IMPOSING PENALTY U/S 27 1 (1) (C) OF THE ACT ON THE DISALLOWANCES/ADDITIONS MADE BY THE AO WHICH WE RE BASED ON THE DISCLOSURE OF THE RELATED FACTS BY THE ASSESEE ONLY . WE THUS WHILE SETTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW IN THIS R EGARD DIRECT THE AO TO DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 19,87,283/-. THE GROUNDS ARE THUS ALLOWED. IN THE RESULT APPEAL IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN C OURT ON 2 ND FEBRUARY, 2015. SD/- SD/- (N.K. SAINI) ( I.C. SUDHIR ) ACCOUNTANT MEMEBER JUDICIAL MEMBER DATED 2 ND FEBRUARY, 2015 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DY. REGISTRAR, ITAT